Author Topic: Is it possible the market has peaked?  (Read 11524 times)

ketchup

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Re: Is it possible the market has peaked?
« Reply #50 on: October 25, 2018, 09:45:42 AM »
C) chooses only consumer goods stocks based on their fandom of the company's products

Yea, I thought that Mac OS peaked ~2005 with OS X 10.4, but stocks are priced almost entirely as a multiple of future earnings, not as geek cred. Recently Apple has been falling down on the job with the Mac line (where's my new mini with replaceable SSD and RAM?, Mac Pro that isn't a total joke?) but their stock is still raising, because investors believe that the profits will keep rolling in.
It is bizarre how their market cap marches past $1T while their computer business has gotten so damn sluggish.  I remember when they'd be the first to put new CPUs and tech in their systems, now they're among the last.  The only thing they've stayed ahead of the curve on is eliminating ports before it makes sense to (USB-C only laptops anyone?).

And like you said, the Mac Pro is truly embarrassing at this point.  Who the hell is overpaying for non-upgradable 2013 tech in 2018?

But they sell a bajillion iPhones so Wall Street sure doesn't care.

sol

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Re: Is it possible the market has peaked?
« Reply #51 on: October 25, 2018, 10:23:42 AM »
I use an iPhone, which shows I have confidence in Apple.  But if I didn't?

None of my investment decisions are in any way linked to my personal preferences.  Do you think I should only invest in orange futures because because I hate grape juice?  If I'm going to play in the fruit market, shouldn't I be making money from every fruit?

Buying things that you personally like may be the dumbest investment strategy ever.  These companies represent the majority of the index because they represent a majority of the profits in the economy.  They are what everyone else is buying, which is why they are the way I make my money.

In fact, three of the companies on that top ten list are names that I actively despise, and personally avoid using at all costs.  I still own their stock.  The S&P500 is full of companies I don't support, but I'm not buying them because I like their corporate culture or mission, I'm buying them because they make me money as part of the index, which they do because other people support them.

ketchup

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Re: Is it possible the market has peaked?
« Reply #52 on: October 25, 2018, 10:31:47 AM »
I use an iPhone, which shows I have confidence in Apple.  But if I didn't?

None of my investment decisions are in any way linked to my personal preferences.  Do you think I should only invest in orange futures because because I hate grape juice?  If I'm going to play in the fruit market, shouldn't I be making money from every fruit?

Buying things that you personally like may be the dumbest investment strategy ever.  These companies represent the majority of the index because they represent a majority of the profits in the economy.  They are what everyone else is buying, which is why they are the way I make my money.

In fact, three of the companies on that top ten list are names that I actively despise, and personally avoid using at all costs.  I still own their stock.  The S&P500 is full of companies I don't support, but I'm not buying them because I like their corporate culture or mission, I'm buying them because they make me money as part of the index, which they do because other people support them.
I was trying to use OP's logic.  I definitely do agree with you.  Later in the post I did say:
Buy posters of bands and sports teams that you like; don't buy shares of companies that you like.  It'll cost you less money.

sol

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Re: Is it possible the market has peaked?
« Reply #53 on: October 25, 2018, 01:46:30 PM »
I was trying to use OP's logic.

I know.  That was mostly directed at JenniferW, who is the one who said she invests in things she personally uses.  I think that's a terrible strategy for choosing which stocks to pick, on top of stock picking being a terrible strategy.

HBFIRE

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Re: Is it possible the market has peaked?
« Reply #54 on: October 25, 2018, 02:17:54 PM »
I was trying to use OP's logic.

I know.  That was mostly directed at JenniferW, who is the one who said she invests in things she personally uses.  I think that's a terrible strategy for choosing which stocks to pick, on top of stock picking being a terrible strategy.

Amazingly, it seems to be pretty common.  Certain popular stocks have had a very nice run in recent years, which just reinforces this crazy strategy.

pbkmaine

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Re: Is it possible the market has peaked?
« Reply #55 on: October 25, 2018, 02:18:10 PM »
I was trying to use OP's logic.

I know.  That was mostly directed at JenniferW, who is the one who said she invests in things she personally uses.  I think that's a terrible strategy for choosing which stocks to pick, on top of stock picking being a terrible strategy.

I agree, sol. I am primarily an indexer. But both Warren Buffett and Peter Lynch have said that investing in things they like is one of their strategies.

HBFIRE

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Re: Is it possible the market has peaked?
« Reply #56 on: October 25, 2018, 02:20:59 PM »
But both Warren Buffett and Peter Lynch have said that investing in things they like is one of their strategies.

