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I don't hear jotucker99 making the case for cash versus equities (perhaps in another thread - not here). I hear him/her making the case for brokered CDs - relatively long term ones. And I often make a broader argument in favor of various flavors of fixed income - including high quality municipal bonds in taxable accounts (used to like BABs - taxable Build America Bonds - in tax-free accounts - but they're close to being dinosaurs - almost extinct now).
Note that one reason I have championed brokered CDs over the years is they have almost always had (much) higher yields than treasuries or safe high quality corporate bonds of comparable maturity lengths. Ranging from 100-150 bp more. Up until this most recent swoon in interest rates (the last couple of weeks) - I was still able to get about 3.125% on 10 year brokered CDs - when the 10 year treasury note was yielding about 2% (and high grade corporate bonds were yielding hardly anything more than that). This is one area where small investors have it over the big guys. Because the big guys can't take advantage of FDIC insurance. Granted - brokered CDs are a heck of a lot less liquid than treasuries - but that's not important unless you're a trader. Also - for older people - like many on the Retirement Forum - all of these brokered CDs have "death puts". So - if you die - your heirs can redeem them for par (100) - regardless of their market price at the time of death.
There is a place for cash in a portfolio - for various reasons. But cash really isn't an investment. And - like I said - I don't hear jotucker99 saying that. Robyn
Who's 10 year cd did you recently purchase at 3.125%?
If i remember he was pro cd and couldn't understand why go anywhere else. Then his tune switched to may be he would dabble if we dropped. He was solely in to investing in his own business . Which is not passive investing .
This forum doesn't make the market. In terms of reality no one buys 20-30 year CDs...
I have been buying long term fixed income since the 1970's. Got my head handed to me way back then (not only in fixed income but in equities too - tax loss selling lessened the pain). Luckily - I was just starting out - with a little bit of money - and learned a lot. Learned more and more as the years passed - in lots of investment areas. Have had to learn more too - especially when it comes to technology. You know - there used to be a time when one couldn't trade/invest on line .
I still have 30 year treasuries I bought with an 8 3/4% coupon. They won't mature until 2020. Wish I had bought (a lot) more. I still have lots of munis with 5%+ coupons that can't be called for 2-7 years. I really don't understand the aversion to buying long term fixed income at the right times when it comes to people who are talking about buying and holding equities basically forever.
I think it behooves (especially younger) people to learn about the fixed income markets. Because there will undoubtedly be good or excellent buying opportunities there in years/decades to come. Probably not as good as those that existed in the 80's - but decent nonetheless.
There are other markets too. Currencies - commodities - many readily accessible through ETFs these days (although various flavors of ETFs have various pluses and minuses). I didn't start with ETFs until about 2006 (when Fidelity changed all its rules on sector fund trading - which I used to do). And it has been a very steep learning curving for me in the past decade. And - I am still learning all the time. It's honestly a lot of fun . Robyn
P.S. If I am confusing people - 90%+ of our portfolio is safe plain vanilla fixed income. It pays the bills. And I trade the rest through ETFs.
I just don't think the next 30 years is going to look like 1985 - 2015, I don't. I think the next 30 years is going to reshape the way people see the stock market as a whole..
I look at 1982-2000 and 2000-2016 as 2 very distinct periods (but only in retrospect - couldn't have known in advance). Also - I don't much worry about the next 30 years - because I'm 68 now. OTOH - I manage my father's money - and he is 97 .
Overall - my equities positions are based on daily trading signals. Guess when you're old like I am - daily signals make more sense than figuring out what will be the case 30 years down the road.
Overall - our youngest adults - the millennials - don't seem to be much interested in investing in anything. Perhaps that's because they don't have money to invest. Whatever the reason - they're not a significant market force IMO. Neither are old people in the US who are selling stocks in retirement. The major movers of markets these days are sovereign wealth funds - hedge funds - trading desks from large financial institutions. And a bunch of computers (HFT/algorithmic trading now accounts for over 50% of trading volume last time I looked). Which is why we're seeing 25-50 handle moves on the SP500 in 24 hour periods now.
I am not sure how I'd feel about this if I were 28 and investing $10,000 - but - at 68 - with considerably more money - I am willing to play the game - but only with a relatively small amount of money.
The most important thing for me as an older retired person who couldn't return to work now is locking in as much income as I can in terms of safe fixed income investments to pay bills down the road. Because I suspect we in the US might go to negative interest rates. And - if anyone thinks that is great for equities markets - look at Japan (or other first world countries with negative interest rates):
Inflation hurts all investments . But the difference is in the growth rate potential during the recovery as inflation falls.
But we are not talking high inflation. What was said was the fed could just have just raised rates to 6% under these conditions with no wage growth and this economy.
Since our inflation rate is pretty much zero now - we don't have much if anything to fall from.
All of the world central banks are pushing on strings now. Which might have some unpleasant consequences down the road. Robyn
...As far as the S&P 500 index - it is a fine index if all one wants to do is invest in large cap companies. The big criticism against it is the exclusion of small cap. A lot of people like small cap because that is where a lot of explosive growth happens, although it is somewhat sporadic.
I trade a bunch of ETFs. Including the Russell 2000 small cap (IWM). Down 22% YOY as of the close yesterday - erratic indeed. I've been out for quite a while. And my entry point when I re-enter will be lower than when I left the party.
Maybe some of you (especially younger computer literate) people should learn how to trade? I started learning how to trade in the 70's - when we had similar up and down and up and down and sideways markets. Trading non-leveraged long only positions will never outperform in a raging bull market - but will never under perform in a big correction or bear market. It might be a useful survival skill for investors in years to come. And it's never been easier to trade than it is today (I used to do charts by hand in the 70's!). Robyn
I trade a bunch of ETFs. Including the Russell 2000 small cap (IWM). Down 22% YOY as of the close yesterday - erratic indeed. I've been out for quite a while. And my entry point when I re-enter will be lower than when I left the party.
Maybe some of you (especially younger computer literate) people should learn how to trade? I started learning how to trade in the 70's - when we had similar up and down and up and down and sideways markets. Trading non-leveraged long only positions will never outperform in a raging bull market - but will never under perform in a big correction or bear market. It might be a useful survival skill for investors in years to come. And it's never been easier to trade than it is today (I used to do charts by hand in the 70's!). Robyn
Well this is false. When you go with absolutes you lose. Plenty of people under perform the market in bear markets trading, even non-levered etfs
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