Dow Plunges 387 points today

[Macdaddy]

Depends on what you need. For long term growth 5% on average with 3% inflation? Might as well bury your money under your shed. For long term if you're a bit squeamish go Roth with an index fund. Low management fees, low portfolio turn-over rates which minimizes capital gains taxes and get a fund with no loads.

Long term index funds do well - around 10% - https://flagship.vanguard.com/VGApp/hnw/funds/snapshot?FundId=0048&FundIntExt=INT

Even play the entire field: https://flagship.vanguard.com/VGApp/hnw/funds/snapshot?FundId=0085&FundIntExt=INT

You are missing the point of the current discussion which is risk aversion.

 

[Crabcake Johnny]

"The worst risk is no risk."

 

[J.R.]

You are missing the point of the current discussion which is risk aversion.

I don't follow you here. How can you justify talking about risk aversion when you conveyed your interest in hedge funds and acknowledged that they have a higher risk. It would have made more sense if you said you're going to dump your money into T-Bills or Cd's to avoid risk.

As for the people who invested in tech stocks. Their morons and a great book can shed some light on the subject as to the probable catalysts. Check out Amazon.com: Extraordinary Popular Delusions and the Madness of Crowds: Books: Charles MacKay

The majority of people who invested in the tech stocks during the late 90's are the same people who are losing their ass trying to flip houses and obsessed with watching the latest reality show depicting other morons trying to live up to cinema verite.

It's a pretty simple process if you study the market. What happens when banks stop loaning money for the housing market???????? They rent until the market stabilizes or they make more money and can purchase a home. More apartment buildings are built to accommodate the influx of renters. The people who cannot afford their home forecloses and need to rent. The investor who rents out homes needs to hold off and usually are experiencing horrible very low debt to income ratio. I'd be surprised if the norm right now is above 1.02. They also foreclosure and now you have the potential for a really great deal.

A person thinking 10+ years down the road isn't as concerned about the stock market going down that much because he or she probably (should) has a diverse portfolio. Only day traders and speculative investors care about that stuff. The longer term investors obviously think about it, but aren't constantly looking at your portfolio every day. The people who are looking at portfolios every day are either brokers or investors with a high level of discipline.

Now if you'll excuse me....MacGyver is on

 

[James]

As John said:

Unless you are selling it is only a "paper loss" and doesn't mean a thing. I won't make any changes in my portfolio based on that information. It's all media hype as far as I'm concerned. I really could care less what the market does on a daily basis.

People buy insurance regardless of what the economy is doing. December has traditionally been my best month.

LOL, "It's only a paper loss", just love that saying. No, its a real loss and will take up to a 150% gain to make up that paper loss. Yet Insurance sales tend to go up drastically in bad times.

 

[J.R.]

LOL, "It's only a paper loss", just love that saying. No, its a real loss and will take up to a 150% gain to make up that paper loss. Yet Insurance sales tend to go up drastically in bad times.

Being somewhat new to the industry I'm curious to hear the reasoning behind the increase of insurance sales during bad times.

 

[James]

Being somewhat new to the industry I'm curious to hear the reasoning behind the increase of insurance sales during bad times.

Just one of them things, go back and look at the times of the great depression, if my memory serves me correctly people were standing in lines to put their money into solid insurance companies. If I had to take a guess I imagine its a safe harbor type of mentallity a lot of people expierence during bad times.

 

[Macdaddy]

I don't follow you here. How can you justify talking about risk aversion when you conveyed your interest in hedge funds and acknowledged that they have a higher risk. It would have made more sense if you said you're going to dump your money into T-Bills or Cd's to avoid risk.

You are right, you don't follow what I am trying to say at all. I have not said that I take on higher risk, I said you have to take on some risk for any potential gains above CD rates.

I am reducing my risk by using hedge funds. The hedge funds I select have a low correlation to the stock market, that is what makes them less risky. You apparently have bought into the "sleaze" factor that the liberal media has placed on all hedge funds. They ain't all sleazy, and banks and institutional investment firms are the biggest customers pouring billions into them.

Here is returns history of one of my funds:

2004: 35.59%, biggest losing month was -4.44%.
2005: 14.47%, biggest losing month was -2.17%.
2006: 22.69%. biggest losing month was -0.56%
2007 16.94 YTD, biggest losing month was -0.20 %

Here is another conservative fund which has never had a monthly draw down and has zero correlation to the stock market:

2004: 11.70
2005: 10.13
2006: 11.10
2007: 3.44 (thru April)

Having investments that have low or no correlation to the stock market is extremely important.

I still own mutual funds for long term retirement, but I also have stocks and hedge funds for current growth and income.

 

[Macdaddy]

LOL, "It's only a paper loss", just love that saying. No, its a real loss and will take up to a 150% gain to make up that paper loss. Yet Insurance sales tend to go up drastically in bad times.

I am in agreement here. Some paper losses are permanent. Enron anyone?

I own 93 individual value stocks for a diversified portfolio in my non qualified account. At any given time 3-5 go completely bust, which thankfully does not really hurt my portfolio since I have included so many. I have some that have gone down 100% and some that have gone up 200+%, that is the beauty of broad diversification.

 

[Crabcake Johnny]

That's why it's all about index funds....unless you think there's not gonna be an S&P anymore. You can put a lot more thought into it and maybe choose investments that return more. But index funds are the Ron Popeil "Set it and forget it" way for the average person to invest for the long term. You won't get rich and you won't get slaughtered.

 

[Macdaddy]

That's why it's all about index funds....unless you think there's not gonna be an S&P anymore. You can put a lot more thought into it and maybe choose investments that return more. But index funds are the Ron Popeil "Set it and forget it" way for the average person to invest for the long term. You won't get rich and you won't get slaughtered.

I like index funds as well, especially when you do broadly diversified asset allocation with Dimensional Fund Advisor funds. They smoke Vanguard for returns.