Trust me, the analysis goes just a tiny bit further than that.  Pretty sure Warren Buffet understands the financials of a business he chooses to invest in better than just about anyone.  When they say "investing in things they like", they mean things they understand.  Buffet will not invest in any business he doesn't fully understand, he's okay missing out on opportunities that are beyond his specific knowledge set.  So yeah, maybe Buffet loves Coke and goes through like 6 a day, but I guarantee that's not the reason for his huge position in it.
« Last Edit: October 25, 2018, 02:26:20 PM by dustinst22 »

pbkmaine

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Re: Is it possible the market has peaked?
« Reply #57 on: October 25, 2018, 02:30:16 PM »
True. After he studied under Benjamin Graham at Columbia, Buffett took Graham’s value investing methodology and made it his own. But many of his stock picks, like Peter Lynch’s at Fidelity Magellan, first came to his attention from his own positive experience or recommendations from friends and family.

marty998

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Re: Is it possible the market has peaked?
« Reply #58 on: October 25, 2018, 02:33:54 PM »
C) chooses only consumer goods stocks based on their fandom of the company's products

Yea, I thought that Mac OS peaked ~2005 with OS X 10.4, but stocks are priced almost entirely as a multiple of future earnings, not as geek cred. Recently Apple has been falling down on the job with the Mac line (where's my new mini with replaceable SSD and RAM?, Mac Pro that isn't a total joke?) but their stock is still raising, because investors believe that the profits will keep rolling in.
It is bizarre how their market cap marches past $1T while their computer business has gotten so damn sluggish.  I remember when they'd be the first to put new CPUs and tech in their systems, now they're among the last.  The only thing they've stayed ahead of the curve on is eliminating ports before it makes sense to (USB-C only laptops anyone?).

And like you said, the Mac Pro is truly embarrassing at this point.  Who the hell is overpaying for non-upgradable 2013 tech in 2018?

But they sell a bajillion iPhones so Wall Street sure doesn't care.

Bought a MacBook Pro in 2011. Still using same MacBook Pro.

Will never buy a MacBook Pro again. It'll be back to the other mob next time.

Oh, and Microsoft Excel is not going out of style anytime soon. Much as the bosses would like to kill it, whole industries could not function without it.

MSFT will be alive and kicking for a while yet.

effigy98

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Re: Is it possible the market has peaked?
« Reply #59 on: October 25, 2018, 03:21:06 PM »
I pick companies which I think make superior products (like I have everything Apple here at home ..

Some of us here are old enough to make the same mistakes in the late 90s... it did not end well.

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Re: Is it possible the market has peaked?
« Reply #60 on: October 25, 2018, 03:27:02 PM »
I pick companies which I think make superior products (like I have everything Apple here at home ..

Some of us here are old enough to make the same mistakes in the late 90s... it did not end well.
My first lesson in stock picking was when my Mom took $5000 from both my sister and me in high school (90s). Sister got Pfizer, I got Lucent. Both did amazing, for awhile. Lucent no longer exists of you want to know how it ended for my stocks....

Of course IBM stock paid for my college, but employee purchase plan.

Scortius

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Re: Is it possible the market has peaked?
« Reply #61 on: October 25, 2018, 03:27:08 PM »
The big red flag to me was Jennifer's post about needing to keep up with the news on the companies. Any news that comes out regarding a public company will be completely out of date, not to mention often based on short-term effects.

She mentioned she doesn't like Microsoft. Does she know who Satyda Nadella is and what he's trying to do? Does she know where Microsoft gets its revenue by product? She mentioned she liked Apple and Amazon. Can she name the C-Suite/Vice Presidents of the company? Does she know what their strategies are for their given divisions? What percent of Amazon's revenue comes from their AWS service, and will that be impacted by Google Cloud and Azure? How does Apple intend to innovate past the perpetual annual cycle of iPhone upgrades as a revenue model?

I feel these are very basic questions that many habitual investors of individual tech companies cannot answer, yet they use an iPhone and not a Windows phone, so Apple is a better buy. Or Windows 10 sucks and people don't like it, so Microsoft is a poor company to invest in. Just buy the damn index!

letired

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Re: Is it possible the market has peaked?
« Reply #62 on: October 25, 2018, 05:02:00 PM »
Thanks for sharing that list.  I had looked at that a few months ago and I think that's why I kind of liked idea of stock picking. 

I am not a big fan of Microsoft -- and it's the #2 holding.  I used to be, starting back with MS-DOS 3.3, Windows 3.0 and so forth.  But back in 2008 I switched to Mac OS because I fell in love with the dock, expose, skeuomorphic graphics and the fact it ran on Unix. Then the iPhone was revolutionary and got that.   In fact, I wanted to buy a lot of Apple stock back in 2009 but didn't have the money.. I really saw it going places when it introduced the app store.


Honestly, this really illustrates why you should not be stock-picking. Microsoft these days is hardly the same company that put out even WindowsXP, and skeuomorphic graphics etc are so 2010 it's not even funny, and I don't even keep up with the design side of software development. Sure, Apple does a bunch of great consumer products even now, but it doesn't have to be exclusively one or the other when it comes to investments, and Microsoft has made drastic improvements in their offerings. And there are a lot of software devs these days who will happily bend your ear about how Apple is going down the toilet.

And that's not even touching on the diversification that comes with VTI. Your picks seem to be heavily concentrated in the oh-so-hot tech sector, which seems especially risky given the history of tech stocks, both recently and longer-term. With VTI, you get a little bit of everything, which is what you want!

Stock picking gives you a very large chance of failure. Index funds give you a 100% chance of success.

