Anything worth investing in, with all these banks failing?

[JeffKeryk]

I agree with your idea of investing in yourself and a home first (and your children if you have them).

However I read an interesting article that said the S&P500 is now like 55% owned by index funds - so its no longer really diversified - since you own the exact same 500 stocks in the same proportion as everyone else - so when everyone heads for the door it doesn't matter how diversified the companies are. Got me thinking thats for sure.

The S&P 500 list issue today is, by weight, the top 5 to 10 companies dominate. And the top 20 or so is extremely tech heavy.
The important thing to understand is that the average return over time beats just about everything. It is a true no-brainer.

 

[PimTac]

However I read an interesting article that said the S&P500 is now like 55% owned by index funds - so its no longer really diversified - since you own the exact same 500 stocks in the same proportion as everyone else - so when everyone heads for the door it doesn't matter how diversified the companies are. Got me thinking thats for sure.

The S&P500 has changed over the years and I agree, it doesn’t give you the same diversification as it did twenty years ago. It’s still diversified but not in the same way.

My idea of complete diversification would be a portion in each of the SP500, the Nasdaq, and international. Over the long haul that should do well.

 

[SC Maintenance]

The S&P 500 list issue today is, by weight, the top 5 to 10 companies dominate. And the top 20 or so is extremely tech heavy.
The important thing to understand is that the average return over time beats just about everything. It is a true no-brainer.

I do own some of a S&P 500 ETF - SPY - and yes mine is way in the green still. If you plan on pouring money in and forget it for 20 years, likely true. But I don't think that was the OP's question.

Remember if your investment falls by 25%, it has to then grow again by 33% to get you back to zero. If it falls by 50% it then has to double again.

 

[supton]

I thought the point of an index fund was to buy various stocks, a number of them, so as to be diversified. If an index fund is meant to be aggressive, then it’s going to be “lots” of the top S&P 500, no? or at the least, “lots” of the volatile stocks, since it’s meant to chase growth. If it’s a target index fund (like retirement), then it’s meant to figure out how to rebalance as it gets close to the end date, flipping into whatever holdings are meant to be stable. Regardless, it’s holding a number of companies, and if one has a bad day, then the fund itself takes a lesser hit—only if the entire market takes a hit does the index thus follow the market.

 

[wwillson]

Our family owns a lot of productive farmland through inheritance and I see this recommendation all the time on the www. I wouldn't recommend it unless you plan to farm it yourself, know someone you trust to farm it, or intend to leave it fallow - as a sitting investment - which you will still pay property tax on. One bad leaser can destroy the soil pretty quickly.

In our case a neighbor - the two families have been neighbors for like 100 years - rents it. I think the rent about covers the property tax.

They should move the farmland to corn country in the midwest.

Economic profit is high on good land that is managed correctly.

 

[PimTac]

I thought the point of an index fund was to buy various stocks, a number of them, so as to be diversified. If an index fund is meant to be aggressive, then it’s going to be “lots” of the top S&P 500, no? or at the least, “lots” of the volatile stocks, since it’s meant to chase growth. If it’s a target index fund (like retirement), then it’s meant to figure out how to rebalance as it gets close to the end date, flipping into whatever holdings are meant to be stable. Regardless, it’s holding a number of companies, and if one has a bad day, then the fund itself takes a lesser hit—only if the entire market takes a hit does the index thus follow the market.

You are correct in that the number of companies in the SP500 assures diversification. Over time the index became weighted and a small number of companies dominate. For example Apple, because of its size is around 5-6% of the SP. So if Apple has a bad day that affects the index a lot more than say Acme. ( fictional example)


This write up explains it better than I can.

What Is a Price-Weighted Index, and How Does It Work?

A price-weighted index is a stock market index where each stock makes up a fraction of the index that is proportional to its price per share.

www.investopedia.com

 

[JeffKeryk]

I do own some of a S&P 500 ETF - SPY - and yes mine is way in the green still. If you plan on pouring money in and forget it for 20 years, likely true. But I don't think that was the OP's question.

Remember if your investment falls by 25%, it has to then grow again by 33% to get you back to zero. If it falls by 50% it then has to double again.

Great point! In fact you are making my point. Your numbers are correct, but are only applicable to the short term. I hate the short term.
The objective of a true long term plan is a 25%, or even 50% drop, does not dramatically affect the investor's lifestyle.

I have a friend who is still more than $2M down from a few years back and it doesn't change a thing in his/her life. Maybe his/her beneficiaries...
My advice is, be like my friend.

