Ways to make money tommorrow

[jIM_Ohio]

If you need to make money today (the day you read this), find another thread.

If you want to make money tommorrow here are some moves to make.

1) Today I converted a 3k rollover IRA to a Roth. This is as low as this account will ever be. So I sold 3k of shares in my left pocket (rollover) and bought 3k of shares in same fund in my right pocket (Roth).

same shares in both places, biggest difference is that I paid 15% tax on the 3k conversion amount ($450). I will not have to pay taxes on this again.

To do this my AGI for 2008 must be less than 100k. It was 103k in 2007, so this is a gamble that I have a lower AGI in 2008 than I did in 2007.

If this does not work, I can recharactorize the contribution before filing taxes with no taxes owed.

2) If you currently are paying extra towards a debt (like mortgage or car) direct that money into equities.

This could be done by
a) increasing 401k contributions
b) increasing the equity contributions of the 401k contributions
c) increasing the equity contributions of IRA deposits
d) opening a brokerage account and buying equities in the brokerage account.

3) If you have taxable accounts and need to rebalance, this is the time to do it. Sell now and maximize losses, rebalance and write the losses off on your tax returns.

If you do any of these moves, do not sell anything for 15 months. If you will panic within 15 months, you should not have taken my advice in the first place.

Some mid term advice-

If you need investment monies within 4 years, wait. Do not liquidate mid term monies now. Plan to liquidate in about 18 months.

As stated above, any new money invested right now should be going to equities. I am not advising to sell bonds or reduce cash allocations. But I also would not increase bond positions or cash positions right now- I would be increasing equity positions every chance I get.

I have read numerous stories of people which invested in 1987-88 and retired around 1999. Meaning bottoms like this are not seen often, but when they are seen, profits can be made for the people willing to take the risk.

I hope to retire in 2026, and more than likely I will look back to 2008 down year as the year which catpulted my retirement (because my new monies will be invested at the market low).

[disneysteve]

I would be increasing equity positions every chance I get.

hope to retire in 2026, and more than likely I will look back to 2008 down year as the year which catpulted my retirement (because my new monies will be invested at the market low).

Great advice. The million dollar question, though, is where to put the money. What would you be buying tomorrow?

I have one taxable mutual fund that I've been thinking about getting out of for some time but kept procrastinating. Perhaps now is the time to dump it and put that money in my brokerage account to go shopping for bargains.

Some famous person said the best time to make money in the market is when there is blood in the streets. I think now would be the time.

[kork13]

How does that work though for someone like myself exclusively in mutual funds, without any sort of brokerage accounts? I suppose I could stop paying ahead on my car loan for now (technically, i could stop paying altogether until 2010 or so, for how far ahead i am), but I have no idea where that money would do the best good. All my MF's are looking awful, how do you determine what actually has strong promise right now?

[jIM_Ohio]

How does that work though for someone like myself exclusively in mutual funds, without any sort of brokerage accounts? I suppose I could stop paying ahead on my car loan for now (technically, i could stop paying altogether until 2010 or so, for how far ahead i am), but I have no idea where that money would do the best good. All my MF's are looking awful, how do you determine what actually has strong promise right now?

That is why you need to know asset allocation before picking the funds.

I own PRFDX- a quick look at it is off 12% ytd.

But I like the fund and will continue to like the fund. I chose it as my core fund for a reason. That gets my new money, plus as far as my allocation goes any fund which is off by a % to my allocation will also get money.

If the mutual funds you hold are for "a rainy day", and you had no rhyme or reason for picking them, you need to rethink the whole construction of your investment portfolio, then when this happens again (give it 20 or 30 years), you can take advantage of the next drop.

Portfolio construction comes before making money buying on dips.

[jIM_Ohio]

Great advice. The million dollar question, though, is where to put the money. What would you be buying tomorrow?

I have one taxable mutual fund that I've been thinking about getting out of for some time but kept procrastinating. Perhaps now is the time to dump it and put that money in my brokerage account to go shopping for bargains.

Some famous person said the best time to make money in the market is when there is blood in the streets. I think now would be the time.

Equities in general.

Look at your allocation and see what dropped, buy those.
If you wait to react, you missed the upturn.

[savingdealz]

1) Today I converted a 3k rollover IRA to a Roth. This is as low as this account will ever be. So I sold 3k of shares in my left pocket (rollover) and bought 3k of shares in same fund in my right pocket (Roth).

I have a Roth IRA (thanks for your help opening this account). Right now, I choose Retirement Fund 2055 (I put 50$ each month to this fund). So, base on your information ( I am good in 15 months), what fund should I choose to buy if I have 3000$?
Thanks!

[jIM_Ohio]

I have a Roth IRA (thanks for your help opening this account). Right now, I choose Retirement Fund 2055 (I put 50$ each month to this fund). So, base on your information ( I am good in 15 months), what fund should I choose to buy if I have 3000$?
Thanks!

You are just starting out, I would simply buy more of what you are already buying (that is really what I am doing too).

[atomicrc11]

I actually have a sum of money for the future invested in FASIX, which is Fidelity's Asset Manager 20% fund, which is 20% stocks. It isn't for any specific purpose and I won't need it for at least 10 years. I've been thinking about selling all my shares and buying something like Fidelity Balanced Fund (FBALX) which is 60% stocks. Now may be the time.

[jIM_Ohio]

I actually have a sum of money for the future invested in FASIX, which is Fidelity's Asset Manager 20% fund, which is 20% stocks. It isn't for any specific purpose and I won't need it for at least 10 years. I've been thinking about selling all my shares and buying something like Fidelity Balanced Fund (FBALX) which is 60% stocks. Now may be the time.

