My wife and I are in our early 30's and both have Roth IRA accounts. My wife's account is doing well over the past couple of years. Mine, however, (begun in February of 2000) is down substantially (50+%). It seems at this point it will take awhile for me to just break even. I am not sure of all my options at this point, but the ones I see are:1. Hold onto the fund indefinitely, continuing to contribute, thus lowering my average cost.2. Cash out and reinvest the money in my brokerage account. I am not sure though if there is a penalty for me cashing out since I have sustained a loss. Anyone know?3. Roll what is left into a different IRA account (either my wife's or a new one for myself).We are not talking about an extraordinary amount of money here, and whatever I do with this money is not going to break us financially. I just feel there are better long term alternatives out there than what I am currently in.Thanks in advance for any input.Porthole.
I assume from your post that your IRA is in some kind of account with limited or no choices. If the choice(s) available in the current account aren't performing up to your expectations, I would definitely choose option 3, move the account to a different brokerage with more or better options. A Vanguard account is a good option, with a broad based index fund like the S&P or total market index.
It is not the Roth IRA (the struture) that is the problem. It is the investment and maybe the alternative investments possible with the present plan administrator.You certainly show work on finding a better investment. If that means you have to find a different administrator then that is what it will take. If you chose the last investment then consider what you need to do better so that you have better success. It might be the best way to improve the returns is to buy a book or two and then decide what to do with the funds.John
Roll what is left into a different IRA account (either my wife's or a new one for myself).You can't "roll" your IRA into your wife's. Your money is yours and hers is hers. Now, you CAN withdraw the funds and use them for her contribution, but that will reduce her ability to contribute by that amount for the year. Max contribution to each account is $3,000, no matter where the funds come from.That said, if your wife's investment has outperformed yours, maybe you should move your funds into the same investment (retaining the funds in your own IRA). Just a thought.3MM
It is not clear to me what sort of an IRA you have. What you need, however, is an IRA with a brokerage company like Brown, Ameritrade, or Scottrade. Then you can do anything you want with the money except for short sales and some kind of options transactions. I cannot imagine holding the same fund since February 2000. We went into a major bear market in mid-March, and prudent people sold around that time went to cash or perhaps to short funds like USPIX, which you can buy in an IRA. Most funds have not gone recovered to go back to the highs of March 2000, except for some notable exceptions like RSPFX, ARGFX, RSCOX, OAKLX, SCUIX, PBFOX, and some (perhaps all) REIT funds. That is not a complete list. Gold and natural resource funds have done well, but only for the last few years. Index funds like VFINX are still under water, of course, but that is to be expected from an S&P index fund.If you want to make serious money in the market, you have to time the market. There are a number of good timing systems, such as TimingCube, and a number of free systems on my site, and an archive of stuff, mostly for timing, at Dexter French's site. This approach has certainly worked for me - I have vivid memories of selling stuff in March 2000 when I was staying at a Red Roof Inn on a business trip to Colorado. Have not been to one of those since.Timing the market just means following the trend, and there are a lot of good trend-following systems. These systems will generally trade 2-4 times per year (that is go from buy to sell status). Nothing is perfect, but if you look at TimingCube's record you can see that it has done very well compared to buy and hold. People scoff at this sort of thing, but I just laugh all the way to the bank. If I had listened to the people who say you cannot time the market, I would still have to be working for a living. When I started at this stuff, I had only the most rudimentary tools and knowledge, but even with that I certainly could spot the major trends.The second aspect after timing is selection. The easiest thing to do is to trade funds like QQQ (soon to be QQQQ), SPY, and IWM. There are also some other things you can do, of course.There is absolutely no such thing as a good long-term buy-and-hold investment. Even an excellent fund like HSGFX looks terrible some times.http://www.actwin.com/kalostrader/TradingSystem.htmlhttp://home.earthlink.net/~dexf/http://www.timingcube.com/app/html?page=home
