#MGoMoney: The Market & Your 401K/Investments
The Bear has is awake it seems and he is pissed off.
Are you worried about your investments, not worried at all, have already cashed out, or happy that you can buy more at lower prices? Are you retired, close to retirement or a few years/decades away? What kinds of funds do you own in your 401k?
February 9th, 2018 at 5:10 PM ^
February 9th, 2018 at 5:11 PM ^
I try not to watch or time the markets. What goes up often comes down. Why is it we're ecstatic when the market goes up, but grumble to no end when it comes down? I'm sure there are a ton more savvy investors on this board, but investing immediately (after beginning my work life,) regularly, significantly, steadily, and aggressively has made all the difference.
Hopefully you'll find a good financial advisor. I have personally chosen a combination of large cap, small cap, mid cap, and international mutual funds in Roth IRA, 403b, and 401k instruments, as well as some that can be tapped immediately. Like I said, I am sure there is a lot more wealth and wisdom on this board than me.
I have only a little advice, which mostly should be obvious
- Spend less than you make (I keep zero credit card balances - live within your means)
- Start investing immediately after you enter the work world. It doesn't look like much, but will eventually grow. If possible, have thi s come automatically out of your pay
- Don't put all your eggs in one basket. Having one stock, or one mutual fund, is too stressful for me. Diversify your investments.
- This last one is more my opinion, but if you can stomach it, be as aggressive as you can. (Betting everything on one stock is too much for me, but if you are convinced it would pay off, maybe that'd be a good strategy for you!)
February 9th, 2018 at 5:23 PM ^
February 9th, 2018 at 5:30 PM ^
S&P500 index fund..Vanguard Institutional index Fund is awesome. Schwab has a newer S&P500 index fund, I think, with a expense ratio lower than Vanguard as I recall. Might switch the ROTH IRAs over to it.
February 9th, 2018 at 7:31 PM ^
100% of my Roth IRA is in the Schwab S&P Index Fund.
93% of my 403b is in Vanguard index fund.
It's that simple. I just turned 31. It's gonna stay that way for at least 20 years and then maybe I'll slide a percent a year into bonds... but the "your age in bonds the rest in stocks" line - to me - is far too conservative.
The last couple years I've really cranked up my savings and have moved up my $2M goal by two years. Of course, easy to say that after last year, but just invest, invest, invest and don't let your lifestyle inflate. Simple steps to becoming a millionaire.
February 9th, 2018 at 8:38 PM ^
February 9th, 2018 at 9:49 PM ^
February 9th, 2018 at 10:14 PM ^
I've focused on maxing out my Roth, which I just did for the third time. Now that it has reached a point where it serves as a fully funded emergency fund (20k), I've upped my 403b contributions to $500/month. Obviously that's not maxed, but I also get an auto 7% company contribution (regardless of my contribution!!! great benefit!!!), so right now I'm approaching $1k a month into 403b.
So, I guess the question is: Now that I've gotten my Roth contributions to 15k+, should I take some of that monthly contribution and work towards maxing out the 403b? My Dad says that's the priority. Mathematically, whether you pay the taxes now or at retirement is the same... but that of course assumes everything stays equal. It won't, I'd theoretically, hopefully be taking out more per year than I am currently earning a 31.
My current plan hs be increasing 403b conts. by $1k a year until maxing out, however this January I doubled it from $3k to $6k a year (250 to 500/month). Could be temporary bc I have a roommate that makes a huge chunk of this possible. However, I'm really thinking right now about what it would take to go even further on the 403b while still maxing the Roth. I ultimately come back to "you're in better shape than 99.999% of people you're age, just keep saving and avoid spending stupidly"
February 10th, 2018 at 12:07 AM ^
February 10th, 2018 at 11:29 AM ^
Yeah, the question seems to be what will I be paying in taxes when I'm taking them out. Until very recently, I think the answer for me was that I am not making more than I will be taking out. Now that that is reversed and my Roth is up to a level that can act as an Emergency Fund, I was in the right to double up my 403b contributions. I'll see how it goes for a couple months and maybe up it again.
The max is up to $18,000. I don't think I can swing $1500/month yet, but I'm working towards!
February 9th, 2018 at 9:03 PM ^
As the term diversification is normally used, a Vanguard total stock market fund is extremely diversified because it has every industry represented and large caps, small caps, and everything inbetween. Adding an international index fund will increase diversification further. A bond fund will diversify you further, but don't put too much in there, especially if you're young.
