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Money Talk

Discussion in 'General' started by PJF, Oct 11, 2008.

  1. PJF

    PJF New Member Piano Society Artist

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    Let's talk about money! Post comments, articles, questions...rants, whatever you happen to be interested in. Share a perspective!:D

    Since I've first had employment, I've been addicted (in a good way) to investing. It's my quaternary passion: behind piano, running and the weather. :lol:
    I invest primarily in the stock market, exclusively in index mutual funds. Luckily, I got out of stocks, exchanging for a long-term U.S. treasury bond fund (VUSTX) in early August, (@ DOW 11,700); I "only" lost 12% this year (so far.)
    Today, however, I exchanged myself back into the stock market (got in @ DOW 8000), my asset allocation is now 90% stock, 10% money market. I invest in the Vanguard Total Stock Market Index: VTSMX

    So, I strongly feel that we are close to a bottoming out of the markets and I put my money (2 years salary worth) where my mouth is.
    Does anyone else see the TREMENDOUS buying opportunity at hand?
    FYI, I'm 29, no kids and have a very high risk tolerance; your circumstances may be different.

    How about that LIBOR?!?!? :shock:
     
  2. techneut

    techneut Active Member Piano Society Artist

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    Ah, I see... This abysmal crisis is going to make everyone rich again as you can now buy stock for next to nothing ! All the "money" that has "evaporated" is going to rain down again after the crisis ends ! Which it surely will ! It must, as it can get hardly any worse than this !

    I say wake up. It is never again going to be like it was. I believe the world would be a better place if the entire stock trade were to be abolished, so that people could either do something useful or trade in things that actually exist. I'd rather buy a plot of land, a painting, anything at all, than risk my money in the ludicrous circus that is called "financial market".

    Just the view of someone who does not grasp the basics of economics :lol:
     
  3. Terez

    Terez New Member

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    Yay, gas prices are down!

    - Terez, too broke to "invest" :lol:
     
  4. PJF

    PJF New Member Piano Society Artist

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    You're missing the point, there is no getting rich quick! Anyone who expects such a miracle will be sorely disappointed. I don't desire wealth, I desire financial security when I'm old. Getting rich may be possible, but this doesn't happen to everyone.

    Chris, you're what's called "risk averse"; for people who are turned off by risk, there are great, non-stock ways of investing. (In the US, there's the govt bond market, which is a good venue to grow your money slowly but steadily, with much less risk (less potential reward) than the stock market. (I'm not sure how that works in other countries, however, if someone could fill me in?) The cool thing about the stock market is that even as it goes up and down, in the long run, it ALWAYS goes up.

    I disagree on your comment about stocks not existing, they are tangible assets, last time I checked that was not illusory. :lol:

    "Never" is a very long time!

    I certainly wouldn't recommend someone in your life-position to invest in the stock market, but for someone like me, (I'm single, no kids, no house note, still in my 20's not looking at retirement for 37 years) the miracle of compound interest can do its work OVER TIME, that's key...if one has 20 years to let the money sit, it WILL grow; those who will be needing their money sooner than that shouldn't be heavily in the stock market to begin with! I'm going to need that capital appreciation at retirement; social security (a US govt tax-subsidized national pension plan) will be bankrupt way before then. I'll gladly be clown to the market circus any day.

    The very first dollar I invested in 1992 is now worth 10! Had I put that dollar in gold or land, it would be worth only 2-4 dollars; this difference adds up hugely over time. Also I couldn't have afforded to invest in real estate in monthly installments as I've done in stocks. That's the beauty of dollar-cost-averaging (investing in steady increments, not huge lump sums.)


    Terez, check this out. Some mutual fund companies (T. Rowe Price) have automatic investment plans with minimums as low as $50 per month! A tiny bit of money invested today (especially for someone your age) can ultimately show 50 times growth in 40 years! That 50 bucks you put in may very well be worth thousands in time.

    Another great mutual fund is Vanguard.com fund #0056, the STAR fund. It is a great starting point with a minimum investment of only $1000; after that, no more investment capital is required (but recommended!) I'm tellin' ya girl - find the money to do it, you won't be sorry. The STAR fund is what's called a balanced fund, it holds stock AND bond mutual funds within; as the markets change, the asset allocation within the fund is adjusted to preserve capital.

