Is it time to re-enter the stock market?
HW "Skip" Weldon
market during the decline/crash/whatever and who are now beating
themselves up for "missing the 50% rise".
My approach is to try to talk them out of re-entering the market -
they already have demonstrated that, despite protestations to the
contrary, they are not long-term investors. This is especially true
for those 50ish and over.
For those under 50ish, who swear they have learned their lesson, we
talk about mutual funds for diversity - no-load, low expense balanced
funds like Target Funds, Wellesley, Wellington, etc.
And for those who adamantly refuse to be swayed, I talk index funds,
particularly large cap index funds to limit the investor to the more
conservative parts of the market (if there is such a thing.) Also,
slow and steady with dollar cost averaging.
Would like to see other's opinions - especially those who disagree.
Rubaiyat of Omar Bradley
<skip5700removet...@yahoo.com> wrote:
> I am hearing this question these days from those who got out of the
> market during the decline/crash/whatever
Also, how about some advice for those of us at the other end of the
spectrum. I got out of the market *before* the downturn, and am now
sitting on almost 100% cash. Ready to retire in a few months (age 63).
Afraid to get into bonds because interest rates are so low.
Douglas Johnson
>I am hearing this question these days from those who got out of the
>market during the decline/crash/whatever and who are now beating
>themselves up for "missing the 50% rise".
I think the answer to anyone, anytime, who asks "Is it time to re-enter the
stock market?" is "No". Long term investors aren't asking. Neither are the
short term traders. It's only the short term traders who think they are long
term investors who ask.
As a financial planner, you probably have the opportunity to retrain some of
these folks to be real long term investors. You would know how to do that
better than I.
The fact that folks are asking the question is encouraging. It means this rally
has some legs. Let me know when they stop asking and are jumping in with both
feet. There'll be trouble ahead.
-- Doug
Douglas Johnson
>Also, how about some advice for those of us at the other end of the
>spectrum. I got out of the market *before* the downturn, and am now
>sitting on almost 100% cash. Ready to retire in a few months (age 63).
>Afraid to get into bonds because interest rates are so low.
Morningstar has been doing a series of articles on suggested retirement
portfolios for people with various risk tolerances. Here is their latest
offering:
http://news.morningstar.com/articlenet/article.aspx?id=309595
-- Doug
rick++
bad: buy & hold is bad, asset balancing is bad, yada, yada.
Yet except for a few lucky timers, no one seem to do that
great during the recession. Some huge investment funds
like college endowments did well in the past, but fell flat
on their faces this time.
Evandro Menezes
There's no such thing as a "timer" when one can limit one's losses by
setting up a % trailing stop order on each and every stock one has.
If the stock rebounds, it can always be repurchased.
The problem is that many understood buy & hold as a license to be a
passive investor. This attitude is what has hurt so many portfolios.
And this attitude is bad now and it's always been.
And, no, this is not the time to reenter, unless one's going short.
But one's got to be an active investor to keep an eye on this kind of
transaction, be it options or inverse funds.
Cam
<skip5700removet...@yahoo.com> wrote:
> My approach is to try to talk them out of re-entering the market -
> they already have demonstrated that, despite protestations to the
> contrary, they are not long-term investors. �This is especially true
> for those 50ish and over.
What do you think the P/E is for the S&P500?
I've seen a low of 20 "adjusted". Over 100, over 700 and over 1900.
If you have almost no earnings for a quarter the number could get very
high. Buying indexes when the P/E is high hasn't been a big
historical winner.
Blind Broccoli
funds) after Bear Stearns went down but prior to Paulson allowing Lehman
Bros. to fail. So did I time the market? Was it genius or fear? I know
the answer in my own mind, and I'm no genius.
