97

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 into the stock market. In other words, this question strikes me about the same as asking, why don't ice cream shops stop selling ice cream, and instead get in the ...


59

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. I recall thinking to myself, that if I were older, and passed the $1M mark, the drop would have been $360K, fully invested. Fast forward to the crash of 2008-...


57

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 should never worry about it. Why? Because you're not selling now, you're selling years in the future. You don't realistically care what the stocks at any ...


16

Because your "bank" will fail The related questions assumes a "buy low, sell high", or even better, a "buy low, never sell" scheme of investment. But your proposed geared fund will not have that. They will have clients. Clients that can withdraw at worst possible moment. Recessions come hand to hand with markets down run. Long recessions will cause ...


12

This image is an advertisement from a recent Barron's. The broker would want to put himself in the best light, correct? This shows you that of their current accounts, 53.5% are not profitable. And, keep in mind, these guys have the best track record of the list. Also, their client base isn't random. The winners tend to stay, so even if it were 50/50, the 50%...


12

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. You are more likely to get in too late, or get too edgy and jump out early, than to consistently navigate the market ahead of millions of other people (all of ...


11

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 value. During your lifetime you will see numerous large drops in the market. What's important when that happens is that you don't panic sell. It is almost a ...


10

When you buy a stock, the worst case scenario is that it drops to 0. Therefore, the most you can lose when buying a stock is 100% of your investment. When you short a stock, however, there's no limit on how high the stock can go. If you short a stock at 10, and it goes up to 30, then you've lost 200% on your investment. Therefore shorting stocks is ...


9

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 - if a stock has a beta of 2, it will fluctuate twice as much as the market, so it is "riskier" than average by that definition. The Beta quoted is ...


8

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 such, there's really no way to tell, at least not with any amount of accuracy that would allow you time the market. Instead, follow the advice of William ...


8

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 (next 5 to 10 years), then this is great! My retirement date is further than 10 years out, so if the stock market crashed tomorrow (and the companies I was invested ...


8

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 Staples which lost 31% and the worst was Financials which lost 76%. It's debatable if gold performed well because for the calendar year of 2008, it dropped 30% ...


7

Lazy Portfolios do tend to have a mix of US bonds, US stocks and international stocks as there is something to be said for that international exposure being somewhat mixed in the big US companies. While Coca-Cola's growth may be overseas, there is something to be said for domestic sales playing a role in how well does that work. Same for Apple, Microsoft ...


7

Forex vs Day Trading: These can be one and the same, as most people who trade forex do it as day trading. Forex is the instrument you are trading and day trading is the time frame you are doing it in. If your meaning from your question was comparing trading forex vs stocks, then it depends on a number of things. Forex is more liquid so most professional ...


7

The efficient frontier is drawn from the risk-returns of various combinations of portfolio assets. The general theory is described here: Theoretical Basis Calculating the average return of a basket of assets is fairly staightforward. where Xi is the fraction of the investor's funds invested in the i th asset. The calculation of risk (standard deviation, ...


7

Your strategy fails to control risk. Your "inversed crash" is called a rally. And These kind of things often turn into bigger rallies because of short squeezes, when all the people that are shorting a stock are forced to close their stock because of margin calls - its not that shorts "scramble" to close their position, the broker AUTOMATICALLY closes your ...


7

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 total pot of money with periodic deposits. To your point, sometimes you make your contribution but your account value is down $1,000 (more than your contribution) ...


7

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 and will win over time in a very stable manner as they make repeat bets. The main problem for investors outside of people already sitting on millions+ is it is ...


6

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 the start, so the stock prices might still drop severely" then you could stick to cash or government bonds (although yields are at historic lows right now). But ...


6

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 such as gemstones has everyday items such as cars, boats No matter what "mix of stuff" Brother has, as assets, those assets can be chased by another ...


5

He's calculating portfolio variance. The general formula for the variance of a portfolio composed of two securities looks like this: where w_a and w_b are the weights of each stock in the portfolio and the sigmas represent the standard deviation/risk of each asset or portfolio. In the case of perfect positive or negative correlation, applying some algebra ...


5

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 could make a fortune. The problem is, how do you know when the market is at its high and low points? There was another question on here where someone asked about ...


5

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 to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves. But now for the final ...


5

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 problems never change. It's impossible to fix the behavioral problem.4 As OP has already stated, OP's option 2 will not happen. There are only two ...


5

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 for the moment and think just of the more "normal" part of insurance: protection against an unusual but potentially huge expense. Suppose you buy fire insurance ...


4

what is cost of coverage (without insurance) for the things i may need medical assistance with? Cancer costs something in the neighborhood of $1,000,000. A complicated child birth can be $250,000. The issue is that about 70% of claim dollars are paid toward treatment of about 10% of the covered people. The remaining 30% or so of claim dollars will go ...


4

The short answer is that it is impossible to KNOW when the best time is to sell a stock. There are a number of reasons to sell a stock: You need the money Company fundamentals have changed Share price has advanced very rapidly, perhaps unsustainably The stock is overvalued The stock is overvalued compared to its peers The dividend has been cut Portfolio ...


4

Why doesn't any (serious) bank offer a savings account with a fixed 2% interest rate for an unlimited amount of time? I don't want to assume your age but you may not remember that this was actually a completely real situation in the past. When I was a growing up in the 80's I recall my basic savings account had an annual interest rate of somewhere between ...


4

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 Unhedged ETF could be EUR denominated simply because a Market Maker constantly help you convert money in Foreign Exchange Market.


4

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.) From time to time, a few 100 or even 1000 tonnes is discovered; as you would expect there is no effect. The urban-legend "Nazi gold" is a couple of ...


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