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No one would think your stupid for listening to your pucker factor or not investing in what you don't understand.
We only object with you arguing with those who do understand and telling us we are stupid for not listening to you.
MathJak but I never said you were stupid. The only thing I said in opposition was that people who know and understand (those are the keywords) how to run a profitable business will for the most part always produce higher returns than those investing in stocks.
That's pretty much all I said and research proves me correct when you look at how the wealthy truly got wealthy, it was through running profitable businesses.
I'm very passionate about everything I do in life, including investing. I honestly would love to be making more than 3% forever, and I would love to get to a 7% average over 30 years or even a 10% average. That's going to get to my financial goals MUCH QUICKER.
But the only way I'm going to get to that point, is that I have to understand the Stock Market to where here in August 2015 if I throw some money in, by August 2045 it will have grown to XYZ amount which should average a 6% - 10% per year return before fees. I'm trying to get to this formula going forward so I can make this prediction of what my money will grow to, I know what the average has been over the previous 30 years, but I can't figure out what it's going to do over the next 30 years.
Also I'm not alone in this MathJak, a lot of Millennials are not investing in the Stock Market right now for the same reason I'm not doing it, and it's because we don't understand it.
MathJak but I never said you were stupid. The only thing I said in opposition was that people who know and understand (those are the keywords) how to run a profitable business will for the most part always produce higher returns than those investing in stocks.
That's pretty much all I said and research proves me correct when you look at how the wealthy truly got wealthy, it was through running profitable businesses.
I'm very passionate about everything I do in life, including investing. I honestly would love to be making more than 3% forever, and I would love to get to a 7% average over 30 years or even a 10% average. That's going to get to my financial goals MUCH QUICKER.
But the only way I'm going to get to that point, is that I have to understand the Stock Market to where here in August 2015 if I throw some money in, by August 2045 it will have grown to XYZ amount which should average a 6% - 10% per year return before fees. I'm trying to get to this formula going forward so I can make this prediction of what my money will grow to, I know what the average has been over the previous 30 years, but I can't figure out what it's going to do over the next 30 years.
Also I'm not alone in this MathJak, a lot of Millennials are not investing in the Stock Market right now for the same reason I'm not doing it, and it's because we don't understand it.
successful people earn their money in their business but the smart ones have that money then working for them compounding in PASSIVE investments as well while their business keeps the money flowing so it can work for them over time diversified away from the business creating that money .
The best advice I have ever received on this topic (and just heard additional justification for it by none other than Tony Robbins) flies in the face of what many professional financial or wealth advisers (people that make money by managing portfolios) recommend... take your 401k money and move it all into the most conservative/protected category available to you (if there's something inflation protected as well - choose that).
It's your money, that you earned with your time (your limited "life" time), and there is no reason to risk it in markets/funds which are without a doubt manipulated by those with much greater knowledge, technology, relationships and money to leverage than you or I ever will have. Additionally, make it so that your "account manager" cannot make money moving things around throughout the year (that is exactly how they earn a living - negotiate a set/acceptible fee for holding your money) and just sit tight adding to your account until you are ready to use it.
Sure you may have friends and or family who make huge gains once in a while your account just plugs along, but you will be insulated from major market adjustments/losses which inevitably strike every few years and wipe out significant percentages of people's retirement savings.
I am not reading this very long thread so apologize if this has been addressed. But please do not do this, this is the absolutely worst suggestion possible and it will guarantee that you will leave money on the table. I'm not sure how many more times this needs to be explained but I'll try again: the best LONG TERM investment is in the stock market. Of course you will have ups and downs (and up 3% is not a down, it blows away ever return this poster is suggesting) but over any length of time longer than a few years it's the only way to invest at least a portion of your portfolio.
Conservative investments today pay nothing. Once inflation and taxes are factored in it's a losing bet every time. Do not be this stupid, please.
Aredhel you say that the growth of Stocks are indeed tied to the growth of the economy in particular as well as the companies within the portfolio. There are other Stock gurus that say this is false, and that, to quote, "The Stock Market is Not The Economy". So who is right, YOU or THEM?
Of course the stock market is not the economy; there's a lot of economic activity that takes place independent of it (such as the activities of wholly-owned individual businesses which don't issue stock, the real estate market, and the commodities market). That doesn't mean that the growth of the economy isn't the underlying factor powering the growth of the stock market as a whole. There's no contradiction there.
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They say that with Stocks you aren't really investing in the underlying companies...
And that's a lie.
