Dow dropped 513!!!??

Sorry if this has been missed, but 513 points in one day. Holy crap! We were sailing along at 12,000+ for 9+ months and then wham. I guess since the debt ceiling was raised uncertained followed, but this is crazy.

According to the article it was the worst day since 2008.

Thoughts?!

Seriously I pulled out one mutual fund that had dropped up 16% and made a recovery to -6% before pulling out.

I still have several funds in the market this has me troubled.

http://money.msn.com/investing/dow-plummets-market-dispatches.aspx?GT1=33002

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Comments

powerfool

Yeah... things aren't going so well. Apparently the market didn't approve of the POTUS having such an extravagant party...

erpadmin

The worst thing you can do is pull your money out....doing that means you keep your losses and you don't give enough time for your money to recovery. If anything, this is the time to BUY, not sell.

If I were you, I'd put your money back into the stocks so that your don't eat the 16%.....timing the market is foolhardy because you're going to buy back when it's high.

I'm down 9% right now in my Roth (80% stocks, 20% bonds). I'm staying put. They're all ETF funds that pay dividends, so I will be ok. My deferred comp, I don't even look at because I'm not going to need the money for about 15-20 years (depending on when I retire and how long I can use it before I dip into Social Security....[Yes, Virginia, SS will still be there...don't believe the hype.

]

GAngel

I'm making money hand over fist.

The only useful part of my economics degress :0

powerfool

Eh, I have ignored my money in the market, by and large. If a recovery happens I will be sitting pretty... if the economy tanks, I wouldn't be able to get to the money anyhow.

chrisone

ah what fears do to the market

SephStorm

i fear that one day, during my lifetime the stock market will crash. temporarily or permanently.

So why would I risk putting my money there? Especially for 40 years?

erpadmin

SephStorm wrote: »

i fear that one day, during my lifetime the stock market will crash. temporarily or permanently.

So why would I risk putting my money there? Especially for 40 years?

Simple....because it's either that, or give it to Uncle Sam.

If you have access to a 401k, it behooves you or ANYONE to take advantage of it. It lowers your AGI, which means you pay less taxes.

If done correctly, you still get the same take home pay you'd have gotten if you didn't invest in a 401k (or in my case a 457(b) [same thing...]). A lower AGI gives you some pretty good advantages, especially if you're going back to school.

If you lose the money (worst case), at least it didn't go to taxes.

If you end up saving a fortune, you are pretty much ahead. It's really win-win.

Forsaken_GA

SephStorm wrote: »

i fear that one day, during my lifetime the stock market will crash. temporarily or permanently.

So why would I risk putting my money there? Especially for 40 years?

Because during any given 10 year period since it's inception, the stock market has actually made money?

If you can't put money in and leave it alone for at least 5 to 10 years, don't get in the market.

If you're in the market now, suppress your gag reflex. Any choices you make out of fear will just magnify the pain.

spicy ahi

Don't forget if your 401k has an employer match! If they do match, then you've already "earned" a return on your investment. That's the way I look at things. My company has a 1 for 1 match for the first 3%, and 1/2 for 1 on the next 3%. So if I put in the maximum match of 6% of my pay into my 401k, they put an additional 4.5% for me. 75% automatic ROI.

Forsaken_GA

erpadmin wrote: »

Simple....because it's either that, or give it to Uncle Sam.

If you have access to a 401k, it behooves you or ANYONE to take advantage of it. It lowers your AGI, which means you pay less taxes.

If done correctly, you still get the same take home pay you'd have gotten if you didn't invest in a 401k (or in my case a 457(b) [same thing...]). A lower AGI gives you some pretty good advantages, especially if you're going back to school.

If you lose the money (worst case), at least it didn't go to taxes. If you end up saving a fortune, you are pretty much ahead. It's really win-win.

The 401k is a good deal only up to the amount your employer will match. After that, a Roth IRA is a much better choice. While you may pay less taxes now, the money is growing tax deferred, not tax free. The math of the 401k makes sense up to the match amount, because your input is basically doubled at no cost to you. After that, the Roth IRA is better. It's funded with after-tax dollars, but all of the growth is tax-free.

The 401k also sort of annoys me in that it basically requires me to keep a regular IRA account as well, because you *will* leave your job at some point, and not all of them will allow you to roll your old 401k directly into your new one.

