i started investing about 11 years ago. at that time everything i read
was about US stocks. Later i read about bonds and then there is real
estate. these seem to be the main options.
but these days i wonder if there is something better. in the last 11
years we've had a major stock crash and a major housing crash. for a
few this worked out well. but most people watched their overvalued
so what else is out there? i don't want gold either btw. what about
micro-lending? or keeping the money more local where you can support
the place where your family lives? how do you find out about other
options? any recommended books? wouldn't community based lending be
better for all involved? i've come to see many large financial
institutions as high class grifters.
so much is focused on US stocks and traditional investments. i think
they are over hyped but i don't know where else to look.
Investing around home may be ok if you have genuine knowledge that biz
is good. Otherwise it can be putting too many eggs in one basket -
like the Enron employees that put only Enron stock in their IRA only
to evaporate along with their jobs. Maybe a fund of local banks across
Anyway assuming you don't want to speculate on recovery of commercial
reits or something, you did miss the tricky category of commodities.
Things with industrial use such as palladium (pall) or cotton (bal) or
whatever is in
A lot of experts over the years have stressed that the best time to
buy stocks is NOW, because there will always be ups and downs, and
getting in the game early is a good idea. And so much the better if
you get in during one of the "down" periods. According to that wisdom,
it would seem that right now, today, would be a great time to invest
in stocks, and real estate too.
But it is interesting that you don't hear that advice much at the
present time. In fact, if I recall correctly, you hear that wisdom
most often during one of the "up" periods. People, even knowledgeable
people, are now talking a lot about bonds and safe investments.
Somehow it seems that the present-day part of the cycle usually turns
out to be "special," unlike any previous episode, either at the bottom
or the top of the market.
A breakdown of peoples assets show that as the main places people are
Having your own business is a good alternative with many side benefits
like being able to work 60 hours a week.
Buying collectibles like art and wine is a possibility, but isn't
practical for most people.
There are stock options - puts and calls, spreads and straddles.
People who are not knowledgeable about stock options often have the
unfounded opinion that they are *always* highly speculative, but this
is not necessarily the case. Options are available in a wide variety
of prices, ranging from "in the money" to way *out* of the money.
These range from highly speculative to highly conservative, and
everything in between.
Also note that an option transaction actually involves two
transactions - one transaction creates or sells the option, the other
transaction purchases the option. So, they more speculative one of
those transactions is, the more conservative the other transaction
In any event, you would definitely need to do some considerable
reading on this subject before attempting to trade stock options.
Those who were not diversified in stocks may have lost their shirts.
But the long-term investors who were and remain diversified, and
have been in the market at least six or seven years, are likely doing
Do you understand what it means to hold stocks? If a person does not
understand this, then he or she will never be comfortable when the
market declines for the short term, and stocks are probably a poor
choice for them.
I gotta go with Elle and Don on this one.
The bottom line is that capital (money) is a store of value and a
factor of production. Making products and services is the objective,
not "making money." Only the U.S. Mint makes money.
Owning a stock is owning a share in a company which is a producing
enterprise. There are great companies with solid products and
services. Lewis Rukeyser had a cool story about two brothers,
investing the same $$ in stocks each year. One was lucky, and always
bought at the lows. The other was unlucky and always bought at the
highs. The unlucky one got started ten years before the lucky one did.
After 30 years, the unlucky one had more money invested. Interesting
One can start one's own company, but it is critical to do your
homework since something like 90% of all new businesses fail within
the first two years - because they never had a business plan to begin
with, never did their research on demand for product and services and
even if they got plain lucky on that, never organized, never had
adequate resources to produce (you must know what you're doing and be
able to do it). There are lots of books on start ups, and some elect
to go with a franchise - the business plan is all in a manual.
Investing in your home town is admirable, and Food Lion got its start
that way, I believe, tapping locals for five thousand each - that seed
capital came to be worth a couple of million for those who took the
I suppose this is another of those many posts where we all guess
differently on what the OP was asking, and the OP never comes back to
clarify. I hope they realize suggestions like mine can be dangerous
without some interactive clarifications.
But why didn't anyone guess they were asking about non-US stocks? It
ought to be a great diversification, but they are somehow hard to get
excited about for the first time in decades. Maybe that means it is a
good time to get in?
The emerging markets have great (although inflationary) economies, but
unfortunately their stock valuations seem high. Japan has been
slumbering for 2 decades. Euro land has been mostly exposed as a false
utopia, previously funding their social welfare by deferring nearly
all defense spending to the US taxpayer.
I think there is one sure bet investment to depend on - cotton
underware! Stockpile a lifetime supply in every closet or attic space
you can find. Look how cotton continues to skyrocket (noted by me here
months ago) compared to US or foreign developed/emerging stocks or
One reason: Large cap U.S. based stocks so often have a huge
international presence that, as long as one is diversified across U.S.
based stocks, one will have significant exposure internationally.