Correct now is a good time to get into what you want.

One note above- most of what I suggested (#1 and #2) are about getting new money into investments now. I am not a huge advocate of selling something to raise cash for another opportunity, unless the selling meets some criteria.

If you buy some of #1 because you sold some of #2, that is a bold move. You realize gains and losses and then move on.

In your example #2 might have better short term performance than #1. Put new money into #1 is another alternative to consider.

If you have a good allocation plan to meet your goals (you stated a 10 year time horizon), remember the allocation trumps all timing. Maintain the allocation at all times. Just add new money to what is low now and that will be profitable. Selling something to buy something else makes sense if:
a) you want to write the loss off for 2008 tax purposes (if you have a large loss, some of the loss can be carried forward to other years to offset gains later).
b) the new opportunity is too good to pass up- if this is the case remind yourself to create a cash allocation so next time this happens you will not incur the loss, you just use the cash on hand to buy.
c) the old opportunity is considered a failure.

DS- did you read this- that was what I was thinking when I answered those PMs you sent me.

[disneysteve]

DS- did you read this- that was what I was thinking when I answered those PMs you sent me.

Thanks, Jim.

[zetta]

When you say "tomorrow", are you implying that we need to act extremely quickly, and literally place the trades tomorrow? Or does your reference to stopping extra payments imply that you think there will be good buying opportunities over the next six months?

I've got $20k sitting in cash within various investment accounts, but don't really know if I need to rebalance or not, or which fund I want to buy within the family I invest in. How quickly do I need to move?

[jIM_Ohio]

When you say "tomorrow", are you implying that we need to act extremely quickly, and literally place the trades tomorrow? Or does your reference to stopping extra payments imply that you think there will be good buying opportunities over the next six months?

I've got $20k sitting in cash within various investment accounts, but don't really know if I need to rebalance or not, or which fund I want to buy within the family I invest in. How quickly do I need to move?

Move the money when you decide the time is right. I did not wait on my Roth conversion- I called T Rowe, got the form and filled it out within minutes of what I saw the market do. I don't think my situation will get too much better. Many times people want a clear signal... I can see the window open, but I don't know when it will close. I might not see the shore, but I see the seaguls and hear the fog horn, so shouldn't I assume the shore is near and now is the time to act?

In 1987 when the market dropped in september (or was it October?) the market had nearly recovered by years end (2-3 months later) for ytd positive returns on the indices. I don't think assuming market will stay down for 2-3 months is prudent. The market might stay that low, but before this crisis it's not like companies were giving earnings warnings (they were showing earnings increases).

If you want more equites, this is the time to make money. If I had 20k cash, I would be buying around 10k now and keeping 10k until I saw other moves to make. Assuming I had 12 months mortgage payments in the bank already and our vacation was funded... I don't have that kind of cash around, so I am just making sure all purchases right now are executed quickly...

for example an $1000 IRA deposit normally scheduled on the 26th of the month is being moved to the end of this week once I confirm the bills have been paid and the money is available (we are usually one month ahead on IRAs, so the money **should** be there.

Simple moves like this could net you a quick 5% gain (long term would have little consequence, but if you want to boost 1 year returns, techniques like this will help).

Tommorrow means you will make money slowly over time by seeing the opportunity which happens once every 20 years. If you stay on sideline and wait, that is OK, just not what I am doing.

If it is a situation where you are going to stop paying extra on a mortgage to invest, I would pick an equity percentage now (relative to value of current position or value of house) and when you hit that percentage, stop buying.

For example if you have a mortgage payment of $1000, pay an extra $400 each month and a mortgage balance of $50,000 create a target equity to be either
a) 1/10 of mortgage value ($5000) contributed (this is 13 months)
b) 12 months of mortgage payments invested (value of 12k- this means market corrected upward)
or
c) total equity exposure in portfolio reaches 80% (this means you reached your target equity exposure)

If you hit any of those triggers, stop the contributions and resume the extra payments.
Have your stop strategy in place before you start. You need to realize though if you are an 80-20 allocation and don't have high account balances, hitting c) will come quick even if market does not recover quickly.

[amarowsky]

I'm currently putting 6% of each check's gross into my 401k. My company will allow up to 10% tax defferable into my 401k, but will only contribute up to the 6%.

So if I can afford it do you think I should be putting the full 10% into my 401k considering the low value of the funds right now?

(my 401k is split between 4 different vanguard funds that are all fairly aggressive, majority [50%] in internation growth fund).

[jIM_Ohio]

I'm currently putting 6% of each check's gross into my 401k. My company will allow up to 10% tax defferable into my 401k, but will only contribute up to the 6%.

So if I can afford it do you think I should be putting the full 10% into my 401k considering the low value of the funds right now?

(my 401k is split between 4 different vanguard funds that are all fairly aggressive, majority [50%] in internation growth fund).

YES- if you can affored to squeeze now and buy more, you should see some extra boost if the market recovers in our lifetime.

[tripods68]

How does that work though for someone like myself exclusively in mutual funds, without any sort of brokerage accounts? I suppose I could stop paying ahead on my car loan for now (technically, i could stop paying altogether until 2010 or so, for how far ahead i am), but I have no idea where that money would do the best good. All my MF's are looking awful, how do you determine what actually has strong promise right now?

Best advice, start reading how to invest in mutual funds. There so many books out in this field. I remember when I was 19 years old someone once told me, read "How to Invest in Mutual Funds". I started reading it and couldn't understand the concepts. So I decided to major in Finance instead. Of course, one don't need degree in Finance to know learn investing. But that's how it happened for me.