i need to stop looking at my 401k

[gypsy]

because i work in journalism, having a 401k -- or any kind of retirement savings -- is a relatively new thing to me, having finally set one up just over a year and a half ago. it makes me feel good, you know, that every week i'm socking some money away for The Future. and because my plan is handled by a very big company with big snazzy website, i can track that sucker in about 6 different ways from any computer in the world. unfortunately, this means that i have a tendency to go look at it whenever i get bored. for the first 17 or 18 months, this was a reassuring thing to do, because every week i put more money in, and the value of the 401k went up -- sometimes by even more than i put in. but the last several months... like, it's depressing to look at it and see that, despite the money that i know has gone in there over the last two weeks, the thing is actually worth less now than it was at the end of june.

now, i know that's meaningless. i know it's even theoretically a good thing, because it means i'm actually buying in more cheaply than i was last month, and that the only thing that counts is what's there in 30 years or so. and i know 30 years is a long time, and that -- barring apocalyptic events -- i can count on a reasonable rate of return over that time. i know all that. i know the daily dollar value of the thing might as well be expressed in green cubes for all the meaning i should attach to it. but still. i hate seeing numbers go down.

i wonder if i can get the company to block my computer access...

[JohnT]

You make money when you buy, not when you sell.

What's your investment mix? You don't have to go into specifics, but I was wondering as to your equity/debt/cash ratios, if you know them.

[JohnT]

Also, try to stay away from managed mutual funds. If you have to go mutuals, go index funds, not managed funds.

Why?

Because when you buy, say, a managed "Small Cap Growth" fund, you're buying into the quality of management, not the quality of the investment. And since 95% of all managed funds underperfom the market during their life, betting on management is a risky proposition. As a matter of fact, the only managed fund I own is Dodge and Cox Balanced.

If you're just interested in owning a grabbag of "Small Cap Growth", buy the corresponding Vanguard Index fund.

[metulj]

You are buying units. Always keep that in mind. I adjust my mix every month. One day a month and I don't look at it other than if there is some titanic news that requires movement. Look into a SPDR too. Neat way to invest in a whole market or segment or whatever those fucking weasels call it.

I also recommend looking at value stocks that are doing good things (as in not evil things). I owned 100 shares of a little company that makes solar dielectric film that is applied to skyscraper windows. I spent 10 bucks on the the trade ($4.00 for one hundred shares and $6 for the trade). I sold them at $2.00 a share (another fee there). It's back down to $0.68 a share today. A good value still because it is a good idea.

[gypsy]

hey, i'm open to advice. i think i thought about it for about a half-hour when i was setting it up. it's heavy on equities at the moment, about 84 percent. (given the way things have gone the last 18 months, i'm not sure being in stocks vs. bonds has actually mattered very much...). i'm paring that down to about an 80-20 mix. (less than 1 percent cash.) it's split between 6 funds, all managed. in my very cursory research, they all had decent records (although i know past performance is no guide to future returns and blah blah blah). i could shift to indexed funds. i've read arguments on both sides by people who seemed to know what they were talking about -- as with everything in finance, the more i read the more i'm convinced no one really knows. (which i know isn't fair -- there are a lot of people who know a lot about specific areas. it's just that the big picture is so big that there's inevitably an awful lot of intuition, luck, and throwing at dartboards.)

but blab advisement is probably as good as any other kind. and no fees!

[JohnT]

80:20 isn’t too bad.

In regards to basic investment philosophy you have two types: Investors and speculators. Investors are defined as people who look for substantial long-term (>1 year) increases in value for their investment. Speculators are defined as people who look for substantial short-term (<1 year) increases in the value of their investment.

Most of what done today, at least in the popular press, is speculation. Any advice that has a term of less than one year is, most likely, speculative.

To personalize this: If you and your wife buy a house with the intent on raising a few kids in it, that’s an investment. If you and your wife buy a house with the intent on flipping it within the next year or so, that’s speculating.

