What to do with investments - spin-off from buy.food.now thread

[Chi-Chi Mama]

another spin-off that thread... sorry if this has been discussed before...

Several people here got out of the market (housing, stock, etc.) before the mess we're in now. For some, it was just lucky timing (that happend to me before), but others made an education decision. What would you do if you hadn't sold back then - WWYD now?

We didn't sell our house two years ago because the market started getting soft here and we thought we'd wait it out. We now owe $250K on a house that we could sell for $150K, $170 tops. We have savings, but would be wiped out completely if we had to sell and pay the bank. Short sales are not working for people here, they all end up in foreclosure because the banks are so slow to respond. We'd like to move because we now drive way too much after work changes...

A while back, I thought about moving all of my 401(k) from a 'target fund' - targeting my retirement a few decades from now - to something safe... and then got busy with kids, life, work... then things went downhill and I sort of froze. Now I"m thinking if I have a few decades before retirement, should I just leave it alone? WWYD? I"m 30 btw and we have decent savings...

Do you stay in the market and hope to ride it out? Do you get out and save what you can?

[slsurface]

I also have 30 years before I can think about retirement...I say wait it out. That's what DH and I are doing.

[Violet2]

I think you need to wait and read everything you can get your hands on about the market.

The only way to see the trend is to know the history.

I hear rumblings that the bond market is going to collapse. That would have a significant impact on the market.

I am also reading about how E. Europe is on the brink of financial ruin which will, in theory, take Europe down with it.

IMO there's a lot in flux right now and I don't see a clear direction yet. The bond market might or might not collapse. E. Europe might get a bailout or not. Obama has played his cards, but the effect is not fully known yet.

If you had asked me this 5-6 months ago, I would've told you to get out of the market, pay off all debt, and hunker down. But right now, I'm not sure if the benefit of getting out covers the losses to date. People have already lost so much, there's not a lot to salvage any more.

It's a really personal decision based on your personal mix of debt and income. I highly suggest the Crash Course parts 19 and 20 for a decision-making rubric that will help you isolate your determining factors.

V

[Sk8ermaiden]

Originally Posted by slsurface

I also have 30 years before I can think about retirement...I say wait it out. That's what DH and I are doing.

Us too, actually, we are investing 3% more in our 401Ks right now. We feel that the stock market is on sale and since we can afford to wait it out, we will reap big rewards - I read over and over that the stock market has never lost money over any 10 year period.

[slsurface]

Originally Posted by Sk8ermaiden

Us too, actually, we are investing 3% more in our 401Ks right now. We feel that the stock market is on sale and since we can afford to wait it out, we will reap big rewards - I read over and over that the stock market has never lost money over any 10 year period.

Yep. We're doing this too. I don't think the world is going to end. The market will bounce back eventually and we stand to benefit for investing now. Irrational fear and selling stocks short is what is driving the current mess anyhow. I'm doing my part to support the market and our economy.

[sunflower.mama]

I don't feel 100% great about it, but we are still 100% invested (long term savings, retirement and kids college that is) We live in a part of the country that real estate values (per my refinance appraisal two weeks ago) have stayed pretty stable. At this point, we are just going to ride it out. I honestly think that if a portfolio which is now down 40% gets totally wiped out, we (as a country) will be in such bad shape that money won't work. I don't think it's coming to that FTR. But it's how I justify staying fully invested when I read the panic and sell threads.

[katheek77]

We're continuing to invest on the exact same schedule that we've been doing for the past few years. No more, no less.

[kirstenb]

Originally Posted by katheek77

We're continuing to invest on the exact same schedule that we've been doing for the past few years. No more, no less.

This is what we are doing as well. We have 30-40 years until retirement so I am comfortable doing what we were doing before the stock market starting falling.

[Sonnenwende]

I just moved the money to conservative investments for the time being. I'd rather not throw principal in the hole every pay period like I was with my former investment strategy. If the market starts to recover, I'll reallocate then.

[Chi-Chi Mama]

thanks for the responses.. definitely food for thought...

[SeekingJoy]

As someone who got out ahead of the crash, at this point I would just stay in and wait. In your situation I certainly wouldn't start saving more for retirement beyond what your employer matches. I would start throwing every extra penny at your debts, including your mortgage.

[Violet2]

Originally Posted by SeekingJoy

As someone who got out ahead of the crash, at this point I would just stay in and wait. In your situation I certainly wouldn't start saving more for retirement beyond what your employer matches. I would start throwing every extra penny at your debts, including your mortgage.

Yes, that's a good point. We also got out before the crash and have stopped contributing. We don't even do the employer matches. A lot of those are disappearing anyway and it's just a matter of time before our employer discontinues their match.

We are putting every penny in trying to prepare for prolonged unemployment.