 

[SC Maintenance]

I thought the point of an index fund was to buy various stocks, a number of them, so as to be diversified. If an index fund is meant to be aggressive, then it’s going to be “lots” of the top S&P 500, no? or at the least, “lots” of the volatile stocks, since it’s meant to chase growth. If it’s a target index fund (like retirement), then it’s meant to figure out how to rebalance as it gets close to the end date, flipping into whatever holdings are meant to be stable. Regardless, it’s holding a number of companies, and if one has a bad day, then the fund itself takes a lesser hit—only if the entire market takes a hit does the index thus follow the market.

An index simply matches the exchange index in both companies and weighting.

Mutual funds can be somewhat more focused and weighted - ie large cap growth fund - for example. But there actively managed, charge higher fees, and historically have not beet the S&P.

 

[Deleted member 89374]

Anything worth investing in, with all these banks failing?

In yourself and your own education.

 

[atikovi]

Because we know he isn’t being serious.

But you are.

I didn't see a smiley face indicating that.

 

[atikovi]

If you had put $100,000 under the mattress twenty years ago or even ten years ago you would still have that $100,000 but what will it buy?

The purchasing power of the dollar is going down.

But if you had put it in the bank 20 years ago instead of under the mattress, you would have over $200,000 now.

 

[supton]

But if you had put it in the bank 20 years ago instead of under the mattress, you would have over $200,000 now.

I’m having a tough time finding a quick/easy website that shows interest rates, year to year, that would fact check this. I came across a site that says in the 2000’s CD rates were 4-5% but those quickly dropped to like 1% in the 2010’s. Before I go and try to find average savings account interest rate for the last 20 years… is your number of doubling over 20 years a guess, or a fact? That’s a 3.6% interest rate, which sounds right, 20 years ago (maybe?), but not for any recent year that I know of. Also, is a regular savings account or CD?

 

[Vern_in_IL]

Invest in physical ammo.

 

[atikovi]

I’m having a tough time finding a quick/easy website that shows interest rates, year to year, that would fact check this. I came across a site that says in the 2000’s CD rates were 4-5% but those quickly dropped to like 1% in the 2010’s. Before I go and try to find average savings account interest rate for the last 20 years… is your number of doubling over 20 years a guess, or a fact? That’s a 3.6% interest rate, which sounds right, 20 years ago (maybe?), but not for any recent year that I know of. Also, is a regular savings account or CD?

I tried to keep it simple and figured an average 5% a year for 20 years is 100% or double your money. Of course that doesn't figure compounding into the equation which could significantly raise the return, but calculating that is above my pay grade.

 

[64bawagon]

Guns, Gold and Silver

Guns, ammo and lawyer retainers ? (I probably just got myself on a list somewhere)

 

[supton]

I tried to keep it simple and figured an average 5% a year for 20 years is 100% or double your money. Of course that doesn't figure compounding into the equation which could significantly raise the return, but calculating that is above my pay grade.

Rule of 72. Take 72 and divide by the interest rate, and that gets you time to double. 72/5 is about 14 years.

I'm just not sure where you are getting 5% from?

 

[64bawagon]

Land.

The one thing in the world they aren't making more of !

 

[SC Maintenance]

Land.

I generally agree land is a good investment. I wish I had more. But its far from perfect.

You pay property tax forever. That tax gets increased at will. If your not a resident many counties charge you more. Residential property in my county is 3X taxes if your not a resident and its not your primary residence. You have to protect it from squaters. You need to protect yourself from someone getting hurt on it - even if its not your fault.

If you own rental / income property it can pay for itself and appreciate at the same time - but a lot of work comes with that, or you have to pay someone a lot of money to do a lot of work.

Not saying its bad, just saying there's lots of work with it. Not the same as parking your cash in a T-bill

 

[Astro14]

Invest in physical ammo.

Best done 3+ years ago.

It is still overpriced at the moment.

If you need some, then buy it, of course, but it is still quite expensive.

 

[Warstud]

An index simply matches the exchange index in both companies and weighting.

Mutual funds can be somewhat more focused and weighted - ie large cap growth fund - for example. But there actively managed, charge higher fees, and historically have not beet the S&P.

I think an Index Fund is a good way to go . If you have ever used a stock scanner you'll notice that as one sector becomes overbought the money goes into another sector which propels the Index even higher . So ultimately an Index keeps going higher as each sector within it sees money flowing into it .