Author Topic: Neighbor got out of stock market after 9-11  (Read 7943 times)

BTDretire

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Neighbor got out of stock market after 9-11
« on: July 25, 2019, 06:27:54 PM »
I was talking with my neighbor and he mentioned how much money he had  in his 401k.
I think he was asking for advice without asking. He pulled out his latest statement and it showed
92% of his money in cash or cash equivalents and 8% in 2030 stock fund. However he had just recently moved that 8% into stocks. He said he went to all cash after 9-11. :-(
 He has options to invest in, Vanguard funds, T.Rowe Price and about 15 others.
 He's 56 yrs old, I told him I'm reluctant to give advice to get into the stock market because it it at a high,
 however, I added the stock market is at a high most of the time. I said you should be in the stock market,
 but I can't tell you to, because it could go down 30% in the next year. But I have 80% of my money in the stock market. I hope he gets the hint.

G-dog

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Re: Neighbor got out of stock market after 9-11
« Reply #1 on: July 25, 2019, 06:44:21 PM »
Ouch. He should look at what the stock market has done SINCE 9/11.  Of course, he may just point to 2007-2009 and say “I told you so”.


SwordGuy

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Re: Neighbor got out of stock market after 9-11
« Reply #2 on: July 25, 2019, 07:11:08 PM »
Point him to the JL Collins Stock Series and let him make his own mind up.

He'll either get it or he won't.   

As it stands, with his track record, the worst thing he could do would be to invest now unless he has already seriously changed his gut feelings about investing and risk.


Radagast

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Re: Neighbor got out of stock market after 9-11
« Reply #3 on: July 25, 2019, 07:46:25 PM »
2030 fund is not particularly high in stocks. The 2035 might be a little more appropriate to eke out another 5 years of moderate growth. Just dumping all money in that would be a very big improvement, and you would not be going out on a limb with that recommendation at all. Hopefully it is Vanguard with low fees.

Bateaux

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Re: Neighbor got out of stock market after 9-11
« Reply #4 on: July 25, 2019, 08:07:08 PM »
Newsflash!   Most don't have money invested in anything.  Half of Americans couldn't even tell you how to buy stocks. We're floating around in the top 5 or 10 percent wondering why they don't understand?  The power of many of our portfolios is as vague to them as moons of Jupiter. 

Car Jack

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Re: Neighbor got out of stock market after 9-11
« Reply #5 on: July 26, 2019, 08:40:20 AM »
The market is at a high?  Oh, ok.  So we now have to wait for 18 days for the market (on average) to hit its next new high. 

My thoughts are.....invest or don't.  If it's "don't", then enjoy your 2.4% Redneck Bank interest taxed annually.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #6 on: July 26, 2019, 09:13:09 PM »
Newsflash!   Most don't have money invested in anything.  Half of Americans couldn't even tell you how to buy stocks. We're floating around in the top 5 or 10 percent wondering why they don't understand?  The power of many of our portfolios is as vague to them as moons of Jupiter.
  That is exactly the problem, he looks at the statement and says I don't understand what any of that means.
It had all the funds he could buy, 3month, 6 month, 1 yr, 2yr, annual growth rate, he didn't understand.
  I so appreciate the fact that I liked listening to talk radio and sometime around 1990 I started listening to Bob Brinker and his financial advice and about hitting "Critical Mass"  We call it FI! :-) He gave me a great education and got me into Vanguard early.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #7 on: July 26, 2019, 09:20:55 PM »
The market is at a high?  Oh, ok.  So we now have to wait for 18 days for the market (on average) to hit its next new high. 
OK, it wasn't at a high when you wrote that in the morning, but it was when the market closed in the afternoon!
Quote
My thoughts are.....invest or don't.  If it's "don't", then enjoy your 2.4% Redneck Bank interest taxed annually.

 My point is, if he has missed the last 8 years in the market then gets in and loses 25%, it will be a lot harder on him than on me that has had the gains of the last 8 years.
 I don't know if it was on his statement, (I don't think it was) so I don't know what percent his cash is earning, but I wouldn't be surprised that the fees on his 401k are eating a lot of that 2.4%. :-(

chasesfish

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Re: Neighbor got out of stock market after 9-11
« Reply #8 on: July 27, 2019, 05:04:05 AM »
This isn't that uncommon for the age group.

My dad got burned on some hot telecom stock in the late 90s, ventured back into the market then got mostly out in March of 2007.  He basically hasn't found an entry point since then saying "everything it too high" then spouting off all the same crap you would hear shouted at you by the gold commercials.

He's now 60.   He basically missed the market from ages 48-60 and more than doubling the money.

Now he's calling me about a "junior gold miner" and how he'll either loose $2,000 or make $10,000.

Its like Forest Gump's mama always said...

TomTX

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Re: Neighbor got out of stock market after 9-11
« Reply #9 on: July 27, 2019, 07:51:05 PM »
This isn't that uncommon for the age group.

My dad got burned on some hot telecom stock in the late 90s, ventured back into the market then got mostly out in March of 2007.  He basically hasn't found an entry point since then saying "everything it too high" then spouting off all the same crap you would hear shouted at you by the gold commercials.

