401(k) sucks, I hate stocks

[JohnCU]

Originally posted by: BrownTown

Originally posted by: JohnCU
and i don't get overtime except during outages since i was promoted.

see here is the screw up right there, I now alto of people that intentionally took lower paying jobs just to get more overtime (BrownTown makes 1.5X base for OT )

i assume the neutrons and gamma rays have gone to your head, making you refer to yourself in the third person more frequently.

 

[LegendKiller]

Originally posted by: darthsidious

Originally posted by: LegendKiller

Originally posted by: Playmaker
Who says you have to buy a car? If you're too poor to pay cash for a beater to get around until you can save for a decent car, then get a fuckin bus pass. His point is perfectly valid ... needing to take out 5-figure debt to buy a car when you're fresh out of college is the true "stupidiest" (sic) statement made on ATOT.

His statement is retarded. There's absolutely nothing wrong with leverage and, in fact, its a benefit to your life.

Paying cash for a car? Only if the loan is at 8%+.

OP, shove the money in and don't look at it.

I've lost thousands in this market and don't care. I'm not touching it for more than 30 years, in that time the thousands will be regained and I'll have a ton of money.

Time is as good as a diversifier as multiple stocks.

http://homepage.mac.com/j.nors...nce/risk-and-time.html

I know you have some finance related background, so I'd recommend poking around the rest of the website; there's some interesting information (especially for someone like me w/o a formal background in finance, but having interest in it's theoretical underpinnings).

It's all a matter of perspective. Standard deviation won't always increase with time, but can, if enough economic cycles happen. However, even if it did, that doesn't negate the idea that over the long-haul, returns are mean reverting, even if there are short-term standard deviations.

Not to mention he makes the mistake of comparing different time horizons, rather than linking the horizons. A series of short-term horizons will not come up with the same std dev as a single short-term, but will reasonably come out to the same one as the long-term. Given transactional frictions and the inability to guess the market for the average layman, you actually significantly increase your risk for short-term time horizon chaining.

Great site in theory, poor in practice.

 

[JohnCU]

Originally posted by: Engineer

Originally posted by: BrownTown


EDIT: work more overtime..

Mine was cut...no more pay!

(Well, no more workie it either! )

did you have a policy like no OT from 40 to 45 hours but anything over 45 you got paid for?

 

[BrownTown]

Originally posted by: JohnCU

Originally posted by: BrownTown

Originally posted by: JohnCU
and i don't get overtime except during outages since i was promoted.

see here is the screw up right there, I now alto of people that intentionally took lower paying jobs just to get more overtime (BrownTown makes 1.5X base for OT )

i assume the neutrons and gamma rays have gone to your head, making you refer to yourself in the third person more frequently.

BrownTown has a total dose of 0 mrem (because he only goes in unit 2 which is under construction and never run)

 

[Bignate603]

If you wait for the market to turn around you'll miss the big gains. Stocks are on sale right now, they're cheap and will bounce back If there's any time that you want the market to do badly, it's when you're starting out. You fill up your portfolio now, and over the next few years it will bounce back and take your earning up.

 

[LegendKiller]

Originally posted by: Playmaker

Originally posted by: LegendKiller

Originally posted by: Playmaker
Who says you have to buy a car? If you're too poor to pay cash for a beater to get around until you can save for a decent car, then get a fuckin bus pass. His point is perfectly valid ... needing to take out 5-figure debt to buy a car when you're fresh out of college is the true "stupidiest" (sic) statement made on ATOT.

His statement is retarded. There's absolutely nothing wrong with leverage and, in fact, its a benefit to your life.

Paying cash for a car? Only if the loan is at 8%+.

OP, shove the money in and don't look at it.

I've lost thousands in this market and don't care. I'm not touching it for more than 30 years, in that time the thousands will be regained and I'll have a ton of money.

Time is as good as a diversifier as multiple stocks.

Hah, there's a difference between using debt properly and and taking out a 5-figure car loan on a massively decreasing asset. I seem to remember you were a high-powered wall street type, you should know this.

