Getting into the financial markets

[rancid]

I have been saving up a chunk of cash over the last two years. I am interested in some opinions on whether or not now is a good time to put it into the market? I hopefully will not need this cash in the next 5 years unless there is a Great Depression-like collapse of the U.S economy.
The other option I have been considering is purchasing a lot in Grayton but I do not feel like prices have bottomed out. Any thoughts or advice? Thanks

 

[northshore]

There are some really good deals out there right now in the stock market. I here ya about the Grayton lot. Personally, I would not buy land, at least not yet. I feel like that's going to be a LOOOOOONNNNNGGGGG term investment.
Good luck to you!;-)

 

[Bob]

buy the lot in grayton....the market will be whipsawing around with months of bad employment,gdp,more bailout capitolneeded,congressional hearing revelations coming up....if you can afford grayton, that's a very wise choice

 

[30ashopper]

I have been saving up a chunk of cash over the last two years. I am interested in some opinions on whether or not now is a good time to put it into the market? I hopefully will not need this cash in the next 5 years unless there is a Great Depression-like collapse of the U.S economy.
The other option I have been considering is purchasing a lot in Grayton but I do not feel like prices have bottomed out. Any thoughts or advice? Thanks

Ignoring the bubble, lots have returned about 7.5% annually from 99 to today. Prices are also still inflated a bit so I wouldn't expect that 7.5% figure to get better. Short term you'll loose money, long term maybe 5-7% annually is a conservative guess. That does not include the cost of ownership (property taxes) which may drive the annual return down to around 2-4%.

Stocks and funds also have short term downside, and also carry more risk today as we do not know where the bottom is. However, choosing the right stock or fund today (stable companies, good balance sheets, solid businesses, beaten down p/e) your annual return over a few years could be 15% with no ownership costs. Over that same period lots in grayton probably won't appreciate much if at all.

Personally I'd go with the market.

 

[SHELLY]

I have been saving up a chunk of cash over the last two years. I am interested in some opinions on whether or not now is a good time to put it into the market? I hopefully will not need this cash in the next 5 years unless there is a Great Depression-like collapse of the U.S economy.
The other option I have been considering is purchasing a lot in Grayton but I do not feel like prices have bottomed out. Any thoughts or advice? Thanks

Not counting this money do you:
(1) Have a fully liquid 6-12 month emergency fund
(2) No CC debt
(3) Have A fully funded IRA/401K

.

 

[rancid]

Not counting this money do you:
(1) Have a fully liquid 6-12 month emergency fund
(2) No CC debt
(3) Have A fully funded IRA/401K

.

Yes. This is money that I have been saving and waiting for Grayton real estate to bottom out or waiting to get into the market. for the last 1-2 years , I have not felt safe putting this money into either.

Now with inflation and the devalue-ing of the dollar , I feel I am losing quite a bit of value by simply sitting on this money. I had been getting 4-5% before taxes in a MoneyMarket with this money but that has since dropped to 1-2% now

 

[SHELLY]

Yes. This is money that I have been saving and waiting for Grayton real estate to bottom out or waiting to get into the market. for the last 1-2 years , I have not felt safe putting this money into either.

Now with inflation and the devalue-ing of the dollar , I feel I am losing quite a bit of value by simply sitting on this money. I had been getting 4-5% before taxes in a MoneyMarket with this money but that has since dropped to 1-2% now

There are lots of folks who would kill for a 4-5% return up to this point for the year. I've been overweight in cash and have got a few 5%+ CDs (with over a year still on the clock) that are keeping the old portfolio (barely) afloat.

You said, "I hopefully will not need this cash in the next 5 years unless there is a Great Depression-like collapse of the U.S economy."

What were you planning on using this money for in 5 years? How many years do you have till retirement? Your 5-year timeframe is a bit iffy for both stocks and real estate. What would happen if you lost 25-30% of your investment?

How big of a hit did you take on your 401K so far this year? Do you have a brokerage account?

 

[traderx]

Yes. This is money that I have been saving and waiting for Grayton real estate to bottom out or waiting to get into the market. for the last 1-2 years , I have not felt safe putting this money into either.

Now with inflation and the devalue-ing of the dollar , I feel I am losing quite a bit of value by simply sitting on this money. I had been getting 4-5% before taxes in a MoneyMarket with this money but that has since dropped to 1-2% now

The purchasing power of your money is reduced through price inflation but the value of the dollar versus other currencies has nothing to do with your money unless you take a trip. To the extent that you buy imported goods from countries which have a currency higher than the dollar, the premium is already factored into price inflation.

The best approach for most investors, unless you learn how to trade, is to dollar cost average into mutual funds or ETF's. Most managed funds do not beat the market so put most of your money into broad index funds or ETF's. Too many people try to get fancy with the stock market when simplicity is typically the best approach.

 

[rancid]

There are lots of folks who would kill for a 4-5% return up to this point for the year. I've been overweight in cash and have got a few 5%+ CDs (with over a year still on the clock) that are keeping the old portfolio (barely) afloat.

You said, "I hopefully will not need this cash in the next 5 years unless there is a Great Depression-like collapse of the U.S economy."

What were you planning on using this money for in 5 years? How many years do you have till retirement? Your 5-year timeframe is a bit iffy for both stocks and real estate. What would happen if you lost 25-30% of your investment?

How big of a hit did you take on your 401K so far this year? Do you have a brokerage account?

42 years old. Have kids starting college in about 5 years so may need some cash. Already have a 529 account. Nothing would happen if I lost 25% except I would be pissed off.

Haven't had the nerve to look at my 401K yet. I have been dollar cost averaging with 15% in bonds and the rest in stocks.

I do have a basic brokerage account and a few broker friends. At this point ,I have not hired one of them b/c of the added expense and I am not clear if it makes much difference over buying index funds.

 

[SHELLY]

I do have a basic brokerage account and a few broker friends.

(1) Look at your 401K before you decided to do anything. I looked at mine on Friday--I recommend covering the keyboard with Saran Wrap before you do.

(2) What are your broker friends telling you? (other than "hire me")

(3) Personally, I think the 5-year horizon for stocks and RE is uber-risky--moreso now that we're in a recession. But if you want to roll the dice on the stock market, I'd look at large international companies with solid balance sheets, good cashflow, lots of cash, and a good record of paying out dividends (at these low prices you may even be able to eek out a solid 3-5% dividend yield) . The benefits of owning stocks over a chunk of dirt are many: low carrying costs; no annual property taxes; no liability problems; very, very low sales commissions; and--most important--liquidity (you can shave off a few shares to turn into cash if you need it--you can't do that with a dirt lot in Grayton). I'd also recommend dollar-cost-averaging into the stock(s) over the next several months depending on how big of a chunk of money you've got to invest.

If you want to take a safer route, you might want to opt for bonds. If you're investing outside your 401K, depending on your tax bracket, you might benefit from Muni's...otherwise keep in mind that the dividends on the bonds will be taxed at your ordinary income rate (whereas stock dividends are taxed at 15% in most circumstances).

Before you make any decisions, you may want to brush up on your understanding of the stock and bond markets to fill in the gray areas (you don't need to hire your "broker friends"--hey, given the current economy, all your friends are "broker" )--and especially read up on the companies whose stocks you consider purchasing.