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Posted on 2/6/09 at 4:21 pm to Parliament
That's the brilliance in invoking "the long run". You're always right. Eventually.
Posted on 2/6/09 at 4:23 pm to Colonel Hapablap
So what do you guys suggest as an investment strategy for the average guy who isn't willing to put in the time to understand "puts" and "coupons" and the like?
A diversified, stock-heavy portfolio which is funded through DCA seems like a pretty reasonable approach for most people. Don't forget, this is money that people HAVE to have when they are 65-70 years old and it needs to last...
I suppose you guys might have different goals (e.g. serious wealth-building rather than retirement), but I don't think that is what the original poster was talking about.
A diversified, stock-heavy portfolio which is funded through DCA seems like a pretty reasonable approach for most people. Don't forget, this is money that people HAVE to have when they are 65-70 years old and it needs to last...
I suppose you guys might have different goals (e.g. serious wealth-building rather than retirement), but I don't think that is what the original poster was talking about.
Posted on 2/6/09 at 4:27 pm to Colonel Hapablap
even a stopped clock is right twice a day
I say this to my wife a lot. She hates it when I do it.
I say this to my wife a lot. She hates it when I do it.
Posted on 2/6/09 at 4:29 pm to Sigma
quote:
So what do you guys suggest as an investment strategy for the average guy who isn't willing to put in the time to understand
don't do it. Either take the time to learn and understand or just put your money in long term bonds and sit tight.
Posted on 2/6/09 at 5:08 pm to amsterdam
amsterdam, when the Fed is using inflation targeting of 2% (untill recently) and everyone on this board knows it, do you think that we believe staying in cash all the time is a good idea?
Some of happen to believe that it is possible to make money timing various markets. Some of us have made much more money than we have lost by timing markets. Some of us might spend a lot more time at this avocation than you do.
I can use the link below and make as good a case for buying and holding gold as you do equities. But I do not view gold as an investment, I view it as a way to preserve value...insurance of a sort. LINK
Some of happen to believe that it is possible to make money timing various markets. Some of us have made much more money than we have lost by timing markets. Some of us might spend a lot more time at this avocation than you do.
I can use the link below and make as good a case for buying and holding gold as you do equities. But I do not view gold as an investment, I view it as a way to preserve value...insurance of a sort. LINK
Posted on 2/6/09 at 5:16 pm to amsterdam
quote:
Timing the market
I dislike this terminology. I reserve that for people who try to predict daily or weekly moves. None of us is trying to do anything close to that.
But you CAN look at fundamentals (and people like Buffett DO SO all the time). Why would I want to be in the S and P 500 on the precipice of a massive housing/debt bubble? How is that good risk/reward? Or when the P/E ratio of the index is 30, why would I want to be in something like that? You buy when shite is cheap and pays a good yield even if it doesn't go up. You don't just buy on a hope and a prayer.
quote:
Market Index - all months - 10.3%
exclude best 5 months - 8.4%
exclude best 10 months - 7.5%
exclude best 20 months - 5.3%
exclude best 40 months - 3.6%
Your other problem is you are relying too much on history or track records. It would be comforting to think they are good guides, but there is no guarantee whatsoever that they aren't. The next Black Swan around the corner will be just that - a Black Swan you have no idea about right now - and it could change the game forever.
I would also argue that the last 50 years of equity investing have been set to a pretty great backdrop - unprecedented technological gains, relative world peace and a great Wall Street sales job of convincing grandmas that they have to be in equities. If you think that virtuous cycle is going to repeat itself in perpetuity, the fine. Have at buying the index randomly. I'll stick to buying assets at sane prices with good yields.
Your analysis also ignores taxes and inflation.
Posted on 2/6/09 at 5:22 pm to Tiger JJ
the one thing that hasn't been noted in this thread is that cash tends to be a great investment in a deflationary scenario. Which is where we are.
Posted on 2/6/09 at 5:28 pm to Sigma
quote:
So what do you guys suggest as an investment strategy for the average guy who isn't willing to put in the time to understand "puts" and "coupons" and the like?
I assume you are young and healthy? I had this in a previous post:
70% Vanguard Total Stock Market Index
30% Vanguard Total International Index
With the exception of some new $'s that I'm dollar-cost averaging into stocks over the next five months, I'm 100% stocks. And I never pulled anything out on the way down, or at the peak.
