Put all your eggs in one basket with investing?

[Wylie6G72]

A couple of weeks ago I upped my contribution to the 401k to 12%. Combining that with employee match of 7%, I'm hoping for faster growth. I'm 54 years old and am not nearly where I need to be.

One of the best things I did a few years ago was to move contributions around in all of the different funds Fidelity offers. I picked the best year-to-date performers and increased contributions there, pulling out of the non-performers. It made a big difference in my gains over the next 5 years.

I've changed jobs since then, but I'm still with Fidelity, so I did the same thing on the computer last night. I was in one of their canned 2035 Target Date plans and it wasn't doing all that well, so I moved into higher risk territory. It's now only getting 25% of my contributions, while 3 better performing, highly-rated funds are getting the other 75%.

Fingers crossed.

 

[Astro14]

The best way to get rich is slowly.

Time in the market matters and it works.

Avoid specific company risk by limiting your exposure to any individual stock to 5% of portfolio.

Start when you’re young (I’m looking at you @AutoMechanic ) and work up to at least 10% of salary invested.

Max out any company match.

 

[supton]

Just an example if you lost 25,000 how long would it take you to replace it?

Depends. Could all come back in a day. Or a month, or a year.

Remember the start of the pandemic? I had a small portfolio and “lost” at least 100k. What did I do? nothing. Left my contribution alone. And rode the wave back up… very well recovered now. Markets can surge ahead, when they recover, and that’s the time you are glad to have left your money alone.

 

[supton]

Fingers crossed.

Good luck. I’ve decided to keep my target fund, at least for now. I figure, the money in that will get less volatile the closer to when I need it, at the start of my retirement. I can leave a bigger chunk out to grow, and later rebalance as I wish. But I’m not putting as much into that target fund now, either.

 

[ecotourist]

Sure, but if you had a retirement fund, I would think the 4% rule would still apply, unless if the goal was to draw it down to zero inside of some short time frame. My understanding is that the 4% rule is from multiple simulations (and real world results) of withdrawal from a fund, regardless of the total amount of money one may be getting retirement.

The 4% rule is based on a Monte Carlo simulation using all known data. Turns out that a 4% withdrawal rate would be safe (should be safe) 98% of the time after 35 years.

If you take out 4% a year there is a 98% chance there would be money left at the end of 35 years. The idea being that if you retire at age 65, and take out 4% a year from your retirement savings, you'll have a bit of money left at the end of your life, or to age 100 at least.

You could take out more than 4% a year but the chances of running out of money increase. I had patients who quite literally ran out of money and I had to talk proud people into accepting charity. It's not a pretty situation.

Since the stock markets are so high right now some authors have suggested reducing the 4% to 3.5%.

I have the original paper "somewhere", but good luck finding it.

 

[99Saturn]

Depends. Could all come back in a day. Or a month, or a year.

Remember the start of the pandemic? I had a small portfolio and “lost” at least 100k. What did I do? nothing. Left my contribution alone. And rode the wave back up… very well recovered now. Markets can surge ahead, when they recover, and that’s the time you are glad to have left your money alone.

Very true.

Couple of stories I've experienced come to mind. Was speaking with an in-law probably back in 2010s, basically they shared that they pulled most of their money (retirement) out of the market back after they lost ~ half their value in the 2009/2010 time frame. They couldn't "afford" to lose any more and went ultra conservative. i spent some time trying to explain the boom bust aspect and that they were very likely missing the boat but they were not interested in my opinion. They retired a year or two ago, I often wonder if they got back in and when.

Back in March of 2020 (probably late in the week of March 2nd), my then boss comes into my office and basically says this is crazy, I've lost so much, at the point that I am thinking I should just get out and get on the sidelines. No idea what he did, obviously may have missed the continued drop, may have missed getting back in, etc. Always been curious what he did.

 

[ecotourist]

I sold Amazon in 2001 after it tripled for me. I missed out on a lot.

Fortunes have been made by buying too late and selling too early.

There an important saying, "pigs lose their shirts". There is nothing wrong with taking money off the table. Many people have owned a stock that "went to the moon" and then followed it back down to nothing again.

