Retirement-Era |OT| How to Invest For Retirement

[Liquidsnake]

Im a little late to the game. I just started a 401k with prudential through work. Im starting with 5%. Company matches 8%. So for every $100 Contribute They will add 8 dollars Annually.

I'm 41 so I've got 24 years to do something with it.

It says my bi weekly amount is $144 does that mean 77 buck less take home (about?)

I went middle, not safe not high risk, but moderate.


I don't even know what i'm talking about. Im just happy I finally started,

 

[Fancy Clown]

So I put in the max for a Roth IRA and I want to do a Total Stock/International Stock mix as per the OP's recommendation, but the minimum buy for each is 3,000 dollars...so should I put all 5,500 in total stocks for now?

Edit: nvm only maxed out for 2017, I can put a lil more in

 

[Keyboard]

Seeing a lot of reactionary emotional posts lately.

Let's do a thought experiment.

What if you were the world's worst market timer? You only invested at peaks. How well would your portfolio perform?

http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

What's the key strategy here?

I assume people who aren't in it for the retirement timeline are freaking out. I doubt anyone here is unduly concerned.
To be realistic, I fancy myself pretty stoic but I'm sure if there was a drop of like 30% or something I wouldn't exactly like it, but even with all the yammering about 'worst 1-day ever' it's not really even that bad. Our portfolio is down like 5% from peak, so whatevs.

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-2.67% on the day

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Would you rather lose 3% or 100%?

Read some stories of people who lost everything due to limiting their portfolio to a few stocks.

They'll give you some prospective on how to react.

https://www.bogleheads.org/forum/viewtopic.php?t=148446

 

[Smiley90]

Seeing a lot of reactionary emotional posts lately.

Let's do a thought experiment.

What if you were the world's worst market timer? You only invested at peaks. How well would your portfolio perform?

http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

What's the key strategy here?





Would you rather lose 3% or 100%?

Read some stories of people who lost everything due to limiting their portfolio to a few stocks.

They'll give you some prospective on how to react.

https://www.bogleheads.org/forum/viewtopic.php?t=148446

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I read that article earlier, it's a good read.

And my post isn't reactionary emotional, I actually had a good chuckle about it lol. it'll hit us all worse at some point in the next 5-10 years again anyway.

 

[Coolluck]

Im a little late to the game. I just started a 401k with prudential through work. Im starting with 5%. Company matches 8%. So for every $100 Contribute They will add 8 dollars Annually.

I'm 41 so I've got 24 years to do something with it.

It says my bi weekly amount is $144 does that mean 77 buck less take home (about?)

I went middle, not safe not high risk, but moderate.


I don't even know what i'm talking about. Im just happy I finally started,

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Wait, doesn't that sound like a terrible 401k match? Like I've been at a company where they only match 25% max of your contribution but this sounds worse than that. Something is better than nothing but that sounds insulting.

 

[Smiley90]

Wait, doesn't that sound like a terrible 401k match? Like I've been at a company where they only match 25% max of your contribution but this sounds worse than that. Something is better than nothing but that sounds insulting.

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That does sound wrong - Maybe it's "if I contribute 5% out of my 100, they contribute 8%"? e.g. he pays 5 bucks out of 100 into it, the company pays 8? That'd be similar to my current job, e.g. I have:

Personal Contribution: 6.5%
Company Contribution: 9.13%

so they essentially do a 140% match of my contribution. I'm thinking something similar applies in his situation, because a 5% match is laughable.

 

[ZackieChan]

I assume people who aren't in it for the retirement timeline are freaking out. I doubt anyone here is unduly concerned.
To be realistic, I fancy myself pretty stoic but I'm sure if there was a drop of like 30% or something I wouldn't exactly like it, but even with all the yammering about 'worst 1-day ever' it's not really even that bad. Our portfolio is down like 5% from peak, so whatevs.

Lol, my 'worry' right now is that the market will recover before I can deploy some more cash into it.

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Yep - I'm out of the country, so I needed to have my bank send a check to 401(k). It'll take at least a few days. Hoping they don't go back up too much in the meantime! I made back today almost as much as I lost yesterday, if I read the numbers right.