joelxwil wrote:If you want to make serious money in the market, you have to time the market. There are a number of good timing systems, such as TimingCube, and a number of free systems on my site, and an archive of stuff, mostly for timing, at Dexter French's site.This is a classically irresponsible statement. Market timing is nothing more than gambling, and is totally inappropriate for retirement investing.Russ
Sorry, you can only recommend a post to the Best of once.What Russ said ^ 10.Landog
As you can see, you'll get a variety of answers.I would study why your particular investment choices have lagged your wife's, and whether those choices will (may) do well in the coming days. It's a crap shoot to an extent. I have finally started to rebalance our accounts, but like picking individual stocks, I will be wrong with some.There are certainly low fee IRAs, like Vanguard. Low fees don't guarantee high future returns. I'd see how the fund(s) you're in rate at www.morningstar.com, and study what they actually hold. Many think bonds are going to be bad in the near future. But, dividend reinvestments in a bond fund may level that a bit.Just my 2 cents. I've sat on several funds for years, losing money, and rebalanced and am now in the plus column. I contribute more of that to a bull market than to my prowess. Tomorrow (or Monday) could change that. Evaluate your risk aversion too.Not much help, but figured I'd throw it out there.Good luck,Mike
Welcome!Well don't fret for one thing. You're a youngin' and that's a good place to be and the fact that you both have Roth's is great. (I assume you're taking advantage of a 401k somewhere hopefully???) 50%? Ah, that's peanuts compared to a bunch of other folks so don't feel bad.Joelxwil's options are pretty decent with respect to Scottrade and Ameritrade. I'd either go for Scottrade or Vanguard myself.As far as timing the market that's really up to you. Joel seems to have had some success with it and I recall looking at his results and they were respectable for at least the last 5 years if I remember correctly.I'm one of those Long term buy and hold types that rebalances every 12 months or so. I will admit to some timing however. If I see things are getting hot and my P/E's are getting out of whack then I might rebalance a bit earlier. I've maintained a very diversified portfolio and was able to escape the bear market without too much damage (but there was damage so don't think I go off free either!)Pick up a book and have a nice read. The fool has plenty of articles on investing. I maintain a mixed portfolio of index and active funds averaging about .5% expense ratio. I never pay more than 1% for a fund. Just not worth it IMHO.I'm going to take a leap of faith and say you're looking for something fairly simple so here's a thought...Rollover your account to VanguardThrow 90% or 100% (remember you're young) into the Total Stock Market Index fund and the rest in the Total Bond Market Index Fund. Rebalance ever year or so and you're.A slightly more complex strategy is to open yourself up to some Value fund and then some small caps. Maybe...100% Portfolio25% Large Cap Growth/Blend30% Large Cap Value20% Small Cap Growth/Blend25% Small Cap ValueThen let's go ahead and add a little Foreign flavor to our mix so you might have...100% Portfolio25% Large Cap Growth/Blend25% Large Cap Value15% Small Cap Growth/Blend20% Small Cap Value15% Foreign Large Growth/BlendHmmm, missing a REIT in there...100% Portfolio25% Large Cap Growth/Blend25% Large Cap Value10% Small Cap Growth/Blend20% Small Cap Value15% Foreign Large Growth/Blend5% REITHow about some emerging market? Foreign Small Cap Value? Precious Metals anyone?You can offset the portfolios to your liking with the appropriate % of bonds. It really all depends on the type of risk you're willing to take. The more risk...the more return. You want to turn your risk down a notch? No problem...pump up with some short term bond funds, not more than 10% or so though unless you are truly risk averse. You've got a lot of working years ahead so you want to take advantage of them and grow your portfolio. You can just hold on the above portfolio's, rebalancing once a year...or if you really feel lucky, use a timing strategy (although I would recommend against it but that's me.)Best of luck to you!Jesse
Claiming that market timing is gambling is an utterly stupid remark. This indicates the level of irresponsibility on this board, and why I have never seen anything on this board that actually has helped me make money.So far as something that is totally inappropriate for retirement investing, consider that VFINX has been a loser for the last 5 years. Consider also that over the last 10 years, it has about a 10% average annual return, but a 47% drawdown. For those you you who do not know what a drawdown is, that means that at some point you had lost 47% of your money. Now losing that much is totally inappropriate for anything, retirement or otherwise.Now there is an interesting fallacy that says that if you do nothing, you incur less risk, whereas if you take action, you incur risk. That is nonsense, of course. The important thing is to take the right action, and holding a losing position is not the right action.
