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well thats the issue, at least the house ends up being somewhat of a forced savings... hypothetically its easy for people to say they will invest the difference of initially buying vs renting. in application very few can pull it off and before long renters are renters not by choice but because they blew thru the money they could have put into a house but didnt. eventually unless they become savers overnight they are trapped renting.
in most areas where there is a nice difference between renting and buying intitially like here in nyc the renter has only a decade to do his serious investment thing before that extra money they are putting in each month is
no more.. at the average 3% rent increase the lines eventually cross where buying is cheaper then renting and now the renter no longer has that extra dough hes been investing each month.... its those 10 years where
the renter better take that down payment money and that 20-30% difference each month and invest it .. if they blow it they will probley be behind the homeowner forever.
once those lines cross the renting advantage is diminished greatly
the problem on these forums is people dont realize our brains work very differently when we do things hypothetically versus do things in real time mode with our own real money on the line.
the decisions and actions our brains have us do are not the same under those two different conditions
brain scans have shown we humans hate loosing money more then the rush of making money... our brains give us weighted bad advice when analyzing financial situations and we need to be aware of this.
most folks get whats called analysis paralysis. these folks are always late to the party or never show up at all. there brain has them fearing they are not getting the best deal or things will drop more and these folks never
act or act so late they missed the best part. . they are always the ones on the sidelines going damn, missed it. oh well ill catch it next time.
they wait so long for that ship to come in the pier collapses....
Last edited by mathjak107; 11-09-2009 at 05:18 PM..
Living with mom and dad is not an option for everyone. Do what feels right. Speculation is what got us here in the first place. The only guarantee in life is death. Renting is not a sure thing. Owning property can present problems and speak to all of the retirees who can not retiree because they lost a huge chunk of their money in the stock market. That really burns me up. Good luck everyone.
Living with mom and dad is not an option for everyone. Do what feels right. Speculation is what got us here in the first place. The only guarantee in life is death. Renting is not a sure thing. Owning property can present problems and speak to all of the retirees who can not retiree because they lost a huge chunk of their money in the stock market. That really burns me up. Good luck everyone.
i have to interject one point, well maybe a few points because it just drives me nuts when i see it posted:
why is it folks like to talk about the retirees who lost money in the stock market and cant retire. i got to tell you there are tens of millions of retirees who can retire because of it including myself.
ill say it plain and simple ,anyone who lost money and isnt up well beyond any other asset class over the time frame they should have been saving for retirement is a speculater and not an investor.. im not the smartest investor but i am a good planner. i have to say anyone who was investing their entire life cant be down,.. they may not have caught the exact high of things but they still grew more money then they would have otherwise . even at the low they had more, forget about the fact if you merely rebalanced things around the low and bought more equity funds you are just about even now.
ITS NOT ABOUT TIMING THE MARKETS-ITS TIME IN THE MARKETS ,thats what makes things work.
anyone who even bought diversified un-managed no brainer index funds would be up big time even with the drop.
my simple portfolio of mutual funds was up from 1987 to the high point before the big drop by over 1300% these are simple nothing special run of the mill funds.. i rolled back to up 1100% now.... do you know how much money that grew even at the low point?" its mind blowing. 100,000 invested when i started saving in 1987 is 1.1 million right now after our drop. my real estate was up about 300% over the same time frame in new york city . to put it in perspective you just about doubled your money in the bank but after inflation and taxes all you got was a guaranteed loss. those are the folks who cant retire, not the investors .
no one can predict what any markets will do today, tomorrow even 10 years out. but long term you are almost guaranteed an amount you will be very happy with.
the dow stood at 1700 in 1987 when i started as a young investor., its over 10,000 today and thats after the 2nd biggest drop in history. that dosnt even reflect properly dividends and splits and dividends account for 1/3 the growth so its actually up more. other indexes are up even more.
anyone saving for retirement had to actually work hard to loose money long term. in fact except for once over the last 100 years you will be hard pressed to find even a long term period of 15 years where markets werent up big time.
speculators attempt to beat the markets returns . they think they are smarter. they are the market timers, they are those that think they can play sectors or trends..
even worse they are grandma and grandpa who think they are investing by buying individual stocks their dopey son inlaw told them to buy or worse their broker.
i have been an investor in all asset classes for over 20 years and i can tell you except for a thrill and speculation im not smart enough to pick a handful of just the right companies at just the right time,in just the right sectors , in just the right market sentiment and even if i guessed right i still dont know what competitors are doing.
