OT/ Question for those with investments

[Sassy]

This is the first market downturn since the Great Depression that all asset classes failed, throwing all asset allocation models out the window. One thing I have noticed with clients is that when we went through the bull markets and their equity portions of their portfolios grew, they never re-balanced to keep their allocation within the range they had originally intended. So they had a larger exposure to equities, allowing for greater losses.

I think on top of the market, another reason behind properly diversified portfolios failing to hold up in the down turn, is the use of mutual funds. As Americans we have trillions in mutual funds due to 401k platforms. If you hold fixed income in your 401k, you can actually lose money. A lot of people fail to recognize this. You have a fund manager trading bonds based on what he finds in favor at that time, as opposed to a simple buy and hold bond strategy and keeping them until maturity. Since bonds can be bought and sold at a discount or premium, this can lead to losses in what most think is a rock solid asset class.

As a rule of thumb in investing, keep as few people between you and the investment as possible. You need transparency in investing, if you don't fully understand what you are investing in, don't invest.

I've wondered why my bond fund has went down. I though those did better in troubled times and were a little more safer than stocks. I had some money I was saving for a new car that I put in bonds because I want to have the money set aside in 5 yrs to get another newer model. The only thing good about it right now is that it is tax-exempt.

 

[skulbone]

Anyone realize that the crash of '29 stayed down til.......

1973. Yep 44yrs. Add that to 2007 and you get 2051. Not saying its going to happen, but it could. Just a little history to put into perspective.

 

[thebrick]

Anyone realize that the crash of '29 stayed down til.......

1973. Yep 44yrs. Add that to 2007 and you get 2051. Not saying its going to happen, but it could. Just a little history to put into perspective.

We also have the housing bubble in Japan that burst in the 90's as an example. Its been over 10 years and the Nikkei is still not anywhere close to those previous highs. The Japanese refer to it as the "golden recession". That is, the economy tanks and seems to stabilize but afterward there is no GROWTH as one would normally expect. Everything stagnates. We may be entering a long period when being frugal and saving money is the way to accumulate assets vs. depending on assets to automatically greatly increase in value.

 

[skulbone]

Hell if you go to an online trader and have buy's at a value then trade it when it hits 5-10 bucks higher (higher=more risk) then auto sell it at +5. Back and forth. You'll still make cash in the market but you'll have to do your homework and pay attention to the markets. Money is still being made, but its not just buy and hold any longer.

 

[maldorf]

Hell if you go to an online trader and have buy's at a value then trade it when it hits 5-10 bucks higher (higher=more risk) then auto sell it at +5. Back and forth. You'll still make cash in the market but you'll have to do your homework and pay attention to the markets. Money is still being made, but its not just buy and hold any longer.

Ive never done this sort of thing, and maybe its best that I dont lol. I have a question though. Arent there fees involved in trading like this, and how much does that cut into your profit?

 

[papapumpsd]

This may seem a bit off the beaten path, but in such financially tumultuous times, "alternative" investments may be an option. Has anyone on here thought of angel investing in lieu of traditional investing (stocks/bonds/ETFs/etc.)?

Just because the economy is rotten doesn't mean small businesses don't need capital to keep their doors open. Credit's tight....maybe investing in a fledgling company is a viable option for some. Start-up/seed capital, at the riskier end, might even be fun!

Food for thought

 

[OuchThatHurts]

Ive never done this sort of thing, and maybe its best that I dont lol. I have a question though. Arent there fees involved in trading like this, and how much does that cut into your profit?

I do it all the time. Through my dinky Scottrade account it's 7 bucks both ways so 14 dollars total for a trade (basically nothing). There's some extra fees when you borrow shares and margin and so forth but still next to nothing but here's the problem.

I HIGHLY RECOMMEND NOBODY TRY WHAT THIS GUY IS DESCRIBING.

What he's talking about is aptly called "catching a falling knife". You know what usually will happen when try to catch a falling knife? 9 times out of 10 you're going to get cut. Yeah, you can try to buy on dips and you'll get lucky here and there but you'll likely incur a net loss when it's all said and done. This is not the market for a long position. I know a lot of longs will say, "you just don't want people to buy so you can make money covering your short position" but trust me. This is the biggest bear ever. Seriously... EVER. And it's going to get worse yet. I'm sorry but the leading indicators are still awful and I mean AWFUL. I'm going to cover most of my positions because this stimulus is going to create a mini-rally but a few trillion isn't going to band-aid this problem. You need to just weather this one out. Everyone is saying negativity is driving the markets down but this is absolutely no time for fake optimism. Most people are in massive debt and banks are suffering from defaults and foreclosures because of the historically massive job reductions. Something like 2.6 million in 2008 alone in the US? That's 7000 men and women every single day of 2008. How's that for an indicator?

 

[Pekkerwood]

Please listen to OTH. Trading and investing are two differnet animals. Trading is a full time pursuit. We have an MBA from MIT working full time running models and a full time trader and its still difficult. We have been blessed this year with our style of trading, but it is not only not for everyone, it is for almost no one.

The those that care, we get the cheapest deals trading futures contracts with Interactive Brokers. We primarily use TradeStation for modeling.

 

[skulbone]

I'm not talking about catching a falling knife, if you were talking about my post. I wouldn't do what I was talking about w/ just any stock. It has to be GUARANTEED company (like 90+% probability), for example EXXON. It has been trading between a $10-15 swing, and if you only make 7-11 bucks/share every couple weeks. It's worth it. Take your cash out first then play w/ the house's $$.

