The Stock Market

[Right Divider]

People seem to think that when the "market" loses trillions of dollars.... that money just evaporates...

Are people really this stupid?

 

[Right Divider]

On a similar note...

It seems that everyone thinks that 401K's are forced to be tied to the stock market...

THEY ARE NOT...

My wife and I both have 401K's that are doing fine... since we already moved out of stock based funds and into more stable and less volatile investments.

 

[Right Divider]

Again, why do I never hear this on any media?

 

[Clete]

On a similar note...

It seems that everyone thinks that 401K's are forced to be tied to the stock market...

THEY ARE NOT...

My wife and I both have 401K's that are doing fine... since we already moved out of stock based funds and into more stable and less volatile investments.

The vast majority of people who have 401K's have little or no ability to move their funds into something other than the stock market. They might have some limited choices in regards to how aggressively they're exposed to risk but most people don't understand enough about it to even know what it is they're deciding.

Moreover, the vast majority makes the wrong decision at exactly the wrong time when it comes to getting in or out of any market. The masses, by and large, buy at the top and sell at the bottom. Indeed, that is precisely what creates the tops and bottoms. It's better for most people just to leave it alone. The market indexes are designed to go up over time and they will do so as long as the market exists. They'll always have their ups and downs but over the long term that can't not go up because if there is a company in the mix that sucks, it gets removed and replaced with a company that is making money and growing. Buying an index fund is buying an investment vehicle that is automatically diversified and managed by default and as such is very definitely the safest long term investment that average person could make.

 

[Right Divider]

The vast majority of people who have 401K's have little or no ability to move their funds into something other than the stock market.

That is simply false.

They might have some limited choices in regards to how aggressively they're exposed to risk but most people don't understand enough about it to even know what it is they're deciding.

That is their own responsibility. Ignorance is a lame excuse.

Moreover, the vast majority makes the wrong decision at exactly the wrong time when it comes to getting in or out of any market.

I'm not talking about moving in and out. I'm talking about older (probably retired) people that need to limit their risk.

The masses, by and large, buy at the top and sell at the bottom.

That is irrelevant to this topic.

Indeed, that is precisely what creates the tops and bottoms. It's better for most people just to leave it alone.

Not if they are older and retired.

The market indexes are designed to go up over time and they will do so as long as the market exists. They'll always have their ups and downs but over the long term that can't not go up because if there is a company in the mix that sucks, it gets removed and replaced with a company that is making money and growing. Buying an index fund is buying an investment vehicle that is automatically diversified and managed by default and as such is very definitely the safest long term investment that average person could make.

Older retired persons are not looking "long term".

The difference between retirement age and typical expiration age is less than 10 years for a man in the US (a little longer for a woman).

 

[Clete]

That is simply false.

I speak from personal experience. I suppose my 401k may have been different. It was several years ago now but I have basically three options which were basically various mixes of stocks and bonds. You picked based on your risk tolerance. I certainly had no ability whatsoever to move the money into a different asset class such as precious metals.

That is their own responsibility. Ignorance is a lame excuse.

No it isn't! I actively traded the markets for several years and I'm here to tell you that the vast majority of people who manage their own money also lose it. That's a fact of life. The masses buy at the top and sell at the bottom.

I'm not talking about moving in and out. I'm talking about older (probably retired) people that need to limit their risk.

If my mother made her own decisions about such thing instead of paying a fee to let someone who knows what they're doing do it for her, she'd be flat broke. Not because she's stupid but because it isn't as simple as it seems.

That is irrelevant to this topic.

I really don't think so.

Not if they are older and retired.

Older retired persons are not looking "long term".

The difference between retirement age and typical expiration age is less than 10 years for a man in the US (a little longer for a woman).

If their fiduciary has any brains at all, then he'll have moved them to something appropriate for their financial situation and told them to leave it there. It would most likely be bonds (mostly) and dividend paying stocks (e.g. things like utility companies and P&G - companies where the value of the stock itself is stable and well established) and probably not any commodities, including gold, at least not a major portion of their money anyway, unless their wealthy and can afford the risk.

 

[Right Divider]

I speak from personal experience.

You claimed that "the vast majority of people...". How do you know that "from personal experience"?

I suppose my 401k may have been different.

Indeed.

It was several years ago now but I have basically three options which were basically various mixes of stocks and bonds. You picked based on your risk tolerance. I certainly had no ability whatsoever to move the money into a different asset class such as precious metals.

What does "precious metals" have to do with anything?

You have now admitted that "You picked based on your risk tolerance". That is exactly what I was talking about. Everyone has that ability and duty. Nobody is forced into the stock market with their 401k allocations.

No it isn't! I actively traded the markets for several years and I'm here to tell you that the vast majority of people who manage their own money also lose it. That's a fact of life. The masses buy at the top and sell at the bottom.

AGAIN, I was NOT talking about "playing the market". I was talking about the fact that everyone has a responsibility to know how their 401K money is allocated and to make reasonable choices about those allocations..

If my mother made her own decisions about such thing instead of paying a fee to let someone who knows what they're doing do it for her, she'd be flat broke. Not because she's stupid but because it isn't as simple as it seems.

AGAIN, I'm not talking about "playing the market" or "picking individual stocks". I'm talking about making reasonable choices about where your 401k money is allocated.

If their fiduciary has any brains at all, then he'll have moved them to something appropriate for their financial situation and told them to leave it there.

What makes you think that everyone with a 401K has a "fiduciary"? I would guess that the vast majority do not.

It would most likely be bonds (mostly) and dividend paying stocks (e.g. things like utility companies and P&G - companies where the value of the stock itself is stable and well established) and probably not any commodities, including gold, at least not a major portion of their money anyway, unless their wealthy and can afford the risk.

Thanks for finally agreeing with me.