    Take a look at vanguard.com there's mutual funds for everyone from little Susie to Grandma Betty! :lol:
     
  5. techneut

    techneut Active Member Piano Society Artist

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    Yeah I am probably missing the point - if there is one at all :lol:
    Of course there's no getting rich quick - I was being sarcastic.

    I can't help seeing this from a distance, and wondering how money can produce money, and how people can get rich on this stuff other than over the back of others who are more vulnerable and/or gullible. Where the heck does all this money come from, and where does it go ? How can it simple disappear or evaporate ? Was it ever there in the first place ? Or have millions of people been what we call in Holland 'calculating themselves rich' ? Does stock actually exist when the company in question goes bust ?

    All I hear about this crisis is that it's all about trust. Way I see it, nobody with half a brain will ever again trust something as fickle, instable, and unmanageable as the financial market (or the economy, these things seem to be totally entwined) which is ultimately governed by nothing more than the FUD factor. I am glad I have half a brain :lol:
     
  6. pianolady

    pianolady Monica Hart, Administrator Staff Member Piano Society Artist

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    Yeah - that makes me and my big SUV happy. I paid $3.52/gallon yesterday. :D

    I have a rather large mutual fund that I am purposely not looking at these days, so I have no idea how much I've lost. But things will go back up again. They always do.
     
  7. PJF

    PJF New Member Piano Society Artist

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    Knowledge is power, Monica! So look at your statement. :lol: What company do you use? Vanguard is the shizznit, IMO.

    The only way you can lose something at this point is to sell! You know, some dunderheads in their 60's were so heavily into stocks, they lost 40% of their retirement! What did they do? Sold low out of panic.

    I've been warning my neighbor for years to steer clear from the stock market at his age, 60. Did he listen? No. Did he sell last week like a rat on the Titanic? Yes. Why? Thinking with emotion. As the previous bull of 2002-2007 was going up, up, UP! his irrational exuberance was sickening, his whole life's savings (I'm talking 7 figures!) were in aggressive stocks; he gambled that the money would grow constantly; that's not how it works. So when the sharp declines of this month ensued he came to me and asked "what to do?" I told him there's nothing to do; he shouldn't have been there in the first place! But if he sold NOW, he'd be selling at a loss of hundreds of thousands of dollars!

    I suggested he sell half his stock and put it into long-term bond funds and let the other half sit and wait for the rally - So what did he do?- He sold ALL his stock and put it into a money market fund!!!! :evil: People who disrespect money like that get my goat. Greed kills. Even our house cynic, Mr Breemer can agree, I think. (We love ya, Chris :lol: )
     
  8. techneut

    techneut Active Member Piano Society Artist

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    Yepp, that pretty well sums it up. Money makes the world turn, and then greed makes it spin out of control. This is why the world is in its current state. It's a simplistic, rather than cynical, view :wink:
     
  9. PJF

    PJF New Member Piano Society Artist

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    I hear ya! :wink: We (some) need to get our economic noses bloody to wake us up! Debt also kills.

    If only the governments would quit meddling! There's gonna be a downturn, they should just let it happen...oh wait...that's right...THEY CAUSED IT! :evil:
     
  10. nathanscoleman

    nathanscoleman New Member Piano Society Artist

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    *standing up to speak for the penniless orphan*

    The above statement by Pete could not be truer. Due to my current non-working situation, I'm SO glad that we didn't accrue massive debt based on present earnings. I have friends with 10 THOUSAND :shock: or more dollars worth of credit card debt ... not even counting car notes, house notes, etc. Jen and I are living on practically nothing right now ... and only able to do it because of having low debt ratio.

