Investing and finance thread

[gregf]

I am planning on buying on the dip.  Any sector or stock you think I should look into?

I just realized I have front porch on Taptalk now.   About 5 years ago I took over my moms finances as she went in a home and I sold her house to fund her bills for dementia care. I went to a respected investor some of the guys at work use.  He helped me set up  stock funds through Vangaurd at a risk category of 2 and 3 out of 5  -5 being  most aggressive. Mom didn't have much and I was stressed how long I could keep her in good care. When the pandemic crashed the market,  her money was completely safe.   I got super lucky and timed the dip perfect, moving all her money into the most aggressive fund I could find.  I made a clean 30%  return that year.  Anyhow,  mom passed away last month.  She had the best care all the way through and  few bucks left over for her kids too. 
     As a side note,  the investor told me to not worry about aggressively paying off my house to retire.  I refinanced to a low interest rate and went full in on 401k pre tax for over 50 at 27k a year. The pre tax savings for 401k investing plus the rate of return over saving on a home interest loan have helped balloon my 401k.  At this point, I am on pace to retire at 55 in 2.5 years.   

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[MightyGiants]

I just realized I have front porch on Taptalk now.   About 5 years ago I took over my moms finances as she went in a home and I sold her house to fund her bills for dementia care. I went to a respected investor some of the guys at work use.  He helped me set up  stock funds through Vangaurd at a risk category of 2 and 3 out of 5  -5 being  most aggressive. Mom didn't have much and I was stressed how long I could keep her in good care. When the pandemic crashed the market,  her money was completely safe.   I got super lucky and timed the dip perfect, moving all her money into the most aggressive fund I could find.  I made a clean 30%  return that year.  Anyhow,  mom passed away last month.  She had the best care all the way through and  few bucks left over for her kids too. 
     As a side note,  the investor told me to not worry about aggressively paying off my house to retire.  I refinanced to a low interest rate and went full in on 401k pre tax for over 50 at 27k a year. The pre tax savings for 401k investing plus the rate of return over saving on a home interest loan have helped balloon my 401k.  At this point, I am on pace to retire at 55 in 2.5 years.   

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I am a big advocate of maxing out (or putting in as much as possible) one's 401K.  It's like found money (no taxes taken out).  I mean you will pay taxes down the road, but it will be likely at a lower tax rate.

[Bob In PA]

I just realized I have front porch on Taptalk now.   About 5 years ago I took over my moms finances as she went in a home and I sold her house to fund her bills for dementia care. I went to a respected investor some of the guys at work use.  He helped me set up  stock funds through Vangaurd at a risk category of 2 and 3 out of 5  -5 being  most aggressive. Mom didn't have much and I was stressed how long I could keep her in good care. When the pandemic crashed the market,  her money was completely safe.   I got super lucky and timed the dip perfect, moving all her money into the most aggressive fund I could find.  I made a clean 30%  return that year.  Anyhow,  mom passed away last month.  She had the best care all the way through and  few bucks left over for her kids too. 
     As a side note,  the investor told me to not worry about aggressively paying off my house to retire.  I refinanced to a low interest rate and went full in on 401k pre tax for over 50 at 27k a year. The pre tax savings for 401k investing plus the rate of return over saving on a home interest loan have helped balloon my 401k.  At this point, I am on pace to retire at 55 in 2.5 years.   

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greg: You look younger than your years! And once again, sorry for your loss but great to hear that it didn't hurt your personal finances.  Bob

[MightyGiants]

In my own investing, I bought some banking ETF (they are cheap right now because they got beaten down by the general market conditions) as I believe that the banks will go up as the interest rates go up (which increases the earnings of banks)


Otherwise, I am still keeping my powder dry to see how things go

[Bob In PA]

I am a big advocate of maxing out (or putting in as much as possible) one's 401K.  It's like found money (no taxes taken out).  I mean you will pay taxes down the road, but it will be likely at a lower tax rate.

Rich: I just finished watching some author named Ed Slott who would make the opposite point, one which I can understand but do not necessarily agree with.

He knows the only way for the U.S. to ever pay off it's horrendous national debt is with higher taxes.  He glossed over the point that the most people "make" less money after they retire & no longer receive a salary.