[~Rumormonger~]

You should consult dilettantedude (http://funhouserock.com/funhouse/blab/member.php?u=466). Though, he'll probably just tell you to invest ethically and everybody knows, that's no way to make money ;~)

[gypsy]

yeah, speculation is not my bag. i don't have the knowledge or interest to do all that moving in and out looking for scores. which is why the only thing i have is this 401k with its mutual funds. but being in the early stages of building it, i'm willing to buy a little more into the aggressive side, on the theory that you want to become more conservative as the years go by. i'm kind of divided up now between large-cap, small-cap and overseas funds. i have read columns about why to be in and why to get out of all of those sectors. so i guess just trying to spread the eggs around a little. i haven't touched the mix all year. i'll probably look at it again when i hit the two-year mark.

[gypsy]

You should consult dilettantedude (http://funhouserock.com/funhouse/blab/member.php?u=466). Though, he'll probably just tell you to invest ethically and everybody knows, that's no way to make money ;~)

yeah, i feel bad about not being in any designated "socially responsible" funds. that's something i might change...

on the other hand, military contractors are sure looking attractive right now...

[metulj]

To personalize this: If you and your wife buy a house with the intent on raising a few kids in it, that’s an investment. If you and your wife buy a house with the intent on flipping it within the next year or so, that’s speculating.

Cubes. Cubes. Cubes.

Now the problem with this is that it is way too easy (or has been until lately) to get cheap money with dangerous mortgage tools (interest only loans!!!) and there are a lot of folks who are sitting on a house they intend to flip that isn't going to do what they thought. Mark my words. I figured on 7%-8% a year increase in value on our house purchase with no flip on in the picture. In the last 2 years, this house gained 120% in value and 300% since 9/11 (I can stand at Macy's Herald Square in 35 minutes). It was once a flip candidate, but now the folks who are looking to INVEST in real estate are moving here and buying in my neighborhood.

[Tess]

Plus the comfort of having a home, and a beautiful one at that, Metulj.

[Headless Geisha]

I need to start GETTING a 401K! ;)

[ernie]

yeah, i feel bad about not being in any designated "socially responsible" funds. that's something i might change...

Ariel. A managed, socially responsible fund that is strictly for the long haul. That fund has taken very good care of me.

BTW: At your age, 80:20 is a good ratio. But quit looking at quotes and trying to manage your investments to maximize your returns! You cannot beat the market, but you can let the market take care of you. Some of the best advice I ever heard was, "Buy good stocks and do not check the price again until you cash them in 30 years later."

[gypsy]

yeah. that's what warren buffett says too. and i know it's true. it's just...so close, a click of the computer button. i tell myself i'm just doing it to make sure they haven't, like, accidentally deleted my account...

[~Rumormonger~]

yeah. that's what warren buffett says too. and i know it's true. it's just...so close, a click of the computer button.

Don't do it...Don't push the button Gyps
http://ourworld.cs.com/WeezelX/rs/redbtn1.jpg

[dilettantedude]

You should consult dilettantedude (http://funhouserock.com/funhouse/blab/member.php?u=466). Though, he'll probably just tell you to invest ethically and everybody knows, that's no way to make money ;~)

Awright, dammit, now I gotta say something.

Invest ethically! :D

[dilettantedude]

Stock markets break down two ways. We have secular (long term) bull markets like 1885-1900; 1921- 1929; 1942-1965; 1982-2000. These markets are characterized by rising valuations. I.e., P/E ratios go up from the single digits into the 20s or higher. They float all boats.

We have secular bear markets like 1901-1920;1929-1941; 1966-1981; and 2000-??. They are characterized by P/E ratios on the overall market that fall long term, from the 20s or higher into the single digits. We are currently in a secular bear market. Discipline and a value approach is critical.

Don't confuse secular with cyclical bull & bear markets. Cyclical bulls & bears are shorter term up and down markets that oscillate around the longer term valuation trend line. But the trend is still long term down in this market, and it will last for many more years.

Index funds do very well in secular bull markets. They're in their element. The market floats all boats, and the fact that capitalization weighted index funds (about the only kind today) are overinvested in overpriced stocks doesn't matter much. It's a safe, no brainer. No discipline is required.

