"If You Invest Now In Your Child's College Fund You Will Be Very Happy In Fifteen Years"

[DemocratSinceBirth]

Why?

The market is lower now than it was in 1998 and it took from 1929 to 1948 to get back to where it was in 1929 and it took from 1966 to 1982 to get back to where it was in 1966...I might be off by a couple of years but not by much...

I am not saying investing for the long haul is a bad idea but it is not the sure thing its advocates suggest...

[dmallind]

1. I wonder why you didn't use the timeframe given?

15 years ago the DJIA (not the bast indicator of the market but the one weveryone uses just as you did so fair comparison) was around 3700. Investors have well over doubled and near tripled what they put in at that time, even with this bear market and panic. If they had done what any even vaguely aware investor will say you should do and moved more and more into bonds as you near the time when you need to withdraw money they would have avoided most of the drop anyway (people only a year or two from needing to liquidate investments should be almost all in bonds). Even had they not been this prudent and rolled the dice, is 250% gains not good enough?

[DemocratSinceBirth]

3. What If You Invested In 1998?

What if you invested last October when it was at 14,000?

When do you think we will see Dow 14,000 again?

[Honeycombe8]

4. There would be 5 more yrs to go to get to a 15 yr investment period.

No one can tell the future. But the Dow will be 14,000 again one day. We just don't know when.

Actually, when you get close to the 15 yr mark, you should move the investments to more conservative ones. The golden rule is that you should not be in stocks with any money you need within 5 years. So if I had invested in 1998, with a time horizon of 15 years, I should be moving to conservative investments right about now. Unfortunately, the market is so low that that would be a problem. Unless, of course, I had done it at the beg. of the year. Which is what the investor should have done.

[DemocratSinceBirth]

5. I Am Not Knocking The Market

But I doubt the average investor knows there have beeen fifteen, even twenty year periods, where the market moved sideways...

[dmallind]

13. You were questioning 15 year plans

So ask the first question in five years and the second in 15 and we'll have an answer

[DemocratSinceBirth]

16. I Already Cited Two Fifteen Year Periods Where The Market Moved Sideways

This might be the third...

[dmallind]

22. You can cherrypick a few.

I can cherrypick many where it did peachy.

Even if that were reversed all that it would prove is that equities have risk. This is hardly a killing syllogism. Let's forget for a moment that you almost certainly ignore dividends, splits and 401K benefits like matching and pre-tax withdrawals. Let's pretend (ludicrously) that it's all about the DJIA index at selected intervals. You can pick a few time periods where people would lose. I can pick many times more when they would win.

But that's not really material because the idea of a single investment and single withdrawal in one index fund is minuscule in probability. The vast majority of investors either choose their own stocks and funds or even more likely let a professional do it for them. Nobody sane in either group picks one index and one buy/sell interval for their portfolio.

I have been dollar cost averaging for 20 years or so. So have many investors. I bought at 14000 sure and I have lost on those buys if they were DJIA funds (but what about if I bought Google or Genentech?) but I also bought at 4000, with pre-tax dollars and my investment doubled due to matching employer funds and made a compound-multiplied killing (the majority of investors are 401K and 403B participants where this is most likely).

During that time I bought international funds and high growth funds and value funds as well as the blue chips of the Dow. I no doubt lost a bunch of money on dot.com startups and no doubt gained a bunch on biotech and new economy winners.

I can track my last 12 month results where even with a drop from an all time high to a 10 year low once you add in matching and tax benefits I am up 40-50% over what I would have been had I panicked and stashed my cash in a mattress like the idiots say we should now. But again that's as anecdotal as the (in this case fictitious rather than my real example) person who put all their money in the DJIA one year ago and needs it now. The difference is my example is far more representative.


Only idiots use equities as short term one year investments unless they are skilled day traders. Only fools stay in equities when they are due to need cash. Only damn fools don't diversify when they try either. Your putative examples are worse than damned fools. You try to make it a crushing syllogism to say you can lose in equities. Nobody rational ever denied this, but then again nobody rational ever invested as you suggest for those who lost in this artificially selected time frame.

[LynneSin]

2. I've had friends who had to use their kid's college fund just to save their house

how grateful do you think these folks are?

[seabeyond]

6. my 8th grade son and i looked up colleges. he wants to get out of texas. looked at colorado college

40k a year for out of state. that was a couple weeks ago. i still cant get past this.

two kids. 240k for a four year. what if they want to get a stronger degree. i mean, wtf...

[Jane Austin]

7. My son graduated from The Colorado College about fifteen years

ago.

It was "only" about $10 to $15 thousand a year back then.

[seabeyond]

8. it isnt bad (everything realitive, compared, lol) with in state. 18, 20k

per year.

but son doesnt want to stay in texas, and i dont want him to either.

it is crazy.

[Jane Austin]

27. Good idea about not statying in-state for college.

My rule, which I read someplace and wasn't original with me, was that kids need to go to college far enough away that they can't bring their laundry home on the weekend. :)

That would be a lot harder these days, but seemed like a good idea twenty years ago.

