Stock Investments

[simme]

Is anyone here actually making their living or a good part of their income from the stock market? I don't really know anyone that lives off a 401k retirement plan or gets money from trading stocks, everyone I know just invests for retirement. I'm wondering how this downturn affects someone trying to live off of money invested in the market?

I retired 3 years ago. I have some cash, some stock index mutual funds, some bond index mutual funds and a few odds and ends. Held in IRA's, Roth IRA's, 401k, and checking account. My plan was to have enough cash to live on for several years, enough in stock funds to have some gains and growth, and some in bond funds. Declines in the market don't last forever- usually a few to several years. My thinking is to have enough in cash to cover living expenses in a down market and don't be selling stock funds in a down market. Replenish cash if needed during a bull market.

A down market is an opportunity to transfer taxable money from IRA or 401k into a Roth IRA (no future taxes). Get more shares moved for a specific dollar amount when values are down. Let the gain be tax free in the roth account when the market recovers. Pay the taxes due to transfer out of the cash account. Look at tax tables and your misc. income to determine how much to transfer per year and remain in the 12% tax bracket (about $83,500 for joint filers). Consider transferring each year while you have low income even if the market is not down.

You can lower your expenses during a down market if needed for economic reasons or if it makes you feel more secure. Most people spend on some things that are not essential that can be reduced if you feel the need or have to. I figure I could always cut back on the cow hobby if I need to save money.

Minimum required distributions will come into play at around 72 years of age for regular IRA's and 401k's. And taxes must be paid on those. If you have accumulated a good amount of money in those, taxes will be one of your big yearly expenses. Better to plan for that when you are younger while in the saving and accumulating stage. Look for tax free plans like Roth when you are younger to avoid those taxes when you are retired.

Is the market really down? I realize the Dow got almost to 37,000 and now is around 33,000. That does seems down. But here are the average closing values for a few years:

2021 34,055
2020 26,890
2019 26,379
2018 25,046
2017 21,750
2016 17,927

Just seems to me like the market is up, way up in fact. Investing and accumulating requires a long term view. Short term view will cause mental health problems and bad decisions. I went through 1999 and 2008. I just quit opening my statements for a couple years and tried to increase my additional investments. Looking back now at the "losses" I had then, it seems so small compared to where the market is now. It took me several years to learn this principle.

 

[Brute 23]

The market is at record highs even though it's down from its peak.

Unless I was on a fixed income and living off the money there is no way I'm moving it out for fear of collapse or any of that stuff. We have seen several big falls and it always comes back up. If it doesn't your money won't matter.

Getting in and out based on fear is never a good business plan, in any market, although I am not opposed to realizing my gains at any point.

Do I have some money in bonds right now, yes. It's not out of fear though. It's to capitalize on the opportunity a fall creates.

 

[hurleyjd]

My dividend income from ATT was cut in half and there is some capital loss but I will stick with it. Really do not know what the value WBD spinoff will be worth in the future. A lot of the companies made outside investments that were wrong ATT being one of them and GE being another.

 

[Travlr]

Well I guess I'm going to have to play Devil's Advocate...

I know every "financial advisor" on Earth advocates for "buy and hold"... but I just don't believe that Warren Buffet is where he is by buying and holding. I've heard him advocate it... but I don't believe he practices it. I believe that having most people buy and hold is a way to make money for those that don't. That is why the companies making the big bucks have their "trained" financial advisors advocate the practice.

I've ridden out three great downturns in the market and one burst housing bubble. I pulled out of the market in 2000 and again in '08, early in the crashes, as well as selling all of my real estate before the bubble burst in '05. They were the best money making decisions I've ever made for the effort expended. It's the same way we anticipate the cattle market when we buy a year ahead to sell what we think will be the best money-maker a year later. It's why we stock our barns with hay we won't need, in order to buy when cows are down in February and others are selling because they are running out.

Downturns are part of the game... and we can all benefit more by anticipating and acting than by riding the tsunamis.

