Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Others have objected about the p/e comment. While it certainly is not the only consideration, it is quite a big one. And paying way too high a p/e will almost certainly result in poor future returns.
I agree that PE's are not generally excessive today. People tend to look at only the S&P500 p/e, which I think is a mistake. Looking at values of individual companies can give a lot of insight, even for people who don't plan on buying stocks directly.
We can also look at dividend yields. I just scanned the DJIA and I see about half of them have yields north of 3%. This is nearly double the yield on the 10-year Treasury note, and I think there are few DJIA dividends that are in any sort of trouble. Maybe Chevron.
A correction is what occurs to a previous uptrend. It gives back a certain percentage (25, 38, 50, 62, 75, or 100) of the change and not the absolute value in the underlying index. The Dow Jones Industrial Average is about 5 percent away in absolute terms from the 25 percent correction of the 2009-2015 market.
A lot of young people made a lot of money in 2007-2009 because they had just started maxing out their retirement accounts. Considering how early I am in the cycle and I am just starting to put substantial amounts of money in the market I like this type of market. Allows me to get a lot more in at lower levels.
Doubtless it's thrilling to be starting out at a market-bottom (if indeed the present is a bottom), especially if your initial foray into savings/investment was in cash, awaiting deployment in equities. But the very definition of "starting out" means that as compared to lifetime earnings and accumulation, you are, well, just starting out.
Suppose that a young-ish person accumulated $100K in cash, after paying off student-loans and whatnot, over the course of 5 years. This person then puts all of this money into stocks, nailing exactly the market bottom, and in 5 years has 200% returns. Awesome, no? But wait… said person has another 30 years left, of working and earning and accumulating and investing. Fast forward another decade beyond those 5 years of glorious returns. Now our erstwhile young investor is middle-aged. Much, much more money has been plowed into the market by him/her in the intervening years, than in the initial investment. And if the market zoomed up from its nadir, only to plateau and oscillate thereafter, then those paltry gains average out to a much more significant drag, overwhelming the initial gains.
What we really want is a huge huge huge bull-market in the years just before we conclude contributing to our investments (or to the portion of investments allocated to equities). What happens early in our investment-careers matters psychologically (scarring or emboldening us for life), but the specifically financial impact is limited.
Quote:
Originally Posted by mizzourah2006
If this turns long term like Japan, I'm not even sure cash would be good, you'd want to know who the next US will be and own their currency.
From time to time, one hears that America is finished, that it's finally met its apogee and will thenceforth inexorably decline. But who will replace it? Japan zoomed and faded, but Japan's rise was somewhat artificial, and its decline was easily absorbed by global markets. The idea of China waiting at the sidelines to overtake a wounded America, has seemed to be attractive for 2+ decades now. A wise and patient nation, with an industrious and longsuffering population, ready to supplant a tired and self-vitiated giant. But that's not happened, for so many reasons. No hegemony is eternal, and eventually some other nation or bloc of nations will replace America as top-dog (at least in commerce, business and investment). But not for a while. So if America does seriously falter, the whole world is in big trouble.
Last edited by ohio_peasant; 02-11-2016 at 10:52 AM..
I don't gamble with retirement money. However, I watch economic events closely for what it means for my son and his generation. It is really quite nerve racking.
Same here.....my son wanted to get into the market earlier last year, DOW was at around the 18K mark...he just started a job and was being advised to start his 401k right away by "financial professionals" at an orientation seminar....they even offered to help sign him up right there and start scheduling contributions. I told him he'd be crazy to start throwing money in since it looked like a top and it would be the catch a falling knife situation. Told him to hoard cash and bank it waiting for it to settle out or at least for a much lower entry point. He listened and is happy to be standing by and getting in where his money can do something except drop.
Market timing???......yes....but in this case it looks like it works despite those here who say it never does.
If he passed up on a company match for his contribution, it doesn't make a lot of sense to forego opening a 401K. At the least, he could've put it in the most conservative option and let it build up until he was comfortable with investing.
If he passed up on a company match for his contribution, it doesn't make a lot of sense to forego opening a 401K. At the least, he could've put it in the most conservative option and let it build up until he was comfortable with investing.
+1 on this. Even if he put his contribution in a money market fund, he would still get his company match and a deferred tax exemption on money earned until he decided where to put his money.
Where I work, the company match is $1.00/hour so it's like getting a small raise that adds up over the years.
The bottom line is that it's not what you make, it's what you keep.
Same here.....my son wanted to get into the market earlier last year, DOW was at around the 18K mark...he just started a job and was being advised to start his 401k right away by "financial professionals" at an orientation seminar....they even offered to help sign him up right there and start scheduling contributions. I told him he'd be crazy to start throwing money in since it looked like a top and it would be the catch a falling knife situation. Told him to hoard cash and bank it waiting for it to settle out or at least for a much lower entry point. He listened and is happy to be standing by and getting in where his money can do something except drop.
Market timing???......yes....but in this case it looks like it works despite those here who say it never does.
Every 401K has a fixed income/bond option. If your son's company has a match provision he is forgoing income by not participating.
I see nothing to be gained by not investing. You missed out on a teaching moment.
Every 401K has a fixed income/bond option. If your son's company has a match provision he is forgoing income by not participating.
I see nothing to be gained by not investing. You missed out on a teaching moment.
No....I didn't.
I neglected to mention I advised him to instead dedicate the money he would be paying into a 401K at this time to paying down his college Stafford loan (@ 6.8 %).
With the raping going on on Wall Street I think a guaranteed return on the saving that compounding interest is the best advice and beats what he'd be seeing in a 401k for a while (even with any co. match the other way).
Same here.....my son wanted to get into the market earlier last year, DOW was at around the 18K mark..... I told him he'd be crazy to start throwing money in since it looked like a top and it would be the catch a falling knife situation.
Uncanny... clairvoyant! I'm a stodgy buy-and-hold type, who ignores hunches, either pro or con. But had I been a betting man, in the summer of 2015 (when the DOW was at around 18,000) I would have guessed that it would have ended 2015 at 20,000... and would have muscled its way to 22500 by the end of 2016. And I would have sold puts (options) with a strike-price at 19,000. Why? Because after a period of stagnation (as of the summer of 2015), I was convinced that the market was finally ready to break out of its doldrums. Oh, and I would have called the Nikkei to be at 27,000 at this point (February 2016).
It's a good thing that I stick with buy-and-hold!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
