Your risk tolerance appears to be changing. You should adjust your asset allocation accordingly. As flynbuick suggests a CFP would be helpful for you. There are ones available that do things on a fee only basis if you are more comfortable with that arrangement. To be more direct about your scenario, if the $#!t hits the fan like that(meaning a singular event) I would suggest you have more important things that you'll want to worry about. Going to cash would be the easiest thing, but would you be right about the event and its future impact to life on Earth? My guess is that most of us wouldn't. You made a wise choice in a spouse. I went to Duke also, was nowhere near #1 in my class(my roommate was #8 or #9 out of 1200 or so, he had much better study habits than I, but I probably had more fun), and graduated from the Engineering School(Pratt) in 1993. Okay, okay, he was just plain smarter than I.
Duke is a great University. I have a B.S. in Electrical Engineering from N.C. State. I appreciate the effort it takes to obtain a degree in engineering.
OK guys, let us try this again. This is not a savings account, it’s the market, a long term investment. When the market takes a tumble, sure, your bottom lines takes a tumble as well, but you don’t lose the number of shares you have, it’s a paper loss. You don’t lose anything until you actually pull out. In 2008-9, I didn’t touch a thing, in fact I kept on investing 20% of my paycheck in my 457K, share prices were falling, stocks were on sale. I was getting more shares for my money. I knew I wasn’t touching that money for at least 15 years, who cares. It took about 2 years for the market to come back. Long term guys, long term.
Exactly. 100% stocks will produce huge gains when the market is doing well, but will also produce huge losses when things go bad. In comparison, a 60% stock/40% bond portfolio will have lower returns but will weather the downturns better. Maintaining your desired ratio will account for changes in the market.... when stocks are doing well they would exceed your 60% allocation, so sell some off and buy bonds. And when stocks drop, your bond allocation will rise, so it's time to sell some bonds and buy some stock that is 'on sale'. Instead of buying individual stocks or bonds, you can buy into a 'balanced fund' with your desired ratio of stocks vs bonds. They will rebalance your ratio as needed. A 'Target date' fund will shift your stock/bond ratio from a more aggressive ( and riskier) ratio for a younger investor, to a more conservative ratio for one approaching retirement. Idle cash reserves can earn 1.15% in an online savings account, a 5 year cd is paying 2.25%. Investing doesn't have to be hard. I highly recommend the Boglehead site. Check out the forums and the wiki articles. Here is just one of their forums to give you an idea: https://www.bogleheads.org/forum/viewforum.php?f=1
Larry, when the market tanked in 2008, I too started buying. Rule one in business is "buy low - sell high." Most people who lose money in the stock market do the opposite. As has been said many times in this thread, Investing should be for the long-term. Day trading and attempting to time the market is gambling, nothing more. In gambling, the house usually wins. A few years back we bought a vacation home in Cape Coral, Florida. I paid for it with capital gains and dividend reinvestment from my mutual fund. When we sold it for almost double what we paid for it (due to improvements, a gain of about 25%), I calculated that after all expenses, we made about $10,000 for living in our pool home for five years. I love dividends and compound interest. The money went back into my mutual fund, and it's value is at an all-time high. When you are young you should not be afraid of some risk; as you get older you need to become more cautious - you have less time to replace any losses. At my age, I will invest only in mutual funds and blue-chip stocks that pay big dividends. I could care less if the stock price goes up or down as long as the dividends look good and likely to stay that way. I bailed on GM when it looked to me that although the dividend was good, they were operating in an unsustainable manner.
The downside to dividend stocks is that the dividends are taxable. And when dividends are paid (a 4% dividend is fairly typical), the stock price will drop an equivalent amount, or 4%. You're not losing money, but in effect you are cashing out part of the stock as a dividend that then gets taxed. In comparison, stocks that don't pay dividends will simply increase in value more. You could still get some money back from the investment if you sell a few shares (say 4%), and you would also get taxed on the 4% 'sale'. Either way it works out about the same. Your choice depends on what is advantageous in your tax situation. I like dividend paying stocks too. I prefer to keep them in a trad IRA or Roth so I'm not paying taxes on them every year. Something like a S&P or 'total market' index fund pays about 2% a year in dividends, so it's a better choice for a taxable account (not in 401k or IRA).
Speaking of dividend paying stocks, the real estate stocks out there that payout the big dividends pay those before the companies pay tax on that income so the stock owner gets dinged twice on that dividend! To get around that double ding is to hold those stocks in a Roth IRA and have the div rolled back into the Roth when they pay! Some of those dividends are over 15%! Unfortunately most of those stocks don't hold their PPS as good as other stocks but they keep paying those dividends! Having those in a Roth when they payout use those funds to buy large cap dividend stocks and have those divs rolled back in to use to diversify even further. Stay away from mid and small cap stocks because if those get stagnant and don't grow Q after Q then the sharks start circling! And especially stay away from small and mid cap stocks that have a lot of "institutional" buying into them because 99% of the time will turn into a pump and dump! Those "institutional" "investors" are there for one reason and one reason only, to "short against the box". Shorting stock against the box is one of the biggest scams if not thee biggest scam in the stock market!(right up there with naked short selling but only market makers can get away with that scam) Shorting against the box is where you short your own stock because you think it will go down, can retail investors do that in like a Scottrade account you ask, why absolutely NOT, only "institutions" or stock broker houses or market makers and the like can short against the box! Here is how the scam works when there is a lot of "institutional" "investors" buy into a small or mid cap stock they announce that they bought in when the prices are way below what they are when they announce they bought, the bottom is propped up while the hype that they were buying is announced and or some other fluff what if pie in the sky type of news to get people excited in the stock. As the retail buyers buy up the stock from the hype news the bottom of the price is propped up while those "institutional" buyers short sell their own stock at the 52 week high. After they short sell all of their "own" stock the bottom is no longer propped up and now there is a roof so the PPS no longer rises. This process could take as long as 5 years or sometimes longer, the slow bleed to the bottom. Their end game with this strategy is to have a no cover short so they don't have to pay tax on it when(if) the company goes belly up. Then because on the books it shows how they still own shares in a company that went belly up they can claim what they paid for the stock as a total loss! They don't even have to pay the service charge to borrow the stock because they already own it. Even if the stock goes up they can't loose because they shorted their own stock so no margin call because when the stock goes up so does the "stock" on the books that they "own" so zero risk shorting! The above strategy is used on a lot of penny stocks as well, 99% of ALL penny stocks are pump and dump scams with short against the box being used more and more! When they were killing the MJ stocks there were "investors" that cried to the SEC that the stock they "own" is being manipulated to go up. WTF you say, yeah they already sold short against the box so they didn't want the PPS to go up. But they could show that they were major stockholders so they could go to the SEC and say stupid sh!7 like that! A lot of those stocks got halted and when(if) they opened back the pps would go straight in the toilet so they either cover there and wait to pump it again or try to bankrupt the company so they don't have to cover for the above mentioned reasons. Of coarse if you're in a small or mid cap stock before the tutes buy in and then they do, make sure to have an exit strategy in place before the floor is taken out of the PPS and the roof is in place.
It is true that a stock that pays a 4% dividend will drop about 4% in value as of the record date. It is also usually true that the stock will have increased in value in the time period before the record date because people and institutions are looking for the dividend. If you are planning to sell a stock, selling immediately after the record date is quite frequently a bad idea. Hold on for a bit and the share value will increase again (assuming a healthy, going concern).
