What can you do with your IRA?

instead of stocks

[Clark]

With the bailout, I've been reading lots of Mark Cuban, who has done some of his best blogging ever on this topic. He was pointing out that stocks are a horrible investment for the average guy and the fund managers and 401k managers as well, who are mostly idiots it seems. He ought to know as he went on the roadshow (if you've never been in a company that went public, the founders go on a roadshow before the IPO to convince fund & 401k managers to invest in the IPO) and detailed how he and his partner purposely made huge mistakes to see if anyone ever caught them, as they saw that none of the people watching the show actually asked a single intelligent question.

The way he describes wall street, it makes you feel like the bankers are salespeople whose job it is to hype their "product", i.e. stocks. With the salespeople going bankrupt...it will change the whole landscape and we probably don't quite realize how large the impact is.

He also pointed out that the current structure, including stock repurchases like Microsoft used to do, just creates wealth for the executives and some of the employees with nice stock options but does not reward the investors much.

In any event, my IRA (my 401k rolled over into IRA) went to the crapper, like everyone else's. Worst time to sell are when things go bad, so I'm definitely going to wait until it recovers. But I'm beginning to think Mark Cuban is right. Stocks are a bad investment.

So if my IRA ever recovers, what can I put it in instead of stocks? Anyone know? Is it only stocks, bonds and money market?

[vincevincevince]

To me, I feel I need a balanced portfolio. What's happened is that stocks have moved up the pyramid a bit - where they were spanning 20% to 100% range of risk they are now 40% to 100% risk. That means I need to supplement the foundation of the portfolio (the 20% to 40% and <20% ranges) with more secure investments. Foremost in my mind at the moment are gold, spread currency, and government bonds.

Now, I just need to become rich enough for it to matter!

[Clark]

If you have your IRA in etrade, how do you do that?

[wheel]

>>>Stocks are a bad investment.

Stocks are not a bad investment, unless you think that the engine of the american economy over the long term is a bad investment (most think it's a good investment).

The way that stocks are bought and sold can make them a bad investment.

I don't think it's as difficult though, as most people believe - or as most advisors would have you believe. here's the way to go about it:
1) read up on Modern Portfolio Theory. This will tell you how to split your investments.
2) For that portion of your investments that end up in equity, go with index funds.

Rather than taking that as investment advice from me, I recommend you do your reading on those two topics. You'll find plenty of academics and statisticians recommending that approach, based on analysis. And precious few 'advisors' recommending that approach.

However, with that approach, the latest market hammerings mean pretty much nothing - you can ignore it.

[LifeinAsia]

IRS Pub 590 is your friend. :)

Online at [irs.gov...]

[Clark]

Wheel,

I've been reading about the market for a very long time. Before I accept your rebuttal of the conclusion I came to AFTER reading cuban's blog, I'd like to know that you actually read it.

Are you disagreeing with something you have knowledge of, or you're just going by what you always thought and heard dozens of economists, advisors, academics and the media saying for a long time?

Cuban has the unique perspective of being at the top, having taken a company public, "selling" his company to the people who make the market what it is, and his conclusions in a way are a confession by someone who has benefited enormously by the market.

The rest of those people have a history of being wrong and steering people the wrong way.

Asia,

Thanks, you seem to know a lot for someone in Asia ;)

[edited by: Clark at 6:23 pm (utc) on Oct. 6, 2008]

[LifeinAsia]

I used to do taxes/investments. And I haven't been living in Asia for close to 6 years. :)

So if stocks are such a bad idea for Joe Investor, what exactly does he suggest? (I agree somewhat- stocks may not be the best investment for some people, and individual stocks are probably not the best investment vehicle for most people.)

[Dabrowski]

With my IRA I would assasinate Chris Moyles.

[Clark]

He suggest safe investments where you earn interest :)
Which isn't that great either because interest rates are too low...

It would be nice to be able to use IRA as angel money pooled with some other buddies :) And if possible used to seed own company heh heh...

Dab, you must UKian? Don't UKians have IRA's besides the assassinators?

[Webwork]

Sometimes the time to buy is when everyone else is selling in a panic.

Folks who bought Wachovia in the toilet, before some figured out there was more to WB than banking, doubled their money in a few days. Those folks then doubled their money again when Wells Fargo stepped up.

There are other "in the crapper" stocks that, when you look deeper into assets, etc., the values represent panic not reason.

So, it may be a good time to take some losses (by selling a holding that won't soon rebound) and then go hunting for "irrational pessimism".

I can't say every day is going to be a good day or that I'm any kind of investing smartypants but the other day, when a certain company was being absolutely trashed, I threw a healthy sum at it and was rewarded. Took my profits and now I'm in the hunt again.

It's a market in which to proceed cautiously . . when everyone else is jumping out windows . . sortof.

Just think, either way, before going all in or jumping out. :P

[Dabrowski]

Dab, you must UKian

Yes.

And we probably do, I suspect the HMRC is our equivalent. What's your IRA?

[Clark]

Individual retirement account.

[ergophobe]

Let's see - Warren Buffet just jumped in with a big investment in GE.

I think if you're like me, individual stocks are a stupid investment. I don't track them and I don't want to. Like Vince, I still don't have enough milk to cry over when i spill it, so the downturn doesn't hurt that much.

[Dabrowski]

Individual retirement account

Oh no, not the same then! We have pensions.

[timster]

To weather cyclical stock downturns, less risky investments such as bonds, CD's, money markets, and precious metals can help preserve principal.

In the current economic climate, the best investments may be canned food and ammunition.

[Jane_Doe]

I think the best you can do is asset allocation - buy a variety of asset classes that tend not to move in sync with each other. And invest in index fund, EFAs, no load mutual funds, CDs, etc - things without a sales charge. And wheel is right, most "experts" aren't going to tell you how to do it because they don't make any money from you investing this way.

This guy I know in our neighborhood charges people 2% to just find someone to manage their portfolio. Then the guy he finds (most likely some golf buddy) charges another percent or two on top of that. After inflation and taxes, that leaves little real earnings on his clients' portfolios. But this guy who charges the two percent lives in a nicer house than me and makes a ton of money off people who could be putting that ton of money into their own portfolios if they just took the time to read up on things index funds and asset allocation, instead of turning it over to an "expert" like him.

[edited by: Jane_Doe at 9:31 pm (utc) on Oct. 7, 2008]

[Clark]

Another down day...good thing we added 812 billion to help the economy, with that irrelevant $112 billion "sweetener". Remember when $112 billion on the budget was a figure worth considering? Sigh.

[edited by: lawman at 10:26 pm (utc) on Oct. 7, 2008]

[lawman]

"A billion here, a billion there; pretty soon you're talking real money." Attributed to Sen. Everett Dirksen

"Oh, I never said that. A newspaper fella misquoted me once, and I thought it sounded so good that I never bothered to deny it." Sen. Everett Dirksen