February 10th, 2018 at 12:48 AM ^
Short answer: no advantage.
Long answer: I started investing a good 25 years ago. At which point, there were no index funds. Or they were very new.
Longer answer: I would probably go with an aggressive indexed fund today. But I at least slightly like being able to focus on segments of the market that I like, which may differ slightly from an index fund.
February 10th, 2018 at 10:35 AM ^
A total stock market fund tends to skew toward Domestic Large Caps somewhat.
Individual funds that track Large Caps, Small Caps, and Internationals can even that out more.
A total stock market fund can still be pretty good though. Just make sure you get one that has a healthy mix of Internationals if you are only going to have one.
February 10th, 2018 at 5:32 PM ^
To answer your question, it depends largely on who the investor is and what their strategy is.
For most people, index funds are a decent vehicle if they are designed to mimic overal market performance. When you consider total cost, historically they often outperform mutual funds and other actively managed assets (somebody's diversified "portfolio")(yes, there are plenty of sub quality professional investors). Even if something is actively managed appropriately, its quite possibly going to pass off market hurt to the consumer, and cut steeply into gains. So, for most people, the benefit of an index fund over time is that it's a low cost relatively safe investment strategy that works WELL.
There are only several issues with index fund investment, but most retail investors should be happy to live with these, presuming they are not pulling out during a dip.
1) Index funds are overweight on the overweight stocks, and underweight on the underweight stocks. Index funds are (usually) weighed vehicles that take the overall market cap of a sector or whatever. As a specific stock becomes overweight and takes up a larger share of the market than it should, the index fund purchase ignores this, and you end up propping up overweight stocks. Undervalued stocks are purchased less than they should be. This potentially becomes an issue especially in indexes that have a smaller number of stocks that make up the portfolio. For example, indexes designed to mimic the DJIA are comprised of almost 10% Boeing stock. I'm not saying that's a bad investment, but there is a theory out there that large firms are becoming more overweight not simply because of their large weighting in index funds and steadily decreasing percentage of professionally managed money. (There is theoretically an inflection point beyond which the amount of active (or emotionally) managed money that may pull out based on news, earnings or developments, may not be enough to not have a zombe index fund purchase waiting to prevent a drop). At that point you have a run-away stock, and there are one or two out there.
2) Index funds are not reactive. They are often designed to grab all of a certain type of stock, which is great when everything is hunky dory, but could be devistating if there is a game changer that affects the underlying sector. For example, PNQI attempts to grab some of everything internet, but it's not actively going to protect itself if there is some sort of market shift or emerging technology, especially if its not publicly owned.
3) Index funds are becoming more volatile in market drops as they become more popular with investors. We are actually seeing this right now. The increased volatility (large volume) is hitting the market as a whole, even though certain stocks are very well positioned for growth under a higher inflation higher rate environment. (JPM for example). This doesnt impact an investor unless they either wish to sell quickly based on new news, or may have to sell based on changing financial situations. While this is proving to provide a lot of tasty arbitrage for strategically placed investors, it's not a big deal if you just ride it out. The point here is though, that even the market as a whole is not a completely diversified strategy if that's what everyone else is doing, for if you feel you have to sell, and so does everyone else, then that's not a place you want to be in.
February 10th, 2018 at 10:36 AM ^
Excellent advice, SRK.
There isn't anybody smarter, only luckier or poorer.
February 9th, 2018 at 5:15 PM ^
For growth stocks, buy MU (micron) and DQ (daqo new energy)
For income/Dividend, buy ABR (arbor realty) and SSW (seaspan corp)
Get the hell out of cryptos or stay away - its too late to get in and if you made money on the fluff, get out.
I also do not believe stocks are quite done going down the tube. Wall street needed a major correction, it has ran too much too fast for the last few years.
February 9th, 2018 at 5:37 PM ^
Cryptos - lol it is not fluff and it absolutely is not too late to get in
The funny thing is that most doubters are uneducated as to what cryptocurrency actually is. They think that people are just making up digital currencies when in reality there are underlying technologies and businesses/uses for them. Sure, there are exaggerated swings, all markets have ups and downs - we see what just happened with the Dow and S&P 500. People who bought Bitcoin at its all-time high in Dec may be freaking out right now, but they will be happy in the end if they hold steady. And again, now is the time to buy more if you can
February 9th, 2018 at 6:03 PM ^
Which cryptos are you into?
