Market Philosophy

[Tjf1967]

Any thoughts on stopping 401k/IRA payroll contributions while the market slides downhill, not touching balance of account, and using that money towards paying down mortage as a better use of funds.

Very very very unwise.

 

[sig]

Any thoughts on stopping 401k/IRA payroll contributions while the market slides downhill, not touching balance of account, and using that money towards paying down mortage as a better use of funds.

do the opposite. increase 401k contributions. especially if you are a young cat. market will be back. i have seen this many times in past 30 years.

 

[MC2]

Any thoughts on stopping 401k/IRA payroll contributions while the market slides downhill, not touching balance of account, and using that money towards paying down mortage as a better use of funds.

Why would you trade a 3% return (paying down your 3% mortgage) for the 10.5% average return of the S&P 500 (1953-2021)?

Agree that you should do the opposite. In a year where the S&P has only returned about 3% (March ‘21-March’22), it seems like a good time to put *more* money into your 401K.

 

[freeheeln]

This years -8.37 rate of return has me wondering if I am just throwing that money away and could it be used in a positive way.

 

[Harvey]

This is the hardest thing to embrace, but it is key to do so.

You are looking at the price of a company (companies in a fund) not the value.

@freeheeln are you 50? Let's say you are, and you want to retire when you are 65. The only thing that really matters is what you bought a stock for, and what you will sell it for in 15 years. If the stock will be at 100 in 15 years is it better to buy it at 80 or 85? Market dips are buying opportunities.

My business partner and I are the same age. We started saving at the same time and in 2008 we had roughly the same amount in our 401ks. She got out of the market in 2008 and went into cash, I kept buying all the way down and all the way back up. I have 2.5x what she has now.

Buying opportunities:

9/11
2008

You can see that the drop from covid was very short. That's not my style, to go all in with a big buy. I just keep doing my usually purchase every week and after 9/11 and 2008 it really added up.

 

[freeheeln]

Just making sure I wasn't throwing good money at bad money. I have been in my 401k for nearly 40 years, always just let it ride.

 

[Andy_ROC]

I personally think people are going to be shocked at what happens if/when the worlds central banks stop pumping money into the economies to prop them up. SP500 valuations are still pretty lofty despite the 10% mkt drop. But you gotta invest in this but you gotta have some alternatives.

 

[Harvey]

I have been in my 401k for nearly 40 years, always just let it ride.

Formula for success, assuming you contributed all that time.

Not asking you to reveal, just saying if that was $100 a week for that time, I bet you got seven figures in there.

 

[Harvey]

I personally think people are going to be shocked at what happens if/when the worlds central banks stop pumping money into the economies to prop them up. SP500 valuations are still pretty lofty despite the 10% mkt drop. But you gotta invest in this but you gotta have some alternatives.

I'm not even sure what this means, but unless you have to have your money after the market drops huge, like 50%, all you need are cohones of steel.

To me the key is to live below your means, so even when the shit hits the fan, you can still keep buying.

In one of those drops (can't remember if it was 9/11 or 2008) the market (DJIA) went for 14,000 to 6,000. BUY!

 

[Andy_ROC]

I'm not even sure what this means, but unless you have to have your money after the market drops huge, like 50%, all you need are cohones of steel.

To me the key is to live below your means, so even when the shit hits the fan, you can still keep buying.

In one of those drops (can't remember if it was 9/11 or 2008) the market (DJIA) went for 14,000 to 6,000. BUY!

What I'm saying is a lot of economic growth has been funded by central banks and govt debt around the world and I believe it puts the long term health and growth of the economy at risk. Look at debt to GDP ratio of the USA over time in the chart I posted. Just in the last 14 years the economy has received stratospheric funding through debt. Huge sums of money injected by the Fed to recover from 2008. Then the 2017 20% corp tax cut which was significantly funded by federal debt yet. Then we have trillions of dollars of covid relief... again all funded by more government debt.

Yes the SP500 value is reflective of decent earnings growth yet the PE is still near historical highs. Growth significantly funded by government debt. What happens to earnings and the market when the central banks stop pumping money into the economy? I just don't think a lot of people are mentally or financially prepared for that day of reckoning.

The only thing saving us now from a serious credit crisis are low interest rates. If/when interest rates go up (and I don't recall the number but I read it somewhere) the total of all the US government tax collections won't be enough to service the federal debt. Could be a pretty bumpy ride and why it's good to diversify. Personally I think paying down your home is never a bad thing to do. It's a real asset you own and its value isn't likely to vaporize like paper in the next financial crisis. Most importantly it still puts a roof over your head and the more you own the less likely some bank can take it a way if you hit hard times.