Posted on 02/08/2018 2:12:16 PM PST by CincyRichieRich
I'm an investor, and like most here, overwhelmed with the sources to read, the Q Anon stuff, the stimuli, the conspiracies...and now, a few days of stock market drops - including today's 1000 pt drop. I'd like to discuss with anyone who will participate, as to causes, where from here, etc.
Day trading, though, is gambling.
But what I was originally trying to say was that there's not a 100% correlation between the health of the economy and daily or weekly or monthly market trends.
The thing to remember is the stock market has occasional corrections, sometimes large ones, but it eventually rebounds to new highs. People who sell during the corrections usually regret it.
The DJ Ind Avg is still up 19% over December 2016.
Long term stock market growth is between 4% and 7% a year. With the current drops the Dow is still averaging 9% plus improvement over the last two years.
I hope the Fed looks at five and ten year averages and not one year changes in isolation of longer averages.
At least with these drops the stock market is entering more neutral territory as far as P/E values - neither a bull making a bubble (which it has been) nor a bear. Long term getting markets to look more at fundamentals than immediate expectations is a good thing.
The stock market is fickle.
When I had a mutual fund, I noticed a pattern — the market would drop about the time each month that my account was valued. After a while, I took that to be more than coincidence.
Nervous or Boomers cashing in some IRA’s now that they are retired and are ready to live off the fruits of their labors? I fit that category. I’m of a certain age and am now a seller rather than an investor. I’m probably not alone. Are there young people moving into the market to take my place?
In the fwiw dept, if you didn’t sell, you had no loss.
5.56mm
I did throw a dart at the board myself and have been buying IEP (Icahn Enterprises) stock because the share price is still affordable (for me) and the company has been paying a quarterly dividend of $1.50 per share.
QE3 ended in October 2014, less than 9 months into her term.
Bingo!
If you are truly “an investor” (i.e. in for the long haul), then you really shouldn’t care. If you need money in the short term, it should already be out of the market. The market goes up, and the market goes down. But in the long run, it goes up.
Every time the market takes a bit dip like it did today, i buy a little bit more (taking cash from my IRA and buying index funds). Buy on the dips...
I never stood why it recovered in 2008. The economy was poor and there wasn’t any recovery until recently. I would like to have the Fed audited to see if they have propped it up.
Retirees have gotten tired of earning nothing from interest while essentials have increased. More money from retirees has flowed into the market. In addition corporations have been squeezing workers and pouring the savings into stock buybacks. Also how much of the stock increases really just a decline in the value of the dollar?
I never thought it was wise Trump bragging about the stock market. It is too subject to manipulation. The deep state will do anything to destroy him.
Snowflakes and scoundrels
A few random thoughts.
*First don’t panic. The absolutely worst thing you can do in a down market is to sell. That just turns theoretical losses into real losses. The general rule is buy low and sell high. The smartest people back in the dark days of 2008- early 2009 were the ones who stayed calm and bought in when everyone else was running for the exit with their hair on fire.
*Investing in the stock market should be approached as a long term project. I will define long term here as being ten years or longer. If you have a long term investment horizon and can handle short and intermediate term volatility then you will be fine (probably).
*The best way to invest in stocks is through low cost index funds or near equivalent ETFs. Just buy one or maybe two super cheap index funds (I suggest the S&P 500 and a good international index fund) and set the dividends to auto-reinvest. That way, whether it’s a good year or bad, you are always guaranteed to beat the market. And long term the market does tend to go up. Index funds also have the advantage of giving you instant diversification and they keep your fees and expenses to a minimum. They are also usually very tax efficient. The most important thing is to leave your index funds alone and tune out the noise of short term movements in the market.
*Do not try to outsmart the market. Very few people are able to do it over the long term. And avoid frequent trading. The only people who make money doing that are the brokers. Actively managed mutual funds and hedge funds that aim to beat the index are a racket. Avoid them. Numerous studies have shown that they invariably fall short because the investors get killed by high fees and expenses, which compound the loss in earnings over time. Read pretty much anything by Jack Bogle for more information.
*For those who do not have a long term investment horizon or are by either choice or necessity conservative investors you will want to limit your exposure to the stock market because of its very high near and intermediate term volatility. Depending on your situation, if you can’t afford steep losses you will want to have between 25- no more than 50% in the market. If you are retired and not independently wealthy I would suggest not more than a third of your money in stocks. The rest should be in high quality bonds or a good bond mutual fund. Tax exempt bonds may make sense for those in the top couple of income tax brackets.
*Keep a strategic reserve for unexpected emergencies. You should have at least six months of essential living expenses in some form of cash or a near equivalent.
*I am also a fan of gold as a disaster insurance policy. In an SHTF scenario banks and the financial markets might be closed for a while. In that kind of situation paper money may lose value quickly. Gold is the ultimate form of emergency money. Don’t go crazy with it. Gold pays no interest or dividend. Think of it as a the financial equivalent to a catastrophic health insurance policy. If all goes well you will never need it. But if you do...
*Finally for those with a very low risk tolerance, which is to say you really can’t afford significant losses or you stay awake at night worrying about stuff like what’s been going on over the last couple of weeks, consider the Harry Browne Permanent Portfolio. It is a completely crazy portfolio construct that when I first heard about it I dismissed it as nuts. But it does actually work. Basically it is a 4x25% portfolio with one quarter in each of the following assets,stocks, long term government bonds, cash and gold. See here for more information...
https://wiki.earlyretirementextreme.com/w/index.php?title=Permanent_Portfolio#External_links
“Stocks were overbought
Soros is attacking the markets to punish Trump”
Maybe it’s not being done to punish Trump, but to make the market the Big Story instead of FISA, etc. We’re coming close to the time when the MSM will have no choice but to report what’s going on, and a negative financial outlook will draw attention away from FBI, DOJ, State.
Isn’t deficit spending actually a stimulant for the economy? Even if it isn’t prudent, and left unchecked inflationary? Wouldn’t a significant reduction in govt spending actually be bad for equities.
“Every time the market takes a bit dip like it did today, i buy a little bit more”
Charles Payne on FBN loves the dips. He scoops up more stock at the low rate.
Quants. The quantitative algorithms. If they stop for any meaningful time the market just hangs at this point as they’re so much of volume.
EXACTLY. I listened to Fox News on Sirius XM the other day, and they played a bunch of clips with Trump bragging about how much the market was up, up, UP! And knew..with certainty..that the powers that REALLY run the country (and the world) would almost certainly do everything they could to crash the markets. They really do hate him (and what he stands for - which is essentially in their way of doing what they want with globalism, strip mining America, etc) that much.
Those who don't think this is an orchestrated / intentional crash for political reasons are not paying attention. That said, it's very frustrating to "invest" and learn after many years that your "investment" has NOTHING to do with the value of a company, but what political games are being played. Very sobering.
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