Investments: how are you taking advantage of low prices?

[strokeoluck]

Hypothetical situation: you're in your late 30's/early 40's and doing ok. You've got a wife, a couple kids, a decent job that pays the bills and allows you to sock a little away for college and the nursing home down the road. Your only debt is a mortgage.

You come into a little money (inheritance, bonus, found a wallet at the gas station, whatever)...let's say it's 20% of your gross income just to make the math easy. You're not buying an island in the Caribbean, but it's enough to make you think. What do you do with it?! Do you...

a) make a decent dent in your mortgage so that you can sleep better knowing you're that much closer to being 100% debt free?

b) plow it into stocks knowing you're "buying when others are fearful" which of course is what made Buffett a gazillionaire, and this is your chance to make up for the dozen stocks on which you lost your *ss?

c) venture into the real estate world and scoop up a foreclosed/undervalued home and take advantage of someone's loss, even though you know little about this world and have little time to devote to a property (or renters) due to your demanding job?

d) stick it in the bank and collect 2% interest

 

[PmDavis300]

Re: Investments: how are you taking advantage of low prices?

i would put it into the mortgage... but im only 24 and a poor college student

 

[bayman]

Re: Investments: how are you taking advantage of low prices?

Diversify. A good chunk towards the mortgage. Put some in the bank for later investments and some into solid, but undervalued stocks. That's my take anyway. If you really knew what to do you could make a mint by buying and waiting on the right investment.

 

[strokeoluck]

Re: Investments: how are you taking advantage of low prices?

If you really knew what to do you could make a mint by buying and waiting on the right investment.

Thanks. I'm very inclined to dump it into a few stocks that I feel real good about. My wife wants us to reduce debt as much as possible - and there's nothing wrong w/that. But I think the compounding/growth factor on stocks right now makes it look very attractive. True, we might end up catching a falling knife but I have to believe the odds are decent that we're a lot closer to a bottom in the market, than we are to the top. I think the Depression saw 90% stock declines and 25% unemployment ("only" 25%...I thought it would have been much more than that).

I'm eager to see what others say.

 

[mthieme]

Re: Investments: how are you taking advantage of low prices?

2008 Boston Whaler 15' Sport w/all the options.

 

[CheapboatKev]

Re: Investments: how are you taking advantage of low prices?

71 Hemi Cuda.68 GT500KR Mustang...Have you guys seen Barret Jackson Car Auctions??? Cars have appreciated a thousand fold

 

[seven up]

Re: Investments: how are you taking advantage of low prices?

Put it in a dufflebag and sock it away somewhere. It's the only way you can be guaranteed it'll still be there in years to come and still be yours, too.

Enjoy

 

[bucky7680]

Re: Investments: how are you taking advantage of low prices?

20% of $100,000 is only $20,000. Not much money to do anything with. It would not make a dent in most mortgages. I'd bank it for an emegency. $20,000 will not change most peoples lives.


Some of you guys make way more than me.

 

[strokeoluck]

Re: Investments: how are you taking advantage of low prices?

71 Hemi Cuda.68 GT500KR Mustang...Have you guys seen Barret Jackson Car Auctions??? Cars have appreciated a thousand fold

You guys are too funny. Actually my son and I saw a new Dodge Challenger; all white w/two black racing stripes. Sweet! My Dad is a big Vette guy (owns two now; has owned ~10 over the years) and is always trying to talk me into buying one. But I have to keep reminding him there's four people in my family and only room for two in a Vette. And he says "That's the point!!!".

If anyone follows individual stocks the one that's really caught my attention is ISRG. I've owned it before, and sold it for a profit before it tripled. Now it's come back down to earth but once this economic thaw ends the company seems ripe to grow in the U.S. and internationally. Of course as someone pointed out, the mattress is looking pretty good too.

 

[david_r]

Re: Investments: how are you taking advantage of low prices?

i would have to go with the new boat guys!

 

[lowkee]

Re: Investments: how are you taking advantage of low prices?