But, dividend reinvestments in a bond fund may level that a bit.I'm confused. Bonds (which are debt) don't pay dividends. Where are these dividend reinvestments coming from?3MM
I'm confused. Bonds (which are debt) don't pay dividends. Where are these dividend reinvestments coming from?Bond funds usually do pay dividends.FuskieWho focuses on high-yield interim term bond funds himself...
Fuskie, you didn't list any funds on your biography page. Which interim bond funds have been good to you?wc
I'm confused. Bonds (which are debt) don't pay dividends.Almost all bonds do pay dividends.Which bonds don't pay dividends, besides I & EE Savings Bonds (which accrue interest) and zero coupon bonds (which are purchased at a discount to face value)?
Okay, I'm a CPA, but clearly I'm confused. I've never heard of companies paying dividends to creditors. My understanding is that dividends are a distribution of earnings to owners, i.e. stockholders.Can someone point me to a link that explains why bond holders would receive dividends?I tried to google "bond dividend" and I'm getting a bunch of sales sites that discuss distributions to bond holders, but not dividends per se.thanksAlways wanting to learn.3MM
Bonds pay interest. Stocks pay dividends. They are different things. The company, if doing well, should increase the dividend paid to its owners (shareholders). If doing poorly, it may reduce or omit the dividend. The shareholders will be disappointed but they should understand. The interest on bonds is an obligation of the company. It will pay the obligatory amount. It will NEVER increase the payment no matter how well the company is doing. If short on money and the company cannot pay both the dividend and the interest on its bonds, the interest on the bonds comes first. Best wishes, Chris
3MM,Do you know whether or not I can withdraw those funds completely without penalties being assessed (since I have lost money in the investment)?Thanks.Porthole.
1. Hold onto the fund indefinitely, continuing to contribute, thus lowering my average cost.If your investment plan calls for holding this fund, hold it.But if today you would purchase another fund, then sell and buy the desired fund inside your Roth IRA. Depending on who your Roth IRA custodian is, this might involve transferring your Roth IRA over to a new custodian (e.g., when I moved my Roth from a load fund family over to Vanguard).It is a mistake to hold on to an investment until it recovers if one intends on selling it anyway.2. Cash out and reinvest the money in my brokerage account. I am not sure though if there is a penalty for me cashing out since I have sustained a loss. Anyone know?If you transfer your Roth IRA over to your brokerage, there is no tax penalty.If you pull your money out of the Roth IRA (as opposed to transferring the Roth IRA), that money will no longer be available for tax-free growth. And the tax deduction for liquidating all your Roth IRA accounts and withdrawing all your money is small because you can only deduct the difference between the total of all contributions and the total of all withdrawals (assuming the total of all withdrawals is less than the total of all contributions) and that goes on Schedule A in the section subject to 2% AGI exclusion, and even then the bottom line of Schedule A has to exceed your standard deduction before you receive any benefit. So, if the dollar amount of the total loss is less than 2% of your AGI, you have no benefit from liquidating your Roth IRA account.3. Roll what is left into a different IRA account (either my wife's or a new one for myself).You cannot roll your IRA into your wife's IRA. As some people are fond of reminding us, the "I" in IRA stands for "Individual".If your current Roth IRA custodian does not offer the investments you want to invest in, rolling over to a different Roth IRA custodian makes good sense.Before moving your money, however, you should have an investment plan. You have not told us what your Roth IRA is invested in, nor what your investment plan is. Nor have you told us whether your investment portfolio is just the Roth IRA or if the Roth IRA represents a small percent of a much larger portfolio. (My Roth IRA is approximately 8% of my investments.)You can guess by the variety of suggestions that different people are speaking from their different plans, but it does no good to follow one person's market timing plan for a few months, and then switch to an asset allocator's plan a few months later, and then a month after that switch to picking investments by fundamental analysis. While the goal is the same, the timing of buying and selling would be different for each of the investment plans.My personal investment plan involves an asset allocation plan with periodic rebalancing. This is a method that tends to be advocated on the Vanguard, SmartMoney, Oppenheimer, TIAA-CREF, and Morningstar web sites, partially because it tends to have long-term success (though with short-term volatility), partially because it is easy (physically) to administer (but sometimes the emotions want to push against the plan), and partially because it requires just a little periodic attention (whereas market timing strategies tend to involve a lot more attention and fundamental analysis may land somewhere in between).The important thing is to develop a plan that you have reasonable confidence in, and follow that plan. Once you have the plan, you can pick the best investments for implementing that plan. (Many Roth IRAs start out with mutual funds, hopefully low-expense, no-load mutual funds or exchange traded funds, to get broad market exposure with the small amount one can contribute each year.) And once you have chosen the best investments, then pick the most suitable Roth IRA custodian, e.g., a discount broker if holding individual stocks or exchange traded funds, or maybe a fund family (such as Vanguard) if the Roth IRA will hold mutual funds from one specific fund family. If one's investments extend beyond the Roth IRA, the investment plan should include all the other investments, too, and then part of what one does is pick the best accounts for holding the investments that best fulfill the investment plan.Starting from the individual investments and failing to plan doesn't work as well and will leave you with questions every time your investments experience a dip. I think most participants on this thread would agree that aimlessly trading investments would likely lead to under-performance at best.That is why I strongly recommend you form a plan and then change the Roth IRA custodian and investments accordingly.