That does sound wrong - Maybe it's "if I contribute 5% out of my 100, they contribute 8%"? e.g. he pays 5 bucks out of 100 into it, the company pays 8? That'd be similar to my current job, e.g. I have:

Personal Contribution: 6.5%
Company Contribution: 9.13%

so they essentially do a 140% match of my contribution. I'm thinking something similar applies in his situation, because a 5% match is laughable.

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Yeah, the employer match is usually based on your income, not on your contribution.

 

[Galkinator]

I'm going to make use of the dips and buy a new ETF. I narrowed my options to:
SCHX - focused on companies in DOW, basically like a cheaper version of QQQ with nice yield and low expense ratio.
GAMR - focused on video game companies. Seems like it's not active though and many filler companies that hold it back from sky rocketing, but it did go up like 50% the last year.
MJX/HMLSF (not certain which one) - Canadian weed stocks. I'm already invested specifically in Canopy so this isn't good for diversification, but it's still a safe bet imo.
LIT - seems to focus on lithium batteries and automated cars, that's definitely for the long run.

Any thoughts? or other recommendations that you think are better options?

 

[Liquidsnake]

Wait, doesn't that sound like a terrible 401k match? Like I've been at a company where they only match 25% max of your contribution but this sounds worse than that. Something is better than nothing but that sounds insulting.

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It's an awful match. Just terrible.

 

[moblin]

I'm going to make use of the dips and buy a new ETF. I narrowed my options to:
SCHX - focused on companies in DOW, basically like a cheaper version of QQQ with nice yield and low expense ratio.
GAMR - focused on video game companies. Seems like it's not active though and many filler companies that hold it back from sky rocketing, but it did go up like 50% the last year.
MJX/HMLSF (not certain which one) - Canadian weed stocks. I'm already invested specifically in Canopy so this isn't good for diversification, but it's still a safe bet imo.
LIT - seems to focus on lithium batteries and automated cars, that's definitely for the long run.

Any thoughts? or other recommendations that you think are better options?

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I can't speak on the latter three but I have 6 figures invested in SCHX. To clarify, it tracks the Dow Jones U.S. Large-Cap Total Stock Market Index, which is slightly more expansive than the S&P 500 (SCHX has 750 components). It tracks the S&P 500 almost exactly and is therefore their version of an in-house "S&P 500" ETF. QQQ tracks the NASDAQ-100, which is limited to the top companies listed on NASDAQ and has one other very important distinction from other large-cap funds -- it excludes financial companies.

 

[tokkun]

So I put in the max for a Roth IRA and I want to do a Total Stock/International Stock mix as per the OP's recommendation, but the minimum buy for each is 3,000 dollars...so should I put all 5,500 in total stocks for now?

Edit: nvm only maxed out for 2017, I can put a lil more in

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You can use the equivalent ETF versions of those funds if you want something with a lower minimum. ETFs can be a bit less simple to transact, but are fundamentally nearly identical to the mutual funds in terms of performance.

I'm going to make use of the dips and buy a new ETF. I narrowed my options to:
SCHX - focused on companies in DOW, basically like a cheaper version of QQQ with nice yield and low expense ratio.
GAMR - focused on video game companies. Seems like it's not active though and many filler companies that hold it back from sky rocketing, but it did go up like 50% the last year.
MJX/HMLSF (not certain which one) - Canadian weed stocks. I'm already invested specifically in Canopy so this isn't good for diversification, but it's still a safe bet imo.
LIT - seems to focus on lithium batteries and automated cars, that's definitely for the long run.

Any thoughts? or other recommendations that you think are better options?

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If you are talking about investing as a hobby with fun money, that's fine, but I don't see a great deal of value in doing sector bets as part of a retirement investing strategy. For retirement, you are better off using a more broadly diversified portfolio, which is why people commonly recommend total market indices.

 

[Keyboard]

Seems very strange to urge oneself to "buy a new etf" when the market "dips."

Something must be wrong with the current portfolio.

What's wrong with adding more to existing investments?

