skip to main content

The Kitchen Table

Discussion and strategies re current stock market drop

16 years ago

There's been a discussion on how to deal with the drop in the stock market over on "Household Finance" in recent days, as to whether to sell assets to pay off mortgage, whether and how to plan to invest, etc.

Some of you may be interested who may not visit there frequently.

ole joyful

Sort by:Oldest

Comments (18)

alisande
16 years ago
Why sell when the market is down? I was always told, "Buy low, sell high."
grammahony
16 years ago
I won't even look at my account. I don't want to get sick/scared. I'll wait until it comes up and stays up a while. Then when I do look, maybe it will have reached where it was a year ago. :(
Leslie
Related Discussions
Stock Market Stupid
Q
Comments (20)
Michie1, There's a lot of information at Yahoo, then click on the "Finance" option. If you enter the symbol (see them listed beside the name of the stock in a good financial paper, e.g. N.Y. Times), it will show you what the current price is, during the day (with 15 - 20 min. delay). If you click on the symbol, it will show you recent information about that stock, plus chart of stock price ranges, over a day, a few days, a month or so, a year, 5 years, etc. In most libraries you can look up information about a whole host of stocks. Very few mutual funds have a long-term track record of much higher than stock market averages. Which are somewhere in the neighbourhood of 7 - 8% annual growth. U.S. mutual fund managers often charge about 1.5% management fee - which is a fairly hefty percentage of your growth for the year. Many Canadian mutual fund managers charge over 2% annual management fee, which is about a quarter of the usual rate of growth. However, if the value of the stocks in their portfolio drops - they still get their fee. There are some stocks that carry a number of stocks as part of their business, so they operate somewhat like a mutual fund. One such could have been bought for $12. in 1965 and recent price was quite a few thousand, as they've never split. Some say that they've not paid out any of their earnings, either - which would have meant that you'd have incurred no tax liability since '65, had you bought shares then and continue to hold them. But the guys who claim that are wrong - they paid out 10 cents in 1967, so shareholders would have had some tax liability that year. I understand that they own more Coke shares than any other agency, plus a lot of Gillette, insurance, candy, etc. Their annual report is written in language that most of us can understand. I'm not suggesting that you should buy any of that company. I own some shares - of the recently issued kind, which are valued at one-thirtieth of the original shares. Good wishes for learning how to make wise investment decisions. ole joyful
...See More
Alternatives to Stock Market?
Q
Comments (15)
Greetings everyone. Some folks may find some useful advice in the posts above. All that I said in the previous post still applies. The guy whose system I spoke of, whose Canadian system, using solid stocks, takes about 2 hours per year to operate, as one can choose a basket of 10, or 5, or 4 stocks and several of the chosen stocks, usually about 6 to 10 of the list of 10, continue unchanged, year to year. The system has a growth rate averaged over 20 years of about 14% ... at low (for Canadian residents) tax rate on current income, plus much of the gain stored up over a number of years till one sells, then there's a tax advantage on the gain, in Canada. But if one puts one's asset into the bank, where it produces interest ... one must pay part of the interest to the income tax people ... and interest is taxed at top rate. The borrowing agency guarantees that the number of dollars that you lent them won't shrink: the parallel guarantee that they never mention is the number of those invested dollars won't grow, either. So folks who put those grow-proof dollars into the bank must put some of the interest with the principal to maintain purchasing power, to counteract inflation. I expect my stocks to increase in value, at least partially offsetting the inflationary costs. I'd rather buy (part of) the bank! Not only have my bank shares' values grown, directly, over those years ... ... the dividend rate grew from a nickel or a dime, 41 years ago, to $3.48 annual rate, last year. Taxed at a low rate in earlier years, but the tax rate on that kind of income dropped again, last year. As that mutual fund manager said, "I like to buy a Dollar ... for 60 cents". I agree - but I'll buy it myself, saving the management fees that he charges. I'm sad that so many investors, when stock prices fall ... rush to the exits, instead of getting ready to buy more, and buying them. Further ... had some of you U.S. guys chosen to buy some Canadian money to have bought those stocks 5 - 6 - 7 years