Fuskie, you didn't list any funds on your biography page. Which interim bond funds have been good to you?I actually do not have any mutual funds listed in my bio. My primary bond fund was a Scudder high yield fund which I ended up selling as I liquidated my eFund. As for current funds, I am on vacation this week, but if you email me and remind me when I get back on Sunday I will look at my list. I am pretty sure one of them was a Vanguard index fund for bonds.FuskieWho is sorry he does not have the details at hand...
Bonds pay interest. Stocks pay dividends. They are different things.The interest that bonds pay is also called dividends.
I've never heard of companies paying dividends to creditors. My understanding is that dividends are a distribution of earnings to owners, i.e. stockholders.Have you heard of paying interest to creditors? A "bond dividend" is essentially interest.See http://dictionary.reference.com/search?q=bond%20dividend
Okay, I'm a CPA, but clearly I'm confused. I've never heard of companies paying dividends to creditors. My understanding is that dividends are a distribution of earnings to owners, i.e. stockholders.I think people are using terms a little too loosely; especially since you're a CPA. A bond owner is a creditor. The company owes him the principal and interest on the bonds(debt) he has purchased from the company.Hedge - wondering if he has been pedantically correct ;)
Okay, I understand now.I'm referring to an accounting term. MarkOYoung is referencing Wall Street jargon.thanks3MM
As far as timing the market that's really up to you. Joel seems to have had some success with it and I recall looking at his results and they were respectable for at least the last 5 years if I remember correctly.Just to know what we are talking about.What does it mean when you say results and they were respectable for at least the last 5 years if I remember correctly.If someone could earn a secure 10% return for 5 years would that be respectable? What is the number was 15%?What 5 year return should someone shoot for? I am not asking about only the equity market. Just trying to get a benchmark that people think is reasonable for a 5 year period if the return was to be fixed for the period.John
3muttsmom wrote:Okay, I'm a CPA, but clearly I'm confused. I've never heard of companies paying dividends to creditors. My understanding is that dividends are a distribution of earnings to owners, i.e. stockholders.You are correct.Individual bonds pay a 'coupon', which is really interest, not a dividend. The IRS treats interest income differently than dividend income. Interest income is taxed at your marginal rate, while dividend income is taxed at the same rate as long term capital gains.Bond funds distribute what are sometimes called 'dividends' in addition to possible capital gains. In this case, the 'dividends' are non-qualified meaning they are not qualified for the 15% maximum tax, and are taxed at your marginal rate, so they are really interest regardless of the name.Russ
On your federal taxes, you report interest and dividends in separate places. There is a definite distinction. If you own a bond mutual fund, the fund may pay dividends, representing the interest collected from the bonds the fund owns. That is a point where it can get confusing. I don't own bond mutual funds. Interest is obligatory. Dividends are optional, and are declared by a board of directors. Under current tax laws, qualified dividends are taxed at a lower rate than interest, so $1 of dividends is actually worth somewhat more to you than $1 in interest. Best wishes, Chris
Rmacdonald, that is both a true and false statement. Obviously by losing 50% in the IRA, he made a bad market timing mistake (as did many others by buying then). On the other hand, market timing is very complicated (you will second guess yourself a LOT). I think it is more feasible on a) individual stocks, and , b) if you have a lot of time on your hands.It is nearly impossible (please believe me) to time a trendless market. However, it is a little easier to time the market if it breaks above a pre dispositioned trading range. For example, if the nasdaq can hold above 2,200- your timings will be greatly favored to the long side.However, for me, i've done very well buying and holding HGs and making a lot of money. I got angry over the summer and got pissed, and i sold a lot of my hidden gems. they are up a lot more now. But i made most of the (potentially lost) money back through daytrading. BUt now since i am back in school it is much harder to do that. So i guess my market timing experience was fairly unsuccessful.However there is one thing i have learned. When everyone is bearish, be bullish. When everyone is bullish, be bearish. It is not easy to time the market and my results have been mixed. However many have professed to doing it, and doing it successfully. I am a new trader