Index funds are likely to do quite poorly in secular bear markets. The longer term bias in the market is down. The only way to deal with such a market is to lower your stock ratio for already accumulated significant amounts of stocks, and to invest only in the most conservatively managed funds.

These secular markets typically last 10 - 20 years. It doesn't seem prudent to claim holy status as a long term investor and plod blindly ahead, and just forget about the decade or two you're gonna be losing money. It's too long a period. You have to make some changes to adapt to it.

That said, it mostly affects only losses in accumulated wealth. If you're just beginning to build it, monthly investing in such a market is a much better way to start out, as you have Gypsy, than by starting out your first 20 years in a secular bull market, accumulating a lot of dough, then spending your last 20 years just before retirement in a secular bear market.

As for ethical investing, Gypsy, it simply doesn't affect your investment returns. It does affect your moral state, though.

[dilettantedude]

You are buying units. Always keep that in mind. I adjust my mix every month. One day a month and I don't look at it other than if there is some titanic news that requires movement. Look into a SPDR too. Neat way to invest in a whole market or segment or whatever those fucking weasels call it.

I also recommend looking at value stocks that are doing good things (as in not evil things). I owned 100 shares of a little company that makes solar dielectric film that is applied to skyscraper windows. I spent 10 bucks on the the trade ($4.00 for one hundred shares and $6 for the trade). I sold them at $2.00 a share (another fee there). It's back down to $0.68 a share today. A good value still because it is a good idea.

What he said.

[dilettantedude]

yeah, speculation is not my bag. i don't have the knowledge or interest to do all that moving in and out looking for scores. which is why the only thing i have is this 401k with its mutual funds. but being in the early stages of building it, i'm willing to buy a little more into the aggressive side, on the theory that you want to become more conservative as the years go by. i'm kind of divided up now between large-cap, small-cap and overseas funds. i have read columns about why to be in and why to get out of all of those sectors. so i guess just trying to spread the eggs around a little. i haven't touched the mix all year. i'll probably look at it again when i hit the two-year mark.

Every long term study of returns in the stock market ever done shows that conservative value investing beats growth or aggressive investing every time.

Look at it this way. You have a growth stock growing at 40% annually. A more aggressive investor pays fair value or more for it. Say fair value is $30. and we're pretty sure about that. A value investor waits until he can buy it for a 30% discount to fair value, say $20. The value investor will always outperform the growth investor in an up market, and will always lose less in a down market.

It's one of the great investment myths that growth or aggressive investing means higher returns.

[dilettantedude]

Yikes! I just looked at the last 4 posts on this topic. They're all mine. I'll shut up now and go play EverQuest.

[gypsy]

i appreciate the comments. i'll devote some more time to this later this year, try to structure things a little more attentively.

now excuse me while i check on my bunker-buster bomb investments...

[lynnpoint]

conservative value investing beats growth or aggressive investing every time.
Double D. What are some funds that would fall under this type of investing? Currently I have most of my retirement plan in some Vanguard Index Funds with a little bit in Dodge and Cox. Luckily we're offered these plans through work. I'm sort of late to the party like Gypsy - due to my previous vocation as well, though a bit longer than him. I like to check on my account too but don't seem to be quite as afflicted as he is. Of course OCD is Gypsy's alterego when he posts on other boards.

[lynnpoint]

hey jessee. here's a blog that you might enjoy. you can also go to the archives section and do searches for previous columns.
http://www.andrewtobias.com/

and i like this one as well. http://www.freemoneyfinance.com/

[knoxregressive]

the apocolyps has started so none of this shit means shit

[lynnpoint]

the apocolyps has started so none of this shit means shit
Jessee has some stocks in Apocalypse. There doing quite well lately.

[gypsy]

i bought 'em at $6.66 and they're up to $66.6

[lynnpoint]

i bought 'em at $6.66 and they're up to $66.6
yeah, and the whole "soul" thing you had to spend as well. still, seems like you did nicely with this pick.

[gypsy]

the soul is actually redeemable at the back end. unless i've been misinformed.

