AM a recent college grad, have a 401K at work and have started a Roth Ira to try and invest while my tax bracket is low. But I wanted to take about $10k and hopefully inject it with the help of the fool.com and maybe hit some of those huge gains in the stock market. My issue is all this talk about the possibility of crashes etc. Just wondering if maybe I should wait some months to see if the stock market retraces rather than put it all in now and possibly lose when it happens. What is the consensus lately, will there be some sort of crash or major retracement on the horizon.Obviously I feel that I am starting at a great time with years of potential growth but I also can wait to see if some unfortunate event might take place.Thanks for any help or concerns
tracybrooks11,Being right out of college I'd recommend you open that Roth IRA and buy a very low-cost S&P 500 or total stock market (or target date) mutual fund or ETF. Also you should also do your best to forget how much you contributed, as I can guarantee a couple of things will occur:1. At some point in the near future you will cringe and hate yourself for loosing money in the stock market, and if you hang onto the investment for at least a decade2. You will come back and thank me for this advice.There's some fine tuning I could make to that advice; but that's what most young investors should do ... plow a good chunk of their savings into the broad market and give it time. The problem is most people want to fiddle with it, so they will tend to take money out and put money back in at the worst possible times.- Joel
You are on the right path - but maybe you should not worry about the mile makers so to speak. Instead spend a year or maybe even two reading, studying and thinking while you steadily invest in and S&P500 index fund. Let me specifically suggest Vanguard's VFINX (and when you get above $50K they will automatically move your funds into VFIAX which has even lower fees).If you are fearful you might be missing out on some serious gains, that is good - you are thinking. So Google about Warren Buffett's million dollar challenge. (Short version he bit a million dollars against any and all comers that he could invest in one single item and out perform the hedge fund people and the investment period was to be 10 years.)The bet began in early 2008 - just before the big crash. Warren lost more than 55% by the time of the bottom in March 2009. Warren chose VFIAX and won.
all this talk about the possibility of crashes etc.Not to worry about it. This is standard Wall Street gibberish. Any time stocks go up, someone somewhere asks I wonder how long that can go on. And then all sorts of stats about last time.First be aware that big crashes are rare. Corrections of 10 to 20% or so should be within your risk tolerance range. By making steady investments as in your 401K, dollar cost average will buy you more shares in those dips and give you a better average cost.The best part of your plan is to begin making regular investments as part of your routine budget. Over time "pay yourself first." As you get raises and promotions, make sure some of those gains go into your investment plan. Steadily increase your saving rate when you have the resources.Best of luck with your choices. I agree an S&P 500 or total market index fund is the best way to begin. Once you pass the $10K mark it can be ok to start investing in individual stocks. CAPs is an excellent way to test your stock picking skills. Once you can consistently beat the average, investing in stocks is ok. Until then use mutual funds or etfs and let the pros do the stock picking.
"My issue is all this talk about the possibility of crashes etc. Just wondering if maybe I should wait some months to see if the stock market retraces rather than put it all in now and possibly lose when it happens. What is the consensus lately, will there be some sort of crash or major retracement on the horizon."**********************************************************************All things are cyclic - but not all cycles are duplicated. Yes, there will be bear markets.Yes, there is a potential for a repeat of the Great Depression. And not a single soul cantell you when markets will crash and burn or which companies or industrial types willdecline and never recover. Consider history. Great societies come and go. Great nationsare beset by great failures and great disasters. If the world economy craters, there is no real way you can avoid the impact.Eventually, the sun will destroy all life in the solar system.All the worries that are out in the mind's eye are possible. What if they do notoccur for fifty years? 75 years? 275 years? What if the markets continue to work?What options are available to consider? One question any investor should ask themselves is "What do I feel about risk? What doI think about losing investment capital?". You need to think about this because you willlose money at some point. Will the possibility of loss cause you to worry? Will you have troublesleeping? Would you feel the same about half of your assets? Three quarters?What amount of cash do you need to have available to not worry too much about losingwhat you have invested? Think about setting up an emergency fund as a way of dealing withyour worries. But also recognize that even a cash emergency fund can be lost. Folks inVenezuela lost theirs. Germans lost theirs after WW I and again after WW II. Countries are devastated - and everyday people lose everything - and have to rebuild from scratch.In the worst of all possible worlds, people still survive.You can as well.Howie52
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