Wanting to Begin Investments

There's more to financial security than investing, but investing is critical to the success of your future.

So, low cost investing is simply smart. Vanguard is a historical low cost leader, and at your age Roth is the type of investment to look at, maybe even in their Total Stock Market. You have time to ride the ups/downs of investing.

There may be other investment types that work better for you if you employ at a company that has a 401 type program and some % of matching. But you're not there yet.

Being/staying out of debt is the number one goal. And there are other financial objectives as well. But saving when you can is a good thing, and younger is better.

Find a calculator. Pick an amount of significance to save between now and 30, then stop saving, assume some returns, and see what you have at 70.

Then save that same amount from 30-42 (in your case), use the same assumptions and see what you have at 70.

Time is your friend.

 

Guess we'll agree to disagree then. Right now, the FANG stocks have skewed the market, and all these banks and investment firms are upgrading these stocks causing people that don't really know what they're doing to piling in. How often are so many stocks at all time highs at the same time.... the goal is to buy low and sell high, not buy high and hope for higher.

 

Sure if you are a short term trader. In 40 years even if you time it perfectly what is the difference between buying the Dow at 19k vs 21k? Not a big difference.

Even the best with masters degrees in finance etc generally don't beat the market. Timing entries and exits short term is a fools errand unless you are getting paid client money to do it for them IMO.

When we are talking in terms of retirement I just buy at all levels. Sure there are times when it keeps going up and will surely come back down, but there are also times when it keeps going down and will come back up. In return you get a nice line that matches exactly the market average return when you are done, which is good enough to get me to where I want to go.

 

The flaw in your thought process is opportunity cost (which is much more expensive than buying a stock that's overpriced)

I agree you can't time the market, however, you can ensure you're not just blindly buying stocks but rather reading the signals the market is giving you. When you have cash, there is no rush to buy a stock.

 

That is where the interest rates I mentioned in my first post come in. What opportunity cost? A cd at 1%? Simply just not losing anything? Precious metals (which I happen to think aren't a bad buy right now, but that is a different conversation)?

My point is that if the opportunity cost is almost nothing, which it is, and you can't time the market short term, what does that leave you with?

Any way around I'm content with agreeing to disagree.

 

Opportunity cost meaning you've tied your money ( which is in finite supply ) into a high priced stock market, and when the time comes when the market is at a low, you can't buy. Missed opportunity is what opportunity cost is. Time is opportunity cost.

You can't time the market but you can not buy at record highs.

What your doing is the whole dollar cost averaging that all those financial advisors, banks, etc push cause that's where they make their money. They push the little guy to keep buying, while they themselves have already bought at a lower price, thereby pushing their investment higher. Thing is, they'll pull the rug out from under you and leave you holding the bag.

 

Ah I see what you mean, that is not how a textbook defines opportunity cost. Any way agree to disagree, we are both better off either way than the 50% or so of Americans that don't invest at all.

Just out of curiosity, I would bet you have been saying this since the Dow hit about 18k?

 

The definition of opportunity cost in layman terms .... the cost of missing out on an opportunity cause you were stuck doing something else.

My motto: Don't be a bagholder.

 

You know just enough to be very dangerous to your own finances. I am good friends with someone just like you, and he is more often on the losing end of his trades than not, all while he missed one of the biggest rallies in recent history. That is an opportunity cost and a half right there. Funny thing is he has that superiority thing going too like he knows what is going to happen next.

I'm not gonna pretend to know more where every peak and trough is, I have no idea, and neither do you. I have seen studies about your kind of trader and missing rallies tends to cost them more than catching their golden opportunity once in a blue moon. Either way this isn't the place to hash this out, if you want to PM me to discuss finance I'd be happy to. Peace out.

 

Actually I've ridden this wave in the market from 2010 up til earlier this year. I sold all my equities at inauguration earlier this year and now just sitting on the sidelines in cash waiting for the crash/correction/crisis. I daytrade now and then, but I'm more than happy to wait til the next "huge event" before I go long again.

Worst feeling is being a bagholder, and seeing an opportunity and not being able to pounce on it.

 

I'm within reach of retirement and the money I put into Wealthfront was some cash I'd received in a settlement that had been deposited into a savings account for several months. My primary aim was to get more out of it than the pittance I was being paid from the credit union, and to have it available if I decide to do something with it. My point was that robo advisors are marketed toward people like the OP who may be more comfortable with an automated approach than are many older people, such as those in my age group. Being an IT guy, I appreciate what robo advisors bring to the table in terms of convenience, even if the investment options aren't all that flexible.

As far as my brokerage account, it's done better in the past, but I'm about ready to cash it out and pay off most of my mortgage. I pay so little in mortgage interest that next year it will be more effective to take the standard deduction than to itemize.

You're right that it's hard to beat the market while it's going up, but investing isn't only about trying to maximize returns in a good market, but also hanging on to your assets in a downturn. I have yet another account that's managed for that primary purpose while making a better return than having it sit on the sidelines.

 

Good call getting rid of the mortgage as you are going in to retirement. That is almost always the right move.

 

I mean if its such a bargain such as stock were after the last two crashes, you might as well leave what you had invested there, and buy on margin what you want to buy if there are so many bargains on the market. Then by the time they go up sell half to cover the margin and then hold the rest as the "house's money".

 

Hope you realize how dangerous buying on margin is, and what factors into that. Just the interest rate alone for margin (~ 6-9%) should deter anyone from going that route. You can defeinately go broke using margin if you're on the wrong side of things a step nothing in the stock market is a guarentee.

 

Me too.

Hi @scottalot from 18 months ago

 

We do agree on something! Haha. Buying on margin is right up there with shorting. There was a story floating around on the internet, so who knows if it is true or not, but this guy with about 40k in his account decided to short a couple dollar stock. Some great news came out for it and it tripled in after hours. His brokerage closed out his position and he owed them over 100k. I think he even had a go fund me. I have no sympathy if it is true though.

Found the story. It was up 8x. https://www.google.com/amp/www.marketwatch.com/amp/story/guid/18CF8EE8-8ED0-11E5-87B6-3CB893D25A7F

 

Woah......

*stashing that lesson away for future review*