He's now 60.   He basically missed the market from ages 48-60 and more than doubling the money.

Now he's calling me about a "junior gold miner" and how he'll either loose $2,000 or make $10,000.

Its like Forest Gump's mama always said...

Sounds a lot like a friend at work - similar age, got burned with tech companies (bought high, sold low trying to outsmart the market), but he can't stop treating the market like a gambling exercise.

Actually, a second friend at work of similar age did the same thing (bought high, sold low trying to outsmart the market) - except he was in Amazon. If he had held it, he would have a lot more money now - apparently he had bought 200 shares in 1998 and sold at the bottom of the .com crash.

https://www.investopedia.com/articles/investing/082715/if-you-had-invested-right-after-amazons-ipo.asp

oldtoyota

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Re: Neighbor got out of stock market after 9-11
« Reply #10 on: July 27, 2019, 10:06:56 PM »
The market is at a high?  Oh, ok.  So we now have to wait for 18 days for the market (on average) to hit its next new high. 
OK, it wasn't at a high when you wrote that in the morning, but it was when the market closed in the afternoon!
Quote
My thoughts are.....invest or don't.  If it's "don't", then enjoy your 2.4% Redneck Bank interest taxed annually.

 My point is, if he has missed the last 8 years in the market then gets in and loses 25%, it will be a lot harder on him than on me that has had the gains of the last 8 years.
 I don't know if it was on his statement, (I don't think it was) so I don't know what percent his cash is earning, but I wouldn't be surprised that the fees on his 401k are eating a lot of that 2.4%. :-(

He would have missed more than eight years if I am understanding this correctly.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #11 on: July 28, 2019, 07:32:22 AM »
The market is at a high?  Oh, ok.  So we now have to wait for 18 days for the market (on average) to hit its next new high. 
OK, it wasn't at a high when you wrote that in the morning, but it was when the market closed in the afternoon!
Quote
My thoughts are.....invest or don't.  If it's "don't", then enjoy your 2.4% Redneck Bank interest taxed annually.

 My point is, if he has missed the last 8 years in the market then gets in and loses 25%, it will be a lot harder on him than on me that has had the gains of the last 8 years.
 I don't know if it was on his statement, (I don't think it was) so I don't know what percent his cash is earning, but I wouldn't be surprised that the fees on his 401k are eating a lot of that 2.4%. :-(

He would have missed more than eight years if I am understanding this correctly.
Ya, I missed 10 years. it was 2001 not 2011.
That make it all worse, I'm good at procrastination, but he let that slide to long.
I did mention to him, the problem with getting out is you don't know when to get back in.

Bateaux

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Re: Neighbor got out of stock market after 9-11
« Reply #12 on: July 29, 2019, 03:39:31 AM »
Newsflash!   Most don't have money invested in anything.  Half of Americans couldn't even tell you how to buy stocks. We're floating around in the top 5 or 10 percent wondering why they don't understand?  The power of many of our portfolios is as vague to them as moons of Jupiter.
  That is exactly the problem, he looks at the statement and says I don't understand what any of that means.
It had all the funds he could buy, 3month, 6 month, 1 yr, 2yr, annual growth rate, he didn't understand.
  I so appreciate the fact that I liked listening to talk radio and sometime around 1990 I started listening to Bob Brinker and his financial advice and about hitting "Critical Mass"  We call it FI! :-) He gave me a great education and got me into Vanguard early.

Bob Brinker was a great educator for me back in the 90s.  I remember trying to calculate my Critical Mass number.  It was 1.5 million for me.  Starting at negative of zero, that was a long way.  Now that number is past and we're wrapping it up.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #13 on: July 29, 2019, 11:01:12 AM »
Newsflash!   Most don't have money invested in anything.  Half of Americans couldn't even tell you how to buy stocks. We're floating around in the top 5 or 10 percent wondering why they don't understand?  The power of many of our portfolios is as vague to them as moons of Jupiter.
  That is exactly the problem, he looks at the statement and says I don't understand what any of that means.
It had all the funds he could buy, 3month, 6 month, 1 yr, 2yr, annual growth rate, he didn't understand.
  I so appreciate the fact that I liked listening to talk radio and sometime around 1990 I started listening to Bob Brinker and his financial advice and about hitting "Critical Mass"  We call it FI! :-) He gave me a great education and got me into Vanguard early.

Bob Brinker was a great educator for me back in the 90s.  I remember trying to calculate my Critical Mass number.  It was 1.5 million for me.  Starting at negative of zero, that was a long way.  Now that number is past and we're wrapping it up.
Ya, Bob liked to make a big deal about his market calls. Several years ago I found "Honey's Bob Brinker Beehive Buzz", it was a group that liked Bob, but held him to a higher standard.
https://honeysbobbrinkerbeehivebuzz3.blogspot.com/
They pointed out all the things he did but forgot to mention, mostly things he got wrong.
 He made a great call on Feb 11 2000, when he said sell everything. The market peaked within a month and then dropped 48% over the next 29 months. Then months later he said put 30% in QQQ, that was a failure and lost a lot. That was one that slipped his mind.  He totally missed 2008.
 

ericbonabike

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Re: Neighbor got out of stock market after 9-11
« Reply #14 on: July 29, 2019, 12:56:23 PM »
My exwife was told by a financial advisor to move 30k into cash after the 08 crash.  She did.  I didn't know any better either.


