Stock Market

[BruceB83]

You should always save. If you have a 401(k) invested right (and continually managed by YOU) you can maximize gains and minimize damage. Right now you might (for example) put most of your account into bonds or cash accounts. WRONG! You don't STOP investing when the market slows...this is the complete opposite from what you should do assuming your goal is long-term investing. For that matter, if that is your goal and you are invested in mutual funds, unless the stock market complete tanks, dont even care about what it's doing in it's ups and downs. FACT: There has NEVER, I repeat NEVER been a 10 year period in the market history where the stock market has averaged a loss. As the market in general slides you will be protected, and when the market comes around you move back into growth funds, etc. NO...you don't change your objective until TIMING in relation to retirement causes it...not because the media trys to scare everybody. Selling when things slide downward is NOT what you want to do.

As always, DEFINITELY save and make sure your savings are at least keeping up with inflation. NOT hard to do if you are in mutual funds. If your MF's are not keeping up with inflation then you need to switch MF's. Mutual funds are a good way to send a check and let someone else handle the details, but growth is low and it's pretty expensive in the long run. What? Please, nobody listen to this. A mutual fund is a type of investment, not a type of account. One of my mutual funds has grown 21% in the previous 5 years....beat that in blue chips. You don't "send a check" to the mutual fund management team. On the other hand you could get a Roth IRA and completely handle your retirement on your own, at much greater risk. Again, totally wrong. You are comparing a type of investment against a type of account. A Roth IRA is the type of investment account where your gains are not taxed through capital gains. My Roth IRA is made up of mutual funds. And rewards, if done right. I lost $4k today on the second option, but overall I do OK.

How? The DOW went up 300 points? You need to change your funds. Ok...you only do ok? My MF's are UP for the year, given the recent slide, by still 6%.

Sorry but the information he has given is not correct information. Not trying to be a jerk but don't give financial advice to people if you are not fully educated on the subject. You didn't even come close to making accurate statements. Seriously, you need to talk to your IRA holder to get your some educational materials on this subject. Feel free to ask if you don't know.

 

[BruceB83]

Can't really give any advice, but according to BW "CPI (not including energy and food) rose 2.5% the fourth quarter 2007". That is 10.3% inflation. Whatever you save today will have only 2% of todays buying power 40 years later. That is about saving in cash. Stocks, sure they rise with time, do they rise as fast as inflation ? Some do, but not always. Those retired in 2002 have a nice example to show. CDs, bonds - all insured stuff gives about 5% now, it sure helps a lot to fight inflation, it will leave about 14% of your first year of savings 40 years later.

Saving for retirement when you are 20-30, does it really make any sense ? Am I missing something ? Teach me, I am 32, I will need it soon.

Thank you,
Andrey

Ok. Inflation is NOT 10.3% each year...or anywhere NEAR that. When calculating people's financial plans, we use 3% right now for assumed inflation per year. Even if your investments are only performing on the market "average" (8% on the conservative side...10% on the risky side) then you are beating inflation. So YES, stocks DO perform above inflation. Nobody would invest in stocks or mutual funds if they didn't rise about inflation...that wouldn't make sense now would it???

Saving for retirement when you're 20-30...YES it makes sense if you want to retire beyond comfortably without a huge impact on your monthly finances. I plan on retiring in my early to mid 50's and I will do so without stressing my monthly finances because I have started young. I'm 24 and have had investments for about 3 years now. Time is my best friend right now. Yeah, you should definitely start saving for retirement now. At 32, you're not really too far behind...most people don't have anything at all at 32 so get going and you'll be fine. Let me know if you have any questions.

 

[SCW]

How? The DOW went up 300 points? You need to change your funds. Ok...you only do ok? My MF's are UP for the year, given the recent slide, by still 6%.

Sorry but the information he has given is not correct information. Not trying to be a jerk but don't give financial advice to people if you are not fully educated on the subject. You didn't even come close to making accurate statements. Seriously, you need to talk to your IRA holder to get your some educational materials on this subject. Feel free to ask if you don't know.

How? I've been making a killing selling futures for the past 2 months. Didn't get out of the sells fast enough today, no biggie really.

