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I've taken to doing some (small time) stock investing since November of last year. It seemed like a really great time to get in.
However, I've been running into a lot of skepticism to downright "you're obviously going to fail and lose all of your money" sentiment from a wide group of people.
Another friend of mine and I were talking about it and he was talking about how he viscerally wants to invest when the market is doing well and wants to stay out when it is doing poorly.
I was wondering what people's perspectives were. Does investing in stock (currently and over the past 6 months or so) feel like a good or a bad idea to you?
Posts: 10177 | Registered: Apr 2001
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posted
My "gut" tells me that this is a great time to invest. I think we're going to level off for a while but then have a huge boom in 3-5 years.
Some big new industry (like the internet) is going to take off, and I'm betting that once again America will lead the way.
The only way I see now being a bad time to invest is if America is truly a "declining empire". Even if it is, I think the stock market will level off at worst (barring war, nuclear exchange, plague, etc).
Posts: 5656 | Registered: Oct 1999
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While you stand to risk losing potential profits, waiting until there are more signs that the recession is over seems an overall safer way to invest. Stocks have fallen so far across the board that you could still stand to gain a lot if you wait until they regain 1/4th or even 1/3rd of their pre recession value.
Having said that, the only reason I am not investing right now is that I don't have funds to set aside for such a worthy venture.
Posts: 14316 | Registered: Jul 2005
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quote:While you stand to risk losing potential profits, waiting until there are more signs that the recession is over seems an overall safer way to invest.
Of course the more people who wait for the stock market to go up before they invest, the less the stock market actually goes up. Funny how that works. If everyone gets over their fear and starts investing again, then it will start going up.
Posts: 5656 | Registered: Oct 1999
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quote:Originally posted by MrSquicky: I've taken to doing some (small time) stock investing since November of last year. It seemed like a really great time to get in.
However, I've been running into a lot of skepticism to downright "you're obviously going to fail and lose all of your money" sentiment from a wide group of people.
Another friend of mine and I were talking about it and he was talking about how he viscerally wants to invest when the market is doing well and wants to stay out when it is doing poorly.
I was wondering what people's perspectives were. Does investing in stock (currently and over the past 6 months or so) feel like a good or a bad idea to you?
I've been doing the same since October. Very "small time" because I have precious little to spare for it, but with stock prices off 30%-60% or more from their 5 year average, I couldn't pass up the opportunity.
I get a lot of the same feedback, but I don't really understand it. Buying low is the point isn't it? Sure, it feels great to "ride the wave" when everything is going well, but your returns are limited unless you're dealing with large amounts of investing dollars. And even then, you could be making a lot more if you buy the undervalued options.
So far, my overall portfolio is up 20%. I'm happy enough for now.
Posts: 382 | Registered: Jan 2008
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Yeah, my portfolio is flirting with crossing 100% up right now (Ford's Q1 2009 results this morning were very helpful), but I've had people who otherwise seem to think I'm a very smart guy treat me almost with derision because I'm investing.
Posts: 10177 | Registered: Apr 2001
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posted
I've been trying to get over my nervousness to invest since January (and I'm very happy that I didn't totally lose my nerves and sell anything at any point. March was very good).
I think a consistent constant investment plan through the lows and highs is a worthy goal but I find myself having difficulty balancing that against the temptation to create a bigger emergency fund in the case of lay-offs and the like.
Also, over time, I've learned that the market can be extremely counter-intuitive. When I was investing in China in 2006 people were like "Holly heck, are you crazy, there's a bubble and the North American banks are so much safer."
Well, its been a wild ride but my (still admittedly tiny) Chinese investments are positive while anything touching (unfortunately larger) the US stock market has been quite injured. Thats just one example and I still diversify but I place little faith in my ability to predict short-term trends ... I think that might be healthy.
Posts: 7593 | Registered: Sep 2006
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I am not an investment broker. Please do not consider this investment advice.
I have my 401k maxxed and recently put in my max contribution to my roth IRA.
I'm also looking to move more into my non-retirement mutual funds.
My hubby has recently bought into a gold fund.
...
If you buy after the market has been going up for a while, you're buying high. If you buy after the crash when things are stabilized, you're buying low.
You'll never buy at the absolute bottom; you'll never sell at the absolute top. Just try to get reasonably close.
...
What Hubby and I anticipate is a gradual recovery in the market followed by an inflation-powered boom. That is, a boom that is not in Real Dollars, but in Inflated Dollars. We have a huge deficit, they're going to have to print money to get rid of it.
Any money kept in savings will be inflated away, however diversification is key (keep SOME money in savings/bonds) because no one has a crystal ball.
Posts: 7085 | Registered: Apr 2001
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quote:Does investing in stock (currently and over the past 6 months or so) feel like a good or a bad idea to you?
I think the important question is how long you are investing for. If you are investing now but plan to sell in 1-5 years, then you should be worried that this recession might keep going down for a while. In that case, I'd say investing now is pretty risky (but still probably more likely to pay off than not, since most recessions don't last many years and the market is already pretty low). In the short term, it's hard to say how long the recession will last.