Also, note that I never said there was anything wrong with a car loan in an absolute sense. But when someone complains about the "necessity" of a car payment detracting from one's ability to make 401k contributions, well, that's bullshit, and part of the reason this country's national saving rate is shit.

And if you don't think they roll that subsidized interest rate back into the purchase price, you're naive. Don't let me stop you from justifying your decision after the fact, though.

Again, it all depends. I'll certainly take out a 5-year loan if I think it's a good deal. If I think, over those 5 years, I can make better returns in the market than I am paying for the loan, you shouldn't pay cash.

I agree with you on justification of cars. I don't even have a car, I walk (or take my apartment's shuttle) to and from the train station to commute into manhattan. It's pointless for me to garage a car the whole time. I do also agree that people buy way too much car, they should be far more practical.

As far as rolling the cost into the pricetag, I somewhat agree, but not really. Overall, loan rates have nothing to do with the asset, since they are market rates. Incentives, such as 0%, are usually on the normal price, since it is a sale incentive. You can make the argument that that normal price will include that, but it depends also.

 

[Engineer]

Originally posted by: Bignate603
If you wait for the market to turn around you'll miss the big gains. Stocks are on sale right now, they're cheap and will bounce back If there's any time that you want the market to do badly, it's when you're starting out. You fill up your portfolio now, and over the next few years it will bounce back and take your earning up.

I saw something interesting in the Fidelity (or T-Rowe Price, don't remember which) publication that mentioned that the S&P 500 returned nearly 10% per year on average, but if you took out the top 10 days, it was down to less than 3%. If you took out the top 20 days, it was down to 1+ %. Top 30 was slightly worse than top 20. This is per decade, IIRC. I thought that to be pretty telling, and I assume they did their homework. I could have details slightly wrong....

 

[JohnCU]

Originally posted by: Engineer

Originally posted by: Bignate603
If you wait for the market to turn around you'll miss the big gains. Stocks are on sale right now, they're cheap and will bounce back If there's any time that you want the market to do badly, it's when you're starting out. You fill up your portfolio now, and over the next few years it will bounce back and take your earning up.

I saw something interesting in the Fidelity (or T-Rowe Price, don't remember which) publication that mentioned that the S&P 500 returned nearly 10% per year on average, but if you took out the top 20 days, it was down to less than 3%. If you took out the top 20 days, it was down to 1+ %. This is per decade, IIRC. I thought that to be pretty telling, and I assume they did their homework. I could have details slightly wrong....

?

 

[Engineer]

Originally posted by: JohnCU

Originally posted by: Engineer

Originally posted by: Bignate603
If you wait for the market to turn around you'll miss the big gains. Stocks are on sale right now, they're cheap and will bounce back If there's any time that you want the market to do badly, it's when you're starting out. You fill up your portfolio now, and over the next few years it will bounce back and take your earning up.

I saw something interesting in the Fidelity (or T-Rowe Price, don't remember which) publication that mentioned that the S&P 500 returned nearly 10% per year on average, but if you took out the top 20 days, it was down to less than 3%. If you took out the top 20 days, it was down to 1+ %. This is per decade, IIRC. I thought that to be pretty telling, and I assume they did their homework. I could have details slightly wrong....

?

The point was that timing the market was generally bad because it only took 10 to 20 top day (missing them) to do poorly or miss most of the returns. I was amazed to see that missing so few days (big up days) could cause your returns to diminish so badly.

Edit: It was supposed to be top 10 and top 20.

 

[darthsidious]

Originally posted by: LegendKiller

Originally posted by: darthsidious

Originally posted by: LegendKiller

Originally posted by: Playmaker
Who says you have to buy a car? If you're too poor to pay cash for a beater to get around until you can save for a decent car, then get a fuckin bus pass. His point is perfectly valid ... needing to take out 5-figure debt to buy a car when you're fresh out of college is the true "stupidiest" (sic) statement made on ATOT.

His statement is retarded. There's absolutely nothing wrong with leverage and, in fact, its a benefit to your life.