ago, 65 - 69 - 75 cents U.S. would have bought you CAD$1.00. If you were to choose to sell those stocks now (and I don't know why you would) every CAD$1.00 now does not buy only 69 cents U.S. ... but within a couple of cents either way of $1.00. Which would have meant an additional 1/3 - 1/2 growth of your invested asset. In addition to the growth over those years. I've written recently of a guy's mixed Canadian and U.S. system that, running for 16 years, has produced 5 year growth rates averaging 16 - 36% (a difference of 20) ... and 10-year growth rates averaging 19.6 - 29.3% (a difference of 10): note the lower rate of volatiity over the ten-year periods, please. The longer you leave quality stocks ... the better they do. Remember how the skilled advisors say to invest your dollars in good stocks, watch them a little in case the company gets crippled, but don't sweat blood if a $20.00 stock goes down $1.00 ...or $2.00 ... or $3.00 or more. If it's a quality stock, it'll likely recover. In fact, while the market is dropping, remember what a mutual fund manager told a group of us sales people almost 25 years ago ... "I like to buy a Dollar for 60 cents". During a substantial drop in the market, recruit some extra money in addition to the regular investment program that you follow. As you don't know when the bottom will appear, invest some funds from time to time, in a regular fashion. Would you rather buy coffee that's worth $1.00/lb. usually ... ... for $1.20 ... ... or, after a drop in the market - for 80 cents. As long as the quality is there, I like the last scenario the best. How unfortunate that so many investors buy a stock for a Dollar ... and when the market goes down, they get upset, angry and scared ... and sell for 60 cents! Good wishes for learning more about how the markets work, every month and every year. It's a hobby that pays well. Maybe use mutual funds for a while in the early years of your investing program, for diversity, but later learn how to buy various stocks from time to time, building your own diversity? The fees that you pay to regular mutual fund managers are substantial - comparable to the rate of income tax that you pay. And, if you put the money into the bank in "guaranteed" financial products, you must take some of current ernings to add to the principal to keep the purchasing power of your dollars even. When you put $20,000. into the bank 15 years ago, the bank would pay you (rather slim) interest every year, as agreed. If you need your $20,000. now and go to collect it, they'll pay you exactly $20,000. - which would have bought a nice car, 15 years ago ... but not now - cars are more expensive, as are most things. So, you must pay income tax on the current income, and at the top rate, by the way. You must put part of it with the principal to maintain purchasing power. I don't like earning interest! Good wishes to you and yours. And teach your kids about how money works, O.K? Please! They'll use that information every day of their lives! ole joyful
...See More
OT: Any way to profit from current market?
Q
Comments (22)
Hi Roxyl, I'm just wondering what else could be done with that equity in our situation (like investments or acquiring a rental property, etc.)? Where would I find out info about this kind of thing? EVERY market has opportunities, and generally the uglier & downer a market gets (especially BEFORE the actual recognition of reversal back upwards,) the sweeter the opportunities. Successfully investing in ANYTHING is never obvious nor easy... or the opportunity wouldn't exist because the hordes would have already applied their buying pressure, bringing market equilibrium back to level again. WHERE TO LEARN... truly, there are books, and seminars, and CD/DVDs, and workshops and bootcamps and compendiums and summits ad nauseum. A) Check with your local county free-loan library... I guarantee they have TONS of top-notch books & materials by some/many of the most powerful and popular course teachers & authors. Look up Robert Kiyosaki as an engaging start. Look up Robert Allen also. B) Check out your local real estate investor's club. They'll likely have evening meetings once or twice a month, for free, or entry fee in the teens. Don't be shy, don't be afraid to admit being a novice... r/e investors are notoriously extremely friendly (and regular, sown-to-earth folk,) GO! C) Commit to meeting, interviewing, and finding several currently-active real estate investors (everyone has a different style, so you need to meet many to "discover" which style actually fits YOUR temperament as well!) Make good friends of them... go to coffee with them often... "pick their brains" (again, surprisingly, most private r/e investors keep very little secret, and are often willing to share what really works for them.) I currently own 9 profitable income properties... and I have to tell you, the current home