So, theres NO RECESSION, no DEPRESSION? OH YES THERE IS! - Page 4

DeeJayH · 07-17-08, 11:28 AM

Quote:

Originally Posted by donsutherland1

Not many investments yield such a return over the long-run. The overall stock market has done so in nominal terms, but the past decade has not been good for stocks.

Taking the S&P 500, on July 16, 1998, the S&P 500 closed at 1,183.99. Today, ten years later, it closed at 1,245.36. That's just 5.2% higher. In nominal terms, that would translate into an annual return of +0.5%.

Once one factors in inflation, the real return is decidely negative. The 10-year return amounts to -21.8%. That comes to a return of -2.4% per year in real terms.

That is solely the price appreciation. One must include dividends. If one considers the average annual dividend of 1.4% paid during that timeframe, then the S&P 500's total annual return comes to 1.8% and its annual real return remains negative at -1.1% per year.

I am sure you realize there are more instruments to invest in than just stocks
that is also why i am against Mutual funds except as an introduction to the market
triple exempt muni bonds
last i checked US savings bonds still double after 10 years
commodities have done rather well of late
shorting or buying puts would have done well every down year of the market
and on and on and on

its hard to get good investment advice with a few hundred bucks
but its pretty easy when you go a few $100,000

donsutherland1 · 07-18-08, 08:40 AM

Quote:

Originally Posted by DeeJayH

I am sure you realize there are more instruments to invest in than just stocks
that is also why i am against Mutual funds except as an introduction to the market
triple exempt muni bonds
last i checked US savings bonds still double after 10 years
commodities have done rather well of late
shorting or buying puts would have done well every down year of the market
and on and on and on

its hard to get good investment advice with a few hundred bucks
but its pretty easy when you go a few $100,000

Of course there are a wide variety of investment vehicles. I cited stocks merely as an example, as there has been a tendency--particularly in the media--to mention that stocks offer the highest return, on average, for major investment choices with the implicit message that over the long-run, there is not too much risk. The reality is that persistent macroeconomic trends play a big role on stock market returns, as with those of any other investment vehicle. The outcomes are different for periods with elevated inflation vs. low inflation. They are different in the years and sometimes decade or so following an equities bust i.e., dot.com bubble, 1907 panic, 1929 crash, etc.

My point is that there is no single vehicle that is assured to offer let's say an 8% return. This holds for individuals to the largest and most sophisticated investment banks and other financial institutions. Indeed, if there were a largely fool-proof way to reap only investment returns, one would not be witnessing continuing write-offs from Merrill Lynch, Citigroup, etc.

One needs to continually adjust or fine-tune one's portfolio, be aware of the wide variety of instruments available, have some knowledge in practical hedging strategies e.g., the put options that you mentioned that give investors the right to sell a given security over a given timeframe at a given price (American option), use tactics e.g., stop orders to reasonably "lock in" gains, among other things.

Having said that, based upon the number of participants and funds in mutual funds, 401(k)s, etc., most investors tend to be relatively passive or semi-passive when it comes to managing their investments. "Buy-and-hold" is the norm. Considering the risks inherent in frequent trading, the time required to stay on top of developments, and role psychology plays in influencing short-term price-setting, for many investors the passive to semi-passive approach makes sense.

donsutherland1 · 07-18-08, 11:27 AM

Highlighting the sobering reality that there are no guaranteed superior returns in investing, Forbes reported today:

A two-day rally aside, the beating that financial stocks have taken lately have knocked out some top money managers and their brand-name mutual funds.

No champ has endured more pain than Bill Miller of Legg Mason Value Trust (LMVTX). Until 2006, Miller held the distinction of beating the S&P 500 for 15 consecutive calendar years, but lately the fund has struggled. Last year, LMVT fell nearly 7%, while the S&P finished up more than 5%. Even after losing 20% in the first quarter, Miller wrote to shareholders that he thought the worst was over.

If only that were true: as of Wednesday's close, Miller's fund is down 41% year-over-year, according to Morningstar. The S&P 500 is down 18% over the same period.

Of course, if one wants to take a more esoteric approach, one can try one's luck with the "Michelle Girard fashion rule."

When the RBS Greenwich Capital senior economist wears yellow, gloom is cast aside and cheer is in the air. When she wears blue, blue skies herald favorable trading weather with higher prices. When she wears red, watch out for falling stocks. Pink? Red is a primary color, so a down day is in store. Purple? Usually not a good day, but a positive suprise is occasionally possible--red plays a dominant role, while blue is a recessive primary color. Multiple colors? Chaos drags down prices.*

* Timing matters. If she appears on TV before the start of trading, the rule applies to that day's trading. If she appears on TV after trading has begun or concluded, the rule applies for the following day.

DeeJayH · 07-18-08, 11:48 AM

Quote:

Originally Posted by donsutherland1

Of course there are a wide variety of investment vehicles. I cited stocks merely as an example, as there has been a tendency--particularly in the media--to mention that stocks offer the highest return, on average, for major investment choices with the implicit message that over the long-run, there is not too much risk. The reality is that persistent macroeconomic trends play a big role on stock market returns, as with those of any other investment vehicle. The outcomes are different for periods with elevated inflation vs. low inflation. They are different in the years and sometimes decade or so following an equities bust i.e., dot.com bubble, 1907 panic, 1929 crash, etc.

My point is that there is no single vehicle that is assured to offer let's say an 8% return. This holds for individuals to the largest and most sophisticated investment banks and other financial institutions. Indeed, if there were a largely fool-proof way to reap only investment returns, one would not be witnessing continuing write-offs from Merrill Lynch, Citigroup, etc.

One needs to continually adjust or fine-tune one's portfolio, be aware of the wide variety of instruments available, have some knowledge in practical hedging strategies e.g., the put options that you mentioned that give investors the right to sell a given security over a given timeframe at a given price (American option), use tactics e.g., stop orders to reasonably "lock in" gains, among other things.

Having said that, based upon the number of participants and funds in mutual funds, 401(k)s, etc., most investors tend to be relatively passive or semi-passive when it comes to managing their investments. "Buy-and-hold" is the norm. Considering the risks inherent in frequent trading, the time required to stay on top of developments, and role psychology plays in influencing short-term price-setting, for many investors the passive to semi-passive approach makes sense.

which is exactly why i think only an idiot would have more than $100,000 in an account that is only insured for $100,000