If you had $500,000 to put in stocks, what would you put it in-also stock stories!

[DuncanK]

JohnT,

You are talking about the next century, but what about the next 10-20 years. I think there are a lot of bad years ahead for the stock market. People are starting to live off of their wealth. This started in 2000, and will continue for 10-20 years. Additionally, taxes are going to be huge within 5 years.

[JohnT]

"You are talking about the next century, but what about the next 10-20 years. I think there are a lot of bad years ahead for the stock market. "

You are very likely right... and what's so wrong with starting a 25+ year stock investment plan by buying into year 3 of a 10-15 year bear/neutral market? Isn't that, you know, the idea? To buy when stocks are cheap and nobody wants them (like seemingly everybody else on this thread) and sell them when they are dear and everybody wants them (everybody on this thread in 10-15 years?

"People are starting to live off of their wealth. This started in 2000, and will continue for 10-20 years."

I remember hearing this back in 1980: "The WW2 population controls 80% of all the money and they're going to dump it all when they retire." (that, and "we baby boomers can't get into the upper management positions that are held by old WW2 vets. I wish they'd retire." And Ayn Rand believed that people were rational. )

Regardless, what are the implications of Americans "living off their wealth"? If masses of people are truly selling off their assets, they will have to sell more and more shares to achieve the same income stream... meaning that stock prices are going to (and many have) drop to ridiculous lows. Which, of course, is when you buy.

"Additionally, taxes are going to be huge within 5 years."

Sez whom? Anyway, taxes are only applicable to realized gains... my big issue is the tax code in 30 years - will 401(k)'s and other popular shelters still be around? Can the government keep their fingers off trillion$ in capital accounts? Dare they allow all that income to be earned by the lowly but retiring middle class without taxing it?

Keep your fingers crossed.

[Sava]

The best thing you could do with your money would be to get out of the market.

[Sten Sture]

Hey JohnT - that was pretty good!

(as a CFA, fully paid subscriber to Institutional Investor, and Bloomberg Professional user, I give you a hearty )

I am so smart I own a bunch of Kmart at $0.96.

[JohnT]

It's suffered an 80% drop since, Sten. You need to buy some more!!!!!

Actually, now that it's down to 12 cents a share, it might be worth buying. If the company can ever right itself, a thousand shares of Kmart bought at rock-bottom prices can be worth something in 5-10 years. But I wouldn't put anything more than my "playing around" money in this dog.

[Zkribbler]

JohnT is right about stock indexes. They're the safest, best long-term bet. He's wrong though about K-Mart. It's a dead duck who just ain't dead yet. Target is gonna gobble of the last of its market, and K-Mart's stockholders are going to be very unhappy.

If you want to live dangerously , then you can try to re-live your Martha Stewart coup by investing in AOL/Time-Warner. I mean, can it go any lower??

[JohnT]

Nah, if you really want to live dangerously, buy some Lucent.

[DuncanK]

Originally posted by JohnT

"People are starting to live off of their wealth. This started in 2000, and will continue for 10-20 years."

I remember hearing this back in 1980: "The WW2 population controls 80% of all the money and they're going to dump it all when they retire." (that, and "we baby boomers can't get into the upper management positions that are held by old WW2 vets. I wish they'd retire." And Ayn Rand believed that people were rational. )

Regardless, what are the implications of Americans "living off their wealth"? If masses of people are truly selling off their assets, they will have to sell more and more shares to achieve the same income stream... meaning that stock prices are going to (and many have) drop to ridiculous lows. Which, of course, is when you buy.

The baby boomer generation is much larger. We've already seen that its aging process is more consequential. Anyway, good for you. We need people to start investing more.

[JohnT]

I think a large part of that transition has already set in, as millions of baby boomers have already been shifting their fund allocations to "balanced" and bond-heavy allocations... and the events of the past 3 years have done nothing but hasten that process. Remember, the oldest boomers are but 6-7 years away from retirement - they likely have less equity exposure compared to people younger, which means that the impact of their sell-off will not be as great as you feared.

