Dave Ramsey prefers a commission-based planner?

[littleroc02us]

It is exceedingly rare to lose 100% of a stock investment. You have to be choosing incredibly speculative issues and then totally ignoring your investment. Companies do go bankrupt but it is rarely sudden and the value rarely goes to zero overnight.

Besides, nobody recommends putting all of your eggs in one basket. Even if you do choose to go with individual stocks rather than mutual funds (which have essentially zero risk of going to zero value due to diversification), you need to spread your money around among numerous stocks so even if one did really poorly, the others would be okay.

I know a guy at work that all he does is put's money into Apple every year and then take it out. What if they crash again down to $7 like they did in early 2000? The same guy just foreclosed on his house because he bought it with a friend and now they aren't. He doesn't have any investments besides that. So, what I'm saying is there is the possibility someone could lose a ton of money... I think a lot of people in this forum aren't that stupid, so we are among the wise for the most part.

[disneysteve]

I know a guy at work that all he does is put's money into Apple every year and then take it out.

So, what I'm saying is there is the possibility someone could lose a ton of money...

Agreed. You could lose a ton of money, but only if you are acting in an incredibly stupid manner, which it sounds like this guy is.

When Enron imploded, many employees lost pretty much their entire retirement portfolio. Why? Because they had it all invested in Enron stock. Sorry, but diversification is a core principle of investing. If you invest all of your money with one single company, you deserve what you get.

[snshijuptr]

So if Ramsey is the debt guy, and Orman is the within your means gal, then who would be the investing person?

Paul Merriman (FundAdvice.com - Sound Investing)?
Joshua Kennon (Investing for Beginners)?

Who do you think is a good investing guru?

[disneysteve]

So if Ramsey is the debt guy, and Orman is the within your means gal, then who would be the investing person?

Who do you think is a good investing guru?

Warren Buffet
John Bogle

Those were the first two names to come to mind.

[littleroc02us]

Agreed. You could lose a ton of money, but only if you are acting in an incredibly stupid manner, which it sounds like this guy is.

When Enron imploded, many employees lost pretty much their entire retirement portfolio. Why? Because they had it all invested in Enron stock. Sorry, but diversification is a core principle of investing. If you invest all of your money with one single company, you deserve what you get.

I was gonna say, could you imagine being a guy who instead of paying down the mortgage on their house, they took that money and put into the market between 2007 and 2009 and then pulled it out because of the stock market tanking. They would be hurting pretty bad right now.

[littleroc02us]

So if Ramsey is the debt guy, and Orman is the within your means gal, then who would be the investing person?

Paul Merriman (FundAdvice.com - Sound Investing)?
Joshua Kennon (Investing for Beginners)?

Who do you think is a good investing guru?

Warren Buffet. Still searching and reading books on the topic. I take bits and pieces from those I read about.

[disneysteve]

I was gonna say, could you imagine being a guy who instead of paying down the mortgage on their house, they took that money and put into the market between 2007 and 2009 and then pulled it out because of the stock market tanking. They would be hurting pretty bad right now.

But that would not have been intelligent investing. You don't put money in stocks with a 2 year timeline. Money invested in 2007 and left alone is doing just fine now.

[jpg7n16]

So if Ramsey is the debt guy, and Orman is the within your means gal, then who would be the investing person?

Technically, Ben Graham.

Warren Buffett is his most famous student.

Worth a read: The SuperInvestors of Graham-Doddsville

[littleroc02us]

But that would not have been intelligent investing. You don't put money in stocks with a 2 year timeline. Money invested in 2007 and left alone is doing just fine now.

I guess your not getting my point, if you were to have put your money in some Vanguard funds from 2007 to 2009 and got scared when everything tanked like so many Americans did and you pulled it out and you missed the huge rebound. You would have blown a ton of money. It happened. All I'm saying is that there is a huge risk, unless you ride it out for 20 years or longer.

[BuckyBadger]

I guess your not getting my point, if you were to have put your money in some Vanguard funds from 2007 to 2009 and got scared when everything tanked like so many Americans did and you pulled it out and you missed the huge rebound. You would have blown a ton of money. It happened. All I'm saying is that there is a huge risk, unless you ride it out for 20 years or longer.

But I think that *is* the point. If you have 20 years, you don't freak out and pull it after 2 or 3. And if you only have 2 or 3 years, you don't put it in something volatile. That's the whole point behind target date funds. The further out you are, the more risk you take. The closer you are to needing the money, the less risk you take.

When the economy tanked, the people who were hurt the most were the people who needed the money right then, but hadn't transferred their diversification to something less risky. And the people who freaked out cashed everything out. The people who were okay were those who had the time to ride it out and DIDN'T freak out, and the people who were using their money but had smartly transitioned their portfolio to a level of appropriate risk for their age. For sure, there were people in the middle who had to delay retirement for a few years.

