Saving and investing money without the stock market or 'gold'

I'm am getting pissed off at this stupid irrational stock market. The stock I have went down 20% in the past two days for no reason what so ever. I work there and nothing is different. And since I have a day job and really don't want to spend the other half of my life following the market and all of the sheanagins that the CEOs are pulling to get millions and millions for running their company into the ground (CHK)... And I'm sure these 'analysts' have partners on the outside that short the stock before they downgrade it, and then ride it back up just too make more money.

And gold is a conspiracy play for the right wingers who want the dollar to fail, and I'm not buying into that. I will blame the Fed for thinking inflation is good and deflation is bad. And the Fed for manipulating the rates instead of having the government prevent housing speculators... Plus, the ability to devalue the dollar to get the stock market to go up is wrong too.

I have come to the conclusion, that unless you never lose money in the stock market, you can never 'win'. Am I really going to be able to take $40,000 (about 8 years of saving around 8% of my income) and make it into $1-$2 million like all of the 401k brochures say?
T.ROWE PRICE 2045 RETIREMENT FU Fund Chart - Yahoo! Finance

Does anyone think that this 401k fund would get to about 240, which is where it would need to be for me to get to the goal retirement amount... without the dollar plummeting in value that is? Most of the money that I have saved in my 401k has done nothing great. I would have been better off buying CDs at a credit union and making the 1%...

Do you know anybody who has been able to retire based on just their 401k doing great? Are people able to get out of their 401k when it is going up and up (and might go up higher), only to see it collapse 10, 20, 30% over a few days?

Wouldn't I be better off paying off my $100,000 mortgage in 5 years instead of 15 to prevent Bank of America from making $70,000 off of me in interest payments? And then 'catching up' with retirement savings once I owned my house outright, instead of paying 4.25% (which is still low) to borrow money because I want to gamble on the stock market going up (and being rational)?

(And I won't get into the large percentage of the population who wishes they had my financial problems, with their debt loads and 0% savings rate, and no retirement accounts. And then complaining that it's a bad economy, when they are going to have big problems in a few years.)

 

Do not get TOO concerned about short-term fluctuations... they are just that, short-term. When you're looking at 30-40 years, your only concern should be where you will end up. A well thought out strategy will get you there. Remember, the best time to buy is when others are selling (like now) and the best time to sell is when others are buying (NOT now). Reactive buying is bad, reactive selling is worse.

Your questions are good ones. Remember that every dollar you put on a consumer loan earns you an AFTER-TAX return equal to the interest rate on the loan. With money being fairly cheap these days, that's not as big an incentive as during high interest rate times. If you think you can get a 10% return on an investment, and your marginal tax rate is 30%, you're only getting a 7% return (roughly). If you have an 8% consumer loan, you're better off paying off the loan. In the US, where mortgage interest can be deducted, that is generally the last loan you want to pay off early as it often has the lowest interest rate, and that rate is further reduced times your marginal tax rate. In Canada, residential mortgage interest is not usually deductible.

But, the majority of self-made millionaires' first piece of investment advice is to pay off your first home sooner, and live in it longer (I believe Warren Buffet still lives in the modest home he bought in Omaha in the 1960's). The rationale is that your mortgage ties up so much of your early capital and cash flow that you may miss out on some very lucrative investment opportunities because your cash flow is still committed to paying off your mortgage.

Finally, even if you are in a staff position, drawing a salary and slogging away a few bucks a paycheque into your IRA, don't overlook other investment options. Small businesses can be great places to invest relatively small amounts of money (a few tens of thousands) with relatively good returns. Yes, often more risky, but you can often invest as a silent partner and reap the benefits of what is generally the main engine of economic growth.

 

Use your 400k and build yourself a small printing press with good-quality second-hand machinery.

Alternatively, invest into a Middle Eastern company with high profit margins.

 

Stop confusing investing with expressing your opinion on things like "CEO Shenanigans" and "right wingers".
You are investing to make money.
You want to express a political opinion? Post it here. Argue with friends at a coffee shop.
But keep it out of your investing.
You could have bought gold 10 years ago and made a fortune, and still posted all kind of political thoughts on crazy right wingers.
Just learn to seperate the two.

 

Some good stuff in your post but I don't understand these two claims.
How have short sellers warped the market? By pointing out and profiting from the frauds like Enron and FNM and Lehman and their ilk?

And what is your definition of bubble, and how does it apply to gold?

Thanks.

 

Yes.

In more general terms, the most important factor in financial success (as measured by financial security - this can mean what each person wants it to mean), is owning stuff that has real value.

Stock certificates are pieces of paper unless the underlying stock is supported by stuff that has real value. If I invest in Coke, I have to ask where is the value. Is the value in the "formula"? Is the value in the "brand"? Is the value in the "employees"? Is the value in the "distribution network"? Is the value in projected future "cash flow"? Does the sum of real values support the stock price? In most cases the answer is no. So generally, small investors invest in a no win situation - the same is true for 401(k) investors in mutual funds. Once this is understood, a small investor can adapt a winning strategy. It requires work. In 401(k) investing, the start is a honest self-assessment of risk tolerance, establishing a disciplined approach, followed by diversification matching the risk tolerance. For people who get uncomfortable with 20% market swings, a focus on fixed return instruments (bonds, bond funds, money market funds, CD, etc) is most appropriate. Personally I am a high risk taker when it comes to investing (I have risked every thing I have owned several times on business investments), to me a 20% drop, is like a perfect opportunity to buy what I want at a 20% discount - or to make money on short positions (puts, covered calls mostly, however most 401K's don't allow that).

 

It looks like other media people are talking about this now.