Maybe I wasn't clear, I never intended to give the impression that you should stop investing at any point, just that some funds will retract further than others and you can minimize damage in downturns by moving from big losers to bonds, cash funds, etc. I don't mean by cashing out the account, just moving it.

I'm only advocating paying attention to your accounts. Many people simply get whatever their company offers and watches it grow or shrink. Adding up the cost of a mutual fund over the years shows that it actually does cost- either up front or throughout the life of the investment. You are paying for security, I didn't (intentionally) mean that they are a bad investment. If you had moved your 401(k) into bonds 2 months ago your account would not have had the pounding it had over the past weeks. That's all I'm saying. Keep investing, but don't expect it to be a set-and-forget until you retire.

Also, mutual funds are governed by an administrator, not all of them are all that great. Sometimes an administrator moves, quits, etc. You should always be looking at your fund to determine if it's the best for you right now.

 

[BruceB83]

How? I've been making a killing selling futures for the past 2 months. Didn't get out of the sells fast enough today, no biggie really. Ahhh....gotcha. Futures market is a totally different ballgame than what most common retirement investors ever gets into. Lol...yeah, that stuff will bite you in a hurry. Good luck with it in the future (no pun intended)...that stuff can make you big money in a hurry...but as you found out today...it can do the opposite in the same time.

Maybe I wasn't clear, I never intended to give the impression that you should stop investing at any point, just that some funds will retract further than others and you can minimize damage in downturns by moving from big losers to bonds, cash funds, etc. I don't mean by cashing out the account, just moving it. True, but you're really not "minimizing damages" because your mutual funds will come back up so no damage is realized unless you do the wrong thing and sell when low. Unless you are within about 5 years of retirement (or in retirement) you don't need to worry about swings in the market. And by that time, you should be in short-term bonds and such to reduce volatility in your investments.

I'm only advocating paying attention to your accounts. Many people simply get whatever their company offers and watches it grow or shrink. Yeah, I have run across some people who never moved their money out of the standard cash market fund that the company defaults the money to. Adding up the cost of a mutual fund over the years shows that it actually does cost- either up front or throughout the life of the investment. Well yeah, it costs but it's not "expensive". You are paying for security (you are paying management fees...security only comes in CD's and traditional savings accounts and bonds), I didn't (intentionally) mean that they are a bad investment. If you had moved your 401(k) into bonds 2 months ago your account would not have had the pounding it had over the past weeks. Like I said, somewhat true, but those mutual funds will come back up with no harm done, moving money could cost you money That's all I'm saying. Keep investing, but don't expect it to be a set-and-forget until you retire.

Also, mutual funds are governed by an administrator, not all of them are all that great. No, that's why you look at the 3-, 5-, and 10-year averages to see how they perform. They are managed by a management team. A mutual fund is nothing but a collection of stocks and possibly smaller mutual funds. Usually, the largest company holdings in a mutual account is around 2-3%. The management team decides what to make the mutual fund out of. Sometimes an administrator moves, quits, etc. You should always be looking at your fund to determine if it's the best for you right now. Right, but usually unless a huge shakeup happens, the overall goal of the management team remains constant. A mutual fund rarely sees a change in it's overall investment strategy/goal. i.e. "long-term", "short-term", "growth and income", etc...

 

[Stumpalump]

Ok...***sigh***

1) You completely negated what you said in your first post. In your first post you said "do you think the goverment will let a common worker retire a millionaire"....and now you are saying yes. ??? Make up your mind and please stop giving people advice when you obviously are not fully educated on this yourself. For one thing...you don't get "interest" on 401k accounts. Your stocks/mutual funds/whatever either GAIN or LOSE value...not interest. Interest is given on savings accounts like CD's...NOT investment accounts.

2) You really had to throw the "gun freak" thing in there didn't you? And you had to make it a completely ridiculous possibility.

I'm all for free speech but seriously...can somebody censure this guy now? :gag:

Read a little between the lines man. A million when 401K fist came out will be chump change by the time you retire. You need more . This thread is like the last one it's all about getting the Stump. Get a life and hears a hint ,you won't get it by focusing on me.

