The fear is palpable now since taking profits when the S&P 500 was at ~1,405. After about a 4% correction, I allocated 70% of my stable value fund back into equities when the S&P 500 dived to 1,345-1,350. Too early, I know. Now, I’ve invested the remaining 30% into the S&P 500 at 1,297-1,300 the morning of 5/23. We’ve corrected a healthy 8%, a spread wide enough where I’m happy to jump right back in.
The new market concerns are old market concerns:
* Greece and the rest of Europe.
* China slowdown.
* Corporate malfeasance.
* Summer malaise.
* Concerns of Mitt Romney winning, making us all fend for ourselves.
During times of intense market panic, you’ve got to ask yourself these questions:
* Who was the dumb ass buying the markets at its peak in March and April? What made them so bullish?
* What kind of bozo invests the majority of his/her net worth into the markets? Do they not believe in themselves more than entrusting the fate of their future in uncontrollable circumstances?
* How are dividend buyers feeling now? You know, the one who says “I don’t care what the market does because I’m getting a 4% yield”? Making a 4% dividend and losing 10% of your investment is a bad result.
* Is the world really coming to an end?
I care about absolute performance first. I’d rather be up 2% in a crappy year than outperform the markets by 20%, but still be down 10% for example. However, if I’m going to lose money, the second best thing is to lose less than everyone else!
REMEMBER, THE GAME IS RIGGED
You should all know by now that the game is rigged. Underwriter Morgan Stanley telling their institutional investors that they’ve cut estimates, but not disseminating the info to all at the same time is a good example. What are you going to do about it, file a class action lawsuit if you were one of the retail investors who bought at $38? Good luck trying to get anything back.
Meanwhile, investors who have at least $100,000 to deploy can invest in a structured product that provides 100% principal protection and 110% participation towards the upside of the Dow Jones Industrial Index over x amount of years. If shit hits the fan and the market goes down 50% from here, said investor will get all his money back plus a 0.5% annual coupon, which is still better than today’s 0.2-0.3% money market rates!
Meanwhile, for years, our Congressmen and Congresswomen could front run the very bills they were voting on!
INSTEAD OF GETTING MAD, GET MOTIVATED!
You’re never going to become an institutional investor by definition, but you can certainly make and save enough money to invest money with an institutional investor e.g. a hedge fund. Just know that even institutional investors got hurt by the Facebook deal since they accounted for the lion’s share of the public offering at $38. They’ll at least have more recourse and knew more about what they were getting themselves into than the typical retail investor.
Even though private wealth companies such as Citibank charge 0.5%-1% annual fees to manage your money, they can buy mutual funds for you that cost 1-1.5% annually for only 0%-0.5% (different class shares), thereby negating much of your annual fees. In other words, for a net fee of only 0-0.5%, you get someone constantly looking out for your best interests while you get to focus on building your wealth in other ways.
If you have more money, you gain better access. With better access comes better knowledge. And with better knowledge comes a higher chance for greater fortunes and stability for you and your children. In other words, stop messing around! Once you get into the wealth cycle, it’s hard to lose your edge unless you are a complete idiot.
FIGHT TO EQUAL THE PLAYING FIELD
At a friend’s gathering the other day, the President of the SF Public Library system talked about how libraries help equal the playing field between the haves and the have-nots. I couldn’t be more supportive of her words and the system in which she presides. Libraries not only provide a place for our youth to learn and grow, libraries also help empower us with knowledge so we can make better life choices.
The internet is like a library, allowing us to find categories of specific interest at a flick of a button. The internet is just a tad bit more interactive, with writers who will snap back at nonsensical comments.
I hope that reading this site is as educational for you as it is for me. I was poor once, but I’ve learned my way out of poverty. Just keep on reading those books and sites that interest you. Keep on consuming as much information as possible. The more you know, the better decisions you will make for the long run.
I encourage everybody to get a handle on their finances by signing up with Personal Capital. They are a free platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different accounts (brokerage, multiple banks, 401K, etc) to track 28 financial accounts. Now, I can just log into Personal Capital to see how my stock accounts are doing, when my CDs are expiring and how my net worth is progressing. The best feature is their free 401K Fee Analyzer which is now saving me over $1,000+ a year in portfolio fees. There’s no better free tool out there for managing your finances and it only takes a minute to sign up.
Invest In Ideas Not Stocks: Motif Investing is a terrific company based right here in the San Francisco Bay Area. They’ve raised over $60 million dollars from smart investors such as JP Morgan and Goldman Sachs because they are innovating the investment landscape with their “motifs.” A motif is a basket of 30 stocks you can invest in, which are aimed to profit from a specific idea or underlying theme. Let’s say you think new housing construction is going to quicken in the US next year. You could buy a housing motif which might contains Lennar, KBH, Home Depot, Bed, Bath, and Beyond, Zillow, and more in various weightings.
You can buy a basket of 30 stocks for only $9.95, instead of buying them individually for $7.95 through a typical broker. You can build your own motif, buy one of the motifs created by Motif Investing, or buy a motif by a fellow Motif Investor with a great track record. You can even buy retirement motifs, much like target date funds, except you don’t have to pay the 1% management fee. You get up to $150 free when you start trading with Motif Investing. Given my focus on buying winning long-term ideas and ignoring the short-term volatility, I really like Motif Investing’s value proposition for retail investors.
Updated on 12/1/2014. The bull market is alive and well. Don’t forget to rebalance and manage your risk exposure. Everybody feels like a genius during good times.