Quote
I don't know what's wrong with me.. hopefully I'll learn my lesson soon and just invest in the index funds.  For some weird reason I think there is a chance I can outperform the market.  I've liked to gamble in the past, maybe that's my problem.

It sounds a lot like a gambling problem. I know I'm some rando on the internet and unlikely to convince you, but maybe do some hard thinking about what your goals are and what is going to get you there.

JenniferW

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Re: Is it possible the market has peaked?
« Reply #63 on: October 25, 2018, 05:33:57 PM »
Okay you all conviced me, going to stick with monthly purchases of VTSAX.  I don't really want to have to do all this research all the time and always wonder if I made the right choices etc.  I need to spend my spare time doing other things than thinking about the market.  Ty

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Re: Is it possible the market has peaked?
« Reply #64 on: October 25, 2018, 05:36:47 PM »
Okay you all conviced me, going to stick with monthly purchases of VTSAX.  I don't really want to have to do all this research all the time and always wonder if I made the right choices etc.  I need to spend my spare time doing other things than thinking about the market.  Ty

Great!

letired

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Re: Is it possible the market has peaked?
« Reply #65 on: October 25, 2018, 05:41:48 PM »
Okay you all conviced me, going to stick with monthly purchases of VTSAX.  I don't really want to have to do all this research all the time and always wonder if I made the right choices etc.  I need to spend my spare time doing other things than thinking about the market.  Ty


:))) Congrats! That is one of the reasons I use index funds! I don't have that much time, and it's waaaaay more stressful!

ketchup

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Re: Is it possible the market has peaked?
« Reply #66 on: October 25, 2018, 05:59:33 PM »
Okay you all conviced me, going to stick with monthly purchases of VTSAX.  I don't really want to have to do all this research all the time and always wonder if I made the right choices etc.  I need to spend my spare time doing other things than thinking about the market.  Ty
Fantastic! Think of what you can do with all that free time! Read a book, write a book, compose a symphony, do your taxes.,,

sol

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Re: Is it possible the market has peaked?
« Reply #67 on: October 25, 2018, 06:01:50 PM »
Read a book, write a book, compose a symphony, do your taxes.,,

... think of new ways to spend all of the time and money you aren't going to lose to stock picking.

markbike528CBX

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Re: Is it possible the market has peaked?
« Reply #68 on: October 25, 2018, 06:38:00 PM »
Okay you all conviced me, going to stick with monthly purchases of VTSAX.  I don't really want to have to do all this research all the time and always wonder if I made the right choices etc.  I need to spend my spare time doing other things than thinking about the market.  Ty

As poster #3, I'm so happy for you.   As I said in that post, you already knew the answer and just needed confirmation:

......I guess in my case, I shouldn't stop investing in it because, I just started out.  If it keeps declining I'll keep dollar cost average down, then perhaps get a lot of bargains during a recession.. I dunno....
You DO know, you just presented one of the best arguments FOR staying steady on course.

also, the TOP IS IN....   If a 2 year 53 page thread doesn't convince you of the rightness of your course, then try the RED DOW! thread.

Some people are in your situation/thought state and never quite can be convinced of the simple indexing/dollar cost averaging solution. 
Welcome to the future rich club!

JenniferW

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Re: Is it possible the market has peaked?
« Reply #69 on: October 25, 2018, 08:21:24 PM »
I guess saving an emergency fund is a valid excuse for waiting for the market settle down a bit before investing in index funds?   Right now I have about $5k cash (sold the stocks today -- broke even). 

Our monthly expenses are $1800 right now.  So I guess that means it's a good idea to save about $10k for emergency fund?  I'd have $10k total cash within next 3-4 months.

I know JL Collins says don't try to time it, just invest blindly.  But I am nervous with the way the market has been going past month and I have this above excuse :)
« Last Edit: October 25, 2018, 08:25:49 PM by JenniferW »

HBFIRE

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Re: Is it possible the market has peaked?
« Reply #70 on: October 25, 2018, 08:29:47 PM »
Doesn't seem like an especially great time to start investing in index funds does it?   Maybe I should wait after elections at least.

Stop trying to time the markets, it's always a good time to buy.  Time in the market is much more important than timing the market.  Right now there's even a discount on stocks, wish I could buy more.  I'm considering depleting some of my 6 months reserves.  In a sense, it would be rebalancing much like moving bonds to stocks.

As far as emergency funds go, I personally like having one but this has a lot to do with your situation and your comfort with risk.  Many people keep very little in cash reserves knowing they can float any emergencies on a CC until they either get paid or sell stock to cover the expense.
« Last Edit: October 25, 2018, 08:35:41 PM by dustinst22 »

Abe

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Re: Is it possible the market has peaked?
« Reply #71 on: October 25, 2018, 08:40:50 PM »

I have thought about it and think what I am doing might not be the best idea, because do I really want to have to keep up with the news and all the financial details of every company I am invested in, buying in volatile dips? Or just auto-deposit and auto-purchase VOO (or VTI) on Vanguard and keep my mind free for other things.

