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My wife and I are in our late 30s. Our careers and other environmental factors mandated that we stay in school a very long time, so we are just starting out in the 'real world'. We have only recently settled into permanent positions. Both of us will have pensions and contribute the maximum to our 401K accounts each year. In addition, we purchase the maximum Roth IRAs each year. Beyond these investments we are 'sitting' on ~100K in a 7 month CD at 3% interest, but are confused whether to invest it in stocks for the long term or to hold on to it for a bit at 3% interest until the economy picks up and then after invest in stocks. It is a question of when to invest rather than whether to invest in stocks in our current situation. We will have an additional ~25K/yr to invest in future years, so ultimately we are formulating a long-term strategy.
We believe that investment amateurs, such as us, can never 'time' the market. Perhaps no one can, but then again when you look at someone like Warren Buffet and his return record of ~20% it does make you rethink the impossibility of it all!
Given the current economic climate, can one say with any certainty that this is NOT a good time to invest? Many of our friends are, in their words, riding out the investment storm. With this 100K to invest should we voluntarily enter the eye of a hurricane, knowing that some day the sun will again shine? Some articles suggest the complete opposite – that this is actually the best time to invest because prices are artificially low. Do you believe that even in this economy that the stock market will yield greater than 3-5% in the near term, say over the next 5 years?
Among various possibilities, we are considering a low-cost index fund for our near term investments, such as a Vanguard fund, as a compromise to our stock investment jitters. Thoughts? Perhaps we should invest in a company that produces antacid tablets, as it will likely show strong profits in the years ahead!
Invest on the short side. Markets are going lower from here. We may hold up into the election (I doubt it), but if you thought 2008 was bad, wait till next year. Real estate has a long way to correct, inflation has yet to be realized, and commodities will go through the roof.
Invest on the short side. Markets are going lower from here. We may hold up into the election (I doubt it), but if you thought 2008 was bad, wait till next year. Real estate has a long way to correct, inflation has yet to be realized, and commodities will go through the roof.
I was thinking the same thing. Deflation then inflation/hyperinflation. What do you think of ultrashort fianancials like SKF?
I was thinking the same thing. Deflation then inflation/hyperinflation. What do you think of ultrashort fianancials like SKF?
It's obviously a buy, but I'm betting it'll get cheaper at some point. I think the rally isn't over yet. We might be heading back towards 11350-11400 near term, but I think we'll get one final bounce and a push to 12000 before things deteriorate and we make the next leg down to 10000. If it gets down to $100 at any point, that's where I'm buying.
I wouldn't recommend shorting for folks new to investing. With inflation north of 4%, it may be better to put some money to work. I'm in the group that thinks many stocks have been knocked down so I am a buyer (have had 30% of portfolio in cash the last two years).
To play it safe you can keep 50-60K in Cds, and maybe allocate 10K in each of the following areas. Market Index fund, Small cap stock fund, Growth & Income fund, International fund. Or maybe buy 2 funds of each type for 5k each.
FYI in the last two months I have purchased GE, F, BAC, PFE for long term holds. Looking at MMM, MRK, UNH, MCD as well
We believe that investment amateurs, such as us, can never 'time' the market. Perhaps no one can, but then again when you look at someone like Warren Buffet and his return record of ~20% it does make you rethink the impossibility of it all!
Here are a couple of places (First one free, second one not) that have interesting records on timing the market:
First, build up a 6 month emergency fund (CDs, money market fund). Any money beyond that I would put in the stock and bond markets, given your age. You need to decide on an asset allocation you are comfortable with. Personally, I would choose an 80:20 stock-bond allocation. The stock portion I would divide 45:45:10 between US stock index, foreign stock index, and REIT index. The bond portion I would put in a total bond index (if in a tax-sheltered account), or municipal bond index (if in a taxable account).
These are basic allocations I would use if the account is relatively small. Once you hit $500K, I would start adding some "niche" investments like precious metals and TIPs for more diversification, but I won't devote more than 10% of the total account into these.
Lastly, don't forget your human capital. If you are in an industry that is recession proof and you have a reasonable chance of keeping your job for the long haul, then you can afford to be more aggressive - just keep plowing your savings into the investment account. If you are in a weak industry, or your jobs are seasonal in nature, you need to be more conservative (keep more cash and bonds on hand).
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