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No one knows what the future holds, but to say the stock market hasn't gone up over time, even despite major crashes, is simply incorrect.
As I say like a broken record, it's usually best to have a stock allocation of 50-75% of your portfolio with the rest in bonds and cash. Better yet, just put it in a good balanced mutual fund and leave it alone.
Vanguard Wellesley Income is good for the chicken little set. It's ~60% bonds and ~40% stocks.
For those who want to be a bit more aggressive with a stock allocation in the 60-75% range, these funds have tended to match or beat the S&P 500 over long periods of time with less volatility:
Vanguard Wellington
T. Rowe Price Capital Appreciation
Oakmark Equity and Income
Dodge and Cox Balanced
Mairs and Power Balanced
FPA Crescent
Just a question. How would this portfolio work if interest rates were to increase? Wouldn't stocks and bonds not do well? Kind of like the 70's, and a commodities boom would take place?
The gold price has gone down recently and comex and GLD's holdings are down 33% by some big buyers of physical. A remarkable thing is, the gold price got hit hard right after Germany wanted their gold back, and now 400 tons is withdrawn from these two?
I also know banks are buying up stocks en mass. hmmm, Interest rates are very low and bonds might not do well going forward.
I think the market is starting to overtake interest rates and that is why the fed doesn't know if they are tightening or loosening, because they aren't in control anymore. I also think stocks have been pushed up, gold pushed down, and this is about to reverse course.
Just a question. How would this portfolio work if interest rates were to increase? Wouldn't stocks and bonds not do well? Kind of like the 70's, and a commodities boom would take place?
I tend to think they will get hit if interest rates really spike but will still do ok if rates go up gradually.
I'm not really big on gold. It's really volatile and unpredictable...but I think owning 5% of gold commodities in your portfolio can be ok as a diversifier.
As far as the funds I mentioned, during the 1970s, $10,000 invested in the following on 12/31/69 would be worth these amounts on 12/31/79:
S&P 500: $18,134.72
Vanguard Wellington: $16,469.36
Dodge and Cox Balanced: $17,489.64
Mairs and Power Balanced: $21,949.29
The other funds weren't around back in 1969. However Vanguard Wellesley income's inception date was later in 1970. 10K in the fund from 6/30/70 ended up becoming the following on 12/31/79:
$19,739.60 vs. $18,800.87 for the S&P 500 Index.
Not bad for a rotten decade for both stocks and bonds.
I tend to think they will get hit if interest rates really spike but will still do ok if rates go up gradually.
I'm not really big on gold. It's really volatile and unpredictable...but I think owning 5% of gold commodities in your portfolio can be ok as a diversifier.
As far as the funds I mentioned, during the 1970s, $10,000 invested in the following on 12/31/69 would be worth these amounts on 12/31/79:
S&P 500: $18,134.72
Vanguard Wellington: $16,469.36
Dodge and Cox Balanced: $17,489.64
Mairs and Power Balanced: $21,949.29
The other funds weren't around back in 1969. However Vanguard Wellesley income's inception date was later in 1970. 10K in the fund from 6/30/70 ended up becoming the following on 12/31/79:
$19,739.60 vs. $18,800.87 for the S&P 500 Index.
Not bad for a rotten decade for both stocks and bonds.
Thanks for your feedback and solid reasoning. I'll look into some of the mutual funds you recommended and pick some up in my 401K for the long haul.
Monetary base is irrelevant. There's two factors. Monetary base and the amount actually in circulation above and beyond reserve requirements. The latter has barely budged and what impacts the economy, not a pile of cash sitting on reserve in a bank. Basically, the Fed is going nuts expanding the monetary base because everyone (meaning large corporations) is sitting on huge piles of money twiddling their fingers. The actual amount of money in circulation? Not any more than normal. The problem is it's a ticking time bomb. Is the Fed going to be able to contract the monetary base fast enough once all the money currently sitting around doing nothing starts getting put to work in the economy? Probably not. If all that monetary base is suddenly actually IN the economy... well, yeah, the rally will be sustainable in DOW measures. The DOW usually does quite well in inflationary periods since it is priced in nominal dollars.