markets are so incredibly exciting for me as an investor!!!!! I expect to see more profit in my pocket from my own chosen investing style* this year (2008, I'm already weeks ahead in my mind,) than in all the previous 5 years combined!!! And I expect 2009 to be as much as double 2008!!! * My style is to acquire properties with an eye toward seller-provided terms (paying them over time, and keeping their old financing in place when able,) rather than haggling/scrappling to lowball & pish everyone off. With generous terms, I can be generous in my buying price (often offering full retail... of today's prices (which will only be paid out in 3-5 years, of course.) I structure my acquisitions preferrably so I have 3-5 years to complete the terms with the seller. THEN I get tenant/buyers in place who will gladly pay a significant rent-to-purchase premium (because there are so few mortgage programs available for them anymore.) The above may sound a bit complicated... and it takes understanding, to be sure (virtually no real estate agents I encounter fully understand what I am doing,) but it is EXPONENTIALLY EASIER than getting bloody in the fight to lowball people out of their percieved equity. "Selling price" is one of those hallucionatory numbers that people emotionally grasp onto... and it you let them KEEP it, they'll hand you almost everything else you want (which can significantly MORE than make up for it!!!) Good luck, and repeat after me; "Learning Is Fun!!!" Cheers, Dave The Dealmaker
...See More
Here's a discussion of China's currency on the world market
Q
Comments (12)
U.S. folks have had their money accepted as payment almost everywhere in the world, for two or three generations. They've scarcely ever had the experience of having their dollar refused, as being something of a suspect currency ... will it hold its value? That is happening in some areas, and some semi-official financial agencies in some countries are putting limits on the amounts of U.S. funds that they are willing to accept/hold (I'm not sure which, and failing memory leaves me unable to provide specifics, but I read it recently). When I was young, we had radios, TVs, etc. made by GE, Westinghouse, Emerson, Electrohome, Admiral, etc. and the electronic goods production has been taken over by offshore sources. Much of the research is being done, there, as well, and as more patents are held by people/institutions in various areas, there'll be reduced income for us from royalties, etc. when others use them. In worldwide competitions of scholars, many of the kids from the second or third world, despite many of their school systems being badly undernourished, are producing better results than the young folks in our area. One wonders whether some of that may be due to motivation - as they have grown up in an area where one must excel in order to get ahead, while our young people have grown up expecting that things will be well for them. We've been rather used to being top dog for a few generations, but the playing field is being levelled, as other parts of the world become more prosperous. Having lived among refugees, I can't feel badly about people who were desperately poor having work ... but at the same time I feel unhappy about many of the formerly high-level workers in our part of the world becoming unemployed. We've just heard that one of H J Heinz plants, in our area, that's been around for something like 100 years, is to close next year, with something like 700 people affected directly, along with hundreds or thousands of farmers who produced tomatoes and other vegetables for them. Over thirty years ago, at the time of the first oil price crisis, when I was working in a plant building travel trailers and truck campers, there was some discussion of the need for us all to be concerned for the efficiency of our operation, and some of the guys said that wasn't our problem - that was management's problem. I said that if quite a few people decided that the extra cost for gas to feed their truck with camper, or a big enough engine in the car, needing fuel all year, to pull a seldom-used trailer, led a number of people to decide not to buy our product, that some of the manufacturers would go out of business, and it was in out interest to keep ours efficient enough that it wouldn't be us. Couldn't get folks interested: not their problem. I was concerned also about a number of our companies being bought by companies in other countries, and many said that they didn't care who owned the factory, as long as they had a job. After one of the world's biggest nickel companies, formerly based here, was bought by an offshore company ... the local workers, who'd hated their management for years as being skinflint, etc. ... decided, as they dealt with the new owners, that the earlier ones hadn't been so bad, after all. ole joyful
...See More
minnie_tx
16 years ago
I don't look.