I can't speak on the latter three but I have 6 figures invested in SCHX. To clarify, it tracks the Dow Jones U.S. Large-Cap Total Stock Market Index, which is slightly more expansive than the S&P 500 (SCHX has 750 components). It tracks the S&P 500 almost exactly and is therefore their version of an in-house "S&P 500" ETF. QQQ tracks the NASDAQ-100, which is limited to the top companies listed on NASDAQ and has one other very important distinction from other large-cap funds -- it excludes financial companies.

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NASDAQ funds also overlap into the S&P 500. The one selected focuses very hard on tech which there's a consensus that it is currently overvalued. It also only includes 100 companies vs. 505.

You are better off holding an index that tracks the S&P500. Even better if you can hold 3000 companies.

 

[Galkinator]

I can't speak on the latter three but I have 6 figures invested in SCHX. To clarify, it tracks the Dow Jones U.S. Large-Cap Total Stock Market Index, which is slightly more expansive than the S&P 500 (SCHX has 750 components). It tracks the S&P 500 almost exactly and is therefore their version of an in-house "S&P 500" ETF. QQQ tracks the NASDAQ-100, which is limited to the top companies listed on NASDAQ and has one other very important distinction from other large-cap funds -- it excludes financial companies.

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So by excluding these financial companies, what would that mean? I mean, looking at the charts QQQ and SCHX perform nearly identically.
There's also SCHD which look like it has a bit more diverse portfolio in its holdings, also a better dividend yield %. Too many options!

If you are talking about investing as a hobby with fun money, that's fine, but I don't see a great deal of value in doing sector bets as part of a retirement investing strategy. For retirement, you are better off using a more broadly diversified portfolio, which is why people commonly recommend total market indices.

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I wasn't planning on betting on a specific sector, just presented a very select few that I followed for a bit. Also I'm not exactly planning on these ETFs for retirement, still a long time for that. Was looking for more of an opinion by those with more knowledge than me, I'm still a newbie regarding everything in finances.

 

[moblin]

So by excluding these financial companies, what would that mean? I mean, looking at the charts QQQ and SCHX perform nearly identically.
There's also SCHD which look like it has a bit more diverse portfolio in its holdings, also a better dividend yield %. Too many options!


I wasn't planning on betting on a specific sector, just presented a very select few that I followed for a bit. Also I'm not exactly planning on these ETFs for retirement, still a long time for that. Was looking for more of an opinion by those with more knowledge than me, I'm still a newbie regarding everything in finances.

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Well, first, if you don't have a budget and haven't started thinking about retirement finances, that is absolutely the priority over anything else. The younger you start and the more you contribute, the better you will fare down the road barring a complete economic collapse.

And there is actually quite a bit of difference between those three funds. Here is their relative performance over the past 5 years, for example:

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QQQ is restricted to NASDAQ-listed companies, which is tech-heavy and will disproportionately follow the performance of the major tech companies. As you can see, the industry has had a very good few years! It might have several more! But you have no way of knowing how things will develop, and as Bogle loves to preach, reversion to the mean is a surprisingly stubborn theory. SCHX has overlap with QQQ, but has a broader net and performs very similar to the S&P 500 index and slightly less closely to a "total stock market" index. SCHD is a dividend fund, which is simply focused on companies that have a higher dividend yield.

The graphs may look like they follow similar patterns, but it's crucial to understand the distinctions and understand why something like SCHD is not appropriate for a retirement account.

 

[TheTrinity]

So by excluding these financial companies, what would that mean? I mean, looking at the charts QQQ and SCHX perform nearly identically.
There's also SCHD which look like it has a bit more diverse portfolio in its holdings, also a better dividend yield %. Too many options!


I wasn't planning on betting on a specific sector, just presented a very select few that I followed for a bit. Also I'm not exactly planning on these ETFs for retirement, still a long time for that. Was looking for more of an opinion by those with more knowledge than me, I'm still a newbie regarding everything in finances.

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What people are saying is that as far as retirement investment goes, your whole line of questioning here is starting from a faulty premise. Like, I have a bunch of questions about why this has even come up.