I have to put $5500 in Roth by April of next year, and that will all definitely go into VOO or VTI on Vanguard.com.

+1. After several years of reading financial news, I came to the conclusion that finance news is super boring and it is rarely news.


Blueberries

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Re: Is it possible the market has peaked?
« Reply #72 on: October 26, 2018, 06:40:56 AM »
No offense, but what makes you qualified to pick stocks? Are you a professional trader or a financial analyst? Why would you trust yourself to stock pick when you have no special knowledge or experience doing so? Even people that are professionals dont beat the index consistently!

This is a huge misconception about the market.  Stock picking does not need to be an intellectual endeavor; it isn't about being smarter than the market or smarter than professionals.  You do need to have certain psychological skills, you need to have concrete rules, and you need to stick to those rules despite what you think, feel, or read.

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Re: Is it possible the market has peaked?
« Reply #73 on: October 26, 2018, 06:55:46 AM »
It is bizarre how their market cap marches past $1T ...

But they sell a bajillion iPhones ...

OurTown

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Re: Is it possible the market has peaked?
« Reply #74 on: October 26, 2018, 07:34:47 AM »
I guess saving an emergency fund is a valid excuse for waiting for the market settle down a bit before investing in index funds?   Right now I have about $5k cash (sold the stocks today -- broke even). 

Our monthly expenses are $1800 right now.  So I guess that means it's a good idea to save about $10k for emergency fund?  I'd have $10k total cash within next 3-4 months.

I know JL Collins says don't try to time it, just invest blindly.  But I am nervous with the way the market has been going past month and I have this above excuse :)

If you don't have an emergency fund you should save for one.  That is a separate question from whether you should try to time the market.  (spoiler alert, you should not try to time the market).

GuitarStv

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Re: Is it possible the market has peaked?
« Reply #75 on: October 26, 2018, 07:36:38 AM »
I pick companies which I think make superior products (like I have everything Apple here at home ..

Some of us here are old enough to make the same mistakes in the late 90s... it did not end well.
My first lesson in stock picking was when my Mom took $5000 from both my sister and me in high school (90s). Sister got Pfizer, I got Lucent. Both did amazing, for awhile. Lucent no longer exists of you want to know how it ended for my stocks....

Of course IBM stock paid for my college, but employee purchase plan.

Betamax was an objectively superior product than VHS.  I'm sure glad I wasn't picking stocks based on what I thought were superior products in the 80s.

ketchup

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Re: Is it possible the market has peaked?
« Reply #76 on: October 26, 2018, 08:35:18 AM »
I pick companies which I think make superior products (like I have everything Apple here at home ..

Some of us here are old enough to make the same mistakes in the late 90s... it did not end well.
My first lesson in stock picking was when my Mom took $5000 from both my sister and me in high school (90s). Sister got Pfizer, I got Lucent. Both did amazing, for awhile. Lucent no longer exists of you want to know how it ended for my stocks....

Of course IBM stock paid for my college, but employee purchase plan.

Betamax was an objectively superior product than VHS.  I'm sure glad I wasn't picking stocks based on what I thought were superior products in the 80s.
Laserdisc would also like a word.

Glenstache

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Re: Is it possible the market has peaked?
« Reply #77 on: October 26, 2018, 09:52:45 AM »
I guess saving an emergency fund is a valid excuse for waiting for the market settle down a bit before investing in index funds?   Right now I have about $5k cash (sold the stocks today -- broke even). 

Our monthly expenses are $1800 right now.  So I guess that means it's a good idea to save about $10k for emergency fund?  I'd have $10k total cash within next 3-4 months.

I know JL Collins says don't try to time it, just invest blindly.  But I am nervous with the way the market has been going past month and I have this above excuse :)

If you don't have an emergency fund you should save for one.  That is a separate question from whether you should try to time the market.  (spoiler alert, you should not try to time the market).

If you search around a bit, there are a few good threads on strategies for emergency funds. One approach that I personally like is to keep enough for normal month to month plus a marginal buffer in checking/savings (definitely enough to keep free banking through local credit union) and then put the rest into a taxable index fund. The trick with investing is to make sure that you allow a buffer to allow for downturns (which will happen). I started with a 30% buffer (~14k to have  an emergency fund of 10k). This quickly grows such that you don't have to pay attention to the buffer anymore. Most emergencies don't require payment within just a few hours, so the time delay of a day or two to pull funds out of the investment account isn't an issue and you still get the benefits of having those soldiers work for you.

Again, there are plenty of threads on this to read and make your own decisions on how to set up your emergency fund/buffer based on your own needs and situation. the approach above is far from the only way to do it.

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Re: Is it possible the market has peaked?
« Reply #78 on: October 26, 2018, 10:08:19 AM »
I guess saving an emergency fund is a valid excuse for waiting for the market settle down a bit before investing in index funds?   Right now I have about $5k cash (sold the stocks today -- broke even). 

Our monthly expenses are $1800 right now.  So I guess that means it's a good idea to save about $10k for emergency fund?  I'd have $10k total cash within next 3-4 months.

