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The Investment Thread

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#21

Posted: March 07, 2017, 10:19 AM Post
Posts: 499
GAME05 said:
I agree with you in a sense. I definitely would make more money in the long term by investing additional money and not being in a rush to pay off the loans. Even at a modest return I'd calculated about $800 more that I'd make with investing to the point my loans were paid. But I decided that being entirely debt-free is worth more than $800 to me. I'll still check out the calculator you posted and see if my own figures were about right, though. Thanks.


There is a certain value to not having debt on your personal books. I know that it probably would have made more sense for me to not pay off my student loan and mortgage as soon as possible but it sure feels good.


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#22

Posted: March 07, 2017, 10:20 AM Post
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homer said:
davego said:
I'm a boring mid-cap 401k and Roth guy.


I switched all my retirement accounts to index funds. Fees are way cheaper and over time you do exactly the same as trying to beat the market.


Imho, best post/advice in this thread, especially if you are looking for long term retirement type saving.

.....sorry for the long post, and I know all the posts above are not necessarily about retirement savings planning, but I'm all for people taking a vested interest in their own financial futures.

Save early and diversify your investments. If you in your 20's or 30's you should have no less than 80% of your retirement savings in equities. As your savings grow, you should be sure you diversify among large cap, mid cap, small cap, and international. This can easily be done with Index funds either with just core index funds or also adding growth and value funds (although, I feel the core funds alone are fine). Non-equity money can be invested in an Intermediate bond fund. The only caveat to this is remembering to rebalance your portfolio quarterly or semi-annually. Otherwise, target-date funds are another option and will automatically rebalance and become more conservative as you get closer to retirement.

I have 5% of my retirement money in individual stocks and it's more of just a "fun" thing to do without risking too much of my total savings. I would caution anyone against putting too much of their retirement money into individual stocks. My wife works for a company were all employer contributions to 401(k) goes into the company stock. While the stock has done well over time, I always try to have her keep her total investment in the stock at no more than 15% of the total...and preferably closer to 10%. I'm sure many former employees of companies of Enron and Worldcom wish they had done the same.

I think the US does a bad job in general of educating students in primary education regarding financial planning in general. There are too many 25-35 year olds that either feel like they can't afford to save (which is usually not true, they actually can't afford not to save) or that don't understand/trust the market. The average person only pays attention to news regarding the stock market when there are drastic downturns. The S&P 500 has never had a negative return in any 20 year period and very rarely has it ever had a negative return in any 10 year period. Over long periods of time the market has always gone up. There is no guarantee that that will always be the case, but I'm not going to bet against history. Diversify and don't panic during downturns in the market. To me, trying to time the market is a fool's game.


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#23

Posted: March 07, 2017, 10:24 AM Post
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wallus said:
GAME05 said:
I agree with you in a sense. I definitely would make more money in the long term by investing additional money and not being in a rush to pay off the loans. Even at a modest return I'd calculated about $800 more that I'd make with investing to the point my loans were paid. But I decided that being entirely debt-free is worth more than $800 to me. I'll still check out the calculator you posted and see if my own figures were about right, though. Thanks.


There is a certain value to not having debt on your personal books. I know that it probably would have made more sense for me to not pay off my student loan and mortgage as soon as possible but it sure feels good.



Not to mention that if you pay off loans earlier and reduce your debt, your credit score will increase. This in turn will increase your chances for any loans you may need in the future and will also get you better interest rates on those loans.


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#24

Posted: March 07, 2017, 12:58 PM Post
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GAME05 said:
I agree with you in a sense. I definitely would make more money in the long term by investing additional money and not being in a rush to pay off the loans. Even at a modest return I'd calculated about $800 more that I'd make with investing to the point my loans were paid. But I decided that being entirely debt-free is worth more than $800 to me. I'll still check out the calculator you posted and see if my own figures were about right, though. Thanks.


Simple way to look at it is if you invest properly in equity based mutual funds/ETFs, you can typically bank on ***7-10% returns over a 10 year period (also assuming this is in your retirement account so you aren't paying taxes on gains). That will fluctuate from year to year, so you need to remember this is long term. Compare that to the interest rate you are paying on your loan. If it's close, it's probably up for debate. If one is quite a bit higher, that will tell you where to put your money.

I guess you should also figure in the fact that money that would go towards your loan would be taxed as income. Money going in to your 401k would not get taxed. Added benefit to saving for retirement. You also get to write off your student loan interest amount.

I was lucky to consolidate my loans right out of college at an extremely low rate. Rates were super low. I've decided my money is better off invested in retirement as apposed to paying off my loan. Higher interest rate loans/credit cards should always take precedence over the retirement money, in my opinion.

Just my two cents.

