Yeah, this IS a forum about lubricants
Hope you were getting over 5%. Then no harm, really. Cause, what can you change about the past, anyway? Just learn, that's all.
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- Thread starter Warstud
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Hope you were getting over 5%. Then no harm, really. Cause, what can you change about the past, anyway? Just learn, that's all.
Each scenario is different, but there are silver bullets. Long term investing in an S&P indexed fund is pretty fool proof.
We've heard a lot of recession doom and gloom; those predictions did not materialize.
We head of the immanent market crash; well look at the numbers now.
As you point out, diversification means a lot of different things. I used to be homeless, so having a home is key; it is my priority. I invested in myself at local Community Colleges, San Jose State and continued to keep up with business computer programming. I did not sell my stock options and buy BMWs and MBZs. I drove Toyletta 4 banger pickups and used Hondas.
So I invested in everything I could. I never wanna be homeless again. I will work my you-know-what off to keep my head above water.
This is what has worked for me. Diversification and basically invest in yourself.
Everything comes down to the level of RISK.
Especially most of the folks on here are older and don’t want to lose any money…... unlike the kids on Reddit.
An easy 5% is nice and safe.
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Risk and knowledge of what products are available. Without understanding of what's out there, you are shooting in the dark.
I use (and argue with) Schwab Wealth Advisory. If I needed surgery, I would get some help...
JHZR2
Staff member
Yes, look at the numbers. Seven companies in the S&P 500 account for 110% of the recent rise.
Equal weighting all 500 companies and its down like 1%.
That’s neither foolproof or an indicator that all is well. That a bit of math abuse with some perpetual motion blended in.
And the valuations of these seven or so companies are pretty high too, imo.
Sooner or later things revert to the mean.
Tech can do well, it can make money, but it is only one facet. The rest of the market isn’t doing great.
Disagree. The S&P 500 is one of the most popular benchmarks of the overall U.S. stock market performance.
Everybody tries to beat it, but few succeed. That's the numbers.
I believe you are looking at a point in time; I am referring to a term strategy.
Overtime, the S&P outperforms or equals the overall market. Even most professional mutual fund managers can't beat the market.
As you know, the S&P companies change over time; it adjusts.
Individual investments may be able to beat the S&P but with investment fees, taxes, and human emotion working against you, you're more likely to do so through luck than skill. If you can merely match the S&P 500, you'll be doing better than most investors.
A nice index fund allows investors to take part in the wider market than by buying individual stocks. IMO, an S&P index fund is the closest thing you are gonna get to a no-brainer in the stock market. But bring a lunch, it takes time. It's a great place to get started and use as a foundation.
My personal foundation is the double tax free Muni bond fund (which I hate) and the conservative products which include the S&P. The rock-n-roll stuff has been very rewarding, but that is dumb Silicon Valley luck.
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What is known as "the market", or really the S&P 500, is small compared to private equity and dwarfed by bonds and currencies. There are also commodities, real estate, etc. Us peasants seem to think the S&P500 is the end all be all. Its really not much.
The S&P500 has a inherent bid under it as every week people like me dump a sizeable chunk of their pre tax income into it, so there are always buyers. You won't get another 1987 failure to open for this reason. The market melts up every month, because there are a finite number of shares and a constant inflow of capital. People used to take there money out when they retired. Now its seen as so risk free they leave it in till they die. This is why pro's struggle to beat it. Its indexed with a constant inflow. Its a self fulfilling Ponzi scheme.
This is why when it does blow up - which could be tomorrow or 20 years from now, it will be absolutely spectacular. When retirees figure out maybe it isn't so safe, there won't be enough young people to buy there shares on the way down. I point you to the Nikkei 225 in 1987 - which to this day even ignoring inflation hasn't recovered. Don't worry - it won't happen here - someone will monetize it, but your dollars will be worth a lot less when its over.
Given no man can predict the future, I am still invested in it, but not completely, and I am looking for alternates. What else can you do?
Hedge accordingly.
The S&P500 has a inherent bid under it as every week people like me dump a sizeable chunk of their pre tax income into it, so there are always buyers. You won't get another 1987 failure to open for this reason. The market melts up every month, because there are a finite number of shares and a constant inflow of capital. People used to take there money out when they retired. Now its seen as so risk free they leave it in till they die. This is why pro's struggle to beat it. Its indexed with a constant inflow. Its a self fulfilling Ponzi scheme.