 

[JHZR2]

Yeah if I ever got to that point I'd just quit working and live off the interest, then go travel or something

It’s not interest. The yield of the market is 1-2% or something like that. 9% or whatever figure gets thrown about includes appreciation and reinvested dividends.

 

[ecotourist]

it’s not a good time for investing right now the markets very unpredictable and unstable.

It's also said that "the markets climb a wall of worry". I've seen a review where someone who looked at the last 20 or 30 years and found that in every year there was some major problem or major worry. And if you had stayed out all that time waiting for better times ....

So yes the markets are high right now. It's good to be cautious but I'm not selling everything and going to cash.

 

[JHZR2]

There should be a BITOG rule on these threads. In order to give great investment advice we must-see atleast one brokerage account or your overall portfolio..
I never said this in my life but old age is ruling my brain these days. Knowing @AutoMechanic can do it to you.

If it was that easy, everyone would be doing it. We need losers to create winners. Remember that

This isn’t a wall st bets Reddit where we’re showing that we actually bought and had diamond hands.

If someone has $1, they should be reading, learning, asking for advice, and doing their dd.

 

[JHZR2]

I'd go for a safer 138 $Billion rather than the chance at 1.33 $Trillion myself.

I'd take $1,000 as a sure thing rather than a chance at $10,000 too. Different folks I guess.

That’s true. Granted, MSFT was a juggernaut even back when… but things could have take. It out.

In Bill’s shoes perhaps I’d have split the difference and become worth $500MM and had some diversity… but who knows.

 

[JHZR2]

it’s not a good time for investing right now the markets very unpredictable and unstable. Preserving capital is key right now. Just an example if you lost 25,000 how long would it take you to replace it? be conservative let’s say 2-3% on that 25,000 multiple that by how long your losses are. If you have time to play and ride the market get a target date mutual fund or etf. ETF will trade like a stock and will normally have a lower expense ratio.

You need to look at all sources.

I tend to agree, but…

A few weeks ago, I had read and noted that the massive rise in the S&P was because of like seven stocks. And on some days it was like two. Everything else amounted to a wash or a small net loss.

Recently I read that the equal weight S&P has also risen to a record high (means nothing in and of itself since the rising tide lifts all boats), but also that around 20% were around new highs. That’s a lot better than seven stocks.

Now does that mean that liquidity and rebalancing isndoing its thing? Or that more companies are doing better than expected this far into the cycle?

As usual nobody knows what’s artificial, manipulated, etc. and more companies going to new highs can mean more of an overheat, sure. But IMO it’s better to see a lot more businesses pricing up, then everything being drowned out by the success of a select few.

 

[ATex7239]

Don’t have the stomach for the eggs in one basket approach. Index funds on auto pilot for me.

Smartest thing one can do in regard to the stock market is set up auto withdrawals for an S&P 500 Index Fund and completely ignore it until the day you retire. Anything else requires more luck than smarts.

 

[ecotourist]

You could put all your money into 20 small caps and never look at them again. In 30 years 1 or maybe even 2 might have gone to the moon and you could be unbelievably rich. But more likely they have all gone bust and you're flat broke. So that's not a great plan in my opinion.

Way better to get rich slowly with regular deposits into a broad index ETF and "time in the market". And a low cost investment (ie one having a low MER) is better. There is no evidence that paying more gets you a better investment product.

My average MER is around 0.5%, and mutual funds that I've had for decades are bringing my average MER up a bit. I can't easily get out of those mutual funds because of the massive capital gains (taxed at 50% of the rate for regular income in Canada).

 

[Pablo]

Another investment thread. Sweet!

 

[Rogueman2016s]

Just approach the market with caution have a strategy and keep a cool level head, impulse buying and selling often leads to a portfolio of hurt & ugly. Smile at a gain.. grunt at loss but don’t get too emotional over it. Be wise to investors that say they got the glory hole of stocks and can fill your basket with “their” golden eggs. No one says you can’t get rich but not everyone gets there the same way.

 

[k1xv]

I think the most obvious rule in investing, that many ignore, is to buy low and sell high.

Many amateur investors see "momentum" stocks that seem to go up and up, far higher than their intrinsic value as a going business. For example, in the recent past, Tesla, and Nvidea. So they buy when the prices are high, hoping they will go even higher.