I know JL Collins says don't try to time it, just invest blindly.  But I am nervous with the way the market has been going past month and I have this above excuse :)

If you do not have an emergency fund, I would not be investing in stocks.

We actually keep our emergency fund invested, at this point, but we have multiple commas in our investments.  If the market truly sinks, we could pull $100k out for a cash fund and deal with the loss from the purchase price.

sol

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Re: Is it possible the market has peaked?
« Reply #79 on: October 26, 2018, 11:11:47 AM »
I guess saving an emergency fund is a valid excuse for waiting for the market settle down a bit before investing in index funds?   Right now I have about $5k cash (sold the stocks today -- broke even). 

A couple of things...

1.  Congratulations on breaking even with the stock picking.  Consider yourself fortunate to have learned that lesson so cheaply.  Hopefully you've actually learned it, because some people get tempted to dip back into it if they haven't taken a serious financial hit and you seem to have avoided that fate thus far.

2.  The term "emergency fund" can mean any assets you can convert to cash quickly, not just your checking and savings account balances.  All of your Roth IRA contributions can come back out tax and penalty free in 48 hours, so those can function as your emergency fund.  Any taxable investment account you use can count as an emergency fund, because you can always sell for cash.  Emergency funds don't have to be in cash or cash equivalents, they just need to be available to you on short notice to deal with emergencies without incurring huge costs.  Basically anything that's not a tax-sheltered retirement account can be an emergency fund.  You can keep your emergency fund invested in stocks, too, as long as it's invested in a place you can access and large enough to see you through an emergency even after a market crash of ~20%.

Quote
Our monthly expenses are $1800 right now.  So I guess that means it's a good idea to save about $10k for emergency fund?  I'd have $10k total cash within next 3-4 months.

If your income is low enough to use a Roth IRA, I would put $5k of it there.  You can always get it back out if necessary, the tax breaks are fantastic at your (apparently kind of moderate) income level, and they expire at the end of each calendar year so you have to complete 2018's contributions before December 31.

I usually kept about two months of expenses in my checking account, not 6.  My thought was that I would need to make no changes to my spending or income streams for several consecutive pay periods before anything bounced, and I was pretty sure I would be able to modify my finances in less than two months if necessary. 

Also very important, consider that for people like you with such crazy high savings rates, emergency funds are kind of silly.  You can probably cash flow most emergencies that come up by cutting back on your savings for a month or two, right?  If your expenses suddenly double or triple in an emergency, you'll just save less for a while, not actually dip into your emergency funds.

Quote
I am nervous with the way the market has been going past month and I have this above excuse :)

Being nervous is totally fine.  Making mathematically suboptimal decisions because you are nervous is not fine.  And mathematically speaking, investing early and often is most likely to make you the most money.  Remember that every person who stays in the market while prices are crashing was also staying in the market during those crazy 10% plus months of gains, too.  The inevitable corrections are just giving back some of the excess you've previously earned.  They're not losses, they're part and parcel of guaranteeing that you earn the market average return.  And in the long term, that average return is approximately 9% per year.

OurTown

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Re: Is it possible the market has peaked?
« Reply #80 on: October 26, 2018, 11:28:53 AM »
I pick companies which I think make superior products (like I have everything Apple here at home ..

Some of us here are old enough to make the same mistakes in the late 90s... it did not end well.
My first lesson in stock picking was when my Mom took $5000 from both my sister and me in high school (90s). Sister got Pfizer, I got Lucent. Both did amazing, for awhile. Lucent no longer exists of you want to know how it ended for my stocks....

Of course IBM stock paid for my college, but employee purchase plan.

Betamax was an objectively superior product than VHS.  I'm sure glad I wasn't picking stocks based on what I thought were superior products in the 80s.
Laserdisc would also like a word.

Word.  Those things were huge. 

ketchup

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Re: Is it possible the market has peaked?
« Reply #81 on: October 26, 2018, 12:07:53 PM »
I pick companies which I think make superior products (like I have everything Apple here at home ..

Some of us here are old enough to make the same mistakes in the late 90s... it did not end well.
My first lesson in stock picking was when my Mom took $5000 from both my sister and me in high school (90s). Sister got Pfizer, I got Lucent. Both did amazing, for awhile. Lucent no longer exists of you want to know how it ended for my stocks....

Of course IBM stock paid for my college, but employee purchase plan.

Betamax was an objectively superior product than VHS.  I'm sure glad I wasn't picking stocks based on what I thought were superior products in the 80s.
Laserdisc would also like a word.

Word.  Those things were huge.
We still used at least one in my high school biology class circa 2006 or so.

PizzaSteve

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Re: Is it possible the market has peaked?
« Reply #82 on: October 26, 2018, 12:34:05 PM »
To the OP, the market may well have peaked, or maybe not.  We dont know.

To those criticizing individual stocks, I think they exaggerate at bit. 

Saying you are guaranteed to dramatically underperform the overall market is not an accurate representation of the possible outcomes.  Individual stocks will have a greater variance in terms of results, depending on how you construct your portfolio, but if you buy good stocks and hold for decades, most studies show you will do pretty well.  I did well with both my individual stocks and funds (note when I started investing, low cost index funds  didnt exist and a good individual stock portfolio was actually more efficient than 1%+ fee funds).   

