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Old 11-11-2008, 12:04 PM   #21
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I sold off 2/3 of my equities 3 weeks ago. I went from 90% stocks to 33%. I couldn't sleep and it was stressing me out. The market is right where we were when I sold out. So I figure this is like a "time out". However I find myself getting sad when the market goes down because I still have some stocks, and sad when it goes up cause I feel like I missed the boat. Go figure.
Annuitize! But I am sure there would be much to make us sad with this choice too.
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Old 11-11-2008, 12:16 PM   #22
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Im frozen with fear so Im doing nothing. Just keep putting some in every so often. Maybe it will go up again someday Are you not supposed to buy stocks when they are down not vice versa ....
That's what I did in the '70s, served me well. Dang, Tango, I thought your thread was about quitting your job. Got me!
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Old 11-11-2008, 12:18 PM   #23
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That's what I did in the '70s, served me well.
The '70s were rather hazy for me....
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Old 11-11-2008, 12:18 PM   #24
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It is really impossible to know what the best thing to do is. But overall, now is perhaps not the time to leave. The one thing that we know for absolute sure is that the absolute price of equities is now less than before.
To expand this thought . . . .

We also know with absolute mathematical certainty that returns on $1 invested in equities today will yield higher returns than that same dollar invested exactly one year ago. Plenty of people were eager to invest that dollar 12 months ago, fewer are now, even though we know with absolute certainty that returns will be higher.

Go figure.
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Old 11-11-2008, 12:20 PM   #25
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Correct me if I am wrong but if the Market is down about 40%, does it not have to "come back" about 70% to be even with say October LAST year? If you get in now, and it did, come back 70% you would make a killing! Of course if you stayed in over the past year or so, you would be even. I am asking in all seriousness as I have almost never invested in the Stock Market (little bits, here and there, over the past 25 years or so); currently nothing there, all is in CD's.
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Old 11-11-2008, 12:21 PM   #26
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One thing I do know is that when all is said and done, a lot of people are going to seriously reconsider their risk tolerance. Many people now are resigned, I think, to stick it out and wait for the recovery...but at that point they may reconsider their AA.

I was a 70/30 guy, and I suspect that once my holdings get back to about 70/30 (if they do) I'll probably be more like a 50/50 in the future, especially given the yields we can get on TIPS today for fixed income...
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Old 11-11-2008, 12:22 PM   #27
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For a different perspective, if I end the year where I was last week - down 34.32% then my compound annual return for the last 6 years will be 9.96%. That is significantly better to me than CDs and Tbills.

6 years is arbitrary, but all I have data for. The point being that stocks have averaged about 10% long term. That includes losing about 1/3rd of the value every 7 years on average (10 bear markets in 70 years). Part of obtaining the return is dealing with the volatility because the timing often makes no sense. We could go up 10% in a day (happened twice last few weeks) or 20-30% in 6 weeks or we could continue down. No one knows whether the next rally will be a "sucker" rally or the real thing. If you don't think it is the real thing you may miss the first 30% of the next bull and your long term result will suffer accordingly.

Unless you are in withdrawal phase then I would not worry about it. I have also learned that I should be more cautious when I am within sight of my retirement date. No need to bear the volatility when I am crossing the goal line.
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Old 11-11-2008, 12:24 PM   #28
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Correct me if I am wrong but if the Market is down about 40%, does it not have to "come back" about 70% to be even with say October LAST year?
Yup, you point out the pretty basic arithmetic of the situation investors face.

However, this isn't the first time stocks have declined 40%. On most long-term charts those periods are almost entirely imperceptible little blips or pauses in an otherwise powerfully upward trend. Is it different this time? Perhaps. But that is not my bet.
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Old 11-11-2008, 12:25 PM   #29
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To expand this thought . . . .

We also know with absolute mathematical certainty that returns on $1 invested in equities today will yield higher returns than that same dollar invested exactly one year ago. Plenty of people were eager to invest that dollar 12 months ago, fewer are now, even though we know with absolute certainty that returns will be higher.

Go figure.
Yes, that is true. There are all sorts of "yes buts", mostly riding on "but last year we didn't know how bad the economy would get", etc. What we forget is that we did in fact know that this was a possibility( unless we were ignorant of market history), we just paid little attention because it hadn't happened recently. Now we are very aware that it can happen, but we still know nothing more about the year to come, or the year after that, ....

So it seems to me that the most logical approach is to continue with whatever you rationally and carefully planned before this crash.

I am not the most careful person in the world, so this can be a tall order for me.

Ha
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Old 11-11-2008, 01:04 PM   #30
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#1 - "always take advantage of your pre-tax investments (IRA, 401K)"....mine is down 40%+
a)The match is FREE MONEY, b)You get to defer the tax for decades, and c) You are DCA'ing at the lows.....

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#2 - "buy real estate - you'll never go wrong"....don't think I need to explain that one any more....BTW, I have yet to sell an unoccupied condo after 2 years on the market and having lowered the asking price by 25%!
Is the price comparable to other in the market? How is the location?

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#3 - "buy good quality stocks and hold them - you can't go wrong".....hmmmm, another piece of advice that I have taken advantage of and believed in....and I know that I'm not the only one! .....down over 50%!!
What is you dividend income off those stocks??

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#4 - "if you're buying quality stocks, buy on the dips....buy when everyone else is selling....DCA"....with this market I would have to say that it's ALL BS!....this is just another piece of advice that has placed me in a position to re-enter the work force after going all-in with a good piece of my "3 years of living $$$'s"....
I am truly sorry to hear that.........
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Old 11-11-2008, 01:19 PM   #31
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The '70s were rather hazy for me....
Can you dig it?
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Old 11-11-2008, 01:31 PM   #32
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So it seems like that keeping it in the market in hoping to recoup some of the losses is kind of futile, since it does seem likely that there will be further losses in the stock market
Frank just took me out to lunch and we had a similar discussion. He thinks that in general equities are a gamble and that keeping money in the bank is where it's at.

