OT/ Question for those with investments

[altamoreaf]

Often yes. But usually only if a trustee or group of trustees was not specified when the trust was created. For example, I would never allow my own son's trust to fall into the hands of a non-relative. But you are right, many people are not forward-thinking and it does happen.

Yes, I do understand your concerns, but given the fact that the law imposes such a strict standard on trustees in terms of their investment decisions, it ultimately may be unfair to ask a relative to be trustee.

 

[rotty]

Often yes. But usually only if a trustee or group of trustees was not specified when the trust was created. For example, I would never allow my own son's trust to fall into the hands of a non-relative. But you are right, many people are not forward-thinking and it does happen.

Oh, and by the way....You're an asshole, cock sucker, mother fucker, dick head, piece of shit, serial rapist

 

[Turk]

I'm down 43% on my shares from buying price. Thats nearly a 200% loss from their high

 

[jawbreakerkid]

I woulkd assume he was talking about all the companies that are getting the bailout from the government. I'm not sure if Wells Fargo took money or not, but if I had money to invest I would be putting it in Wells Fargo and Golman Sachs and if I owned any big 3 auto stocks I would use it as TP.

I think if you have money that you can afford to take a loss on in the short term there are a lot of really good buys out there. The market will come back and come back strong, it just might take a while. When it does come back, it will be like a last man standing fight anf those companies should be good to go from here on out

I wouldn't own any financial stocks, not for a looong time. You're on the right scent, but individual stocks I wouldn't touch with a 10 ft pole in this market. Think about what got financial services in trouble, leverage. Think about what made these companies so profitable, leverage. Think about what the government is forcing these companies to do, de-leverage. When you have institutions leveraged 30x per dollar, that magnifies gains and losses, it's like investing on margins as an individual. The companies will never see profits like they have in the past decade, I think leverage will be legislated in the future to prevent events like we're experiencing now. Without bloated profits, no more bloated stock prices, these are unpredictable. On the equity side I prefer owning entire indexes, the Dow, S & P, as opposed to owning individual stocks. I think OTH was dead on that some of these beaten down companies will not get off the mat, I don't want to be left holding their stock. But the indexes as a whole will recoup, will it be 12 months, 18 months, 36 months? I don't know that, but in time you will profit owning indexes.

OTH, that will be a long PM, let's chat over the phone if you want to pick my brain.

 

[OuchThatHurts]

I'm down 43% on my shares from buying price. Thats nearly a 200% loss from their high

That's about the norm if you had shares of some indexing fund or diversified stocks. If you're down 43% than you need to see a 74% rise in your shares to get back to your former price. If you had a 200% loss, you'd own THEM money! LOL

But still, I'd take what you have left and regroup. You're not going to see a 70% return for a looooong time in the markets unless you go completely mad and bet all you eggs on some long-shot biotech that doubles overnight.

 

[thebrick]

Yes. And this is the other way of looking at it. Basically two camps going on here. And here is the problem I have with this philosophy. Normally, on a stock market dip or mild recession, you can be assured that those stocks come back because the business models are intact. Unfortunately, this is a totally different situation. We are in a place we have never been before, historically speaking. Some of these stocks simply aren't coming back. These companies are going down for good. They represent poor business models that relied too heavily on credit and rampant consumerism and the bad apples are just raining off the trees.

Take this guy in this thread. He's down 30% and yeah, the trust isn't a ton of money but he still owns a substantial portion of it. Better for him to cut his losses than wait for this hopeful "big up". Trading volume has gone way down. I'm not exactly suggesting that he try to catch a falling knife. I don't try to catch falling knives. But until jobless rates begin to fall and home values start to level off or rise, the trends will remain downward and the inevitable deflation will increase the value of his remaining money. I don't foresee the "big up" that everyone is waiting for. Too many people have already tried to catch that only to get burned once again and lose even more money. The credit industry will never be the same.

Under normal circumstances, I'd be agreeing with you 100% but nobody in finance seems to want to acknowledge that this isn't just the decade's typical run-of-the-mill recession. These are historically bad numbers with a historically bad forecast and every day the headlines read, "Dow up as investors shrug off dismal 4Q estimates". Everyone just keeps "shrugging it off". And that's exactly the way it will stay - either trade sideways or down until all the bad apples are shaken out of the tree.

At the very least, go with bonds or precious metals. I keep hearing them saying "undervalued, sale price, etc." but what value is a stock that's undervalued now but will be worthless in two years? The treasury can't play the role of a kickstand for the economy forever and 1 or even 5 trillion dollars is just not going to fix it.

I hope I am wrong, in which case I will have made no money from now until it's over but if I'm right (and the leading indicators are right) than I'll save a fortune. So I ask you. Would you rather wait this out making no money and get back in when true signs of improvement are seen or do you just hold on for dear life and pray that the markets don't continue their years long trend?

IMHO, if your downside potential is huge than it's wise to play it safe. But if downside potential is only a few hundred thousand than maybe it might be better to wait because with just a few hundred thousand what you are looking for there is appreciation obviously. But if your downside risk is much higher you need to consider asset preservation.