One can chose riskier than average stocks, hold them and get better returns (or worse), or one can pick less risky stocks and have a less volatile portfolio than the overall market. Dividend stock lovers tend to do this.

That said, it is not something one usually recommends without some serious homework.  It requires time and attention to do well, and it is more likely to do poorly if you buy and sell frequently due to transaction costs, bid ask spreads, etc.  However, a buy and hold portfolio of at least 20 stocks would probably track the market if well thought out.  Most studies of active funds underperforming indexes are because few active funds are run in a way they would outperform (e.g.buy and hold long term like BRK.a).

If you are afraid of market risk, I would not let internet strangers talk you into investing.  First take your time to learn more, read some good books and get comfortable with the real risks you are taking with your money.  The rewards are very likely worth it, but you should feel confident in your choices so you have no regrets should it not turn out as expected.

« Last Edit: October 26, 2018, 12:38:30 PM by PizzaSteve »

GuitarStv

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Re: Is it possible the market has peaked?
« Reply #83 on: October 26, 2018, 01:03:47 PM »
You're not guaranteed to dramatically underperform the overall market.  That's why stock picking and other forms of gambling are so dangerous.  Sometimes your guesses are right . . . and then you believe that the system you've worked out is genius, and become wiling to risk more money.  If you failed every time, stock picking would be much less seductive.

letired

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Re: Is it possible the market has peaked?
« Reply #84 on: October 26, 2018, 05:20:16 PM »
It sounds like you might be a good candidate for both the Investment Order and an Investment Policy Statement. Both are really useful tools to sit down and work out what you know are the right answers, and make a plan for keeping yourself on track.

For the emergency fund question, I think the answer is whatever lets you sleep at night, and that's going to be different for everyone. I'm single, stably and well employed. I aim for ~6mo of expenses between my checking and high-interest savings because that's about how long I see it taking my friends to get new jobs and I don't have any other income to fall back on at this point. I've tried less, and I don't like it. It also means that when I need a big chunk of cash (I need a new car), it all works out, and I gradually build up the savings account back up.

Writer_Girl

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Re: Is it possible the market has peaked?
« Reply #85 on: October 27, 2018, 09:12:24 AM »
Reading this thread has been good for me.  I have more than maxed out my company max on my 401k and have been considering opening up a Roth IRA, but the current conditions have been scaring me.  I just got a promotion and was going to put in the freelancing money I make to give it a little kick start, but yeah, watching my 401k drop (which honestly wasn't that great to start with - I graduated in 2007 so my whole professional life was an interesting, jittery jump start) was a little alarming.

Thanks for the wake up call!

Sugaree

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Re: Is it possible the market has peaked?
« Reply #86 on: October 27, 2018, 12:42:05 PM »
Quote
Buy posters of bands and sports teams that you like; don't buy shares of companies that you like.  It'll cost you less money.

I mean, I bought a share of the Packers once...

I'm a red panda

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Re: Is it possible the market has peaked?
« Reply #87 on: October 27, 2018, 01:07:33 PM »
Reading this thread has been good for me.  I have more than maxed out my company max on my 401k and have been considering opening up a Roth IRA, but the current conditions have been scaring me.  I just got a promotion and was going to put in the freelancing money I make to give it a little kick start, but yeah, watching my 401k drop (which honestly wasn't that great to start with - I graduated in 2007 so my whole professional life was an interesting, jittery jump start) was a little alarming.

Thanks for the wake up call!

If you were heavily indexing in 2007, and kept doing so on a regular schedule, you'd be doing really well right now.

pecunia

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Re: Is it possible the market has peaked?
« Reply #88 on: October 27, 2018, 01:46:19 PM »
As I walk from the top of the snow capped mountain, I pass the tree line.  Only small bushes here.  the season is too short.  The growing season is not long enough to make a good harvest.  So I head down the steep incline.  It is truly a frightening journey.  I ponder whether I should give up my path.  It has been fraught with obstacles.  Boulders have caused much extra up and down traversing.

I enter the bottom.  It is a green valley.  In the distance I see the farmer J. L. Collins.  He smiles at me and gestures that now is the time to plant.  It is time to plant many different plants.  Some will satisfy people's needs and will be in great demand.  Some will not survive in the soil they are in.  Some will not get enough rain and others will whither in the strong sunlight of the valley.  But others will make up for their lack.  The people will have great joy as we pass through the season of growth and they will enjoy the bounty.

Then we will harvest, climb the mountain, sell our produce to those hill people, reach the top of the mountain and repeat the process.  It is the natural cycle repeated again and again since May 17, 1792 upon the founding of the NYSE.

ysette9

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Re: Is it possible the market has peaked?
« Reply #89 on: October 27, 2018, 08:18:45 PM »
As I walk from the top of the snow capped mountain, I pass the tree line.  Only small bushes here.  the season is too short.  The growing season is not long enough to make a good harvest.  So I head down the steep incline.  It is truly a frightening journey.  I ponder whether I should give up my path.  It has been fraught with obstacles.  Boulders have caused much extra up and down traversing.