V

[velochic]

We're staying the course for better or worse. We have a lot of taxable (non-retirement) money tied up in the stock market... well diversified, but it still hurts to see hundreds of thousands of dollars gone. We don't rely on that money for anything but we were hoping to leave our dd well off. She might have to wait a while before she sees the profits of that investing. We're okay with that and will keep plugging away the same way we always have. Different times, but the basic principles remain... buy and hold and eventually you'll get there. It just might not be as quick as it used to be.

We're closer to retirement than many here. Dh will be 65 in just over a decade. While our retirement accounts were not as aggressive as our taxable investments, they've taken a blow, but we can weather through.

Dh has a recession-resistant job (I no longer call ANY job recession-PROOF) and if he loses his job we can get by about 3 years, living on a shoestring and completely depleting the one-year pantry I've built up over the last 5 years. He's the senior tenured professor in his department, but if the country goes bankrupt, we're all in the kettle together with everyone else.

[MidwifeErika]

My dad always taught me that you don't gain or lose until you cash out. So, at this point I am pretending that I don't know what has happened with our retirement accounts, because it is only a loss on paper for now, it would be a real loss if we pulled our money out. I am 28 and my husband is 31, so we are about 35 years from retirement, so we have time to bounce back or figure something else out if it never bounces back. At this point, I would try to ride it all out. Even with a house, unless you HAVE to move, I would try to ride it out.

[Chi-Chi Mama]

Originally Posted by hotwings640

Even with a house, unless you HAVE to move, I would try to ride it out.

that's the thing - defining "have to" - I work part time, but the days I have to go into the office, I spend about 3.5 hrs in the car. pollution, waste of resources, waste of my time with my family!! Dh has to go half hour into town for his work, takes the kids, then they're stuck because they have a break for a few hours, but it takes an hour to go back to the house for the break. Sometimes I think of it as inconvenience, sometimes it's just plain maddening. I guess we have to figure out for ourselves what to do. I can't imagine living like that for 10 yrs or whatever it will take. Dh is self-employed btw and can't move his business closer to our house and I won't find another job like I have now somewhere else. I guess if things get worse we could both be out of work.

we're just so paralyzed over what's going on that we're afraid to do anything.... guess noone has a crystal ball though, right?

[freespirited]

We have been also been thinking about what to do. We tried to sell our home last year but it didn't sell. We thought about trying again but now we are just sort of fixing it up more and liking it more too. The issue I have is that we might want to move back to dh's home country at some point, and if the market and the economy deteriorate further, we could be unable to sell at all even if we lowered the price another 10-15k (which is a lot for a starter home in this price range). For us, it is about having the freedom to leave if we wanted to. That said, we pay very little for our home, around $600 a month, and a rental of comparable size rents for $900, so we'd be paying 30%more, and our property taxes are only 1k a year. We could always rent our house out but we've really fixed it up nicely and I hate to think of someone not taking care of it as we do.

I recently came across this alarming article about home prices, and I tend to think it's probably accurate: http://www.usatoday.com/money/econom...meprices_N.htm
If you are just going to buy another home, does it really matter all that much though? All homes are going down in price so it sort of evens out. Most people are not in the enviable position of buying their first homes now. Funny they kept saying "buy now or be priced out forever" about 3-4 years ago. Can you really trust any forecasts? Does anyone really know? People are still buying now precisely because no one knows, and if you wait then maybe interest rates go up or whatever. But getting back to your situation, we are still wondering what to do as well, but only because we don't feel stable enough where we are at. If I knew for sure I was ok with where we are living and dh had a better job than he does, then I would totally sit it out, and even if prices take decades to recover, a house is a home and was never meant to be a get-rich quick scheme, even though some people did get really lucky timing the market's rise and fall.:

[freespirited]

Originally Posted by Chi-Chi Mama

that's the thing - defining "have to" - I work part time, but the days I have to go into the office, I spend about 3.5 hrs in the car. pollution, waste of resources, waste of my time with my family!! Dh has to go half hour into town for his work, takes the kids, then they're stuck because they have a break for a few hours, but it takes an hour to go back to the house for the break. Sometimes I think of it as inconvenience, sometimes it's just plain maddening. I guess we have to figure out for ourselves what to do. I can't imagine living like that for 10 yrs or whatever it will take. Dh is self-employed btw and can't move his business closer to our house and I won't find another job like I have now somewhere else. I guess if things get worse we could both be out of work.

we're just so paralyzed over what's going on that we're afraid to do anything.... guess noone has a crystal ball though, right?

Now that I read this, it sounds like you really yearn for a simpler life and that is pretty priceless. Follow your gut, it doesn't sound like you would be selling out of fear but out of a desire for a different way of life. Dh works 5 minutes from our house and neither of us can imagine being commuters ever again ionce you experience the convenience of being close to work, etc. This year may be a better year than next to sell. Low interest rates and the stimulus tax break for homebuyers, so really think about what would make you happy and try not to stress too much about the loss you'd take. Everyone is losing money now and we are all going to have to redefine what makes us happy. I love that my life is so simple. We don't have much but we never go far from home and we have a lot more free time because of it, which is worth a lot.