 

[Brute 23]

Well I guess I'm going to have to play Devil's Advocate...

I know every "financial advisor" on Earth advocates for "buy and hold"... but I just don't believe that Warren Buffet is where he is by buying and holding. I've heard him advocate it... but I don't believe he practices it. I believe that having most people buy and hold is a way to make money for those that don't. That is why the companies making the big bucks have their "trained" financial advisors advocate the practice.

I've ridden out three great downturns in the market and one burst housing bubble. I pulled out of the market in 2000 and again in '08, early in the crashes, as well as selling all of my real estate before the bubble burst in '05. They were the best money making decisions I've ever made for the effort expended. It's the same way we anticipate the cattle market when we buy a year ahead to sell what we think will be the best money-maker a year later. It's why we stock our barns with hay we won't need, in order to buy when cows are down in February and others are selling because they are running out.

Downturns are part of the game... and we can all benefit more by anticipating and acting than by riding the tsunamis.

The reason they say to buy and hold is because if the are going to a financial advisor you are probably a passive investors. Buffets advice is usually also for the passive investor. Context is key.

 

[Travlr]

Context is everything.

That's why I don' believe Buffet practices what he preaches.

I mean... does anyone believe that Buffet is where he is because he does the very same thing most people do?

 

[simme]

All depends on your goals, risk tolerance and amount of effort you are willing to put into it. If you want to accumulate an adequate amount for a secure future without putting several hours per week into planning, monitoring, scheming and managing, then a buy and hold plan with an annual review is probably sufficient. If you want to be Warren Buffet or Peter Lynch (remember him?), then you probably need to work at it a lot more than most people want to spend their time on. Or just be super talented and knowledgeable.
Most people don't even have the discipline to invest for a lifetime with a yearly review. Much less operate at the commitment level of Buffet.
I suspect that those talented enough to achieve the Buffet level spend 60-80 hours per week on the task. That don't leave any time for cows or farming. They probably lead a miserable life while just counting their money. After the basics needs are met and a little for enjoyment, how much can a person really enjoy? Is there a higher level of happiness at 10 million vs. 2? Or 100 million or 1 billion? Really, what are you going to do with that level of money that will make you a better or happier person?

 

[Brute 23]

Context is everything.

That's why I don' believe Buffet practices what he preaches.

I mean... does anyone believe that Buffet is where he is because he does the very same thing most people do?

I don't worship at Buffets feet.

 

[Travlr]

Context is everything.

That's why I don' believe Buffet practices what he preaches.

I mean... does anyone believe that Buffet is where he is because he does the very same thing most people do?

I don't worship at Buffets feet.

Neither do I. Especially since I don't believe what he says.

But I do chase a buck if I can figure out which way the wind is blowing. So far it has worked pretty well for me. I'm just reentering the market after years of being in cattle and real estate. Testing to see if my senses are still as reliable.

 

[Brute 23]

Context is everything.

That's why I don' believe Buffet practices what he preaches.

I mean... does anyone believe that Buffet is where he is because he does the very same thing most people do?

Neither do I. Especially since I don't believe what he says.

But I do chase a buck if I can figure out which way the wind is blowing. So far it has worked pretty well for me. I'm just reentering the market after years of being in cattle and real estate. Testing to see if my senses are still as reliable.

Not every one invests the same way with the same goals. What works for Buffet may not work for you or I.

 

[Buck Randall]

All depends on your goals, risk tolerance and amount of effort you are willing to put into it. If you want to accumulate an adequate amount for a secure future without putting several hours per week into planning, monitoring, scheming and managing, then a buy and hold plan with an annual review is probably sufficient. If you want to be Warren Buffet or Peter Lynch (remember him?), then you probably need to work at it a lot more than most people want to spend their time on. Or just be super talented and knowledgeable.
Most people don't even have the discipline to invest for a lifetime with a yearly review. Much less operate at the commitment level of Buffet.
I suspect that those talented enough to achieve the Buffet level spend 60-80 hours per week on the task. That don't leave any time for cows or farming. They probably lead a miserable life while just counting their money. After the basics needs are met and a little for enjoyment, how much can a person really enjoy? Is there a higher level of happiness at 10 million vs. 2? Or 100 million or 1 billion? Really, what are you going to do with that level of money that will make you a better or happier person?

