108 votes
Accepted

If a broad long-term investment in the stock market is such a good deal, why don't banks do the "obvious" things?

Fundamentally, I think there's a high level (and perhaps unsatisfying) answer to this. It's because that's not "banking" as a business, and a bank is established to do banking, not to get ...
dwizum's user avatar
  • 17k
59 votes

How can I protect my 401(k) when the stock market is performing badly?

In 1987, this is what we lived thru - A high of 2722 and subsequent drop to 1739. Just over 36% in a few months. My 401(k) was just over $20K at that time, and I 'lost' $7000 between those 2 dates. ...
JTP - Apologise to Monica's user avatar
56 votes
Accepted

How can I protect my 401(k) when the stock market is performing badly?

This is a problem that always looks worse than it is. Here's why. When you're young, and your 401k is weighted towards long-term growth, you're going to have large swings. That's expected, and you ...
Kevin's user avatar
  • 2,630
30 votes
Accepted

Why would long-term investor care about volatility?

If you really do not need to withdraw the money, it is just for psychological reasons. Excessive volatility makes many people uneasy and probably rightfully so given the amount of money involved after ...
Manziel's user avatar
  • 7,422
22 votes

Risks of using home equity for high risk market investing

The United States (S&P 500) is a great example of Survivorship Bias. There is no reason to believe it will continue to deliver returns as good as the last hundred years going forwards. There are ...
Kaz's user avatar
  • 2,489
19 votes

If a broad long-term investment in the stock market is such a good deal, why don't banks do the "obvious" things?

Because a "bank" like this will fail The question assumes a "buy low, sell high" system, or even extreme "buy, never sell" investment scheme for the "bank". But ...
André LFS Bacci's user avatar
15 votes
Accepted

Are there risks or hidden costs of buying a CD from a bank I don't have an account with?

One issue with a CD is that it is all or nothing. If you need it early there may be a penalty. If you only need 75% of it you have to cash it all in and then buy another CD or move the rest someplace ...
mhoran_psprep's user avatar
12 votes

How can I protect my 401(k) when the stock market is performing badly?

What you are talking about is an idea called "Timing the market". A lot of other people with more time, focus, and education than you or I have attempted to time the market in the past and failed. ...
Derek_6424246's user avatar
12 votes
Accepted

Risks of using home equity for high risk market investing

While your research shows you how the market has historically recovered from a crash, you haven't shown that you will be invested in that market. I still have 20 years until I retire and currently my ...
mhoran_psprep's user avatar
11 votes

How can I protect my 401(k) when the stock market is performing badly?

If you have a long time before retirement you don't try and protect losses. You cannot time the market. And in the long run the stock market always goes up. So when it is down you are getting a better ...
Karl's user avatar
  • 127
11 votes

Is there a quantitative answer to how frequently I should optimize my portfolio?

You are applying theoretical financial concepts to the practical world. There are two (potentially significant) factors you haven't mentioned at all which can create significant 'slippage': ...
Grade 'Eh' Bacon's user avatar
9 votes
Accepted

Should retail investors learn and use the capital asset pricing model (CAPM)?

At a basic level, yes. Most finance websites will quote a "Beta" for a stock, which is the sensitivity the stock has to the price of the underlying market. It's also a rough measure of risk -...
D Stanley's user avatar
  • 135k
8 votes
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What are some signs that the stock market might crash?

Although it is impossible to predict the next stock market crash, what are some signs or measures that indicate the economy is unstable? These questions are really two sides of the same coin. As ...
grfrazee's user avatar
  • 717
8 votes

How can I protect my 401(k) when the stock market is performing badly?

Think of it this way. The stocks you're investing in have just gone on sale. When things go on sale, people usually buy more of them rather than selling. If you don't intend on selling them soon (...
Kevin Peter's user avatar
8 votes
Accepted

What kinds of ETFs weathered well the 2008-2009 financial crisis?

