Finance question -- with a grain of salt

My savings, mostly stock S and I Funds (Small cap and the International stock market) have lost about 50%. My plan was to hang in there because it WILL go back up. I hate to throw good money after bad, but losing more is just sad. To get that amout back would take about 100 years in a savings account.

Note: All responses taken seriously but with a grain of salt.

Dan

That's my plan, just stay in as it can't stay bad forever. Or if it does stay bad forever I'll have worse things to worry about than my portfolio.

Agreed. I have 2 different 401's with different companies, one took a beating the other not so much. Before the Dimmycrats wrecked the mortgage market I had considered rolling the one that has tanked into the one that hasn't, I am now wishing I had.

But- if I do it now- I turn a paper loss into a real one. Not exactly the best course of action. So I am staying put for right now.

If the sourball recoups, say, 50% of what it lost then I'll probably go ahead and roll it, since it's proven itself to be pretty volatile.

Keep in mind my retirement horizon's probably longer than yours, mine is currently 12-15 years out and could go as long as 18 years.

Jensenman wrote: Before the Dimmycrats wrecked the mortgage market

I actually thought this too, until I asked my economics professor about it. He is pretty far right wing, and said that both parties are at fault for this.

Jensenman wrote: Agreed. I have 2 different 401's with different companies, one took a beating the other not so much. Before the Dimmycrats wrecked the mortgage market

I plan on investing GRM flounder futures on the Chigago Board of Trade because comments like this are bound to set off tangent political rants that don't really have much to do with the original question

With regards to the stock market, its hard to say. I am not taking anything out. But with the huge number of baby boomer set to retire in the next fifteen years, there are going to be big outflows of capital from the US markets. It is not clear to me where new money will be coming in from. Things will get better. I think it may be a long time before we see highs like we had in the last ten years.

And they wonder why I stuck the grin smiley in there. I've said it before and I'll say it again, both sets of crooks are to blame.

Type Q, what do you mean when you tie the baby boomer retirements to an outflow of capital from US markets and thus cutting 401k etc returns ? To me, there would seem to be no correlation unless they moved out of the country and took their money with them.

I'm staying in, though I don't like it. I feel for the poor folks who were trying to retire in this 2-3 year window, however, or who recently did. Hopefully I'll build up some capital loss credits to apply to next year's capital gains.

I'm not as optimistic.

I'm thinking this could be the new normal. I can see alot of ways things could get a lot worse, and not too many positives on the horizon (thinking long term).

I'm looking for creative alternatives.

Having said that, at the moment I am also staying put, but only because I have no idea what to do.

A couple of random thoughts:

-Get out of debt. Completely. If you've got money loosing 20%, or worse, then paying 18% on credit cards, 10% on a car, or even 6% on a home only makes the problem worse. These days, $10,000 worth of debt reduction is a much better investment than $10,000 worth of stock that could loose 10%. I owe nothing except my modest home mortgage, which is financed at a 30 year fixed rate 6%. I'd like to be rid of that, and I am debating pulling investments out of the stock market to accomplish it (which isn't the best idea). BTW- this won't help the economy, but it will help you.

-I am also considering structuring a kind of reverse dollar cost averaging arrangement- pulling more out as the market goes up, and less as it goes down over an extended period. I'm still debating this one.

-6% long term CD's currently look very appealing.

-Investments that have big matches or tax incentives (like 401K's) are still a good idea, but I'm limiting those investments to the maximum match benefits or tax advantages. For example, if the company matches 3%, I'll put in 3%, but probably not more. I can loose up to 50%, and it will be the advantage money, not mine. I didn't really loose anythiing other than my pride.

-There are nations that have nationalized (taken) retirement funds.

-We (the US) are not playing the game like capitalists, and probably won't for several decades. Plan accordingly (whatever the heck that means). China is setting the world capitalism example right now. Russia, Argentina, among others are also showing promise.

-I'd love to see small private options for addressing the mortgage crisis. I'd rather invest in real property in my neighborhood while assisting someone in bad straights, then in the stock market. Again, I'm not sure how to do this one.

I don't have any great ideas. I think I am in the assessment stage, like you.

Personally as far as growing existing capital I would consider hooking into microloans. I guess they are popping off at a pretty good clip in larger markets and they work in a grey area not like a bank and not like loansharking. I guess the object is to make $100-125 for every $1000.00.

Good point. I forgot that one (which I am also considering).

BTW- these type loans have an incredibly good track record of re-payment.

Jensenman wrote: Type Q, what do you mean by tying the baby boomer retirements to an outflow of capital from US markets? To me, there would seem to be no correlation unless they moved out of the country and took their money with them.

What I mean is that boomers as they retire are going to be pulling money out of the markets to live on. Even if they don't want to, IIRC, it is a requirement to start drawing down money in 401k's and the like at age 70 or so. I think because the IRS wanted this to be retirement money and not tax deffered to the next generation money. Around 2015 or so this start kicking in for a significant portion of the population. A huge proportion fo the wealth is held by the boomers. There are significantly fewer of us in the following 2 generations. Its the same demographics driving the Social Security insovency problem.

Okay, I see what you mean. Honestly, I don't see it being a problem because the money won't vanish: it will go back into the overall economy to buy goods and services, a part of the profit from which will go back into new 401's or whatever the new rage in retirement accounts will be.

May I suggest Mofoloans?

You give your favorite mofo cash and he buys a BMW!

