Investment account back up!

[RSKY]

With the stock market going down the last few months I have a sister who was in a panic mode. They had received a statement for their account in the mail and had lost a little more than 10%. She was ready to fire her advisor and take all her money out. My other sister and I convinced her not to do this. Mine also dropped not quite 10% but I had a lot in CDs so it didn't hurt as bad. The market started going back up and the sister was pacified a little but still thought she should have pulled everything out. Now this week mine has topped where it was the highest it has ever been and is slowly creeping up. I expect the panicking sister's to be way up her next statement. She only checks hers monthly when the statements arrive.

I am trying to make a point here. When you have money invested in stocks or mutual funds, and the market drops, don't panic and sell for a loss. It will come back up! Well, it will if it is a mutual fund. Single issue stocks may not if the company goes bankrupt or something. (Why I don't invest in individual stocks) A person needs to buy mutual funds when everybody is talking doom and gloom and everybody worried about what is going to happen. Only sell when the market is good and prices are up.

Over the years I have seen people on this forum say they cashed their 401Ks because the market had dropped and it was worthless. Not realizing that if they held it a few months or years longer the value would go up dramatically. This is a basic misunderstanding of the markets and how they work. (don't want to get banned for calling people stupid)

Anyway, hoping your investments in your retirement accounts have recovered.

RSKY

 

[ruffdog]

Some people are slow to react so they end up selling at a loss. I had a friend like that. He would be panicking as the stock was dropping and finally start talking of selling. I would tell him if it drops a bit more I'm going to buy more. People end up thinking a stock will ALWAYS go up and they ride it all the way down. Like they say..."never fall in love with your stock".

 

[Torvy]

Most people have no idea how investments work. If they did, they wouldn't put much, if any, money in things like CDs or savings accounts.

I had a lot of fun and satisfaction teaching kids (most of whom came from poor households) how simple, small investments held over a long period would make them millions by age 65.

Mutual funds are certainly part of a sound portfolio. Also, stocks that regularly pay divideds and REITs.

 

[ruffdog]

At least with a CD you know what the return will be, with no surprises from a market loss.

 

[MoKelly]

I’m not a fan of mutual funds - primarily for tax reasons. You cannot control the amount or timing of distributions which are taxable unless inside a ROTH (or similar account).

So, I typically own the stock or bond itself so I can control the timing and amount of any taxable event.

Taxes are, by far, my largest annual expense so I tend to try to manage as best as possible.

I particularly like MUNI bonds with no Federal or State income taxes.

 

[Torvy]

At least with a CD you know what the return will be, with no surprises from a market loss.

CDs are almost always a loss. Here's some unbiased info.

CDs vs. Inflation: Are They Keeping Up?

Learn how to determine whether the money invested in certificates of deposit (CDs) can keep pace with the rate of inflation and how you measure inflation.

www.investopedia.com

 

[ruffdog]

CDs are almost always a loss. Here's some unbiased info.

CDs vs. Inflation: Are They Keeping Up?

Learn how to determine whether the money invested in certificates of deposit (CDs) can keep pace with the rate of inflation and how you measure inflation.

www.investopedia.com

You look at investing as a form of income. Maybe your job doesn't pay too good and you have more bills to pay so you invest because you NEED income. I have already made my money and I don't NEED any more. A CD just offers a way of having a bit more return on what I do have. There is a big difference in those two positions.

 

[MossRoad]

With the stock market going down the last few months I have a sister who was in a panic mode. They had received a statement for their account in the mail and had lost a little more than 10%. She was ready to fire her advisor and take all her money out. My other sister and I convinced her not to do this. Mine also dropped not quite 10% but I had a lot in CDs so it didn't hurt as bad. The market started going back up and the sister was pacified a little but still thought she should have pulled everything out. Now this week mine has topped where it was the highest it has ever been and is slowly creeping up. I expect the panicking sister's to be way up her next statement. She only checks hers monthly when the statements arrive.

I am trying to make a point here. When you have money invested in stocks or mutual funds, and the market drops, don't panic and sell for a loss. It will come back up! Well, it will if it is a mutual fund. Single issue stocks may not if the company goes bankrupt or something. (Why I don't invest in individual stocks) A person needs to buy mutual funds when everybody is talking doom and gloom and everybody worried about what is going to happen. Only sell when the market is good and prices are up.

Over the years I have seen people on this forum say they cashed their 401Ks because the market had dropped and it was worthless. Not realizing that if they held it a few months or years longer the value would go up dramatically. This is a basic misunderstanding of the markets and how they work. (don't want to get banned for calling people stupid)

Anyway, hoping your investments in your retirement accounts have recovered.

RSKY

There's a caveat to staying the course, and that's if you're going to need your money before the market comes back up. You may have to cash some out at a loss if you need it.

Back in 2008, when I was 47 years old, and the market tanked, and our net worth dropped by 30%, we stayed the course. By 2010 we were back to even, and by 2012, our net worth doubled from pre 2008 levels. Fantastic! A 100% gain in 4 years. Pretty good.

Fast forward to today. I'll be 63 soon. While our net worth growth was not effected too badly in the last few years, and it didn't grow as much as I'd have liked it to, we're at the point where we might want to lock in our nest egg, not wanting to risk another large downturn, not knowing how long a recovery could take.

 

[CloverKnollFarms]

We are up 25-28% YTD across all funds. I'd like 40% considering the past 24 months of burning things down. However, this is a long game... And our 15 year average is 10%. I carefully select funds and revise them when needed. The wife is about to go off and earn another $60k per year for us, which is why I'm pretty sure I'm retiring soon. I’m not that smart, but I can do simple math, so we always had savings goals.

 

[dstig1]

There's a caveat to staying the course, and that's if you're going to need your money before the market comes back up. You may have to cash some out at a loss if you need it.

Back in 2008, when I was 47 years old, and the market tanked, and our net worth dropped by 30%, we stayed the course. By 2010 we were back to even, and by 2012, our net worth doubled from pre 2008 levels. Fantastic! A 100% gain in 4 years. Pretty good.

Fast forward to today. I'll be 63 soon. While our net worth growth was not effected too badly in the last few years, and it didn't grow as much as I'd have liked it to, we're at the point where we might want to lock in our nest egg, not wanting to risk another large downturn, not knowing how long a recovery could take.

Sound practice says that you should move a portion into cash-like investments around now (since you are close/thinking about retiring soon) while things are up. I've heard 2-3 yrs worth of needs should be in cash.

But you also will need to live off that money for the remainder of your life which could be 20-30+ years, so pulling it all out into cash would assure you losing purchasing power due to inflation over that time. Even if the nutz in Washington pull their heads out and get it back under control. It adds up significantly over time as it is the same compounding interest that helps you in your 401k over the years, but in reverse.

The worst thing that can happen is to retire directly into a down market as you now have to withdraw money when everything is down, so you lose twice as you take losses up front and now that money is not invested for the rebound over the long haul. But if you have cash reserve set aside, you can mitigate the loss. Down markets always happen over time, but when that happens relative to your retirement is a much bigger and more personal issue. Later in retirement it is not so big an issue as it is early on.