In 2016, I read Jon Collins book, and I went through a serious examination of our finances. 
I moved all of my money into low cost funds, and I saw her 30k sitting there.  It got moved also. 
She was pissed.


About a year after that we split up. Her 30k, was 40k in that short year.   But I still ended up paying her a shade over 100k out of my 401k, and the entire time, I thought "if you had that 30k in the market from 08 to 17, you would have been paying me instead!".


Bateaux

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Re: Neighbor got out of stock market after 9-11
« Reply #15 on: July 30, 2019, 10:58:13 AM »
Newsflash!   Most don't have money invested in anything.  Half of Americans couldn't even tell you how to buy stocks. We're floating around in the top 5 or 10 percent wondering why they don't understand?  The power of many of our portfolios is as vague to them as moons of Jupiter.
  That is exactly the problem, he looks at the statement and says I don't understand what any of that means.
It had all the funds he could buy, 3month, 6 month, 1 yr, 2yr, annual growth rate, he didn't understand.
  I so appreciate the fact that I liked listening to talk radio and sometime around 1990 I started listening to Bob Brinker and his financial advice and about hitting "Critical Mass"  We call it FI! :-) He gave me a great education and got me into Vanguard early.

Bob Brinker was a great educator for me back in the 90s.  I remember trying to calculate my Critical Mass number.  It was 1.5 million for me.  Starting at negative of zero, that was a long way.  Now that number is past and we're wrapping it up.
Ya, Bob liked to make a big deal about his market calls. Several years ago I found "Honey's Bob Brinker Beehive Buzz", it was a group that liked Bob, but held him to a higher standard.
https://honeysbobbrinkerbeehivebuzz3.blogspot.com/
They pointed out all the things he did but forgot to mention, mostly things he got wrong.
 He made a great call on Feb 11 2000, when he said sell everything. The market peaked within a month and then dropped 48% over the next 29 months. Then months later he said put 30% in QQQ, that was a failure and lost a lot. That was one that slipped his mind.  He totally missed 2008.

I never subscribed to the newsletter, only listen to the radio show.  Financial broadcasts were rare back then and the internet was only starting to expand.  I was a member of an old AOL message board with investing as a topic.  I actually met some of them in person.  It was there thzt I found out about John Bogle and his stay the course mentality. It worked.

powskier

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Re: Neighbor got out of stock market after 9-11
« Reply #16 on: July 30, 2019, 11:42:52 PM »
How much has his cash lost to inflation in the past 18 years?

People are scared of the wrong stuff all the time>" I don't ride a bike because it's dangerous, but eat crap food all day long" ...one of these 2 may kill you early the other one absolutely will.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #17 on: July 31, 2019, 04:55:43 PM »
How much has his cash lost to inflation in the past 18 years?

People are scared of the wrong stuff all the time>" I don't ride a bike because it's dangerous, but eat crap food all day long" ...one of these 2 may kill you early the other one absolutely will.

  I don't have much info on his costs. However, if he is paying 2% on his 401k investments and and as it is invested in cash or cash equivalents, That is easily less than 3%, then with inflation. I don't even want to think about it.
  I talked to him yesterday, his insurance inspector came out and OKed payment for the hurricane Michael repairs. He said he would get $30k and then he was going to add some more out of savings and pay off the house. I ask, what is the rate on your mortgage. He said it's 3%. !!!
 I suggested that is not the best idea financially.
We are going to talk again.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #18 on: July 31, 2019, 05:55:12 PM »
I'm trying put together a financial primer for my neighbor, to help get him a basic financial understanding.
I doubt he will add much self help, so I want to cover the basics to get him into the market. He's got 11 years before retirement and say another 20 years for the money to be invested after retirement.
 Here's what I have so far. I'm running out of steam, so please correct or add to what I have as you see fit.
I'll check it tomorrow and maybe have another go at it.


                     Things that affect the value of our savings.

                         Inflation and investment fees.

 If a savings account earns 2% and there is any kind of fees charged by the custodian* of the money, you only grow at 1%. However if the inflation rate is 3% you would actually loss 2% for that year.

* custodian= the company that handles/holds your money
 
  It is important to minimize investment fees charged by the custodian.
 Fees can cost you a lot. If you have $200,000 and it earns 9% over 20 years, that grows to $1,120,192, but if you had to pay 2% in fees every year, your $200,000 would only grow to  $773,937. The fees would have taken $346,255 out of your pocket.

 The lowest maintenance fee around is Vanguard's VTSAX at 0.03%. Fidelity also has some low cost funds.
 Often you are restricted in what you can buy, then you just do the best you can with a diversified fund.

 Because it is near impossible for anyone to pick the right stocks year after year, for most people it is wise to buy a total stock market fund. VTSAX is named
 “Vanguard Total stock Market Index Fund”  VTSAX has 3,637 stocks that it holds. When you buy VTSAX you own some stock in all those companies.
  Fidelity has similar funds and costs.

The fund above VTSAX at the present time pays Dividends and interest of about 1.8%. But you
are more interested in long term growth. The price of VTSAX has grown from $30 in the year 2000 to $75 in 2019.