Invest in stocks? Small players still smarting – USATODAY.com

And shouldn't there be a philosophy of paying down all debt, reducing taxes, living sustainability, generating your own electricity, having as few monthly bills as possible...

Not this:
Life Inc. - Americans are feeling more comfortable about debt

But also not this:
Life Inc. - He 'quit money' and is still living a happy life

If you could maintain your same quality of life, but did so cheaply, it would be easier to retire if you only needed $10,000/year instead of $30,000.

 

Having been a stock broker in the early 90's, I can tell you the very basic, "You ONLY lose money, if you sell." If the stock drops 20% in 2 days DON'T SELL, unless it is still a profit for you. There are some good stocks and bad stocks to invest in.

My first stock was General Cinema, because that was my high school job and they GAVE it to me. After I left I had like 10 shares and at the time it was worth something like $15 a share. I thought I'd just let it set and make money. Then forgot about it. 10 years later when I was scrambling for money trying to cover my gambling addiction, I found that it was pretty much worthless because it had been spun off into Harcourt General a few years earlier. Had I known I probably would have sold then, but like I said I never truly thought much of it.

If the stock is "free" or considered a dividend for working there (as mine was), then even if it is 20 cents a share and you sell you make money.

Companies fail, companies make money, some companies like the Limited at one point, experience exponential growth allowing its early investors to make lots of money through multiple splits over a short period of time.

RESEARCH the stock before you buy it. Look at the history, goals, management (how long have they been in that particular business, or are they just owners of an MBA and could care less?), look at P/E a good rule of thumb is under 20 there is a lot of room for growth. The further over 20 or N/A (because of losses) then chances are it's headed downhill, UNLESS they are putting money into the business (through acquisitions/mergers/buying new factories, properties... whatever) IF the losses look like they can be explained and they seem to be a one time hit, then it still may be a good buy. NOT ALL CEO's are out to rape the company. That's why you research.

As for analysts, it seems they throw darts sometimes on what to "buy, sell, hold".... look at a history of their recommendations and see how accurate they have been the past 10 years.

The stock market is in NO way what it used to be. It originally was used for companies to raise capital investments. "You invest 20K and I'll give you x shares representing 20K worth of my company. Reagan came along deregulated and the result is what we have today.

We used to have a saying when I worked in the business. "It's like Vegas, you put in ONLY what you can afford to lose. You sit on it for 5-10 years and see what happens.

The one thing people bitch about more than anything is the Prime Rate. In the late 70's when it was high, so were CD rates. Then came the S&L scandal and Reagan and rates dropped. My grandmother sold her house in 1978, invested the vast majority of it into 5-15 year CD's with a 17% rate that would automatically renew if she didn't touch them.

As interest rates fell, she was still making a killing. She would just let the principals turn over and pull out some of the interest, leaving the bulk of it in there to grow.

When she fell ill a few years ago, she had to get rid of all she could without giving the money away so that she could get medicaid to cover what her medicare couldn't, it was either that or her medical bills would have eaten into everything and left her with basically nothing to show for it. My mom took granny's money bought her a Sony Bravia, a new bed and several other things.

Gold has done this before, look at the history of it. Gold skyrocketed in the 70's and then fell back to earth, Silver was even worse (though today maybe a better investment than gold). When investing in those, make sure you get the actual gold/silver and not some "certificate" that says you "own x ounces held in some vault. Cause if the Right wing nutjobs are right and gold does become the future of money, then people are going to find that the whole gold/precious metals investing was a ponzi scheme. The known gold reserves are finite, not infinite. Same with silver, although silver, there is more of and it is immensely cheaper, thus you can buy more. RESEARCH how much gold/silver/platinum/whatever as a percentage goes into jewelry, countries treasuries, institutions stockpiling it, and how much is truly available to the public at large. Then find what the demand is and how much of that is truly able to be covered. You maybe surprised. Hence, the popularity of all these "we buy gold jewelry and old scrap". That tells me these people are scrambling to find enough gold to cover the certificates they are putting out there.

The safest investment in all honesty, IMHO, are in IPO's or good solid companies that in 10 years will have grown in their industry.

 

I'm so lost when it comes to Lindy

High-school slut, stripper, highly sexual lover, a female with an understanding of computers, big tits, investor, business owner.

 

I would say that this is a recipe for disaster.
When the stock drops 20%, your loss has occurred. You may choose to ignore it, pretend it's not there, but it has surely happened.
What you need to do at that point is re-evaluate the position, integrate the new information that has come out, and decide if that is still the best place to have your money.
Had you sold your (pick and insert one:Enron, Lehman, Fannie etc.) down 20% you would have saved a lot of money and heartache, rather than riding them into the ground.

 

I use a fall of 7% in a stock as a trigger to re-assess the position.
I may not jettison the position, but a 7% fall makes me go through the mental exercise of re-evaluationg and seeing if I want to stay or go.
Sometimes tedious to do, but it's good to be forced to justify keeping a position on. Otherwise it's just too easy to go with the flow, and end up down the drain!

 

You need to look at why it dropped so fast in 2 days. Was it just a sell off from someone who held a lot of the stock and died recently, where the heirs or the courts put the assets into probate and trying to sell everything for distribution to the heirs? Is it a poor business plan? Is it the company is flailing and showing signs of falling apart (Best Buy)?

In ASU's case and the stock he named (CHK) it sounds like an interesting quagmire. Do you wait and see if the line of credit gets opened or if Southeastern Asset Management gets its way and Chesapeake takes offers to sell out.

It sounds like McClendon is getting greedy and taking advantage of a good company. It sounds like between SAM and Noster there is some serious concern.

This line from the article linked below is what would have me worried most:

Shareholders Urge Changes at Chesapeake Energy


Shareholders Urge Changes at Chesapeake Energy - Yahoo! Finance