What To Do If Your Stock Or Bond Portfolio Is Down?
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- Опубликовано: 14 окт 2024
- A Wall Street Journal article quotes Financial Advisors who give one form of advice, and I discuss additional options for you to consider. Add me on Instagram: michellemarki
Just because your 401k or other retirement portfolios like an IRA could be falling behind (as in they are down from a previous high point), doesn't mean you don't have options. You can do more than just twiddle your thumbs, IMHO!
This Wall Street Journal (WSJ) article might have you believe that maybe the best thing to do is nothing, as some Financial Advisors advocate for.
But I think if you're dissatisfied with seeing your portfolio go sideways or down, you might want to start looking into what you're actually invested in.
Even though bond funds haven't been doing great in recent years due to higher yields causing bond prices to go down -- maybe you should consider buying shorter term US Treasury Bonds and lock in 5% yields while you can! Maybe Financial Advisors are right to say that now is not a good time to sell bond funds, so don't! But then hedge them by buying bonds in another account, perhaps!
I discuss how Target Date Funds may not be all they are cracked up to be as their performance is often subpar to that of the low-cost S&P 500 Index Fund that Warren Buffett recommends to most people.
In addition, Target Date Funds (TDF) tend to be "fund of funds" and have higher fees (expense ratios), therefore causing you to have a lower return than if you'd have just stuck with an S&P 500 Index Fund (I'll refer to this as SPX for short but this isn't one of the investable ticker symbols).
SPX is not the only way to go though, you could invest in individual stocks, bonds, or other types of assets if you're so inclined and willing to do the homework.
I credit the WSJ article for discussing the notion of Treasury Inflation Protected Securities, or TIPS, which some people have made a ladder out of to get some steady stream of income out of.
Also, I convey my disapproving opinion on the popular notion that stocks are riskier than bonds, which may not be true. What's risky is if you do not know or understand what you're invested in. Being in high expense ratio funds that you don't know what stocks are in could be riskier than if you had done your research and invested in stocks you believe in and plan to hold for the long term.
I mention other options like high yield savings accounts, Certificates of Deposits, Qualified Longevity Annuity Contracts (watch this video: • Tax Advantaged Annuity... ) and more!
For example make the most of your Roth IRA or Traditional IRA, and a Health Savings Account in addition to the 401k! You are not limited to only "doing nothing" with your 401k, whether it's currently up or down.
However, there is no one-size-fits-all as we're all at different stages of investing toward retirement, so even though more retirees are loading up on equities instead of bonds doesn't mean it's right for everyone.
Even though Warren Buffett said most people should be 90% in stocks and 10% in bonds, maybe the younger crowd should be even more aggressively in stocks or other higher-yielding assets that are better than bonds. Perhaps but you gotta do your own homework! As you know, this is not advice just educational info. ^_^
The sky's the limit, so they say, so weigh your options and make the best financial decisions you can.
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Disclaimers: This content is for entertainment, information, education purposes only. Michelle is not a financial advisor and is not providing financial, investment, trading, tax advice, or recommendations. Please consult with a professional financial advisor with a fiduciary duty and responsibility if you need help in your situation. All trademarks, logos, and brand names belong to their respective owners.
One lesson I learned from Papa Johns CEO "Papa John" Schnatter is that when you invest in dividend paying stock, it doesn't really matter if the market is up or down - you're still winning.
Can't go wrong with Banks, Oil/gas (energy), and food.
Mutual funds are another way to win if you don't understand the market.
Haha I think the only dividend-paying stocks I'd avoid are most telecoms, like Verizon 🤣. I remember briefly owning VZ around $50 in the mid-2010s and even though I got dividends, the stock went nowhere and it's just going down. I'd rather stick with food to your point. Thanks for sharing Jon! What do you think about Berkshire selling 13% of Apple?
@@MichelleMarki
Apple needs to innovate their products.
I understand why Berkshire would sell.
@@PassportBrosBusinessClass Yes, and possibly also to use those capital gains to offset Paramount losses on Buffett's sole decision to buy/sell PARA.
I like my S&P 500 ETF investment in my taxable brokerage account...but I get a little nervous about big market downturns. That's why I'm sort of in an uneasy standoff with my 401k. I'm in a target date fund that's pretty opaque in terms of its underlying investments and the temptation is there to move it to a total market fund (they don't offer S&P 500 only in the 401k), but I worry about a market downturn slashing through my 401k like Freddy Kreuger if something goes haywire. I'm Gen-X so my TDF has a larger percentage of bond investments to cushion a big market hit (in theory). Definitely a dilemma and as I get older I definitely understand the meaning of "analysis paralysis!" LOL. Great info as always, Michelle...thanks! :-)
Hey Craig, thank you so much for sharing your dilemma. I can only imagine what you are wrangling with. As soon as I realized TDFs do not return as much as the "Total Market" or S&P 500, I decided to be more aggressive with mainly allocating toward stocks, high yield money market (or sometimes higher yield treasury bond funds), or even getting a Series I bond back when they yielded 9.62%. You're still young as a Gen-X, I'm optimistic that the stock market will recover and rise higher within our lifetime. It definitely can be an emotional rollercoaster though! Good luck on what you decide! :D
Hi Michelle you have given me more information and understanding than my financial advisor, what he does is just gives me what the market is doing not what I should move or make changes to move money where it will or most likely gain and better positioning. Im invested in bond funds that just has been stagnant for 6 years now., I mean it's has made money but not very happy with where I am. Im retired 6 years ago rolled my 401k into bonds at a lower risk of loosing money, like you mentioned he says it's better to stay in long-term but as I get older I really hardy see much gains...what do you think about what I just mentioned??
Thank you Robert for your questions and feedback. While I am not a financial adviser and cannot tell you "what to do," I have suggestions for consideration. You may wish to try to figure out how much your lifestyle in retirement (including housing and healthcare expenses) costs per year, and add up how much income you are getting (from social security and other sources). It would also be worthwhile to consider how much of a yield or return on investment you are seeking. If you are OK with 4-5% from bonds or high yield savings for the "safety and consistency" aspect, maybe some amount can remain there. But if you think your money should better perform so you can pay for future lifestyle costs, you might want to think about if aiming for a 10-15% return from the stock market or elsewhere is realistic or even possible. Right now I would not just trust that the S&P 500 (index fund) will continue to return 15% (give or take) a year as it has done for the last several years, but rather I would focus on individual companies' stocks that can perform well no matter if we're in a recession or a growing economy. I would encourage you to think about if you want to be committed to studying individual companies in order to try to achieve higher return rates. Otherwise I would seek side hustles or perhaps business opportunities to generate income outside of the stock and bond markets. Hope this helps! Good luck.