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Aredhel this Investment Community on City Data as well as others on the Internet, are speaking out of two sides of their mouth. One minute, as a fixed income "saver", you are blasted all day by these people as being stupid (and yes, they use that terminology) for investing in Long Term CDs and not investing in Stocks, which is to say that if you are earning 3% with the CD then you are "stupid" because you could be earning 7% with the Stock, correct? But then when you turn around and ask them, what do THEY predict the Stock Fund in particular will grow to over the next 20 - 30 years, they strictly state, "I don't know because nothing is guaranteed and I can't predict returns." Why on one hand are they certain that I'm STUPID for not being in the Market, but on the other hand, they can't tell me how much MORE I will make being in the market than being out of it?
But again, THE SAME THING IS TRUE OF BONDS AND FIXED INVESTMENTS! You can't know going forward what the long-term returns of those investments is going to be, either. (You can lock in a rate for a set number of years, but without knowing what the prime interest rate and the inflation rate will be during that time period, you can't know if that fixed rate is even keeping up with inflation, much less earning you any gains). The problem you fear is not unique to stocks.
And we DO have about 140 years of data that show stocks significantly outperform bonds and fixed interest investments over periods longer than 15 years, and it's generally by at least 3-4%.
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The theories in regards to Stock Investing seem to keep changing every decade. There was a time when Index Funds were not as Popular, now everybody swears by them. There was a time when Mutual Funds were all the rave, now nobody likes them.
Not really. Indexed mutual funds weren't invented until the 1970s, and it took a while to show they outperform managed funds and individual stock picking for the average investor. ETFs were invented in the 1990s, and their advantages over mutual funds also took some time to be recognized. Plenty of people still invest in mutual funds because they don't find ETFs to be a significant improvement over them (I am one of them).
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Aredhel you confirmed that things UNRELATED to the financial fundamentals of the company, such as the News Media blasting a CEO for cheating on his wife, can cause the stocks to go down in the short run. You recommend just to keep holding them for the long run as they will eventually "go back up". Again, how do you KNOW they are going to "go back up" and why in the hell does the value of the Stock have to decrease based on something totally UNRELATED to the financial fundamentals of the company? What if something else unrelated pops up and does the same thing? Aredhel YOU SAID the appreciation of the Stock is tied to the fundamentals of the finances of the company and the Economy, but then how does a CEO cheating on his wife cause the stock to go down? How can the News Media make the stock go down Aredhel? You see how this is damn confusing?
You don't understand how folks who aren't very smart can be scared by the news industry into doing stupid things? You don't understand how cool-headed people who ARE smart can take advantage of that situation to pick up something on sale?
If the fundamentals of a company are sound and its earnings are good, a decline in its stock price results in a decline in the stock's price:earnings ratio, and those are the stocks clever investors are looking to buy. Their price eventually goes back up because silly panics don't last forever (but the desire to make money is eternal).
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I will continue to bust my tail off in my Career, live below my means, and invest my savings in Long Term CDs at 3% - 3.5% guaranteed with FDIC Insurance. If according to you guys my plan is "stupid" and I will run out of money in retirement, then so be it, hell I might not even LIVE to see retirement.
If that's your choice, fine. But understand you're going to have to save a lot more money to reach the same final amount for retirement than those of us who invest in the stock market with its much higher long-term rate of return will need to do.
Of course the stock market is not the economy; there's a lot of economic activity that takes place independent of it (such as the activities of wholly-owned individual businesses which don't issue stock, the real estate market, and the commodities market). That doesn't mean that the growth of the economy isn't the underlying factor powering the growth of the stock market as a whole. There's no contradiction there.
Okay, I will take you on your word here as my "gut" tells me that your theory is more correct than theirs in that if the Economy is doing well in general, then the Stocks of the largest companies should be doing well as well AS LONG AS those companies are properly operated.
So going forward I will adapt this theory that the Stock Market's appreciation is tied to the growth of the Economy, which means if I were to do Stock investing I would be looking at spreading out monies in the largest US and Foreign companies just so you know, because I believe the next 30 - 40 years will see the "super-power" status of the US spread out more amongst the top global markets.
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But again, THE SAME THING IS TRUE OF BONDS AND FIXED INVESTMENTS! You can't know going forward what the long-term returns of those investments is going to be, either. (You can lock in a rate for a set number of years, but without knowing what the prime interest rate and the inflation rate will be during that time period, you can't know if that fixed rate is even keeping up with inflation, much less earning you any gains). The problem you fear is not unique to stocks.
