Hedging 401K accounts

[SimpleMeLike]

the japan argument is the same brain dead argument like what if you bot the qqq peak in 2000... it's the empty handed people looking for excuses.

Exactly dozu888,

The point is the dollar cost average over time (years), NOT a big lump investment at some random price on the chart, and then sit back and hope and wish and chill begging for it go up. NOPE, it takes monthly work over time. Age does play a big role

 

[Deez]

Exactly dozu888,

The point is the dollar cost average over time (years), NOT a big lump investment at some random price on the chart, and then sit back and hope and wish and chill begging for it go up. NOPE, it takes monthly work over time. Age does play a big role

Actually the math says you’re better off investing a lump sum today than DCA over time. But discipline and emotions are two arguments against that for most people.

 

[gmal]

There were no safety nets back in the 1920s. Today in the US, EU and Japan, SS will soften the blow, 401K and IRA will further help frugal savers.

I think the risk is higher if you don't invest in equities.

Who said not to invest in equities or a being frugal saver?

I was responding to the overconfidence to the quote investing all the way to 80% drop with 100% equities. It may workout for younger investor, but not for the ones closer to retirement. Now he has changed the tune 30% to 50% stock and bond at the time of retirement, which is fine.

It is simple math: 80% drop means it needs 500% return from that point on-wards to recover. safety net or not 80% drop asset has happened.

 

[Deez]

“If you can’t afford a 50% drop you shouldn’t be in equities” Maybe you can afford a 25% drop..so be in 50% equities. Common sense.

 

[gmal]

At the time of retirement, noone should be over 50% allocated to stocks. more like 30% stocks and 70% low risk (stable fund or bonds)

Keep it simple and stop bullshitting.

RedDuke,

I want to be a millionaire in 20 (hopefully less) years. My black ass HAVE NO choice on earth but to buy the S&P 500 index every two weeks when I get paid. I max 401K to government limits every year and I buy in another account as well. Where I work at, about 4 people not even 60 years old yet are retiring from work early because of the 30% returns the index provided in 2019.

I would be a damn fool not to invest in S&P 500 index if it drops to 60-80 percent. And I get dividends 4 times a year. Easy money. Ridiculously easy money.

Which one is right? you seem to indicate 100% stock all the way till retirement and suddenly switch over to 30% to 50% stock just before the retirement? What happens one year before retirement stock drops 80% as you suggest?

Who is bullshitting? I don't think you understand sequence of return

 

[dozu888]

It is simple math: 80% drop means it needs 500% return from that point on-wards to recover.

folks should never use this argument.... it's bogus.

if a stock goes from $100 to $20 then back to $100, the amount of money that went out of then back into the market is the SAME... the % calculation is distorted because the denominator is different.

 

[SimpleMeLike]

Which one is right? you seem to indicate 100% stock all the way till retirement and suddenly switch over to 30% to 50% stock just before the retirement? What happens one year before retirement stock drops 80% as you suggest?

Who is bullshitting? I don't think you understand sequence of return

gmal,

stop playing around man. you bullshitting too much.

 

[Cuddles]

damn it...

 

[vincentnyc]

I’m 80% cash and 20% spy. Gonna slowly average it in the coming months.

 

[Sig]

It's not wise to do so unless you will need the money in <10 years. The market is not meaningfully overvalued in terms of the ERP - and rates are only headed lower barring a sudden breakout in the CPI. So while volatility, selloffs etc. are certainly possible, it's not likely that the market will tank lower and stay at those lower levels forever. If SPX did drop 30% you'd be getting a 6% earnings yield, very attractive with bonds and cash at zero. With a long term view you should be hoping for a crash, since your contribs and reinvested dividends will be yielding so much more.

Another good long-term option is to diversify to international equities which might be more favorably valued, especially as the USD is quite strong - however historically these have sold off right along with the U.S. when we've hit a major bear.

If you will be needing the money fairly soon then you could take some risk off the table, and invest in blue chip rental real estate (even if discount rates rise tanking the property's value, your rental income will stay the same so long as the local economy holds up, the neighborhood stays good, etc), or just raise your cash balance - IB is paying 108bps on cash now which compares quite favorably with <150bps on 10 year bonds.

This is a somewhat dangerous line of thinking because it ignores a massive assumption....that earnings and dividends won't be impacted by a 30% drop in the market. It assumes that not only won't the market fall itself impact the real economy, but the thing causing the market fall won't either.
I guess it's possible they won't be impacted, despite the fact that they have in past corrections of that magnitude. However you'd want to make a case for why that would be the case rather than just ignoring something that's crucial to that line of thinking.
It's hard to model and even harder to intuitively predict the impacts of interconnectedness, so our brains tend to discount it or pretend it's not there at all. IMHO that's the reason so many predictions and more importantly their error bars (if the predictor is sophisticated enough to provide them) are so far off.