                      Types of Accounts
Taxed and Tax deferred.
 A regular account is taxed a time of sale or when dividends or interest are paid.
There are special (lower) rates for Qualified dividends and interest.
Tax deferred accounts, get a tax deduction from your income when you invest money and grow tax free until you take the money out, usually during retirement when you must pay the taxes.

                              Risk Tolerance
As far a your risk tolerance, that is something each person needs to decide. One way to look at it, how will you feel if you invest for 4 years and the market drops 40% meaning your nestegg drops 40%?
Or another way, what if you keep money in a cash account and it breaks even, earns 3% but inflation eats up 3%, but the market gains 40% and you missed out on a 40% gain?
  The stock market is volatile, it does go up and down, but over many years it has an upward climb. There is usually more risk in letting 20 years of inflation take away the value of your nest egg than putting your money in the stock market. Of course there is a chance of have the wrong twenty years and you could lose money, but that would be very rare.

Bateaux

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Re: Neighbor got out of stock market after 9-11
« Reply #19 on: August 01, 2019, 05:48:40 AM »
I'm trying put together a financial primer for my neighbor, to help get him a basic financial understanding.
I doubt he will add much self help, so I want to cover the basics to get him into the market. He's got 11 years before retirement and say another 20 years for the money to be invested after retirement.
 Here's what I have so far. I'm running out of steam, so please correct or add to what I have as you see fit.
I'll check it tomorrow and maybe have another go at it.


                     Things that affect the value of our savings.

                         Inflation and investment fees.

 If a savings account earns 2% and there is any kind of fees charged by the custodian* of the money, you only grow at 1%. However if the inflation rate is 3% you would actually loss 2% for that year.

* custodian= the company that handles/holds your money
 
  It is important to minimize investment fees charged by the custodian.
 Fees can cost you a lot. If you have $200,000 and it earns 9% over 20 years, that grows to $1,120,192, but if you had to pay 2% in fees every year, your $200,000 would only grow to  $773,937. The fees would have taken $346,255 out of your pocket.

 The lowest maintenance fee around is Vanguard's VTSAX at 0.03%. Fidelity also has some low cost funds.
 Often you are restricted in what you can buy, then you just do the best you can with a diversified fund.

 Because it is near impossible for anyone to pick the right stocks year after year, for most people it is wise to buy a total stock market fund. VTSAX is named
 “Vanguard Total stock Market Index Fund”  VTSAX has 3,637 stocks that it holds. When you buy VTSAX you own some stock in all those companies.
  Fidelity has similar funds and costs.

The fund above VTSAX at the present time pays Dividends and interest of about 1.8%. But you
are more interested in long term growth. The price of VTSAX has grown from $30 in the year 2000 to $75 in 2019.

                      Types of Accounts
Taxed and Tax deferred.
 A regular account is taxed a time of sale or when dividends or interest are paid.
There are special (lower) rates for Qualified dividends and interest.
Tax deferred accounts, get a tax deduction from your income when you invest money and grow tax free until you take the money out, usually during retirement when you must pay the taxes.

                              Risk Tolerance
As far a your risk tolerance, that is something each person needs to decide. One way to look at it, how will you feel if you invest for 4 years and the market drops 40% meaning your nestegg drops 40%?
Or another way, what if you keep money in a cash account and it breaks even, earns 3% but inflation eats up 3%, but the market gains 40% and you missed out on a 40% gain?
  The stock market is volatile, it does go up and down, but over many years it has an upward climb. There is usually more risk in letting 20 years of inflation take away the value of your nest egg than putting your money in the stock market. Of course there is a chance of have the wrong twenty years and you could lose money, but that would be very rare.

Very well stated.  Hopefully this gets across to the neighbor.   People are afraid of potential loss and have a lack of understanding when it comes to money.  You're doing a good thing.  Especially when explaining custodial fees.

Trevor Reznik

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Re: Neighbor got out of stock market after 9-11
« Reply #20 on: August 01, 2019, 05:56:47 AM »
Advising people to invest that aren't into it is a great way to lose friends.  Market drops 20% they panic and sell and forever blaming you for 'losing their money' and never listen to you again.  What is the upside for you personally?

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #21 on: August 01, 2019, 09:46:12 AM »
Advising people to invest that aren't into it is a great way to lose friends.  Market drops 20% they panic and sell and forever blaming you for 'losing their money' and never listen to you again.  What is the upside for you personally?
Yes, that is a concern.
 It may not matter, I mentioned that he wants to payoff his 3% mortgage when he gets the hurricane insurance check. I suggested 3% was an awfully low rate and he might be better to invest the money.
I talked with him this morning and he said he thought about it while in bed last night and decided he just wants to payoff the mortgage, because only $100 of his payment goes to principal.
 So, unless he asks for more info, I probably won't say anymore.