I hope I am right too Ouch. Maybe I am too much the optimist for my own good. I will agree with you that I think things will get worse before they get better. I don't foresee things turning around for some years because we are undergoing some fundamental changes here. At the very least, I think this is a time to reevaluate where you have your money invested and look for possible opportunities. As bad as it is, there will be some winners come out of this and some that will suffer but eventually adapt back to profitability and some that will just die. Its going to be baptism by fire. For now, I just see it as numbers on paper and I am going to hang on for the wild and wooly ride. And hopefully years down the road, it will pay off when I need it. Maybe not. That prediction is bigger than me.

 

[maldorf]

Sorry guys, I have to respectfully disagree when you say bail out of equities at this point... especially after the big hit last year.

1) First, evaluate WHEN you will need this money. If its sooner than later, no you shouldn't be heavily invested in stocks to begin with. If we are looking at at least 10 years out before you need it, stocks have historically out-performed other investments long-term, period.

2) If you do cash out now, you have insured that your losses on paper have now become permanent realized losses.

3) Don't try to time the market. When the day comes markets recover (and it will) history shows us that some of the best market gains comes literally in the first days of the recovery. Trying to time this is virtually impossible and in doing so, you have already missed some of the biggest returns.

Bottom line is, you have to find a place where you are comfortable with your money. You want to be able to sleep at night. Would I put NEW money in the market right now? That's up to the individual and their tolerance for risk.

This is pretty much where my thinking is, I totally agree. Reason I made the post though was that I was not aware that everyone was having so much trouble with their funds, I knew it was bad but not that bad! None of my family has to rely on this trust to get by, so its just going to sit there and wait for the recovery. I think this may be the best strategy.
One reason I was starting to think about this trust fund though was because of my heart attack. I almost died and have begun to think about how much time do I have left on this earth. It might be nice if I could enjoy a bit of the fund while I am still around.

 

[maldorf]

Abandoning equities could be an enormous mistake, however, I would cut back my equity exposure. There are ways to have equity exposure without incuring all the risk, in the form of structured investments, or some of the ETF products available today.

If you are invested in equities in the form of mutual funds, SELL. Mutual funds are expensive when taking into account the manager fees, your advisor fees, and the trading fees the manager incurs in the management of the fund. You can lose up to 2% of your gains, or add that 2% to the losses you experience. ETFs are much more efficient, where you incur a .2% cost for the passively managed fund as opposed to the actively managed mutual funds. Beautiful thing about mutual funds in this bear market, when some funds are losing as much as 63% of their value, redemptions are causing the managers to sell out of profitable positions, causing the remaining investors to pay capital gains when they have lost a considerable amount of principal! If you can't tell, I hate mutual funds.

If you are smart about it, the government is telling you where to invest, follow the government. You can get equity type returns in investments that are essentially government guaranteed. There is tremendous opportunity, outside of trying to pick up beaten down stocks. I don't want to make it too easy for you, but a good advisor worth half a $#@* should be able to steer you in the right direction.

This market is not going to rally anytime soon, we have a multitude of problems that we need to work through. If there has ever been a market to take a tactical approach as opposed to a strategic approach, this is it.

Yeah, I saw when looking at the statement that the trust fund is going to incur capital gains. That idea is unfathamable. Just crazy.

 

[maldorf]

If I read your post correctly, you have no choice as to where the money is invested. A beneficiary of a trust has a right to receive the benefits of the trust, but only the trustee can make investment decisions. My advise to you is to talk to a qualified legal representative concerning the loss. The trustee is regarded as having a fiduciary relationship with the beneficiary, and any loss as a result of bad investments by the trustee could be actionable by the beneficiary.

I think you are absolutely right here. I have a friend that is a lawyer and need to get with him.

 

[maldorf]

Often yes. But usually only if a trustee or group of trustees was not specified when the trust was created. For example, I would never allow my own son's trust to fall into the hands of a non-relative. But you are right, many people are not forward-thinking and it does happen.

I do not know much about these matters. THe trust was formed back in 72' and is an irrevocable trust. Whats that mean to us?

 

[maldorf]

How can it be a mistake? All you stand to lose is some measly appreciation yet at the same time risking your childrens' future. I have an online brokerage where I play with some fun money but in my opinion, and it's just my opinion, you should have in equities that which you can afford to lose. Because one thing I can promise you is more losses if you stay in stocks and mutual funds. I have more short positions now than long.
Before sending the guy on a legal crusade, it might be wise to first ask him who the trustee(s) is! It could be Dad, Aunt Marie, or Rick down the street. He did not say whether or not he has any control over the allocation of the trust assets. It might just be a matter of a phone call.

It was originally formed by my grandfather in 1972 one year before he passed away. An irrevocable trust. I have a copy of the trust and it is 27 pages long and I cant make much sense of most of it.

 

[maldorf]

Oh, and by the way....You're an asshole, cock sucker, mother fucker, dick head, piece of shit, serial rapist

Where did this come from? Came outta nowhere.