***I didn't have the time to double check that figure. I used to be in the financial planning industry and I believe that was the figure that was usually thrown around. You could ask a financial planner or probably get that online, but I believe that to be the number roughly when looking at what the market has returned on average.


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#25

Posted: March 07, 2017, 3:50 PM Post
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As a contrarian when it comes to most things, I ignore the First Commandment of investing- don't jump in and out of the market.

I don't claim to hit the very top and very bottom of every time, or any time. But I do start re-allocating my funds in 401k/ Roth IRA from stock funds to bond fund when I see signs we may be reaching a bubble or peak. (Now is one of those times, for example.)

That doesn't mean I go 0% in the market. It just means I start backing off in steps. Then, in times where it couldn't look more bleak, I begin buying again in steps.

Have I missed out at the very top at times not having 100% or close to that in equities? Sure. But I've figured I have at least broken even doing it this way, and a couple times came out well ahead. Not saying it's right or wrong, just what I've been doing for about 20 years now.

Finally, I only have a handful of individual stocks left. I have learned through the years I can't compete with market makers. I can do all the research in the world, but I don't know what the institutions know. So I'll trade a few stocks here and there, but when I buy stock now it's almost all S&P 500 ETF.

Great discussion here though, always curious what others really do.


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#26

Posted: March 07, 2017, 4:46 PM Post
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I don't expect I'll ever have that much tied up in IRAs because I'll be retiring at 54 and as soon as I do I'll be needing to buy a house/condo/apartment.


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#27

Posted: March 07, 2017, 5:14 PM Post
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GAME05 said:
I don't expect I'll ever have that much tied up in IRAs because I'll be retiring at 54 and as soon as I do I'll be needing to buy a house/condo/apartment.


Do you have a pension? Just curious.

"Dustin Pedroia doesn't have the strength or bat speed to hit major-league pitching consistently, and he has no power......He probably has a future as a backup infielder if he can stop rolling over to third base and shortstop." Keith Law, 2006


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#28

Posted: March 07, 2017, 6:28 PM Post
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Yeah. Pension pays 2/3 of what I make now, plus an extra benefit which basically pays social security from when I retire until 65 years old. My only 401k right now is that I get 5% of my salary (as a bonus, not taken from) put into that. I'm in work-supplied housing right now, which is why I'll need a place to live after retirement.


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#29

Posted: March 07, 2017, 7:00 PM Post
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If you're paying down quicker, aren't you saving money because less is added via interest? More goes towards the bottom line, quicker?

But I dunno what a student loan looks like only a car loan. So theres that.

I do agree with Brew4u on investing in something you may have more knowledge about. I have a nurse friend who told me to invest in something I forgot (brain cancer) but the hospitals she worked at had switched on a product and company they got supplies from. For me it'd be something in the golf industry, a trend or something used new to it.

But trial and error. Whatever you do, will have ups and downs. So best advice is dont tie yourself in to one investment. Gotta give yourself something to recover with when the downs happen.


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Offline  Re: The Investment Thread
#30

Posted: March 07, 2017, 7:43 PM Post
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For stocks this is basically what I use. The Elliot Wave Theory is what I use when I am investing though I do use triggers for my sales once I lock in a gain that I am comfortable with. I also know some very successful traders who bring in about $75k-100k a year just doing this but they are on the market all day.

Apple is a pretty good stock in terms of the Wave Theory.

Apple is currently in wave 5.

I have lost some using this strategy but overall I have come ahead. I don't do long term investing that is what my 401k is for and my gold and silver investments. Everything that I do with my own money is all short-term and I think the longest I have owned a stock personally is for about 12 months and that was Amazon in 2015 which was a nice return on investment even if it was only 10 shares stupid car repairs.


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#31

Posted: March 07, 2017, 8:47 PM Post
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Brew4U said:
I've always wanted to play the stock market a bit but I'm not even sure where I would start.

Warren Buffet and others have said repeatedly that the best option for the average investor is to find a low-fee S&P 500 fund and put your money there. Those are generally the most profitable companies - let them do your work for you. The time it would take for you to do the research versus the fact that there are always people who know more than you... odds are you won't win by trying to pick stocks.

The exception is if you know an industry really well and can spot an overreaction by the market. For example, when the market got scared of airlines reducing fares and overreacted to lower $/seat/mile predictions, American Airlines stock dropped to $33. That meant it had a P/E of around 2.5; the average P/E of a S&P 500 firm is around 13-15. Total overreaction, and I bought a bunch of AAL at $33 and now it is around $44 even after a significant pullback this week - it was around $47. A nice 33% gain over less than six months.

