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well...you were a brave man (and a gambler). When the market hit bottom 2 years ago, the consensus was "cash is king". You have 30% gain now. But unless you take the profit and get out of market and never get back in, you won't know what you will end up with 1 year from now.
short term a coin toss is about right as to where you will be. but long term the markets smooth out like silk. you can take almost any 15 year period. either pick it randomly or in order and you will find returns on equities markets are with in 1% of each other way more ofton then not.
thats why equities are a long term investment and in my opinion anything less then 15 years time frame is no guarantee you will be up.
even at 65 you still have money you wont need to eat with for 30 years and thats still money that can go into equities.
people put money in and before its even gone a few market cycles expect to see growth and huge gains... your money has to pay its dues first and that can take more then a decade .
it has nothing to do with timing when your a long term investor. its all about diversification so your not captive to just one part of the market cycle and it has to do with a plan that includes rebalancing for taking what went up and buying more of what didnt. that plan shouldnt be by the seat of your pants either. all emotion should be out of the equation about rebalancing or adding more money to the portfolio.
i always point out that a simple mix of gold,long term treasuries ,cash and a total market fund averaged cagr over 9% a year for almost 40 years just rebalancing once a year back to the origonal percentages.
in fact even if you screwed up and bought gold at almost 1,000 bucks in the 80's ,just rebalancing that gold all those years in the above portfolio has now left you with a 9.8% average annual return on the gold vs a 9.2% return on the equities. know what the average small investor got according to morningstar? 3.5% is all they got as they jump here,jump there and try to buy whats hot and ditch whats not.
that is why i say forget where things are today. you buy your portfolio as a package and it acts as a package and isolating each part into whether you think its high now or low is silly. i though oil in the 1990's at 40 a barrell was crazy high, since we just were at 10 bucks a barrel. well it went to almost 140 a barrel from there, go figure.
anytime you think your smarter then the markets and got it all figured out the markets will teach you they can be irrational alot longer then you can remain solvent. remember its not what we dont know that causes us to fail---its what we think we do know that aint so.
want to know my definition of investing? when you think your smarter then everyone else and you know when to buy what thats is speculating.. when you accept the market returns the same as everyone else gets for investing in those markets without trying to outsmart them and beat them , thats investing... unfourtunetly far to many of us are speculators and end up doing poorly and complaining how investing is a suckers game.
Last edited by mathjak107; 03-22-2011 at 03:59 AM..
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in fact even if you screwed up and bought gold at almost 1,000 bucks in the 80's ,just rebalancing that gold all those years in the above portfolio has now left you with a 9.8% average annual return on the gold vs a 9.2% return on the equities. know what the average small investor got according to morningstar? 3.5% is all they got as they jump here,jump there and try to buy whats hot and ditch whats not.
....
right.
but it would be unfortunate if a person bought gold in the 80's and bought stocks in the dot com era, then needed to retire in 2008.
oh and the average 8% annual return that everybody belives, it really depends on what period you look at.
actually you can pull out chunks of 15 year periods of time and like i said your returns will be within 1% of each other more than likely. a 50/50 mix was around 7%.
buying gold or any one asset class is a speculation at best.. no telling what will happen,. thats not investing. but a comprehensive portfolio that included you rebalancing that gold in your portfolio since the 1980's would have left you pretty much okay anyway. in fact just the gold portion would have fared just fine still returning over 7% annual cagr return. its all about having a strategy , its not the asset class so much as the plan that will determine how you do long term. thats because everything cycles around to its day in the sun and its day in hell. thats why a successful investor holds them all and doesnt try to predict which one is next. you cant.
Last edited by mathjak107; 03-22-2011 at 05:21 PM..
What do I do with $55,000 sitting in my savings account? I've gone through some life struggles, but finally back on my feet. I fortunately have my 401k intact, and this money is more a rainy day, so it needs to be accessible within 2-3 weeks as cash. Any advice? I'm getting 1.2% right now on it with Discover, but I don't know if I can do better. I know it's not alot, but if I could get even an extra 1% per year, that enough to take a little trip.
Are you near Va.?
I have an Uncle in S.C. and he has 50% of his estate in a bank in Va.
So, somewhere up there, he is getting a good interest rate on some account. Why else put it 350 miles away?
He has not told me his rate, but maybe you can do a search in Va.