I have three options for you and you can choose which (if any) to follow:

1: Pull out your mortgage paperwork, look at what you bought your house for. Now look at what you will have paid the bank for that same house if you pay the base amount for the entire term. Then pull out an amortization schedule (don't skip this step!) and look how little you are actually paying down your debt each month paying the base amount.

2: Dump it all into some way-down, yet diverse, stocks (minimum of 4 different stocks) and sit on them for 3+ years, not a day less.

3: Buy gold or oil futures and keep it for the very long term (retirement). This one sounds risky, but really isn't. Peak oil was a while ago and gold remains at a balanced value (even when the dollar plummets) and is always in high demand (no, not jewelry, mostly circuit boards).

An easy reason to not do the other other options:

Real estate: If real estate investors have no idea what to do, you don't stand a chance. We haven't hit bottom and nobody knows what the bottom is. Values are still WAY above what they were pre-bubble and now there is a huge excess of supply, neither of which spell 'buy me'.

Savings account: We just passed a 1.6 trillion dollar budget.. this means the federal reserve is going to create 1.6 trillion more dollars, making our money worth that much less than it already isn't. Since 1980, our dollar has lost 50% of it's value. That is not an investment. Even at 5%/yr in a CD (which is tough to find nowadays), going by the previous inflation rate, you would only make a ~40% profit over a 30 year period. That's barely more than 1% per year of 'actual value'.

As always, keep in mind this is a boat forum and any advice, including mine, is just advice and we don't go broke if you lose it all. Of course, we don't make a dime if you succeed Warren Buffett, either.

 

[mthieme]

Re: Investments: how are you taking advantage of low prices?

I was once told in some economics class that 90% of all wealth came from real estate. Not that $20K would buy much.

 

[Navy Jr.]

Re: Investments: how are you taking advantage of low prices?

I'd make the maximum contribution I could for tax year 2009 in a well diversified Roth IRA (large cap, small cap, international, bonds and cash) and put the rest in a rainy day fund.

A little off subject, but in keeping with the title of this post, in the last couple of months I've been transferring mutual funds that have lost value from my traditional IRA to my Roth IRA (only have 20% in stocks and stock mutual funds). The tax bite isn't nearly as bad as it would have been if I transferred these assets back when they were at their peak value. Any capital gains, interest and dividends earned in the growing Roth IRA will be tax free (not tax deferred), and there's no minimum required distribution at age 70 1/2 and beyond. Of course, there's always the chance I might look back at this in a few years and wonder just what the heck I was thinking of!! Time will tell, I guess.

 

[Provo5]

Re: Investments: how are you taking advantage of low prices?

I would put 5K into Fanny Mae stock. Max out Roth account for wife and myself. Put the balance into a savings accout at a credit union.

 

[eaglejim]

Re: Investments: how are you taking advantage of low prices?

I would keep it in my own hands since the powers that be like to give money away

 

[aspeck]

Re: Investments: how are you taking advantage of low prices?

Well, with my $285,000 that will be coming in 2 1/2 hours, let's see ...

I don't have a mortgage and have managed to become and stay debt free, so I guess I will average down on my investments. GE seems like a real bargain right now, so does Microsoft. There are some others out there that seem sound and are poised to do well. Archer, Daniels, Midland has some potential. The solar and alternative energy stocks should be okay because they will be getting a lot of government investment and interest. Also heavy construction equipment would be good because of the infrastructure contracts that should be coming. But stay away from defense contractors at this point.

That is how I will be investing my $285,000 winnings. Come on 1-2 pm!

 

[mphy98]

Re: Investments: how are you taking advantage of low prices?

I am buying as much Ford stock as possible when it gets to $1.25 a share or so. The last time this happend was 1982. I told a wealthy friend to buy as much as he felt comfortable with. He bought $10,000.00 worth at $1.05 a share. Kept it until it hit $40.00 and sold. He made a Killing! Now Ford has new product coming out soon, the festiva, new hybrid Fusion, new taurus, it is like 1982 all over again. I suspect there stock will rise again to new heights. By the way, they are the only domestic not taking our money!!

