My 401(k) sure likes the stock market lately

[MillCreek]

Things have sure been picking up on the stock market lately.  After just poking up and down mildly for the first several months of the year, the last couple of months has been looking good.

[Ben]

Not to rain on your parade with pessimism, but I can't help but think we'll see the first major correction of the last few years sometime shortly after DOW 17K. I'm still quite invested in stocks and stock indexes, but am looking at sidelining a good chunk of dough into my TSP "already retired" more conservative blended fund. After the next big correction, I'll move (most of it) it back into stocks.

[MillCreek]

Right now, I am about 65% stocks and 35% bonds/short term.  Most of my stock funds are index funds, target date or blended investments.  I am thinking of doing some shifting to reduce the stock holdings to 55-60%, but that would primarily be from the index funds to the target date fund.  I am still pondering this.

[zahc]

What else is there besides stock? I'm asking a serious question in ignorance.  Some kind of precious metals or commodity ETFs?

[grampster]

Put it in your gun safe.

[brimic]

Apple
Stock is splitting after today 7:1. W00t

[Scout26]

It's a bubble created by the Fed pumping so much money in.  I'd get out soon.

But yeah, it's mostly because there's no where else to put money right now..

[HankB]

What else is there besides stock? I'm asking a serious question in ignorance.  Some kind of precious metals or commodity ETFs?

Take a look at precious metals over the past few years - gold peaked at around $1900, and is now about $1300. Silver's peak was around $50, and is now around $20. Some people made a lot of money - many lost, buying at the peak. The guys hawking precious metals on TV sort of skip over this . . .

I wouldn't buy a commodity unless I understood - I mean really understood - what was influencing that commodity.

But in a ray of good news, if you look around, you can find bank certificates of deposit that now pay (drum roll please) . . .more than ONE PERCENT INTEREST!!! Better move fast, though, because these incredibly high yields may not last.  [/sarcasm]

[Ben]

I just heard a report a couple of days ago that the largest investors in the US are currently buying up real estate versus putting their money into stocks right now.

To answer Zahc's question, I put money I don't want to roller coaster into the Vanguard Wellesley Fund. It's averaged a solid ten percent over the 50 or so years it has been around. Nowhere near the returns stocks are getting right now, but when stocks tumble, it still generally makes a little money, plus pays nice dividends. If I didn't already have real estate that keeps me busy, I would have bought more rental property over the last few years. Not so much now, as prices in most of CA at least, are getting back up to their previous high levels. Which goes to show that when you hear stuff like the market report I mentioned above on the news, it's probably already too late to make good money there.

The other thing I've done now that I don't have a paycheck anymore, is put a "five year emergency fund" of basic projected subsistence wages for myself (utilities, taxes, insurance, food, fuel, etc.) into the G and F funds of my TSP. They don't make squat on interest, but the money is still there even if Wall Street takes a temporary death spiral, and gives me a buffer to wait out market recovery. There's an opportunity cost on the money parked there, but I prefer to live with that versus having to get a job as a Walmart greeter. :)

[brimic]

It's a bubble created by the Fed pumping so much money in.  I'd get out soon.

But yeah, it's mostly because there's no where else to put money right now..

+1
We're pretty much screwed no matter where we put the money, we don't pull the strings.

[MillCreek]

In an article in today's WSJ (paywalled), they argue for a 60% stock and 40% bond portfolio.

http://online.wsj.com/articles/how-much-stock-is-too-much-1402075902?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth

[Tallpine]

I don't think stocks are going up so much as the dollar is going down 

[Ben]

In an article in today's WSJ (paywalled), they argue for a 60% stock and 40% bond portfolio.

http://online.wsj.com/articles/how-much-stock-is-too-much-1402075902?mod=WSJ_hpp_MIDDLENexttoWhatsNewsForth

[img]http://si.wsj.net/public/resources/images/BF-AH552_HULBER_G_20140606112703.jpg

I can agree with that, especially for the very long term. When I first joined the gov and got into the TSP, I was a bit overly conservative for my age at the time and went 50/50. I changed to around 75/25 halfway through, and figure that I averaged out to around 60/40. I'm pretty happy with my results. Sure, I could have gone more aggressive, and the way things have turned out with stocks, made more money, but it could easily have gone the other direction too. I think 60/40 is a good "set it and forget it" ratio. It's a little opportunity cost, but I think it creates a bit of a safety net, especially for people that don't want to, or don't have the knowledge or time, to constantly monitor their retirement investment.

