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On July 12 2014 05:32 TheFish7 wrote:+ Show Spoiler +I'm not a fan of stock funds in general. Studies have shown that picking stocks at random yields about the same results as following an index or buying into a fund. + Show Spoiler +In my taxable accounts I am going basically 70% large cap dividend stocks and 30% small and mid caps that I think have growth potential. Once in a while I'll take 1% and buy something very risky. I bought SIRI when it was trading at $0.11 for example.
Another option is to hedge yourself with some bonds. In that case it might make sense to go with a fund. I got my mom into one and it's been very consistent, for me though I like the higher risk.
Personally I have sold off about 25% of my portfolio over the last couple of weeks. I get very nervous when the dow is at record highs and the vix is floating aroung 10-15. Last time that happened was in the middle of 2007 about 6 month before the great recession. That is a very relative statement. From what I am aware, you are correct as long as you are selecting from a large enough volume of stock. Yes, the expected return is the same; however, if you are selecting a low volume of stock, then you would be exposing yourself to a high degree of alpha risks. Personally, I would rather minimize transactions costs and purchase a fund.
If I am following correctly, Doodsmack is trying to maximize returns on equity while optimizing his risks and, more or less, eliminating his alpha risks. It seems like a reasonable way to do it if those are indeed the goals (but I am an admitted Vanguard fanboy because of the low expense ratios and passive management style).
As TheFish7 mentioned, there is some reason to be nervious. I would seriously consider his suggestion of buying into a bond fund as well. Recently, I changed my girlfriend's 401k to reflect that timidness. After doing that for my girlfriend, I came to realize that when it comes to investing other people's money I am wayyyyyyy more conservative than I would be with my own money because I do not want to be culpable of someone else's losses... even if it is at risk of losing my internet credibility xD
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Yep that is pretty relative, and using various funds is certainly not a bad strategy, just not my personal preference. The reason I like bonds right now is that I just can't be a buyer in this market:
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While volatility is traditionally low during the summer, I just think that buyers are beginning to run out of steam. Certainly not time to go short or anything but it just feels really overbought. Especially when you consider how the economy in the US has basically been sputtering along. Bonds are generally used as a flight to safety so will do well if the market starts to come down. So they can be a good way to hedge oneself against big exposure to a market like this in case we have some sort of correction, and also provide some consistent returns in the meantime.
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Hey guys, I'm not very financially savvy as far as investment goes, but I recently got a decently paying summer internship and realized I literally don't spend any of my money outside of cost of commute aside from like, the occasional outting/dota 2 tickets, so I was wondering what's the best way to invest a small amount(1000USD or so)? I don't feel like I'd actively be involved in single stocks unless I saw a really good opportunity in a company that I felt I knew a lot about and I feel like an IRA is a bit long term. I'm probably not going to need the money for 3-4 years at least.
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On July 12 2014 10:06 TheFish7 wrote:+ Show Spoiler +Yep that is pretty relative, and using various funds is certainly not a bad strategy, just not my personal preference. The reason I like bonds right now is that I just can't be a buyer in this market: + Show Spoiler +While volatility is traditionally low during the summer, I just think that buyers are beginning to run out of steam. Certainly not time to go short or anything but it just feels really overbought. Especially when you consider how the economy in the US has basically been sputtering along. Bonds are generally used as a flight to safety so will do well if the market starts to come down. So they can be a good way to hedge oneself against big exposure to a market like this in case we have some sort of correction, and also provide some consistent returns in the meantime.
Just for clarification, are you postulating that investors will be less willing to invest in equity thus creating a decrease in financial liquidity? if so, the volatility index does give a compelling argument for that proposition.
With that in mind I took a glance at the Dow over the last two years from July 2012 - July 2014 VS the two years preceding the recession Nov 2005-2007, with simple moving averages of 50 and 200 days. (the only technical that I like to use) + Show Spoiler +
Those two look rather similar... and now for the scary bit directly following Nov 2007... + Show Spoiler +
It is a little bit hard to see segmented like this, but I do see why some people are fearful.
If today's market has something that occurs similar at purple circle in the last picture, then I would probably start thinking about jumping the beta return boat and trying to catch a ride on the "Short" bus on the occurrence of significant losses.
On July 12 2014 14:57 strobeLite wrote:+ Show Spoiler +Hey guys, I'm not very financially savvy as far as investment goes, but I recently got a decently paying summer internship and realized I literally don't spend any of my money outside of cost of commute aside from like, the occasional outting/dota 2 tickets, so I was wondering what's the best way to invest a small amount(1000USD or so)? I don't feel like I'd actively be involved in single stocks unless I saw a really good opportunity in a company that I felt I knew a lot about and I feel like an IRA is a bit long term. I'm probably not going to need the money for 3-4 years at least.
100% VT - Vanguard Total World Stock Index ETF (Exchange Traded Fund)
As I alluded to before, I only give very conservative advise to other people- even my loved ones. The problem that I suspect that you might have with this Exchange Traded Fund, is that you should only expect something like 5-20% returns per year. Most academic finance people will point you in this direction I suspect.