 

[Slonopotam]

Pretty much everything you write makes perfect sense.

Ok. Inflation is NOT 10.3% each year...or anywhere NEAR that.

I would prefer not to speak of a definition of inflation. I am interested in what $1 buys today and tomorrow, from a list of certain things I need, that is, something close to CPI. It would be closer, if they included fuel and food.

When calculating people's financial plans, we use 3% right now for assumed inflation per year.

Correct me if I am wrong, but CPI goes hand in hand with the manufacturing salaries. I remember sitting at some really boring presentation in front of a table with average manufacturing salaries, year by year in the 90ties. I calculated, it was 5.9% annual increase. True, it is far below 10%. I would say, this is the first year I see inflation that high.

Even if your investments are only performing on the market "average" (8% on the conservative side...10% on the risky side)

Conservative for me now is cash. Risky side - CD, bonds, everything FDIC and otherwise insured. Could you please give an example of conservative investment and a risky one.

Where do you invest [what MFs and other], if not a secret ?

Nobody would invest in stocks or mutual funds if they didn't rise about inflation...that wouldn't make sense now would it???

If nothing beats inflation, but some measures to decrease the losses of wealth due to inflation could be taken, yes, it would be done.

 

[needsrepair]

Can't really give any advice, but according to BW "CPI (not including energy and food) rose 2.5% the fourth quarter 2007". That is 10.3% inflation. Whatever you save today will have only 2% of todays buying power 40 years later. That is about saving in cash. Stocks, sure they rise with time, do they rise as fast as inflation ? Some do, but not always. Those retired in 2002 have a nice example to show. CDs, bonds - all insured stuff gives about 5% now, it sure helps a lot to fight inflation, it will leave about 14% of your first year of savings 40 years later.

Saving for retirement when you are 20-30, does it really make any sense ? Am I missing something ? Teach me, I am 32, I will need it soon.

Thank you,
Andrey

Yes it makes sense. Dont worry about inflation. When you get old, you want something there. Half a loaf is better then nothing. There are three factors involved.......The amount of money being put in........the rate of return on that money.......and how long that money earns a return. The first two can be adjusted....the third one cant. I have to go to work, Ill be back.

 

[BruceB83]

Read a little between the lines man. A million when 401K fist came out will be chump change by the time you retire. You need more . This thread is like the last one it's all about getting the Stump. Get a life and hears a hint ,you won't get it by focusing on me.

What you're saying isn't making sense. That's all. At least not to somebody who has experience in the financial planning field. I never said that you didn't need more than $1M...but you're not in bad shape compared to most Americans if you "only" have $1M at retirement. Sure, you may not be able to buy that yacht you always wanted but you'll survive.

Just like "the last one it's all about getting the Stump"...dude...I could care less about "getting you"...I'm just trying to correct incorrect statements. When you're talking about financial future, it's not some insignificant point at hand. And thanks, but have a life. I don't give a rat's tail about you so dont' worry...I'm not focusing on you. What I do care about people reading incorrect information about their financial future. Sorry, but I take it pretty seriously and I enjoy helping people with this topic. I'm not correcting anybody to be mean...I'm doing it because I'm educated in the topic and have provided many people with financial plans and currently, they're all successful. If I see information that's NOT correct, I'm going to correct it.

 

[BruceB83]

Pretty much everything you write makes perfect sense. I'm pretty sure you're being sarcastic here. Look man, everything I say about this is with a sincere teacher's attitude...not trying to belittle anybody so please don't take it that way. As I said to Stump...I'm not correcting people on this topic to be mean in anyway. I am educated enough about this to provide most people with proper information so of course, if I see incorrect info being given than I will correct it. IT'S NO DIFFERENT FROM HOW CERTAIN PEOPLE SUCH AS 5-90 COME INTO A TECHNICAL TOPIC ON WIRING UP LIGHTS AND RE-DIRECTS PEOPLE IN THE RIGHT WAY. (THAT'S A GOOD THING!) Of course, what I'm speaking about is all with respect to common knowledge and the common investor saving for retirement. I called out the guy (I forgot who) earlier saying he lost $4k yesterday b/c it was assumed he was talking about his IRA. He was really talking about the future's market. MOST common investors don't play that game so what I was saying to him didn't apply...but kudos to him for venturing into Futures.