[zahc]

 I'm attempting to become a financial adult this year. I read about index funds in " A Random Walk Down Wall street and it makes sense to me. No idea about bonds. At a nuts and bolts level,  how does one go about setting up a 60%/40% stock/bond portfolio?

1. Get an etrade, etc. acct. (I did this a while back, but never bought any stock)
2. Spend 60% of my money on some stock market index fund (suggestions?)
3.

[MillCreek]

Go to www.vanguard.com or www.fidelity.com and pick a no-load index stock fund and a no-load index bond fund and put 60% of your money in the stock fund and 40% of your money in the bond fund.

Let me know if you want some specific fund ideas at either of those sites.

[Ben]

What he said /\

For what I sock away outside of TSP, I'm a Vanguard man myself as I like their rates, they have very informative webcasts, and you can make use of their financial advisors (consultation fees may apply or it can be free, depending on how much dough you have with them). I like to keep it simple and use the Vanguard Total Stock Market Index and the Wellesley Fund for my stock/bond mix. I do have some in the VDIGX dividend growth fund. Vanguard has really good research pages so you can investigate all the different stock and bond funds and see their risks and historical returns. You can also just buy a targeted retirement fund for the approximate year you want to retire, and forget about it. The fund will change ratios as you get closer to your retirement age.

I use Ameritrade for buying individual stocks, but for me, individual stock investing is my alternative to going to Vegas. It's all money I'm prepared to lose if I screw up. For money I want to live on, the Vanguard folks are simply much smarter than I am.

[zahc]

 Yes, advice on specific funds would be good; then at least I have something to throw darts at.

I had sort of decided on the Vanguard Total Stock Market Index, but I am already forced to have a etrade account for work. Can I get equivalent funds through etrade? 

[Ben]

Yes, advice on specific funds would be good; then at least I have something to throw darts at.

I had sort of decided on the Vanguard Total Stock Market Index, but I am already forced to have a etrade account for work. Can I get equivalent funds through etrade? 

I couldn't say for sure, but I'm betting most of the bigger online places have something similar to VTSI. You will likely need to search through the Etrade funds, and then you can compare them to the VTSI - Vanguard has a breakdown of what stock sectors it puts in it, so if Etrade has something similar, as long as it's managed as well, you should be okay.

Note you shouldn't be tied totally to your work (401K I assume). The govt TSP is pretty much the same as a 401K. While I maxed out my TSP, I still kept (keep) a separate Roth IRA at Vanguard. Definitely invest in the work fund at least up to whatever they match. After that, if they give you a good 401K, you can certainly invest up to your limit in it, but if it's not that great, you can always do an IRA elsewhere with some of your retirement money.

[zahc]

My current job's 401k is worse than my last-there is like 2 mutual funds to choose from-but they match to a higher total %. I'm maxing that. There is also an employee stock purchase at 15% discount, which I'm maxing out. All these automatic withdrawals keeps my take-home pay very low which suppresses wife spending, and the money ends up either in the 401k or etrade account. The stock money is just sitting there not invested in anything. The dow just seems high to me but maybe with inflation coming the value has a lot higher to go.

[Ben]

The stock money is just sitting there not invested in anything. The dow just seems high to me but maybe with inflation coming the value has a lot higher to go.

Like I said in my first post here, the pessimist in me is waiting for a big correction after 17K. I could be completely wrong and it'll break 20K before there's a decent sized correction, but it will correct - it always does.

The thing to look at, because if I remember right, you're a pretty young whippersnapper, is the long term. Look at the DOW history over the last fifty or so years. Pick any peak in it and pretend you invested right at that peak. Five years later, it might look like you lost your shirt. Twenty years later, you made money. Time is on your side when you're young. History has shown that a diversified stock portfolio will gain over the long term. Obviously we can talk SHTF, WW3, or any other ginormous calamities, but if that happens, we've all got bigger problems than our stock profits and losses.

I hate giving money advice, but I'll just say if it were me being younger with money to throw into stocks, I might wait until I see at least a 300 point correction in the DOW before I went all in, but looking twenty years out, I don't think I'd be too worried if I put money into it now and it corrected big in three or six months or a year. With time, history shows I'll make that money back.

[K Frame]

Put it all in waffles, tasty tasty waffles!