Dow at 2-year high

Flagpole wrote:

Listen up baby bird, I've been investing HEAVILY since 1989, and the MOST heavily (based on percentage of my income) was from 1989 and into 1996. The VAST majority of money I've invested was below a 13,000 Dow...WELL below. 8 months of investing for me out of more than 21 years of investing is pretty small brother.

Big Bad Billy wrote:

Wrong. The Dow was above 13,000 for the last 8 months of 2007.

Does anyone else see the inconsistency in what Flagpole is saying here?

First, he's saying he didn't invest much above 13,000 (relative to his portfolio size) because it was ONLY 8 months and he's been investing since 1989.

But, on the other hand, he talks about how MUCH he's MADE during the last 2 years because the market was down and he was investing that whole time.

So Flagpole, which is it? Are your current investments significant or insignificant relative to portfolio size.

By the way, why do you say "brother" all the time? What do you mean by saying it?

He used to call me "brother," when I was telling people I was buying when the Dow was around 7,000, because stocks were cheap.

I was buying low, but now that I have actual profit after getting out of the market, and waiting for the next low, he's waiting for his old age. He doesn't call me "brother," any more.

Perhaps he's a stock hoarder, much as the people who can't get rid of any newspaper or mail they ever got, and just let it pile up for their lifetimes, saving it because it's valuable in their minds. That's not a strategy, per se, but people with that affliction do defend it pretty ardently.

Having every stock (or fund, etc.) you ever bought might not be the worst approach, but it's not the best either, by a long shot.

I do think Flagpole has some good wisdom with the young people here, who are in credit hock, with no savings and lots of spending. He does the uninitiated a good, positive service. With the stock market, he is far less knowledgable than some others here who only post occasionally.

I got you. Its always good to do something for the right reasons. And I agree that the bailouts went beyond the stock market. But it annoyed me that the media played up the prospect of a plummeting stock market and everyone with a pension losing their lifetime savings if we didn't bailout Wall Street investment banks.

Flagpole wrote:

3) Invest 15% or more into retirement accounts...401k first up to match, then Roth IRA and then back to 401k.

[/quote]

Really, I have no problem with your advice as much as your inflexible rules that you think need to apply to everyone.

There are millions of households not eligible for a Roth IRA. And the tax advantages may greatly outweigh the benefits. By dumping $40K or so a year into 401k plans (spouse and I are 50+) we keep from falling into the AMT and save up to $15K in taxes. If a household has income of $150K+ and lives in a high housing cost/high tax state like CA they need to look at their investment plan on a case by case basis.

flip side wrote:

Flagpole wrote:

3) Invest 15% or more into retirement accounts...401k first up to match, then Roth IRA and then back to 401k.

Really, I have no problem with your advice as much as your inflexible rules that you think need to apply to everyone.

There are millions of households not eligible for a Roth IRA. And the tax advantages may greatly outweigh the benefits. By dumping $40K or so a year into 401k plans (spouse and I are 50+) we keep from falling into the AMT and save up to $15K in taxes. If a household has income of $150K+ and lives in a high housing cost/high tax state like CA they need to look at their investment plan on a case by case basis.[/quote]

There are exceptions to every rule, so yes, if you are not eligible for a Roth IRA, then obviously you can't invest in one. While you are correct that there are a lot of households where they aren't eligible for a Roth IRA, the vast majority of people are. I have in the past also mentioned that if you live in the SF Bay area or some other super high cost of living area that if you can't invest a lot (or at all) that you may have to consider your home as a main part of your investment, realizing that at some point you will have to move from that expensive area to get the money out of it.

Anyway, I'm fine with accepting that there are exceptions. Easier to list the rule and let the few exceptions figure out how to make it a bit different.

Well, it's BOTH brother!Let's break this down a bit.1) There IS a difference between 8 months and 2 years. While even the 8 months of investing is important (I maintain that EVERY contribution is important), it is NOT that long a period of time compared to 20+ years of investing and even compared to 2 years.2) While the percentage of my income investing was greater when I was younger (50% of our household income went to investments the first 7 years of our marriage), I make a lot more now than we BOTH did in those early years, so even though I only give about 20% to investments these days, it's still a lot of money. The AMOUNT of money I threw into investment when the Dow was at 6400, and 7000, and 7500, and 8000 etc. was a decent amount, and I have reaped the benefits of those investment dollars since the Dow is now up to about 11,500. BUT, at the same time, since I have been investing for so long, gaining 11% annually since 1989, the amount that was already there was a decent pile.So, the amount I already had was decent, and the amount I've contributed the last two years is decent...the former though in total dollars is much greater...because it had so long to grow. I'm not sure why you were interested enough to ask this question, but there's your answer.

Flagpole, if someone was investing in a Roth, how often should they be putting money into it? Is it best to do it monthly to get an average of the fund price, or dump it in twice a year when it seems low?

laughingostrich wrote:

Flagpole, if someone was investing in a Roth, how often should they be putting money into it? Is it best to do it monthly to get an average of the fund price, or dump it in twice a year when it seems low?

I prefer regular contributions for SEVERAL reasons:

1) When is the market low? If you were waiting since March 2009 for the market to be low, you wouldn't have put anything in as the market has pretty much had a steady climb. It's easy if waiting for a low market to talk yourself out of putting any money in.

2) MOST people who wait for low markets end up NOT investing as much as they would have.

