401k question

[SheltieLover]

Hi All,

I know absolutely nothing about investments. 😊

That said, given the tRump virus, would it be wiser to dump money into CDs or bonds & stocks? My gut is saying CDs.

Thank you in advance!

[brush]

1. Not CDs now. Interest rates are at historic lows. Look into money market funds, ETFs, index funds.

[SheltieLover]

3. Yes, but

100% secure.

[Shermann]

5. Instead of one or the other, think in terms of balancing your portfolio with a portion in CD's nt

[SheltieLover]

8. Tyvvvvm!

[SheltieLover]

27. TYVM!

Will do.

Im just afraid its all going to melt down.

[progree]

28. It will be OK. Trump is the self-proclaimed Debt King. We've got lots and lots of debt

Last edited Sat Aug 1, 2020, 09:53 PM - Edit history (1)

so it'll be perfect.

On a related subject, they used to say that "earnings drive the market". Not anymore apparently. Now its unlimited borrowing by corporations and unlimited money creation and government spending at deficit-tripling levels, along with FOMO (Fear Of Missing Out) that drives the market:

Q1 S&P 500 Earnings per share:
2017 Q1: 27.46,
2018 Q1: 33.02,
2019 Q1: 35.02,
2020 Q1: 11.88 😲 👀
https://ycharts.com/indicators/sp_500_eps

We don't have the full Q2 earnings yet. But likely to be a lot worse, given that Q1 GDP declined by 5%, and Q2 GDP declined by 32.9% (both on an annualized rate basis. The actual GDP drops were Q1: 1.3%, Q2: 9.5%). So it would be pretty much impossible for Q2 earnings to be anything but a lot worse than Q1 earnings.

But stock market is doing great anyway, S&P 500 is down only 3.4% from its all-time high as of Friday 7/31/20 close.

[SheltieLover]

29. Im sure

They can't keep propping it up forever.

[Fiendish Thingy]

14. You have a bigger risk of running out of money in retirement than losing it in the market

Especially if you are a woman, as they live longer.

See my other post below- a balanced, diversified portfolio will protect against market volatility and inflation, which is essential in any retirement strategy.

[question everything]

26. As are money market funds. And are easily available. With CD I think you may have to pay

a penalty for early withdrawals.

[Shermann]

2. What are your timeframes?

The markets are behaving quite irrationally. I've been predicting a W-shaped recovery for a while but it keeps looking like a lopsided V. Today was pretty rough though, perhaps this is the long-awaited slide back down.

[SheltieLover]

4. I was thinking

Lock $ into CDs for a year to give Joe time to start straightening things out. (?)

[brush]

6. That might be wise to see what shakes out after the trump debacle is over.

[SheltieLover]

7. Tyvvvvm!

[SWBTATTReg]

9. My broker said that it was better to wait until things shake out until after the elections

November 2020, so I'll expect that a lot of people will be sitting on the sidelines until the POS is gone. Which is fine w/ me, I didn't really want to do too much anyways with my stock positions (leave alone) AND some of the stocks are paying pretty decent dividends (I had looked earlier this year/late last year, there wasn't really very many stocks w/ a decent rate of return on dividends, and w/ the trump downturn in the markets, some of these stocks are getting better priced / thus resulting in a better dividend rate for your positions.).

Good luck! One thing to remember, is that this is for the long term (it's a 401K), and the money / funds invested in 401Ks will have to stay in the 401K until you are of age (59.5 years of age or older I think). If you withdraw early, you'll have penalties.

There has been talk to eliminate 401K programs by the Congress (the republican controlled Senate) since they're (ironically enough) trying to scrap up money (in effect stick it to you and I and not their billionaire buddies) to 'pay for things'.

In my humble opinion, why don't they rescind the tax cuts of 2017? This would be one way to pay for the massive federal debt caused by the 2017 tax cut and jobs bill (ironically laughing here since rump wiped all of the jobs out all by himself and his actions), but they won't, being that this unneeded bill was to reward their donors.

[SheltieLover]

11. Tyvvvvm!

We can't dump the chump soon enough!

[brokephibroke]

10. I'm sure there is a target retirement fund option

That is a good choice. The only place you can get any yield right now are stock dividends.

[SheltieLover]

12. Thx so much!

I don't even know what those are, but that's ok. 😊

I found a financial advisor who is really good & she recommended a global mix of stocks & bonds. But none of it would be 100% safe.

I fear at the rate chumputin is going, the market will crash.