You can maybe do better studying all this stuff fervently, and coming up with some magical strategy, but I believe you can do just as well following a buy-and-hold strategy, using low-cost index funds, and putting the rest of your energy into working hard and doing well at your actual job.
It's worked fairly well for me, but I'm just one person.
ETA: Although I agree with the general premise of Amsterdam's post, he's still a douchebag.
This post was edited on 2/6/09 at 5:30 pm
Posted on 2/6/09 at 5:31 pm to amsterdam
"Conclusion
While a country has only one past, there are many possible futures. The likely rewards from equity investment are worth having over the very long haul. Yet the risk of shortfall is always present, even over lengthy investment horizons. Investors should not assume that favorable equity returns can be guaranteed in the long term; nor should they assume that stocks are safe so long as they are retained for a holding period of at least twenty years."
I strongly suggest reading this, then quit pimping AF's.
Triumph of the Optimists
For anyone who wants to shell out a hundy it is an excellent read.
While a country has only one past, there are many possible futures. The likely rewards from equity investment are worth having over the very long haul. Yet the risk of shortfall is always present, even over lengthy investment horizons. Investors should not assume that favorable equity returns can be guaranteed in the long term; nor should they assume that stocks are safe so long as they are retained for a holding period of at least twenty years."
I strongly suggest reading this, then quit pimping AF's.
Triumph of the Optimists
For anyone who wants to shell out a hundy it is an excellent read.
Posted on 2/6/09 at 5:42 pm to Tiger JJ
JT you are right about the 'timing' remark. That is not what I do. I look at macroeconomics and attempt to use it trading commodities but only occasionally when I believe that the situation is right. And, reading the Black Swan changed forever my view of experts in all fields. Even before the Black Swan I had no faith in technical analysis. A five year old Gypsy kid would recognize technical analysis as bs after a one minute explanation. His mama is in the next room telling fortunes with a crystal ball.
Posted on 2/6/09 at 6:00 pm to Rivers
I think Parliament's point is very worthwhile. There are many people (read: the vast majority) who DO NOT care about economics and finance, and they want to pay someone else to do the work for them. In that case, DCA/Index funds and the like are probably the best course of action to take. However, the small minority (read: people on this board) who do care try to take advantage of opportunities they sense. That's not reckless day-trading/gambling, and that's not "timing the market." It's active management of your investments on your own terms. Your risks and rewards are equivalently higher, that's all there is to it.
Posted on 2/6/09 at 6:01 pm to kfizzle85
quote:
Why CASH is a BAD investment right now
I think Parliament's point is very worthwhile. There are many people (read: the vast majority) who DO NOT care about economics and finance, and they want to pay someone else to do the work for them. In that case, DCA/Index funds and the like are probably the best course of action to take. However, the small minority (read: people on this board) who do care try to take advantage of opportunities they sense. That's not reckless day-trading/gambling, and that's not "timing the market." It's active management of your investments on your own terms.
+1
quote:
Your risks and rewards are equivalently higher, that's all there is to it.
I disagree that the potential rewards are necessarily higher.
Posted on 2/6/09 at 6:11 pm to Tiger JJ
That's a bit of a variable yes.
Posted on 2/6/09 at 6:15 pm to kfizzle85
I used to think that. I've come to be of the opinion that that's a good way to lose a lot of money. If you're not willing to spend the time to do it yourself, there's really no substitute.
Posted on 2/6/09 at 6:16 pm to Colonel Hapablap
That's strictly an opportunity cost thing IMO.
Posted on 2/6/09 at 6:28 pm to kfizzle85
quote:
e. That's not reckless day-trading/gambling, and that's not "timing the market." It's active management of your investments on your own terms. Your risks and rewards are equivalently higher, that's all there is to it.
No, its definitely gambling.
Posted on 2/6/09 at 6:42 pm to MileHigh
Its gambling if you're jumping in and out with no plan.
Posted on 2/6/09 at 6:48 pm to kfizzle85
Gambling with a plan is still gambling, it's just better odds.
Posted on 2/6/09 at 6:49 pm to Cold Cous Cous
quote:
Gambling with a plan is still gambling, it's just better odds.
Gambling is when you know the odds are against you.
Speculating is when you know what the odds are and make a calculated bet.
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