I enter the bottom.  It is a green valley.  In the distance I see the farmer J. L. Collins.  He smiles at me and gestures that now is the time to plant.  It is time to plant many different plants.  Some will satisfy people's needs and will be in great demand.  Some will not survive in the soil they are in.  Some will not get enough rain and others will whither in the strong sunlight of the valley.  But others will make up for their lack.  The people will have great joy as we pass through the season of growth and they will enjoy the bounty.

Then we will harvest, climb the mountain, sell our produce to those hill people, reach the top of the mountain and repeat the process.  It is the natural cycle repeated again and again since May 17, 1792 upon the founding of the NYSE.
This is the best description of the stock market I have ever read

JenniferW

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Re: Is it possible the market has peaked?
« Reply #90 on: October 27, 2018, 08:31:28 PM »
Yeah I liked reading the little story :)

Right now I am just gonna save a bunch of cash.. get like a 10-20k emergency fund.  Then I'll start putting money into index fund in retirement accounts putting the rest into paying off this house since it is a guaranteed 4.625% return.

I'll have home paid off in like 3 years.  With any *luck* I'll be then investing the extra in the market at just the right time :)

FIREsigns

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Re: Is it possible the market has peaked?
« Reply #91 on: October 28, 2018, 03:17:13 PM »
If you want to gamble, then gamble.  If you want to invest, then invest.  They are two totally different animals (if done right).

If I read your comments correctly, you have invested $3,890, and you plan to invest for the next 17 or so years.  You currently invest $1,900/month.  You have no emergency fund.  Here's what I would suggest:

In November, put $1k in the best 3-month CD you can find.  In December, put another $1k into the best 3-month CD available.  Keep rolling those over every 3 months (into the same CD or one with a better rate), and otherwise leave them alone.  You now have two months' expenses in a relatively liquid emergency fund in case something hits the fan.  Open a Vanguard fund, decide on one or more of their great index funds, and put your monthly contribution there.  Don't buy any more individual stocks until you have at least $100k in your Vanguard account.  If at that point, you still want to buy individual stocks, spend $1k per year buying such stocks.  Otherwise, keep stashing money in your IRA.

You mentioned that you have SSDI income.  Please note that, unless you have other earned income, your SSDI income alone does not make you eligible for a Roth IRA because it is not considered "earned" income by the IRS.

JenniferW

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Re: Is it possible the market has peaked?
« Reply #92 on: October 28, 2018, 05:53:36 PM »
You mentioned that you have SSDI income.  Please note that, unless you have other earned income, your SSDI income alone does not make you eligible for a Roth IRA because it is not considered "earned" income by the IRS.

Thanks for your suggestions, they make sense.  Regarding Roth IRA, I have about 8k per year earned income via self employment.  SSDI doesn't mind me working one hour per day making about $600-800 extra dollars per month.  I resell stuff on ebay and well it's quite convenient for someone disabled like myself.  I can work 5 to 10 minutes at a time, getting bed rest mid day when needed.

Cabaka

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Re: Is it possible the market has peaked?
« Reply #93 on: October 29, 2018, 09:05:05 PM »
I know trying to guess market timing is a bad idea but I just wonder right now.  Since the market has had a rough past few months, and the Shiller PE Ratio is higher than the great depression approaching the levels during the tech bubble of 1999-2000.

I guess in my case, I shouldn't stop investing in it because, I just started out.  If it keeps declining I'll keep dollar cost average down, then perhaps get a lot of bargains during a recession.. I dunno.

I am just wondering what I'd do if I had caught the wave back in 2009 and rode it until now.  Would I put more in bonds?   What do you guys think?

most important thin to do is keep saving/stashing money away. you can save cash or in a bond fund now is you thinks stock markets are going to continue to decline. you can read my posts in the recession thread for my opionions on that. just keep saving

coderstache

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Re: Is it possible the market has peaked?
« Reply #94 on: November 19, 2018, 10:03:11 PM »
Jennifer, I had the same thoughts today after reading some Sussman stuff and other articles. For context, I'm brand new (< 1 month) to FIRE, investing, and all of this. I blew through Simple Path to Wealth, most MMM posts, Random Walk Down Wall Street, Stock Series, MadFientist, etc. in the past weeks.

We are a double-income (w/2 kiddos) household. I've already:

1) Reduced our household spend by 3-5k this month by taking a good hard fucking look at what we're spending. Most of it was waste.
2) Opened and seeded a Vanguard account with 100% in VTSMX (as of today, will be VTSAX) with a $3k investment
3) Set up my current savings deposit (which is the excess amount from my paycheck) to go to Vanguard and set up bi-weekly auto investments for a portion of what I expect my paycheck to deposit
4) Set up a payment plan to avalanche our student loans (paying off mid-2019)

I bring this up because I've shared my plans with a friend whose been investing for a long time. He sent me a bunch of Sussman articles including the recent one (The Top Is Here, etc.) and said in 2017 he pulled most of his allocation out of stocks and now only has cash and some emerging market / commodities / other non-stock things. He did this because he subscribes to Sussman's internal valuation metric and said "I expect the market to lose 60% of its value in the next crash."