First, why would you need to 'make use of' the dip and buy a NEW etf? I'm assuming this means you already have some retirement investments in standard stuff so I don't really get why wouldn't you just put more cash in those.
Why would you buy SCHX when there are several good entire-market ETFs that the majority make use of?
Are you aware that GAMR going up 50% last year means precisely nothing?
Buying weed ETF when you already hold individual stock in the same sector, wot?

You say you're not planning on betting a specific sector but that seems pretty contrary to the evidence. The very act of buying any of these ETFs (I suppose excluding SCHX) means you're making a sector bet.


Like Tokkun said, if this is really just a side-investment thing for fun and potential gains (but also potential massive loss) I don't have a problem with it. I don't think anyone would recommend it for a retirement plan but if that's not what it's for then it's all good. But if that is the case I don't know how much help you'll get here. Our (relative) expertise is in selecting low-cost broad index funds for buy-and-hold strategies, taking advantage of tax shelters, using employer provided financial benefits, and setting yourself up for draw-down strategies in retirement.

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In other news, it's looking pretty likely that EA will convert me from temporary to permanent position. Looking forward to that sweet ESPP and RRSP matching. Those alone are worth thousands and thousands of dollars each year.
And uh, I guess $100 credit for EA games every year is nice?

 

[Keyboard]

I'm not exactly planning on these ETFs for retirement, still a long time for that.

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1. You're asking a non-retirement question in a retirement thread.
2. The secret to retirement savings is to start early. Younger you are the better. START NOW
3. Buy a low cost index fund or low cost active target date fund that utilize a 3 fund portfolio and reinvest all its dividends in it.

No one knows anything else for investing. There are only two kinds of people: 1. Don't know anything. 2. Who think they know but are bullshitting.

There's #3 person who knows but won't tell you because that person is on vacation and traveling across the world 24/7.

 

[tokkun]

I wasn't planning on betting on a specific sector, just presented a very select few that I followed for a bit. Also I'm not exactly planning on these ETFs for retirement, still a long time for that. Was looking for more of an opinion by those with more knowledge than me, I'm still a newbie regarding everything in finances.

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A "sector bet" means investing in a fund that contains only companies from a specific industry or set of related industries. So things like "video game companies" or "marijuana companies" would be sector bets.

When it comes to doing sector-based investments, I am especially wary of trying to predict the performance of sectors that I have a personal interest in or otherwise consider myself an expert in. For instance, I have a PhD in computer engineering. It used to be the case that I would read a new research paper or see a conference presentation and think "this company has some really innovative tech. I should invest in them." The problem is that the company with the best technology doesn't always win, and stock prices (particularly in the short term) are driven by the perception of investors who are not domain experts.

So my advice is that gamers similarly should not try to invest in gaming stocks.

 

[Keyboard]

There is a clear bias for investors to favor products they use, so they want to own individual stocks.

I'm not a believer as I don't trust myself to pick out individual stocks for very long term performance even though I have read a lot of books about the market.

If you have that unquenchable burning desire to invest in very small sectors and individual stocks, add this blurb to your investment strategy. When portfolio is $1 million, invest in individual stocks + other fluff.

I believe the stock market is designed to make active investors poor and foolish.

Focus on retirement. Then you can have fun.

 

[Galkinator]

I guess my ignorance is getting exposed more and more with each comment.
Let's start over - I want to start investing in a ETF because the volatility of individual stocks is something a little bit off-putting at the moment for me. I didn't realize choosing an ETF that invest in a specific sector was necessarily a bet, but I'll know for next time.
Now, what would be a good ETF to start investing in for a newbie like me?

 

[SchuckyDucky]

Increasing my bi weekly contribution into my IRA to be enough to allow me to hit $5,500 this year. I adjusted my W-4 allowances and am putting the amount my paycheck increased by directly into my IRA, so it doesn't even feel like it's affecting my net pay at all. Working to rebuild my general emergency savings account after buying a house last year along with having to pay for a few emergency expenses. Once I get that rebuilt a little bit, I'll start trying to increase my 403b contributions as well. Right now, I'm only doing up to the match (6%.)