I do not think this sound bite describing Japan's stock market is
helpful, accurate or relevant. Japanese industry experienced a bubble
that peaked in the late 1980s and fell by one-half within five years.
It continued to decline. But Japan is so tiny that what happened in
Japan did not affect the economy of the whole world on any kind of
long term basis. Bringing up Japan's blip seems as relevant as
bringing up the Dutch tulip bubble of the 1600s.
snip political speculation that cannot be verified
So your guidance is to buy that which has been going up, on the hope
it will keep going up?
To the OP: Diversify. Buy and hold for the long run. Read Jeremy
Siegel, Ben Graham and others who have studied economies and the
nature of businesses on a macro scale.
Practically every year of the last 30 any half way attentive
international investor could double or triple sp500 positive returns
by using foreign mutual funds or etfs. I say half way attentive
because you didn't even have to cherry pick the best - I have lived
that and retired very early. It doesn't come about by sleepwalking
with the large cap US and related intn'l diversified area. Target
sectors of regions for example. Certainly emerging market funds have
been consistently up by hundreds of percent every few years, although
notice I said not to be extrapolated now.
I contest every aspect. Japan stock market has fallen by 75% in last
21 or so years! It's "tiny" impact comprises until recently the second
largest market cap in the world! Broad index funds are cap weighted,
so there has been a great proliferation of "asia ex-Japan" funds and
the like. International funds tend to be largely weighted not only by
Japan but England, which a discriminating investor has avoided. Thus
that whole aging large cap soup of US/UK/Japan/etc is not
representative of intn'l opportunities, rather it is the hall of shame
we have soared over.
You can verify it by checking how only the UK and Greece had
significant defense budgets in the EU, and both of those were suddenly
slashed. The US maintains a growing responsibility with about 24%
defense budget. Meanwhile there is a book out urging the US to take up
the Euro example of about 10 weeks holiday off per year, free college
and generous welfare etc because it appears to work so well in Euro
economies. Now that the veil is off, and non teutonic eu countries
such as UK are facing stagnant growth, hardly encouraging for
investing in a cap weighted Euro investment. Well, maybe so, if they
can continue to freeload defense responsibilities for the world
democracies, just like in their 1930's debacle.
The underwear price has been greatly lagging the cotton price rise,
even when you consider it is a fraction of manufacturing cost. Do you
understand the pipeline delay effect? Cotton can drop in half and
underwear price will still rise and not drop. Are you saying
underwear appreciation won't exceed the total return of treasuries,
and rampant wage inflation in the SE Asia manufacturing region will
have no effect? Why on earth try to score points about underwear?
That is the path to avoid mistakes, but to remain a wage slave. It
assumes the reader is either uncertain or has a reckless streak that
needs to be restrained. On the other hand, the reader can spend a few
years thinking big yet experimenting with a tiny fraction of your
portfolio - just enough to keep your interest and honestly recognize
pain vs gains from it. May find one has a talent for some investment
areas and a good enough track record to seriously pursue it.
I thought my earlier posts had been laced with enough caveats so that
Elle or others needn't go on the warpath, at least about underwear
I do not consider the last 20-30 years relevant here, first because I
think the number of international funds available 20-30 years ago was
minuscule compared to the number available today (with corresponding
higher cost 20-30 years ago), and second because I think that U.S.
based companies tended to become exponentially more exposed to
You fail to demonstrate that Japan's crash affected the S&P 500, for
Financially speaking, I do not think your political views are useful
in this forum.
You also omit how the U.S. defense budget helps the U.S. economy.
I am saying to the OP: Diversify. Do not try to time. Invest for the
There's an even stronger statement than that...a buy and hold investor
in a balanced index fund should today be at an all-time-high net worth,
_regardless of when they invested_. Except for a few days over the past
week or so but let's ignore that.
Just one example:
Look at the "adjusted close" column which factors in reinvested
dividends. All the numbers in the past are lower! Do some math to see
how the long-term returns look. How many investors beat that?
You can do the same exercise with some all-stock index funds to get a
sense of how that's done (for that, the exact timing of your initial
investment is a huge factor).
The whole "decimated retirement savings" vein in the media has missed
this basic point, that a bland 60/40 stock/bond mix has done quite well.
So before giving up on stocks & bonds in favor of the latest junk pumped
out by Wall Street it's worth considering whether they've failed to
Nice addition to the thread.
Right, I just threw in SPY (S&P 500 index fund) to the yahoo site
above, and the results are as you suggest: Not as good as the stock/
bond fund and timing dependent.
Granted this is a comment on coming out ahead after a bubble bursts
and/or during a recession, no? When times are good, my eccentric
relative will likely start talking again about how he is laughing
himself to the bank, because he stuck with stocks FTW (for the win),
though having a long time horizon.