Paying cash for a car? Only if the loan is at 8%+.

OP, shove the money in and don't look at it.

I've lost thousands in this market and don't care. I'm not touching it for more than 30 years, in that time the thousands will be regained and I'll have a ton of money.

Time is as good as a diversifier as multiple stocks.

http://homepage.mac.com/j.nors...nce/risk-and-time.html

I know you have some finance related background, so I'd recommend poking around the rest of the website; there's some interesting information (especially for someone like me w/o a formal background in finance, but having interest in it's theoretical underpinnings).

It's all a matter of perspective. Standard deviation won't always increase with time, but can, if enough economic cycles happen. However, even if it did, that doesn't negate the idea that over the long-haul, returns are mean reverting, even if there are short-term standard deviations.

Not to mention he makes the mistake of comparing different time horizons, rather than linking the horizons. A series of short-term horizons will not come up with the same std dev as a single short-term, but will reasonably come out to the same one as the long-term. Given transactional frictions and the inability to guess the market for the average layman, you actually significantly increase your risk for short-term time horizon chaining.

Great site in theory, poor in practice.

I've yet to see a convincing argument or explanation for mean reversion. Maybe you could point me to one?

About your second point, I'm not sure what you mean. Yes, standard dev. for a 1 year return vs. say a 20 year return will be different, and I certainly don't advocate moving in and out of the market (which is what I presume you mean by short term chaining). All I was trying to illustrate was that simply increasing your time horizon is not guaranteed to reduce the variation in your final returns 30 years down the road. Therefore, it fundamentally differs from "non-systemic" risk that you can diversify away with multiple stocks. Which is why I didn't agree with your statement that "Time is as good as a diversifier as multiple stocks".

I agree that despite the risks, stock investing is the best way to build long term wealth. However, IMO too many people think that if your investing horizon is large, your risks are non-existent. That I don't agree with.

Again, I have no real formal background in this stuff, so I'm more than open to listening to arguments that could convince me.

 

[Playmaker]

Originally posted by: BrownTown

Originally posted by: Playmaker
Who says you have to buy a car? If you're too poor to pay cash for a beater to get around until you can save for a decent car, then get a fuckin bus pass. His point is perfectly valid ... needing to take out 5-figure debt to buy a car when you're fresh out of college is the true "stupidiest" (sic) statement made on ATOT.

Well unless you both live and work inside a big city you are going to need a car in order to get to work (not to mention everything else in life). And its just play stupid to suggest that you should only pay cash for a car. WTF is the problem with taking out a $10,000 loan for a new car when you make $60,000 a year? Sure it is a depreciating asset, but you are paying it down as fast as it is depreciating so your net worth is more or less staying the same. I mean if as a college student you were able to pay your way through college with no debt and had $15,000+ at the end for a new car then more power to you, but the vast majority of us don't have that luxury. I had $13,000 in college debt and took on $9,000 more for my first car (put my $5000 signing bonus as the down payment), but you don't need to look at your debt level, you need to look at debt/income. For example with overtime I am making like $75,000/year out of college, so where is the problem with having $14,000 in debt?

Also FWIW they don't usually build nuclear plants near big cities, so me and JohnCU pretty much needed reliable cars the day we graduated even if you didn't .

EDIT: and as for the OP, I feel your pain man, my stupid 401K has lost me like 10$ so far in my life ( should be making money not losing it...).

Maybe I'm not conveying my point properly, but like I said in that previous post, I have nothing against a car loan in an absolute sense. For people with the income to treat a car as a luxury item, by all means.

My argument was in reference to the poster that mentioned 401k contributions being difficult when one has a car payment (along with other expenses). I don't know that poster's particular situation, but I do know there are a lot of fresh college grads that finance that new car at the expense of 401k or IRA contributions.

That was the decision I found stupid, and that general mentality has led to our horrible national saving rate. Maybe this is none of my business, or maybe it is given the likelihood my taxes will go to pay for some guy's retirement in 40 years just because he wanted a new BMW every year he couldn't afford (without totally neglecting retirement) rather than a 10-year old civic.

