to invest or not to invest?

[jodi]

Okay, is everyone buying now or waiting for the "correction" to be over? I see that our stocks soared on Friday after going down so much in the previous month. So...do you think they will go back down, or are they on their way up? I just moved $2k into my Roth and I'm wondering if I should buy now, or wait a little longer.
DH wants to buy stock in a gold mine (Goldcorp) that we used to own. Is this a good time for gold?
Signed,
-clueless Jodi

[kv968]

The question isn't is it a good time to buy gold, but how it fits into your asset allocation? I'm assuming you're thinking of buying the gold stock in your Roth. If so, do you have an asset allocation set up for your portfolio and how does gold fit into it? Normally commodities shouldn't be more than 10% of your portfolio. Do you have other investments in your Roth or is this going to be the majority of it? If it's going to be then I'd say no, it's not the right time to buy gold nor will it be until you've got some "core" investments first (ie. large caps, int'l, etc...).

[jodi]

Okay, let's hear it...I'm going to post my portfolio and I already know the response - too much in individual stocks. It used to all be in individual stocks until last year, when I told DH that I wasn't comfortable and needed to have some mutual funds. I picked a target retirement fund, which was doing okay...until a few weeks ago, of course! So, here's the meager breakdown. We have had Apple since it was $30/share, so we've enjoyed the ride on that one. Still, I think I probably have too much in one stock.

A little more info on our goals...DH is 30 and I will be soon. I work for the state, but probably won't long enough to retire with much more than 5 years vested (if that). DH is just starting a career as a teacher, so we should have a good retirement through his job. However, not being ones to leave anything in someone else's hands, we are maxing out our Roths as well. This $2k is the first contribution for 2007.

Here's the breakdown:
price shares total
AAPL $122.06 50.00 $6,103.00
SBUX $26.70 137.00 $3,657.90
VTIVX $14.77 294.74 $4,353.31
$14,144.16

Being that it's still a relatively small amount, I'm wondering just how much diversification I can have at this point (although, I know...mutual funds = instant diversification).

[humandraydel]

A few opinions:

I don't have a problem with individual stocks. That being said, I do think you have too few individual stocks. Almost half of your Roth is in Apple. Another quarter of it is in Starbucks. 3/4s of your Roth is in high end consumer products which will be the first to go if a recession comes (which I don't believe likely in the near future, btw).

Of course, a true picture cannot be seen from just looking at the Roth. If you have another $200k+ in other investments, then the Roth is basically your play money. On the other hand, if the Roth is all you have (I know it isn't...) then you are WAY too risky.

Personally, I buy $1000-1500 blocks of an individual stock. But most of my money is still in index funds.

Now, as to your other question: Is this a good time to buy? It's a better time to buy than 1 month ago! Obviously no one knows how far down it will go. Lots of it depends on how bad the mortgage defaults get (mainly on prime and alt-a.....subprime is already junk). Unfortunately, this isn't something we will know for up to another year. More ARMs will reset in the first 6 months of 2008 than all of 2007. And it's beginning to look like a higher than expected number of prime borrowers will be defaulting.

[disneysteve]

Okay, is everyone buying now or waiting for the "correction" to be over?

I'm doing exactly what I've done for years. Invest a certain amount each month in my funds. I've been doing that since 1982 and plan to continue doing it for the next 20 years. No changes in my plan at all based on the current market gyrations. That's the whole point behind dollar cost averaging.

[kv968]

I agree with humandraydel, I'm not opposed to owning individual stocks either, but 2 stocks doesn't make for a diversified portfolio. I also agree with Steve in that as far as investing for retirement, dollar cost averaging (DCA) works the best, especially when using mutual funds.

It can be somewhat difficult to built a "tailor-made" portfolio using mutual funds if you don't have much to invest (not that $14K isn't much) due to fund minimums and fees. However DCA'ing into your VTIVX fund would give you instant diversification until you have enough in there to break it up and buy individual funds if you so wish.