Also, I'll soon have enough in my Vanguard IRA to convert my VTSMX fund into a VTSAX. So I'm pretty excited about that :)

 

[Keyboard]

I guess my ignorance is getting exposed more and more with each comment.
Let's start over - I want to start investing in a ETF because the volatility of individual stocks is something a little bit off-putting at the moment for me. I didn't realize choosing an ETF that invest in a specific sector was necessarily a bet, but I'll know for next time.
Now, what would be a good ETF to start investing in for a newbie like me?

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What trading platform are you using?

 

[Galkinator]

What trading platform are you using?

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Trading through my bank
(I don't live in US/Canada btw)

 

[Keyboard]

How much does your bank charge you when you trade? Does the bank offer any commission-free trades? Is there a maintenance yearly fee?

 

[Galkinator]

Last time I traded I was charged about $18-19, and there's a 0.3% yearly maintenance fee. Not sure about the commission free trade, but I'd say it's not an option through the bank.

 

[moneywoes]

So I couldn't find any other investing thread here so here it goes. I'm playing a stock market game for a club on campus and was wondering what's the best way to get a ton of short term gains? I've made one trade now that I got out too early and only gained $100. Just shorted SNAP rn we'll see how that goes. Prize is a giftcard and I'm broke so I need to win. have 30 days. Any advice would be appreciated. Thanks.

 

[Walter White Walker]

I guess my ignorance is getting exposed more and more with each comment.
Let's start over - I want to start investing in a ETF because the volatility of individual stocks is something a little bit off-putting at the moment for me. I didn't realize choosing an ETF that invest in a specific sector was necessarily a bet, but I'll know for next time.
Now, what would be a good ETF to start investing in for a newbie like me?

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You mentioned SCHX. If you have access to it a better one is SCHB. Same annual fee of .03% but it has exposure to 2020 US companies vs. 741 companies in SCHX. Every company outside of not that many micro cap companies.

edit: corrected to SCHB, not SCHA. A is their small caps one.

 

[Cyan]

So I couldn't find any other investing thread here so here it goes. I'm playing a stock market game for a club on campus and was wondering what's the best way to get a ton of short term gains? I've made one trade now that I got out too early and only gained $100. Just shorted SNAP rn we'll see how that goes. Prize is a giftcard and I'm broke so I need to win. have 30 days. Any advice would be appreciated. Thanks.

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It depends on how many people are participating, but generally the "winning" strategy in stock market games is to bet huge on high variance things and hope you win your bets. Because you have a limited time and you only win if you're in first place, you aren't going to win a stock market game using actual good investment strategy.

 

[The_Inquisitor]

So I couldn't find any other investing thread here so here it goes. I'm playing a stock market game for a club on campus and was wondering what's the best way to get a ton of short term gains? I've made one trade now that I got out too early and only gained $100. Just shorted SNAP rn we'll see how that goes. Prize is a giftcard and I'm broke so I need to win. have 30 days. Any advice would be appreciated. Thanks.

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if there was a surefire way we would all be investors on wall street. :) Jokes aside what's your time window for the contest? You're best bet is to guess on a stock and hope for the best.

 

[hockeypuck]

Like Tokkun said, if this is really just a side-investment thing for fun and potential gains (but also potential massive loss) I don't have a problem with it. I don't think anyone would recommend it for a retirement plan but if that's not what it's for then it's all good. But if that is the case I don't know how much help you'll get here. Our (relative) expertise is in selecting low-cost broad index funds for buy-and-hold strategies, taking advantage of tax shelters, using employer provided financial benefits, and setting yourself up for draw-down strategies in retirement.

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The closest thing I have to "fun money for side investments" is putting $100 or so every month into Vanguard's Wellington fund. This is mainly so I can save for a new car in a couple years, but also to have a small active management fund that I can use to immediately compare against my 3 fund portfolio.

Also, I don't see anything in the opening posts about draw-down strategies, which I assume are primarily based on minimizing taxes in retirement. Is there a recommended link?

 

[Maynerd]

Anyone have thoughts on using robinhood.com to do some stock trading? Free trades is very attractive.

 

[moblin]

Anyone have thoughts on using robinhood.com to do some stock trading? Free trades is very attractive.