 

[TexasRancher]

Is anyone here actually making their living or a good part of their income from the stock market? I don't really know anyone that lives off a 401k retirement plan or gets money from trading stocks, everyone I know just invests for retirement. I'm wondering how this downturn affects someone trying to live off of money invested in the market?

Yes, part of my income every other year comes from the stock market (individual brokerage account)...but that's every other year....it's cyclic WHEN i can draw off funds....because there's always down years where I don't want to draw off and lose money on shares I purchased. I do keep some "great losses" on the books "intact" unsold long-term share holdings (a bank of sorts)....I will use them when i dig into my mega 401k and pull out 20k to 100k for a huge purchase in my 60's and 70's....offsetting those taxes. I used to despise losses in stocks...now, i understand nearing retirement...i can use them as a tool.
....and some of those "banked intact share losses"...have actually come back to my surprise. SWN (southwestern natural gas) for one...bought at $5.50 even down to $3.00 purchased...went as low as $1.70....I banked those losses in my mind as gone forever SWN was written off.....and recently just sold them at $7.60 two weeks ago.

 

[Dave]

I look at it kinda like owning cattle, if you buy 100 head when the market is up but the market drops, you still own 100 head, you only lose if you have to sell in the down market. Same with stocks, you still own the same number of shares, they are just worth less which doesn't matter unless you need to sell right then.

Not all the time. When the DOT Com bust occurred a good portion of what I had invested just went away because the company went bankrupt and was gone. So I invested in good solid company. Then 2008 came along. Washington Mutual a good solid bank ceased to exist taking my money down with it. I have certainly lost cows and been holding cows when the cattle market dropped but I never lost 100% of the herd.

 

[Brute 23]

Not all the time. When the DOT Com bust occurred a good portion of what I had invested just went away because the company went bankrupt and was gone. So I invested in good solid company. Then 2008 came along. Washington Mutual a good solid bank ceased to exist taking my money down with it. I have certainly lost cows and been holding cows when the cattle market dropped but I never lost 100% of the herd.

That is a reflection of your investment choices not of investing in the stock market as a whole.

 

[Dave]

That is a reflection of your investment choices not of investing in the stock market as a whole.

That is true but I did take a serious bath both times. Other stock market investments I had at the same time took a very serious down turn.
Compared to how I did last year with cattle. To be open about this I have a deal with B. I buy the cows. He feeds the cows. We split the profit or loss. Last year my share of the profits equaled 18.98% profit on the money I invested. A couple mistakes were made that cost us from making substantually more. There have been years I did a lot better. In the last 30 years I have only had one year when I went in the red. And that was no where near the money I lost in the stock market.

 

[Brute 23]

That is true but I did take a serious bath both times. Other stock market investments I had at the same time took a very serious down turn.
Compared to how I did last year with cattle. To be open about this I have a deal with B. I buy the cows. He feeds the cows. We split the profit or loss. Last year my share of the profits equaled 18.98% profit on the money I invested. A couple mistakes were made that cost us from making substantually more. There have been years I did a lot better. In the last 30 years I have only had one year when I went in the red. And that was no where near the money I lost in the stock market.

Like DR says... invest in what you understand.

 

[KAstocker]

Like DR says... invest in what you understand.

DR must have stole that quote from Buffett.

 

[Brute 23]

DR must have stole that quote from Buffett.

Most every one says the same stuff because it's common sense. Kind of like saying some one stole the saying... don't touch a hot stove.

 

[shaz]

Sold United Health Care in the fool's rally today. Figure I'll take the profit while I can. I don't thing the Dow dropping to 22K is out of the question at all.

 

[Gators Rule]

why not invest in Mutual Funds instead of stocks? That's how your 401k is invested. Much safer in the long run.