What good is the stock market?

[Peter]

But if he gets out and there's a sustained rally, he won't sleep at night either.

Do I detect some tongue in cheek here .... ?

Missing a big run-up would be much less distressing to me than particpating in a big collapse.

Peter

 

[wildcat]

NOOOOO! NEVER ASK!  IT SPIES ON US, PRECIOUS!  WE HATESES IT! GOLLUM! GOLLUM!  

I thought Laurence's specialty was Jar Jar Binks (?)

 

[ShokWaveRider]

Uhoh. The web address wouldn't happen to be passionsaving would it? H****, is that you?

No, I have posted mine many time here regarding our jaunts round the Caribbean.

SWR

 

[wabmester]

I pulled out of the stock market just 2 months before the last 2001 stock dive.

I think there's a strong correlation between those who avoided the last crash and those who are now afraid of stocks.   Those who rode out the last crash are more likely to stay in the market in the hopes that they'll get back what they lost (which has pretty much happened after 5 years, and that gives them more confidence in the market).

As I said, my reason for a low equity allocation is that I believe that long-term stock market returns won't be much higher than what you can get with much less volatile instruments.   But, I'm certainly not 100% sure of that prediction, so I do allocate 30% to equities which basically means that I have a 70% confidence level in my prediction.     It also means that I'd probably increase that allocation if bargains emerge, but if there's one lesson I learned from the 90's, it's that we might never see the traditional idea of a "bargain" again.

 

[usc_et]

But if he gets out and there's a sustained rally, he won't sleep at night either.

In the words of Bernard Baruch, "It's not what you miss that counts"

In other words, the only thing that matters is what you actually made and what you actually lost. What you could have made and what you could have lost is irrelevant.

 

[brewer12345]

 It also means that I'd probably increase that allocation if bargains emerge, but if there's one lesson I learned from the 90's, it's that we might never see the traditional idea of a "bargain" again.

I suspect you don't see bargains because you aren't looking. There are thousands of equities out there and God knows how many bonds. I run into attractively priced securities on a regular basis (monthly to weekly).

 

[tryan]

So- what is the best answer, only look once a year

I am surprized no body said "stop looking!" .

Only been FIRED for a couple weeks ... but I pledged to only look at the wad twice a year (Jan and June).  Don't want to react to short term speed bumps.

That's my 2 cents.

 

[wabmester]

I suspect you don't see bargains because you aren't looking. There are thousands of equities out there and God knows how many bonds.  I run into attractively priced securities on a regular basis (monthly to weekly).

Like MOVI at $20? Just kidding. You're right -- it's a picker's market. I'm leaning towards that approach, but it is W-O-R-K. Get together with HaHa and give us a well-diversified list of 20+ values, and I may buy into the BrewHaHa hedge fund.

 

[brewer12345]

Like MOVI at $20?   Just kidding.   You're right -- it's a picker's market.   I'm leaning towards that approach, but it is W-O-R-K.   Get together with HaHa and give us a well-diversified list of 20+ values, and I may buy into the BrewHaHa hedge fund. 

MOVI was a great investment for me...except I lacked the discipline to sell when it ran up to the 30s. I've learned my lesson and have exit points in mind for all but my "lock it in the safe and come back in 50 years" positions. At the present moment, I see several bargains. How about a dividend payor that yields 14% and has low leverage? A tax sheltered dividend payor that yields 8.6% and is not sensitive to changes in the economy? A company trading at about 4X earnings (and solid growth prospects)? Preferred stocks that yield 9% and look to me like the world would practically have to end before they could become impaired?

There is lots of heap stuff out there. You just have to look.

 

[wildcat]

Company trading @ 4x?  Where?!!  Where?!!

 

[brewer12345]

Compant trading @ 4x?  Where?!!  Where?!!

DRYS. They are one of the largest dry-bulk shippers in the world. I'm not sure why the market has thrown them out with the bathwater, but it has. One word of caution: the big difference between these guys and EGLE is that DRYS is significantly more leveraged. Having said that, they look very much like they can easily handle their debt load.

 

[maddythebeagle]

and I may buy into the BrewHaHa hedge fund

you should get a commission for coming up with that most excellent fund name.

 

[uncledrz]

I guess you might just as well ask what good are CDs?  After all, interest rates available appear to be below inflation, you pay taxes on everthing you make, and there is no upside beyound the coupon.

If you can't stand the heat, get out of the kitchen.  Personally, I think it would be foolhardy to not own any equity, but you are the captain of your own ship.  Just be aware of the possible downsides of your choices.

I happen to agree that a long term portfolio should have some inflation protection.  Bonds do provide for present income, but do not, unless inflation protected, provide that component of the long term portfolio.  Real estate/commodities do, but there are other carrying expenses to consider, which leaves equities, althought they are volitale.
OTOH, if the volitility will cause the holder to stray from the portfolio plan, then it is better to stay away and deal with the inflation otherwise.

On a medium or short term portfolio, inflation protection becomes less important.
Uncledrz

 

[Nords]

"What good is the stock market?"

What else has beaten inflation for the last 75 years?

The human brain is a wonderful thing. It claims to invest for the long term and then it focuses intensely on the short term...

 

[wildcat]

The human brain is a wonderful thing. It claims to invest for the long term and then it focuses intensely on the short term...

Maybe that is why insane investors have an excellent chance to outperform the market or at least according to Bernstein.