For me, I have recently done my first bit of dollar cost averaging into
Sequoia Fund, FPA Crescent, and T. Rowe Price New America Growth. I had
kept Fairholme and Dodge and Cox Foreign and all my bond funds. So again
I'm no genius and certainly no timer. I just like the managers from what
I've seen and read. But Wellingon and Wellesley are funds I've also been
considering for a long long time and I think highly of them.
Your first point, aimed at people like me, is a very good one. But your
advisees may not want to hear, given that returns on bonds are so low,
and the market is so risky, that they are better off going back to work
(or continuing to work) so that they are not dependent on investments
for their daily living expenses. I myself am like Maynard G. Krebs when
someone uses that 4 letter word w-o-r-k around me ;-)
BB
Clark Kent
Here is a farily safe approach:
Use a discount broker to keep commissions down to $ 10 or less.
Buy Exchange Traded funds: Symbols SPY, IWM, EEM, EEB, QQQQ.
Place a trailing stop loss of about 7%.
Get out of anything that drops below its 100-day moving average (which you
can obtain by a chart using Yahoo Finance.
After a bear market ends, buy when SPY etc go above the 100 day moving
average.
Ease in a little at a time by dollar cost averaging. Put a few dollars in
and wait for about a month. If it goes up, buy some more. Keep doing this
each month, but keep the stop loss trailing all the way up, and liquidate
when all your stop losses are executed.
Never average down.
Ron Peterson
<skip5700removet...@yahoo.com> wrote:
> I am hearing this question these days from those who got out of the
> market during the decline/crash/whatever and who are now beating
There are many people who have left the market and don't want to
reenter the market with the possibility of delaying their retirement
indefinitely.
> My approach is to try to talk them out of re-entering the market -
> they already have demonstrated that, despite protestations to the
> contrary, they are not long-term investors. �This is especially true
> for those 50ish and over.
People have limited places to put their money, bond, CDs, stocks, real
estate, personal homes, and their own businesses. I can't see how
stocks should be out of the picture, particularly for those unable to
manage real estate or their own business.
> For those under 50ish, who swear they have learned their lesson, we
> talk about mutual funds for diversity - no-load, low expense balanced
> funds like Target Funds, Wellesley, Wellington, etc.
Funds aren't selective enough on stocks and end up owning those that
are very over-valued. Bonds pay little in interest, and with the large
national debt, inflation is sure to occur.
> And for those who adamantly refuse to be swayed, I talk index funds,
> particularly large cap index funds to limit the investor to the more
> conservative parts of the market (if there is such a thing.) �Also,
> slow and steady with dollar cost averaging.
Large caps are more likely to be over-valued.
> Would like to see other's opinions - especially those who disagree.
Selling covered calls works, but some investors don't have the time to
do the work. High dividend stocks like CLMT might help some people.
--
Ron
Yadda
> you average the earnings for the last ten years for your 'E', you
> can't really rely on using P/E except when the market has been normal
> for a while, they can be highly subjective.
>
Looks like a big crash is coming across all asset classes. The tsunami
will be Option ARMs, Commercial Real Estate, and Leveraged Commodity and
Carry Trade. Probably not until early next year as the FED/Treasury
will be propping up the economy on funny money until the moment of
reckoning. I am wondering if money market funds will be safe in this
forthcoming storm...
Yadda
Also in a period (i.e. years) of continuing write downs it is
unconscionable to use operating earnings for the CNBC talking heads.
Reported Earnings (that include write offs) are the critical measure in
this economy as companies can run out of funding very quickly.
Yadda
>> talk about mutual funds for diversity - no-load, low expense balanced
>> funds like Target Funds, Wellesley, Wellington, etc.
>>
>> And for those who adamantly refuse to be swayed, I talk index funds,
>> particularly large cap index funds to limit the investor to the more
>> conservative parts of the market (if there is such a thing.) Also,
>> slow and steady with dollar cost averaging.
>>
>> Would like to see other's opinions - especially those who disagree.
>
>
> The crash changed nothing. Once in while the market goes crazy, this
> is to be expected. Right now people are a little too cautious for
> their own good.