Really the bigger objective is sleeping well at night. I sleep fine
with my more conservative approach (significant CD and similar
proportion). The relative sleeps fine in nearly all blue chip stocks
(but he has way more net worth than I). Orman sleeps fine with nearly
no stocks (even more net worth). 'struck is happy in cotton.
[bears repeating IMO]
That was the premise of a fund that has long since ceased to
exist, but which I found quite interesting. Papp America Abroad,
run by L. Roy Papp in Phoenix. Papp sold his funds to Pioneer,
I think, back in the early 00s, and he himself must be about a
zillion year old now. But his premise was that large US-based
companies are the best way to invest overseas inasmuch as you
get US based accounting (which, contrary to such disasters as
the recent financial crisis and such general outliers as Enron,
is still pretty much the best in the world) and exposure to
all the opportunities in other countries as profitable managers
of succesful large companies here are capable of.
I'm not sure I completely buy the premise, but it's certainly
true that the world, especially at the large-cap level, is
very small. Companies like Intel, for example, make very
substantial portions of their profits overseas.
Of course, recently, it has seemed that the world on the
whole is more correlated than, perhaps, it was as recently
as 20 or so years ago. That's a discussion for another time,
But if you're looking for non-correlated asset classes to
balance against US equities, and you want to stay in equities,
I think you have to look at small-cap and emerging markets.
The latter, on the large-cap level, are generally pretty
tightly tied to commodities and may be more highly correlated
with the developed world, too.
Plain Bread alone for e-mail, thanks. The rest gets trashed.
Maybe. The thing is that a 60/40 equity/bond portfolio simply
has a better *risk-adjusted* rate of return than an all-equity
portfolio even if an all-equity portfolio has beaten it on an
absolute basis over some long-run period.
And that risk-adjusted part is essential. It's essential to
people who have trouble staying the course. And more than
that, it's especially essential once you start plotting out
ways to extract a retirement from a portfolio. Low volatility
has huge value. And a 60/40 portfolio, over the last few
decades, has captured almost all the long-run returns of an
all-equity portfolio with a very substantially lower standard
15-year standard deviation of 10.09 and a 15-year total
return of 6.91%
The total stock market index (VTSMX) has had a 15-year
total return of 7.05% (which beats the SP500, btw), but
with a 15-year standard deviation of 16.76 (very slightly
higher than the SP500).
I had some 30 or 40-year numbers but they are not handy.
IIRC, the standard deviations were similar, but the returns
diverged a bit more (the 60/40 got was beaten by the all
equity portfolio by a more substantial margin, but still
beat the all-equity on a risk-adjusted basis quite handily).
Whether any of that is repeatable, of course, is questionable.
Current interest rates make bonds, at least anything with
a maturiry of more than a few years, look a lot more risky
than they've looked in a long time.
But it's certainly worth remembering when builting an
Plain Bread alone for e-mail, thanks. The rest gets trashed.
How wireless and internet communications have facilitated global
financial machinations, and more cheaply than ever, in the last 15
years or so was at the front of my mind as I wrote about how I think
U.S. large caps tend to have a larger than ever before international
presence. Of course I expect this trend must be true of any large
business regardless of whether it is U.S. based or not.
Then again it may be worthwhile to reflect on impact on stocks of the
telephone in the early 1900s (I think) and other communication devices
over history. I know this is nothing profound. Maybe what would be
more worthwhile is to reflect on how there actually may be a limit to
market expansion at this point. I am not expecting life on Mars. On
the third hand, China is so rural and India so poor that I think it is
safe to say my Philip Morris, for one, has plenty of room to grow more.
While I am not a fan of international investing, I do agree with
Elle's comment on large cap US stocks having international exposure.
Here's an observation from last week's trip through Frankfort
Germany's huge airport. The largest eatery in the airport, and the
eatery with the longest lines, was McDonalds and it wasn't even close.
Further, our Delta plane was at 100% capacity on its run from
Frankfort to Atlanta, as was US Air's offering to Charlotte.
It was obvious to me that those three companies were participating in
those economies (for better or worse).
Don't forget massive improvements in transportation efficiency,
too. As big a deal as the internet is, the modern shipping
container (and computerized tracking of inventory - just what
is actually in a given box) may be even more important.
There's certainly a lot of economic growth poised to take place
in some parts of the world with vast populations. How to find
a way to profit from that, however, is not necessarily an
easy question. But no doubt McDonalds, for example, will find
Plain Bread alone for e-mail, thanks. The rest gets trashed.
I worked briefly on container ships over 30 years ago, so I do not
think the impact of this more efficient mode of transportation of
goods is so new. Wiki elaborates. Nor do I think container ships'
impact is as profound as the last 20 years of computer-driven
communications and (agreed) inventorying etc. Just saying.