However there is one thing i have learned. When everyone is bearish, be bullish. When everyone is bullish, be bearish. It is not easy to time the market and my results have been mixed. However many have professed to doing it, and doing it successfully. I am a new trader Zonties, I responded to your other post just now, and this post just confirms my fears. You are a new trader, and you are of the opinion that market timing can be done BY YOU. The evidence shows that money managers with many years of experience are not even capable of timing the market successfully. Please reconsider what you are doing. Blindly trading hidden gems, day trading, market timing; you're on the road to financial ruin.Hedge
Zonties wrote:...market timing is very complicated (you will second guess yourself a LOT). I think it is more feasible on a) individual stocks, and , b) if you have a lot of time on your hands.I invite you to read the following books, written by some of the most highly respected financial experts:'A Random Walk Down Wall Street' by Burton Malkiel'The Four Pillars of Investing' by William Bernstein'Common Sense on Mutual Funds' by John BogleThese books are filled with historical evidence that proves beyond any doubt that it is impossible to reliably time the market over long periods of time. In the 'Random Walk...' Malkiel investigates all sorts of technical analysis methods and effectively debunks them all. He shows that charts are totally meaningless, because historical market movement has almost no bearing on what will happen in the future. All the trading systems that do work, work only for a very short period of time until any advantage is arbitraged away by professionals.However, for me, i've done very well buying and holding HGs and making a lot of money. I got angry over the summer and got pissed, and i sold a lot of my hidden gems. they are up a lot more now. But i made most of the (potentially lost) money back through daytrading. BUt now since i am back in school it is much harder to do that. So i guess my market timing experience was fairly unsuccessful.However there is one thing i have learned. When everyone is bearish, be bullish. When everyone is bullish, be bearish. It is not easy to time the market and my results have been mixed. However many have professed to doing it, and doing it successfully. I am a new traderLots of people get lucky and beat the market for several years in a row, just like throwing a string of heads in a coin toss. However, in the long term, the law of averages will eventually prevail, and the market timer will lose out to the overall market.After you read at least Malkiel's book, come back and let us know what you think then. I'm willing to bet that it will change your entire perspective on day trading.Trying to beat the market is lots of fun, and I do it with a small amount of money, but it is certainly not what you should be doing with the bulk of your retirement money.Russ
Taylor Larimore, of "Vanguard Diehards" fame, made this post today which seems to fit where this thread has been going:http://socialize.morningstar.com/NewSocialize/Asp/FullConv.asp?forumId=F100000015&convSeqNumber=38042&mrr=1101614160I believe it's pretty easy to see that the authors are of one mind in that market timing is generally a negative investment strategy. Regards,Bill
wcfenton wrote:Taylor Larimore, of "Vanguard Diehards" fame, made this post today which seems to fit where this thread has been going:http://socialize.morningstar.com/NewSocialize/Asp/FullConv.asp?forumId=F100000015&convSeqNumber=38042&mrr=1101614160Taylor's post sums it up nicely. Don't try to time the market.It's also interesting to see that he listed quotes from all three of the books I recommended. I urge the original poster of this thread to read those books.Russ
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