He advises people with a "regular" IRA to immediately roll it into a Roth IRA and pay the taxes (as tax rates presumably are likely to rise) but IMO for the majority of people that's not necessarily a good idea.

I have taken a middle-of-the-road approach and began years ago, after retiring (but long before being required to do so by law) taking a portion out of my IRA every year and paying the taxes on it

Luckily, I have a trustworthy daughter to give it to. Her job is to use it as she sees fit, with the warning that either I or my wife may some day come looking for it, so she treats it as "family" money subject to "recall".

Bob

[MightyGiants]

I will add one more thing.   Greg mentioned debt.   You should look at debt as any other investment.   Compare the interest you are paying on debt with the interest (or return) you can make with your money.  If the interest on the debt is greater (it often is) then pay down the debt rather than invest the money elsewhere

[gregf]

Bob, ( or any others)what's your take on the 4% rule of withdrawing your money?  He's my scenario.  During the pandemic, we had 3 coworkers about 50 all die within one month. A good friend of mine, 50 at the time, up and quit at this point. He and his wife pooled all their money and a plan to draw 7% indefinitely if the past returns continue.
      My plan is to budget 50% retirement with my pension and to draw 5 to 6% from 401k for the rest.  More money comes in when I can collect social security.  Also, if my returns do poorly. I dont anticipate spending  lavishly when I'm 75.   
      Anybody else have advice on withdrawal rate?


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[MightyGiants]

Morningstar has an excellent weekly podcast that has tends to discuss retirement quite a bit.   The formula I am hearing is 4% maybe even 3% (because people are living longer).   If you are willing to take more risk (and get better returns) you can bump it up from those numbers, but there is that risk.

Here is the podcast where they talk withdrawal rates


https://www.morningstar.com/podcasts/investing-insights/149

[Bob In PA]

Bob, ( or any others)what's your take on the 4% rule of withdrawing your money?  He's my scenario.  During the pandemic, we had 3 coworkers about 50 all die within one month. A good friend of mine, 50 at the time, up and quit at this point. He and his wife pooled all their money and a plan to draw 7% indefinitely if the past returns continue.
      My plan is to budget 50% retirement with my pension and to draw 5 to 6% from 401k for the rest.  More money comes in when I can collect social security.  Also, if my returns do poorly. I dont anticipate spending  lavishly when I'm 75.   
      Anybody else have advice on withdrawal rate?

greg: The "basic" (and, I'm afraid, obvious) answer is to try to come up with a plan that does not involve withdrawal of any 401k money until required to do so by law.  Of course, if you cannot manage that, then the next best answer is (also obvious) rather than setting a percentage or trying to devise a plan in advance, just withdraw what you absolutely need each year (but not before you need it). These answers I know are not much help, but there are so many variables and specifics that my very best answer is to consult a financial planner for informed advice (and don't buy anything from him lol).  You can rather inexpensively get a person to map out a general plan for you after providing him with all the details.  Lastly, if you really want to hear what I think (with no experience in this field, I'm shooting from the hip)) start with your life expectancy at the time you want to make the first withdrawal (let's say you actually retire at age 65 and your life expectancy is 20 years, then ADD FIVE years to that (giving you 20 + 5 = 25), now divide 25 into 100 and each year take out 4 percent of whatever the balance of your account happens to be, until you turn the age where you must use the government chart to make mandatory withdrawals, then take the mandatory minimum.  Bob

[MightyGiants]

Bob's advice about professional assistance is a good one, although can be challenging.


Here is a good article that explains who you might want to work with (it's not simple)

https://www.forbes.com/advisor/investing/how-to-choose-a-financial-advisor/

Here is a good link that discusses various certifications they may have

https://www.investopedia.com/articles/01/101001.asp

[Bob In PA]

I like the link Rich just posted, and here's another along similar lines...

https://www.edelmanfinancialengines.com/education/planning-investing/how-to-choose-a-financial-advisor/

[LennG]

Greg

First -- very sorry to hear about your Mom. I know it may not be much, but she was ver y lucky to ahve you for a son, that looked after her as well as you did. God Bless you.

