Stock Markets
 

While the argument of pushing to "open everything back up and getting back to normal" versus the "let's go slow" rages on, it seems to me that the stock markets are acting like there's no chance a gaping maw may be ahead of our stagecoach.

It made me personally feel better regarding the actions I've taken recently (going all to cash) when I read this article, since I totally agree with the author.

Why I Cashed Out of the Covid-19 Rally

Having a portfolio of long-term stock investments in tax-deferred plans, as well as the proceeds from a recently sold house and anticipating purchasing a home in The Villages in the coming months, I've decided I'm going to sit on the sidelines for a while.

I guess my viewpoint being, that I am concerned that even if this virus were to magically disappear tomorrow (almost a zero chance of that), how in the heck will the worldwide economy just go back to where it was? 70% of our (world) economy is (was?) based on consumer spending, so even with the trillions spent so far (how to pay it back is for another thread) in just the USA, who really expects consumer spending to be "pent-up" so much that it will come back to even close to what it was? I think the more important question is; "how many years will it take to get back to even close to where we were prior to Covid-19?"

Greenspan's famous statement of "irrational exuberance"-keeps running through my head. And if I'm dead wrong, the economy picks up right where it left off, all of the markets continue to grow and I miss out, I personally (especially at this age) will still be satisfied with how things have gone since 2009 and won't miss waking up, wondering if this is the day the bottom falls out.

Thoughts, comments?

Been in cash since retired 25 years ago.
No spectacular gains, but no catastrophic losses either.
Just sat back, played golf, travelled, and watched the world go by!

Actually, the S&P 500 Index is only down about one percent over the past 12 months. The only thing that might make sense would be to convert your stocks to cash, because the bond prices are already too high with no place to go but down. I don't plan to do anything because selling stocks would mean paying a huge amount in capital gains taxes, and I don't need the money. Nobody knows where stock prices will go in the future, so I think it is a personal decision to make. I usually don't try to predict the stock market, but it does seem strange to me that the stock market has stayed as high as it has recently.

I believe in the future of the US and think that in the long run the stock market will continue to go up with peaks and valleys.

Best thing to do is find no load mutual funds and invest for the long run and not to try to outsmart the market.

Unless you sold just prior to the recent downturn you locked in your loss and have already missed some of the recovery.
Anyone that gets nervous and feels they must sell during a market panic obviously did not understand their risk tolerance. Knowing your market risk tolerance and establishing the appropriate equity percentage is the best way to position yourself to be able to stay the course and still sleep well during market gyrations.

The market goes up and down but over time it has always been an upwards direction. This time it will do the same. Question is how long will it take? If you cannot accurately predict when to time the market you will likely do worse than staying the course. There is much data out there to support this.

I went to cash last week, which is what precipitated my thought on starting a thread about it now. As I mentioned, I hung on when it went all the way down into the 6,000's and was glad I did as I watched it steadily climb out of the low's of the Great Recession. Ironically though, given that when I started this thread the DOW was almost unmoved at about 24,100 and it closed about 400 points lower after I started this thread, so maybe there's some secret Street followers of this site? lol

I also forgot to mention in my initial post that even before Covid-19 happened, I thought the market was way overvalued and was due for a major correction sometime this year anyway. While we'll just have to wait and see what happens in the coming months, it's comforting to know that even if I miss out on a huge run-up (highly unlikely IMHO) - I'm not going to be checking every day, nor be hurt if the bottom does fall out.

after the 2008 dip we put enough cash into annuities so that we never had to worry again about where our next hot dog was coming from

I recall one of my doctors equating keeping his retirement money in the stock market as akin to betting in a casino

we have a mixed portfolio...actually more complex than I wanted...but it works for us

we actually believe that things will eventually come back....and we've been cherry picking some nice stocks lately that we believe will weather this storm

it all comes down to how much risk you're willing to take...and how much free cash you actually have

Important to have a safety net but for us we think we cannot time the market and just invest in good mutual funds with good record of success and if they do not perform adjust portfolio accordingly

Three words...certificates of deposit. Nabbed a 5 year 4.2% in July of 2018. Just hoping 2023 brings back an interest rate normalcy.

Haha we are all old
 

Theres a rule of 100 for investing. Take your age subtracted from 100 the remaining amount is what you can invest in the stock market. Or think of it this way if you lost everything you have invested in the stock market what will you have left to live on comfortably.
While it is true the stock market has averaged about 8% over its life there have been long periods of minimum growth. Well most of us no longer will be going to work there is no true opportunity 2 have wages deposited in the future so risk tolerance is truly what you have to think about

When most of us only lived to about 65 the rule of 100 made sense but now that we live longer we do need growth and the vast bulk of money earning 2% or so will not cut it. After inflation and taxes that 2% means over time your funds have less value.

Someone 65 will be around another 20 years or more and their funds must last for at least that much time.

Every time a stock trades there is a winner and a loser. I love those cash people, they just keep feeding that loser group!

On March 31 I was down almost 25 percent from December 31. On April 30 that loss was cut to less than 12 percent. Bargains in the Blue Chips. I see no sense in capitalization of that loss.

Wow! Good for you,

Albert Einstein said, “When the number of factors coming into play…is too large, scientific method in most cases fails. One need only think of the weather, in which case the prediction even for a few days ahead is impossible.”

Depending on when you cashed out, hopefully you didn't take your paper losses and make them into actual losses. Will you return to the stock market? How will you know when the right time is to get back in? When you see a solid upward trend or when the market is back to where it was?

