stock market

[Ws6]

You're basically getting worked up over nothing. Basically the facts of life. Don't like it, get active politically and try to change it, but there's also people on the other side who will oppose you. Your arguments and logic so far aren't very persuasive or strong so I don't like your odds.

You should have learned as a child that not everyone gets their way.

I don't expect to change society. It's very much at odds with my own views, and I can read, so I know how this goes. Bread and circuses. People have figured out they can vote money into their pockets that belongs to others. I'm not going to with that argument.

That said, yes I vote, yes I have done all I sensibly can to stave it off for myself. Like you said though, facts.

 

[supton]

Took one day for me to set up a margin account. You can tap up to 50% of the cash value of the account. Transfers take 1 day or less.

Not sure what that does for me?

I figure, 2-5 years out from retirement, I should slide 5 or so years of expenses into bonds. Leave the rest in the market to make money. Once in retirement, slide money into that set of holdings as money is taken out. Is that what you are suggesting instead? use a margin account to hold short term zero to low risk money in?

 

[Wolf359]

Not sure what that does for me?

I figure, 2-5 years out from retirement, I should slide 5 or so years of expenses into bonds. Leave the rest in the market to make money. Once in retirement, slide money into that set of holdings as money is taken out. Is that what you are suggesting instead? use a margin account to hold short term zero to low risk money in?

I suppose I'm proposing a riskier approach. Crashes usually recover in a few years and the example from last year is a few months. Rather than lock in 2% gains for 5 years, I was suggesting letting it ride and just doing a margin account. Currently you can get rates as low as in the 2% range and you get a better shot at averaging that 10-13% gain in the stock market. Or maybe just less volatile funds like Fidelity Balanced, about 30% of the fund is in bonds so you don't completely miss out on growth.

 

[Astro14]

Margin trading, like futures and options, are a way to increase leverage, and therefore, return. But it cuts both ways, it increases risk, and potential loss.

Margin trading is best left to folks who are comfortable with higher risk*, are educated in the market, and who are very focused on their trading. It is most certainly not for an average investor.

*Everyone claims to have a certain risk tolerance, until the losses start, then their real loss tolerance reveals itself.

 

[JeffKeryk]

*Everyone claims to have a certain risk tolerance, until the losses start, then their real loss tolerance reveals itself.

Well said. Everyone looks like a genius for the last 10 years.
I believe in 2 strategies that form the foundation of my portfolio.
1 - Always make your money work for you, regardless of market conditions
2 - Take some $$ off the table (as in poker). I have done that with the Double Tax Free CA Munincipal Bond Fund.

Regarding #2, you HAVE to be willing to accept that the market would have rewarded you by staying into stocks.
It's called diversification, risk mitigation.

 

[Zee09]

I prefer the double flip chip and steal the dividends and then hop on a new train...

 

[PimTac]

Professor William Sharpe concluded that a 64/36 percentage ratio of equities to fixed income gave the best returns with the least amount of risk.

He has several excellent books out there. Well worth reading.

 

[Wolf359]

Margin trading, like futures and options, are a way to increase leverage, and therefore, return. But it cuts both ways, it increases risk, and potential loss.

Margin trading is best left to folks who are comfortable with higher risk*, are educated in the market, and who are very focused on their trading. It is most certainly not for an average investor.

*Everyone claims to have a certain risk tolerance, until the losses start, then their real loss tolerance reveals itself.

Yeah, I wasn't suggesting doing the max margin. It's about 50% of your account. But if the market drops, you get a margin call. But if you just need a small percentage, probably wouldn't do much more than 25% if that. If the market drops 50% and the most it normally does is 40%, then you're still ok and don't have to worry about a margin call.

 

[ArrestMeRedZ]

Let me give my take on Wolf359's suggestion on setting up a margin account. I believe he is saying to stay fully invested in stocks. In the event of a market downturn, instead of selling stocks at a low price to cover retirement expenses and running into sequence of return risk, take out low interest loans (on margin) to fund expenses. Then, after the market recovers, sell some stocks to cover the margin loans.
With this strategy, margin loans would be a small % of the total account value, thus you would never run the risk of a margin call.
Correct me if I have misstated your suggestion, Wolf. If I have it right, it is an interesting strategy I may have to look at.
I will not touch bonds at their current yield - I'd rather stuff money in a mattress than let someone else use my hard earned cash and pay me so little.
About half of my estate is tied up in income producing real estate with some raw land. 2/3rds of the rest is in Roth and regular IRAs, fully invested in stocks. The cash bucket to handle unforseen events is in a regular brokerage account.

