A bunch of people I seem to meet tell me they suffered losses but are in stocks for the long term… Just curious do you agree/disagree with that strategy. I disagree with it, but want to here other thoughts first.
I agree with their strategy. The average investor cannot expect significant equity returns in the short term, only volatility. Over a multi-year time horizon, indexes generally move upward.
I say I’m in it for the long term because I’m in my early 20’s and when I say it, I refer to my 401(k). One cannot be distraught with current market noise when they can’t withdraw the money any time soon. It’s a different story for those with shorter time horizons.
yeah, except that a few months ago, they were all hot shot, swashbuckling, shoot first ask questions later kind of guys.
if you in it for the long term, you have the ability to take on more risk and likely gain it back over the long run… if your constantly moving money around and trying to beat the market, the chances are against you that your skills will beat the market. Short term market volatility should not disrupt a long term investment strategy. you really think you can time the market dont you?
Agreed if you have that l-t horizon, i.e. retirement money for 20-30 year olds. Over the l-t stocks go up and bull markets are stronger and longer then bear markets over the l-t. Look at what Buffet said today in the Times, he’s buying american stocks now over the l-t and for all those (on this site especially) putting retirement funds in cash he said that is a terrible idea for l-t investment, which I have agreed with this whole time.
Because “I’m in it for the long-term” is better than “Holy cow, I got wasted in my 401-K so I’m going to have to keep working for the long-term”
Here’s my rationale Investing for the long term is an attribute not an investment strategy. Simply Investing in the long term means you have loss aversion. To not face a loss, sell a loser, and buy a winner is crazy. Let’s say I have aig at 2 and it goes to 2.5 over 20 years. There are many stocks with better returns. Investing in the long term without knowing what u invest in or reallocating = ponzi S and p 500 is a diversified index… Yes… But does it goes up because of its popularity/ponzi nature or its a good investment I feel many people don’t understand their 401k and its the new social security scare tactic…
Warren Buffett wants his investments to go up. So his letter is for “selfish reasons” You think putting retirement 401k into cash is terrible. Guess - screwed up being up 4 % vs down 35% by pulling my money a year ago s23dino Wrote: ------------------------------------------------------- > Agreed if you have that l-t horizon, i.e. > retirement money for 20-30 year olds. Over the > l-t stocks go up and bull markets are stronger and > longer then bear markets over the l-t. Look at > what Buffet said today in the Times, he’s buying > american stocks now over the l-t and for all those > (on this site especially) putting retirement funds > in cash he said that is a terrible idea for l-t > investment, which I have agreed with this whole > time.
…Of course basically every single study out there says that for an individual investor, investing in an index and holding it for a long term is the only way to extract maximum benefit.
PtrainerNY Wrote: ------------------------------------------------------- > Warren Buffett wants his investments to go up. So > his letter is for “selfish reasons” > Dude, I hope you aren’t serious with this statement. His investments will go up in the long-run because he buys profitable companies at prices that will give him a return, not because he made some remark about buying into stocks. You seemed to have figured this market out, and good for you, but give the market itself some credit.
Its the difference between being a speculator and an investor…read Security Analysis… Basically declining prices results in more attractive returns in the future. Buffett prefers periods of generally declining prices due to this fact, so he can add great businesses to his portfolio at attractive prices. Price is key. WEB explains a lot of this mentality but another decent piece of advice is if the market was closed for 10 years would you be comfortable owning a ownership stake in a business. If not, then you should abstain… Short term performance only matters if you are hot money investors looking to score the next biggest game in town.
CFAchief Wrote: ------------------------------------------------------- > …Of course basically every single study out > there says that for an individual investor, > investing in an index and holding it for a long > term is the only way to extract maximum benefit. Funny, in L3 they tell you to diversify among asset classes and rebalance periodically. Did the curriculum change while I wasn’t looking?
DarienHacker Wrote: ------------------------------------------------------- > CFAchief Wrote: > -------------------------------------------------- > ----- > > …Of course basically every single study out > > there says that for an individual investor, > > investing in an index and holding it for a long > > term is the only way to extract maximum > benefit. > > > Funny, in L3 they tell you to diversify among > asset classes and rebalance periodically. Did the > curriculum change while I wasn’t looking? rebalancing and a complete reallocation to cash are not comparable.
Cash can bring 4 to 5% returns, not 0… It’s an asset class
If you go in and out of the market for your long term strategy you are market timing. In that case you are not “investing” you are “gambling”. When the markets are way down, as history shows. you don’t want to be out because when it turns and goes up it will go fast. Then by the time you get your money back in the market you miss out on those gains. If you allocate your portfolio ahead of time and are prepared for times like this, it is less stressful.
For “typical” investors with long term time horizons “being in for the long term” is reasonably good advice about not getting too worked up about market corrections, particularly if you are adding periodic payments to a plan and rebalancing a strategic asset allocation. This situation is different, it’s a panic/crash that we haven’t encountered in perhaps 80 years, and there is massive destruction of wealth going on in virtually all asset classes. In this case, it might make sense to dollar average down on new contributions, but the destruction of existing capital ought to be prevented if possible. So this suggests that it is not a bad idea to dramatically increase the allocation to cash, at least until there appears to be some orderliness to what the market is doing, and the sense of panic has subsided (meaning, practically, that people are licking their wounds rather than running around screaming their heads off). What’s happening now is that capital market expectations have dramatically changed since about one year ago, and these expectations are likely to be different for at least the next 3-5 years. That filters back to one’s optimal allocation among cash, stocks, and bonds. When you rebalance, you should rebalance to your current optimal allocation - if your situation has changed or if market expectations have changed, you’ll need to rebalance to that new forward-looking allocation. So large cash allocations make sense, and this actually perpetuates the panic because it forces other prices lower and feeds into a self-perpetuating circle. However, cash is not fully safe. It is possible that FDIC might not be able to insure, or that many accounts will exceed the insurance coverage. It is also possible that inflation could return at some point and eat away at cash. It is almost certain in my mind that we will have serious inflation sometime this decade - the question is whether and how much deflation we will experience in the short term before that.
not to nitpick, but… if inflation is a broad, permanent increase in prices, then how can deflation be associated with the short term?
Simplistically, if your economy consists of 5 apples and $100 dollars, then the average cost of an apple is going to be $20. Now, suddenly… poof… 50% of the dollars disappear. Maybe they had a swap agreement with a counterparty that had big round turds all nicely decorated with a pink bow, and the swap agreement went bad. Whatever the cause, there are now only $50 circulating in the economy. Now the average cost of an apple is $10, not $20 as it was before. Deflation happened. — Now, why inflation over the long term? 1) Helicopter Ben says that he will be willing to drop money from a helicopter to get people to spend more and drive up prices. This will increase the money supply, and - barring a carry trade - cause inflation. 2) Massive debts on the public and private books may make people rush out of the US as soon as alternative investments start to look attractive. This will cause the dollar to weaken substantially. Since much of our consumption comes from abroad, this will raise general prices.
I totally understand your point. Its really just nitpicking. My question was really based around if you can not include “permanent” in your definition, but include it in your definition of inflation. If you expect that prices will go up in the long run, then it doesnt matter what happens immediately or in the short term.