And then, when they have stocks that are declining in market value to less than what they paid for them, they worry the prices will go even lower, and they sell.

These investors buy high, and sell low. To make any real money, you need to buy low and sell high.

Bargains are things that are priced lower than their actual value. The trick is to identify them, and have the courage to buy at the low price.

And if you have a stock that has appreciated, don't get greedy and hold on until it stalls, and falls. Nobody ever went broke by taking profits.

 

[Pablo]

Really? To get there, you must save income first.

Save every penny of income you possibly can.

If you are not saving 25% of your paycheck, you are just living WRONG. Your goal should really be 30%, but do the easy 25% first.

Ignore all the fine stuff about stocks, bonds, MMs, CD's, etc......just save 25%.

If you are under 50 or so, save that 25%+ and put it all in VTI. Just buy more all the time, every week or two weeks. Don't worry about the price.

 

[ATex7239]

Really? To get there, you must save income first.

Save every penny of income you possibly can.

If you are not saving 25% of your paycheck, you are just living WRONG. Your goal should really be 30%, but do the easy 25% first.

Ignore all the fine stuff about stocks, bonds, MMs, CD's, etc......just save 25%.

If you are under 50 or so, save that 25%+ and put it all in VTI. Just buy more all the time, every week or two weeks. Don't worry about the price.

You tell a broke 20 year-old or anyone living paycheck to paycheck they need to save 25% of their gross income it is going to likely make them shy away from investing altogether. It will seem impossible. At least in my experience. I tell people to start slow and build up to whatever they can stomach overtime.

When I first started investing, I was only doing 5% and I slowly bumped it up overtime. A few percentage points at a time. Typically when I got pay increases over the years.

Investing is no different than any other behavior or lifestyle change, you gotta start slow and build your way up. Like working out, you can’t go from couch potato to marathon overnight. You gotta start somewhere. Success always starts out small.

 

[Pablo]

You tell a broke 20 year-old or anyone living paycheck to paycheck they need to save 25% of their gross income it is going to likely make them shy away from investing altogether. It will seem impossible. At least in my experience. I tell people to start slow and build up to whatever they can stomach overtime.

When I first started investing, I was only doing 5% and I slowly bumped it up overtime. A few percentage points at a time. Typically when I got pay increases over the years.

Investing is no different than any other behavior or lifestyle change, you gotta start slow and build your way up. Like working out, you can’t go from couch potato to marathon overnight. You gotta start somewhere. Success always starts out small.

#1 ) I disagree. People need the truth. But that's not the end of what I have to say, because at a level you are not wrong.

#2 ) I agree. Now if starting slowly on the % works, then nothing wrong with that, but people must be told the truth. It will hurt the total in the end. Most people could save 10% to start and not buy junk - and not notice it.

If you want to have money for retiring comfortably, doing what you want - in the future not now - it's gotta hurt a LITTLE. It seems like USA has lots of tips and rules for borrowing money, saving money on purchases, but not many hard tips on saving earnings.

Two most simple rules:

1) Start early as possible - this rules over all the others, it's also called time in the market and other names. Compare saving for 5-10-20 years to say 40-50 years. Look how huge the amount will be. Now imagine #2 below. This is compound interest - the tremendous power.

2) Start as big as possible. Of course no one starts with $100,000 or $10,000, but sell that extra car, save an entire paycheck. Compare even starting with $5 to $500.

With tips like:

1) Pay yourself first. There is NOTHING more important than that first 10-15-25-30% going directly to savings. There isn't. Period.

2) It must be automatically deducted. Most all work places can send your savings wherever you want. Yeah it will seem painful the first time, but by the 3rd deduction and beyond the pile will start looking quite nice.

3) Don't touch that pile. Yes I know there is this or that new, crisis - pretty soon you will be inventing crises. Or worse, inner kid will say buy this or that, just because you have the money.

4) Keep going! Pat yourself on the back. Feel good about it.


Of course there are subtleties here. Maxing out the 401K, or just putting enough in to get the maximum matching. Or Roth first. 401KRoth. All important decisions, but the above is much higher level.


Yes just in one Fidelity account I saved: $2,169,131.34 as of 6:51AM 3/18/2024