Here's the thing with Inflation for me, as you are saying the issue with Long Term Bonds and CDs is that the fixed rate on them for 30 years might be lower than Inflation, I do understand that it has averaged "3%" in the past, but it hasn't seen a 3% average since 2011. It was 2% in 2012, 1.5% in 2013, 1.6% in 2014, and right now for 2015 it's pretty much in a deflation period average.
My CDs have been averaging 2.5% over this entire period of time (2011 - current) and you would look at this and say I'm not beating inflation by that much and thus, I'm almost "losing" money, correct?
But my personal expenses have been going down since 2011. Every year, though better spending practices, better shopping, shifts here and there, my spending has been going DOWN while my quality of life has either sustained itself or increased. So I still don't understand "where" I'm losing money, because the inflation argument would have it to where my personal expenses should be increasing rather than decreasing, correct?
Here's my question for you though, what is wrong with a Portfolio of just Long Term Brokered CDs and Investment Grade Bonds only? How do you feel about a Portfolio like that?
I like PREDICTABLE passive income and returns, because it allows me to make plans at the end of every quarter in terms of my current financial standing. Having a portfolio of investment grade Bonds and Long Term CDs, the only potential "losses" on those for the most part is that Inflation Rate you mentioned, but as I pointed out I have a plan to work around that with efficient spending practices like I have been using, and I don't see inflation going over 2.5% in total. Now if I locked in Fixed Income for 30 years at 6% on average and Inflation goes back to Jimmy Carter days at 12%, then YES then I'm going to be screwed . But 2.5% inflation I can work with that with good spending practices to keep my overall spending down not up, like I have been doing.
So if my expenses stay even or go down, then how does 2.5% average Inflation hurt me? The only thing on the table remaining is taxes which aren't much due to the massive deductions I get for my business.
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And we DO have about 140 years of data that show stocks significantly outperform bonds and fixed interest investments over periods longer than 15 years, and it's generally by at least 3-4%.
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But understand you're going to have to save a lot more money to reach the same final amount for retirement than those of us who invest in the stock market with its much higher long-term rate of return will need to do.
My only issue is that we are still only basing this on the previous decades. As you mentioned about Indexed Mutual Funds not being invented until the mid-70s, ETFs coming out in the 90's, what if something else is invented that makes Stocks not the ideal investment anymore?
Plus, you are correct, stupid investors move based on the Media while smart investors don't, but what if the market is flooded with more stupid investors than smart ones going forward? I mean after all, it's my Generation (Millennials) that will be the new investors and most Millennials react based on rumors, gossip, social media and news media, rather than reacting based on logic.
Overall, here's my predictions and goals here:
* Inflation over the next 40 years: I think will average 2% - 3%
* My Spending: I live below my means and still maintain a good quality of life, I'm not making any kids, not getting married (thus avoiding costly divorces) and I live in a low cost of living area. So even with 2.5% average Inflation, my spending is still going down. The only way Inflation will make me LOSE MONEY if it it jumps up over 5% or jumps into the double digits like it was during Carter's days, then I will be screwed, but I don't believe that's going to happen. The ONLY item in my expenses that has been going up has been my Health Insurance Premiums, which are mainly due to Obamacare, wouldn't you agree?
* Passive Return Goal: Right now I believe the Fed will increase rates and I can get Long Term CDs at 3.5% going forward. I would like to instead get this to 6% going forward but it must be a predictable occurrence as I mentioned. So either the Index Funds are going to do this, putting more in Investment Grade fixed rate Bonds will do this, or a combination. I'm still wrestling with a plan to do this.
I'm honestly more likely to invest in an Investment Grade Bond Portfolio of Blue Chip Companies, rather than their Stock, because unlike their Stock, my Bond isn't going to default because the CEO cheated on his wife. If I hold it until maturity and the company doesn't go belly up in the process, I'm getting PAID. There's no volatility crap, no having my "wealth" (on paper) go down because Jim Cramer thinks a particular CEO is a piece of crap, no having my "wealth" go down because the market is flooded with stupid investors, etc.
good luck locking in 6% any time soon ,perhaps even the next decade or more, after taxes and inflation your 3.50% cd's should be just about be at negative real returns through many of the years . . that is a loss no matter how you want to sugar coat it .
don't try pulling more than 2% at best inflation adjusted when it comes time to live off it .
