New and discouraged investor

Sadstate · 08-20-2008, 12:40 PM

Hey, I'm looking for some advice or reassurance. After finishing grad school in 05 with six figures of debt, I spent the next few years paying off my debt. I'm now about debt free and am starting to invest, but it is all new to me and has been discouraging.

I'm under 30 and have two investment goals, 1 investing for a long term like 30 year horizon and 2 investing for a short term to buy a house in a year or two.

For the long term, I've gone with basically index equity funds split between US and international about evenly. In the US I've gone with an S&P index and a small cap index, and for international, I've gone with a small cap index, an emerging market index, and a large cap index. Of course, I've seen massive losses since starting to invest in these about six months ago. So, am I way off track, or is this just part of the ups and downs expected for long term investing when the horizon is decades away?

For the short term, I've gone with two bond funds, a tax advantaged municipal bond fund and an inflation protected bond fund. Small gains, but nothing great there, as expected I guess.

Any thoughts on research I should be doing or better ways to diversify, etc?

Thanks

**Sarah in SC** · 08-20-2008, 12:43 PM

It isn't much consolation to a young and new investor, but you are buying low and with the time horizon you have, there is plenty of time for Mr. Market to work in your favor.

Reading and researching investing is good for all investors, so I think you are on the right track, just keep the faith. It does get easier to weather these market storms as your nest egg grows.

haha · 08-20-2008, 12:48 PM

Quote:

Originally Posted by Sadstate

Hey, I'm looking for some advice or reassurance. After finishing grad school in 05 with six figures of debt, I spent the next few years paying off my debt. I'm now about debt free and am starting to invest, but it is all new to me and has been discouraging.

With the earning and saving ability you demonstrated to pay off all that debt I really don't think you need to worry. Hang around here, read a few of the recommended books, and get started. Like Sarah said, when you carpet bomb a market that is not way overpriced with cash and just keep bombing you wind up rich.

Ha

FUEGO · 08-20-2008, 01:20 PM

Look at it this way: in 30 years when you look back, would you rather have bought in the first few years at a market bottom with the market going down, or would you rather have paid top dollar and have seen the market shoot up quickly, with your savings buying you less shares each year? I'd prefer the former as a young investor.

DblDoc · 08-20-2008, 01:37 PM

I think Bernstein stated something along the lines of: "For the young accumulator they should be on their knees begging for a (long) bear market."

Recommended reading: http://www.bogleheads.org/readbooks.htm

DD

kcowan · 08-20-2008, 01:58 PM

Just think of the market as a Dutch auction. There will be false positive moves making you think things have turned. But they will not turn until the whole ramifications of the recession have been accounted for incorporate earnings. Don't be fooled by earnings that are fueled by inflation. Always focus on real growth. The fire sale is just beginning....

It is a great time to be sinking cash into the market selectively.

Tempesta · 08-20-2008, 02:33 PM

I agree with you Sadstate. I'm also new to stock market investing. Sold one of my properties where I got decent profit from and started testing stock market slowly last month. But I'm already down a few thousands...I mean WTF, this sucks! where's the beginner luck here?

How do you not get that market jitter? kinda suck to see you lose a few hundred daily here and there.

Lusitan · 08-20-2008, 02:54 PM

You're on the right track - congrats. Read a few of the books people recommend on here (I liked the Four Pillars of Investing) and keep saving/investing - that's the key.

You'll have to reach an asset allocation that you're comfortable with on your own, but the one you've got now doesn't sound wildly off the mark in my opinion.

brewer12345 · 08-20-2008, 02:58 PM

Just keep plugging. I started investing in 1999. I knew enough to stay away from the dot com mania, but it was not real encouraging to see the first hard earned dollars get shellacked anyway. But it was an excellent time to be dumping cash into the market. I believe the same is true today.

Coach · 08-20-2008, 04:45 PM

Quote:

Originally Posted by Tempesta

I agree with you Sadstate. I'm also new to stock market investing. Sold one of my properties where I got decent profit from and started testing stock market slowly last month. But I'm already down a few thousands...I mean WTF, this sucks! where's the beginner luck here?

How do you not get that market jitter? kinda suck to see you lose a few hundred daily here and there.

Tempesta, I know it's hard to do, but try not to look. Being able to check every day, or hour, exposes a lot of jittery fluctuation that would disappear if you just looked at, say, monthly statements.