    Of course ... it'd be nice to eat out once in a while .... or even have electricity at the house! :lol: j/k
    oh well, I need to lose some weight anyway! I ought to buy one of those hamster wheels that generate electricity ... i have so many kids I could probably sell power back to the grid!! :roll:
     
  11. techneut

    techneut Active Member Piano Society Artist

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    Not sure if they've caused it, but yes, some people here also suggest that heads should roll, rather than be saved. Some of these banks really had it coming, it seems. Now, John taxpayer will have to chip in to save all manner of mismanaged businesses, not to speak of paying the obscene bonuses their top managers get for f*cking everything up. I have heard it said that this may well be the End Of Capitalism As We Know It. In Iceland, all banks have been nationalized as is the biggest Belgian/Dutch bank consortium.
     
  12. pianolady

    pianolady Monica Hart, Administrator Staff Member Piano Society Artist

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    :lol:
     
  13. Adam

    Adam New Member

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    I've had an investment of 20.000 euro's ( in the so called "Best of two worlds fund" ) since february this year, and its value has now dropped to 16.000. The fun part is that pretty much all of it was invested into bonds, but I still lost nearly 25%, somehow. :roll:
    Ah well, 6 more years to go and I will always get at least 100% of those 20.000 euro's back.
    ( 18 Years old, unmarried, no kids and a Medium to High risk tolerance ).



    Hmm, it does seem that way. I think we're either near, or already past the darkest hours of the financial crisis, and I'm guessing that things will improve from now on. The only problem is that this crisis has made everyone suspicious of each other, so it might take ages before one can make some real profit.

    The thing that bothers me the most about the current crisis is that the media keep scaring people into withdrawing their money from the banks and things like that. Thanks to the media, most people don't trust the 'big bad corporations' any more, so basicly they're only making things worse. It's like the birdflu; nobody had ever heard about it, and there are many other diseases that are far more dangerous than this birdflu, but the media payed so much attention to it that politicians simply couldn't ignore it any more..

    To summarize my rant:
    -The Media sucks.
    -Now might be a good time to invest into stocks
    -The media sucks.
     
  14. cmudave1125

    cmudave1125 New Member

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    As an individual who works for a Bank which has appeared frequently as the object of Media speculation, I have to second your opinion - The Media sucks!

    Having said that, I don't think we have bottomed out yet (personal opinion). I expect things to get worse before they get better. I think we will come out of this eventually, but I don't know that things will ever be quite the same again.

    One other thing: for people who want to grow their wealth through the power of compounding interest, I suggest that this may not be a great idea. Basically, even if you manage 5 to 6% annual return, you are only managing (maybe) to keep up with inflation. This means that even though your balances are growing, your purchasing power is either staying where it is, or worse, declining.
    I work in lending, so I'm no expert in investing, like some of you, but it is definately something that deserves consideration.

    Yay, gas prices are down! :lol:
     
  15. PJF

    PJF New Member Piano Society Artist

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    You are very young Adam! If you find a good, no-load stock mutual fund, you'll get your 20K back times ten in about 25 years. Just keep investing in small, monthly increments and you can hardly be disappointed in the long run. I'm curious about the particulars of your fund, Adam. Is there a link to an analysis of it? A bond fund should not have lost 25% in 10 months! I want to pick its brain, so to speak. I bet it was made of corporate bonds.

    The bond fund I was in made 4% this year. VUSTX US Government bond funds are perfect for protecting one's ass-ets in times of upheaval. (But timing the stock market is usually not advisable or successful.) The stock fund I'm in now, an index fund, is representative of the entire US stock market. I've got a very high risk tolerance. The fund lost over 40% this year but over the last 30 years has increased an average of 11% annually. No savings account can do that!

    For those skeptical of the stock market, in my experience, I'm worth 6 times the capital I've so far invested. I think there's some real value here?
     
  16. pianolady

    pianolady Monica Hart, Administrator Staff Member Piano Society Artist

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    Marry me, Pete. :lol:
     
  17. Adam

    Adam New Member

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    My investment is basicly invested in many different markets spread all over the world: Stocks ( of all kinds of companies ), bonds and a small percentage in real estate. I had to make a so called "Investor's profile" so that the ones that take care of my investement would know how much risk I'm willing/able to take. In the end it turned out that 50% of my investment should be put into bonds, 40% into stocks and 10% into real estate. Since the value of most stocks declined rapidly over the past few months, I lost nearly 25% of the investment.
    Fortunately, I have regained a part of the losses now, and my investment's value has risen to around 17.000 now again.
    The reason why I was surprised that I lost nearly 25% while everything was invested in bonds is that I missed the fact that they sold a large portion of the stocks before they had become worthless. It wasn't purely invested into corporate bonds, but I believe a portion of it was also Government bonds.