I am staying in, with my agressive funds. I lost 30%, but I am 29 so I to move money around now would turn it into a real loss.

Yeah, you have a much longer horizon and can handle more risk.

A word of advice to all you young punx out there: if you haven't done so, start a retirement fund of some sort NOW. Even if it's only $5 a week, start SOMETHING. Leave that sumbitch alone except to add to it. Like my daddy sez: the most powerful force in the universe is compound interest. Many's the time I wish I had started a 401 back in the early '80's when I first had the chance.

ignorant wrote: I am staying in, with my agressive funds. I lost 30%, but I am 29 so I to move money around now would turn it into a real loss.

I lost $130,000. Not Pesos, dollars. I'm six months away from being eligible to retire (I'm 55) but my financial advisor advisises I get a job or something because I'm not hanging around the house getting under her feet all day!

I'm with the J-Man. DO IT NOW!! One of those investment shows pulled people from the audience and they discussed their long term goals. A woman of 26 was putting like $40 a month away, the investment guy said that at that rate she would have something like $700,000 at age 60.

Dan

Yes. I started when I was 27 with a 401K.. I should have started earlier. My wife also does not have a 401k at her place.. so I should put away MOAR.. but don't..

However, when talking with my peers, there is a big divide, some have none, and some like me have enough for a really nice car saved away..

The automatic deductions are a big help to me. Pay yourself first through auto deductions, live off the rest.

I have a ING savings account for my emergency fund and slush fund into my IRA.. I have a small $50 deduction per month set up for that account. It comes out auto..

I have a scott trade account, but they don't have a strong auto deduction setup, and I will be kiling it shortly and moving to sharebuilder. Sharebuilder has auto deductions setup straight from ING. Even though their services cost alittle more than scottrade, The convenience will mean I will actually stoke my IRA as well as company sponsored 401k...

http://www.paidtwice.com/2008/11/13/five-concrete-ways-to-pay-yourself-first/

ugh.

another great hint my buddy shane gave me is to start every month as a pauper. AFter you pay bills drop all the extra money in your checking account(minues minimum balance) to a high interest account or IRA or something.. You'l be surprised how it alters your spending habits.

I'm in my mid 30's so it ain't nuthin but a fire-sale for me.

The stock market's done this a hundred times. It's always the end of the world. And every time, it's never been worse than right now, whenever that happens to be.

If I was in my 60's I'd be pissed cause it would mean holding off on withdrawing anything for a few years, find some low stress way to pass the time for WHEN it recovers.

A couple weeks ago Warren Buffett announced he had moved "all in" As in, 100% stocks. Sounds like a market bottom to me. Man I hope Obama gives that guy some authority.

Same as the above 27 its just cheap buys like GE....

Having said that down well into the 6 figures this year.

I go back and forth on retirement accounts. One part of me says that yeah - gotta do it. Compound interest, retire with millions, etc. etc. etc. The other part of me says "Well, the government's gonna figure out a way to berkeley me out of it anyway, so why bother."

belteshazzar wrote: The stock market's done this a hundred times.

With all due respect, it has not.

There has only been one other time in history when annual performance was down this much. This is a new paradigm.

Having said that, you're right. Fire sale.

Most people think there are only 2 groups of people out there- 60+ year olds who have NO choice (their choices have been made for them), and 20 or 30 somethings who have EVERY choice (plenty of time to make up for any stupid decisions they make now).

I'm close to the age of the original poster, and it's simply not that black and white for us. Many of us have spent a huge number of years doing the best we could, and have just seen all that effort get cut by 40% +-.

The question isn't whether it is the end of the world, clearly it is not. The realization for many of us in our late 40's, early to mid 50's that there is precious little time left for correction, and what we do now is of utmost importance.

I'm just looking for ideas and wise counsel. The fire sale mentality isn't really that helpful.

okay, if you HAD anything in bonds, move to equities pronto. By your profile you've got 12 years and 4 months at least right? That's plenty of time.

The wife and I are real fiscal conservatives, I guess. Back in the 70's I inherited some Westinghouse preferred stock from an aunt. The dividend check that came every quarter wasn't very large but was nice to have.

After couple years I noticed that the check was geting smaller and smaller. So I checked the value of the stock and found it was worth a quarter of what it was when I inherited it. I very quickly sold it and used the money as a down payment on a house. That was the end of any involvement in the stock market for us. There are plenty of other ways to save money that don't cary the same risks.

Starting early to save is very important. When my wife started working she had a $100 savings bond ($50 cost) taken out of her paycheck every 2 weeks. She did this for 36 years until she retired. Since we never "saw" the money we never thought about spending it. When the bonds reach final maturity (30 years) we cash them in and buy new bonds. That money now adds up to a very tidy sum.

on 01 jan 2008 i had about $200k in 401k. my YTD return is -43%. but i'm 42 years old and while i thought i'd retire at 60, maybe now i have to wait until 65.

i owe $265k on the house that i'd be lucky to sell for $300k today -- we bought 5 years ago for $342k.

we have no credit card debt and no car payments. we have 6 months cash in a money market at 3% and another 2 months in series EE savings bonds that have already reached maturity but are still earning so we're leaving them alone.

i'm expecting the final payout from my parents' estate, about $10k non-taxable. it's all going into the stock market, but i don't know exactly where just yet. probably into tobacco and sugar.

Times like these make me glad to be young, broke, and out of debt.