Bateaux

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Re: Neighbor got out of stock market after 9-11
« Reply #22 on: August 01, 2019, 11:54:19 PM »
Advising people to invest that aren't into it is a great way to lose friends.  Market drops 20% they panic and sell and forever blaming you for 'losing their money' and never listen to you again.  What is the upside for you personally?
Yes, that is a concern.
 It may not matter, I mentioned that he wants to payoff his 3% mortgage when he gets the hurricane insurance check. I suggested 3% was an awfully low rate and he might be better to invest the money.
I talked with him this morning and he said he thought about it while in bed last night and decided he just wants to payoff the mortgage, because only $100 of his payment goes to principal.
 So, unless he asks for more info, I probably won't say anymore.

This person may have such a grave fear of potential loss that you can't help him.  He'll come to you if he wants help. 
« Last Edit: August 02, 2019, 06:31:22 AM by Bateaux »

soccerluvof4

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Re: Neighbor got out of stock market after 9-11
« Reply #23 on: August 02, 2019, 02:53:36 AM »
Advising people to invest that aren't into it is a great way to lose friends.  Market drops 20% they panic and sell and forever blaming you for 'losing their money' and never listen to you again.  What is the upside for you personally?
Yes, that is a concern.
 It may not matter, I mentioned that he wants to payoff his 3% mortgage when he gets the hurricane insurance check. I suggested 3% was an awfully low rate and he might be better to invest the money.
I talked with him this morning and he said he thought about it while in bed last night and decided he just wants to payoff the mortgage, because only $100 of his payment goes to principal.
 So, unless he asks for more info, I probably won't say anymore.

This person may have such a grave fear of potential loss that you can't help him.  He'll come to younif he wants help.



This was my thinking. My bet is your better off just staying out of it. Nice to have tried but as others have mentioned all the info you have provided has gone nowhere and if you keep at it you will scare him off and or lose a friend if God forbid he put money in and the market went down.

ChpBstrd

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Re: Neighbor got out of stock market after 9-11
« Reply #24 on: August 02, 2019, 10:19:44 PM »
The FIRE movement is populated by people with analytical personalities. It is hard for us to put ourselves in the shoes of people who literally can't stand to think about things like asset allocation, tax advantaged accounts, compound interest, or using a mortgage as leverage. However, such people are real. They are often socializers who learn from water cooler talk, family members, social media, and salespeople rather than from spreadsheets and data sources. Some of them just don't care about investments in the same way you might not care about the pesticide dicambra accumulating in your body or whether all the outlets in your house are phased right. As I mention such issues to you, you might think "you know, I should probably pay more attention to that" but you won't because you aren't fascinated by such things. It's the same for them.

We were all born financially illiterate and financially uninterested, but at some point became interested enough to educate ourselves. I suspect this occurred when we linked things we wanted with financial outcomes. So perhaps the way to reach financially apathetic/ignorant people is to show them how investments could help them buy things or retire some day, etc. This linkage is not as obvious as it sounds.


BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #25 on: August 03, 2019, 07:21:06 AM »
Advising people to invest that aren't into it is a great way to lose friends.  Market drops 20% they panic and sell and forever blaming you for 'losing their money' and never listen to you again.  What is the upside for you personally?
Yes, that is a concern.
 It may not matter, I mentioned that he wants to payoff his 3% mortgage when he gets the hurricane insurance check. I suggested 3% was an awfully low rate and he might be better to invest the money.
I talked with him this morning and he said he thought about it while in bed last night and decided he just wants to payoff the mortgage, because only $100 of his payment goes to principal.
 So, unless he asks for more info, I probably won't say anymore.

This person may have such a grave fear of potential loss that you can't help him.  He'll come to you if he wants help.
  That's what started all this, he did come to me with his 401k and laid what money he has and where it isn't invested. But, I gave him input and it seems he can't accept what he perceives as the risk.

SimpleLifer

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Re: Neighbor got out of stock market after 9-11
« Reply #26 on: August 03, 2019, 09:05:50 AM »
The FIRE movement is populated by people with analytical personalities. It is hard for us to put ourselves in the shoes of people who literally can't stand to think about things like asset allocation, tax advantaged accounts, compound interest, or using a mortgage as leverage. However, such people are real. They are often socializers who learn from water cooler talk, family members, social media, and salespeople rather than from spreadsheets and data sources. Some of them just don't care about investments in the same way you might not care about the pesticide dicambra accumulating in your body or whether all the outlets in your house are phased right. As I mention such issues to you, you might think "you know, I should probably pay more attention to that" but you won't because you aren't fascinated by such things. It's the same for them.

We were all born financially illiterate and financially uninterested, but at some point became interested enough to educate ourselves. I suspect this occurred when we linked things we wanted with financial outcomes. So perhaps the way to reach financially apathetic/ignorant people is to show them how investments could help them buy things or retire some day, etc. This linkage is not as obvious as it sounds.

I agree, 100% with everything that @ChpBstrd said above. 

A long time ago I realized that if I am wanting to help someone, they MUST care more about the thing than I do.  If they care less than I do, then I listen without judgement, and then move on.

There was a time not too long ago that I entrusted all my finances to others.  I was super intimidated by the fast-talkers.  Then I started peeling the onion, starting with my burn rate and my savings rate.  I got here by myself, and he will too, if he's truly interested.

