Investing in the Stock Market

[Zombie 284]

I recently sold a house I inherited and need to invest the equity into something. I don't know much about the stock market, but I've been reading about index funds and they seem like a relatively conservative approach that will at least match the return of the market. To the extent possible, I'd like to insulate the investment from possible future volatility in the market. Any thoughts on how to balance getting a decent return while protecting against the inherent risks of the market? 

[TwiceHorn 31440]

Short answer, no.

 

But, the long-term history of an index such as the SP500 is quite positive.  Can't go too wrong with something like SPDRSP500 (SPY).  Your money should double every 10 years, or sooner.

[Chewbacca 7767]

What do you consider a decent return?  You can always invest in munis, but I'm not sure that will meet your 'decent return' threshold.

[Zombie 284]

1 hour ago, Chewbacca said:

What do you consider a decent return?  You can always invest in munis, but I'm not sure that will meet your 'decent return' threshold.

I guess somewhere in the 5%+ range. Preferably closer to 7%+. 

[Chewbacca 7767]

Gonna have to be in equities (and take the associated risks) to hit that mark consistently.

[Laga4 1270]

If you go index funds you might think about adding to it over a period of time instead of all at once.  I know interest bearing accounts don't pay much,  but you could park some of it there and add to fund over a period of time.  

It's virtually impossible to time the market,  but we are at or near all time highs and a lot people think a pretty healthy correction is fairly near.  Buy the dips.

Edited September 28, 2018 by Laga4

[Hugh G. Rection 156]

What's your holding period?  Studies have shown that putting it in the market sooner than later pays off in the long run.  If you want market returns you have to accept market risk (volatility).  

[Zombie 284]

20 minutes ago, Hugh G. Rection said:

What's your holding period?  Studies have shown that putting it in the market sooner than later pays off in the long run.  If you want market returns you have to accept market risk (volatility).  

Indefinitely. Fair enough. There may not be a realistic way to obtain a good return without accepting risk and volatility. I think Laga4 is probably right about a market correction coming. I'm probably going to keep the funds in a money market account that gets about 2% until at least after the November election. I may just invest in some real estate developer deals that provide for a guaranteed return on investment for new apartment and office buildings. 

[52-80 19147]

half pork bellies half bitcoins

[Chewbacca 7767]

Indefinitely. Fair enough. There may not be a realistic way to obtain a good return without accepting risk and volatility. I think Laga4 is probably right about a market correction coming. I'm probably going to keep the funds in a money market account that gets about 2% until at least after the November election. I may just invest in some real estate developer deals that provide for a guaranteed return on investment for new apartment and office buildings. 

I'd be careful about investing in development deals unless you know and trust the developer and you understand the real estate market well.

[SDG 3319]

We are at historic highs market wise. Do you want to throw all your eggs in a basket that may go lower soon?  I’d suggest going a managed approach.  Most banks have an auto mange option and the fees are low. (I use Merrill who has a min of 25k).  I have an account I manage through TD which is doing roughly the same as ML w lower risk. I might just be dumb though...

[XYZ 2154]

Zombie:

The stock market has been on a tear for years. Like, the longest bull market ever. You are aware of that, right?

[Hugh G. Rection 156]

Indefinitely. Fair enough. There may not be a realistic way to obtain a good return without accepting risk and volatility. I think Laga4 is probably right about a market correction coming. I'm probably going to keep the funds in a money market account that gets about 2% until at least after the November election. I may just invest in some real estate developer deals that provide for a guaranteed return on investment for new apartment and office buildings. 

REITS are good for providing income on real estate deals and provide diversity in assets.

[TwiceHorn 31440]

53 minutes ago, Hugh G. Rection said:

 

REITS are good for providing income on real estate deals and provide diversity in assets.

Well, diversity in real estate assets, yes.  However, any sort of "sector" investment is more vulnerable to reversals in that sector, and dramatic losses, than something more diversified across sectors and bonds, equities, etc.

[TwiceHorn 31440]

But yean, probably whatever you do, you don't want to dump five or six figures right into any one investment type under present market conditions, unless that's play money.

[Bernard 879]

Buy stock. When the price goes up, sell it. If the price doesn’t go up, don’t buy it. 