3) It's best to just set the limit for automatic deductions and then forget about it, basing your budget on money you take home after the investing. With the Roth, if you REALLY need money, you can ALWAYS take your CONTRIBUTIONS, not the gains out without penalty no matter your age. I actually am not a fan of that, but there it is. Well, I would be a fan of withdrawing contributions before age 59.5 in this case (other than an emergency) -- let's say you invested in a Roth IRA and other investments beginning at age 25. Let's say you did $5,000 a year. If you did well with your money so that by age 55 you owned your home outright and your other retirement accounts did well, you might decide to retire early. You could leave your other retirement accounts AND the gains from your Roth IRA and remove $150,000 ($5,000 times 30 years) from your Roth IRA tax free and without penalty. This could enable you to retire at age 55 so that 4.5 years later you could then get at the rest of your IRA and also your other retirement accounts.

Well, first of all, it's "Fry". Pay proper respect to a high school legend with the correct spelling.

Second of all, it was a cool yet pleasant spring day in 1985 at the Oak Harbor Invitational when high school seniors Flagpole and Scott Fry stepped to the line for the 3200. Scott had already beaten Flagpole in the 1600 in 4:10 and then he ran his lifetime PR of 1:57 in the 800 while Flagpole sat and watched. A year earlier Flagpole had finished 3rd in the 3200 at this very invitational behind Scott and his then-senior teammate Brian Martin. This year, the young Mr. Fry jumped the gun and was disqualified on the spot to the great disappointment of the crowd. I went on to demolish the field in the 3200 for a clear victory as the crowd booed and chanted, "You Suck! You Suck! You Suck!". My distance coach turned to the crowd and said "Hey!" as if to try to quell the unruly crowd. A fat guy with a drink in his hand (that he spilled) yelled, "well, he SUUUUUUUUUUUUUUCKSSSSSSSSSSSSSSSSSS!" It was the most hollow victory of my storied high school career, and while there was no chance I could have beaten Scott, I would have much rather finished second to him while watching him run sub 8:50 that fateful day. Did I make it clear though that I WON the race that day? Because I did. Came in first place I did.

laughingostrich wrote:

Flagpole, if someone was investing in a Roth, how often should they be putting money into it? Is it best to do it monthly to get an average of the fund price, or dump it in twice a year when it seems low?

this is an interesting question. Studies show that since the market tends to go up, you should dump all the money in as soon as you get the chance, in one day. Statistically, this is the best move, by the odds.

However

there is a big binary thing going here- if everyone dumps their money in at once, a certain number of them will no doubt immediately lose 20% and be very sad.

But if you drip money in regularly, you won't have that big catastrophe. Over a large sample, average returns would come down a little if everyone dripped.

So probably the best move is to invest slowly. Your returns might be a little lower, but you are lowering your risk of loss.

Flagpole is a moron. Don't you get it?

One could do much worse that what "Flagpole" recommends. I do find it curious why someone who preaches "buy no matter if the market is up or down" (and correctly so), would care so much about the market's ups and downs. I dump 20% of my salary into 401k and Roth IRA accounts (all index funds due in part to the low expenses), and I do it EVERY paycheck no matter what. I'm AT LEAST 3 decades away from retirement, so I don't care at all what the Dow does this week, or even this year or this decade. Besides, the Dow only includes 30 stocks, and I'm WAY more diversified than that. Now, if retirement were right around the corner, I'd be more concerned, but even if it were, I'd have a higher concentration in fixed income securities to help buffer that short term risk. As it is, I really don't care if the market goes up or down on a daily, weekly, yearly basis.

And that's one odd (and random) story about the Oak Harbor Invitational.

Hello. Dollar cost averaging is the safest way. I started doing it in 1985 and still do. It is very difficult to time the market unless you are professional.

This is what I do. I have a quarterly trading fee (no per-trade fees), so I buy and sell index mutual funds five minutes before the close. If the market is going to close down, I buy. If it closes higher the next day, sell. If not, I wait until it goes higher. Very simple. 1.5 percent gains each month. Adds up fast.

Vancy Pants wrote:

This is what I do. I have a quarterly trading fee (no per-trade fees), so I buy and sell index mutual funds five minutes before the close. If the market is going to close down, I buy. If it closes higher the next day, sell. If not, I wait until it goes higher. Very simple. 1.5 percent gains each month. Adds up fast.

.

You have an astounding ignorance of basic arithmetic

Interesting; I could see how that might work. How did you think of it?

I don't see what you are saying, but regardless of that, it is a foolproof system for me.

The gains are modest, but they add up over time. All it involves is computer access 5 minutes before the close. The goal is to open more accounts with the gains, as there are per trade limits for the funds.

As far as what it means to me financially, I do not care how the market does in short bursts. As a point of interest though, I do find the market moves interesting, especially now as we have been coming out of a recession the last year and a half (it's indicative of our recovery). Also, I care more and more each day (which still isn't that much) about the short-term moves because I'm closer and closer to retirement...as soon as ~10.5 years from now and as long as ~15.5 years from now. As will you, when I'm closer to retirement, my portfolio will be more conservative then than it is now.

What's that sound I'm hearing?? Oh its the sound of the final trading days of the year ticking away.....Where's the Dow right now?? Oh its at 11,467.....What was your prediction for the end of the year?? Oh 12,000, that's right.....Guess you missed on that one, just like most of your predictions.....