 

[AlienCraft]

Originally posted by: ViviTheMage
look at it long term, not the past few months...

So when they say "past performance is no guarantee of future, all investment involves some risk" they really don't mean it's possible to lose what you put in? Because it is possible to invest in stocks in your younger years, get cleaned out, and not have what you put in, let alone any gains after all.
It happens every day. Failure to realize this will cause loss of capital.

 

[LegendKiller]

Originally posted by: darthsidious

I've yet to see a convincing argument or explanation for mean reversion. Maybe you could point me to one?

About your second point, I'm not sure what you mean. Yes, standard dev. for a 1 year return vs. say a 20 year return will be different, and I certainly don't advocate moving in and out of the market (which is what I presume you mean by short term chaining). All I was trying to illustrate was that simply increasing your time horizon is not guaranteed to reduce the variation in your final returns 30 years down the road. Therefore, it fundamentally differs from "non-systemic" risk that you can diversify away with multiple stocks. Which is why I didn't agree with your statement that "Time is as good as a diversifier as multiple stocks".

I agree that despite the risks, stock investing is the best way to build long term wealth. However, IMO too many people think that if your investing horizon is large, your risks are non-existent. That I don't agree with.

Again, I have no real formal background in this stuff, so I'm more than open to listening to arguments that could convince me.

There was a study I read a long time go discussing it, I'll try to find it. Stocks will, in the long term, deliver value based upon their risk, risk-free, and adjusted returns for your portfolio, temporary deviations from the mean will always occur, since human behavior isn't stable to begin with, but there is strong historical evidence to highlight this.

I would agree that time doesn't cure all. However, when it comes down to a basket of stocks and time, then you're going to do pretty well regardless. If you can smell good value, then even a non-diversified pool will do well. Many investors have shown that going with value stocks with good businesses will deliver long-term value, many investors (Warren Buffet for one) work off of this single premise, ignoring a broad-basket (WB completely ignores tech).

I'd never say the risks are "non-existent", since that's effectively impossible. Greatly reduced? yes.

 

[LegendKiller]

Originally posted by: AlienCraft

Originally posted by: ViviTheMage
look at it long term, not the past few months...

So when they say "past performance is no guarantee of future, all investment involves some risk" they really don't mean it's possible to lose what you put in? Because it is possible to invest in stocks in your younger years, get cleaned out, and not have what you put in, let alone any gains after all.
It happens every day. Failure to realize this will cause loss of capital.

The likelihood of losing all of your money on a diversified portfolio over the long-run is pretty remote. It is always possible, but not very probable. Outside of investing the day before the 29 crash, you're going to be OK, and even then, 30 years later, that pool of stocks would have had decent returns.

 

[Special K]

Hey LegendKiller, could you please respond to my PM regarding asset allocation vs. age to retirement?

 

[LegendKiller]

Originally posted by: Special K
Hey LegendKiller, could you please respond to my PM regarding asset allocation vs. age to retirement?

Yeah, I suck, I know. Every time I sit down to reply I get caught up doing something else. I will try to get back to you not this week (closing a deal, probably going to put 80 hours in this week), not next (vacation), but the following.

 

[ModerateRepZero]

OP, I recommend reading "The Intelligent Investor" by Benjamin Graham. It's a classic read if for no other reason than to learn some rational and logical reasoning with respect to market fluctuations/irrational investing and diversification.

 

[FallenHero]

Originally posted by: mizzou
yeah, I think when I see the market start to turn around I'll talk to an investment manager to see what's best for my situation.

Either way, I HATE the entire idea

It will be too late by the time that happens. You'll be behind the curve.

 

[darthsidious]

Originally posted by: LegendKiller

Originally posted by: darthsidious

I've yet to see a convincing argument or explanation for mean reversion. Maybe you could point me to one?