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It's not acceptable for any kind of long-term investing and has zero use as a retirement platform.

Its simplicity is lovely, I suppose, but you trade an immense amount of functionality for it. I'm fairly sure they haven't even introduced automatic dividend reinvestment yet.

Any responsible discount broker (Vanguard, Fidelity, Schwab, etc.) has a suite of commission- and load-free ETFs, Mutual Funds, and occasionally stocks that covers anything you might need. And if you have the money to commit to dumping into individual stocks, $5-7 isn't really a huge dealbreaker. Otherwise? Sure, the platform works fine, as long as you keep your expectations in check.

 

[Tater]

Hey man, just want to congratulate you for getting started. It's like the old proverb: "The best time to plant a tree was 20 years ago. The next best time is now". Just remember to keep plugging away even if the market goes down. People freak out, but you will make a lot of money when things come back.

You're right that an 8% contribution match is low, but it's still better than nothing. I'm your age, and my first job had no match at all.

Your take home should is going to be reduced by the withholding amount times your tax rate. It can get tricky, but I usually figure about 36% once you factor in state, social security, etc. I'd guess you'll see your tax home go down by about $90.

Im a little late to the game. I just started a 401k with prudential through work. Im starting with 5%. Company matches 8%. So for every $100 Contribute They will add 8 dollars Annually.

I'm 41 so I've got 24 years to do something with it.

It says my bi weekly amount is $144 does that mean 77 buck less take home (about?)

I went middle, not safe not high risk, but moderate.


I don't even know what i'm talking about. Im just happy I finally started,

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[Liquidsnake]

Hey man, just want to congratulate you for getting started. It's like the old proverb: "The best time to plant a tree was 20 years ago. The next best time is now". Just remember to keep plugging away even if the market goes down. People freak out, but you will make a lot of money when things come back.

You're right that an 8% contribution match is low, but it's still better than nothing. I'm your age, and my first job had no match at all.

Your take home should is going to be reduced by the withholding amount times your tax rate. It can get tricky, but I usually figure about 36% once you factor in state, social security, etc. I'd guess you'll see your tax home go down by about $90.

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Thanks for the encouraging words man, I appreciate it. I will increase my contributions as I get older. I have a lot of time to make up for, but I appreciate the info you provided.

 

[TheTrinity]

Also, I don't see anything in the opening posts about draw-down strategies, which I assume are primarily based on minimizing taxes in retirement. Is there a recommended link?

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I'll see if I can get something up but I'm thinking I'll need input from Keyboard and others on American stuff as I have only a very slight idea about that.

But yeah, you're pretty much on it with your idea there. As a Canadian example, you would want to try stuff like draining an RRSP as much as possible before it gets converted to an RRIF. Making sure your high growth stuff is in your TFSA as withdrawals from there don't count as income, so it won't result in Old Age Security clawbacks. It would also include stuff like determining your Safe Withdrawal Rate, being aware of sequence-of-returns risk, figuring out what changes to bond/stock allocation you should make as you transition to retirement, that sort of thing.

It's one of those things that really varies per person in the details.

 

[Maynerd]

It's not acceptable for any kind of long-term investing and has zero use as a retirement platform.

Its simplicity is lovely, I suppose, but you trade an immense amount of functionality for it. I'm fairly sure they haven't even introduced automatic dividend reinvestment yet.

Any responsible discount broker (Vanguard, Fidelity, Schwab, etc.) has a suite of commission- and load-free ETFs, Mutual Funds, and occasionally stocks that covers anything you might need. And if you have the money to commit to dumping into individual stocks, $5-7 isn't really a huge dealbreaker. Otherwise? Sure, the platform works fine, as long as you keep your expectations in check.

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Ok yeah I'm just looking to do some individual stock trades with some extra cash to try to make a quick buck or two. :)

 

[Keyboard]

I'll see if I can get something up but I'm thinking I'll need input from Keyboard and others on American stuff as I have only a very slight idea about that.

It's one of those things that really varies per person in the details.

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Someone called? I still have a long way to go before thinking about this problem.

