Playing the stock market to pay off your debt.

[georgina]

i’m invested in real estate and bonds, After watching DW’s grandparents lose everything literally, during the dot bomb crisis. Watching as the broker racked up commission as her grandparents account value ran to negative numbers.

That's sad. We rode out the 1987 drop, again in 2000 and 2008. We make our own decisions and do not have a broker who has any control over our investments. No one is making money off our trades except us.

 

[dvcgirl67]

i’m invested in real estate and bonds, After watching DW’s grandparents lose everything literally, during the dot bomb crisis. Watching as the broker racked up commission as her grandparents account value ran to negative numbers. I’d rather invest my cash with the Mafia it would be safer.

Real estate can provide great returns, I just don't have the interest in the amount of time it takes to hunt down properties, find great renters...etc. And I'm not really interested in REITs....etc. But my brother-in-law (and my sister by association)....is quite good at it. He's done really well.

I'm so sorry to hear what happened to your parents. DH and I lived through the "dot.com bust". We were newlyweds and spent the late 90s living Californina...in the Silicon Valley, where my husband worked as a software developer. Back then, they handed out stock options like candy...and we knew many, many people who were millionaires....on paper. But we both grew up in as middle class kids...me probably closer to lower middle class at that time. As soon as every grant vested, we sold it...and diversified. We really had no idea what we were doing back then, just following the..."don't keep all of your eggs in one basket". That decision was life changing for us. And then over time we learned more and more.....and very shortly thereafter learned about index funds. And that world has only gotten better and better for individual investor, thanks to Jack Bogle the company he founded....Vanguard.

There will always be "busts".....it's just the nature of our world. But I'm really pretty positive on our future thanks to dollar cost average investing...over 25 years...through index investing.

 

[hsmamato2]

I just wanted to put this out there...this thread is interesting,and most here are giving serious replies. The OP who started it did it as a joke. Nelson84 is well known around these boards.... which explains my other post early on in this thread...

 

[_19disnA]

Don't know the history of the OP, but it read more like one of those 'pump & dump' type of posts you often read on social media to hype a particular stock.

 

[MillauFr]

an index fund with an expense ration of 0.04%.....

That is the one "guarantee" in the investment world. The less you pay in fees the more you will have when you withdraw the money. Absolutely shocked there are mutual funds still getting away with charging > 1% in fees.

 

[MillauFr]

What I can't figure out in today's market is who is buying bonds? US 10 year treasuries are only yielding 1.5%. When you adjust for inflation you are losing money every year. Who buys an investment that is guaranteed to lose money every year? Even crazier is the people buying Greek 10 year government bonds yielding 0.73%. The bonds are rated BB, almost junk. Who loans money to a deadbeat and only expects 0.73% interest in return?

 

[Starport Seven-Five]

i’m invested in real estate and bonds, After watching DW’s grandparents lose everything literally, during the dot bomb crisis. Watching as the broker racked up commission as her grandparents account value ran to negative numbers. I’d rather invest my cash with the Mafia it would be safer.

That's unfortunate to hear regarding their experience. Were they in the drawdown phase? And how did the account actually go negative?

Generally speaking there are paths to keeping people out of that kind of trouble and a reputable financial advisor should help them with that. Unfortunately, there are a lot of snakes in the investment world... and by the time you know enough to police your advisors you can self manage.

That is the one "guarantee" in the investment world. The less you pay in fees the more you will have when you withdraw the money. Absolutely shocked there are mutual funds still getting away with charging > 1% in fees.

My guess is the number of those 1%+ fee funds that have kickbacks to brokers is very high.

What I can't figure out in today's market is who is buying bonds? US 10 year treasuries are only yielding 1.5%. When you adjust for inflation you are losing money every year. Who buys an investment that is guaranteed to lose money every year? Even crazier is the people buying Greek 10 year government bonds yielding 0.73%. The bonds are rated BB, almost junk. Who loans money to a deadbeat and only expects 0.73% interest in return?