Bernard

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Re: Neighbor got out of stock market after 9-11
« Reply #27 on: August 03, 2019, 10:04:49 AM »
Here's what I use when being asked:

What is something "worth" only matters when it comes to the point you want to sell it. That applies to a home, a classic car, and to stocks equally.
People have bought their home decades ago for $100K. The price rose steadily over the years; at some point that very home was worth $700K. Then came the downturn of 2009 and all of a sudden their home was worth only $450K. Did they lose $250K? Not if they stayed put, only if they decided to sell at that point in time. If they stayed put, their home would be worth $750K now.

Same with the stock market. It goes up and down like a rollercoaster, but the only way to get hurt is to jump off at the worst point of the ride. Those who have time to stay put will benefit from the fact that the stock market goes up and up and up and has so since its founding a century ago.

If your neighbor has 11 years 'til retirement, he should benefit from getting invested in low fee index funds.

But as others have mentioned already, you can guide a horse to the water, but you can't make him drink. Politics, religion and money can quickly turn a relationship sour, so unless your own money is at stake, you're better off letting your neighbor do what he deems to be best for him.
« Last Edit: August 03, 2019, 10:09:39 AM by Bernard »

BlueHouse

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Re: Neighbor got out of stock market after 9-11
« Reply #28 on: August 03, 2019, 10:49:05 AM »
I didn't see any mention of how much money he has.  I saw the percent in cash accounts, but not the raw number.  If he has $3M in cash and he's 56, so what?  That would seem that he's in pretty good shape and that he's interested in risk mitigation only.  That's what happens when you get close to retirement age.  Even if he doesn't have a shit ton of money, maybe he has enough, between that money and SS to last forever. 

Risk tolerance changes A LOT as you get closer to your "sell by" date. 

If I have enough to meet my goals, I don't really want to engage in strategies that 90% of the time will exceed my goal if 10% of the time they reduce it. 

G-dog

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Re: Neighbor got out of stock market after 9-11
« Reply #29 on: August 03, 2019, 10:58:55 AM »

Risk tolerance changes A LOT as you get closer to your "sell by" date. 

I’ve gotten more risk tolerant!  I FIREd 4 yrs ago at 55 yo.  My tolerance increased because I did have “extra” money (a dip doesn’t wipe me out) and I FINALLY educated myself more about investments.  Al the money I can control is in index funds.  Cash, SS and pension(s) are functionally my  bond/annuity allocation.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #30 on: August 03, 2019, 08:29:11 PM »
I didn't see any mention of how much money he has.  I saw the percent in cash accounts, but not the raw number.  If he has $3M in cash and he's 56, so what?  That would seem that he's in pretty good shape and that he's interested in risk mitigation only.  That's what happens when you get close to retirement age.  Even if he doesn't have a shit ton of money, maybe he has enough, between that money and SS to last forever. 

Risk tolerance changes A LOT as you get closer to your "sell by" date. 

If I have enough to meet my goals, I don't really want to engage in strategies that 90% of the time will exceed my goal if 10% of the time they reduce it.
Financial assets, less than $300k, house another $160k, but owes $60k.

Bateaux

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Re: Neighbor got out of stock market after 9-11
« Reply #31 on: August 04, 2019, 11:51:13 AM »
We've lost 50K on paper this past week.   You only play this game when you can take that hit and ride your bicycle joyously the next day.  Starting from zero, actually below zero, we had a humble beginning.  Along the way came $1,000 losses, $10,000 losses, $100,000 losses and possibly someday $1,000,000 losses.  I've already weathered a loss equal to your neighbors entire net worth.   It has always returned and went higher by staying the course.

TomTX

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Re: Neighbor got out of stock market after 9-11
« Reply #32 on: August 05, 2019, 08:28:55 AM »
We've lost 50K on paper this past week.   You only play this game when you can take that hit and ride your bicycle joyously the next day.  Starting from zero, actually below zero, we had a humble beginning.  Along the way came $1,000 losses, $10,000 losses, $100,000 losses and possibly someday $1,000,000 losses.  I've already weathered a loss equal to your neighbors entire net worth.   It has always returned and went higher by staying the course.

Looks like the market it down all the way to where it was last on June 27th! Erasing 5 weeks of gains!

;)

Radagast

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Re: Neighbor got out of stock market after 9-11
« Reply #33 on: August 05, 2019, 10:51:32 PM »
If I was keeping it simple I would say:
Max out your IRA / Roth IRA into Vanguard 2035 Target Date Fund, including catch up.
Max out your 401k contribution into the 2030 Target Date Fund, including catch up.

Save the rest however you want.

The fixed dates take a real mental load off.

powskier

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Re: Neighbor got out of stock market after 9-11
« Reply #34 on: August 06, 2019, 10:02:56 PM »
How much has his cash lost to inflation in the past 18 years?

People are scared of the wrong stuff all the time>" I don't ride a bike because it's dangerous, but eat crap food all day long" ...one of these 2 may kill you early the other one absolutely will.

So according to some random inflation calculator on the internet $100 in 2001 is equal to $144 in 2019. That's a pretty solid loss for your friend who thinks he is being safe.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #35 on: August 14, 2019, 04:47:44 PM »
How much has his cash lost to inflation in the past 18 years?

People are scared of the wrong stuff all the time>" I don't ride a bike because it's dangerous, but eat crap food all day long" ...one of these 2 may kill you early the other one absolutely will.