I spent 20 years as a Financial Consultant. I have faith in the market and have never sold during any of the market downturns. If you look at a graph of market performance over the last 70 years, you will see some serious market dips. You will also see that these are followed by recoveries that go well beyond the previous market highs. I have never panicked during a serious preferring to "ride it out." This way, I will never miss the upturn or have to worry when is the right time to get back in. During this current crisis and the market reaching "Bear" territory, I held my position, continued to receive dividends and, as of today, have recovered over 70% of my paper loss. I have good feelings about being made whole before year end.

I think the overall economy will take several years to recover in terms of jobs, bankrupcies, business profits, tax revenues, etc. But, I am surprised that the stock market does not seem to have "factored in" these future economic hard times. The S&P Index today is at about the same level that it was a year ago, when the econony was great and no one had even heard about the Coronavirus. I don't understand it, but it just seems very unusual to me.

No idea if we will be made whole by the market by the end of the year but agree with holding the course and riding it out.

Most brilliant people in the world cannot always time the market how can the rest of us?

Exactly... Did that last month and happy to sit idle till after the election and a vaccination...
Easier to sleep at night

Except for IRAs...no penalty to do that....cash out and wait till things quiet down then go back to mutual funds or stocks

People call that sell low buy hi.

the only problem you have is when do you get back in? You want to buy when stocks are on sale. I'm up $30,000 in last 4 months. Bought amzn, goog, tsla fb when they were very lows. it a 3-5 year hold on these stocks

Stock Market
 

Buy physical commodity gold & silver. They will sky rocket like they did in the 1980s.

Can You Pass the Sleep Test?
 

Very simply, if your allocation keeps you up worrying about your wealth you are not balanced for your risk tolerance. This is a very basic fact of investing. Remember, when seeking financial advice what is good for one is not necessarily good for you! The bottom line its YOUR money.

For those waiting for the next major drop in the market it's simple. Just wait until I decide to buy back into the market. Guaranteed a huge drop will occur within days, or even hours of that moment.

Do you have to pay a penalty to the investment company if you cash out?

So in your team!!!

I didn't actually "cash out" (take a distribution from) anything and therefore capital gains and/or gross income at the end of the year is unaffected. I just put all of it in a different fund, whose goal is to basically dog-paddle in place.

Looking at the DJIA just now (down 484 as of 1:40PM), maybe it was bad ju-ju even starting this thread. :doh:

Spending
 

Still spending and buying what I want only now online and I love the home delivery

Stocks
 

Hi, my name is Mike. I read all of the information and as a matter of fact, there is a lot of misconception as to rates of returns and fees.
I've been an accountant for over 40 years and have studied these investments as per my job for 40 years. There has never been any body that has made any where close to 8% return per year. In fact, the largest I've ever seen is 1% per year. The actual way to determine this is simple interest that every one learned in high school. Market value minus your cost basis = unrealized gain or loss divided by the number of years you have had the money invested.
The other thing I want to mention is the actual fees charged by mutual funds are not 1% or .5% per year. It is a deception. The real thing is expenses are always ratio'd against income, never assets, and when you look up the annual reports of each fund, including Vanguard, you will see the "expense to income ratio" is more like 60% of the income. Therefore, they take around 6-7% of your money every year before you make anything. So the market is going down, you still lose an additional 7%. Since the high of the DOW and the NASDAQ and the S&P 500, which is 95% of the market, it has lost as of today 21%, it will take you 30% to gain it back, but what are you gaining back to? A 1% per year rate of return.
These are just facts, not lies, that are presented to you by brokerage firms and mutual fund companies as they do not have a fiduciary responsibility, like accountants or doctors do, which means they can lie to you. There are many lawsuits currently going on that "so called financial advisors" are suing the department of labor not to implement the fiduciary law. In other words, they want to lie to you. These are not opinions. They are facts.
If you have any other questions regarding any of this, feel free to reach out to me via private message.

-- Mike Mastin
Accountant

Sorry, but I don't understand anything in your post. Where should people invest their money?

Thanks

Sorry do not believe mutual funds take anywhere close to 7% in fees

am pretty sure that Warren Buffet makes over 1% per year.

I'm pretty sure, that you are absolutely correct.

I have to say though, I found it amusing reading Mr. Mastin's convoluted and amazingly incorrect analysis regarding investing.

The latest jobs report shows almost 3M more are out of work just last week, so it's hard to imagine that the markets won't react to that.

I think we would be doing well, if even 75% of those jobs come back after a full reopening. My fingers are crossed.

Was scratching the remaining hair on my head constantly while reading it.

Call me old school, but I have always believed the value of any stock should be discounted future earnings. Future earnings are of course an estimate, but it is very reasonable to expect most companies future earnings to be much lower in light of the global economic upheaval caused by Covid 19. The rate used to discount future earnings should represent a risk free rate (US Treasury rate) appropriately adjusted for risk. Again, in light of the incredible amount of uncertainty currently existing, a much higher risk premium needs to be added to the discount rate. So lower expected earnings and much more uncertainty means stock prices SHOULD BE much lower. However, that’s not the case.

The current market represents values boosted by the Federal Reserve pumping absurd amounts of money into the system to artificially support the market above what the underlying fundamentals justify. This is not sustainable, very dangerous, and the cost of this will come back to haunt future generations. You know something is very wrong when the market does best when we get bad economic numbers, because that gives the market comfort that the Federal Reserve will keep acting irresponsibly. This is VERY SHORTSIGHTED!

I'm in a similar situation but we sold and bought a home recently in the Villages. Things are crazy in the stock market and it may be overvalued. Thinking about selling everything and going into cash since the market has regained and because of market uncertainty .

I've put stop loss limits on some big gainers like Amazon and I'm selling aggressive covered calls in hopes of getting income on the looser stocks that I own. Also selling puts to create income instead of going to cash. Some sectors are doing fine but I will continue to be vigilant.

Too complicated to my way of thinking