 

[OuchThatHurts]

I'm not talking about catching a falling knife, if you were talking about my post. I wouldn't do what I was talking about w/ just any stock. It has to be GUARANTEED company (like 90+% probability), for example EXXON. It has been trading between a $10-15 swing, and if you only make 7-11 bucks/share every couple weeks. It's worth it. Take your cash out first then play w/ the house's $$.

Good luck to you. LOL @ "guaranteed company". Even Exxon. House money? This isn't a casino! Market timing is dangerous business - that's a fact. 99.99% of people here do not have the time to do what you're saying which is daytrading. Like I said, good luck to you, but most people don't put their money in these kinds of endeavors.

Someone earlier said it best. Brick. These are days for SAVING. Remember savings accounts? Use your mattress if you have to. The days where you can sit back and let your money accumulate more wealth for your are not now because we are in RECESSION.

I'm just trying to help. I'm not trying to sell anything. I'd just like to see people limit their losses or watch them wait for 20 years to get back the 40% they just lost when they could be reducing debt and saving money. That's all.

 

[skulbone]

It's automated. So daily checking and working does need to be done. If ppl don't have the time to put into this, then they should just let someone they trust do it for them.

I consider anything, that has risk that you can't control, equivalent to gambling. Hell you can count cards to make your odds better in gambling. Most people who are Venture Capitalists, are risk takers, and could be callled gamblers. Guess it depends on perception.

 

[OuchThatHurts]

It's automated. So daily checking and working does need to be done. If ppl don't have the time to put into this, then they should just let someone they trust do it for them.

I consider anything, that has risk that you can't control, equivalent to gambling. Hell you can count cards to make your odds better in gambling. Most people who are Venture Capitalists, are risk takers, and could be callled gamblers. Guess it depends on perception.

Trusting other people with their money is what got most people in trouble in the first place. The concept is equity and asset appreciation when the economy is expanding but that's not happening now - receding. And that's not gambling. That's smart finance. What you're talking about is more like setting a few stops and waiting for your daily bets to hit and you hear that little ding.

Timing dips and getting in and out on daily moves? That's off track betting brother.

Maybe perception yeah. But I'll keep mine thanks. I've been around long enough to know where my safe zones are. I just disagree with you're saying. In a bull sure. But not now. That's okay though. If everybody had the same strategy, nobody would make any money right? And what fun would that be?

All kinds man. All kinds.

 

[Steve123]

I am named as a beneficiary of a small trust fund. Back in July it had a portfolio value of $200k. My most recent statement just arrived and its now woth just $140k. Those of you that have investments, are your values dropping like this or is my portfolio manager just an idiot? 75% is in equities and the other 25% is in fixed income. Just wondering if we could help ourselves by getting someone else to manage this thing. At this rate it isnt going to be worth jack by the end of 09.

Sounds about right bro, unfortunately. Make sure you talk with a fee for service financial planner/advisor to make sure that your asset allocation is in line with your financial goals and tollerance for risk. If the 75% equities makes sense for you from a planning persepctive, it still makes sense despite the markets. Don't let the tail wag the dog. If your goal is long term, which it better be with an allocation like that, unless your goal has changed, your allocation really shouldn't. Now products/funds within the portfolio can be reviewed to make sure you're getting the best quality and lowest fees BUT DO NOT TALK TO A GUY GETTING PAID A COMMISSION TO PUSH PRODUCT!!!!!!!!!!!!!!!! Fee only advisor - that's what you want.

 

[maldorf]

Sounds about right bro, unfortunately. Make sure you talk with a fee for service financial planner/advisor to make sure that your asset allocation is in line with your financial goals and tollerance for risk. If the 75% equities makes sense for you from a planning persepctive, it still makes sense despite the markets. Don't let the tail wag the dog. If your goal is long term, which it better be with an allocation like that, unless your goal has changed, your allocation really shouldn't. Now products/funds within the portfolio can be reviewed to make sure you're getting the best quality and lowest fees BUT DO NOT TALK TO A GUY GETTING PAID A COMMISSION TO PUSH PRODUCT!!!!!!!!!!!!!!!! Fee only advisor - that's what you want.

Long term plan for sure. Its just scary watching it go down so fast, and wondering how long its going to take to even recover back to its value this past summer.

 

[thebrick]

and wondering how long its going to take to even recover back to its value this past summer.

That's the $10,000 question. And be prepared for a long, long wait.

 

[maldorf]

That's the $10,000 question. And be prepared for a long, long wait.

Its this kind of thing that makes me wonder why anyone is making any major purchases these days. Sure there are some great deals out there on things like cars, but whos to say that the deals wont get better a few months down the road. Worst of all, whos to say youre going to have a job 6 months from now and why would you take money out of an investment account so that your loses in the market are now permanent. Have to keep them where they are so that you can someday recover. Yet still though, there are people out there buying cars etc. We were thinking about going on a family trip this summer to Florida . I looked online at the hotel rates on the beach and they were obscene. Place I want to stay wants $350 a night plus tax. I just dont see how they can fill up rooms at that rate. We stayed there in the past for about $200 a night about 10 yrs ago or so. With economy like this youd think at most it would be the same.