How do you tolerate the Peaks and Vallies? I'm having a hard time!

[thefed]

I only have about $5500 in a 401k and Roth. I'm 22, and just getting full swing into retirement planning (45 is my goal). Without a doubt, I will be putting about $500/month into a Roth or Simple IRA...just unsure of what funds (likely it will be more $$ monthly, but it depends on bonus's and my own business success). I currently am in the Target 2045 in my Roth.

First off, I can NOT help but look at my balances every single day. I love to see each increment of $500 pass by. I also like to see myself earn an easy $25 from one day to the next (appreciation)...but I HATE seeing the totals drop by .6, .7 or 1% a day.

My intuition tells me that we're entering a period of sideways and downward travel, but as an inexperienced investor, I have no idea how long it will last (who does?). This worries me....I don't like losing money. I know I know, you don't lose til you sell, buy buy buy when the market declines, you can't time the market etc. But psychologically, I'm not quite ready to fully embrace that concept (although I will try to muscle thru it and keep making regular contributions).

I'd like to sock away some money into something more stable...something that will earn me some money during this decline. Bonds? How do I do it? I see things about the 10-yr treasury note going up, up up. Are there Vanguard or other funds that capitalize on this kind of thing? I've seen things like VMMXX which has an increasing yield it seems, almost daily.

CD's in my price rance are yielding about 4.5%...barely enough to keep up with inflation, but a nice round 5% APR would be fine with me.

Any comments, suggestions, reactions? Thanks!

 

[cute fuzzy bunny]

Look at it every day.

When it goes up, see that your investments are worth more. Rejoice.

When it goes down, note that the money you're putting in is buying shares at discount prices. And rejoice.

The stock markets a funny thing. Stuff goes on sale and people run away screaming. I dont think that happens with anything else anywhere...

 

[MasterBlaster]

Thefed:

Just wait till you are 50 or so, have saved most of your life, and you have some good balances in there.

The daily swings in dollars will make you swoon.

 

[thefed]

Look at it every day.

When it goes up, see that your investments are worth more. Rejoice.

When it goes down, note that the money you're putting in is buying shares at discount prices. And rejoice.

The stock markets a funny thing. Stuff goes on sale and people run away screaming. I dont think that happens with anything else anywhere...

It is a funny thing, huh? Makes no sense. When I make my monthy Roth contribution, I do at least try to wait for a few consecutive RED days, every little bit helps. I would not mind if the market plunged 50% so I could BUY BUY BUY, but the way down would be a stomach churner. Plus, I would have lost 50% of my portfolio on the way, and don't have access to large amounts of cash to throw at the market when I think it's at the bottom. Thus, timing the market doesn't work....for me...or likely anyone else.

I just want something a little less volatile to help average out my risk...


MasterBlaster: I cant even imagine!!!! I really can't.

 

[Andre1969]

I think with time you get used to the peaks and valleys. I was 21 when I first started investing, and for some reason I had trouble grasping the concept that if something's earned, say, 20% over its lifetime that it was NOT a consistent 20% year after year! Might've been 40% one year, 10% the next, and then a 20% loss the next year, and so on.

Eventually too, your increments will get bigger, too. I remember when I used to get excited on those rare instances where I "made" $500 in a day. And ooh, you should have seen me when I "lost" $500 in a day! Nowadays though, the market barely hiccups and I'll "make" or "lose" $1-2K per day, and I don't even blink. Now I'm not trying to act rich and say that the money doesn't matter, but I just keep reminding myself that I'm in it for the long haul.

Basically, just try to ride out the rough patches the best you can, and if you have the money to do so, try to buy more when it's low!

 

[Cut-Throat]

I don't look at the markets on a daily basis. 5% swings, I notice, but don't pay much attention to.

25% Swings are still a gut-check however.

 

[justin]

thefed,

It's all about attitude. Tell yourself that the money is not to be touched for 20 years. Let it work for you.

I'm at the point now where I have a daily fluctuation of $1000-$2000 at least weekly it seems. 2 steps forward, one step back (hopefully!). What I "earn" in one day in the market is frequently more than I make in a week.

To keep my sanity, I prepare a quarterly "Statement of Net Worth" where I list the value of my portfolio and other assets. This way, the day to day swings don't matter as much to me. It's the quarterly performance I care most about. I only fret 4 times a year that way. I still check the balances daily, but that's just for entertainment purposes only.


And what the bunny said:

"When it goes up, see that your investments are worth more. Rejoice.

When it goes down, note that the money you're putting in is buying shares at discount prices. And rejoice."

 

[mickeyd]

thefed,

Your feelings indicate 2 things to me. 1) That you may be invested too heavily in equities (stocks) which are much more volitile than either money markets or bonds and 2) That you need to become more knowledgable in just how business cycles and long-term investing has worked during the past 100 years or so.