40% equity's has survived 4% inflation adjusted withdrawals for every 30 year rolling period the last 146 years. less than that has failed far to often to be usable at 4%
seems to me you will limit yourself to half the income through retirement because you are so gun shy as 2% is all that mathematically will be bullet proof not using much equity's .
as far as your bonds , when rates rise those bonds will crap the bed if you need the money short term . rising bond yields and inflation usually hold hands . getting paid back your 1000 bucks 30 years from now even at 2- 3% inflation is a 50% loss in purchasing power on your principal . . that is a loss , period.
there is no magic that makes holding bonds any better when rates and inflation rise .
Last edited by mathjak107; 08-16-2015 at 01:57 PM..
* Inflation over the next 40 years: I think will average 2% - 3%
* My Spending: I live below my means and still maintain a good quality of life, I'm not making any kids, not getting married (thus avoiding costly divorces) and I live in a low cost of living area. So even with 2.5% average Inflation, my spending is still going down. The only way Inflation will make me LOSE MONEY if it it jumps up over 5% or jumps into the double digits like it was during Carter's days, then I will be screwed, but I don't believe that's going to happen. The ONLY item in my expenses that has been going up has been my Health Insurance Premiums, which are mainly due to Obamacare, wouldn't you agree?
* Passive Return Goal: Right now I believe the Fed will increase rates and I can get Long Term CDs at 3.5% going forward. I would like to instead get this to 6% going forward but it must be a predictable occurrence as I mentioned. So either the Index Funds are going to do this, putting more in Investment Grade fixed rate Bonds will do this, or a combination. I'm still wrestling with a plan to do this.
Look at your word choices here: "predictions", "I think", "I believe".
You are confusing your beliefs with facts. We all make the mistake of believing our thoughts are true, but we need to make the effort to snap out of it. There's no way any of us can know the future for sure, about anything. We can make our best guess based on what happened in the past..i.e. we can play the odds...but that is the best we can do. So, based on what has happened in the past (over long periods of time), your investing strategy is likely to produce significantly lower returns than a portfolio with at least some stocks (i.e. 40% or 50%).
Guys, tell you what. I believe everything happens for a reason and there's a reason WHY I found this Forum. To be honest I never knew City Data even had a Forum, I would always use City Data to look up demographics on new cities I was going to move into to confirm they were indeed a suburb.
I found this Forum and immediately began participating mainly in the Economics and Education portion.
I just turned 32 on August 5th, I'm not planning any type of "sit down retirement" until age 65 which is in 33 years.
I admittedly DO NOT understand the Stock Market in total and what I'm going to do, before totally swearing it off, is I'm going to go into a full-fledged in-depth study. I'm going to be looking more into the Stock Market, the Bond Market, how Macro economies affect them both, etc. I come to this with my "theories" on the Stock Market already, but I think I should at least seek to fully understand it before throwing it out the window.
It's going to take me some time, a couple of weeks or maybe even a couple of months, because you guys know I'm a Conservative guy and I do not rush into anything, but once I complete my study I'll come back and update this thread (that I totally hijacked, sorry OP lol), with more information.
Seeing as though I don't fully understand the damn thing (The Stock Market) it makes no sense to swear it off. Like I said, if I can understand this damn thing and incorporate it, giving me a 7% return over the next 32 years rather than an average of 3%, it will be ALL worth the additional study.
Plus with the Fed about to increase rates, stock prices are going to go down to maybe "discount" levels, which means that would be the perfect time for me to enter the Market rather than entering "tomorrow" while the stocks are trading seemingly in an over-valued state.
Guys like me (very conservative investors) should be welcome around the Investment Community more because everybody should hear out our point of view. Trust me, it's not that we don't want to make more money "on our money", it's just that we aren't trying to LOSE our hard-earned money because The Lord knows, I have gone through a significant amount of trouble to get to where I'm at. I'm talking sleep-less nights, emotional breakdowns, stress out of the REAR, etc.
Last edited by jotucker99; 08-16-2015 at 06:42 PM..
Okay, I will take you on your word here as my "gut" tells me that your theory is more correct than theirs in that if the Economy is doing well in general, then the Stocks of the largest companies should be doing well as well AS LONG AS those companies are properly operated.
So going forward I will adapt this theory that the Stock Market's appreciation is tied to the growth of the Economy, which means if I were to do Stock investing I would be looking at spreading out monies in the largest US and Foreign companies just so you know, because I believe the next 30 - 40 years will see the "super-power" status of the US spread out more amongst the top global markets.
Here's the thing with Inflation for me, as you are saying the issue with Long Term Bonds and CDs is that the fixed rate on them for 30 years might be lower than Inflation, I do understand that it has averaged "3%" in the past, but it hasn't seen a 3% average since 2011. It was 2% in 2012, 1.5% in 2013, 1.6% in 2014, and right now for 2015 it's pretty much in a deflation period average.