I would prefer not to speak of a definition of inflation. I am interested in what $1 buys today and tomorrow, from a list of certain things I need, that is, something close to CPI. It would be closer, if they included fuel and food. Right...here's something we like to say...do 20% of the work for 80% of the results. You can over complicate things by coming up with some huge complex equation to figure out how much you should save. OR, you can go with what most people go by and stick with the standard. The standard uses inflation. If you are concerned about CPI, you are probably a little more educated than what I keep refering to as the "common investor" so by all means, if I have said something that doesn't mesh with your current investment strategy, keep that in mind.


Correct me if I am wrong, but CPI goes hand in hand with the manufacturing salaries. I remember sitting at some really boring presentation in front of a table with average manufacturing salaries, year by year in the 90ties. I calculated, it was 5.9% annual increase. True, it is far below 10%. I would say, this is the first year I see inflation that high. Ya know, hmmmm....to be honest with you I can't say that I'm 100% sure on this. I know it's related, just not sure how closely. Actually, I believe the average inflation for 2007 was about .5% lower than the previous two years. Granted, the 4th Quarter of 2007 did see a higher inflation rate than the rest of the year.


Conservative for me now is cash. Risky side - CD, bonds, everything FDIC and otherwise insured. Could you please give an example of conservative investment and a risky one. It's all relative. I'm guessing you are either coming up on retirement or in retirement if "risky", relative to you, is a CD or bond. To me, being probably 30-35 years out of retirement, and given my personal risk tolerance...a conservative investment would be a mutual fund that is made up of "blue chip" stocks...a risky one would be something lying in mostly foreign markets. But again, it's all relative to each individual. Everybody needs to find their own "risk tolerance". I have a higher one...I'm willing to see some down swings in my funds due to them having a higher rate of return.

Where do you invest [what MFs and other], if not a secret ? Lol...no...no secret here. All mutual funds right now. Currently, I have money in "Fidelity Freedom Fund 2045" just as a solid base fund. This is more on the conservative side to me. But it's an automatic allocation type fund so it readjusts risk level aimed at retirement around 2045. Now, I plan on retiring before then but since I am more risky, I picked this one so it will hang around in the "risky" side of things a little longer. I also have money in American Funds "Growth Fund of America". This has had a 5 year at about 16%. Another American Funds MF "SmallCap World" fund...has had a 5 year of almost 24%...a lifetime at 12%. So those are 3 of my bigger ones currently...I have a few others as well.



If nothing beats inflation, but some measures to decrease the losses of wealth due to inflation could be taken, yes, it would be done. Well, yeah you're right...but currently, and in the past, beating inflation is easily done.

Wheew...

Like I said, I enjoy teaching this stuff...it's what I was born to do. I LOVE helping people work towards becoming "financially comfortable". It's a win-win situation for me and anybody I can help. I get the satisfaction of knowing I helped somebody out while doing something I love, and the other person, hopefully, gets some advice that steers them in the right direction towards having a successful retirement and a comfortable ride along the way.

 

[Root Moose]

The media working people into a frenzy and making them think the sky is falling will be the stock markets downfall. If people would just stay calm and cool, not panic and leave their money alone we would ride this rocky time out with no worries.

Shhh!

How the hell am I supposed to buy low if you are explaining how the markets work to slow people?

 

[BruceB83]

Shhh!

How the hell am I supposed to buy low if you are explaining how the markets work to slow people?

For real! Don't worry...most of them wost listen...lol...

 

[MudDawg]

My investment advisor has a personal favourite expression...."You can't go broke taking a profit, and pigs get roasted".

 

[needsrepair]

This is a good web site for planning your future. http://www.mycalculators.com/ All you youngsters.......I don't care if you only put your money in cd's. In fact do your calculations at cd rates of say 4%. Lets say your 20 years old and you start saving $100.00 a month until your 62. (Min social sec age). The naysayers will tell you its not worth it, inflation will eat it up. Bullshit! Don't worry about that crap. IMPROVE your job skills and your pay will continue to go up also. I'M TELLING YOU RIGHT HERE AND NOW, SAVE SOME DAMNED MONEY. One of the most common mistakes people make is trying to save too much in the beginning. If you try too hard at first you will find that you are short of money some place else so you get discouraged and quit. It takes commitment and consistency for a long period of time. Set a REASONABLE goal and stick to it.