So according to some random inflation calculator on the internet $100 in 2001 is equal to $144 in 2019. That's a pretty solid loss for your friend who thinks he is being safe.
Yes, and then there are fees on his account.

Buffaloski Boris

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Re: Neighbor got out of stock market after 9-11
« Reply #36 on: August 14, 2019, 05:19:38 PM »
Problem I see here is that the world isn’t completely black and white. Investing a large part of your stash in equities makes a lot of sense. Except when it doesn’t.

For some folks, and I’m one of them, the rewards of equities don’t outweigh the risks. For me it’s a price issue. I can’t persuade myself that equities are a good deal at CAPEs of 28 plus. So, I’m very low equity exposure. And will stay that way, with some notable exceptions, until I see a better price environment. On days like today I look like a genius. Most days I get to look like an idiot.

Point is, everyone has their risk/reward expectations.


DavidAnnArbor

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Re: Neighbor got out of stock market after 9-11
« Reply #37 on: August 14, 2019, 06:23:27 PM »
It's been argued in other threads that the CAPE of today is not the CAPE of 1995 or some other previous time. The reason the CAPE today can't be easily compared with the past is because of accounting rule changes that affect the financial statements from which CAPE is based.

Buffaloski Boris

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Re: Neighbor got out of stock market after 9-11
« Reply #38 on: August 14, 2019, 07:00:42 PM »
It's been argued in other threads that the CAPE of today is not the CAPE of 1995 or some other previous time. The reason the CAPE today can't be easily compared with the past is because of accounting rule changes that affect the financial statements from which CAPE is based.

Yes. Very aware of the argument, and to the credit of those who make it, it is persuasive. Problem is, the historical median CAPE is just shy of 16, mean is under 17. Accounting changes are not going to rationalize CAPEs of 28+.

2sk22

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Re: Neighbor got out of stock market after 9-11
« Reply #39 on: August 15, 2019, 04:31:57 PM »
I just saw this thread so apologies for belatedly posting this but I think its highly relevant.

In my case, the market crash after 9-11 was the impetus to drastically increase the amount of my regular investments. The very next week after that crash, I opened an account with ShareBuilder and started investing $100 every week in DIA (The Dow Jones Spider ETF). As my salary increased, I did increase the weekly amount over the years (a little). I was able to keep this going uninterrupted for 17 years. It's now worth over a quarter of a million dollars.

Sadly, ShareBuilder finally came to an end last year as CapitalOne (which was the ultimate owner of ShareBuilder) decided to get out of the brokerage business. I really miss ShareBuilder. There's nothing like it anymore unfortunately.
« Last Edit: August 15, 2019, 04:48:26 PM by 2sk22 »

2sk22

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Re: Neighbor got out of stock market after 9-11
« Reply #40 on: August 15, 2019, 04:53:05 PM »
One more thing that comes to mind is that in some families, there are stories handed down from generation to generation about someone who lost a lot of money in bad investments. In my case, back in the 1930s, my great grandfather invested a large amount of money from an insurance settlement in some dud companies and lost a lot of money. This affected the next two generations and scared them off any stock investments. Thankfully, I was fortunate to get some better advice and ignore my family's folk wisdom.

appleshampooid

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Re: Neighbor got out of stock market after 9-11
« Reply #41 on: August 16, 2019, 08:02:52 AM »
As WC Fields said..."never...smarten up a chump." Or as one of my least-favorite trolls on another forum puts it...you can't wise up a chump.

It's nice to offer your advice and expertise but at the end of the day, some people have 0 appetite for risk. The prospect of losing some of their hard-earned cash is horrifying, and they just can't understand the concept of opportunity cost, and that they are *already* losing money to inflation by taking zero risk.

appleshampooid

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Re: Neighbor got out of stock market after 9-11
« Reply #42 on: August 16, 2019, 01:14:22 PM »
As a counter-example to "never wise up a chump," I was talking on another forum with a friend who is buying a house late in life with his new girlfriend. This person is recently divorced (about 2 years out) and lost a big chunk of his assets in the divorce (he gave her more than 50% up front to eliminate any alimony going forward).

Anyway he said he needed to take a chunk out of his 401(k) to make the down payment...I assumed he meant a loan...NOPE, he was going to take an early withdrawal with all the taxes and the 10% penalty. Now I know 401(k) loans aren't the greatest solution, but they are a hell of a lot better than an early distribution with penalty! Not to mention he would be taking a huge tax hit in one year.

I made the case and talked him down, and just heard today that he ran the numbers and ended up taking a loan instead. I feel pretty good about that.

BTDretire

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Re: Neighbor got out of stock market after 9-11
« Reply #43 on: November 19, 2019, 08:00:03 AM »
 I started this thread 7-25-19.
 After that initial conversation, I said no more.
ARRRGH! He came to me yesterday after an all time new high in the stock market,
and ask me how to invest in the stock market.
  I am really concerned about him starting an investment 10 years into a bull market, I think that's the longest ever.
 Because of that, I said, I would just put in a smaller amount every month.