    I can't seem to find any pages that explain how the fund works, but I hope my explenation was clear enough. :lol:

    I might put some money I have saved aside and buy some stocks myself, rather than invest it into another fund. The only problem is that I lack the time and information to make optimum decisions, but the sooner I learn how everything works the better. And most stocks are going up again, so now might be the right time to do it.
     
  18. sarah

    sarah New Member

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    Well, I guess I'd be one of those folks with a very low risk tolerance :D ... I invest a lot, but avoid the stock market like the plague. I prefer CDs and government bonds instead. I am not very well versed in money matters (I just know it's better to save, not spend!), but my economics course I took when a freshman still weighs heavy on my mind.
     
  19. PJF

    PJF New Member Piano Society Artist

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    Yes, that makes perfect sense.

    A bit of advice: don't invest in individual stocks; find a stock-index, no-load, mutual fund (that's a lot of adjectives) and put money into it that you won't need to withdraw for at least 10 years. It's best that you dollar-cost-average (a fancy term for putting a certain amount of money into an investment at regular intervals...example - X number of Euros per month.) It's better to break down an investment over time because when stock prices are higher you buy less individual shares and when prices are lower, you buy more shares; over time, this adds up to a significant advantage. And any advantage OVER TIME, will add up to a large chunk of change!

    Of course, I went against mt own advice and pulled a large amount of dollars from the stock market to treasury bonds on August 1, 2008 (my own coarse attempt at timing the market) only to put it all back in to stocks on October 10. I sold in August because of many factors including LIBOR, the price of gold, the price of oil, and reduced credit availability. The probable housing market collapse also factored into it. The stock index charts even gave visual indications of a decline. I guessed right by accident and I don't recommend market timing unless you can afford to lose all your money. Market timing refers to the practice of trying to buy low and sell high. The risk of doing that is you can miss out on large, unpredictable positive changes in the market and be at risk of buying during a down turn.

    For those who have 20+ years until they need their money, the stock market continues to be the best bet for long-term capital appreciation. Mid-term (10-20yrs) investments should be a blend of stocks and bonds (the shorter the goal, the less stocks you should own.) If you have shorter term (5-10yrs) investment needs, AAA rated bonds are the best bet. Short term (<5yrs) investments are maybe best placed in money market accounts or lower risk bond funds. If you're trying to protect an already large retirement fund from volatility, you should be <30% stocks, >70% bonds.

    My asset allocation is 100% stocks. I'm 29 and won't be needing the money for at least 30 years (unless I get head cancer from watching South Park. :lol: No one can predict when you die.) An all stock portfolio can expect to see an 11% rate of return over the long term. An all bond portfolio can expect to see a long term rate of return of only 5.5%.

    Let's examine the difference.

    A 1,000Euro investment with a 5.5% rate of return over 40 years will be worth 8,500.
    A 1,000Euro investment with an 11% rate of return over 40 years will be worth 65,000!
    There's quite a difference (7.64 times, to be exact!)

    The longer your investment time horizon, the more stocks you should own. The shorter, the less stocks you should own.
     
  20. PJF

    PJF New Member Piano Society Artist

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    Suggested reading...

    Anything by John "Jack" C. Bogle, the man is one of THE great financial minds of our time. His approach is that of reducing management fees by cutting out the middle man - avoiding actively managed funds (those funds who have managers trying to "beat the market" (at BEST a loser's game) - think "the house always wins - "the house" being Wall Street"), and flocking toward passively managed funds (those funds usually mimic a certain benchmark index and don't engage in shenanigans such as constantly swapping a "bad" stock for a "better" one.) The less one shifts around in the stock market, the better the returns will be! For the uninitiated, I recommend: The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns

    The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk, by William Bernstein A must read for anyone trying to grow their money in the long term.

    Seek and ye shall find.
     

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