If you are investing and planning on keeping your investments for 10-20 years or more, then you don't need to worry about whether this particular recession is at its low point. In that case, the thing that really matters is whether the stocks will eventually go up over the next two decades. If the future is consistent with the past hundred years, stocks will likely go up significantly over a 20 year period, meaning an investment would be pretty safe.
The other important question is what you are buying stock in. If it is a single company, then you need to make sure that company is sound - even in a good economy, unsound companies can go bankrupt.
What I don't think is important is what other people feel right now. The stock market tends to be a measure of how good of an investment people think stocks are. At low points, people always more often tend to think that buying stock is a bad idea - that's precisely why the price is low! I think the lowest points tend to be those cases where most people think investing is a stupid idea and have given up on the market, leaving mostly only buyers. So rather than basing it on public sentiment and feelings, I think its better to base your decision on the facts of your situation and the companies you are investing in.
That's just my view of it, though.
Posts: 8120 | Registered: Jul 2000
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Yep, index funds (not actively managed mutual funds) are still the best long term investment vehicle available.
Posts: 15770 | Registered: Dec 2001
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I've been told by people who know more about this kind of thing to expect 2009 to be the worst year since the Depression. Which is... great. Perfect market to graduate into.
I think it's way too early to start investing, given that we still don't know the full effect of this thing and Obama's stimulus has been criticized by the likes of Krugman for being too small and ineffective.
Posts: 3293 | Registered: Jul 2002
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The stock market typically recovers before most of the rest of the economy. Also, it will not be possible to time the uptick; the stock market, when it recovers, will increase dramatically, gaining quite a bit in a short period of time, far too quickly for the typical investor to react and move their money, even if they realize that it is the start of a recovery right away.
Waiting to put money for long term investment into index funds is a bad idea.
Posts: 15770 | Registered: Dec 2001
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posted
I found one problem when I dabbled in the stock market. First, you have to know what to buy. Next, you have to decide when to sell. Frequently a stock will move substantially in a relatively short period of time. You need to have the diciple to 'pull the trigger'.
I had a stock I bought for about $40, at one point is was up to $85, but I though it might go higher. I blew it off for a few days, and it has already fallen before I had a chance to sell. Today the stock is worth about $4.00.
You have to stay on top of stocks and you have to be decisive. You have to sell knowing it might go up, and you have to be willing to buy even knowing the price might go down.
Many people who deal in stocks are deep in the market, is a broad and not illegal sense, they make their decisions based on insider information. Information, that by the time it gets to the general public, all the big boys have already made their move.
It is difficult to track all the information on all the stocks and companies, and know how to react in time for it to matter. You've really got to be on top of it several times a day, and again, most important of all, you have to be decisive.
I finally got out to individual stock and got into a variety of mutual funds. The up side is not as high, but the down side is not as low. On average I'm down about 25% in this current recession. I easily have reserver resources that let me ride it out.
posted
I have a brokerage account, but I haven't been investing in individual stocks because I don't have the extra time to spend paying attention to it. Rather, that isn't how I want to spend my extra time.
I just put everything that is long term into an index fund. All things considered, I would get a better return if I took my lunch to work every day instead of buying half the time because I'm lazy than the return on the small amount I'm willing to play with would be.
Basically, put the same amount, as much as you can, into an index fund on a regular basis (weekly, monthly, every January, whatever) and you'll do better long term than everyone. Everything. Unless you are one of the rare breeds (Warren Buffet) and you spend your days in research and have an iron stomach, your return will be better than it ever would be otherwise.
If you are doing it for the game, then that's fine. Some people buy ski boats, some people play video games, and some play the market. That's fine.
Posts: 26077 | Registered: Mar 2000
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If you want to have individual stocks for the long term, just understand it is an extremely risky investment; a long shot that might pay off, but most likely won't pay more than the same amount in index funds in the long term.
If you want to day trade, learn how to day trade. It is complicated, and requires setting up trades to manage your risks (guaranteeing no more than certain amounts of losses on any given trade, basically, by stops and the like). You can make money day trading, but only by spending a lot of time on it; you're one of the people generating liquidity in the market, and because of that you're able to eek out a small margin in reacting before the market reacts fully. There's no point in just dabbling in it other than entertainment value, and entertainment costs money.
There is no good reason for a normal investor to buy into any non-index (really, non-very-low-fee) mutual fund, absent restricted choices in a 401k or the like. Index funds usually outperform other mutual funds in the long term before taking fees into account, and outperform mutual funds in the long term consistently once fees are taken into account. Being into mutual funds is just transferring some money you could have had to the owners of the fund company in exchange for not having it.
edit: exactly, katharina, and one of the reasons Buffet does well is that when he invests, he also becomes directly involved in the company invested in (influencing how they run things).
Posts: 15770 | Registered: Dec 2001
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