I said, sounds good and his insight is maybe correct, but I'm going all in* now anyway because after reading all this material, soaking it up, lurking the forums, it is pretty clear to me that Sussman and every other "pro" sometimes has good insights but ultimately, the time-tested method of just sitting back, relaxing, and having some whiskey during a massive drop while leaving your investments on auto-pilot will be what works for my time horizon to FI (currently, 10-15 years).

I am not a senior stache and I haven't seen my net worth drop down 60% but I think if you believe in staying steady, then you have to stay steady. This is, I think, what JL Collins talks about when he says that fear runs high and your will will be tested. It's being tested by a lot of people now.

By the way, my friend and I debated it a bit, and we have a friendly bet going to see where each of us nets out after 10 years. If what he (and Sussman and others) thinks will happen with a crash, in 10 years I should only have a <1% positive return and he should net out more. Personally, it doesn't matter to me, because I won't be selling in 10 years or even probably at 15 years until I reach my FI goals. In Nov 2028, he may well beat me but I don't think it matters in the longer term.

Good luck!

* - By "all in" right now, I mean partially kinda in. Since I'm just starting out, I'll do auto investments of a fixed amount but spend the rest getting rid of my student loans a little earlier. I figure, if there's a crash while I'm paying down debt, then my auto-investment will buy up extra shares. When my loans are gone, all that extra will just turn into higher fixed investments. Like others have said, because my (and your) initial stash is so tiny, a huge market drop won't materially affect us much.

PS. I didn't know who Sussman was until today. When I read the article my friend sent, my first reaction was, "Damn this guy sounds like the chartists (technical analysts) Malkiel warns about." I'm pretty sure that's true but maybe vets would know better.
« Last Edit: November 19, 2018, 10:11:29 PM by coderstache »

pecunia

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Re: Is it possible the market has peaked?
« Reply #95 on: November 19, 2018, 10:25:51 PM »
coderstache:

"I am not a senior stache and I haven't seen my net worth drop down 60% but I think if you believe in staying steady, then you have to stay steady. This is, I think, what JL Collins talks about when he says that fear runs high and your will will be tested. It's being tested by a lot of people now."

The fear does run high.  Today the market dropped about 1.6 percent.  When you translate that drop to the thousands of dollars it represents as your stash, the fear does run high.  When you look at that drop attributed to some bizarre news event, you realize what a stack of cards your money is sitting on.  When you look at that single one day drop and realize that you could easily live a major fraction of a year on that money, it gives you a sinking feeling in your stomach.  When you look at the losses of a single day and also look at the time it takes you to earn it back, you ask yourself, "Whiskey Tango Foxtrot."

The fear runs high for some of us who have lived in little mining towns and seen the mines close and lived in factory towns and seen the factories close.  We look at that market and see the houses that people have lost.  Some of us have worked for many years and have to ask ourselves whether we really want to rely on this market economy to see our lives through to the end of our days.  We have listened to old Bernie tell us about how the difference is today between the haves and the have nots.  We have seen our government owned by greedy forces that take for themselves, giving themselves a massive tax cut taking resources that could help the rest of us.

The fear does run high for we live in interesting times.

I guess I've just got to close my eyes and hope to open them after a year or two and see that J L Collins wisdom was correct.  I hope to see the market slide be over.

MustacheAndaHalf

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Re: Is it possible the market has peaked?
« Reply #96 on: November 20, 2018, 03:48:35 AM »
In December of 1996, the Chairmen of the Federal Reserve said the following:
"But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"

If you sold after the "irrational exuberance speech", you missed out on a 26% gain....every year for 3 years.  Even with the dot-com crash, you came out better staying in the market than running from the market during a bull run that had more room to run.

sherr

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Re: Is it possible the market has peaked?
« Reply #97 on: November 20, 2018, 06:32:37 AM »
i read JL Collins book in its entirety and respected what he had to say.  I do wonder what he thinks now with such a high Shiller PE Index in late 2018.

I like him too. Good news, we don't have to wonder because he's already told us!

That blog post was published on September 25th, almost exactly a month before you started this thread. If he was advocating 75-100% stock index funds then, then he certainly would be after the "October crash" now that the Shiller PE index is much lower.

CorpRaider

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Re: Is it possible the market has peaked?
« Reply #98 on: November 20, 2018, 09:43:16 AM »
CAPE is back down to Black Tuesday levels, but has a ways to go to get to pre-financial crisis levels.  [Not saying you should try to ad-hoc time the market based on valuation measures.]

JenniferW

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Re: Is it possible the market has peaked?
« Reply #99 on: November 20, 2018, 12:01:41 PM »
Thank goodness I have the excuse of saving a substantial emergency fund so I don't have to worry about the market right now -- haven't had any invested in stocks since I sold the day Amazon released its earnings report couple weeks back.   Maybe in a few months after I've saved some more the market will be such that I can get some reasonable bargains.