Coach

Sadstate · 08-20-2008, 05:28 PM

Thanks for the reassurance. Sounds like it might be a good idea to focus on putting more money in long term equity investments while they are "cheap" despite the short term losses and make up the short term savings when prices of equities start to increase again.

copyright1997reloaded · 08-20-2008, 10:47 PM

Quote:

Originally Posted by Tempesta

How do you not get that market jitter? kinda suck to see you lose a few hundred daily here and there.

1. By not investing a lump sum all in one lump sum
2. By continuing investment over a period of time
3. By ignoring the losses (index funds) or learning from your mistakes (individual stocks).

I bought my first stock in 1978. * On 6/5/78 the dow was 859. In 1982, 4 years later, on 6/1/82 it was 805. Yes, that kinda sucks, and all the newspapers and magazines talked about how bad things were and "the death of equities", and interest rates were 15-18%.

30 years later, 6/1/2008, it was 11,382.

In terms of investments, time is your friend.

* I think my first purchase was Warner Lambert, which I sold a couple years later, and boy oh boy I wished I kept it as it eventually did very well and ended up being purchased by Pfizer.

FIREdreamer · 08-21-2008, 12:22 AM

Quote:

Originally Posted by Tempesta

I agree with you Sadstate. I'm also new to stock market investing. Sold one of my properties where I got decent profit from and started testing stock market slowly last month. But I'm already down a few thousands...I mean WTF, this sucks! where's the beginner luck here?

How do you not get that market jitter? kinda suck to see you lose a few hundred daily here and there.

Back in 2001, when I had just started investing my money in the stock market, it made me sick to lose a few hundred dollars in one day. Today, I can loose close to $10K on a bad day but I have progressively learned to deal with losses of this magnitude. I check my accounts everyday. Some prefer every month (which is what I used to do) or even less frequently. Personally, I prefer seeing smaller daily drops than one big monthly drop in my accounts' balances. That's just me, but somehow checking my accounts everyday has made me less prone to panic.

Milton · 08-21-2008, 03:28 PM

No one knows what the future holds: regardless of how intelligent or experienced they may be.

I don't necessarily agree with Sarah that "you are buying low" now. It is quite possible that things could deteriorate further. However, at least you can invest with confidence that you are not buying at the top.

The risk of losses always exists. But history suggests that the market eventually rises over time, and the wise person usually goes with the odds.

copyright1997reloaded's three suggestions make sense.

travelover · 08-21-2008, 04:14 PM

To put this all in perspective, Stocks tend to return around 10% on average. Fixed investments return half that. Why? Because stocks jump up and down and scare the cr*p out of timid investors.

You can't have your cake and eat it, too. If you want to earn stock level earnings you have to take the risk. Otherwise stick with money market funds and bonds.

headingout · 08-21-2008, 06:52 PM

I'll echo the others. I started serious investing in the mid-1990's. Knew enough not to get involved with the dot com foolishness, but I was too timid to buy into the bear market that followed. This time it's different for me. No guarantees, but odds are this year is a great time to buy. Losses aren't real unless you panic and sell. Research shows that the long-term money is made by buying as the market is going down. Think of each dollar of investment as shares in the future economy: they may not be worth $1 now, but odds are they will grow impressively in the future. For what it's worth I check my portfolio weekly. I'm also buying weekly, usually the same day each week. Just dollar-cost-averaging into a variety of mutual funds. Not trying to pick sectors or time the market. That pacing works for me, and keeps me from trying to guess tops and bottoms (impossible).

P.S. As well as Four Pillars, The Random Walk Guide to Investing is an excellent, concise guide to investing basics.

megacorp-firee · 08-21-2008, 08:00 PM

You're doing fine. Your youth is your greatest asset right now. Keep up with your investments. After over 35 years of investing, I have seen many ups and downs. The story had a happy ending.

You have the 'luck of the draw' to get in at a relative bottom. It sucks right now, since you are experiencing some losses from the 'get go'. Believe me, 30 years from now, you will be breaking your arm patting youself on the back. ... the terms like 'genius and seer' will come out of your mouth.

Stay the course and you will have a running start at FIRE sooner than you think. In this case, if you are a betting person, bet on the tortise.

Best of luck to you.

FDCaptain · 08-24-2008, 08:24 AM

Its impressive to have paid off six figures worth of debt in 3 years, congrats.

In my opinion dollar cost averaging (DCA) is a solid investing plan. I would decide how much I needed to save for my house in a couple of years and invest the rest regularly in your funds for retirement. Trying to time the market is very hard to do.
Good luck.

FDCaptain

cute fuzzy bunny · 08-24-2008, 09:03 AM

Once again, everything is on sale and everyone laments the great deal they're getting.

"Gosh darn it! Wont everything go up and get expensive again so I can be happy about buying companies and debt for much higher prices!?!"

travelover · 08-24-2008, 09:39 AM

Quote:

Originally Posted by cute fuzzy bunny

Once again, everything is on sale and everyone laments the great deal they're getting.

"Gosh darn it! Wont everything go up and get expensive again so I can be happy about buying companies and debt for much higher prices!?!"

If they are selling it that darn cheap, there must be something wrong with it!

08-20-2008, 12:40 PM	#1
Sadstate Confused about dryer sheets Join Date: Aug 2008 Posts: 2	New and discouraged investor Hey, I'm looking for some advice or reassurance. After finishing grad school in 05 with six figures of debt, I spent the next few years paying off my debt. I'm now about debt free and am starting to invest, but it is all new to me and has been discouraging. I'm under 30 and have two investment goals, 1 investing for a long term like 30 year horizon and 2 investing for a short term to buy a house in a year or two. For the long term, I've gone with basically index equity funds split between US and international about evenly. In the US I've gone with an S&P index and a small cap index, and for international, I've gone with a small cap index, an emerging market index, and a large cap index. Of course, I've seen massive losses since starting to invest in these about six months ago. So, am I way off track, or is this just part of the ups and downs expected for long term investing when the horizon is decades away? For the short term, I've gone with two bond funds, a tax advantaged municipal bond fund and an inflation protected bond fund. Small gains, but nothing great there, as expected I guess. Any thoughts on research I should be doing or better ways to diversify, etc? Thanks

08-20-2008, 12:43 PM	#2
Sarah in SC Moderator Join Date: Sep 2005 Location: Charleston, SC Posts: 2,734	It isn't much consolation to a young and new investor, but you are buying low and with the time horizon you have, there is plenty of time for Mr. Market to work in your favor. Reading and researching investing is good for all investors, so I think you are on the right track, just keep the faith. It does get easier to weather these market storms as your nest egg grows. __________________ "Never argue with a fool, onlookers may not be able to tell the difference." - Mark Twain DINKS, 37 and 45, plan for his ER at 50, mine few yrs later.

08-20-2008, 01:58 PM	#6
kcowan Thinks s/he gets paid by the post Join Date: Jul 2006 Location: Pacific latitude 20/49 Posts: 1,545	Just think of the market as a Dutch auction. There will be false positive moves making you think things have turned. But they will not turn until the whole ramifications of the recession have been accounted for incorporate earnings. Don't be fooled by earnings that are fueled by inflation. Always focus on real growth. The fire sale is just beginning.... It is a great time to be sinking cash into the market selectively. __________________ For the fun of it...Keith

08-20-2008, 02:58 PM	#9
brewer12345 Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Mar 2003 Posts: 9,255	Just keep plugging. I started investing in 1999. I knew enough to stay away from the dot com mania, but it was not real encouraging to see the first hard earned dollars get shellacked anyway. But it was an excellent time to be dumping cash into the market. I believe the same is true today. __________________ “When you realize that you are one of the rare few who observe moral principles in their relationships with others, there is a temptation to sink into amorality, not out of conviction or pleasure but simply to avoid further pain, because there is no greater suffering than being an angel in hell, whereas a devil feels at home wherever he goes.” – Martin Page, How I Became Stupid

08-21-2008, 03:28 PM	#14
Milton Thinks s/he gets paid by the post Join Date: Apr 2007 Posts: 1,000	No one knows what the future holds: regardless of how intelligent or experienced they may be. I don't necessarily agree with Sarah that "you are buying low" now. It is quite possible that things could deteriorate further. However, at least you can invest with confidence that you are not buying at the top. The risk of losses always exists. But history suggests that the market eventually rises over time, and the wise person usually goes with the odds. copyright1997reloaded's three suggestions make sense. __________________ "There is no more dreadful punishment than futile and hopeless labour" - Albert Camus

08-20-2008, 01:20 PM	#4
FUEGO Full time employment: Posting here. Join Date: Nov 2007 Posts: 689	Look at it this way: in 30 years when you look back, would you rather have bought in the first few years at a market bottom with the market going down, or would you rather have paid top dollar and have seen the market shoot up quickly, with your savings buying you less shares each year? I'd prefer the former as a young investor.

08-20-2008, 01:37 PM	#5
DblDoc Recycles dryer sheets Join Date: Aug 2007 Posts: 465	I think Bernstein stated something along the lines of: "For the young accumulator they should be on their knees begging for a (long) bear market." Recommended reading: http://www.bogleheads.org/readbooks.htm DD

08-20-2008, 02:33 PM	#7
Tempesta Dryer sheet aficionado Join Date: Jul 2008 Posts: 47	I agree with you Sadstate. I'm also new to stock market investing. Sold one of my properties where I got decent profit from and started testing stock market slowly last month. But I'm already down a few thousands...I mean WTF, this sucks! where's the beginner luck here? How do you not get that market jitter? kinda suck to see you lose a few hundred daily here and there.

08-20-2008, 02:54 PM	#8
Lusitan Recycles dryer sheets Join Date: Jan 2006 Posts: 353	You're on the right track - congrats. Read a few of the books people recommend on here (I liked the Four Pillars of Investing) and keep saving/investing - that's the key. You'll have to reach an asset allocation that you're comfortable with on your own, but the one you've got now doesn't sound wildly off the mark in my opinion.

08-20-2008, 05:28 PM	#11
Sadstate Confused about dryer sheets Join Date: Aug 2008 Posts: 2	Thanks for the reassurance. Sounds like it might be a good idea to focus on putting more money in long term equity investments while they are "cheap" despite the short term losses and make up the short term savings when prices of equities start to increase again.

08-21-2008, 04:14 PM	#15
travelover Thinks s/he gets paid by the post Join Date: Mar 2007 Posts: 1,009	To put this all in perspective, Stocks tend to return around 10% on average. Fixed investments return half that. Why? Because stocks jump up and down and scare the cr*p out of timid investors. You can't have your cake and eat it, too. If you want to earn stock level earnings you have to take the risk. Otherwise stick with money market funds and bonds. __________________ Feral Engineer

08-21-2008, 06:52 PM	#16
headingout Recycles dryer sheets Join Date: Feb 2008 Posts: 80	I'll echo the others. I started serious investing in the mid-1990's. Knew enough not to get involved with the dot com foolishness, but I was too timid to buy into the bear market that followed. This time it's different for me. No guarantees, but odds are this year is a great time to buy. Losses aren't real unless you panic and sell. Research shows that the long-term money is made by buying as the market is going down. Think of each dollar of investment as shares in the future economy: they may not be worth $1 now, but odds are they will grow impressively in the future. For what it's worth I check my portfolio weekly. I'm also buying weekly, usually the same day each week. Just dollar-cost-averaging into a variety of mutual funds. Not trying to pick sectors or time the market. That pacing works for me, and keeps me from trying to guess tops and bottoms (impossible). P.S. As well as Four Pillars, The Random Walk Guide to Investing is an excellent, concise guide to investing basics.

08-21-2008, 08:00 PM	#17
megacorp-firee Thinks s/he gets paid by the post Join Date: Apr 2007 Posts: 1,085	You're doing fine. Your youth is your greatest asset right now. Keep up with your investments. After over 35 years of investing, I have seen many ups and downs. The story had a happy ending. You have the 'luck of the draw' to get in at a relative bottom. It sucks right now, since you are experiencing some losses from the 'get go'. Believe me, 30 years from now, you will be breaking your arm patting youself on the back. ... the terms like 'genius and seer' will come out of your mouth. Stay the course and you will have a running start at FIRE sooner than you think. In this case, if you are a betting person, bet on the tortise. Best of luck to you. __________________ Life is GREAT!

08-24-2008, 08:24 AM	#18
FDCaptain Dryer sheet aficionado Join Date: Jul 2008 Posts: 44	Its impressive to have paid off six figures worth of debt in 3 years, congrats. In my opinion dollar cost averaging (DCA) is a solid investing plan. I would decide how much I needed to save for my house in a couple of years and invest the rest regularly in your funds for retirement. Trying to time the market is very hard to do. Good luck. FDCaptain

08-24-2008, 09:03 AM	#19
cute fuzzy bunny Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Dec 2003 Location: Losing my whump Posts: 22,527	Once again, everything is on sale and everyone laments the great deal they're getting. "Gosh darn it! Wont everything go up and get expensive again so I can be happy about buying companies and debt for much higher prices!?!" __________________ Many an optimist has become rich by buying out a pessimist

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