This is why when it does blow up - which could be tomorrow or 20 years from now, it will be absolutely spectacular. When retirees figure out maybe it isn't so safe, there won't be enough young people to buy there shares on the way down. I point you to the Nikkei 225 in 1987 - which to this day even ignoring inflation hasn't recovered. Don't worry - it won't happen here - someone will monetize it, but your dollars will be worth a lot less when its over.
Given no man can predict the future, I am still invested in it, but not completely, and I am looking for alternates. What else can you do?
Hedge accordingly.
I am in awe of your history and knowledge... Pretty darn impressive.
I don't totally agree with everything you posted, but in total it is pretty valid. Then again, what do I know?
My point is, similar to your "What else can I do?" point is, the S&P is the closest thing you can get to a no brainer. I believe it is an excellent place to get started.
Piggy backing on the stock performance of 500 of the largest companies listed on stock exchanges in the United States is a pretty good way to go. Self fulfilling or not, the numbers are the numbers and over time it's shown to be pretty tough to beat.
I need to say I am no one's advisor, except my own.
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JHZR2
Staff member
but again to go back to your response to me, its not the performance of the biggest companies. At least not 493 of them… which are net negative. Thus the fallacy of this situation.
That’s fair, but over time would also mean reversion to the mean, which would put the S&P flat or very slightly negative.
Yes, that’s the fallacy of the situation. Blind money flow into a lopsided way overweighted index.
While the warring politicians try to either claim that all is beyond well, or that only very few are doing well and that the average American isn’t (and we don’t need to go into P here), the reality is somewhere in between. Lots of folks aren’t making it, and aren’t buying stuff, which is why 493/500 companies aren’t moving ahead. But there was a ton of money printed, a ton of inflation which hurts those with less as others raise prices because they can, and thus there is a money inflow from some folks (myself included when my autopilot investments buy similarly).
My point is that it’s kind of fake, and I agree when it stops, it’s going to be spectacular. Add on top of it unpayable national debts, even more unpayable unfunded liabilities, it’s just crazy.
Yet people spend money, oh do lots spend. I’ve spent two weekends in NYC, and a week in London this last quarter, people everywhere, shows packed, restaurants packed. So it’s printed money, or debt, or who knows what. And, the US is probably the safest place in the world to park money…
But all in all, it’s a house of cards, propped up right now, but who knows. Thus why it’s prudent to play it safe and take some risk… at which point reward too likely reverts to the mean…
I cannot disagree with anything you posted, but what is a prudent way forward? With the market melting upward, I can't afford to be out of it while waiting for that reversion. Some degree of caution would be appropriate.
Increase the cash bucket? Move more into precious metals? Rental real estate? I am very interested in your and other members' opinions.
My point is the S&P is the closest thing to a no brainer. What is your suggestion to someone getting started?
Investment carriers risk. The bigger risk, IMO, is to do nothing.
I am working with my niece and grand nieces; there is no one in the family with an appropriate experience.
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Obligatory post that even with previous drops, resets, recessions, etc. the S&P in the long run* has yielded just under 8% or better.
*In the long run = 30 year window for my statement.
Yes I understand that time horizon is not appropriate for everyone and some folks feel there will be a bigger reset (I assume than ever) to come.
*In the long run = 30 year window for my statement.
Yes I understand that time horizon is not appropriate for everyone and some folks feel there will be a bigger reset (I assume than ever) to come.
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I convinced a younger (23 years old) employee at work to contribute to the 401K and open a Roth IRA.
I told him S&P is the way to go for the long run.
It will definitely be a substantial sum of money in 30 years.
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JHZR2
Staff member
Well that’s the conundrum, isn’t it?!?
I’m not intrinsically against the S&P 500, btw. It makes sense that the best companies be grouped like that. What doesn’t make sense to me is to think things are ok when 493 out of 500 companies average a slight loss, and only seven account for the index’s outperformance in recent times. To me that creates cause for concern in buying the S&P 500 specifically, and makes me think that an equal weight version, or some other indices may be better value at least to put new money into currently.
What’s interesting though, is that if you take inflation and dividend reinvestment out, even the S&P 500 (and it was the S&P 90 up until the late 20s) only returns around 3%.
I’m not a follower of this person, they just have all the numbers:
https://tradethatswing.com/average-...ns-for-sp-500-5-year-up-to-150-year-averages/
Which also points to me to think that in a lopsided valuation of the S&P, it may be better at this time to buy value or dogs of the Dow, or something similar. Do your DD of course, other things have run too…
And to be clear, that’s sound advice for someone starting and DCA over a very long time. This lopsided situation will pass. Equities are still a good place to be.