[littleroc02us]

But I think that *is* the point. If you have 20 years, you don't freak out and pull it after 2 or 3. And if you only have 2 or 3 years, you don't put it in something volatile. That's the whole point behind target date funds. The further out you are, the more risk you take. The closer you are to needing the money, the less risk you take.

When the economy tanked, the people who were hurt the most were the people who needed the money right then, but hadn't transferred their diversification to something less risky. And the people who freaked out cashed everything out. The people who were okay were those who had the time to ride it out and DIDN'T freak out, and the people who were using their money but had smartly transitioned their portfolio to a level of appropriate risk for their age. For sure, there were people in the middle who had to delay retirement for a few years.

We all need to remember that we should be discussing the positive and negative aspects of risk when investing, it seems like most of us invest thinking that nothing could ever happen to them, I could never fail. Rarely, do I see a post with risk calculated into the return on investment. The truth is you could lose your butt... But, the wise man as you pointed out stays in for the long haul and doesn't flinch during a downturn in the market. For those, they will be rewarded.

[jpg7n16]

I guess your not getting my point, if you were to have put your money in some Vanguard funds from 2007 to 2009 and got scared when everything tanked like so many Americans did and you pulled it out and you missed the huge rebound.

But I think that *is* the point. If you have 20 years, you don't freak out and pull it after 2 or 3. And if you only have 2 or 3 years, you don't put it in something volatile.

Exactly. The problem for the investor described in the scenario wasn't that he was invested in stocks - it was that he got scared and pulled out his investment well before his time horizon was up.

That's not a problem with stocks.

We all need to remember that we should be discussing the positive and negative aspects of risk when investing, it seems like most of us invest thinking that nothing could ever happen to them, I could never fail. Rarely, do I see a post with risk calculated into the return on investment. The truth is you could lose your butt... But, the wise man as you pointed out stays in for the long haul and doesn't flinch during a downturn in the market. For those, they will be rewarded.

The truth is, that the longterm investor isn't subject to nearly as much risk as you make it seem that they are.

Here are the returns on the S&P 500 since inception in 1871: CAGR of the Stock Market: Annualized Returns of the S&P 500

Please try to find the 10 year periods where total returns were negative. (There were 5 if you compound, 0-if you don't)

Over 140 years, there were 131 10 year peiods. Out of 131 10 year periods, 5 lost an investor money. (Only 3.8%) Including 2008. The average loss in those timeframes? 1.36%/year - not including dividends. Dividends have averaged 4.35% (S&P 500 Dividend Yield)

So even in the worst 10 year period, when you account for dividends, no 10 year period has lost money. Ever.

How about 5 year periods? Of the 140 years, there were 136 5 year periods. Only 19 that lost money. The average returns for those 10 5-year periods with a loss? loss of 4.06%/year (does not account for dividends that would add back 4.35%)


Where are these investors who 'lost their butt'? Where is all this risk you talk about?? It is mainly short term. And only affects people who freak out and sell early - which as pointed out above, is not intelligent investing. And isn't a problem with stocks as an investment.

Rarely, do I see a post with risk calculated into the return on investment.

We account for this risk every time we tell people not to invest in stocks unless they have at least a 5 year timeframe. And we usually make a statement like 'but nothing is guaranteed - no one knows the future'

Also we use 8% as our estimate, which is the compounded average return since inception. Some 10 year periods averaged a compounded 10%, 12%, 15% and a max of 18.7%. So although you could do worse, you could also do better.

[littleroc02us]

We account for this risk every time we tell people not to invest in stocks unless they have at least a 5 year timeframe.

So what is the risk % I should calculate with then? Is there one? I've never heard it from anybody on this forum.

[littleroc02us]

Where are these investors who 'lost their butt'? Where is all this risk you talk about?? It is mainly short term. And only affects people who freak out and sell early - which as pointed out above, is not intelligent investing. And isn't a problem with stocks as an investment.

I'll just repeat what I said above. Not everyone is as smart as the posters in this forum, they make mistakes and pull their money out because they get scared, it just happened in the Great Recession.

if you were to have put your money in some Vanguard funds from 2007 to 2009 and got scared when everything tanked like so many Americans did and you pulled it out and you missed the huge rebound. You would have blown a ton of money. It happened. All I'm saying is that there is a huge risk, unless you ride it out for 20 years or longer.

In this situation you would have lost your butt correct?

[snshijuptr]

The same investor that pulled his money out of the stock market, even though he didn't need it for 15-20 years, might have been the same investor that walked away from his mortgage payments even though there was no need to move.

On another note, I wouldn't really call Buffet a "guru" since he's not selling himself as such. Outside of endorsing the revision of Intelligent Investor and his yearly investor statements, he doesn't advise people. Ben Graham was giving investment advice I agree on that, but he has been dead for 25 years.