$100.00 a month until your 62
@ 4%= $128,000
@ 5%= $165,000
@10%= $674,000


$400 a month until your 62
@4%=$512,000
@5%= $663,000
@10%= $2,696,000

So, you want a million at 62? Save $400 a month at 6.5 %

How will you get 6.5 % LEARN about money. We can find out anything we want about Jeeps, engines, guns, etc. You can learn about money. When you pay attention to money you will know when to buy and you will know when to sell. You cant rely on tips from people who "know". YOU have to learn and know for yourself. Money has been made and lost in the stock market all through time. Go read about the Tulip mania. Go to Yahoo financial. Go to investopedia. If your standing around with a bunch of people and they start talking about the "market", KNOW what they mean. Like I said in my other post, DON'T buy any .ob stocks that you see advertised in the glossy mailers. They WILL take your money.


http://www.mycalculators.com/

 

[BruceB83]

This is a good web site for planning your future. http://www.mycalculators.com/ All you youngsters.......I don't care if you only put your money in cd's. In fact do your calculations at cd rates of say 4%. Lets say your 20 years old and you start saving $100.00 a month until your 62. (Min social sec age). The naysayers will tell you its not worth it, inflation will eat it up. Bullshit! Don't worry about that crap. IMPROVE your job skills and your pay will continue to go up also. I'M TELLING YOU RIGHT HERE AND NOW, SAVE SOME DAMNED MONEY. One of the most common mistakes people make is trying to save too much in the beginning. If you try too hard at first you will find that you are short of money some place else so you get discouraged and quit. It takes commitment and consistency for a long period of time. Set a REASONABLE goal and stick to it.

$100.00 a month until your 62
@ 4%= $128,000
@ 5%= $165,000
@10%= $674,000


$400 a month until your 62
@4%=$512,000
@5%= $663,000
@10%= $2,696,000

So, you want a million at 62? Save $400 a month at 6.5 %

How will you get 6.5 % LEARN about money. We can find out anything we want about Jeeps, engines, guns, etc. You can learn about money. When you pay attention to money you will know when to buy and you will know when to sell. You cant rely on tips from people who "know". YOU have to learn and know for yourself. Money has been made and lost in the stock market all through time. Go read about the Tulip mania. Go to Yahoo financial. Go to investopedia. If your standing around with a bunch of people and they start talking about the "market", KNOW what they mean. Like I said in my other post, DON'T buy any .ob stocks that you see advertised in the glossy mailers. They WILL take your money.


http://www.mycalculators.com/

Glad you did that...I was too lazy to type out the math. Yeah, and that number is at ONLY 6.5%...hell, you can get FDIC savings accounts now for 5.5%. So think, raise that 6.5% up to about 12% and see how much easier it becomes. Like needsrepair said, COMMITMENT and CONSITENCY are key.

Smartmoney.com , yahoo/google finance, and investopedia are all great sites. www.fidelity.com also has some pretty good educational material too.

 

[Slonopotam]

I am 32.

I'm pretty sure you're being sarcastic here

Not at all.

to be honest with you I can't say that I'm 100% sure on this.

You should not. I am too lazy to calculate the correlation, but CPI growth is way lower than salary growth. Something is not right [in my head??]. I will check how CPI is calculated [one day].

"risky", relative to you, is a CD or bond.

The reason this is risky is that I was not sure how the bank and its insurer managed the money. I read an article about some insurer invested heavily in subprime-backed papers. Luckily, my bank just reported that they did not suffer from subprime problem AT ALL, therefore I upgraded my 5% CDs to safe, now I think about swimming into deeper water. Unknown is unsafe for me.

a risky one would be something lying in mostly foreign markets.

Why European market is riskier for you ??? I just read in BW [one of December issues] quite the contrary. Well, not sure how that "Societe generale" scandal is going to play out.