Fidelity handles mine and sometimes it goes down a little but mostly stays nice and neat.
justlinda
16 years ago
Now is the time to buy when the market is down. Bargains to be had out there.
lindasewandsew
16 years ago
During the last big hit, when the dot coms burst, etc., I raised the amount that I bought every week from my paycheck, bought all the way down and all the way back up. It served me very well. There's no reason not to buy on a regular weekly, monthly, or whatever schedule as long as you're in something you're not losing sleep over. What would be the point in selling stocks low and throwing the money at a low interest mortgage, when the stocks will probably outperform that % in a few years. I'm sure no expert, and just buy the standard stock index funds at Fidelity and Vanguard no matter what the market is doing. Holding your nose will probably help when pressing the submit button, lol. Linda
joyfulguy
Original Author
16 years ago
When I bought shares of a Canadian bank 41 years ago, I paid the stock price plus commission to the broker.

No money management company was involved in the years between, so no fees paid for management.

Were I to have sold last May - doubled about 4.5 times.

The dividend rate increased along with that rise in value of the stock, from about a nickel or a dime in the beginning to $3.48 per year currently.

They are involved in the U.S. sub-prime mortgage mess directly, plus it appears that they backed an insurance company that insured them and may now be in trouble.

Now the stock price has dropped by a third - doubled 4 times. If I sold now, I'd get the value of the sale, less commission.

Had I held that stock in a mutual fund, in the U.S. they'd have charged about 1.5% or more per year as their management expense ... plus, as they buy and sell stocks, which many do frequently, that's a cost of doing business, as well.

When I multiply the 1.5% by 41 years, I get about 60% of the value of the stock that would have been paid to the managment company, over those years.

As it is, I'm hoping that my bank stock goes up again, over the years, to recoup the reduction in value ...

... but if it had been held in a mutual fund, much of that money would have gone into someone else's pocket.

Plus ... in Canada, many mutual fund management companies charge 2.5% or more on equity-based funds, which are the main ones that I hold.

That rate of fee over the 40 years would have eaten a larger percentage of the value of the asset, over the long period.

Some mutual fund management companies manage to grow faster than the sector of the market into which they invest, about 10 - 15% of them.

About 85 - 90% of such managers do not.

It is my feeling that a number of investors could do better, as their skills increase, by buying individual stocks, paying for the stock and commission on purchase, and no management fee over the years.

Not only that, several of my equity-based mutual funds buy and sell assets in most years, and I get a report at the end of the year which I need to declare as income to the tax people - some of it taxed at a low rate, usually.

I am taxed on the dividends that I receive directly from the bank, at an advantageous rate.

That bank stock that I bought 41 years ago has not incurred any tax liability on capital in the intervening years.

If you're going to buy especially an equity-based mutual fund, you need to investigate it.

If you plan to buy a stock directly, you need to investigate it, as well.

Good wishes for increasingly skilled use of both your income and your assets.

ole joyful
vannie
16 years ago
The market has been up and down for years. If you can't stand the heat you need to get out of the kitchen. Over time stocks are the best investment. Most of my stocks were bought for the dividends. You just have to hang in there. It's only profit or loss if you sell.
ruthieg__tx
16 years ago
I agree with vannie...the market is and always has been subject to any whim, it pinches when it is down but over all we have made lots of money in the stock market and we ride out the bad days and usually buy instead of selling....We are reworking our portfolio at the moment but the market has been good to us...If you are losing money, you should fire your broker...
itsmesuzq
16 years ago
I agree with all of you. Stocks are meant for the long run. I increased my savings at the first of the year when I felt we were going to go through some rough times. "Buy low, sell high" is absolutly true! I have an IRA that I just started to adjust down into a lower risk portfolio because I'm hoping to retire with 3 years. But my 403b savings I've raised the amount I'm saving, and that account is my higher risk account. I'm hoping not to touch that one for at least 6-8 years.

I agree with Ruthie, you should totally trust (and be involved) your investment broker. And when you have questions don't hestitate to call them!

Oh, I believe it depends upon your age and financial means to pay off your low interest mortgage. In most cases "don't".

~Susan
joyfulguy
Original Author
16 years ago
It's important to deal with a broker in whose skill and integrity you have a good deal of confidence.