Too cautious? The volatility is off the charts in bonds and stocks.
The Big Boy Banks are back to helping others lever up (with taxpayer
money) to bet on currency, carry trade, and commodities. How can oil be
$80/barrel in the USA with ~18% unemployment and horrible car sales?
Turtle
Hallo BB,
> I'm 63 years old and retired and I got (mostly) out of equities (mutual
> funds) after Bear Stearns went down but prior to Paulson allowing Lehman
> Bros. to fail. So did I time the market? Was it genius or fear? I know
> the answer in my own mind, and I'm no genius.
>
> For me, I have recently done my first bit of dollar cost averaging into
> Sequoia Fund, FPA Crescent, and T. Rowe Price New America Growth. I had
> kept Fairholme and Dodge and Cox Foreign and all my bond funds. So again
> I'm no genius and certainly no timer. I just like the managers from what
> I've seen and read. But Wellingon and Wellesley are funds I've also been
> considering for a long long time and I think highly of them.
>
> Your first point, aimed at people like me, is a very good one. But your
> advisees may not want to hear, given that returns on bonds are so low,
> and the market is so risky, that they are better off going back to work
> (or continuing to work) so that they are not dependent on investments
> for their daily living expenses. I myself am like Maynard G. Krebs when
> someone uses that 4 letter word w-o-r-k around me ;-)
Why should returns on bonds or bond funds be low .
The interest rate from the FEDs is still low.
As longs as they are low bonds bring good returns.
If inflation comes and the FEDs are forced to up the interst rates than
bonds will suffer.
CU
John
Bill
> Everybody I know disagrees with me. Which makes me
> all the more certain. :)
Well, that confirms that you do not know me.<g>
--
.Bill.
anoop
[..]
> ...otherwise if
> you've the next 25 - 35 years to play with, you'd be mad not to invest
> in the stock market. Any stock market index!
The Nikkei peaked at around 38K in Dec 1989.
20 years later it's at 10K. Even if you got in
after the crash at around 20K, you'd be severely
underwater.
I know that we're much much smarter in this part
of the world, so that won't happen here. :-)
Anoop
Dave Dodson
> Last March, the S&P 500, adjusted for inflation, was at the same value
> as S&P 500 in 1965, if my memory serves me right. I hope that I am not
> wrong in this recollection, it was mentioned in a Larry Summers speech
> from that time.
>
> Which means that there was no real stock appreciation for 44 years.
> Note, however, that stocks paid their owners dividends throughout this
> time.
Quick fact check: According to
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
The S&P 500 was at 86.83 in March 1965, and was at 757.13 in March
2009, for an increase of 872% over the 44 years. The same web page
shows that the CPI was at 31.3 in March 1965 and it was at 212.7 in
March, 2009, for an increase of 680% over the 44 years.
Furthermore, over the 44 years, the real, inflation adjusted, rate of
return was 0.57% without dividends and 3.75% with dividends
reinvested. Now 0.57% is not wonderful, but it is not "no real stock
appreciation," either. Not to mention that the beginning and ending
dates were chosen near a peak and a valley, respectively, to make the
comparison as bad as possible. Choose October 1966 and September 2009
instead and the real returns are 1.70% without dividends and 4.92%
with dividends reinvested.
BTW, how do you invest in the S&P 500 without dividends?
Dave
BreadW...@fractious.net
> BTW, how do you invest in the S&P 500 without dividends?
Equity-indexed annuity? (which account for some 30% of
the "fixed" annuities sold in recent years.)
Okay, that's not a fair hit -- apples to oranges, annual resets,
guaranteed minimum interest credited, etc.
Nevertheless, it's amazing how few folks realize that their
index-linked annuities ignore such a huge portion of the
actual return of the indices to which they are linked.
I know, it's a complete aside from an interesting conversation.
Carry on.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting