Investing in the market during a recession, good for long term?

[lrak]

Quote:

Originally Posted by MichaelB The most important investment returns for a 30 year old will not result from his or her current portfolio but from regular and continued additions over then next 20 years.

Well yes for the 30 somethings TODAY, but that was not the case for many of the 60 somethings on the board.

I entered the workforce full time in 1999. I'm only 13.5 years into the 20 year run here but, but so far most people my have age gotten average bank interest and stock market returns of ~2% during their working years. If I contribute $16.5k 401k + $5k IRA into retirement accounts and get ~2% returns, my average returns will exceed my contributions once those accounts have grown to $1M. Given today's contribution limits and ~2% returns, it looks like it is going to take me till my early 50s to get to $1M into my retirement accounts.

On the other hand if I had entered into a 1979-1999 like economy where ~15% average stock market returns were common, my returns would exceed my contributions once the accounts grew to $150k. My bank interest would also be returning ~9% on average instead of ~0.9%. I'd also be likely to have a modest pension and retiree health benefits in my career path so I wouldn't need to have as large a nest egg.

I think the OP is thinking its not going to be as easy for our generation to retire early as the one before us. He is likely correct. I for one am not too worried about it. I've averaged healthy (for this economy) 1% annual raises over the last 5 years while college tuition has continued to go up ~7% a year. Since I have a 6 year old ($250-500k tuition?) and 1 year old ($350-700k tuition?), I figure I'll just win one big lotto jackpot (from one of the two lottery tickets I buy every year) and that should leave enough left over to cover early retirement too.

[rescueme]

Quote:

Originally Posted by rodi I agree with this. And would add it was fueled by joe six pack investing in their 401ks. From what I've read - the trend away from corporate pensions, replaced by 401ks was huge in the 90's. This drove more people into investing in the market then ever before.

But didn't the companies that provided those pension plans invest in the market in order to meet their "promise" to the employees?

I see it more of a transfer of who was investing in the market, being transfered from the employer to the employee (with a bit of employer help by providing a match).

[pb4uski]

Quote:

Originally Posted by rescueme But didn't the companies that provided those pension plans invest in the market in order to meet their "promise" to the employees? I see it more of a transfer of who was investing in the market, being transfered from the employer to the employee (with a bit of employer help by providing a match).

True, the principal effect was the transfer of investment risk from the employer (under defined benefit plans) to employees (under defined contribution plans like 401ks).

[eridanus]

Eh, what Gumby wrote. When Gen Y wakes up and decides to start investing, more money will be sent to 401ks (the Echo Boomers are about 80 million strong), especially when SS gets cut. When more Indians and Chinese earn more money, they'll invest.

Or we could see a "Japan" decade in the US, in which case it's wise to invest in emerging markets. If we have jobs.

[Milton]

Quote:

Originally Posted by bo_knows I think this thread is a disaster.

Me too! ;-)

[UnderTheRadar]

Bo, I think it is a reasonable question 0 just that nobody really knows. I sure hope so - because we continue to plan money in to the market. Selfishly - I would love another few years to "average down" - but know there are lots of people older (including parents) who might have another opinion.

I read a book one time where the author said that every generation has one or two good opporunities in their "cycle" to make money in the market. Obviously 2010 was one of those opportunities - for those people who had cash on hand. Monthly steady dollar cost averagers obviously did not unless they made a swith to cash temporarily.