But - don't forget - they are primarily sales people.

And they work for the brokerage firm, not you.

That said, it is important for them to keep you happy, as well, especially if you have major assets ... but sometimes they are assigned to sell products that their company has made a deal about, which may not be best for you.

ole joyful
susan_on
16 years ago
Our financial advisor dropped by tonight for his annual visit. We are quite pleased with how things are going. The market does not scare us, as we're in for the long term.
patti43
16 years ago
I keep looking for deals. I sure do remember the dot com fiasco lindasewandsew. Amazon got down to $9 and change and I talked to DH about buying 100 shares. Didn't do it and now everytime I see that NASDAQ quote I kick myself in the fanny!! Anybody got any inside info, oops--I mean tips?
joyfulguy
Original Author
16 years ago
patti 47?? (who doesn't look a day over 36),

I've been called a "dope", at times.

Does that count?

Susan on,

What kind of stuff does your financial advisor sell?

Does s/he recommend financial investments that s/he doesn't sell?

As you are reasonably young, do you carry mainly equity-based assets? Mainly mutual funds, stocks, or what?

If you carry some mutual funds or stocks, have you considered having some of the certificates issued for ones that you plan to own for a numbr of years, your core assets, to use as collateral if you make a loan to buy a vehicle, etc? If you ask your credit union, bank or other lender, I'll bet that they'll offer a lower interest rate if you use such assets as collateral, in addition to the car.

Are you achieving major tax reductions on current investment income? Quite a bit of deferral of tax load?

Quite a few RRSPs? Have you read some of my materials referring to some of my reservations about using them, especially for younger investors?

If you carry substantial RRSP assets, is a portion of them of the self-directed kind, and, if so, and of substantial size, does your carrier manage them without an annual admin. fee? I enjoyed that for a number of years (got into such a plan under an earlier carrier that was bought out). But when rolling over the RRSP into a RRIF, the later carrier told me there'd be an annual fee.

When I returned a while later saying that I'd found some other carriers that would manage the fund with no fee ... they found a means by which they could do that, as well. I didn't feel it necessary to reveal to him that I found the offer made by the others less attractive. As Grandma used to say, "One should tell the truth ... but it isn't necesssary to shoot one's mouth off and tell all that one knows". (A bit of a free-style rendering of Grandma's words, here).

(My hope here is that you answer these questions within your own mind/family, not to me [it isn't my business, unless you choose to make it so], or here in public).

Good wishes, everyone, for increasing your knowledge of how money works, over the years.

ole joyful

P.S.: Commentary on RRSPs:
http://ths.gardenweb.com/forums/load/saving/msg011934521024.html?4

o j

P.P.S.: Investment portfolio 16 years:
5-year growth rates 16.58% - 36.61% (difference slightly over 20%);
10-year growth rates 19.67% - 29.37% (difference slightly under 10%):
http://ths.gardenweb.com/forums/load/finance/msg0206395613737.html?1

o j
drewsmaga
16 years ago
Our financial planner/advisor works solely on commision. So, if the investments she makes for us make money, she makes money. She's makes a LOT of money, even with the downturn in the market . . . . :-)
duluthinbloomz4
16 years ago
There are bargains to be had out there. I'm a buy and hold investor and have a well balanced portfolio so fluctuations in the market don't bother me. I like some of the energy stocks, Canadian Oil Sands, etc. and I just bought a big chunk of a mining stock this AM - copper-nickel-precious metals. There's a start-up project here in northern MN; 4 billion tons in the known lode to be extracted over maybe the next 30 years. And at $3.50 a share, one can hardly lose.

