Stock Market Tanking

[Yojimbo]

(12-27-2018, 08:23 PM)fredtoast Wrote: You lose money if you stay in while it keeps falling.  A lot of traders try to pull their money out before a large drop.

If I had a lot of money in the market that is what I wouold do.  I'd buy some six month bonds.  You won't get any growth but you avoid losing large sums in a big drop.

My co-worker did that exact thing at the end of August and he’s just crowing and waiting for the market to fall below 20k to start buying again.

[BmorePat87]

My 403b has tanked this last quarter. Fortunately I am 31 and have plenty of years to go.

[Beaker]

(12-27-2018, 08:23 PM)fredtoast Wrote: You lose money if you stay in while it keeps falling.  A lot of traders try to pull their money out before a large drop.

If I had a lot of money in the market that is what I wouold do.  I'd buy some six month bonds.  You won't get any growth but you avoid losing large sums in a big drop.

Again, you don't lose anything when the market drops unless you sell when it does, and its below the price when you bought. 

[ballsofsteel]

(12-27-2018, 11:40 PM)BmorePat87 Wrote: My 403b has tanked this last quarter. Fortunately I am 31 and have plenty of years to go.

So pat let me ax you this. The stock market goes up and down up and down for the next thirty years. When you retire and need to withdraw funds what if its down? You lose correct? So aren't you gambling that its up when you need it ? Isn't it like a 50/50 chance? Those aren't very good odds.

[BmorePat87]

(12-28-2018, 07:36 AM)ballsofsteel Wrote: So pat let me ax you this. The stock market goes up and down up and down for the next thirty years. When you retire and need to withdraw funds what if its down? You lose correct? So aren't you gambling that its up when you need it ? Isn't it like a 50/50 chance? Those aren't very good odds.

I'm gambling that over the course of the 40 years or so that I'll have this plan that the stock market will be increasing far more than it will be decreasing.

Usually a good gamble, and one where the odds are greater than 50%.

[Goalpost]

(12-28-2018, 07:36 AM)ballsofsteel Wrote:  The stock market goes up and down up and down for the next thirty years. When you retire and need to withdraw funds what if its down? You lose correct? So aren't you gambling that its up when you need it ? Isn't it like a 50/50 chance? Those aren't very good odds.

My 401K is matched up front.  If I put 6 percent in, I get the same amount.  Albeit I cant touch it without penalty, but, where else can I get that kind of initial return?  

[Beaker]

(12-28-2018, 07:36 AM)ballsofsteel Wrote: So pat let me ax you this. The stock market goes up and down up and down for the next thirty years. When you retire and need to withdraw funds what if its down? You lose correct? So aren't you gambling that its up when you need it ? Isn't it like a 50/50 chance? Those aren't very good odds.

He wont withdraw it all at once upon retirement. 403b works like a 401k so he will likely take periodic withdrawls throughout his retirement.

[Beaker]

(12-28-2018, 12:04 PM)Goalpost Wrote: My 401K is matched up front.  If I put 6 percent in, I get the same amount.  Albeit I cant touch it without penalty, but, where else can I get that kind of initial return?  

You should put as much as you need in to get the max maatch from your company. Thats almost like free money. If you can put more in, you should. A basic minimum rule of thumb for pre tax money in your 401k should be 15% of your yearly salary divided by the amount of paychecks you get per year. I contribute 25% of my yearly, and my wife contributes 20% of hers.

[Goalpost]

(12-28-2018, 12:28 PM)Beaker Wrote: You should put as much as you need in to get the max maatch from your company. Thats almost like free money. If you can put more in, you should. A basic minimum rule of thumb for pre tax money in your 401k should be 15% of your yearly salary divided by the amount of paychecks you get per year. I contribute 25% of my yearly, and my wife contributes 20% of hers.

Agree.  And when I do withdraw it, it will be taxed.  But the idea is that I will be retired, hence when it does get taxed, I will be in a lower tax bracket than i'm in now.  So in theory, it's also tax beneficial.

[Beaker]

(12-28-2018, 12:51 PM)Goalpost Wrote: Agree.  And when I do withdraw it, it will be taxed.  But the idea is that I will be retired, hence when it does get taxed, I will be in a lower tax bracket than i'm in now.  So in theory, it's also tax beneficial.

The only thing better IMO is a Roth IRA. You contribute with after tax dollars, and distributions are tax free since you've aalready been taxed on the money. I started one for my daughter for her 18th birthday.