People following rigid rules of having a 75/25 (or similar) split between stocks/bonds. It takes time for personal finance rules to catch up to the realities of todays markets.

My parents are still flabbergasted that we're carrying a mortgage balance by choice.

 

[RamblingMad]

What I can't figure out in today's market is who is buying bonds? US 10 year treasuries are only yielding 1.5%. When you adjust for inflation you are losing money every year. Who buys an investment that is guaranteed to lose money every year? Even crazier is the people buying Greek 10 year government bonds yielding 0.73%. The bonds are rated BB, almost junk. Who loans money to a deadbeat and only expects 0.73% interest in return?

Folks that invest in retirement dated funds in their 401k plans are buying those bonds.

 

[MillauFr]

Folks that invest in retirement dated funds in their 401k plans are buying those bonds.

Probably part of it. I don't get the people still buying bonds for the "relative safety". If inflation rates stay above 5% the prices of those bonds are going to collapse faster than bitcoin on a bad day. There is nothing safe or stable about buying bonds at 1.5% yield.

 

[RamblingMad]

Probably part of it. I don't get the people still buying bonds for the "relative safety". If inflation rates stay above 5% the prices of those bonds are going to collapse faster than bitcoin on a bad day. There is nothing safe or stable about buying bonds at 1.5% yield.

If you hold it to maturity, it’s guaranteed that you will earn 1.5% with no risk to principal. That’s pretty safe to me.

And there is no way inflation is staying at 5%. It might stay near 3%for the short term. But I doubt 5% given the components pushing it up.

 

[MillauFr]

If you hold it to maturity, it’s guaranteed that you will earn 1.5% with no risk to principal. That’s pretty safe to me.

And there is no way inflation is staying at 5%. It might stay near 3%for the short term. But I doubt 5% given the components pushing it up.

I would actually be happy if Disney kept their price increases to 5% per year.

 

[RamblingMad]

I would actually be happy if Disney kept their price increases to 5% per year.

Disney gives you magical debt.

 

[dvcgirl67]

What I can't figure out in today's market is who is buying bonds? US 10 year treasuries are only yielding 1.5%. When you adjust for inflation you are losing money every year. Who buys an investment that is guaranteed to lose money every year? Even crazier is the people buying Greek 10 year government bonds yielding 0.73%. The bonds are rated BB, almost junk. Who loans money to a deadbeat and only expects 0.73% interest in return?

We're about 5 years out from retirement...give or take a year or two in either direction, and we hold bonds in our portfolio. We did just move to a short-term vanguard bond fund instead of a total bond market index, as you don't really want to be in longer term bonds. We built our emergency fund up to two years of expenses during the pandemic, but with 5-ish years to go and with inflation likely to be a bit higher than we're used to for a period of time.... we moved all but 25K into our portfolio...currently 80/20....stock index fund to bond index fund. Holding as little cash as possible in this environment makes sense. This is still an aggressive portfolio by most definitions for early 50 year olds by most measures.

I've been reading a lot about how you don't want to be in bonds in an inflationary environment, but inflation isn't necessarily good for the overall stock market either. Look back at equity returns in the mid 70s to early 80s. There's also the usual "stock picker" talk of moving out of growth and into value...yada yada. I own a little bit of every company in the US stock market in VTSAX. And since a large majority of the companies in VTSAX are global entities...I'm invested in international stocks as well. I'm not smart enough to know which sectors may do well...and not do well....especially in a world where things move so quickly. All anyone can talk about lately is how expensive lumber is....well, if you've been paying attention, that phenomenon is changing quite quickly. Prices are tumbling...and suppliers and builders who have been hoarding stockpiles...are quickly beginning to unload their stash. If I was in the market to build a new house or do a home improvement project that requires lumber...I'd wait just a bit.