Bernard

[52-80 19147]

You should use a strategy that employs AI to take advantage of ML mining data from the Cloud to yield the best financial returns

[Hugh G. Rection 156]

On 9/28/2018 at 7:15 PM, XYZ said:

Zombie:

The stock market has been on a tear for years. Like, the longest bull market ever. You are aware of that, right?

Second longest.  If it becomes the longest, there will be 3 more years of gains.  Do you want to keep your money on the sidelines for 3 years?

http://www.finra.org/investors/5-longest-bull-markets-infographic

 

[Wally Fairway 5541]

With an indefinite timeframe, I'd suggest picking one or two ETF's (SPX - S&P 500, IJT - Small Cap 600 Growth - as examples).
If you are worried about putting it in at a time of market highs then put 25% in today, and 25% in at the end of each of the next 3 quarters.
Remember although there is risk in being in the market, there is also risk of lost returns by being out of the market.

that'll be $9.95 - thank you
you can do something much more complicated, or google Bogglehead 3 fund strategy for something very simple

[RollLeft 5040]

On 9/28/2018 at 4:02 PM, Zombie said:

... I may just invest in some real estate developer deals that provide for a guaranteed return on investment for new apartment and office buildings. 

1

Let me know how that works out.

[Reagan1k 3024]

On 9/28/2018 at 8:35 PM, Hugh G. Rection said:

I may just invest in some real estate developer deals that provide for a guaranteed return on investment for new apartment and office buildings. 

Hate to make assumptions here but that sentence reads like something heard on an XM radio advertisement.  

If I'm wrong and you know the developers and have an inside track on some deals, that's one thing, but if you are basing that off a commercial or marketing effort, be very careful.

Those "guarantees" only take you so far.  Consider why they'd be needing to advertise on the radio or in print to bring in capital if the deal was THAT GOOD.

Another thing to consider is that risk does not only manifest itself in potential stock market losses. 

Inflation's erosion of your purchasing power is an equally serious risk that must be considered. 

You can "safe" your way broke over time by not participating with at least some growth assets that have historically preserved purchasing power; even though they have periods of volatility and short term declines. 

[Hugh G. Rection 156]

What the fuck?!?!  I didn't write that...how am I quoted there?

[Zombie 284]

1 hour ago, Reagan1k said:

Hate to make assumptions here but that sentence reads like something heard on an XM radio advertisement.  

If I'm wrong and you know the developers and have an inside track on some deals, that's one thing, but if you are basing that off a commercial or marketing effort, be very careful.

Those "guarantees" only take you so far.  Consider why they'd be needing to advertise on the radio or in print to bring in capital if the deal was THAT GOOD.

Another thing to consider is that risk does not only manifest itself in potential stock market losses. 

Inflation's erosion of your purchasing power is an equally serious risk that must be considered. 

You can "safe" your way broke over time by not participating with at least some growth assets that have historically preserved purchasing power; even though they have periods of volatility and short term declines. 

Good points. Yes, I have friends who are spec home builders and they have a very defined system that has produced a fairly consistent ROI. It of course is not risk free and I don't mean to suggest there is a risk free investment option out there. But I am familiar and comfortable with real estate development projects on a small scale. 

[TwiceHorn 31440]

In a low interest environment with a strongish economy. Spec homes in a rising rate environment with a weakening economy is one of the original ways to lose your ass. 

 

Cuidado amigo. 

[Dbeasy 15042]

To all the real estate gurus, real estate is so easy in an environment favorable to real estate. When it turns, you can quickly find yourself upside down on all of your investments, creating a financial disaster. It happens to many every cycle, pros and amateurs alike.

[tantric superman 4667]

I'm actually selling my very small number of individual stocks because fuck it, I don't have time to think about it. 

I put it all in Fidelity Four in One, except for some in cash, depending on how freaked out I feel :

The investment seeks high total return. The fund invests in a combination of four Fidelity® stock and bond index funds (underlying Fidelity® Funds) using an asset allocation strategy designed for investors seeking a broadly diversified, index-based investment. It allocates approximately 48% of its assets in Fidelity® 500 Index Fund, 12% in Fidelity® Extended Market Index Fund, 25% in Fidelity® International Index Fund, and 15% in Fidelity® U.S. Bond Index Fund.

8% for the decade.