In the 2008 bear market, with equities, there was nowhere hide. When the market was down 50+ pct from 2008 to March of 2009, the best performing SPDR sector (with dividend reinvestment) was Consumer ...
Bob Baerker's user avatar
  • 76.4k
8 votes

Risks of using home equity for high risk market investing

You have correctly identified a couple of the main risks associated with investing through debt. Namely, that you would need to be able to bear interest costs for the period of time that your ...
Grade 'Eh' Bacon's user avatar
7 votes

How can I protect my 401(k) when the stock market is performing badly?

There are already good answers here, so I won't get in to too much depth. You really can't understate how time is the method that protects your 401k. People generally think of their account as a ...
quid's user avatar
  • 49k
7 votes

Should we consider real estate investment low, middle or high risk?

Even if you own a roulette wheel, letting a gambler bet you your entire net worth (or even sizeable % of it) in a single wager is a very high risk thing to do, despite the fact you have a clear edge ...
Philip's user avatar
  • 5,768
7 votes

Risks of using home equity for high risk market investing

Another question asked if one should get a 15 year mortgage, or a 30 year, and invest the difference. I offered the results of a spreadsheet, looking at the 15 year rolling returns for 100 15-yr ...
JTP - Apologise to Monica's user avatar
7 votes

Are there risks or hidden costs of buying a CD from a bank I don't have an account with?

One year treasuries and CDs are currently paying in the vicinity of of 4.75%. Both are guaranteed, the former by the US goverment and the latter by FDIC insurance. Ladder them if you think that you ...
Bob Baerker's user avatar
  • 76.4k
6 votes

Minimize risk of losing a lot of value for your savings during the corona crisis

You are correct, that all of those plans have significant downsides themselves, and no one here knows what will be the best strategy going forward. If you believe that "the corona crisis is just at ...
D Stanley's user avatar
  • 135k
6 votes
Accepted

Is there a currency risk in UCITS ETFs?

If there is a major downturn in EUR, your asset would actually appreciate in EUR even if the index does not move, because US stocks are traded in USD and Unhedged ETF has USD as Base Currency. An ...
base64's user avatar
  • 10.4k
6 votes

Is it better to invest FULL savings, in a home before marriage, or PARTIAL savings after marriage (50/50 contribution with spouse)?

Your concern is that someone ("an ex wife") may take some of Brother's assets. Unfortunately, if Brother has cash money in the bank owns real estate owns stocks and bonds has valuables ...
Fattie's user avatar
  • 13.8k
6 votes

What percent of a portfolio should be directed to high risk assets to enable outsized returns?

Over the years, I predicted a few assets that went up in price a ton. That's not the point. Anybody can predict assets that went up a ton. If I name a hundred hot stocks right now, many of them will ...
DJClayworth's user avatar
  • 33.4k
5 votes

How can I protect my 401(k) when the stock market is performing badly?

A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time ...
SafeFastExpressive's user avatar
5 votes

Worried about wife's spending habits with impending lump sum

The unfortunate absolute facts are Lump sums are a huge particular problem1 2 for people with spending problems 3. People with spending problems burn through lump sums instantly. People with spending ...
Fattie's user avatar
  • 13.8k
5 votes

How can I protect my 401(k) when the stock market is performing badly?

As others have noted, timing the market is very hard. Sure, if you could buy when the market is at its lowest, and sell when it's at its peak, then buy it all back when it's down again, etc, you ...
Jay's user avatar
  • 22.7k
5 votes

Rational risk-assessment decision framework: Should I buy health insurance?

Medical insurance in the US is a little crazy because people routinely expect it to cover all sorts of little things, every visit to the doctor's office, every prescription, etc. Let's ignore that ...
Jay's user avatar
  • 22.7k
5 votes

How would the discovery of El Dorado impact the price of gold?

To make a reasonable answer to your specific questions, A) The ElDorado idea is silly B) There's about 30,000 tonnes of gold bullion. (FYI see the discussion on this specific figure, it may be bigger.)...
Fattie's user avatar
  • 13.8k
5 votes

Is there a quantitative answer to how frequently I should optimize my portfolio?

I'm not familiar with the particular algorithm you're using to balance your portfolio. It's probably irrelevant to my answer so I haven't bothered to look it up. Apologies if that assumption is wrong. ...
Jay's user avatar
  • 22.7k

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