As for real estate, there is always an inefficency in the market. A ton of apartments - most being one or two bedroom - have been built in the last 3 years. There has been very little building of single family homes or duplexes with 3+ bedrooms in the last 8+ years; you just can't find them on the market. If you can find one you will have no problem renting it, and that will be the case for some time. I would not want to own older 2-bedroom apartments right now.


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#32

Posted: March 07, 2017, 9:19 PM Post
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Man the way the market is currently, That idea that Apple is in wave 5 which would mean moving down...That is just tough to believe. I may have stumbled in something like this in regards to my 401k and the dow movements. But man, Since Mid February last year, the Dow hasn't swung down 6percent from it's closing high at any point.

On Feb 11 it closed at 15,660.
Apr 20 closed 18,076 closed Jun 27 17,140.24 5.5%swing
to current high of 21,115

13months~ 34.8% gain from the Dow. Only 1 swing of 5% during that rise. I mean look at that. 5,450 pts. practically non-stop.

I thought I had gotten on to something as during my cancer time off I'd looked at the Dow Closing prices and found that on avg there were 3 times a year it swung 7% or more. Why does that matter or is important? Well Get a 5 year graph of the Dow, Your best Small-cap index, Mid-cap index, and Large-cap index. Do a layover the lines I bet don't swing much differently one way or the other. When the Dow tanked in 2008/09 Those funds tanked just as much. And when it returned, just as much. A few may have dropped or risen 5-8% more or less but everything that was a small,mid, or large fell just like the dow. Often the climbs would approach or exceed just slightly, the Dow's previous High.

For a couple years til mid-year last year 18,000 was the range it'd climb or barely jump over. But last year after that 18,076 close. The battle lasted 11weeks and July 8 We moved in to the keep above 18,000 mode vs below. And here we are 21,000.

I don't think in any of my research the Dow, gained 3,000pts on a previous high level without swinging down 7% or more briefly. There were single days where the Market moved over 1,000pts down and the next regained more than it had lost.

So I'm lost as to where this dow is heading. History(since 2000) shows it should have had 3 7% or more corrections since the last time it had such. We're 34% up without that. No pausing.
Trump's presidency didn't even bring one occasion. N. Korea's reved up Missile tests haven't created a pause. The Fed raising rates finally(Yellen's fears on the markets needing delays on such) no effects when they did. So just be mindful on shorting anything that just doesn't make sense. I think it was late last year when some article I read the Market's PE was super high than norm, well, it must be another level or even 2 above what that PE was at back when I read that article. At some point we should have a correction and usually that correction will be big when we are talking this kind of PE. So I think you can be a week late when the correction begins, and still make a big profit. Without putting so much risk in an insane market as we have today.


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Offline  Re: The Investment Thread
#33

Posted: March 07, 2017, 9:33 PM Post
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Some things to note from this thread:
-new analysis debunks the myth that it's better to switch more conservatively as one gets older. In general, an equities-based strategy will yield better results
-20 somethings are actually saving more for retirement than any previous generation. It's misleading though, as it is because many companies are realizing the benefits of automatically enrolling their new hires in retirement plans. I wish it were because of financial responsibility, since I teach this in class, but it's not.
-real estate seems safe, until there's a bubble. I know people in AZ that were well over 100k underwater on their homes nearly a decade after the crisis.
-if you're under 50, don't plan on Social Security. Our politicians have screwed us over by continuing to pander to old people at the expense of the young. In 2033 we're going to be in serious trouble. I warn all my students that they cannot rely on Social Security in its current form. It is not viable, and our politicians are afraid to deal with it.


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Offline  Re: The Investment Thread
#34

Posted: March 08, 2017, 8:00 AM Post
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DHonks - great point on getting conservative close to retirement. I'm of the belief that when you retire, you hopefully have 20, 30, 40 more years to have your money working for you. It's smart to get a little more conservative, but you definitely don't want to put everything in to bonds when you retire.


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Offline  Re: The Investment Thread
#35

Posted: March 08, 2017, 9:55 AM Post
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DHonks said:
-20 somethings are actually saving more for retirement than any previous generation. It's misleading though, as it is because many companies are realizing the benefits of automatically enrolling their new hires in retirement plans. I wish it were because of financial responsibility, since I teach this in class, but it's not.

-if you're under 50, don't plan on Social Security. Our politicians have screwed us over by continuing to pander to old people at the expense of the young. In 2033 we're going to be in serious trouble. I warn all my students that they cannot rely on Social Security in its current form. It is not viable, and our politicians are afraid to deal with it.


I have been hearing "Social Security" will be gone all my life. That isn't going to happen. Look at the outrage whenever they even hint at changing anything. They can raise the age, they can tinker with means testing, but there will be SS.

As far as 20 somethings saving more than any previous generation, I don't believe that. Years ago, before 401k, it was commonplace for employers to offer pensions, and most people had full time jobs. The 20 something generation is underemployed, and they have to voluntarily sign up for 401k. So I can't believe that combination would equal saving more than a generation who all had pensions.