Without going into too much detail, by investing in VT you will minimize your risk while partaking in returns from the American and International markets. I will over simplify by stating that if you want to have higher expected returns, then you will have to increase the risks that you expose yourself to.
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I guess I'll put my stuff back in with the disclaimer that I'm nothing more than an armchair macro economist. Take my market advice with that in mind.
If you're using the VIX, it shouldn't be used as anything more than a sanity check. It should reflect what you see in markets and your trading strategy, and if it doesn't, maybe you should triple check your foundations. Also, don't (more or less) equate random events as signs of repeating history. The VIX was at the same level back in 2005, and you would have jumped the gun on the whole financial meltdown thing.
As for stocks, P/E ratios are fine and there are no signs of inconsistencies in prices. Commodities have leveled off and developed economies have stopped shooting themselves in the feet (hello EU), so there's a bit of tempered optimism I would bet.
At the same time, there's still a lot of stale capital floating around with no real good place to seek returns, which keeps bond prices high. All signs point to stagnating global demand (high unemployment and stagnating wages), while developing countries seem to be teetering on hard times, so their increased demand won't likely fill the gap. That brings a stable path for growth, but also not very much growth. Hence, "high" stock prices but without expectations of significant shifts up or down.
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There's so many divergent opinions on the state of the stock market, as demonstrated by these posts, that this is part of the reason I want to go with a total market approach to buy and hold. My strategy is premised on the idea that even in the event of a "correction" in the near future, over the very long term there will be positive returns.
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On July 12 2014 22:42 aksfjh wrote: I guess I'll put my stuff back in with the disclaimer that I'm nothing more than an armchair macro economist. Take my market advice with that in mind.
If you're using the VIX, it shouldn't be used as anything more than a sanity check. It should reflect what you see in markets and your trading strategy, and if it doesn't, maybe you should triple check your foundations. Also, don't (more or less) equate random events as signs of repeating history. The VIX was at the same level back in 2005, and you would have jumped the gun on the whole financial meltdown thing.
As for stocks, P/E ratios are fine and there are no signs of inconsistencies in prices. Commodities have leveled off and developed economies have stopped shooting themselves in the feet (hello EU), so there's a bit of tempered optimism I would bet.
At the same time, there's still a lot of stale capital floating around with no real good place to seek returns, which keeps bond prices high. All signs point to stagnating global demand (high unemployment and stagnating wages), while developing countries seem to be teetering on hard times, so their increased demand won't likely fill the gap. That brings a stable path for growth, but also not very much growth. Hence, "high" stock prices but without expectations of significant shifts up or down.
I'm using the VIX as a way to see how much money investors are moving around. Right now it seems most are adopting a buy and hold strategy which is rational considering we've had a pretty steady rise in prices for a long while. Using moving averages is probably a better indicator and we haven't seen a crossover yet. My original investing background was in the highly risky forex markets where I relied on technical analysis, so I brought some of that baggage over when I became a long term eventual retirement oriented investor. In those markets if you saw this kind of price action you'd go short at the next doji candle.
The VIX being lower and lower however does indicate that fewer and fewer new money is entering the market. That could be a bullish sign because it means we aren't seeing overinvestment and investors are acting rationally and prices are settling at about where they should be. It could also mean that we're reaching a peak where no one will be ready to stop the short sellers once they come in. Then again it could just be that it's summer time and everyone is taking a break.
For me it made sense to sell some off since I invested heavily in 2010 and 2011 and now I am taking profits. I actually had a long conversation with my step dad who has been investing for 50 years last night and he convinced me to put some money back on the table. So I will be slowly putting some money into Ford and GE, and if the market starts to come down, I will put more money in to other guys. Basically moving from mid cap and "riskier" plays to dividend stocks. If you're buying solid companies, even if there is a correction or whatever in the long run you'll come out ahead. But yea, stagnating demand, various global conflicts and other events still have me nervous. "buy low and sell high" is the mantra, not "buy high and hope it keeps going higher".
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Annyone an opinion on when and if this bullmarket will end? It has lasted for 5 years now and the dow is making record highs every day. Will the expected tappering in September-December put an end to the party and trigger a large correction or even a long term bear market? will global ecomic growth allow for consolidation at current prices or will markets even continue to go up?
Free money has flooded ws, the fed took over 1trillion+ in otherwise unsellable treasuries out of hands from commercial banks at record prices. Ws got bought out twice,first with the crisis in 2008, and now with the fed buying all their bonds at record prices right before rates will be going up. They should have enough monies and huge decline seems unlikely despite the expectation of rising interest. A 1 year consolidation is very well possible and that is my personal expectation. After that economic growth could push markets higher again though the growth has to continue. If it does then Dow 20k within 3 years?