About your second point, I'm not sure what you mean. Yes, standard dev. for a 1 year return vs. say a 20 year return will be different, and I certainly don't advocate moving in and out of the market (which is what I presume you mean by short term chaining). All I was trying to illustrate was that simply increasing your time horizon is not guaranteed to reduce the variation in your final returns 30 years down the road. Therefore, it fundamentally differs from "non-systemic" risk that you can diversify away with multiple stocks. Which is why I didn't agree with your statement that "Time is as good as a diversifier as multiple stocks".

I agree that despite the risks, stock investing is the best way to build long term wealth. However, IMO too many people think that if your investing horizon is large, your risks are non-existent. That I don't agree with.

Again, I have no real formal background in this stuff, so I'm more than open to listening to arguments that could convince me.

There was a study I read a long time go discussing it, I'll try to find it. Stocks will, in the long term, deliver value based upon their risk, risk-free, and adjusted returns for your portfolio, temporary deviations from the mean will always occur, since human behavior isn't stable to begin with, but there is strong historical evidence to highlight this.

I would agree that time doesn't cure all. However, when it comes down to a basket of stocks and time, then you're going to do pretty well regardless. If you can smell good value, then even a non-diversified pool will do well. Many investors have shown that going with value stocks with good businesses will deliver long-term value, many investors (Warren Buffet for one) work off of this single premise, ignoring a broad-basket (WB completely ignores tech).

I'd never say the risks are "non-existent", since that's effectively impossible. Greatly reduced? yes.

The bolded part is what I don't agree with. Studies like to show nice Arithemetic means of long periods, which show annualized returns having lower standard deviations the longer you average over. However, if you're investing a sum of money today which you want to tap 30 years from now, the variation in the sum you have to withdraw doesn't necessarily go down with time. The variance of a sum of random iid variables goes down as you add more of them. The variance of their product increases with time. Even if some mean reversion existed, I doubt it would be strong enough to get rid of this effect.

 

[LegendKiller]

Originally posted by: darthsidious

Originally posted by: LegendKiller

Originally posted by: darthsidious

I've yet to see a convincing argument or explanation for mean reversion. Maybe you could point me to one?

About your second point, I'm not sure what you mean. Yes, standard dev. for a 1 year return vs. say a 20 year return will be different, and I certainly don't advocate moving in and out of the market (which is what I presume you mean by short term chaining). All I was trying to illustrate was that simply increasing your time horizon is not guaranteed to reduce the variation in your final returns 30 years down the road. Therefore, it fundamentally differs from "non-systemic" risk that you can diversify away with multiple stocks. Which is why I didn't agree with your statement that "Time is as good as a diversifier as multiple stocks".

I agree that despite the risks, stock investing is the best way to build long term wealth. However, IMO too many people think that if your investing horizon is large, your risks are non-existent. That I don't agree with.

Again, I have no real formal background in this stuff, so I'm more than open to listening to arguments that could convince me.

There was a study I read a long time go discussing it, I'll try to find it. Stocks will, in the long term, deliver value based upon their risk, risk-free, and adjusted returns for your portfolio, temporary deviations from the mean will always occur, since human behavior isn't stable to begin with, but there is strong historical evidence to highlight this.

I would agree that time doesn't cure all. However, when it comes down to a basket of stocks and time, then you're going to do pretty well regardless. If you can smell good value, then even a non-diversified pool will do well. Many investors have shown that going with value stocks with good businesses will deliver long-term value, many investors (Warren Buffet for one) work off of this single premise, ignoring a broad-basket (WB completely ignores tech).

I'd never say the risks are "non-existent", since that's effectively impossible. Greatly reduced? yes.

The bolded part is what I don't agree with. Studies like to show nice Arithemetic means of long periods, which show annualized returns having lower standard deviations the longer you average over. However, if you're investing a sum of money today which you want to tap 30 years from now, the variation in the sum you have to withdraw doesn't necessarily go down with time. The variance of a sum of random iid variables goes down as you add more of them. The variance of their product increases with time. Even if some mean reversion existed, I doubt it would be strong enough to get rid of this effect.

And what is the alternative?

This is all relative to other options. To simply say that it's not true doesn't mean a whole lot, since it is true compared to the alternatives.