I can tell you the bank might be near Virginia Beach because he has relatives near there.
I had a checking account in S.C. paying 3.35% and they just lowered that to 1.25% so I moved the funds.
What do I do with $55,000 sitting in my savings account? I've gone through some life struggles, but finally back on my feet. I fortunately have my 401k intact, and this money is more a rainy day, so it needs to be accessible within 2-3 weeks as cash. Any advice? I'm getting 1.2% right now on it with Discover, but I don't know if I can do better. I know it's not alot, but if I could get even an extra 1% per year, that enough to take a little trip.
Congratulations on getting back on your feet! Obviously having $55k saved is quite an accomplishment, and 1% interest deserves nothing more than a yawn.
I know a lot of people have responded to this thread, but one stable fund I've found (and would highly recommend) is DEW - Wisdomtree Global Equity Fund. An ETF is an Exchange Traded Fund, and Wisdomtree takes the highest paying divend companies from the S&P500 for their portfolio. They pay about 3-6% in dividends a year historically, and they grow very close in line with the S&P500. I have half my savings in that, and the other half I day trade.
If you would like any more information, just let me know!
ever wonder why the dividends are almost 2 to 3x the s&p 500 average?
hint: those companies arent doing so well or have been lousy performers..
reminds me of the dogs of the dow theory. that worked for years ,well that was until i tried it . all those companies that were paying such high dividends finally couldnt do it any more. quite a few i had went under.
that theory lagged every 3,5,10 and 20 year time frame as the highest dividend payers either cut,suspended the dividends or outright failed.
im not saying it wont work long term for wisdom tree but i am saying its far to high a risk in my opinion for a newbee. DEW and DLN from wisdom tree have no long term history at this stage so i would be very cautious about it. look at how DVY the darling of wall street got smashed as those high dividend paying stocks they hand picked using sophisticated software and analysis got pummeled. its five year return is .12%. prior to its collapse you couldnt listen to a financial show or read a publication without seeing DVY come up somewhere as the new darling of wall street.
how things behave in up markets is only one aspect. how they behave in the other part of the cycle going down is just as important and thats the part many of these enhanced index funds fall apart in . usually whatever gave them the edge over the index going up bites them on the way down doubly hard.
of course for citi data forum members thats no problem as many here have those crystal balls into the future and know whats coming next so they will simply sell it before the drop. but for the rest of us mortals we are cursed with having to guess.
i can see utilizing something like DLN as one fund in a mix of many others which is fine. i just cant see making it my only bet.
Last edited by mathjak107; 05-09-2011 at 03:25 AM..
If I were you I'd consider putting it into a money market account. Usually those have higher returns.
Most money markets will give you a return of nearly squat these days. Exception would be some of the higher yield funds at different investment firms but many of those require that you keep a balance at or over a certain dollar amount. Those are the funds that require you to trade like mutuals should you need to make a withdrawal but they are still low risk compared to diving head first into the market.
even money markets arent safe. i hold the distinction of loosing a few bucks when a money market i had owned to much lehman paper and went bust. there is no such thing as risk free. there are things that are a given. one is that after taxes and inflation cash will usually be at a loss especially if inflation kicks up. rates are always behind the inflation curve. no different then today. the cost of living way exceeds rates and that gets worse as inflation kicks up and rates rise.
long term investment returns from all asset classes will most likely beat cash many times over ,short term no one knows.. a good diversified portfolio will win no matter what. while stocks,gold,bonds and cash can only go to zero if they become worthless the reality is they rarely fall by more than 50% and if they do the opposing asset classes soar . they can double,triple etc.
even today long term treasuries at 4.5% today can still provide over a 100% increase in value in a severe flight to safety if rates dive back down such as if we head for a depression or sever recession again..
the answer to safety isnt loading up in cash and hiding under a rock, the answer is designing a mix of investments that dont rule out bad things happening but allow for it and profit from it and thats ageless..
there are many tried and true strategys that work.
the problem is what folks call investing is usually flinging a bunch of money into equities and they bet on only 1 out come ,prosperity. the problem is that while long term they will still do just fine the wait can be a very long time and a heck of a wild ride.
most folks cant take the wild ride so they bail out ,loose money and blame the markets because they did the wrong thing.
Last edited by mathjak107; 05-12-2011 at 03:05 AM..
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