[LynneSin]

10. My Nephews are going to community colleges

They didn't have top grades and their family can barely afford college so for now they're doing local community colleges. It makes sense - why pay for those expensive rates for the basic classes like English and other core classes.

Perhaps your son could consider this - if he wants to go to Colorado, he does 1-2 years at a local college first getting his core classes out of the way and then transfer his junior year for his major.

[seabeyond]

15. i could think of all kinds of ways to save money, lol lol

i am that good. my hubby and his family are a bet different about education, snobbery, schools ect...

sons both put effort into their school work so should be rewarded, but also hoping will entail scholarship too

just really surprised me the price on a regular, not out of the world school like a harvard or something

i am more into your suggestion. couple years jr college and in state college, lol. to me, an education is just and only that.

thanks for info

[Mariana]

12. He can do what my stepdaughter did.

He can go there and work long enough to establish eligibility for in-state rates. While he's waiting, he can independently study and test for credit for some of the courses he'll need. My SD also went to a community college for a while, then transferred to the university of her choice. She graduated last year.

There are ways to do it that don't lead to bankruptcy or crippling debt. :hug:

[seabeyond]

14. i wa wondering about this and closer to date i was going to look into some of this

i was thinking if he could do a year of college and be considered out of state, after a year is he considered in state, (if he establishes self as residence of colorado. it is interesting some of the ideas.

i feel a little better, lol

[salbi]

25. My sons away at college now

I started saving when my son was small, but as a single mom I don't have enough for all 4 years. He's away at a state school, (18K) not terrible but I'm still not sure what we will do when the money runs out. I guess we'll look into student loans.

[kurt_cagle]

9. Your mileage may vary

We're in about year eight of a secular bear market, one that will likely end up playing out for another seven to eight years, possible more, before finally going into a long term bull market in about 2015 (and this will likely be an anemic bull because of the baby boom rush out of equitees to fund their retirement). Personally, while you'll have some local bull markets between now and then, equities are going to be pretty much a losing game for most people for at least the next decade or so. Best strategy, as usual - diversify your portfolio, invest because you believe in a company, not because you think the company's stocks will go up immediately, and do your own research - fund managers seem to be doing a much better job of lining their own pockets with fees than they do in making money for their clients.

[DemocratSinceBirth]

11. That's What I Was Saying

The "long haul" can not be easily defined...

[BlooInBloo]

17. hahaha! how many 15 year periods can be picked where the result sucks...

versus how many can be picked where the result is "happy"?

[DemocratSinceBirth]

18. Then It 's A Crap Shoot....As Many "Happy" Periods As "Unhappy" Periods, Ergo

http://www.amateur-investor.net/Secular_Bear_Markets_vs_Secular%20Bull_Markets.htm


Looks like a crap shoot to me!

[BlooInBloo]

19. Only according to an idiotic notion of "crap shoot".

[DemocratSinceBirth]

20. My Bad....It Was Twenty Five Years!

The Dow had reached a high of 381.17 on Sept. 1 and then began drifting downward. Although the date of Oct. 29, 1929, Black Tuesday, is probably best-known by the public, many market historians say the crash began on Thursday, Oct. 24, and accelerated the following Monday and Tuesday.

From its close of 305.85 on Oct. 23, the Dow tumbled 75.78, or 24.8 percent, by the time it ended at 230.07 on Black Tuesday.

It continued its decline to a low of 198.69 on Nov. 13, giving it a drop of 107.16, or 35 percent.

That also made for a drop of 182.48, or 47.9 percent from the September high.

But stocks kept on falling as the Great Depression wore on, and the Dow fell to 41.22 on July 8, 1932, giving it a loss of 339.95, or 89.2 percent from the September 1929 high.

The Dow did not close above 305.85 again until April 1, 1954, more than 24 years after the crash, and it didn't return to 381.17 until Nov. 23, 1954, a quarter century after Black Monday and Tuesday.



http://biz.thestar.com.my/news/story.asp?file=/2008/10/14/business/20081014092445&sec=business

If you don't think that twenty five years is a long time to recover your investment there is nothing I can do to disabuse you of that notion....


It is now beyond argument that "fifteen years" is not some magical "long haul" where you will undoubtedly see a return on your investment in equities...

[DemocratSinceBirth]

21. Tumbleweed

~

[dmallind]

24. Pre-emptive gloating more like

[dmallind]

23. Apparently the word "dividends" is just a long word beginning with D

since in that time frame you would have made an enormous profit on dividends (a common tactic for companies who wish to support their share price). Check out the DJIA stock dividends given in that time period!

Your worry is like saying "I still have only a dollar after I put a dollar in the bank fifteen years ago so banks are useless!" forgetting you made 3-4% interest every year on that dollar (again unlike the mattress-obsessed chicken littles)

[BeyondGeography]

26. Investing in the stock market as a substitute for the defined benefit pension = worst trade ever

What a bunch of hopeless dipshits the owners have turned us into.