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No idea. Many of the sites I trust (like Morningstar) think the US market is only slightly overvalued. They only have the market at 3% overvalued right now.
The issue is that "technical" analysis doesn't really give an analysis of the fundamentals of businesses. It's an analysis of the psychology of market participants. There's a lot of short term noise in the market. It can take years for any over and undervalued stock to correct to their proper value.
As shown in the late 90s, markets can get extremely overvalued before any correction occurs. And as shown in the 1930s, markets can get extremely undervalued before they start bouncing back up again. It might be a scary time to invest, but nobody knows for certain when the next recession will occur. If you load up on dividend stocks right now, you could be earning dividends for years before a market correction.
On July 17 2014 09:20 Doodsmack wrote: There's so many divergent opinions on the state of the stock market, as demonstrated by these posts, that this is part of the reason I want to go with a total market approach to buy and hold. My strategy is premised on the idea that even in the event of a "correction" in the near future, over the very long term there will be positive returns.
VTSMX is a good fund for buy and hold. The Admiral version (VTSAX) only requires $10k minimum, which is easily attainable. Or you could use the ETF version (VTI). It's a simpler option than buying an S&P fund and having to complement it with something like VEXMX. VEXMX is an extended market fund that covers stocks that are not covered in the S&P 500. Personally, I have VTSAX and VTIAX but complement them with VIMAX and VSMAX for mid and small cap respectively.
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It is indeed a scary time to invest. Especially because everything is so interwoven. If the Euro crashes, Europe is f'cked. If Europe done that'll spill over so and so and so.... The exponential growth has to stop at one point right? I feel like there is going to be an 1930's style economic crisis coming up. Only takes a couple of bankers that screw up. But to put it in Warren Buffets words, there is never a perfect time to invest, the times are always uncertain.
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Looking at the data, I can't help but think that stocks are likely undervalued at the present. By all normal standards, prices aren't crazy high or anything. Compared to inflation and GDP, we're nowhere near any of the tipping points of the past (definitely nowhere near the stock bubble of 2000). Even if we assume that 2002-2007 saw a full-faith return to stocks and the high was valued perfectly, we still have plenty of headroom before "bubble territory."
The ONLY worry I have is that I have no idea where the money is going in terms of flight from BRICS. Maybe back into bonds a bit (EU and US)? It's not flooding into the major stock markets, so idk...
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On July 19 2014 02:23 andrewlt wrote:No idea. Many of the sites I trust (like Morningstar) think the US market is only slightly overvalued. They only have the market at 3% overvalued right now. The issue is that "technical" analysis doesn't really give an analysis of the fundamentals of businesses. It's an analysis of the psychology of market participants. There's a lot of short term noise in the market. It can take years for any over and undervalued stock to correct to their proper value. As shown in the late 90s, markets can get extremely overvalued before any correction occurs. And as shown in the 1930s, markets can get extremely undervalued before they start bouncing back up again. It might be a scary time to invest, but nobody knows for certain when the next recession will occur. If you load up on dividend stocks right now, you could be earning dividends for years before a market correction. Show nested quote +On July 17 2014 09:20 Doodsmack wrote: There's so many divergent opinions on the state of the stock market, as demonstrated by these posts, that this is part of the reason I want to go with a total market approach to buy and hold. My strategy is premised on the idea that even in the event of a "correction" in the near future, over the very long term there will be positive returns. VTSMX is a good fund for buy and hold. The Admiral version (VTSAX) only requires $10k minimum, which is easily attainable. Or you could use the ETF version (VTI). It's a simpler option than buying an S&P fund and having to complement it with something like VEXMX. VEXMX is an extended market fund that covers stocks that are not covered in the S&P 500. Personally, I have VTSAX and VTIAX but complement them with VIMAX and VSMAX for mid and small cap respectively.
Yes I am looking at VTI for my taxable. But it will mirror the holdings in my 401k, which doesn't have access to ETFs.
I am trying to determine my blended expense ratio for various options. I'm 90% sure I have the math right, but if anyone would be willing to double-check/offer advice, it would be appreciated.
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Anybody drinking the Alibaba kool-aid?
Poll: Are you planning on purchasing Alibaba stock?no (3) 60% undecided (1) 20% later in the future (1) 20% yes (0) 0% 5 total votes Your vote: Are you planning on purchasing Alibaba stock? (Vote): yes (Vote): later in the future (Vote): undecided (Vote): no
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I wanted to purchase options on Yahoo (for Alibaba) but etrade grumbled something about options approval.
So I'm shut out of the Alibaba gamble, and no I don't enjoy buying shares after IPO simply because it just IPOd
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Question for you tax/investing geniuses.
Am I able to max out a 401(k) at $17,500 and a traditional IRA at $5,500 for the 2014 tax year and still receive the benefits of putting off taxes for the $5,500 in the IRA? I believe the answer depends on your AGI and since I only recently started working in late July my YTD gross pay is only $38,750, so I think I would be under the cutoff for being able to do this?
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