Down goes the Dow

Investor wrote:

$450,000 in stock is only worth $450,000 if you sell it. Otherwise it's just stock.

This is correct. Most people REALLY don't think of investments as they should, and that's why they do incredibly risky things like selling it all at a certain time hoping to buy back in at a later time.

The purpose of investments isn't to have some huge stash of "value"...it is simply to provide supplemental (and in many times greatly supplement) income to the other income you make in retirement from other sources (SS, pension, etc.).

If I have $3 million dollars in my retirement account and plan to take 4% of that annually, that's $120,000 a year. As a married guy, my wife and I can take out Social Security at age 62 to the tune of about $50,000 in future dollars (that's just less than 15 years for me). At that time, we will also have 2-3 years of expenses saved either in cash or some crappy CDs. That money is not supposed to be an investment, it's insurance against a bad market.

So, let's say that at age 62 for me, the market tanks so that in my example, I now have $1.5 million dollars giving me $60,000 a year in income. Ok, If I NEED that, I continue to draw, BUT since I have Social Security income and up to 3 years of expenses saved in cash, I can just use that (since it's SS PLUS 3 years of expenses, I won't even need to use all the reserve cash money in 3 years...might be as long as 5 years or even more before I would deplete that and need to go back to drawing down the portfolio).

The way you put yourself into a position like that is to of course save up the 2-3 years of expenses in cash and then make sure to retire debt free including owning your own home so that you can really pare down the outgo if you need to. It's easy to do and doesn't require getting lucky with hunches regarding the stock market. The market goes up or is basically stable, then you draw from your retirement accounts. The market goes down a lot, then you use cash reserves and Social Security money. Once the situation rebounds, you replenish the cash reserves and continue to draw on the investment money until the next big downturn.

agip wrote:

c'mon bigfoot - just say yes

Oh, OK. I would be proud to consider you my brother, agip.

Bigfoot Investments wrote:

agip wrote:

c'mon bigfoot - just say yes

Oh, OK. I would be proud to consider you my brother, agip.

Well, I don't need your consideration...we're brothers because we're ALL brother, my brother.

Flagpole wrote:

Investor wrote:

$450,000 in stock is only worth $450,000 if you sell it. Otherwise it's just stock.

This is correct...

No, this is not correct. Not unless we want to start making up our own definitions for words.

Please feel free to familiarize yourself with the word, 'worth'.

Flagpole wrote:

Well, I don't need your consideration...we're brothers because we're ALL brother, my brother.

Most accurate thing said on this thread, but let's see how people ACT when and if all of this insidious Mid-East strategery and unprecedented global central bank intervention comes home to roost.

agip wrote:

klondike,

please. No one thinks losing money is a good thing, to be desired. it is simply something that must be endured.

here is your investing strategy: Sell when you have a hunch the market will tank

here is fp's strategy: buy, hold and add at lower prices.

fp believes that a buy, hold and add strategy will create better long term returns than the hunch strategy, because hunches are frequently wrong. however, you believe you in your hunches because one of them was right.

You tell me: which is the better long term strategy - relying on your hunches or relying on the long term climb of the stock market?

I would not bet a dollar on your hunches, but I would bet on the long term climb of the markets.

Good points. I think a mix of the two would work best--this being that you should sell when you feel the market it going to have a huge downturn (like the meltdown of 2008), but otherwise stay the course.

I can see how it is probably wiser to stay the course if you only think the DOW is going from 14000 to 13000. But if you really think it's going to go down to 7000, and you have good reason to believe so, I find it hard to believe that just "staying the course" is the best bet.

I don't believe in selling every time you think the market will have a small downturn, but if you really think it;s headed for a meltdown (losing 35+percent) then I think it's hard to argue that staying the course is a good idea.

Mr Klondike:

Perhaps you stated and I missed it in this thread, but in your previous timing of the market, exactly WHEN did you get back in? And, how will you decide when to get back in going forward?

Question for Klondike wrote:

Mr Klondike:

Perhaps you stated and I missed it in this thread, but in your previous timing of the market, exactly WHEN did you get back in? And, how will you decide when to get back in going forward?

And, please share with us peasant folk what all the obvious signs are that are happening now (and a month or two ago when you sold) that provoked the sale.

I'd like to learn.

Bigfoot Investments wrote:

The fact that a gain or loss is 'realized' is relevant for purposes of calculating tax liabilities. It is not in any way relevant to whether or not you have actually made or lost money.