 I'm not happy with what triggered his decision either, or at least this is a story he tied to the decision.
He was at the bank and saw a guy get several rolls of 50 cent pieces. They happened to be parked next to each other and he ask about the 50 cent pieces. The fellow said he works with kids and it makes them happy when he gives them 50 cents. He said he invested in the stock market and has done very well and he can afford to do this for the kids.

  Luckily he has another friend that he is asking the same questions to, so I can drag my feet a little bit. But I may show him how to open a Vanguard account. I mentioned doing that on his computer, and he said I don't have an protection on my computer, do I need to buy a new computer. I t might be an all paper transaction. :-(
 Not as into this as I was!

SwordGuy

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Re: Neighbor got out of stock market after 9-11
« Reply #44 on: November 19, 2019, 08:36:00 AM »
Point him to the JL Collins Stock Series and let him make his own mind up.

He'll either get it or he won't.   

As it stands, with his track record, the worst thing he could do would be to invest now unless he has already seriously changed his gut feelings about investing and risk.

I reiterate.   Tell him to read the complete JL Collins Stock Series and then, and ONLY THEN, will you give him advice.

If he reads it you can have an intelligent conversation about what he's learned and proceed from there. 

If he doesn't read it, you're off the hook for giving advice he won't follow and will then blame you for.

vand

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Re: Neighbor got out of stock market after 9-11
« Reply #45 on: November 20, 2019, 06:10:24 AM »
I would just keep schtum and say I have no idea what he should do; but secretly take note of whatever he does and then do the opposite

ChpBstrd

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Re: Neighbor got out of stock market after 9-11
« Reply #46 on: November 20, 2019, 08:32:55 AM »
I would just keep schtum and say I have no idea what he should do; but secretly take note of whatever he does and then do the opposite

Only slightly related, but for a while I considered tracking the value of short positions / options in the stocks that appear on Yahoo finance articles (the ultimate dumb money site) or Seeking Alpha (the ultimate site for dumb money that thinks it’s smart). It would seem like one could set up a fund that was long the index and short the media attention getters and make a very fat return. Anyone remember the mania about dry bulk shippers a few years ago, and all the articles trying to track a supposed shortage of ships? How about those Canadian tar sands, eh? I never found the time to build the spreadsheet though. :(

dogboyslim

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Re: Neighbor got out of stock market after 9-11
« Reply #47 on: November 20, 2019, 10:33:47 AM »
One more thing that comes to mind is that in some families, there are stories handed down from generation to generation about someone who lost a lot of money in bad investments. In my case, back in the 1930s, my great grandfather invested a large amount of money from an insurance settlement in some dud companies and lost a lot of money. This affected the next two generations and scared them off any stock investments. Thankfully, I was fortunate to get some better advice and ignore my family's folk wisdom.

When my father passed and my mom asked me to help her with all her accounts, She had an annuity with a 6% guarantee, and then about $150k in what she called "Rainy Day" money.  My dad had about 450k in life insurance.  Her 150k was with an advisor that actually had sound recommendations based on what she wanted to do with it, but the fees were crazy expensive.  She wanted to fire him because he was ripping her off!  When she checked her year-end balance her money was GONE!  I agreed that she should fire him, but due to the fees, not his recommendations, which aligned with my thoughts of where she should invest.  I told her that and she asked "WHERE IS MY MONEY!" with a lot of concern.  I told her that the market dropped at the end of the year, but that if she looks at her most recent statement she'd see that it had recovered.  When I told her this, she said she didn't think it was a good idea to invest in such a dangerous investment.  She then asked me, if I would put my money in that kind of investment and paled when I said no, I'm in much riskier investments.  She asked if I lost money at the end of the year and what did I do about it, I said yes, I lost about $200k, and what I did about it was to keep investing more money, and now I'm up about $200k over where I was before I lost the $200k.  Her look of confusion made it clear we were going to need to do more education.

She's a really smart woman, has a nursing degree and a masters in healthcare management.  She understands risk and volatility in the context of a healthcare center, but cannot fathom similar concepts in her personal life.  We are at a point now where she understands that her SS and annuity are her steady income streams, and that the money in the market is for use down the road if needed or desired for something out of the ordinary.

People are not wired to handle loss, even if its a paper loss.  Very smart people are driven by emotion.  It is not a surprise to me at all that so many people avoid the market.  Volatility isn't something people in general handle well.

MoneyQuirk

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Re: Neighbor got out of stock market after 9-11
« Reply #48 on: December 01, 2019, 10:46:09 PM »
OUCH!

That's especially tough with the age.

If he was in his 20s or 30s, I'd slap him until he switched over to at least 60% stocks.

However, when he's within 10 years of retirement and we're at an all-time high (and bull market of 10 years), that would be devastating if he switched over only to have it crash.

However, the 100-age rule exists for a reason. At 56, 44% in stocks is still fairly reasonable. That's probably the number I'd nudge him towards. However, I wouldn't push hard. If it does crash, I wouldn't want him banging on my door demanding to know why I set him up. There's so much psychology and confidence that goes into it.

My mother is actually in a very similar situation (and basically the same age). I've barely broached the subject with her, because her fear of the market is immense. Instead she ended up getting a financial manager who got her into an appropriate level of stocks/bonds. I think that's the best course, because then the fear can be directed towards him (and presumably he's trained to handle that).