Do retirement accounts have any protections the way the FDIC does for bank accounts?
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Just called & it's FDIC insured.
Last edited Fri Mar 17, 2023, 01:43 AM - Edit history (1)
Here is part of what I wrote in response to one of these recently ...
Nothing holds up as well in the face of withdrawals and inflation than does equities, except perhaps real estate. In other words, it's an even bigger gamble to not have a sizable proportion in equities.
Over the past 20 years, it has grown 6.37 fold, an average annual increase of 9.7%/year
(had the market dropped 60% in 2022 -- a worse crash than any of the post WWII crashes -- then it would have still grown 3.11 fold, an increase of 5.8%/year)
Over the past 50 years, it has grown 131 fold, an average annual increase of 10.2%/year
(had the market dropped 60% in 2022, then it would have still grown 64 fold, an increase of 8.7%/year)
and so on. I'd go to Vegas a lot if I could average these kinds of returns.
This is from the below link, which also has similar for bonds, Treasury bills, and gold. These don't come close to matching the increase in equities.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
And I'm not just cherry-picking the boom periods. The above is inclusive of all periods, down, up, flat.
The market periodically sets new all time highs. It has never set an all-time low.
Yes it goes up and down and up and down and ... but the pattern is that new lows are higher than the previous lows and new highs are higher than the previous highs.
What really matters as far as risk is the risk of running out of money in retirement, and that risk is much higher for people who don't have any equities and only rely on "safe" fixed income investments, which don't even keep up with inflation. Innumerable historical simulations in innumerable studies have shown that. IOW its a bigger gamble not to be in the market. I don't wish to take that gamble.
I hate to see my fellow progressives misled by anti-equity JackPineRadicals-style "progressive" malarkey and end up having to live a very financially constrained old age, not to mention having very little or nothing to give to Democratic candidates or progressive causes. And by default having to accept the minuscule interest that the banks usually dole out in savings and CDs and so on.
Only a fool gambles with their retirement security -- And it makes DU investors out to be fools because only a fool would wager their retirement security on a Vegas slot machine. We are not fools. In the face of inflation and withdrawals, it's an even bigger gamble to NOT have a sizable proportion in equities.
58% of American adults own stock according to a Gallup Survey, 3/5/23 https://www.msn.com/en-us/money/savingandinvesting/only-15-of-american-families-directly-own-stock-and-that-s-okay/ar-AA188NL7
pointing to the detailed report at https://www.fool.com/research/how-many-americans-own-stock/
In response to another recent post, from someone who said I don't need the stock market, I can just go to an Indian casino:
I wish someone could tell me which "Indian casino" gives its clients on average a 223% cumulative return over 10 years, a 537% cumulative return over 20 years, a 1,444% cumulative return over 30 years, a 6,759% cumulative return over 40 years, a 13,016% cumulative return over 50 years, a 33,400% cumulative return over 60 years, and a 120,090% cumulative return over 70 years, because I sure would like to "gamble" there. The equity market is AN INVESTMENT.
What drives the market is earnings (not "luck" or the pull of a slot machine handle ). This from Peter Lynch in 2001:
Edited to add: As our forum host, A Heretic I Am says, "The best option is to use mutual or exchange traded funds, frankly. Picking individual stocks is typically not a good idea for the average investor"
I agree and would even go further -- given the much higher volatility of most individual stocks compared to broad-based funds -- investing in one or two or half a dozen stocks is pretty close to gambling for anybody at my (Progree's) knowledge level or less. That's why virtually all my equity investing is in broad-based mutual funds and ETFs.
In 1991 I volunteered at an AARP tax return preparations. So many of the seniors showed me their 1099 from their financial institutions where they held CDs and lamented the miserable interest.
We often hear about the bad luck of retiring when the market is down as it was last year. But if seniors and others were aggressive in building the "nest egg" than 20% loss from $10,000 hurts a lot more than 20% loss from $50,000.
The one where I supposedly couldn't read a graph and said I didn't think much of permabears? Yup yup, that one.
Thanks for the data and links on the performance of the average generic, run of the mill stock funds
Probably true given that they probably had 2% or more expense ratios back then and that certainly kills returns over a 16 year period. So did bond funds. Individual stocks came with hefty commissions back then too. And so... I should forego the returns of post#9 worrying my pretty little head off that we might be at the beginning of a long flat spot?
Edited to add 625pm ET - Well, it claims a 6.8% annualized average return in that time. So a 2%/year expense ratio would not kill that, it would reduce it to about 4.8% annualized average return. But that would be below the approximately 6.8% inflation rate. -- End edit
Like at Stock Market Watch? Where everything was supposed to go to hell since 1987, or soon after Obama appointed his economic team in late 2008? Or Jeremy Grantham? https://democraticunderground.com/11213664#post1
Maybe you can help out your fellow progressives with more of your "not a science" suggestions. Some specific actionable guidelines.
Links appreciated on anyone who has been able to time the market consistently (and that has been verified -- not some newsletter ad, I've seen probably a hundred of those in my time). Particularly since the stock market tends to be a leading indicator -- it generally has fallen quite a bit before the economy's peak, and turning up before the economy's bottom. But even that doesn't always happen in that order.
I've been very tempted for many months to lighten up on the equities, given that the economy seems to be around a peak (like it was in 2019 too) as far as jobs and unemployment rate. And even more so since many think the Feds are going to push us into a recession or at least a weak period by raising interest rates or even maintaining the current interest rates (The latest 3 month average of the core CPI and the core PCE is more than double the 2% target rate. Anyone who thinks the Feds are going to be happy with inflation that cuts the dollar in half in 16 years and just throw up their hands and say the 2% target rate was always just for shits and giggles is fooling themselves). Obviously lately we've seen the banks are having difficulties.
But I've been wrong calling peaks and bottoms in the past -- any time we're setting new all-time highs and the economy is pretty good and improving (which is most of the time) -- seems like a possible peak. But if I sat out of the market during all those times, I would miss many doublings for fear of a crash or hitting one of your dreaded long flat spots.
Instead I've just been buy-and-hold except I moved a major chunk from non-equities to equities last June because the market had fallen 20%, aka buying stocks on sale. Because I can't time the bottom, so I settle for buying equities on a 20% discount.
Good luck on your individual stock picking. Like I say, I will live with the thin-gruel returns in post#9.
EDITED TO ADD: BTW I would never take investing advice from a "real stock broker", as they make money selling stocks and bonds, and the more churn, the higher the commission. And favoring the higher commission products over lower commission ones. I would rather suggest a no-fee fiduciary financial adviser, but even then I wouldn't be so sure they are without conflicts of interest.