mutual funds take out all that company risk, if you diversify they can even take out some market risk. its trying to get better then what the markets give you when folks loose money. the average small investor left to his own devices according to morningstar and ibbotson research get less than a 4% return long term while the markets do 9-11%.... they buy when they should sell and sell at exactly the wrong time and dont rebalance buying more looosers for the next run and taking some winners off the table.
guns dont kill people,, people kill people and markets dont loose money long term , people do, by speculating or treating long term investments like short term money makers or poor planning. (please lets not start a gun debate, you get the idea what im saying)
a simple mix of equity funds, long term treasuries,gold and cash would have been up last year not down 40%...
you actually had to speculate in individual stocks because there is nooooooo way your not retiring now because of the markets. had a long term investor not been invested you wouldnt even have close to what you had even after the drop.
retirements arent killed by bad markets, they are killed by speculating and bad planning. no one knows what the future will bring but with 100 years of history behind it im willing to bet folks will still grow alot of money investing for the next 20 years.
NOW BACK TO YOUR REGULARLY SCHEDULED PROGRAM.
Last edited by mathjak107; 11-11-2009 at 03:28 AM..
only other thing ill add is many folks think because they invest only in one asset class or they throw money into a hodge podge of funds in their 401k that they are investing and have a plan..
that by itself is not a plan, a plan includes target percentages so you know when to rebalance and take advantage of what dropped or hasnt had its day in the sun.
a plan has provisions for well in advance of retiring for accumulating enough cash and bonds to have years of withdrawls without liquiding equities. dont forget even retired at 65 you have money that wont be used to eat hopefully for 30 years. thats still long term money and needs to be invested as such.
my plan uses 3 buckets , these have been in place for the last few years as we planned our early retirement. between them i can go 15 years of withdrawls before i have to worry about what the markets are doing ...
when markets are higher i can refill any buckets that have been spent down.
these are the types of things that go with throwing that money in a 401k.. its all part of planning well
why is it folks like to talk about the retirees who lost money in the stock market and cant retire. i got to tell you there are tens of millions of retirees who can retire because of it including myself.
Me, too.
ill say it plain and simple ,anyone who lost money and isnt up well beyond any other asset class over the time frame they should have been saving for retirement is a speculater and not an investor..
Disagree. Lot's of us had money in retirement funds and relied a great deal upon fund managers to invest wisely. Not all funds managers did a good job at all.
ITS NOT ABOUT TIMING THE MARKETS-ITS TIME IN THE MARKETS ,thats what makes things work. True, indeed.
anyone who even bought diversified un-managed no brainer index funds would be up big time even with the drop.
Absolutely false. My wife and I invested our entire ROTH IRA in S&P index funds. We contributed the maximum allowed by law every year until we retired last year. Today, our ROTH funds are worth less than the total investment - not only hasn't gained a cent, but has LOST.
long term you are almost guaranteed an amount you will be very happy with. Historically this is true; over the last few years it is patently false. As you said, though, if you have TIME, leave the money and it will grow, although how much is not measured by history, but my the present.
mutual funds take out all that company risk, if you diversify they can even take out some market risk. Again, simply not true. The mutual funds in which my wife and I invested were different: She in TIAA-CREF and me with Aetna that was bought out by ING.
I started investing in 1984, my wife a few years later. We never made remotely close to six figures so our investments were modest. My total investment in fund #1 (ING) was $16,819.98 and is worth $24,911.60 today. My total investment in fund #2 (deferred comp), started in 1992, was $157,209.53. It is worth $152,979.84 but I have drawn for two years a total of $60,884.36.
My wife started investing in TIAA-CREF in 1993. She put in a total of $143,872.42 and today it is worth $168,862.68.
We both used fund managers and followed advice religiously, adjusting for markets as recommended because we are not savvy investors - nor are 99% of people with retirement funds.
Now, you may have had good advice and we bad, but the FACT is that you make some bad assumptions here about people and their retirement funds and investing. If we had not worked in the State Retirement System, we could not possibly be retired now. But we did and we are and our meager investments are supplementary and nothing more.
