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Calculated risks Aredhel, calculated risks, not just a risk for the hell of it. A calculated risk is where you have listed out all of the positives, negatives, potential gains, potential losses, and have mitigated what would create the losses as well as created a plan to execute/acquire the gains.
A calculated risk can still be a large risk. No amount of mitigation will take the risk of loss to zero, and when large sums of money are at stake, the potential size of the losses if your mitigation plan fails makes the risk large.
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This means you know EVERYTHING THERE IS about the investment all the way around...
No investor EVER knows that! (Although some are foolish enough to think they do.)
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People who invest in mutual funds are not experts, people who invest in index funds are not experts, these are people who have no clue what they are doing and diversifying like hell in a way to "limit their loss potential".
I know exactly what I am doing: I am playing the role of a tick riding on a dog. I don't control the dog's motion, but simply go where it goes. If the dog goes in a direction that benefits me, I win. If the dog goes in a direction that doesn't benefit me, I lose. I think the odds in the long run (20-30 years from now) favor the dog having wandered in the direction I want it to go, but of course there's no way I can be certain that it will.
Unlike you, I am not terrified by the thought of losing some of my money. I'll take risks, sometimes even big risks, if I think the potential gain is enough to justify them.
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Furthermore, anybody (and I mean anybody) who bought in at DOW 18k is going to have losses...
And you know that how? I certainly can't predict exactly what the DOW will be 30 years from now. No one can. I do think it will be higher than 18K, which is why I'm in the market.
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No, there's no 100% safe investment (even a CD), which would be the same as saying an investment has zero risks. What you are looking to do is mitigate risks of an investment. You want to firstly identify all said risks and have plans to mitigate the chances of those risks occurring, a plan to acquire the gains, and manage both going forward throughout the duration of said investment period.
A CD has risk in that you might need the money that's locked up, or, you might be holding an outdated CD with a lower rate than what the market is paying, or you might be losing to inflation.
HURRAH! We're finally getting an acknowledgement that your preferred investment strategy does indeed have significant risks associated with it! That took long enough.
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You can mitigate these risks by making sure the money you put away you don't need for awhile, then make sure you shop for either Brokered CDs or CDs from Online Banks, with at least a 5 year term, as both will give you the HIGHEST rates, rates that will be higher than inflation.
There is no guarantee that the highest rate CD you can get will pay rates that outpace inflation. CDs have lagged inflation in the past, and at some point will do so again in the future. What no one can know for certain is when that will happen.
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What? I talk about all types of investment vehicles, I discuss CDs all of the time, I discuss bonds and I discuss P2P lending, which are all mainly debt instruments with a fixed income focus. I personally prefer debt vehicles with a fixed income to it, so I can predict what type of return I will get as long as said investment doesn't go sour which again, if the risks are mitigated, the chances of them going sour significantly decrease. I also discuss owning your own business.
No, you mention these things in passing. You never discuss them in any real depth. (Which is too bad, as it would add some welcome variety to the investing forum!)
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But to just SLAP money in a random fund or index, full of a ton of different stock holdings that I have no idea what price I'm buying at, if they will increase or if they are currently over-valued and are going no where but down, makes absolutely no sense to me.
But SLAPPING money into a collection of random loans, the soundness of which you have no way of evaluating (in other words, a CD), does makes perfect sense to you? And before you bring up FDIC coverage, bear in mind that in a real full-blown economic meltdown there's absolutely no guarantee that the federal government will be able to make good on its promise to cover those losses. The risk of total loss is very small, but it's still there, and it's real.
You aren't comfortable with the volatility of the stock market, and want no part of it. That's fine, but it doesn't make those of us who ARE comfortable with taking risks that make you nervous fools. We are just more willing to tolerate a different risk profile than you are.
300% in gains since 2008 have to level out and regress closer to the norm at some point .
all time frames do .
even the fact gains sucked since 2000 are offset by the fact longer term the years leading up were the greatest in history , 17 years averaging almost 14% .
even after leveling out , long term all time frames still did better then most anything else .
leveling out the gains have always been a part of investing and always will be .
Lol, listen to my buddy MathJak's explanation, he calls it "leveling out the gains".