[Aleta]

We are told to buy low and when it's low, we're afraid to buy. I agree with others here that by buying each month, you will get dollar cost averaging. The market goes up and it goes down. You just have to invest for the long term and not let the day-to-day actions upset you. The only ones that need to be concerned are those selling short term and doing so on a day to day basis.

[Ima saver]

I do own some stocks, but I have not had a lot of luck with them. I prefer putting my money into Index mutual funds.

[disneysteve]

The only ones that need to be concerned are those selling short term and doing so on a day to day basis.

The other folks who are concerned are those who are nearing retirement or already retired and living off their portfolio. Having a big market correction occur soon after you retire could be a major problem and totally alter your retirement outlook.

[Aleta]

Thanks for the correction. In the back of my head, I was thinking of anyone who would need that money now or in the next 5 years. How often have they been writing about the scenarios that we have been discussing lately?

[jodi]

Hey all - thanks as always for the input. I do agree that dollar cost averaging is the way to go...however....we are not in a position to put money in every month until DH finds a steady teaching job. For now, we put in when we have the extra, usually once or twice a year, and play catch-up in the spring. Last year we made the 2006 deadline by a few days because it was such a tough year. So, the facts are that I have $2k now sitting in my account that I need to do something with. Maybe I will look into some more mutual funds.
BTW, that isn't all the money we have invested right now. (I hope no one clutches their chest in horror here). We have another $12k invested in DH's Roth, which is entirely in stocks. I can't sway him. He's been listening to my parents tout the wonders of stocks for too long (but they have much, much more invested than we do).

[snafu]

Jodi: I too suggest a self managed, low cost Index fund which can be added to in increments I believe as small as $ 50. You and DH are young and can ride out the gyrations of the market. When you have a significant sum you can choose to change to a stock or other M Fund. Look at the Index list and ask yourself if you would invest in those stocks if you had pots of $$$

[jodi]

Ok, I've been doing some research and found this chart on Ameritrade. Given that I'm still fairly young in the scheme of things, but not terribly aggressive, where should I aim to get my portfolio allocation too?
(sorry - this chart did not come out right in spacing.)
Risk Level Low Moderate Aggressive
% Treasury Bills 30 30 20 10 0 10
% Bonds 40 30 30 40 30 20
% Growth Stocks 30 30 40 30 50 70
% Small Caps 0 0 0 10 10 0
% International 0 10 10 10 10 0
Chart illustrates sample portfolio asset allocations: Low Risk (those nearing or in retirement); Moderate Risk (middle-aged investors); Aggressive Risk (younger investors).
*Allocations are presented only as examples and are not intended as investment advice. Please consult a financial advisor if you have any questions about how these examples apply to your situation.

If I shoot for my age (29) - 10 = %bonds, I should have 19% in bonds (round up to 20%). I don't understand why the most aggressive column has 10% in treasury bills - I thought they were slightly safer than bonds? I'm thinking I should aim for the second to last column (0-30-50-10-10), except take the bonds down to 20% and redistribute the other 10% elsewhere.
My target retirement fund (VTIVX) is roughly 90% stocks and 10% bonds, according to the description. Given that everything else I have is in stocks, I guess I would put my allocation at roughly 3% bonds, 97% stocks (I assume Apple and Starbucks are growth?). Assuming that I'm not going to make any changes to my current portfolio, but attempt to balance things out with additional contributions, should I allocate my $2k to bond funds (which would make my portfolio app. 15% in bonds), or should I leave my 3% in bonds alone given my age and put the $2k elsewhere (i.e. small caps or international funds)?
Thanks for anyone who's stuck around long enough to read this

[jodi]

Ok, I just stumbled upon this nifty little Ameritrade tool. I wasn't too far off in my estimations. Here's my allocation:
Cash 12.52 (soon to change)
U.S. Stocks 80.13
Foreign Stocks 4.68
Bonds 2.58
Other 0.09
Not Classified 0.00

More info:
Information 50.61% (S&P 20%)
Service 39.69% (S&P 45.66)
Manufacturing 9.70% (S&P 34.32%)

I could easily see myself becoming an information junkie with all this at my fingertips!

[humandraydel]

I would put the $2k in an International Index.