Boglehead philosophy is to keep it simple. I've only read about the 4% rule and founder's story how it worked for him: https://www.bogleheads.org/forum/viewtopic.php?t=73249

Here's another page on withdrawal methods: https://www.bogleheads.org/wiki/Withdrawal_methods

There are RMD calculators out there. Search.

There's a misconception that withdrawing means money that has to be spent. You can choose to reinvest leftovers in a taxable account.

 

[FliX]

Also, I don't see anything in the opening posts about draw-down strategies, which I assume are primarily based on minimizing taxes in retirement. Is there a recommended link?

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Unless you are close to reaching that magic number (~5 years out) there is only so much point thinking about it as (tax) laws will change significantly in the next 10-20 years.
But there are all sorts of strategies for early retirement strategies start here.

 

[Deleted member 2145]

so I have a 401k through my employer and a Roth IRA on my own

are there forms I need for those for my taxes?

 

[Deleted member 2145]

dp

 

[Linkura]

so I have a 401k through my employer and a Roth IRA on my own

are there forms I need for those for my taxes?

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No.

 

[Deleted member 2145]

cool thanks

 

[Prax]

Geez I just got confirmation of an rrsp transfer I made on jan 30 and just my luck it had sold during feb 5th's closing (which was of course, one of the market lowpoints). What are my chances that it buys into new funds while it's on one of the bumps/peaks again? lol

Though I just woke up to find everythings down again? I just want to transfer like for like! This unpredictable market sucks. :p

 

[Chaosblade]

All this tanking hubbub got me investing in my Vanguard account again. Haven't contributed in several months since I bought my home, I had a good idea of where my finances would sit but I wanted to grow it all back out organically. Not putting as much in as I was before I had a mortgage payment and everything that goes with it, but something is way better than nothing.

(I didn't stop putting money away entirely though, my 401K contributions remained the same).

 

[moneywoes]

if there was a surefire way we would all be investors on wall street. :) Jokes aside what's your time window for the contest? You're best bet is to guess on a stock and hope for the best.

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Sorry for the late reply, have my password for here autosaved on my PC which wasn't working. The game lasts for 2 more weeks and so far I have lost 1k from 100k lol. Also, I just found out the game lets people cheat by making a lot of different accounts but since I registered with my name as my account I can't do that.

 

[Keyboard]

Vanguard posted an infograph: https://personal.vanguard.com/pdf/bear_markets_feb2018.pdf

 

[Jokab]

A question I have been thinking about for a long time is what actually drives stocks in the long term. I feel like there are two alternatives here: speculation or dividends.

If we consider speculation to be what drives stocks, then the reason why we buy stocks is because we can sell them at a higher price in the future. We buy stocks because we guess that people will want to buy the stock later. But what is the reason why people want to buy the stock? If we follow this line of thinking, the reason for why people want to buy our stocks is because people want to buy the stocks. It's circular reasoning, no?

To me, a much clearer theory is that dividends is what drives the stock market. People want to buy good stocks because good stocks have high profit, giving high dividends. That would explain why someone wants to buy my high-priced stock of a good company: because good companies give high dividends.
Of course, the theory of dividends falls apart a bit when it comes to companies that expressedly will never give dividends, like Berkshire Hathaway. I don't mean to say that speculation is not a part of stock trading, but I don't think it makes sense to see speculation as the primary driver of the stock market.

Any thoughts? I haven't been able to find any good sources for this discussion.

 

[tokkun]

A question I have been thinking about for a long time is what actually drives stocks in the long term. I feel like there are two alternatives here: speculation or dividends.

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It's a bit more complicated than "dividends". The term for the valuation that is based on the fundamental, measurable aspects of a stock is called "intrinsic value" or "fundamental value":
https://en.wikipedia.org/wiki/Intrinsic_value_(finance)

Within intrinsic value it can also be broken down into components. There are valuations based on a company's cash flow (e.g price-to-earnings, price-to-revenue, CAPE, etc.). There are also valuations based on a company's assets (e.g. price-to-book).

