Warning Family about the Economy

[cdcolvin]

Quote from babe714:

Our 401k advisor held a meeting with all us plan participants recently. Told us he likes it when the market goes down because you can buy shares cheaply. He personally is 90% invested in stocks. Put up a graph showing time length and depth of decline for all the bear markets from 1980 till june of 2008. Looked pretty encourageing actually Then gave us the big spiel on dollar cost averaging.

SNIP

For a long time buy and hold strategy, DCA can work. It's especially useful for someone who's in their 20s and 30s. A lot of mutual fund companies look back only 50 years when talking about best and worst case scenarios. If we look back to 1929, if someone had invested $100k into the DOW in October, not counting dividends, it would have taken until 1952 to recover that money.

All joking aside from my previous post, last November I took our family out of the market and went into the sweep account. Been DCAing into value stocks, and pruchasing DXD whenever the market has a 400 point gain in one day.

We've stopped spending on anything unless it keeps a roof over our heads.

Hope this helps.

 

[Diamond Geezer]

"spread hope not fear"?

Just wish things away?

It's amazing that most adults did graduate from high school but can't engage in a rudimentary economic debate. Try discussing the economics of the auto industry with your average person. It will turn quickly to "well, we can't lay off all those people".

They are already on welfare and we are paying, the bill just hasn't arrived yet but it will and the longer we wait the bigger the bill will be.

Ask people about the Bush tax cuts. Further ignomy. Milton Friedman brilliantly said "a tax cut without a spending cut is not a tax cut". So by that measure we actually got a tax increase over the past 8 years.

We get bad government policy because of widespread willful stupidity and ignorance among the sheep.

In Barrons last week it was pointed out that if the Federal Reserve were a commercial bank, it would need to access the TARP! (it's balance sheet is blown to s***.) Bring that one up at the dinner table and watch the blank stares.

Someone once summarized this well by saying "if you think education is expensive, try ignorance."

 

[fearless9]

Quote from Diamond Geezer:

"spread hope not fear"?

Just wish things away?

Interesting comment.

I have often wondered if the market for "positive thinking" was aimed at fearful people on a rising market.

The alternative is a balanced view and as close a sense to reality as one can muster.

regards
f9

 

[Port1385]

Buying and holding combined with dollar cost averaging does work, but you have to know what to buy and hold.

For a 401k investor, I would encourage someone to look at the VIG, VWELX and VBMFX. The VIG comprises components of the Mergents Dividend Achievers Select Index. The VWELX is a balanced fund. The VBMFX is the total bond market index.

I would go with the following routine:

- VIG - 60%
- VWELX- 25%
- VBMFX- 15%

You would be down in the above portfolio year to date, but not as far down as some others.

All of the above funds pay out a dividend so the loss is minimized. I believe now is a better time then 12 months ago to start placing contributions in a 401k, however, I still feel there is a chance that the market will sink lower.