My response to him was that yes, in the short term preceding this moment this has been true, but in the long term it may become even riskier to keep money in the bank/MM/CDs than to invest in mutual funds. Think of it - - this bailout is involving billions, or by now trillions, and is barely yet begun. Eventually it is possible that massive inflation will result. The risk of inflation is the risk you bear when not investing in the market. Massive inflation is not a problem right now, but at some time in the future it could hit us like a ton of bricks all of a sudden, just as this recession knocked us down in the beginning of October.

Since not investing has its risks as well, we are back to balancing risks.

But all that is theoretical. In the practical realm, all I have to say is "psst!!! Wellesley" (to borrow from UncleMick).
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Old 11-11-2008, 01:33 PM   #33
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Every chance I get....
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Old 11-11-2008, 02:45 PM   #34
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Thanks for everyone's replies! This board never fails me. Who knows how many breakdowns and suicides it has prevented by giving people a place to express their fears and concerns and get some advice? And not feel entirely alone in this Brave New World of the economy (don't know if the world/economy is brave, but we definitely have to be to tough it out...especially us FIRE types living entirely off our investments!).

Cuppa Joe, sorry to disappoint you with the misleading title! But don't you see, if I was still working I wouldn't be as worried about my investments.....

VA Collector, am I reading your post correctly in that you now have to go back to work? If so, I am so sorry----and I apologize for bellyaching when at least I am still retired.

Want2R, your point about inflation is a good one, but wouldn't a scenario still be possible that inflation goes up and the stock market doesn't beat it and even whittles down savings even more? So---did you convince Frank?

Spoke to my broker who commented that, with all the phone calls we have made to him recently, he sees we don't have the risk tolerance anymore for the market! I've been fired (not our type of FIRE) from my broker! (Not really, he actually is just our muni bond broker, except that years ago, he got us into a GMAC bond that was $30K, now is worth $17, and promises to tank further...and he can't even sell it now.) He did not note that for ten years since 1997, the S and P did go up a cumulative 79.86 percent whereas T bills went up 48.97....but that 2008 has obviously eroded that gain. And possibly has eroded my confidence in the market/investing....
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Old 11-11-2008, 02:50 PM   #35
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Ah yes, this sell off continuing today after the bit of a rally from the bottom made on Oct 27 (up almost 19% on election day from those lows) is going to flush out some more capitulation amidst panic amongst those who haven't already done so. There will be much more of this kind of action, I predict, before we finally start heading up in a sustained fashion. I admit to fighting my own gut on days like today. It's very easy to get bogged down in the pessimism and start buying into the worst case scenarios and doomsday predictions.

I just have to continue to go back to the basics as others have stated, and look at the valuations we see now and the huge upside vs. the much more limited downside that we likely would get from here forward. Even many of the perma bears are saying it's time to get into the market now.

If you can stay liquid (i.e. you have plenty of cash-like funds to see you through a year or two at least) and gut this out I think you'll be well rewarded. But it is very gut wrenching to do so. I know, I feel it too.
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Old 11-11-2008, 03:00 PM   #36
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I just have to continue to go back to the basics as others have stated, and look at the valuations we see now and the huge upside vs. the much more limited downside that we likely would get from here forward. Even many of the perma bears are saying it's time to get into the market now.
Agreed. I'm following a list of strong companies with solid dividend yields and a good history of paying them.

A couple weeks ago I bought some ADP and today they increased the dividend nearly 14% ($1.32/yr up from $1.16). So even in a market going nowhere, this provides some solace and a reminder that I'm taking the right approach...
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Old 11-11-2008, 03:00 PM   #37
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Old 11-11-2008, 03:08 PM   #38
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A quarter of a million will do. Can I pick of a check this afternoon?
Wow, that would buy a large quantity of your favorite medication (and not the cheap stuff either

P.S. Show me the little beer drinking smiley. I crack up every time I see him.
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Old 11-11-2008, 03:09 PM   #39
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Frank just took me out to lunch and we had a similar discussion. He thinks that in general equities are a gamble and that keeping money in the bank is where it's at.

My response to him was that yes, in the short term preceding this moment this has been true, but in the long term it may become even riskier to keep money in the bank/MM/CDs than to invest in mutual funds. Think of it - - this bailout is involving billions, or by now trillions, and is barely yet begun. Eventually it is possible that massive inflation will result. The risk of inflation is the risk you bear when not investing in the market. Massive inflation is not a problem right now, but at some time in the future it could hit us like a ton of bricks all of a sudden, just as this recession knocked us down in the beginning of October.
Sounds like he needs a lecture on "Inflation 101"..........
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Old 11-11-2008, 03:10 PM   #40
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Want2R, your point about inflation is a good one, but wouldn't a scenario still be possible that inflation goes up and the stock market doesn't beat it and even whittles down savings even more? So---did you convince Frank?
No, I didn't! We are both very independent and opinionated people. So, he compared equity investing to bookies and horseracing, and I predicted gloom and doom due to inflation. We both enjoyed our grilled chicken and iced tea, kissed goodbye, and he was off to work after lunch.

Yes, a scenario like that is certainly possible! I tend to think of equities as being shares in companies, so that the dollar worth of the shares might increase with inflation as company profits inflate and company assets inflate. But there is no guarantee of that and actually, it doesn't happen all of the time. At least there is a chance of it happening. I guess TIPS or I-bonds would be a better and more reliable inflation hedge but it is hard to get enthusiastic about TIPS lately, either! and at $5K/year, I-bonds are no help.
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