How about this buddy? How about learn the stock market and learn how macroeconomic factors influence it? Go back to 2006/2007 when the Fed began lowering rates, then look at 2008 when the crash occurred from the big bank over-leveraging. The Fed was going to continue lowering rates to prop up the stock market, that right there is the time to BUY solid companies that will be around in the next 5 - 10 years.
The moment "the recovery" (whatever that was supposed to be) occurred and we got to about late 2014, maybe early 2015, it was time to get the hell OUT. The Fed was not going to let the party go on forever and the rates were going to come back up. I'm advocating to do what financial advisers (who want your management fee) don't want you to do, and that's LEARN AND TIME the market. Come in, get the gains, and get the hell out before the party comes crashing down.
Stock investing is an adventure, but what type of adventure do you want?
- You could have a water slide, where you buy too high and end up sliding all the way down into the deep.
- Or, you could have a roller coaster, where you stay strapped in a cart going up, down, up, down, up, down, up, down, all around, for 20 - 30 years and HOPE to whatever God you pray to that you end up on top.
- Or, you can take my advice, and go mountain climbing. What do I mean? I mean you buy a stock when it's low (when stocks have low demand), and then you let the appreciation of the stock "climb up" to the estimated TOP or "over-valuation" of said stock to where there's high demand for it, then you sell it off during that high demand "top of the mountain" peek.
This is why "buy, hold and forget it" makes NO SENSE.
Buy and hold of index funds makes great sense if you're young and are investing for the long term -- such as 20 or 30 years. The reason it works is that indexing actually puts the odds in the investor's favor.
Over the long haul the SP500 and the Dow generally trends up because the indexes cull out the losers and replace them with companies that are actively generating revenue and not bankrupt or dying on the vine. Essentially the indexes act as fund managers who don't manage very often (they definitely don't churn) and they do it for free. That's why index funds have very low fees.
And so with an index fund you're getting a basket of big caps that are periodically refreshed at very low fees. Inflation causes revenues to go up (even if the company is not growing). Book values go up as assets are valued with inflated dollars. They odds are really stacked in the investor's favor.
The only way this strategy fails is in a long-term massive depression-deflation scenario.
Buy and hold of index funds makes great sense if you're young and are investing for the long term -- such as 20 or 30 years. The reason it works is that indexing actually puts the odds in the investor's favor.
Over the long haul the SP500 and the Dow generally trends up because the indexes cull out the losers and replace them with companies that are actively generating revenue and not bankrupt or dying on the vine. Essentially the indexes act as fund managers who don't manage very often (they definitely don't churn) and they do it for free. That's why index funds have very low fees.
And so with an index fund you're getting a basket of big caps that are periodically refreshed at very low fees. Inflation causes revenues to go up (even if the company is not growing). Book values go up as assets are valued with inflated dollars. They odds are really stacked in the investor's favor.
The only way this strategy fails is in a long-term massive depression-deflation scenario.
The reason that the strategy fails is that people tend to need access to cash during the worse periods of the stock market. Of course if someone has tons of cash and doesn't care about what the market does, then no problem. But then what is the purpose other than to gain more wealth than what one needs? I guess for some it is a hobby then.
The reason that the strategy fails is that people tend to need access to cash during the worse periods of the stock market. Of course if someone has tons of cash and doesn't care about what the market does, then no problem. But then what is the purpose other than to gain more wealth than what one needs? I guess for some it is a hobby then.
This makes no sense to me. My needs to access cash are unrelated to the market. I certainly don't invest funds that are needed for daily, weekly or even annual expenses. That's a different bucket entirely, and is unaffected by the value of the market.
If you need more access to cash during a bad market, you're doing it wrong.
The reason that the strategy fails is that people tend to need access to cash during the worse periods of the stock market. Of course if someone has tons of cash and doesn't care about what the market does, then no problem. But then what is the purpose other than to gain more wealth than what one needs? I guess for some it is a hobby then.
then they planned wrong . you can't blame bad behavior on markets . taking long term investments and using the money for short term needs is one of the biggest mistake anyone can make .
I've said my piece. The rest is learned from experience.
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