To actually give some math -

Put 1000 in your 401k. If you're in a 25% tax bracket, you save yourself $250 in taxes that year. Let's say it's invested for 40 years at 12% interest, it'll be roughly $120k. But that will be taxable at your normal tax rate, which lets say you're retired, and is around 15%. So you'll pay $18k in taxes, netting $102k. Hope it was worth saving that $250 bucks 40 years ago

Wherease, the same 1000 invested in a Roth IRA yields the same amount of money assuming same term and same interest rate, except you get to keep the entire $120k.

Now, if your employer had matched that 1000 dollar for dollar, that turns into $237k, which again, assuming a 15% tax rate, is $201k in your pocket. So where a match is concerned, it's a no brainer to take it up to the full match value.

N2IT

spicy ahi wrote: »

Don't forget if your 401k has an employer match! If they do match, then you've already "earned" a return on your investment. That's the way I look at things. My company has a 1 for 1 match for the first 3%, and 1/2 for 1 on the next 3%. So if I put in the maximum match of 6% of my pay into my 401k, they put an additional 4.5% for me. 75% automatic ROI.

No question about it free money is the best money!

N2IT

erpadmin wrote: »

The worst thing you can do is pull your money out....doing that means you keep your losses and you don't give enough time for your money to recovery. If anything, this is the time to BUY, not sell.

If I were you, I'd put your money back into the stocks so that your don't eat the 16%.....timing the market is foolhardy because you're going to buy back when it's high.

I'm down 9% right now in my Roth (80% stocks, 20% bonds). I'm staying put. They're all ETF funds that pay dividends, so I will be ok. My deferred comp, I don't even look at because I'm not going to need the money for about 15-20 years (depending on when I retire and how long I can use it before I dip into Social Security....[Yes, Virginia, SS will still be there...don't believe the hype. ]

ERP

I had pulled out several months back so this was not a driver for me pulling out my investments. My point being was that when I did pull out the market was on an upswing. I agree now is the time to put back in.

instant000

So glad the voice of reason came to this thread. Of all times available, times like this are the best times to be investing.

Watch how the poor shmucks out there go and start pulling everything out of their 401Ks, when they see the market tanking.

Then, once the market comes soaring back, they try to put their money back in.

If you're not too sophisticated with investing, just learn to be patient.

Unless you're really old, you should be able to afford patience. if you can't afford a little patience, then get into day trading, but keep in mind that to be decently good at it, you either need to put a lot of time into it, or you're paying someone else to put a lot of time into it.

I try to avoid making emotional decisions when it comes to money.

The mathematician and historian within you should be able to do the math and show you the gains that can be made if you place more money into the market now.

spicy ahi

instant000 wrote: »

So glad the voice of reason came to this thread. Of all times available, times like this are the best times to be investing.

Watch how the poor shmucks out there go and start pulling everything out of their 401Ks, when they see the market tanking.

Then, once the market comes soaring back, they try to put their money back in.

If you're not too sophisticated with investing, just learn to be patient.

Unless you're really old, you should be able to afford patience. if you can't afford a little patience, then get into day trading, but keep in mind that to be decently good at it, you either need to put a lot of time into it, or you're paying someone else to put a lot of time into it.

I try to avoid making emotional decisions when it comes to money.

The mathematician and historian within you should be able to do the math and show you the gains that can be made if you place more money into the market now.

Or in my case, it's another way my wife can "hide" my beer and hot wings money.

the_Grinch

I figure there will be no such thing as retirement for me so at this point I am focusing on debt reduction. I can't see putting money into a market that is fueled more on rumor and speculation then anything else. Hell, there are computers doing auto-trades now that swing things like crazy. Time to just sock cash in my mattress and pray that I can start an even mildly successful company to live off of.

erpadmin

N2IT wrote: »

ERP

I had pulled out several months back so this was not a driver for me pulling out my investments. My point being was that when I did pull out the market was on an upswing. I agree now is the time to put back in.

I think the only mistake I made in my post was that you got a 6% loss instead of a 16% one. Regardless, I stand by everything else I stated.

The dow losing 500+ points in one day really is irrelvant for me. I'm still a young enough guy as well as an active investor to seriously not give a ----. In fact, I had to stop looking at my 457(b) investments (which are very well diversified) so that I wouldn't do anything stupid. In fact the only thing I have to do is take 1% out of stocks and put that in my bonds. I do that rebalancing every year.

BTW, in 2008, I was down 41% percent in my 457(b). Now I believe I'm a little bit above 2% or maybe even even. I had made no changes to my investment strategy other than invest more money.