You never know how true these studies are, and then they always change. For example, just heard earlier this week that 50% of all Americans couldn't write a check for $500 if they had to.


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Offline  Re: The Investment Thread
#36

Posted: March 08, 2017, 12:38 PM Post
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Location: Kenosha, WI
brewcrewdue80 said:
If you're paying down quicker, aren't you saving money because less is added via interest? More goes towards the bottom line, quicker?

But I dunno what a student loan looks like only a car loan. So theres that.


Same thing really if we are talking the typical repayment method of 10 years at a fixed monthly rate. Only difference would be the interest rate

The thought process is if you had extra money would it be better to pay off more of your loan or invest it? If your loan interest rate is 4%, but I could invest it and get a 7.5% return technically you would be better off financially investing and just paying the minimum on your student loan. In the end I would be gaining 3.5% on that extra money. Of course, in my opinion, this theory doesn't make a ton of sense to me unless you have some incredible loan amounts to pay back and you have a lot of extra money. Because if you only have $30k in loans or so you really aren't going to be gaining much. I would rather make my credit look nice and have the loans gone faster than make an extra grand or two.


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#37

Posted: March 08, 2017, 6:32 PM Post
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DHonks said:
-real estate seems safe, until there's a bubble. I know people in AZ that were well over 100k underwater on their homes nearly a decade after the crisis.

Another thing to keep in mind - you never make or lose money on anything until you sell it.

Doesn't matter if they are underwater as long as they can make the payments (or rent it to someone who can make the payments for you). Keep making the payments and reduce the principal, eventually it will be paid off. Many people who were underwater in 2009 are now above what they bought it for in 2006/2007 because the lack of home building from 2009-2013 has created a housing shortage.

But if you didn't know the real estate market was going to crash in 2007/2008, you weren't paying attention.


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Offline  Re: The Investment Thread
#38

Posted: March 10, 2017, 12:05 AM Post
Posts: 7218
FVBrewerFan said:
DHonks said:
-20 somethings are actually saving more for retirement than any previous generation. It's misleading though, as it is because many companies are realizing the benefits of automatically enrolling their new hires in retirement plans. I wish it were because of financial responsibility, since I teach this in class, but it's not.

-if you're under 50, don't plan on Social Security. Our politicians have screwed us over by continuing to pander to old people at the expense of the young. In 2033 we're going to be in serious trouble. I warn all my students that they cannot rely on Social Security in its current form. It is not viable, and our politicians are afraid to deal with it.


I have been hearing "Social Security" will be gone all my life. That isn't going to happen. Look at the outrage whenever they even hint at changing anything. They can raise the age, they can tinker with means testing, but there will be SS.

As far as 20 somethings saving more than any previous generation, I don't believe that. Years ago, before 401k, it was commonplace for employers to offer pensions, and most people had full time jobs. The 20 something generation is underemployed, and they have to voluntarily sign up for 401k. So I can't believe that combination would equal saving more than a generation who all had pensions.

You never know how true these studies are, and then they always change. For example, just heard earlier this week that 50% of all Americans couldn't write a check for $500 if they had to.


FVBrewerfan, Social Security will be here. It doesn't pay out very much on average now (a little over $1200/month on average), and it will only pay out less. Created in the 1930s, the Social Security Trust Fund ran a surplus until 2009. Beginning in 2010 (I believe in part due to the Obama temporary tax cut), the SSA began collecting less money annually than it was due to pay out. Therefore, the Trust Fund was tapped into. By 2033 the Trust Fund will be drained and tax collections will only cover 75% of expenditures. Therefore, massive changes will be needed, likely a combination of tax increases, benefit cuts, means testing, and increasing the eligibility age. Perhaps SSA will also stop some of it's long-term disability coverage. In 2033, the Social Security shortfall is projected at over $600B. Congress needs to do something about this. They should have done something about this years ago. That's why all people today need to be investing.

I love asking my students if they could save $5 every pay period, and they all raise their hands. Then point out that at normal growth rates, $5/pay period would amass $40k+ of wealth by retirement age. We can all do a better job of this.


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Offline  Re: The Investment Thread
#39

Posted: March 10, 2017, 7:19 AM Post
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Location: Phoenix, AZ
Another investment idea is BitCoin.

https://bitcoin.org/en/


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#40

Posted: March 10, 2017, 9:41 AM Post
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wallus said:
Housing as I have one duplex now and it isn't that difficult.


My dad was in the landlord business for thirty years until his stomach couldn't take it anymore. However, he is enjoying a comfortable retirement right now. His municipal bonds are spitting out semi-annual interest checks.


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