Imho, we are already in the midst of this transition, which means that the time to start a long-term program would be... now.

[DuncanK]

JohnT,

They may have sold off some stocks, but that wont stop a general down fall of all markets. True, it might be so that the stock market will fall the least because it is the least inflated, but as the other markets fall that will affect the stock market further becuase people will tranfer funds from the stock market into the other markets to take advantage of lower prices.

You may actually see stocks recover a bit in the next few years. After that there is real danger. Then there will be many sellers and few buyers. That's when taxes will be raised to horrible levels and the baby boomers really start to retire and sell their stocks.

[Japher]

If I had 500,000 and 25 years to invest it, and staying within the stock market, I would first check out, What Works On Wall Street by James P. O'Shaughnessy, and follow his advice when I go to sit down with a financial advisor. O'Shau ussually suggests high PE and low PSRs. I think, in any market, that this is a good long term strat. I would do what he says with about 75-85% of the money. The rest I would invest rather rashly in some stocks with good rep and a good sales, even if their price sucks. I would try and predict market fluctuations through population trends, and would therefor buy into underpriced or emerging pharmeceutical companies with a good amount of capitol.

Personally, I would take about 50% of the money and do that. The other 50% I would sink into real estate and/or annuities.

I am a risky investor and might even consider futures. I would never short a stock or buy a mutual fund.

[Buck Birdseed]

You're all wrong!

He should invest his entire allocation in Banana futures! Remember that the Cavendish Banana is dying! Out!

[Ted Striker]

Originally posted by Sten Sture
Hey JohnT - that was pretty good!

(as a CFA, fully paid subscriber to Institutional Investor, and Bloomberg Professional user, I give you a hearty )

I am so smart I own a bunch of Kmart at $0.96.

If Sten Stenish certifies it then it's a good bet.

[JohnT]

Yes, Ted, your absolutely right. Where are my manners?

Thank you, Sten. That means a lot. My Uncle thought that I did a pretty good job too:

I received your letter of 2/05/03 today and I think you did a great job of selecting your asset allocation especially for someone that is new to this game.
You seemed to have really worked to "get it correct" instead of just putting something down on paper. I congratulate you for doing that...

First, I would NOT consider the 18% in Dodge and Cox as medium to high risk as compare to the S&P 500. I think it might be interesting for you to look at their many decades of performance of D&C stock versa the S&P 500 Index fund... I really did think you did a fine job, but just maybe we can make it a little better for you and your family... You did a really great job for the first cut.

Given how much asholes the rest of my family has been over the past 7 months, this was really nice. Especially coming from a guy who retired when he was 41 to live as a private investor of his own money... and has done quite well since 1980.

[JohnT]

Originally posted by Japher
If I had 500,000 and 25 years to invest it, and staying within the stock market, I would first check out, What Works On Wall Street by James P. O'Shaughnessy, and follow his advice when I go to sit down with a financial advisor. O'Shau ussually suggests high PE and low PSRs. I think, in any market, that this is a good long term strat. I would do what he says with about 75-85% of the money. The rest I would invest rather rashly in some stocks with good rep and a good sales, even if their price sucks. I would try and predict market fluctuations through population trends, and would therefor buy into underpriced or emerging pharmeceutical companies with a good amount of capitol.

Personally, I would take about 50% of the money and do that. The other 50% I would sink into real estate and/or annuities.

I am a risky investor and might even consider futures. I would never short a stock or buy a mutual fund.

Is that supposed to be "50% of the remaining money"?

Before I would do that, I would read (thoroughly!) William Bernsteins The Four Pillars of Investing. Perhaps I'm a bit more risk averse than you (wife, baby, mortgage will do that to ya), but I truly believe that the markets are chaotic, not rational, and their ups and downs are determined far more by psychology and emotion than mathematical ratios and reason.