Also keep in mind that this stock market is quite frothy, and so owning a percentage in bonds allows one to preserve funds that will be moved into equities when portfolio rebalancing takes place. It evens out the wild ride that equities can provide. If you had 100% of your retirement funds in an S&P 500 fund and retired in 2000....you were in for a rough ride for the next decade. You began withdrawing from a portfolio that saw a 40% drop during the dot.com bust...or your first two years in retirement, the market recovered (but not to the heights of 2000)....and then came the 55% drop during the housing bust/Great Recession. Holding bonds during that time eased the pain you would have felt, and you could have pulled from the bond portion of that portfolio allowing equities time to recover.

 

[RamblingMad]

We're about 5 years out from retirement...give or take a year or two in either direction, and we hold bonds in our portfolio. We did just move to a short-term vanguard bond fund instead of a total bond market index, as you don't really want to be in longer term bonds. We built our emergency fund up to two years of expenses during the pandemic, but with 5-ish years to go and with inflation likely to be a bit higher than we're used to for a period of time.... we moved all but 25K into our portfolio...currently 80/20....stock index fund to bond index fund. Holding as little cash as possible in this environment makes sense. This is still an aggressive portfolio by most definitions for early 50 year olds by most measures.

I've been reading a lot about how you don't want to be in bonds in an inflationary environment, but inflation isn't necessarily good for the overall stock market either. Look back at equity returns in the mid 70s to early 80s. There's also the usual "stock picker" talk of moving out of growth and into value...yada yada. I own a little bit of every company in the US stock market in VTSAX. And since a large majority of the companies in VTSAX are global entities...I'm invested in international stocks as well. I'm not smart enough to know which sectors may do well...and not do well....especially in a world where things move so quickly. All anyone can talk about lately is how expensive lumber is....well, if you've been paying attention, that phenomenon is changing quite quickly. Prices are tumbling...and suppliers and builders who have been hoarding stockpiles...are quickly beginning to unload their stash. If I was in the market to build a new house or do a home improvement project that requires lumber...I'd wait just a bit.

Also keep in mind that this stock market is quite frothy, and so owning a percentage in bonds allows one to preserve funds that will be moved into equities when portfolio rebalancing takes place. It evens out the wild ride that equities can provide. If you had 100% of your retirement funds in an S&P 500 fund and retired in 2000....you were in for a rough ride for the next decade. You began withdrawing from a portfolio that saw a 40% drop during the dot.com bust...or your first two years in retirement, the market recovered (but not to the heights of 2000)....and then came the 55% drop during the housing bust/Great Recession. Holding bonds during that time eased the pain you would have felt, and you could have pulled from the bond portion of that portfolio allowing equities time to recover.

Bond yields over those periods were on the decline. Now yields are going back up. I’m shorting the long bond.

 

[_19disnA]

Serious investors don't look to random comments by anonymous people on the internet to make their investment decisions..........or at least they shouldn't...............LOL.

 

[RamblingMad]

Serious investors don't look to random comments by anonymous people on the internet to make their investment decisions..........or at least they shouldn't...............LOL.

I’ve never met a serious investor.

 

[trainpuncher]

$AMC is funding my trip!!

 

[mefordis]

What I can't figure out in today's market is who is buying bonds? US 10 year treasuries are only yielding 1.5%. When you adjust for inflation you are losing money every year. Who buys an investment that is guaranteed to lose money every year? Even crazier is the people buying Greek 10 year government bonds yielding 0.73%. The bonds are rated BB, almost junk. Who loans money to a deadbeat and only expects 0.73% interest in return?

When the pandmic hit and the market went down I know people who sold everything and bought bonds. Wonder if they got out of them.

 

[MillauFr]

When the pandmic hit and the market went down I know people who sold everything and bought bonds. Wonder if they got out of them.

That seems like a very risky response. Half of that value of the 10 year bond is going to get destroyed by inflation. You are basically accepting a 50% loss of your money.

 

[mefordis]

That seems like a very risky response. Half of that value of the 10 year bond is going to get destroyed by inflation. You are basically accepting a 50% loss of your money.

I know. I wonder if they were able to get out in time. I won't ask them, but they have been foolish with their money in the past.