[UrbScotty]

15. Target funds

Target funds are associated with a certain year in the future ("target 2035 fund", for example). The idea is that you invest in a target fund for a year that is close to when you plan to retire. So if you plan to retire in 2028, you might invest in a 2030 fund.

The farther way that year is, the more aggressive the fund's investment strategy is. As the target date gets closer, the fund takes a more conservative investment strategy.

[SheltieLover]

18. TY For explaining!

I'm just trying to keep what I have. 🤣👍

[Fiendish Thingy]

13. Get a good advisor (fee for service, not commission) and tell them your goals/needs

A diversified, balanced portfolio will withstand the volatility of the market.

We just retired this past year; our portfolio weathered the crashes of 87, 01, and 08.

When the Dow was down 30% in March/April, ours was down just 4-5%. Now it’s up 11% YOY.

With interest rates near zero, CD’s are unlikely to beat inflation unless you’re willling to lock up your money for 5+ years, and even then that’s a maybe.

Seriously, talk to a trusted advisor who doesn’t work on commission and can offer you a wide range of products, not just in house funds.

[SheltieLover]

19. Ty so much!

[JudyM]

22. I've been trying to find one of those, a bit of a challenge.

[Fiendish Thingy]

23. It Often depends on how much you have to invest

Once you’re over $100k, the advisors will come find you.

In the US, we use Ameriprise, but you need to specify that you want a fee-for-service, non-commission advisor who is a licensed fiduciary, not just a CFP (certified financial planner). They charge us $700 per year, and do an annual plan with graphs, etc. Showing our goals, if we are on target, etc as well as the performance of our portfolio.

If you are in California or Nevada, let me know, I can send you the contact info for our advisor.

In Canada, we were pleased with Raymond James, I think they might have branches in larger US cities.

[JudyM]

24. Thanks.The ones I've contacted all want the money moved to their institution, don't want to do that.

Also we just want a point-in-time plan review, rather than ongoing advising.

[Fiendish Thingy]

25. Ah, I see. Then yes, you may have a harder time finding someone. Nt

[BigmanPigman]

16. Wise words from my financial adviser...

Don't put all your eggs in one basket...diversify! (my dad was my advisor). He managed my money without greed but with security and low risk in mind. He said to keep everything as it is during tRump's ups and downs with the economy. It is too crazy to move money around. I don't make a bundle but I also don't lose a bundle either. He passed away a year ago and I am keeping everything as it was as far as investments go. I only need to go a little while longer so I should be OK, unless the ACA is killed. If that happens all my savings and assets are history.

[brokephibroke]

17. Same boat

The ACA goes away we are all screwed financially, especially those of us who don’t want to work until we are medicare eligible.

[SheltieLover]

21. Absolutely!

Must dump the chump!

[SheltieLover]

20. I'm looking at

All the impending evictions & blue chip stock companies that, imho, are going to take big hits: airlines, oil, retail, restaurants, etc.

[PoindexterOglethorpe]

30. The only thing I will add is to point out that trying to time the market

is a fool's game. The main gains and losses in the market occur in something like five or seven days of the year. A remarkably short time.

Invest in a diversified portfolio. Either do research on your own or, after talking to several or many people, find a manager you can trust. Don't sell in a panic when the market drops. If anything, buy more if you have the cash.

I'm speaking as someone who has been in the market for about 45 years now. I've weathered lots of ups and downs and essentially have more money than ever. I've taken money out of my account to open a business that failed. Darn. I took money out for a down payment on my current house. Good. I happen to have an excellent financial advisor whom I trust very much. He's honest to a fault. I am far away from his most lucrative client and he's always available to me.

I will add this. Several years ago he got me to put part of my money into two annuities. I know that annuities have (an undeserved) bad name here, and I don't understand why. I started taking income from those annuities about a year and a half ago. I got a monthly payment from each, and if I die and the value of the annuity is still positive, my heir gets that money. It might be nice to live long enough that the value is negative, meaning they are paying me money I didn't give them, but I won't fret that. I have a guaranteed income for life and possible inheritance to my survivors.

There are lots and lots of ways to invest your money. Please do a lot of reading on this topic. But I will point out, as others have already, that CDs or bonds right now are no better than stuffing cash under your mattress. Do keep in mind that stocks have, with almost no exceptions, been a much better investment than bonds or CDs. By a lot. Again, diversification is crucial.

And sincere good luck to you.

[SheltieLover]

31. Thank you!

I appreciate you taking time to explain.