[fredtoast]

(12-28-2018, 01:52 AM)Beaker Wrote: Again, you don't lose anything when the market drops unless you sell when it does, and its below the price when you bought. 

Again, losing what you have gained is still losing.  If I have gained 100K over the years I want to keep it instead of losing it.

It is better to sell and lose 10K when the market drops than stay in and lose the whole 100K.

[Beaker]

(12-28-2018, 12:58 PM)fredtoast Wrote: Again, losing what you have gained is still losing. 

You didnt gain anything unless you sell at that point either.

The only thing that determines a gain or loss is the value of the stock when you sell it. The rest is potential. 

[fredtoast]

(12-28-2018, 07:36 AM)ballsofsteel Wrote: So pat let me ax you this. The stock market goes up and down up and down for the next thirty years. When you retire and need to withdraw funds what if its down? You lose correct? So aren't you gambling that its up when you need it ? Isn't it like a 50/50 chance? Those aren't very good odds.

The closer you get to retirement the more you should shift your investments into bonds that have less growth but zero loss of principle.

Too many people fail to realize what a crap shoot the stock market is.  It is true that if you are in your 30's and won't need the money until retirement you can ride it out.  It took five years for the stock market to regain the losses from 2007-08.


But if you retire with plans to live off 5% per year of your savings and suddenly your savings are cut in half you are now using 10% per year.  And since you are no longer "buying low" you don't have any way to make up those losses.

When you get within 5 years of retirement you should be almost exclusively in bonds instead of stocks.

[fredtoast]

(12-28-2018, 01:02 PM)Beaker Wrote: You didnt gain anything unless you sell at that point either.

The only thing that determines a gain or loss is the value of the stock when you sell it. The rest is potential. 

Exactly.  If you have a $500K portfolio with $100K in gains it is better to sell and realize that gain before it disappears in a massive drop.

To claim you "lose nothing" when your portfolio drops by $100K is absurd.

[Beaker]

(12-28-2018, 01:14 PM)fredtoast Wrote: To claim you "lose nothing" when your portfolio drops by $100K is absurd.

You lose nothing unless you sell at that point. If 10 years from now you retire and the portfolio is now worth 700k when you start taking your distributions, you still realized gain overall. The temporary drop was only on paper.

[fredtoast]

(12-28-2018, 05:02 PM)Beaker Wrote: You lose nothing unless you sell at that point. If 10 years from now you retire and the portfolio is now worth 700k when you start taking your distributions, you still realized gain overall. The temporary drop was only on paper.

Exactly.  That is why people want to sell before a major drop.  I don't know what you are trying to say.

We both have a $500K portfolio with $100K in gains.  I foresee a market drop and sell.  I now have $500K.  You sit on yours and lose your $100K in gains.  You now have $100K less than me.  I don't know why saying "it is only on paper" makes any difference at all.  

[Beaker]

(12-28-2018, 05:14 PM)fredtoast Wrote: Exactly.  That is why people want to sell before a major drop.  I don't know what you are trying to say.

We both have a $500K portfolio with $100K in gains.  I foresee a market drop and sell.  I now have $500K.  You sit on yours and lose your $100K in gains.  You now have $100K less than me. 

I dont have 100K less than you if I leave it in another 10 yrs and now the portfolio is worth 700k.

The 100k drop is moot at that point. It was on paper only. I only have 100k less than you if had I sold my stock at the low point of the drop.

People get burned in the stock market when they buy without researching the companies they invest in, or panic sell. And they can still get burned even with research if the companies are not truthful.

[fredtoast]

(12-28-2018, 05:19 PM)Beaker Wrote: I dont have 100K less than you if I leave it in another 10 yrs and now the portfolio is worth 700k.

Right.  You don't have $100K less.  You have $175K less because I re-invest after the big drop and my $500K earns a lot more interest than your $400K.

(12-28-2018, 05:19 PM)Beaker Wrote: The 100k drop is moot at that point. It was on paper only. I only have 100k less than you if had I sold my stock at the low point of the drop.

The amount "on paper" is REAL.  You absolutely have $100K less than me if I have $500K and you have $400K.

[Beaker]

(12-28-2018, 05:34 PM)fredtoast Wrote: Right.  You don't have $100K less.  You have $175K less because I re-invest after the big drop and my $500K earns a lot more interest than your $400K.

Or you dont realize the margins because you keep chasing the market and I end up with 200k more than you because I rode out the "down" period.

Quote:The amount "on paper" is REAL.  You absolutely have $100K less than me if I have $500K and you have $400K.

I only have 400k if I sell when its at that level.