My CDs have been averaging 2.5% over this entire period of time (2011 - current) and you would look at this and say I'm not beating inflation by that much and thus, I'm almost "losing" money, correct?
But my personal expenses have been going down since 2011. Every year, though better spending practices, better shopping, shifts here and there, my spending has been going DOWN while my quality of life has either sustained itself or increased. So I still don't understand "where" I'm losing money, because the inflation argument would have it to where my personal expenses should be increasing rather than decreasing, correct?
Here's my question for you though, what is wrong with a Portfolio of just Long Term Brokered CDs and Investment Grade Bonds only? How do you feel about a Portfolio like that?
I like PREDICTABLE passive income and returns, because it allows me to make plans at the end of every quarter in terms of my current financial standing. Having a portfolio of investment grade Bonds and Long Term CDs, the only potential "losses" on those for the most part is that Inflation Rate you mentioned, but as I pointed out I have a plan to work around that with efficient spending practices like I have been using, and I don't see inflation going over 2.5% in total. Now if I locked in Fixed Income for 30 years at 6% on average and Inflation goes back to Jimmy Carter days at 12%, then YES then I'm going to be screwed . But 2.5% inflation I can work with that with good spending practices to keep my overall spending down not up, like I have been doing.
So if my expenses stay even or go down, then how does 2.5% average Inflation hurt me? The only thing on the table remaining is taxes which aren't much due to the massive deductions I get for my business.
My only issue is that we are still only basing this on the previous decades. As you mentioned about Indexed Mutual Funds not being invented until the mid-70s, ETFs coming out in the 90's, what if something else is invented that makes Stocks not the ideal investment anymore?
Plus, you are correct, stupid investors move based on the Media while smart investors don't, but what if the market is flooded with more stupid investors than smart ones going forward? I mean after all, it's my Generation (Millennials) that will be the new investors and most Millennials react based on rumors, gossip, social media and news media, rather than reacting based on logic.
Overall, here's my predictions and goals here:
* Inflation over the next 40 years: I think will average 2% - 3%
* My Spending: I live below my means and still maintain a good quality of life, I'm not making any kids, not getting married (thus avoiding costly divorces) and I live in a low cost of living area. So even with 2.5% average Inflation, my spending is still going down. The only way Inflation will make me LOSE MONEY if it it jumps up over 5% or jumps into the double digits like it was during Carter's days, then I will be screwed, but I don't believe that's going to happen. The ONLY item in my expenses that has been going up has been my Health Insurance Premiums, which are mainly due to Obamacare, wouldn't you agree?
* Passive Return Goal: Right now I believe the Fed will increase rates and I can get Long Term CDs at 3.5% going forward. I would like to instead get this to 6% going forward but it must be a predictable occurrence as I mentioned. So either the Index Funds are going to do this, putting more in Investment Grade fixed rate Bonds will do this, or a combination. I'm still wrestling with a plan to do this.
I'm honestly more likely to invest in an Investment Grade Bond Portfolio of Blue Chip Companies, rather than their Stock, because unlike their Stock, my Bond isn't going to default because the CEO cheated on his wife. If I hold it until maturity and the company doesn't go belly up in the process, I'm getting PAID. There's no volatility crap, no having my "wealth" (on paper) go down because Jim Cramer thinks a particular CEO is a piece of crap, no having my "wealth" go down because the market is flooded with stupid investors, etc.
We are talking about investment returns, the fact that your expenses are going down really doesn't matter in this discussion. In fact it only means the gap between what you plan to make and what you should be making is even wider as you have more to invest.
Your last post cleared things up. You do not understand the stock market so you are afraid of it. That and your conservative nature gives you the opinion you are sharing. I'll just say as politely as possible that your ingorance will cost you an astonishing amount of money, especially for someone so young. The numbers do not lie. The long term investor who is not at least partially in the market is making a huge mistake. Your paltry 2.5% return on your CDs is making you very little once inflation, even today's low inflation, and TAXES are factored in. And of course these low inflation rates will not maintain. At some point in time your investments will be losing money, the one thing you are most afraid of.
But again you are conservative by nature. There are plenty of balanced mutual funds that will be safer than others.
Last edited by DaveinMtAiry; 08-17-2015 at 05:00 AM..
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. But 2.5% inflation I can work with that with good spending practices to keep my overall spending down not up, like I have been doing. 
