I'm thinking about picking up some blue chips that pay dividends while the market is tumbling. I'm a buy and holder with nerves of steel. Any suggestions from the supertaco stock advisory council?
For what it is worth (exactly $0):
To diversify and reduce risk an S&P 500 index fund give you exposure to about 70% of the market and has a dividend yield currently of around 1.9%, with a very low expense ratio (<.1%)
Individual stocks carry higher risk and reward (recent good risk example is GE) and most would advise limiting your overall exposure to any individual stock or sector, but here are a few:
JNJ (dividend yield) 2.5%, ABBV 4.5%, XOM 4.3%, RPM 2.2%, JPM 2.8%
IF were going into a recession IMO people will still drink and smoke so I like DEO 5.8%, MO 5.8%.
Gold and cash for now.
pretty conservative advice. No reason not to have at least some exposure to the stock market.
Thanks all! I probably don't even know enough to ask the right question! So, I have a 401k to which I make the maximum annual contribution and an S&P 500 index fund that I contribute to monthly. What's a logical next move? Is it better to just put more money in the index fund or balance things out somehow? Likely some other type of fund makes the most sense for me, as I like just making contributions and not paying that much attention.
Frankly, I would advise you to hold yer cards closely for a while. The Vanguard Money Market is holding even with inflation so you won’t lose anything. Check back in 3-6 months.
Here’s a couple good reads by a well respected guy. A number of other good articles by him.
I like the Vanguard Wellington fund, their oldest. It is 2/3 equities and 1/3 bonds so in a comparison with the S&P 500 it is slightly lower but less volatile due to the bonds.
ontheedgeandscaredtodeath, when do you expect you will need that money? If more than 10 years, your strategy now is perfect.
Moosie, if you had invested $10K in gold 196 years ago yer investment would be worth $26K today.
If you had put it into bonds it would be worth $8 MILLION!
If you had put it into stocks it would be worth $5.6 BILLION!
Gold is for loozers!
Hehe, Reilly, I moved some money around a few months ago. I'm still 30% invested in stocks. Cash and gold 30% as well.
The times are troubling.
Btw, TSLA is doing well, you can still buy it below $400. Not for long!
Not sure this what you're getting at, but what is your 401(k) investment in?
You'd likely want to consider that to make sure that the combination of your 401(k) and S&P 500 gives the asset allocation you're looking for.
(And what asset allocation are you looking for? There's no right answer, but for most people, it's function of years to retirement and personal risk tolerance.)
As a tax point, you're better off putting your investments that pay more interest and significant dividends or capital gains in tax deferred accounts. In other words, if you've got a mix of stocks and bonds, get your bonds in your 401(k) and your stocks in a taxable accounts.
There's no way to know what will work out best, but standard advice along the lines of what I've mentioned may to put whatever you've got to invest in a target date fund (based on your expected retirement date) and don't worry about it. It's not at all clear that any amount of worrying and active trading will allow a retail investor to get better or safer returns.
This is sort of an obvious point, but I always have to remind myself: left to his own devices, the average retail investor will usually make poor market timing decisions. Market going into the crapper? Better sell to protect what you've got left. Market's been booming? Better get in on that. And where are we now? Booming market from a longer term perspective, tanking from shorter perspective. What do you do with that info?
Reilly has a very gud point about gold, although I confess to buying some back when it was in the range of $600.00 oz.
Of course you have to remember what happened to the price of gold back in the 1950's when Scrooge McDuck & his nephews found the Lost Mines of the Incas in Peru.
One reason India remains poor is that as soon as they accumulate a little cash they buy gold,
often to bulk up a dowry. They buy a yuge amount yearly rather than investing it in saner things.
A behavioral economist did a study. You can flip a coin to win $200 for heads or 0 for tails,
or you can pass and pocket $100. Most people (not all!) take the sure thang.
Now they said flip the coin to LOSE $200 for heads or 0 for tails, or pass and just pay $100.
Guess what? MOST people will take the gamble!
Obviously the testers did not assemble ‘contestants’ based on their investing acumen but it
clearly confirms that most people are crankloons.