Dividends are sort of related to price-to-earnings component of valuation. If a company has earnings of $X per share, that is the amount they could return to shareholders without impacting their price-to-book. There are other ways to return money to shareholders besides dividends - specifically it can be done through share buy-backs. This may be preferable for shareholders because it tends to result in better tax treatment in the US than dividends. Some companies choose to do neither dividends nor share buybacks, and instead keep the profits as cash. This then increases their price-to-book valuation.

The price of any equity is some combination of investors' guesses about future cash flow-based valuation and asset-based valuation. When those guesses seem to diverge too far from present-day evidence, we call it "speculation".

To use an explanatory example, let's look at Tesla.

- Tesla loses money, so it's current cash flow-based valuation should be negative.
- Tesla has assets like factories and patents that contribute to a positive asset-based valuation.

The actual stock price seems pretty high based on the fundmentals, so I think it would be fair to categorize it as "speculative".

 

[demosthenes]

A question I have been thinking about for a long time is what actually drives stocks in the long term. I feel like there are two alternatives here: speculation or dividends.

If we consider speculation to be what drives stocks, then the reason why we buy stocks is because we can sell them at a higher price in the future. We buy stocks because we guess that people will want to buy the stock later. But what is the reason why people want to buy the stock? If we follow this line of thinking, the reason for why people want to buy our stocks is because people want to buy the stocks. It's circular reasoning, no?

To me, a much clearer theory is that dividends is what drives the stock market. People want to buy good stocks because good stocks have high profit, giving high dividends. That would explain why someone wants to buy my high-priced stock of a good company: because good companies give high dividends.
Of course, the theory of dividends falls apart a bit when it comes to companies that expressedly will never give dividends, like Berkshire Hathaway. I don't mean to say that speculation is not a part of stock trading, but I don't think it makes sense to see speculation as the primary driver of the stock market.

Any thoughts? I haven't been able to find any good sources for this discussion.

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This is why you take corporate finance and accounting classes.

 

[jstevenson]

A question I have been thinking about for a long time is what actually drives stocks in the long term. I feel like there are two alternatives here: speculation or dividends.

If we consider speculation to be what drives stocks, then the reason why we buy stocks is because we can sell them at a higher price in the future. We buy stocks because we guess that people will want to buy the stock later. But what is the reason why people want to buy the stock? If we follow this line of thinking, the reason for why people want to buy our stocks is because people want to buy the stocks. It's circular reasoning, no?

To me, a much clearer theory is that dividends is what drives the stock market. People want to buy good stocks because good stocks have high profit, giving high dividends. That would explain why someone wants to buy my high-priced stock of a good company: because good companies give high dividends.
Of course, the theory of dividends falls apart a bit when it comes to companies that expressedly will never give dividends, like Berkshire Hathaway. I don't mean to say that speculation is not a part of stock trading, but I don't think it makes sense to see speculation as the primary driver of the stock market.

Any thoughts? I haven't been able to find any good sources for this discussion.

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I mean, you're ultimately right at some level --- people invest in a company (buying the initial shares, or buying shares on the secondary (aka, Stock), market) because they believe in the business, believe their investment will be returned to them (growth in the company, or return of profits via dividend).

But it's not pure speculation, as others before me noted, there's a lot of metrics to value companies.


Now, you can argue that companies may be overvalued right now on the stock market in general, and that some speculation is trading at a higher level. Of course, in 2008, many companies were UNDER-valued. So it's normal ebbs and flows.

At the end of the day you own a sliver of an entity that is using that money (intrinsically, since the share you own means you own a piece of that company) - to try and create more wealth / money. That's why you buy them, because they put your money to work for you.


There's tons of details about how companies and shares are valued, how to price shares, etc.

 

[Straight Edge]

Im a little late to the game. I just started a 401k with prudential through work. Im starting with 5%. Company matches 8%. So for every $100 Contribute They will add 8 dollars Annually.

I'm 41 so I've got 24 years to do something with it.

It says my bi weekly amount is $144 does that mean 77 buck less take home (about?)

I went middle, not safe not high risk, but moderate.


I don't even know what i'm talking about. Im just happy I finally started,

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If your company matches contributions up to 8%, you are losing free money by only contributing 5%. Also your company match isn't per $100 you contribute, it's a direct match to the percentage of your income you contribute.