 

[Wolf359]

Let me give my take on Wolf359's suggestion on setting up a margin account. I believe he is saying to stay fully invested in stocks. In the event of a market downturn, instead of selling stocks at a low price to cover retirement expenses and running into sequence of return risk, take out low interest loans (on margin) to fund expenses. Then, after the market recovers, sell some stocks to cover the margin loans.
With this strategy, margin loans would be a small % of the total account value, thus you would never run the risk of a margin call.
Correct me if I have misstated your suggestion, Wolf. If I have it right, it is an interesting strategy I may have to look at.
I will not touch bonds at their current yield - I'd rather stuff money in a mattress than let someone else use my hard earned cash and pay me so little.
About half of my estate is tied up in income producing real estate with some raw land. 2/3rds of the rest is in Roth and regular IRAs, fully invested in stocks. The cash bucket to handle unforseen events is in a regular brokerage account.

Yes, that's what I was suggested. You won't need 5 years worth of living expenses right away. I've only used my margin account a couple of times just for short term loans to people without having to sell any shares and it was quick and painless. Only needed it for a few weeks and I made a little on the spread. Fidelity doesn't really have that good a rate on margin accounts but I'm told that if you call and ask them to lower the rate they will to stay competitive as there are other companies out there that will do around 2% instead of Fidelity which I think is over 7%.

 

[supton]

Ah, I see now, thank you for the explanation.

Not sure if I would feel comfortable with that, but it certainly is an option. I'll look into that in the future, right now it is just a curiosity (too many years out to not have all of my money out making money).

 

[Dave Hess]

Margin trading, like futures and options, are a way to increase leverage, and therefore, return. But it cuts both ways, it increases risk, and potential loss.

Margin trading is best left to folks who are comfortable with higher risk*, are educated in the market, and who are very focused on their trading. It is most certainly not for an average investor.

*Everyone claims to have a certain risk tolerance, until the losses start, then their real loss tolerance reveals itself.

I don’t margin trade but someone wanting to dip their toes in the water should set aside ____ amount of money they are willing to experiment with.

The key with any type of investment is not to get greedy and get tunnel vision.

I know a guy who day traded away his $200K inheritance.....

 

[mjk1967]

I am glad that I've developed some patience as I age, as APPL has been a head scratcher since it's split. Have seen this before since I got in during 2011, but this is getting a bit old.

 

[PandaBear]

I know a guy who day traded away his $200K inheritance.....

Sometimes things happen, and risk is real.

The #1 reason people went from rich to broke is to start a business or invest in something too risky.

 

[PimTac]

I am glad that I've developed some patience as I age, as APPL has been a head scratcher since it's split. Have seen this before since I got in during 2011, but this is getting a bit old.

Don’t look at the stock, look at the company.

 

[eljefino]

No, it does not. Those people are contributing, even if it's less. What makes you a sponge is when your absence would lighten the load. People who simply make less wouldn't lighten the load of they were dissapeared.

What if someone works 40 hours a week in retail and makes minimum wage? They get the EITC on their taxes and probably some medicaid as well. Is this their fault? Are we as a society cool with their employer paying people so little?

 

[Ws6]

What if someone works 40 hours a week in retail and makes minimum wage? They get the EITC on their taxes and probably some medicaid as well. Is this their fault? Are we as a society cool with their employer paying people so little?

I worked for 5.75hr back in the early 2000s. I didnt get any of that mess. I paid for everything I ate or used. Did I go hungry? Yes. Did I lose weight? Yup. Was what it was, but I didnt mooch. So me personally? I've lived it, and that was my situation. I wont be kept.

 

[ZeeOSix]

Like I also stated...there are no absolutes. Also yes, some retailers are fluff. Or do we really need Gucci handbags? We do need groceries though. Fuel. Etc.

A true "fluff" company or job will not survive free enterprise economics 101. If people buy a product then it will survive, regardless of someone thinks it's "fluff" or not.

 

[Ws6]

A true "fluff" company or job will not survive free enterprise economics 101. If people buy a product then it will survive, regardless of someone thinks it's "fluff" or not.

Absolutely.

 

[Dave Hess]

Sometimes things happen, and risk is real.

The #1 reason people went from rich to broke is to start a business or invest in something too risky.

Yep. I’ve seen a few people open a restaurant only to close it within a year.