Congratulations to you on your great returns; just don't assume that those of us who didn't match your numbers are fools - we are not.
you had to pick the worst fund managers in the world not to be up big time over the last 15 years... in fact i cant find any diversified funds listed not up big time over 15 year time frames...
maybe fees? maybe you got ripped off? maybe they werent diversified funds . like strictly nasdaq....
more than likely your not figuring right for long term investments...
what i think your doing is taking all the money you contributed and without regard for time frame trying to take the total in a down turn and apply it in a lump sum. dont forget alot of that money is still short term money and under 10 or 15 years since you put it in......
its like the markets were stagnent going 10 years out so any money put in under that hasnt been in long enough to grow..
any money from 84 to 87 though has to be substantially up.... even thru the early 90's has has to be up alot.
its long time periods of 15 years or more that will bring it all up substantially .... your new money contributed over the last decade will have its growing period too but it needs more time. if you had put all the money in 15 years ago in one shot you would be very wealthy now but since you are contributing it over time its still a work in progress.
i figure 15 years out for any of the equitie funds i own .
my new contributions over the last decade are still seeing there way clear because i started maxing out my plan and overwhelming old money with new money that hasnt grown yet. . but over the next decade that to should grow nicely...
i assume thats where the confusion between us is... makes sense?
Last edited by mathjak107; 11-11-2009 at 07:04 AM..
I don't know, mathjak. Like I say, I put the money in, met with the advisors semi-annually or more frequently, and adjusted funds as they recommended. The facts are the facts; the numbers are what they are.
The 1984 fund was invested ONLY between 1984 and 1992. After I left the university, I couldn't contribute to that fund any more, so I left it. It is up about 50% since 1992. That seems OK although is is still down from the peak where it had doubled.
The deferred comp fund started in 1992 and I contributed each year until 2006. It bounced with the markets.
I haven't put a dime in since March 2006. Last year I lost a boatload, but this year the funds are up: The ING TSA is up 23.62% this year after losing 40% ++ last year. The deferred comp fund is up 7.13% this year, but I locked it down in fixed and bonds on Oct 2007, knowing I would be drawing on it. It hasn't lost a dime - even last year.
The Roth IRAs, which are true S&P Equity funds through Vanguard, lost over 40% last year and are up 20.88% this year but are still worth just a little less than total contributions. When did Roth start? We got in pretty early when contributions maxed at $3,000 I think.
I guess the bottom line is - don't assume all retirees who lost money are fools. Many (most?) of us just followed instructions. When the blind are led by the blind, they both fall off the cliff. But just as we put our lives in the hands of a doctor we have to pick almost arbitrarily, so we put our investments in the hands of funds our employer dictates and have to trust the reps who (supposedly) know what they are doing.
I am very, very good with my home budget but I am not at all knowledgeable about investments.
The good news is that after 25 years in the state retirement system, I get 55% of my last gross income (avg'ed over 3 years) as a benefit for the rest of my life. My wife, with 20 years in, get 40% of hers, but she made less. Nonetheless, we get enough from those funds to survive and the others will supplement. And my taxable liquid savings are in a CD earning 4.26% right now (until June 1, 2010).
well bottom line is if you got a 15 year time frame in equities there is a good
chance you will do very well. anything less can be iffy, but being only in equity funds isnt the best way either.
the other thing you may have been missing is diversification, and i mean real diversification... not the bogus stuff like buy domestic stocks ,foreign stocks and corporate bonds and everything goes down together because they are all linked .
of course when stocks did poor the outlook for their bonds was poor too
just a simple mix of 25% each
long term treasuries
a total market index fund
a gold bullion fund
cash
would have returned not only a positive return last year but over 9% average over the last 35 years......
last year stocks down 40% , long term treasuries up 28%, gold up.... the 2 pulled the mix positive for the year.
thats diversification..... not what most think they have as diversification
buying one asset class and expecting that asset class to perform is a gamble.... while stocks returned nothing the last decade that mix is up 9-1/2% a year on average..
part of your problem is probley having poor diversification..
most traditional ideas of diversification look diversified until you count on it , then everything drops together.
thats why i say its not bad markets but bad planning that kills retirements
Last edited by mathjak107; 11-11-2009 at 07:42 AM..
Wish I'd met you about 25 years ago. You obviously know more than my advisers did. Yes, their diversification was all in funds. We didn't have a lot of choice. This fund or that. They generally chose the ones with the greatest returns over 1, 3, 5, and 10 years. Some stocks ("growth funds"), some bonds, some real estate, some foreign (usually 10%), but never gold. I don't think gold was ever an option, but I'm not sure.
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You obviously know more than my advisers did. Yes, their diversification was all in funds. We didn't have a lot of choice. This fund or that. They generally chose the ones with the greatest returns over 1, 3, 5, and 10 years. Some stocks ("growth funds"), some bonds, some real estate, some foreign (usually 10%), but never gold. I don't think gold was ever an option, but I'm not sure.