[lynnpoint]

the soul is actually redeemable at the back end. unless i've been misinformed.
But you'll have to pay taxes on it then if you keep it. Kind of explains Republicans in a nutshell, huh?

[bookeddy]

ohmygod, don't get me started.... If you own ________ mutual fund which is invested in index funds and the goal of those managers is to match the s&p 500 give or take a reasonable randomness factor..., and to do that they invest in a gold fund that has an interest in mining companies that dump their tailings in lakes that.... blah blah blah.

oh my god, i'm so insulated.... I'm innocent!!

[gypsy]

oh like we don't know all about the used book sweatshops. those malaysian orphans, reading 12 hours a day for a crust of bread, all so you can fill your shelves.

[~Rumormonger~]

yeah, and the whole "soul" thing you had to spend as well. still, seems like you did nicely with this pick.

The Devil went down to Wall Street
Lookin' for a soul to steal
He was in a bind
'Cause he was way behind
He was lookin' to make a deal

That's where this story ends my friends
The Devil won't get his due
There's nary a soul
In this Wall Street hole
for the Devil to subdue

[bookeddy]

money is a matrix... You pick a money manager, you get in at one point and your money grows 1000%, you get with the same manager at a different time, you might lose 40% or 60% of your initial investment.... I used to manage other people's money(OPM) It sucks. Now I do my best to manage a peasant book store and my own sanity.

Another thing: Leverage: If you borrow against your mother in law's house to invest four times what you can really afford, you might lose "everything" on a 30% change in NAV. Much of what happens in the world is about timing. Leverage is a fascinating tool. Combine the abuse of leverage with the current "bankruptcy" laws and you have a witch's brew of temptation.

It gets more and more intersting every day.

... and another thought: you gotta keep your eye on the the denominator, even if the numerator IS more sexy! If I were you, I'd keep my eye on that denominator....

Insert requisite crytic googled stuff here...:
numerator says how many parts in the fraction...vinculum = "divide by" denominator says how many equal parts in the whole object.

p.s. Oh my allah, Japan recently raised their key interest rate from 0% to 1/4 of 1%.... What does THAT bode for the world?

[dilettantedude]

Double D. What are some funds that would fall under this type of investing? Currently I have most of my retirement plan in some Vanguard Index Funds with a little bit in Dodge and Cox. Luckily we're offered these plans through work. I'm sort of late to the party like Gypsy - due to my previous vocation as well, though a bit longer than him. I like to check on my account too but don't seem to be quite as afflicted as he is. Of course OCD is Gypsy's alterego when he posts on other boards.

Sorry for the late reply, been driving a lot. I don't know of any funds (other than mine, of course). I'm just a stock jockey, not a financial planner, so I don't keep up with the mutual fund world. I got enough on my plate just trying not to lose my gains this year.

[jfm]

update: my 5-year return as of december: 0.8 percent. great. even at low inflation rates i've lost money.

but hey i've got 25 or 30 years til i need it, so i can expect another ... 4 or 5 percent cumulative growth! perfect.

[The Pullet Surprise]

At least it's growing.

You could have been someone like me who was getting company match in stock that would eventually become worthless.

(I really didn't have to do anything to turn $25,000 in securities into $150 in cash except for choosing to work for Worldcom.)

[crooked-finger]

money is a matrix... You pick a money manager, you get in at one point and your money grows 1000%, you get with the same manager at a different time, you might lose 40% or 60% of your initial investment.... I used to manage other people's money(OPM) It sucks. Now I do my best to manage a peasant book store and my own sanity.

Another thing: Leverage: If you borrow against your mother in law's house to invest four times what you can really afford, you might lose "everything" on a 30% change in NAV. Much of what happens in the world is about timing. Leverage is a fascinating tool. Combine the abuse of leverage with the current "bankruptcy" laws and you have a witch's brew of temptation.

It gets more and more intersting every day.

... and another thought: you gotta keep your eye on the the denominator, even if the numerator IS more sexy! If I were you, I'd keep my eye on that denominator....