 

[DatBtrue]

Dollar cost averaging doesn't mean you have to hold a portfolio of stocks during the worst economic period since the Great Depression.

A diversified portfolio is not safer when some of the asset classes will not only fail to perform but many members in that class will just go under.

You have received a bunch of advise here most of which advises to stay the course ...maybe they all know more than I.

I am not an investment adviser.

I do have a Bachelor of Science in Finance & Investments. I do have a masters in Economics. I do have a Juris Doctorate and I am involved in int'l finance which includes managing our own funds...but I am no financial adviser.

Just stay on top of your financial affairs and don't allow your wealth to dissipate and you'll be okay.

Good luck to you.

 

[maldorf]

Dollar cost averaging doesn't mean you have to hold a portfolio of stocks during the worst economic period since the Great Depression.

A diversified portfolio is not safer when some of the asset classes will not only fail to perform but many members in that class will just go under.

You have received a bunch of advise here most of which advises to stay the course ...maybe they all know more than I.

I am not an investment adviser.

I do have a Bachelor of Science in Finance & Investments. I do have a masters in Economics. I do have a Juris Doctorate and I am involved in int'l finance which includes managing our own funds...but I am no financial adviser.

Just stay on top of your financial affairs and don't allow your wealth to dissipate and you'll be okay.

Good luck to you.

I have to agree that having more fixed income would be a smart move. Guess the idea though of cashing out of those funds I have makes it so final, that money is really gone then. Right now I can pretend that they might recover and I will end up with what it started at just last July. Hard to believe it fell 30% in less than 6 months.

 

[OuchThatHurts]

I'm no kind of financial adviser either but I've been managing my own portfolio and all my assets for a long time with the help of a few friends and family. We're all in the same "wealth preservation" camp. Granted, this past year I've only made 4 percentage points but any gain must be accepted with gratitude in this climate. We're focusing more on reduced losses rather than capital appreciation in a bear like this.

Maldorf, I hear what your saying about your recent medical trouble and this. It must've been one hell of an eye-opener. You ultimately have to do what you think is best. I hope you are fortunate enough to be able to reallocate some of that coin.

Best,

OTH

 

[thebrick]

Ouch, you did much better than 99.999999% of everyone else out there last year! I would consider a 0% gain after last year a huge plus! Most have lost 30-40% of their value.

 

[Sassy]

I think I've lost about 20%... it comes out to be 30K. Which I don't have a lot to invest so to me is a lot of money considering I only make 43K.

Cashing totally out doesn't seem like the answer. Wouldn't it be better if you reviewed it stock or holding individually and determine if how each of the companies stand financially. It's always a risk when you invest in any of company even banks are in trouble. If everyone pulls out of the stock market, that would just make matters worse. That's why I've decided that the money I've invested I don't plan on using for a very long time. As long as the companies are well managed and not headed for bankruptcy, then I will sit it our. However, if something comes up and I need the money, then I'll cash out.

I don't know how those of you who work in finance do it. There is some very good advise here, but it seems like this stock market crises throws all the investment models out the window. It's more like a wing 'n pray right now.

 

[Pekkerwood]

Maldorf:

Several guys (Brick, OTH) have presented good information. I will say up front that I have zero invested in equities. I do own interest in a hedge fund and invest there in addition to my real estate investments which are the bulk of my portfolio.

One of your primary keys is the structure of the trust itself. Who can steer investments? What investment classes is it limited to etc.? No one here can know this without examination of the trust documents themselves.

I have multiple trusts where I am the beneficiary. Most are for single use asset protection in real estate investments however, My primary trust was moved to Equity Trust to basically give me a SELF-DIRECTED control of my IRA and Roth IRA funds to invest. The company I use is www.trustetc.com This has been an absolute godsend. The key being it is sefl directed, I pick the investments including real estate and private notes, and options on real estate and some other advanced strategies to shift profits to tax advantaged entities.

I there is something I may help you with feel free to pm or call.

 

[jawbreakerkid]

I think I've lost about 20%... it comes out to be 30K. Which I don't have a lot to invest so to me is a lot of money considering I only make 43K.

Cashing totally out doesn't seem like the answer. Wouldn't it be better if you reviewed it stock or holding individually and determine if how each of the companies stand financially. It's always a risk when you invest in any of company even banks are in trouble. If everyone pulls out of the stock market, that would just make matters worse. That's why I've decided that the money I've invested I don't plan on using for a very long time. As long as the companies are well managed and not headed for bankruptcy, then I will sit it our. However, if something comes up and I need the money, then I'll cash out.

I don't know how those of you who work in finance do it. There is some very good advise here, but it seems like this stock market crises throws all the investment models out the window. It's more like a wing 'n pray right now.

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.

 

[maldorf]

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 am pretty ignorant about investments and need to do something about it by educating myself. Even though I dont know much, I would still like to have some idea whats going on with my money. With these trust funds its like some forbidden rite that these people perform and every quarter you get a statement. Suppose I didnt help matters much though by not asking them more questions and being active. I enabled them to do this I suppose.