Hello? Tax liabilities are based on the sales of investments. You make,or lose, no money until you sell.

anapaix wrote:

I don't believe in selling every time you think the market will have a small downturn, but if you really think it;s headed for a meltdown (losing 35+percent) then I think it's hard to argue that staying the course is a good idea.

The problem with that is that no one gets it right; hunches just don't cut it. You have to get out at the right time and get back in at the right time, and you have to have your money invested somewhere in the meantime (which the vast majority of those who engage in this foolish behavior don't do) so that you can continue to make money on that money while you wait to get back in. What if the wait is 5 years? You want to lose 5 years of gains (maybe gains, but maybe losses), dividends? What about all the stocks you would have PURCHASED during that time?

Trust me, it's pretty fun to be on the upswing of a market when you bought all the way down to the bottom.

Klondike5 wrote:

I got out at the end of June with the Dow at @ 15,000.

No plans to get back in any time soon. I will play it be feel.

Got out in 2008 with the Dow at 12,800 having come down from mid 14,000s. Boy was I glad I did as I watched most of my acquaintances take the ride down to 6,800.

Got back in later in 2009 with the Dow at @ 9,000

Keep in mind, all of those who have gotten out, trying to time the market, and all of those articles trying to convince people we're in for a big correction, would like nothing more than everybody to get out so it would drive the market down.

Hang tight, and reap the rewards that are about to come or you're going to miss it.

Looks like the rebound may be underway. Hey, Klondike, did you buy yesterday or are you still waiting?

Smoked. wrote:

Question for Klondike wrote:

Mr Klondike:

Perhaps you stated and I missed it in this thread, but in your previous timing of the market, exactly WHEN did you get back in? And, how will you decide when to get back in going forward?

And, please share with us peasant folk what all the obvious signs are that are happening now (and a month or two ago when you sold) that provoked the sale.

I'd like to learn.

Klondike5, in case you didn't realize, these questions are really them just handing you some rope, because you will not be able to give them an answer than bears any fruit. They aren't looking for real advice.

You really should reconsider your investment strategy. If you want to get the rush you apparently get out of selling high and buying low, then do that only with Mad Money (that is money above and beyond what should be your normal investing of 15% into good growth stock AND VALUE (or income) mutual funds. You should also be 100% debt free and own your home outright before doing so. When you are there, THEN go buy some stocks and play this little game...but only with money you can afford to lose.

Say wha? wrote:

Bigfoot Investments wrote:

The fact that a gain or loss is 'realized' is relevant for purposes of calculating tax liabilities. It is not in any way relevant to whether or not you have actually made or lost money.

Hello? Tax liabilities are based on the sales of investments. You make,or lose, no money until you sell.

Did you really just say that? I mean, come on, you can't really be that dense, can you? OK, at the risk of being trolled...

"Tax liabilities are based on the sales of investments."

Yes, hence:

"The fact that a gain or loss is 'realized' is relevant for purposes of calculating tax liabilities."

Then you follow with:

"You make, or lose, no money until you sell."

No, hence:

"It is not in any way relevant to whether or not you have actually made or lost money."

Surely you are just trolling. Well, bad on me I suppose for taking the bait.

What?! Tax liabilities are not relevant to whether you've made or lost money? Then what are they relevant to?

Why do I pay taxes on capital gains? Why do I get deductions for losses?

Say wha? wrote:

What?! Tax liabilities are not relevant to whether you've made or lost money? Then what are they relevant to?

Why do I pay taxes on capital gains? Why do I get deductions for losses?

Nice trolling.

You win.

Of course I win. I'm right.

Speak for yourself, Flagpole.

I asked a question. And only I know my intentions. YOU sure don't, despite once again claiming you know more than you actually do.

I actually agree that it is possible for some people to beat a buy & hold strategy. I am not looking to hang anyone. By the way, it is extremely arrogant for you to state that nobody can possibly do something. Again, speak for yourself.

I was curious what specific things he was noticing/observing and acting on.

Flagpole wrote:

[quote]anapaix wrote:

I don't believe in selling every time you think the market will have a small downturn, but if you really think it;s headed for a meltdown (losing 35+percent) then I think it's hard to argue that staying the course is a good idea.

The problem with that is that no one gets it right;

Actually, I do not think myself or present myself an expert like you do but I got it right twice out of two times.

Now I am out again. We will see if I go to 3 for 3 or fall to 2 for 3.