Insert requisite crytic googled stuff here...:
numerator says how many parts in the fraction...vinculum = "divide by" denominator says how many equal parts in the whole object.

p.s. Oh my allah, Japan recently raised their key interest rate from 0% to 1/4 of 1%.... What does THAT bode for the world?

Who is this goof ball!? Ha. Ahhhh 12:45 am. That explains it. The dude was probably drunk.

[PrinceWince]

update: my 5-year return as of december: 0.8 percent. great. even at low inflation rates i've lost money.

but hey i've got 25 or 30 years til i need it, so i can expect another ... 4 or 5 percent cumulative growth! perfect.

I was going to say that whoever bumped this thread is an asshole for reminding you of a time before everything went completely tits-up.

I'm halfway considering still saying that.

[jfm]

I was going to say that whoever bumped this thread is an asshole for reminding you of a time before everything went completely tits-up.

I'm halfway considering still saying that.

hey the one-year returns look GREAT.

but yeah i just keep thinking about this story in the times about a japanese woman who started her retirement savings in the late '80s, right near the peak of the nikkei, and then watched it just all fall down and pretty much stay there. and of course people kept telling her it would come back, and she kept putting money in it because basically there was nowhere else to put her money that was going to pay anything at all, but now it's more than 20 years later, she's in her mid-50s, and she essentially has just watched her money erode and erode.

and i'm not saying that the fixed-pension model was the way to go either, it has a lot of problems and basically you're just not going to get that anymore. but "saving for retirement" is no kind of guarantee that you're going to have money to retire on at the end of it all.

[edens]

"saving for retirement" is no kind of guarantee that you're going to have money to retire on at the end of it all.

http://www.impactlab.com/wp-content/uploads/2009/12/Money-Under-the-Mattress-746.jpg

[jfm]

and i don't know what these guys' rates-of-return look like (http://tpmlivewire.talkingpointsmemo.com/2010/02/rep-hensarling-advocates-cutting-benefits-and-privatizing-social-security.php?ref=fpa), but i think they're picking sort of a bad time to start talking about privatizing social security again.

[crooked-finger]

Let's not all head for the exit at the same time....

[Hildegard]

Let's not all head for the exit at the same time....

....when we could be heading for a high window....

[Tess]

Is it that bad? I saw that DJ had dropped 188 points, but that ain't nothing. What am I missing here?

[Boris]

My 104k is doing better. It's almost back to where it was 10 years ago.

[Hildegard]

Is it that bad? I saw that DJ had dropped 188 points, but that ain't nothing. What am I missing here?

Nah. I was cracking wise. Wall Street's fine, but another two of my friends got laid off in the past two days.

[Tess]

Nah. I was cracking wise. Wall Street's fine, but another two of my friends got laid off in the past two days.

That is the troubling part to me, as well. Very troubling.

[Boris]

That is the troubling part to me, as well. Very troubling.

No kidding. They say the economy's improving, but folks are still out of work.

[Hildegard]

http://money.cnn.com/2010/02/04/news/economy/initial_claims/

[Tess]

http://money.cnn.com/2010/02/04/news/economy/initial_claims/

Yep, I have two close family members and one close friend who have been unemployed for going on several years.

[crooked-finger]

I wouldn't be surprised if layoffs don't accelerate. The more people big companies lay off, the harder the remaining workers work(while complaining publicly less), the better the bottom line gets(relatively), and on top of that, if it keeps getting worse, there will be more stimulus money..., and who gets that!? Brilliant.

[Tess]

http://www.naomiklein.org/shock-doctrine

Naomi Klein said that the former middle class can look forward to digging ditches and working as servants for the uber rich in The Shock Doctrine.

http://www.naomiklein.org/shock-doctrine/resources/disaster-capitalism-in-action/tags/goldman+sachs

[jfm]

the white house's own projections i think say they expect the year to end with still close to 10 percent unemployment. having lowballed it last year, they may be being extra careful this year. but also, i think they know things are going to stay rotten for a good while.

and here's the thing: they might not get "back to normal" in the sense of 4 percent unemployment for a looooong time. we might just all get used to 7 or 8 percent unemployment as the norm.