 

[strokeoluck]

Re: Investments: how are you taking advantage of low prices?

Who knows what the future will bring, but not so sure I want to bet on any U.S. car company right now. If the govt were to take over, my understanding is us "little guy" investors lose it all. I just had breakfast w/a guy this morning that lost a bundle on AIG and Lehman - he thought they would never be in the situation they're in.

And man oh man, the market keeps dropping like a rock. I know it will turn around, but the falling knife thing is starting to worry me. Of course, that's the right time to jump in...right?!

On another note, I called Vanguard yesterday - that's where we have all our IRA money (mostly rollover money from previous jobs). I learned I don't qualify for a Roth, and their expert proceeded to tell me about all the different tax rules and "what not" related to traditional IRA's. I hung up dazed and confused. I've always been an independent investor in individual stocks (within my IRA's) but I think it may be time to hunt down a local "expert" that I can sit down with face-to-face to get some advice on this stuff.

 

[aspeck]

Re: Investments: how are you taking advantage of low prices?

GE has gone up 26% since I said what I said. Microsoft went up 2 1/2 points but dropped back a dollar to only be up a dollar and change. Archer-Daniels-Midland is also up a little over 1 1/2 points. Would not have been a bad return for a week if I only had the $250,000 to invest.

 

[v1_0]

Re: Investments: how are you taking advantage of low prices?

Hypothetical situation: you're in your late 30's/early 40's and doing ok. You've got a wife, a couple kids, a decent job that pays the bills and allows you to sock a little away for college and the nursing home down the road. Your only debt is a mortgage.

Interesting situation. A lot depends on what you think will happen in the future. For example, if you are an extreme doom and gloom sort you should invest in sandbags, guns, ammunition, and foodstuffs.

If you are slightly less doom and gloom, investing in gold is an established tradition in times like these.

Moving from those extremes, if you think that there will be widespread deflation then hiding the money is a good choice. Run your credit cards up to the max! *After* everything has deflated, and you have navigated through bankruptcy and renegotiated the loan on your house, then you can pull that money out and live the large life.

If you don't think that deflation will be that bad, then playing "stock bottom chicken" is the game to play. The rules are simple: wait until the stock market bottoms out and buy everything in sight. Everything depends on the timing: buy too early, and you will loose money. Buy too late and you will have lost the good deals that happened at the bottom... Of course, you will need to sell your stocks to actually make money.

You could also buy options on "futures" of any number of things. You've probably seen all of those "world poker tour" TV shows. Children's games. Buying options allows you to buy the option to buy an amount of something. (The beauty is that it dosn't matter what that something is. You aren't really going to buy it, just buy the option to buy it!) Now the trick is to buy the option to buy it at the right price. You are buying the option NOW to buy something at a set price LATER. If the set price you buy NOW is better (less) then the actual price that the thing is selling at LATER - you win!!! (You buy at your price, and immediately turn around and sell the item at the current price and pocket the money). If the set price you buy is worse (more) than the actual price - you walk away from the deal having paid only for the RIGHT to buy the item (which you do not exercise, as it would cost you more money). The oposite of this is true too - you can *sell* options to buy something at a set price. But this is more risky, as if you guess wrong YOU will have to buy the item at the current price, then sell it to the buyer of your option at the lower price.

You could also try to be creative. Run a lottery with the grand prize being a chunk of your money. You want it large enough to be tempting, but small enough so that your ticket sales will exceed the amount of money that the winner wins.

My choice would be to start emailing people in Nigeria telling them that you've recently inherited a large amount of money, but need help in getting it out of the country (USA). You would be willing to give them a 'administrtive fee' for allowing you to deposit the money in thier bank account so that it could be transfered to yuor offshore bank account. Make sure you use this exact spelling, as it is universally recognized as being official.