And no, that doesn't mean rush out and buy some gold. Gold is a terrible inflation hedge, contrary to the old wive's tale. It's not even really correlated to inflation rates at all. I suppose you could be in long-term treasuries or something. At least gold has a chance of going up.
"The stock market" is not a monolithic entity: In times of trial, some stocks will fall while other stocks will rise. In times of plenty, some stocks will rise while others will fall and/or stagnate.
The stock market is as it always was. Just do your research, invest carefully and watch your funds rise. Don't rely on others to do your research for you.
Alternately, you can play the risk/reward game. A fortune can be made or lost overnight with some of the penny stocks. Just know what you want and what you're willing to risk.
Their are people wearing Dow 20,000 hats right now. Every financial "expert" I've talked to in the past 6 months have told me that I should be fully invested. Not one is concerned. Very strange! Wait when have I heard that before.
The basic trend of the stock markets is upwards - over the course of U.S. history. This is because company earnings, entrepreneurship and economic growth fundamentally drive the U.S. stock markets.
In this year alone, the S&P 500 is up 18%. If you're not invested in the stock market, then you continually miss out on these big upwards movements.
The basic trend of the stock markets is upwards - over the course of U.S. history. This is because company earnings, entrepreneurship and economic growth fundamentally drive the U.S. stock markets.
In this year alone, the S&P 500 is up 18%. If you're not invested in the stock market, then you continually miss out on these big upwards movements.
I would argue that stocks are up because of inflation and mostly inflation. the real rate of inflation is closer to 6-10%/yr.
If this is the case and stocks return 10-12%, take out taxes, what are you left with?
I am an investor in silver bullion right here, and that is just me. I am not advocating anyone else to follow me to the T, but I like silver at this price down here. I also think gold is a good buy.
Gold does will in inflation, and deflation. it doesn't do well in disinflation.
Silver and gold are a better inflation hedge than people realize. Look at the price of gold after Nixon closed the gold window in 1971. It's up from, $35 an ounce to $1,326?
The melt value of pre 1964 silver coins is quite high. Last I looked, it was a little higher than 14x face value. And that's with silver down, 60% from its high?
I've never seen gold as a beanie baby or stuffed animal (in terms of being "worthless", or having no purchasing power). If you put a stuffed animal in a drawer 50 years ago, would it have gone up 14x in value by now?
People say gold has no intrinsic value. The dollar has no intrinsic value either. It can be printed on command (by trillions). Gold seems more like a claim on human labor. The human labor and resources needed to get gold out of the ground are finite.
Call me stupid, but I fail to realize why every sustained bull-market is a "bubble", as if large and systematic gains are somehow always unjustified, and the recompense for doing well is to inevitably do poorly?
Here are some ideas, the espousal of which is often mutually correlated:
- The stock market is just a giant casino. It doesn't represent any intrinsic worth. It's all fixed.
- The FED is debasing our currency. The FED is a crude monstrosity that's ruining our lives.
- No amount of positive annual inflation rate is a good thing.
- Passive investment is for suckers.
- The present times are profligate, phony and vain. We're all building castles in the air. We're all going to get slammed.
- Government meddling in markets is the root of all evil. Leave markets alone, and they will self-equilibrate.
- All it takes is one "black swan" event, and the whole rotten house of cards will come crashing down.
My own view? Take the exact negation of pretty much all of the above list.
Call me stupid, but I fail to realize why every sustained bull-market is a "bubble", as if large and systematic gains are somehow always unjustified, and the recompense for doing well is to inevitably do poorly?
Here are some ideas, the espousal of which is often mutually correlated:
- The stock market is just a giant casino. It doesn't represent any intrinsic worth. It's all fixed.
- The FED is debasing our currency. The FED is a crude monstrosity that's ruining our lives.
- No amount of positive annual inflation rate is a good thing.
- Passive investment is for suckers.
- The present times are profligate, phony and vain. We're all building castles in the air. We're all going to get slammed.
- Government meddling in markets is the root of all evil. Leave markets alone, and they will self-equilibrate.
- All it takes is one "black swan" event, and the whole rotten house of cards will come crashing down.
My own view? Take the exact negation of pretty much all of the above list.
The recent recession has bred quite a few armchair economists, armed with Google, who feel inclined to repeat the same old rhetoric in the hopes that it will eventually come true.
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