See above. For someone getting started, the odd valuation prop-up of the S&P will revert to the mean. Other horrid things may happen in time, as the US and eat of the world struggles to pay debts and fix issues. But as you said, doing nothing is a risk too. I’m not advocating that, nor am I against the S&P.
Situations are too varied. But for someone starting out I’d plan to buy into the S&P long term, but also I’d be considering if they could currently get 5% for cash without any risk exposure, and that may be good, as may be some value and small cap indices.
None of that is to say that I’d keep such a mix forever. To the contrary, there are other times I’d buy the S&P aggressively, and/or rebaseline and rebalance.
Timing the market can be a fools errand. But being smart about where money going in goes is something that can be actively managed for the best, imo.
Thanks for your input. I am not sure I agree, but that's just me. I struggle with your "revert to the mean" point, because the S&P adjusts. Perhaps I am not understanding... We agree that portfolio adjustment is wise as time goes by; that is part of portfolio management, especially larger, diverse portfolios. But IMO adjustments should be minor, otherwise you have a lousy portfolio. Schwab reminds me that my money needs to work for me at all times, regardless of market conditions.
The S&P beats or matches the overall market over time. Very few professional analysts beat the S&P over time. That's just the numbers.
You might beat the market, but with fees, taxes, and emotion working against you, you're more likely to do so through luck than skill. If you can merely match the S&P over the long run you'll be doing better than most investors.
It seems we agree that it is a good starting point for a person to get into the game. Perfect.
I have begun this conversation with my Schwab Wealth Advisory team. My goal is getting the girls started and letting time do its part.
Again, I appreciate your thoughts.
JHZR2
Staff member
I’m using the concept of reversion to the mean as an analog for the fact that seven companies putting an index of 500 “in the black”, otherwise it would be net negative, to be unsustainable.
Seven companies with absurd market capitalizations.
From a 2022 NASDAQ article:
“S&P Dow Jones Indexes said in November it is relatively unusual for value to outperform growth in a month when the S&P 500 rises. Notably, equal weight has continued to outperform despite the S&P 500 now posting two consecutive months of positive performance.“
My theory is that with all performance due to seven overpriced companies, it’s better to buy value currently when it’s relatively cheaper, and then hold it through the downturn where the seven prop-up companies come back down and value gains… value. Meanwhile reinvesting dividends.
Thinking out loud here but I think this would mean I’d be buying the S&P 500 equal weight index, or a value index equivalent.
Personally I don’t have that option in my work plan, so we do it with my wife’s 503b, and individual stocks/etf.
All I know is, a lotta really smart, rich people, with really expensive computer systems, have been trying to beat the market for a long time.
Those who do are statistically outliers. I can tell you that every Silicon Valley billion $$ company has a dedicated team doing this. And their budget is anything they want.
I also know most millionaires and billionaires are made via the stock market.
Those who do are statistically outliers. I can tell you that every Silicon Valley billion $$ company has a dedicated team doing this. And their budget is anything they want.
I also know most millionaires and billionaires are made via the stock market.
Most millionaires - like the rank and file ones living around the corner sort of thing - are from real estate.
Another thing I found quite interesting when researching this idea of a constant bid under the S&P500, is that Individuals investing in stocks is rather new. Stock ownership historically was around 10% of households, +/- a bit dependent on decade, until 401K's got started in the late 80's.
So really we have 40 years of history is all. You can infer before that, but it was definitely different.
But yes, if you have a 30 year plus time horizon, I tell my kids the same, buy the broad market, take your employers match, forget about it for a long time.
Most people, especially those who only own 401K, have no idea what products they own.
I know what single stocks I own, which are very few, but my total portfolio is far too complicated. That's Schwab's problem.
Regarding various strategies, if there were a good one, everyone would do it and the originator would be #1 in the world. There are no secrets.
JHZR2
Staff member
There’s a vast difference between companies, fiduciaries, etc. and individual investors.
Nobody will get it absolutely right. And I’m not even really advocating to try to stock pick or time the market.
But a wacky situation is a wacky situation.
And it’s something that we can manage and mitigate individually, that a fund manager or investment firm can’t necessarily do because they can’t be as agile.
You’re essentially saying that the market won’t correct, or that living with that correction is the best one can do.
I’m saying it’s unsustainable as is and that the broad market is at a loss, so the inflated values of a select few will probably do so.