Of course we never know the future and the most variables added into the formula will increase the variability. However, given that a broad basket of stocks that is globally diversified will in of itself reduce std dev of the portfolio, reducing it down to just systemic risk, which is present in all situations. In that case, in a buy-hold, you're also eliminating the variables of poor human judgment in the face of lack of time/knowledge. That, in of itself, is a huge variable that will massively influence the outcome of the investment in period n. Short-term investing adds far more ids than long-term investing, which is really the point.

For the lay investor, compared to most other options, time will yield much less risk and better returns. It's been proven time and again in various studies.

I could sit around and spread financials for hours, but I choose not to. I am 100% invested in stocks and will be for a long time. I do have a speculative portfolio which I play around a bit, but overall, when I am working 80hrs a week, it's simply not worth my time.

 

[Yossarian]

Originally posted by: thomsbrain
I didn't read the rest of the thread, so I apologize if I'm repeating what everyone else is saying.

This is a REALLY dumb strategy. You are in a unique position to get pure benefit from our current down market. You didn't lose anything when the market went down because you weren't invested in it yet, and if you pile money in now, you'll see nothing but profit when it turns around. Everyone else will be trying to re-gain their losses, and you'll just be gaining. Yes, that might take a couple years and will take patience. There will be more little ups and downs before we're out of this. But "buy low, sell high," means BUY LOW SELL HIGH. What is the market right now? LOW. So what should you do? BUY. Contribute as much as you can afford. Remember that each $100 you contribute only actually takes about $75 out of your paycheck. It's hard when you're young and aren't making much as have so many huge expensive things to save for (car, home, kids, kids college, retirement, etc), but this is the best way to maximize your bang-for-the-buck right now. Every dollar saved now is worth more than a dollar saved later. So keep eating ramen and living poor for a while so that you can live the fat life later.

This is good advice. To the OP, you are trying to time the market which is nearly impossible. The best thing you can do is put 80% of your 401k into a U.S. total stock market index fund, 20% into bonds, and start reading. Go to http://www.bogleheads.org/forum/ and check things out. Read a couple basic books on investing, like The Four Pillars of Investing and The Bogleheads Guide to Investing.

This is a great time for a young investor to buy stocks. Over the years they will bounce back and you'll be happy you bought them now when they're cheap.

 

[PowerEngineer]

Originally posted by: JohnCU

Originally posted by: PowerEngineer

Originally posted by: HaiBiss

Originally posted by: PowerEngineer

Originally posted by: Wheezer
you are young enough to be around when the market bounces back, it always does......just be patient.

QFT The way the tax laws work, it's hard to find a better long-term investment than 401K (and IRA). You should promise yourself -- particlarly now when you are young -- to always max out your 401K contributions.

It is too hard to max out your contibutions, when you have to pay rent, bills, student loans, car payment, and everything else that comes up. Do what you can but, don't make yourself so poor that you are putting things on a credit card instead of paying cash for them. You just lost money that way, 3-5% gain on 401k vs 22% on a cc.

I would recommend that you try to get as much as you can from the match, think of it as a raise it is free money.....

I think I see the problem...

Never borrow money to buy something that goes down in value.

wow hey let me pull out that 10k out of my pocket straight out of college to pay for a reliable car. :disgust:

that's probably the stupidest statement made on ATOT in a while

LOL

Given what's regularly posted here, that's really something!

You might not like what I said, but it's still pretty good financial advice. You might want to read this. Bullet two should look familair.

I'd think that a cheap used car immediately after graduation makes more sense (yes, that's what I did). Need a new car? I don't think so. Want a new car is more accurate. If you must, car payments should be small; not a big factor cutting into savings.

Just my two cents...

 

[imported_Lothar]

Originally posted by: ModerateRepZero
OP, I recommend reading "The Intelligent Investor" by Benjamin Graham. It's a classic read if for no other reason than to learn some rational and logical reasoning with respect to market fluctuations/irrational investing and diversification.

:thumbsup: