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What to Do About This Scary Stock Market

But by removing emotion, you will overall make the right choice. And studies show you will outperform the guys that spend an hour a day worrying about it. Of course, the problem is that when assets become overvalued, they may stay overvalued for some time before the market “wakes up” to this fact.

The macro efficiency of markets comes from real people responding to real inefficiencies on a more micro level. But of course, nothing moves in a straight line. Mean reversion can take a very tumultuous path, and markets rarely persist at the average for long. Of course, as the hedge fund industry becomes more and more saturated with trend-following copycat funds, you find a greater and greater percentage underperform. But if you break things down by strategy, you will find that certain strategies perform better than others, not just year after year, but generation after generation.

5) If and when interest rates rise, and it will have to eventually, borrowing may slow a little, our national debt becomes more expensive, etc. etc. I keep ignoring the general public and investing. It’s little amounts here and there but I know it’s going to add up. Are you at all conerned about the performance of your Betterment accout compared to the index fund?

If you’re mostly invested in stock index funds, that snapshot reflects the volatility of the stock market. I have a dividend reinvesting fund with roughly 0.6% costs plus roughly 0.4% depot costs. Additionally the tax system here implies you annually have to pay about 1.5% of everything you own in stocks, funds etc. I treat exchange rate fluctuations the same as I do stock market fluctuations – ignore them, and keep adding my money every paycheque according to my established allocations. I don’t think trying to time the exchange rate is any better than trying to time the market – you might get lucky, but you’re usually better off not doing it. I have been investing in individual stocks for over 30 years, and I’ve learned how to design a portfolio that will produce consistent returns over long periods.

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Of course you can know when stocks are expensive. You can look at their price compared to their earnings. You can look at their price compared to their dividend yield.

  • Timothy says this would be bad if we ended up in a market that looks like the Japanese stock market of the last twenty years.
  • While I agree it is difficult to time the market , I do believe that adjusting the % based on market conditions is warranted.
  • Some years it goes up 20%, other years it drops by 10%, but overall the continuous stream of dividends and growth in company value and productivity keep you well fed and happy – forever.

I’ve been trying to put money into things that have some intrinsic value (real estate/commodities/etc), but even these have obvious risks. Brandon, You’re not missing a thing and that fact is why I don’t bother much trying to convince people to invest in the stock market if they are dead set against it. Any of us who are using 401k, 403b or IRA to help build wealth get a positive double whammy of nearly guaranteed gains. Never before in the history of the world (ok, yes I love hyperbole!) has a gov’t tried so hard to create so many programs to help their people get wealthy. The real question is why don’t more people take advantage of these amazing programs and the answer is…I have no freaking answer to that baffling fact.

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I’d hate to work at desk for 30 years only to have the market completely crash the day after I retire. Sorry for the ramblings, but these seem like very mustachian problems and I am quite curious bittrex review to hear other peoples solutions. That being said, the best way to mitigate this sort of risk is to reign-in spending. The less you need, the less a potential crash or slow decade will affect you.

But you can build a portfolio that is low cost , simple to maintain , provides SUPERB stability and generate excellent returns. In fact, I’d say this is the most BADASS portfolio idea I’ve ever come across. The definition of a good stock can be entirely different between for different people. Also the risks in individual stocks is large until you build a well-balanced portfolio suitable for your individual risk tolerance. I’m very late to the game here and who knows if you’ll ever see this, but here it goes anyway.

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My take away is that the market is high, but what is the alternative? The way I see it stocks in aggregate pay inflation (2-3%), dividends (2% ish) and earnings (2-3%) that rolls up in an expectation of 6-8%. However, PE10 suggests that the market is roughly 35% overvalued.


Without understanding the future prices of eggs AND milk, assessing the intrinsic value of cows and hens is just a guessing game. I consider myself quite knowledgeable of investing and am familiar with cost averaging, but was unaware of that specific data you quoted. Thank you, that’s really interesting to see just how effective it is and might just help me convince my family members to finally follow suit with me on this stuff.

I don’t know whether your way of investing is better or not but I do want to know the true cost of the learning curve before I decide to head in that direction or not. Please do the same comparison that you did above showing the last 20 years, minimum. I believe that would be a true and fair comparison.

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After 26 years investing and now that I’m retired I see indexing as a much smarter play. It is tax efficient and over long periods of time managers can not beat the market. just2trade broker review Everyone who buys individual stocks and says how they do so well have to be taken with a grain of salt. The time they spend on it and accuracy of their stated returns?

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For the average investor Vanguard index funds provide a great wealth building path. Also check out Paul Merriman .com he does extensive research on indexing and withdrawal strategies. He shows real life examples of 4,5 and 6% flexible and fixed withdrawal rates. It really is interesting and put my mind at easy when I need to pull from my portfolio. This is why I have always invested only in individual stocks. When the market crashed in 2009, I could clearly see that the stock prices were ridiculous.

Thanks for the advice, I’ll have a look into that and see if it would be a good fit for him. I have also been working with him on getting his spending down, as a recent divorce has changed his whole situation. It’s hard though when many costs are locked in as long as he stays in the house, and he’s no longer splitting the bills. Goes to show that you can live a certain way and plan for a certain outcome for your whole life and it can go upside down in a matter of months.

I have 30 paid holidays that I can actually take. My mortgage will be at 1.2% interest until it’s paid off completely. The cost for health insurance won’t change because of my individual health. Germans don’t believe in credit cards and paying cash is common. So you actually feel the pain of spending physical money.

The markets are going to take a breather now and then due to the business cycle. Things go bonkers, then they pause or contract azure-docs create-subscription md at main MicrosoftDocs azure-docs for a while. By many measures, the markets may not be ridiculously overpriced right now, but they sure aren’t cheap.

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