I've got a pretty standard issue 401K, probably a tad too aggressive for my age.

 

[Txzen 498]

It's all about risk tolerance. Look at 2008 - even the Four in One lost 33% (S&P was -37%). Even more conservative approaches like Fidelity Asset Manager 30% went -20% in 2008. Not knocking either choice, but if one is worried about the bottom falling out, it gets tricky.

The tradeoff is those managed income funds - say BLADX. Was 7% in the black for 2008, but you have to get used to some single digit returns since. How's 1.2% for 2018?

 

[TwiceHorn 31440]

Well, as noted, the Fidelity 4-in-1 and other funds/fund groups recovered from 2008 to provide a tidy annualized return over the longer term since.  It's probably foolish to try to avoid a biggish loss over a very short period while also avoiding the bigger returns over the longer haul.  Unless for some reason, you couldn't afford to lose 20% in 2008 or 2009.

My parents retired in 1986 and lived off Social Security and income from their investments (not strictly income, a lot of growth too, as they didn't move everything to fixed income).  They endured three pretty serious recessions (late 80s, dotcom/9/11, and 2008) without extraordinary measures (cashing out, moving everything to muni bonds or something) and it never hurt them over the 20 plus years of their retirement.

Which isn't to say throw all your money in some stupid-ass hedge fund, but if you stay in diversified things of moderate risk, you may eat your hooter for relatively brief periods, but it likely won't matter if you hold fast.  And if you have enough money to live off 1.2%, fuck it, who cares.

[Txzen 498]

That’s a key point. 2008 was disastrous if your really needed the money right then, right now. 

 

[CfRhTxStBobcats 600]

I have some cash laying around and I own some land in a small town. I'm building some mini storage hopefully in January. From what I here it's as close to a can't miss investment there is. I'll let you know how it works out, unless it doesn't. Lol

[Catpfish 618]

I know a guy who owns several non-climate controlled storage businesses in the Central Texas area.  His returns are $3,000 per acre per month for the parking rental (boats, RVs) with minimal investment and $10,000 per month per acre for the storage buildings.  Very little variable cost since he doesn't have to worry about the climate control side.

[Jack Burton 35]

Small cap value index funds or SPY ETFs.

[Celery Man 20933]

Just hammering home that the insulation against market volatility is time.

Emotionally I'd be tempted to sit back for a bit or do the phased buying in to the market discussed above.  But time and time again when I've had that feeling, I've decided "yeah but I don't actually know anything" and have continued to invest/keep my money in play, and I have no ragrets.

[fattyflattie 4639]

On 10/15/2018 at 8:03 AM, Catpfish said:

I know a guy who owns several non-climate controlled storage businesses in the Central Texas area.  His returns are $3,000 per acre per month for the parking rental (boats, RVs) with minimal investment and $10,000 per month per acre for the storage buildings.  Very little variable cost since he doesn't have to worry about the climate control side.

I’m on the west side of Katy/Richmond. There are 5 of the RV/open boat storage type places that have opened in the last few years within 5 miles of my house.  All seem to be about 50% full immediately, and busting at the seams within the first 18 months.  And I just keep watching it happen. 2 have guards/office.  The others are just 5 acre lots with large open end steel buildings and a gate with a code. Printing money. 

[52-80 19147]

On 10/15/2018 at 3:03 PM, Catpfish said:

I know a guy who owns several non-climate controlled storage businesses in the Central Texas area.  His returns are $3,000 per acre per month for the parking rental (boats, RVs) with minimal investment and $10,000 per month per acre for the storage buildings.  Very little variable cost since he doesn't have to worry about the climate control side.

just has to worry about homeless people sheltering up in there

[Red Six 131]

On 10/15/2018 at 8:03 AM, Catpfish said:

I know a guy who owns several non-climate controlled storage businesses in the Central Texas area.  His returns are $3,000 per acre per month for the parking rental (boats, RVs) with minimal investment and $10,000 per month per acre for the storage buildings.  Very little variable cost since he doesn't have to worry about the climate control side.

Increasing property tax and insurance would seem to be a significant variable cost.

[Catpfish 618]

True, but that can be budgeted for very easily.  I was referring more to the variable cost of climate control and the higher costs of maintenance associated with that type of self-storage