February 9th, 2018 at 6:09 PM ^
not telling
February 9th, 2018 at 6:03 PM ^
Which cryptos are you into?
February 9th, 2018 at 6:09 PM ^
dude back off, I'm not telling you
February 9th, 2018 at 6:04 PM ^
Which cryptos are you into?
February 9th, 2018 at 6:08 PM ^
alright you ask 3 times I'll tell you. I own BTC, ETH, ADA, LTC, XLM, TRX, ICX, XRB, INT
February 9th, 2018 at 6:28 PM ^
February 9th, 2018 at 7:22 PM ^
February 9th, 2018 at 8:26 PM ^
February 9th, 2018 at 7:57 PM ^
February 10th, 2018 at 9:16 PM ^
Hope your XRB is not stuck on Bitgrail like mine :(
February 9th, 2018 at 6:12 PM ^
Amen. Just look at the year to year charts for Bitcoin. It always dumps in February like this, then makes gains for the rest of the year. This freakout is nothing new, and if you ask me, nothing to worry about (especially with the Lightning network on the horizon)
February 9th, 2018 at 9:11 PM ^
February 10th, 2018 at 7:25 PM ^
Same here. I feel like we're just now getting out of the latency stage of this stuff, if that.
A lot of the smaller coins will fizzle out, but cryptocurrency as a concept is here to stay. It will become more and more viable as improvements in the technology are made.
February 10th, 2018 at 10:56 AM ^
February 10th, 2018 at 3:10 PM ^
February 9th, 2018 at 5:17 PM ^
February 9th, 2018 at 5:23 PM ^
I agree with you. The job market is definitely heating up (hello headhunters) and there seems to be increased expansion spending by business. Alot of optimism in the market...almost an inverse of 2009.
February 9th, 2018 at 5:25 PM ^
https://qz.com/487013/this-game-will-show-you-just-how-foolish-it-is-to…
This is random and you have no information on market fundamentals, but it's an interesting visualization.
February 9th, 2018 at 5:27 PM ^
forward to. I trade the DAX index futures specifically. I'm not much of an investor other than IRA's and a Roth for my daughter. I don't think this downside move is over. The drop was toooo fast for a reasonable pullback so I look for some downside pressure and violent whipsaw action similar to the last few days.
February 9th, 2018 at 5:32 PM ^
February 9th, 2018 at 5:39 PM ^
I have a relative that's an emotional investor and sold after both the 2001 & 2008 crashes and bought when the market recovered. Over a timeframe when most peoples 401k's should have easily doubled, he lost well over 50% of his retirement savings...and is at retirement age.
He'll be fine, but moral of the story is don't be like him. Unless you invest for a living, take the longview and don't sell when the market plunges or buy crypto currencies after they've had a 20,000% run up.
February 9th, 2018 at 5:41 PM ^
Also, I suspect what we're currently seeing is just an overdue correction. Market should steadily recover.
February 9th, 2018 at 5:46 PM ^
Just don't sell anything. You haven't lost any money until you sell low. Warren Buffett would tell you the same thing, just put your money in a total market index fund and let it sit there.
February 9th, 2018 at 5:50 PM ^
February 9th, 2018 at 5:52 PM ^
I'll be rebalancing which is overdue, and getting some tax benefits out of it. Keep playing the long game.
February 9th, 2018 at 5:53 PM ^
February 10th, 2018 at 11:48 PM ^
Forward PE is like 19 and has been declining since 2016. At the rate we are going, we'll be at parity rather soon unless there is a recession.
February 9th, 2018 at 5:53 PM ^
I am heavily invested in blue chip stocks. Mostly Facebook, Apple, Netflix. Also a ton in TRBCX which is a great blue chip index fund.
I started investing about 10 years ago right before the market bottomed out, so couldn’t have timed it better. The yearly returns have been insane!
February 9th, 2018 at 5:59 PM ^
Im no't worried - my 401k, Roth, and TDam accounts have held up somewhat well...basically I'm back to where I was around Thanksgiving, more or less. But, I am extremely annoyed because I wanted this party to go on forever so that I could GTFO out my job, and now I got a dose of reality. Whatever, I guess.