I think the if you resolve issue #2 that issue #1 will also be resolved.

Uncomfortable feelings about situations that you have little experience or knowledge about is a natural human condition that we all have. In your life you have been scared or uncomfortable about situations that you have found yourself in haven't you? And now when you look back on that situation now that you have more experience/knowledge, that situation (s) no longer looks so tough, isn't that true?

Same  thing with investing. What are you saving for (a goal)? Retirement? House? College for the Kids? All of these are long term goals (some longer than others for sure) that require putting away a bit of each pay check now (denying yourself the use of the money) so that you can reap the benefits later on of long term growth that stocks have always brought to patient, knowlegable  investors.

At the web sit www. diehards.org they have list of excellent books that I suggest you look at (your library may have them). Reading these books and becoming more knowledgable will ease your fears and will last a life time.

 

[kaudrey]

justin - I do that monthly. I don't know why, I probably should just do it quarterly. I also take a look each morning, just to see how I did, but I don't think about it until it gets near the 30th/31st.

It IS fun watching how things move as you amass more money.

 

[Danny]

The stock markets a funny thing. Stuff goes on sale and people run away screaming. I dont think that happens with anything else anywhere...

...and when it gets more expensive some folks want to buy..

 

[yakers]

I think whatCFB said is about right. In the accumulation phase volitility and even a declining market is a "good thing". Buy when things are cheaper. Now in the withdrawal phase you might want toget more conservative.

 

[dusk_to_dawn]

I can remember the first time I lost over $1,000 in one day in the market.  That was about 12 or 13 years ago.  Today, hardly a day goes by where I don't see a $1,000 swing, either up or down.  If you are going to invest in equities, it comes with the territory.  I used to tell my neighbor/dentist that the one thing that kept me smiling on big down days was knowing that he was losing a lot more money than I was.  

The best suggestion I can give you is to control what you can control, allocation and expenses.  The rest you have to leave up to the markets, and if history is any indication, the markets go up a bit more than they go down.  And try not to look too much.  One day, week, or month won't make or break you if you are in your 20's and don't plan on getting at the money for 20 or more years.

 

[cute fuzzy bunny]

Plus, I would have lost 50% of my portfolio on the way, and don't have access to large amounts of cash to throw at the market when I think it's at the bottom.

No, you havent. The liquid asset value of your shares is lower. You havent "lost" a thing. You still have every single share. Unless you're planning on liquidating on that down day/period (not recommended), not a thing has lost.

Do you own a home? I'll bet the valuation, depending on where you live, may rise and fall several thousand dollars a day and change by tens of thousands of dollars every year. Does that make you squirrely? Your car just became worth ten bucks less while you read this! Yikes!



Relax. Its only the stock market.

 

[Texas Proud]

Hi thefed,

First of GOOD FOR YOU!!! Being 22 and starting to save is great.. you are way ahead of all the others that are in their 20s!!! I have nephews and nieces that spend every cent they earn and more... could care less about saving... so again GOOD FOR YOU..

Let be bust one of the things you said... and I hear many people say this... you do not lose unless you sell. BULL HOCKEY... You lose when the value goes down... not when you sell. So every day you either gain or lose with no selling involved. Let me give you an example... you are driving down the road and a truck hits you and totals out your car... do you say "well, I do not have a loss since I have not sold it"?

But on the other side... you can not gain without taking some risk. I remember the saying of a bank president a long time ago... it was in response to a question about bad loans... he said if he did not make any bad loans he was not making enough loans!!! If all you want to do is preserve capital at all costs, you are not investing for capital appreciation... you will have some bad investments, but in total you will (or should) make many more great ones that easily cover the bad ones... do not worry about the days the markets goes down.

 

[TromboneAl]

TheFed,

I also can't help looking every day.  But I'd recommend that you educate yourself a lot so that you understand that those short-term fluctuations aren't important to someone your age.  For example, read the Straight Talk on Investing book by Brennan or other books that emphasize a long-term approach. 

At one point someone said to Brennan "You sure were lucky to be investing in the 90's with the market rising so much." He replied "No, it would have been better if the market had stayed flat or declined over that period." 

It's super important to gird your loins like this, otherwise, if the market has a big downturn, you'll be tempted to sell. 

When I was in your situation, I'd be really into investing and checking results for a few months, and then not even check for years.  'Course back then, it wasn't as easy to check as it is now.

 

[brewer12345]

I look all the time and sometimes it isn't fun. Multi thousand dollar swings a day are not uncommon for me, but that pales to the money under management here at work (millions of dollars a day swings).

I think that after a while you get used to it. As long as things don't go completely pear-shaped (company goes BK, industry goes away, etc.), there is always tomorrow and the next day. As time goes on, you will also see the account value pile up to be far above what you contributed. Somehow watching fluctuations in stuff that already has huge cap gains is easier.