Fidelity Freedom Fund 2045, ok, I'll look at Fidelity, what they invest it.

 

[BruceB83]

I am 32.


Not at all. Oh....well thank you...:laugh3:

You should not. I am too lazy to calculate the correlation, but CPI growth is way lower than salary growth. Something is not right [in my head??]. I will check how CPI is calculated [one day].


The reason this is risky is that I was not sure how the bank and its insurer managed the money. I read an article about some insurer invested heavily in subprime-backed papers. Luckily, my bank just reported that they did not suffer from subprime problem AT ALL, therefore I upgraded my 5% CDs to safe, now I think about swimming into deeper water. Unknown is unsafe for me.


Why European market is riskier for you ??? I didn't say "European"...I just said foreign markets. In general, world market funds (meaning funds made up of more than 1 market) are a little more volitale than US funds...but with that increased risk comes a larger opportunity for growth. I just read in BW [one of December issues] quite the contrary. Well, not sure how that "Societe generale" scandal is going to play out.

Fidelity Freedom Fund 2045, ok, I'll look at Fidelity, what they invest it. Yeah, I'm not saying that is the best fund but definitely look at the "Asset Allocation" funds for something that will be managed for your investment goals and they eliminate the need for you to move money as you get older, they do it for you as they change the objective of the fund.

You seem like you don't have much risk tolerance right now but there are still plenty of decent funds out there that you can feel safe getting into that will yeild you higher results than you CD's. Just trying to help! :wave:

 

[Slonopotam]

$400 a month until your 62
@4%=$512,000
@5%= $663,000
@10%= $2,696,000
...
So, you want a million at 62? Save $400 a month at 6.5 %

Let's see some historical data.

1965 average cpi 36.14
2007 average cpi 224.62

That is the buying power of the dollar weakened 4.4% annually on average.

Now, that nice page you wrote about has a second half - adjustment for inflation.

If inflation averages 4.4% per year Contribute More Periodically 2,440.51.

Any takers ?

 

[BruceB83]

Let's see some historical data.

1965 average cpi 36.14
2007 average cpi 224.62

That is the buying power of the dollar weakened 4.4% annually on average.

Now, that nice page you wrote about has a second half - adjustment for inflation.

If inflation averages 4.4% per year Contribute More Periodically 2,440.51.

Any takers ?

Lol...you won't let this CPI/inflation thing go will you? I said that when calculating amounts to save, the accurate way, we mathematically factor inflation into the equation. Look, you can sit here and argue over .5-1% of inflation but you can't argue with all of the people who have retired early thanks to the stock market. Investing works. End of story. I'm not being an a$$ but what exactly are you trying to point out??? That you need to throw in an extra $10-15 bucks a month to compensate for that additional amount of inflation?

 

[Slonopotam]

I'm not being an a$$ but what exactly are you trying to point out??? That you need to throw in an extra $10-15 bucks a month to compensate for that additional amount of inflation?

I am not going to argue about the rate of inflation. But the problem is hardly $15 a month.
If inflation averages 3 % per year.
Contribute More Periodically 1,384.28.

I agree, something has to be done, but it looks like 6.5% is too low. Then again, I do not know how much money one needs for retirement. I would say stay healthy, find a job you love and just get used to the idea that you will work till the very end. This is my current position, it might change. I just do not expect my savings to be enough for anything.

Andrey

 

[BruceB83]

I am not going to argue about the rate of inflation. But the problem is hardly $15 a month.
If inflation averages 3 % per year.
Contribute More Periodically 1,384.28.

I agree, something has to be done, but it looks like 6.5% is too low. Then again, I do not know how much money one needs for retirement. I would say stay healthy, find a job you love and just get used to the idea that you will work till the very end. This is my current position, it might change. I just do not expect my savings to be enough for anything.

Andrey

Oh...gotcha. Well, that's unfortunate you feel that way. I plan on retiring by mid 50's at the latest. And that plan is mathmatically backed by a plan so I'm pretty confident in that. Yes, you are absolutely right though...find a job you love and get used to the idea you will work till the end. Then, when you have the opportunity to retire, it will be a great relief. Good luck man!