One reason India remains poor is that as soon as they accumulate a little cash they buy gold,
often to bulk up a dowry. They buy a yuge amount yearly rather than investing it in saner things.
An interesting global trend of 2018 seems to be countries dumping US treasuries and buying gold.
And where are we now? Booming market from a longer term perspective, tanking from shorter perspective. What do you do with that info?
Blahblah, you might right, since that's what we've learned from the past. But, I think, this coming crises is different. I wouldn't be surprised if we see 30% correction over the next two years, and then the bear market for another 20+ years. The Feds will try to pump money into the market, but that will eventually lead to an huge inflation. Times are different now. I'm still 30% invested in stocks, just in case I'm wrong. (But I'm never wrong! hehe)
Since I need to live from my savings, I have to protect my principal. Cash (money market) for survival, and gold for the short term investment, seem to be a reasonable insurance against the collapse of the world as we know it. (Short of building a bunker and buying supplies for 20+ years).
briham, per yer latter article:
“Going into the FOMC minutes and subsequent Fed meetings, U.S. bonds look like an attractive risk-reward on the long side”
That’s why I’m long bonds - softens the equities pain now and they will pay off.
I’ll take less payoff if it means much less risk. And in regards to my previous post about
irrational behavior the bond markets are much more rational and, hence, more efficient.
Reilly, I made a simulation involving two scenarios. (No inflation, in order to simplify it).
Assume you need to withdraw a fixed amount of money from your investments every year to make your living.
The first scenario. You are 100% invested in S&P 500.
The second scenario. You are 50% in S&P 500, and 50% in cash. You withdraw either from the S&P found or cash, depending how the market is doing. (Meaning, you withdraw cash when the market is down, and from the S&P 500 found, when its up.
Guess what, historically, you win if you are 100% in S&P 500. Even though, it looks like you should keep some cash in case you are losing money on the S&P 500 investment.
So, you may ask, why I'm so shy with stocks right now. Well, like I said, the times seem to be different now. (I know, I'm timing the market). Fuking dRump!
No argument, as I said earlier, on being wary right now: the atmosphere is unstable with a lot of potential convective activity. Keep yer topgallant masts struck, and double gammon yer bowsprit! And Trump is only the obvious squall on the horizon - rogue waves can strike from any direction!
Blahblah, you might right, since that's what we've learned from the past. But, I think, this coming crises is different. I wouldn't be surprised if we see 30% correction over the next two years, and then the bear market for another 20+ years. The Feds will try to pump money into the market, but that will eventually lead to an huge inflation. Times are different now. I'm still 30% invested in stocks, just in case I'm wrong. (But I'm never wrong! hehe)
"This time is different" can be one of the more pernicious thoughts investors have (and of course it's not just investing: consider relationships, etc.). That is not to say you're wrong on your predictions, although your 20-year bear market is outside consensus views. My view is that something like a 20-year bear market would lead to such a radical restructuring of society that I'm not sure your ownership of cash or bonds or gold would really help. All of our ownership of these assets are just pieces of paper (in the old days, now just bits in the cloud)--when the sh#t really hits the fan, it's probably back to the law of the jungle.
I'm not at all saying you're wrong and I'm right. The current environment is really testing my buy and hold, stick mostly with equities viewpoint. I am thinking of shifting somewhat away from equities, although for me that would probably be something like shifting from 90+% to 70-80% or so. If I do that, I'll cost average in selling over a period of time. But the long term advantage of equities seems so strong that I'll probably stick with that, knowing I may well get burned.
blahblah: I think you have it right with a buy & hold strategy.
This market may well be going to schist, but the longest down market on record was the Great Depression of 1929, which lasted until the ramp up to WWII spending boom in 1939.
I've been reading about a 20 year economic downturn for about 30 years now. There's always room for Doom & Gloom predictors in the market.
If it really goes to sh#t, we have our 5 acre ranchette, with irrigation water, here & 110 miles away is Heidi's family farm, which she owns half of, including the original farmhouse her old man constructed in 1951. (He homesteaded 120 acres then, thanks to a new taxpayer funded dam & a lottery for farmland he won, that you had to prove you were a WWII veteran, had a farming background, & had $2,000.00 in cash.)
Let us know!