Now, as someone who has been retired for about 15 years--

First, I worked for myself so I have no pension, and not much in an IRA. My wife worked for NYC and geta a small pension, but she has a decent amount of money in her retirement account. WE are definitely no gamblers and our investments have always been on the conservative side. As long as we see a halfway decent return and not lose money to inflation, we are satisfied. We have no outstanding bills and are able to come and go as we please.

That said, I started drawing Soc Sec at 62--I had to. If I was able I would put it off until I was 66, if you fall into that category. Since I just turned 76, I had to start drawing from my IRA at 71 and took the least amount that I was required to take. In fact, last year, when we did basically nothing, all the money that was withdrawn was put into other things as I just did not need it.

We have an investment guy who handles our money. Maybe I shouldn't say this without knocking on wood, but since the market has done so well, I have more money in my IRA, even with the yearly withdrawals, than when I retired. (Not a lot more, but it hasn't gone down throughout my withdrawal period, so I never even bothered to rethink 3%, 4% or whatever. I think you have to withdraw 3% at age 71m but you can reinvest it in other things.

I could never sleep if I were to invest in anything aggressive, but that's just me. I am content with what we have and hope we have enough to keep enjoying ourselves. We look at it this way, each year we get older and our money is still stable and increasing, even slowly, we should be able to spend more as our life expectancy is going down (less years to enjoy it). Thinbgs that once were no-nos because of high costs, are now, well on the radar to enjoy, if you know what I mean.

[gregf]

Lenn, Bob, Ritch, thanks for the feedback. I respect all the views, but I'm going to share perhaps a different perspective.   To start, I have seen too many family and friends not reach 60. I believe most people older than me retire on pensions or ss.  The next generations rarely receive pensions and are expected to retire off of 401k's.  Historically the SP500 averages 8 to 9%  1/3rd of my money is in VPMAX. The 10 year average return is 15% 
Say I have 1 million and I invest poor or conservative and only average 4%  return and draw out 6%    The 2% loss would take 50 years to draw to zero. Of course inflation halves the money every 25 years.  My view is I want a solid 25 year run financially off my investments.  If I'm poor at 80, so be it.   
    Anyhow, 5% of my 401k is expected to be half my budget at 55 when I retire. ( not including ss) I believe I can pace the principle plus inflation.  If I don't, so be it.  I'm super excited to take Lenn and Bob's job in 2 years!

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[MightyGiants]

FWIW I have begun to dip my toes into some of the battered "tech" names. Uber and Netflix are ones I have bought recently around the current levels. My thinking is that while the selloffs could continue in the near term, both have had very big corrections (50-ish percent), and both are companies that I don't think are going anywhere. Both are smart, cutting edge companies that are pioneer brand names in their industries. Not only are they not going anywhere, but I don't think these are companies that will just sit on their laurels and fail to innovate/adapt. On the contrary, I think that is what these two (and other) companies are all about. Obviously, none of what I have said means that the stock price cannot continue to go lower from where it is today -- in fact I think it likely may -- but I do think these are both sound very 3-5 year investments (or longer). I think it is reasonable to speculate that the majority of the "pain" in these moves has played out.

Tech was extremely frothy heading into early-mid Q4 of last year. You had the covid stimulus and the QE/zero rate environment leading people to really chasing moves higher to silly levels in a lot of these stocks. However since then, the corrections have been huge. Moreover the market has become much more realistic and accepting about the reality of fed hikes and the removal of QE. So while again I am not saying these stocks can't/don't have further near term downside, when something that I regard as an excellent long term company corrects 50%, it begins to pique my interest. Should the ongoing downward moves continue, I will likely look to add further in these and other stocks.

While I am certainly long stocks overall, because the environment is skittish, I am continuing to hold a reasonable amount of cash, although my intention is to continue deploying it in certain areas when opportunities present themselves.

Condolences on Netflix

[Jolly Blue Giant]

Condolences on Netflix

Yeah - Netflix took a beating lately thanks to an overly skittish market that tends to overreact to every little thing. Netflix will bounce back as it is a strong company. In general, the whole market is crazy. Companies with 2X earnings over past year go down, another company still in the red goes up. A story comes out on a company and the stock goes up like a rocket (then sells off) or sinks like a rock in a pond. It's been an interesting year so far. Crazy times - especially the tech and energy market.