If anyone claims that stocks are too high they likely have been blaring the same message for months–if not years. It is not possible to predict even the next day movement in stock prices—one can make guesses, but that is all they are — guesses.
Today the rally marches on–for no particular reason other than there are still more buyers than sellers and the FOMO is very strong for folks who have CDs and treasuries maturing and just want a piece of the action. On the other hand no one will be sounding the bell when markets hit a high and some black swan swoops in and slaps investors down reminding them that markets go both directions. Obviously we had an example of this only weeks ago based on a singular data point.
The amount of money available to move into equities remains massive and growing larger week by week as folks earn fat interest payments (relative to zero). Trillions and trillions of dollars are available—not to say this will be all moving to equities, BUT once Fed Funds rates are cut we are likely to see meaningful amounts move.
I continue to have sizable balances in money market funds because they are paying me better than CD rates–my money market is paying around 5.3%.
Today I watch – that is all. Watching is sometimes the best thing to do.
Until the stock market risky assets return to the long term MEAN…The golden decades continue for now. Long live the bull….
Equities are easy, fixed is hard. Why anyone really needs more than an index for equities in terms of growth is a difficult argument. And market timers, often prevalent on financial forums, never seem to learn. In the short term anything can happen but over time the market will follow earnings and earnings growth.
I can’t imagine what your motivation could have been to explore III…
2whiteroses, There are different strategies to investing and one of the ones talked about most often is just investing in a fund or ETF that follows the S&P 500. I work with a 22 yr old who bought 80 shares of NVDA at 98.00 last week in 40 yrs this young man will be 62 plenty of time to allow for growth and to recover from his mistakes. My wife did similar to this for 30 yrs and ended up with a 7 figure + nest egg. I think Tacitus is young enough to enjoy compounding of his investments. On the other hand both my wife and I would be over 100 in 30 or 40 yrs. I prefer a secure income for our sunset years. Just two different investing strategies depending on which cycle of life you’re in.
This gentleman can learn from hanging around with us seniors.
Oh my. I am a retired senior, which is why am looking more at fixed. Have explored dividend investing, still do, and some speculation and BDCs. But for equities it is very very hard to beat the index over time. Now can always find an apparent exception at least for a while, such as someone who bought Apple early on-have some too- but good luck to all. And if your non index equity portfolio performance is in fact beating for instance the S&P 500 index over various significant time frames more power to you. But maybe we all have something to learn.
OK, T… I think at least to me, you left the wrong impression which you’ve now cleared up a bit… I thought your point was why bother with fixed income at all when buying equities is an easy one way street to economic heaven…. Now I think your point is one of how the best path to basic success in equities is thru an index fund as a base as opposed to dabbling in individual stocks. IMHO that’s always good advice for those just entering the world of investing in general… I’ve suggested the same for all my grandchildren who just received a nice lump sum inheritance in honor of their Grammy. Put a base amount into an index fund and fuhgettaboutit. Then once you see how it builds over time, branch out into Peter Lynch like “buy what you know” individual stocks to grow your knowledge around stuff familiar to you… So it’s not so much why bother with fixed income when it’s always so easy to make money in equities at all times in the history of the world – it’s how easy it is for the young with so many years ahead of them to be able to ignore any temporary setbacks to base their equity investing in an index fund first then build around that… There’s a place for fixed income for all investors, and most likely it’s appropriately bigger for we old fogies who most frequently are those who frequent this site…. Apologies to you youngn’s who’ve joined us here, appropriately.
I guess I too am a young’n- retired for over a decade– as is Tacitus ( not sure that registered) 😉
Tacitus…… You are right index investing is easy compared to fixed income investing. Fixed Income investment requires you to invest some time and is not easy at first. If you stick with it though it gets easier and you will begin to enjoy your time spent. My story………. For the first 35 years of investing for retirement I contributed annually to my Vanguard account. I had one account there which was 100% invested in guess what!? The Vanguard Index 500 fund! Yes, it is extremely easy to the point you only think about it occasionally. Two things happened though, I got older, began thinking about income rather than capital gain, and also began reading about the huge runup in housing leading to the great financial crisis in 2007 -2008. I decided to move out of the S&P 500 index fund and into government securities after the credit freeze in August 2007 when I got the chance. The world’s central bankers stepped in and really opened the taps to unfreeze credit and the equity markets roared, giving me the chance to flee to Ginnie Mae securities. When the dust settled in 2009 I started reading about fixed income investing and eventually stumbled onto Tim’s first blog before this one. I now own nothing that doesn’t pay a dividend of some sort. I own mostly preferred stocks and baby bond type equities except for some dull old public utility common stock. Yes, fixed income investing is harder but quite rewarding! The first preferred stock purchase I made was for $500 and I didn’t sleep well for a week afterwards worrying what I had done. A decade later I don’t blink to buy $25,000 worth and sleep well at night now. The payout of fixed income investments is far greater stability and you can easily eat the dividends without selling anything you own. It comes back quickly, every month or quarter. Capital Gain does not digest nearly as well as you mostly must sell something and there are times your portfolio will shrink in value.
Dj well said and thanks for going in depth on your experiences. Similar here, I saw the collapse coming and moved my wife and myself out of equity funds into bond funds. When the bond market froze up I wasn’t worried as we were at least 10 years from retirement. Then in 2012 we rotated back out of bond funds into equity.
Several issues between growth and income investing. My parents grew up in the depression and were retired when the GFC hit. They were very worried about losing their life savings. My dad had a pension and SS but the pension was with GM and the United Auto workers which added to their stress. They lived long enough for their investments to recover.
My wife retired right after Covid hit and was in equity funds. Her account lost 18% over a 9 month period. The income off that account was minimal. To start taking withdrawals the fund advisor said they would sell a slice of the holdings including the ones doing good along with the ones that were down.
Now with 75% in bonds, preferred and baby bonds and the rest in a MM or treasury fund the account is generating twice what she is withdrawing.
We do hold some REIT’s and CEF’S and BDC’S but only the preferred and BB less yield and less risk.
Drivers of stock indexes: employer/employee paycheck contributions, esp. to target date funds, various funds that do algorithmic buying/selling (not talking high-speed trading algos).
I should have said “rules-based” not algorithmic. Simple rule example: long-only, 100% invested.
Getting paid Tim on my GTC bids and no hurry for them to fill . Did start putting in a few GTC sell orders just to rearrange the deck chairs.
Been thinking about bonds but I feel like that ship has sailed until the next panic
CM-
You get paid for a bid?
Gary chuckle, I hold my GTC in the MM fund at Fidelity and get paid more than Schwab. I have too many things to juggle in my life without having to remember to transfer between one fund and another to play that game with Schwab. Happy to get over 5% ( for now) at Fido