And think of the alternative. If I insisted on a low/no volatility portfolio, I'd be retiring in my 60s.

 

[uncledrz]

Any comments, suggestions, reactions? Thanks!

At 22 your most important and strong asset is not the balance in any specific account, but the time factor.  Let that factor work for you.  Look at your balances every day if you must, but before you do sit down and write out a plan, and stick to the plan.  
For example:  "1.   Save 10,000 in emergency fund, 2.  Save for house downpayment of $10,000 and 3. Invest $500 a month in Vanguard Targeted..2045, starting January 2006 until December 2026".  
Once you buy into the idea of a written plan that you can stick to, you will be able to weather the downturns which will be strong and will be severe and will also be the best opportunity you'll have, just at the time you'll want to run and hide.  Everything in you  will scream run, just when you should and must hold fast and keep on track with the plan.
Don't let the day to day ups and downs get you off track.
Fed, your a long way ahead by facing this reality.  
Good luck to you.

Your
Uncledrz

 

[dunc0029]

I can't help watching my balances daily either.  I'm the anal type that keeps an eye on the market all day ( even though I never do anything in reaction ) and even found the time of day my different brokerages update the mutual fund balances by trial and error.  I update my net worth projection spreadsheet on a daily basis.  But, I don't fret over losses because the bulk of my money is in retirement accounts I couldn't pull out without penalty even if I wanted to.  It's money that has no effect on my current lifestyle.  If my balances were cut in half overnight, it only MIGHT dealy early retirement if the market doesn't rebound for a long time.  It's not like I'll be eating the proverbial dogfood.

You'll probably develop a stronger stomach after a few years ... then it might get worse again as you approach the ER date.  I would expect the hardest (psychologically) part of ER planning would be the "do I have enough?"/"should I wait another X months/years?" of actually pulling the plug on employment.  In those days, a major loss would be really nerve-wracking if you don't have a lot of cushion in your net worth.

 

[grumpy]

One thing that helped me tolerate the peaks and valleys when I was just starting out with investing was to only look at the number of shares I owned (I always reinvested all dividends and capital gains). That number ALWAYS went up and NEVER down. The same was not true of the daily market value of those shares, but so what; I had no plans to sell anything for many years. Try to remember that if your number of shares is growing, you are buying an increasing fraction of a business. It is the underlying worth of that business that ultimately determines the value of your shares. If you are buying shares of a good business, don't worry about how the market is currently valuing those shares.

Grumpy

 

[rs0460a]

If on the last day on this earth I'm left with $1.00, I figure I'm ahead...

When I had $100 invested, a swing of $1 (was a lot)
When I had $1,000 invested, a swing of $10 (was a lot)
When I had $100,000 invested, a swing of $1,000 (was a lot)
When I had $1,000,000 - U know where I'm going with the story...

I won't go into my personal details, but just to tell you regardless of your "base", some days will alway seem like "a lot".

You are young  8); relax, and enjoy life a bit  :

I'm on the "verge of retirement" - from an "old guy", don't sweat it  

- Ron

 

[thefed]

Thanks all of you for your wisdom and support.

Maybe I said it wrong, but I understand at my age TIME and waiting is what I need to worry about....nothing else.

To calm myself down though, I'd like a chunk of change earning about 5% that is NOT very volitile...bonds maybe? How do I go about buying bonds, or what funds offer a good stable yield around 5%?

Thanks!

 

[Cool Dood]

If on the last day on this earth I'm left with $1.00, I figure I'm ahead...

You made me smile -- thanks!

 

[brewer12345]

Thanks all of you for your wisdom and support.

Maybe I said it wrong, but I understand at my age TIME and waiting is what I need to worry about....nothing else. 

To calm myself down though, I'd like a chunk of change earning about 5% that is NOT very volitile...bonds maybe?  How do I go about buying bonds, or what funds offer a good stable yield around 5%?

Thanks!

I think you're nuts to bother, but if that's your bag your best choices are either a money market fund (yields over 4%) or s stable value fund (only offered in 401k plans and yield approaching 5%).

 

[justin]

To calm myself down though, I'd like a chunk of change earning about 5% that is NOT very volitile...bonds maybe? How do I go about buying bonds, or what funds offer a good stable yield around 5%?

Thanks!

Check out CD's. You can get 5% for a rather short term CD, or close to 6% with a long-term CD. If "stable" is what you need for peace of mind, go for it.

 

[thefed]

Check out CD's. You can get 5% for a rather short term CD, or close to 6% with a long-term CD. If "stable" is what you need for peace of mind, go for it.

I'm not seeing any CD's yielding 5%. Where are you seeing them....? I check bankrate.com usually.