Although I have a trusted broker who knows what I like, my confort levels and risk tolerances, I do my own research if something catches my attention. I get good tips from my brother, too, who seems to be a wizard at picking stocks. We've both done extremely well.
janemarie5
16 years ago
I feel that if your in it for the long haul and not close to retirement then you just buy more. I also have energy stocks and gold/silver/cobalt stocks also. I believe you have to be somewhat of a contrarian and if the stocks are going in the toilet then probably gold and energy are doing well. And because of those choices I have had some good gains on those. My husband has his 401K and he just keeps putting in his weekly amount, if the market goes down for the next 5 years it still doesn't matter because we are 15+ years from retirement and I figure we will have a great looking portfolio by then. You have to look at the big picture. My stepdaughter said to me the other day (she's 21) "I just don't see the point in saving my money, why not buy what you want now, you never know how long you will live" OY OY.. So I said.. well, if I felt that way, me and your dad can live with you when we retire right? Because we will have spent all of our money already and won't be able to afford to live on our own" LOL.. LOL...
joyfulguy
Original Author
16 years ago
drewsmaga,

Does your planner sell mutual funds?

Insurance?

If your mutual funds are doing better than the market as a whole (or their segment of it), you're doing better than most, for about 85 - 90% of mutual funds' managers don't. Many mutual fund investors pay approximately as much to the mutual fund management company as they do in income tax on those investments.

If only mutual funds, have you discussed the idea of buying individual stocks with her?

Can she sell stocks?

If you do some studying, then choose individual stocks carefully, you pay a commission on purchase and a commission on sale ...

... and there's no middle-person in between to get paid every year.

You may feel badly if some of your choices turn out basdly ... but don't cry too hard - actually your loss may be less than the mutual fund sales person was making in trailer fees (annual small compensation) over those years.

And if your stock price drops for a while, if it has quality, it will likely recover later, if you don't lose your nerve and sell.

If you have a number of equity-based mutual funds now, you have a good deal of diversification in place now.

Learning how money works is an interesting hobby, and it pays well. Check the biases of the people putting out the information, including planners - few are unbiased. And fewer stil lack a conflict of interest.

Good wishes for increasingly skilled investing.

ole joyful
joyfulguy
Original Author
16 years ago
JaneMarie5,

You didn't tell us the answer that your step-daughter gave you when you suggested that, having spent everything as you went, you'd move in with her on retirement.

I was waiting to hear what answer she made.

No such luck!

ole joyful

Related Stories

DECLUTTERING 9 Exit Strategies for Your Clutter

By Alison Hodgson

How to efficiently — and regularly — rid your home of the things you don’t want

HOUSEKEEPING Can-Do Cleaning Strategies for Busy People

By Laura Gaskill

While you dream of having a maid (to go with the cook and chauffer), this simplified cleaning routine can keep your real-world home tidy

LIFE When You're Suddenly Solo at Home

Whether you stay in a home alone or move on, these strategies from professional organizers can help you with the process

KITCHEN DESIGN 7 Strategies for a Well-Designed Kitchen

By Dylan Chappell Architects

Get a kitchen that fits your lifestyle and your design tastes with these guidelines from an architect

HOME TECH New Strategies for Hiding the TV

By Becky Harris

Its easy to be discreet when you've got cabinets, panels and high-tech TV hiders like these

MOVING Tips for Winning a Bidding War in a Hot Home Market

By Christine Tusher

Cash isn’t always king in a bidding war. Get the home you want without blowing your budget, using these Realtor-tested strategies

CONTRACTOR TIPS 10 Things to Discuss With Your Contractor Before Work Starts

By Ventana Construction LLC

Have a meeting a week before hammers and shovels fly to make sure everyone’s on the same page

WORKING WITH PROS Get the Upholstery Work You Expect: 10 Details to Discuss

By Shelly Miller Leer

Avoid disappointment and unexpected costs by going over these key areas with your upholsterer before work begins

ORGANIZING Checklists for a Well-Stocked Home

By Laura Gaskill

Thank-you notes, first-aid kit, clear glass vases ... It’s easy to go with the flow when you’ve got the items you need at hand

FEEL-GOOD HOME The Well-Stocked Minimalist

By Laura Gaskill

The trick is to have just enough of the right stuff at home — no more, no less. Here’s how to do it

Sponsored

More Discussions

Oh no! Another one!

623

What are you reading? April 2024 Edition

65

Ninapearl -- An idea for my scoliosis twin

12

I'll show you mine/you show me yours - F 4/26/24

20

Friday/Weekend Quiz

9