Do retirement accounts have any protections the way the FDIC does for bank accounts?

[progree]

15. If only I could time the markets (or find someone who could), I would do so

Last edited Fri Mar 17, 2023, 05:31 PM - Edit history (1)

From 1968 to 1982 returns were zero.

About 1966-1982: PoindexterOglethorpe pointed this article out to me:

Was the 1966-1982 Stock Market Really That Bad?, by Ben Carlson, 6/19/2014
https://awealthofcommonsense.com/2014/06/1966-1982-stock-market-really-bad/

According to this article, the S&P actually earned a respectable ((annualized)) 6.8% return in that time. The real return (i.e. after inflation) was 0.0%, but bonds lost 40% after inflation.

I checked it out with the source of my infamous table in post#9 --
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

The lowest return period for the S&P 500 that I could find around the 1966-1982 period was this one:

12/31/68 - 12/31/81: A 5.66% annualized return including reinvested dividends. (A 2.0467-fold increase over 13 years)

3 month T-bills did better: 7.28%, while Treasury bonds did worse (4.11%) and Baa corporate bonds: (5.61%) -- these are all annualized total returns.

For pre-WWII: one can trot out the Great Depression period, but, that was when stocks could be bought on only a 10% margin. Regulation, while still falling laughably far short of what's needed, is far better than that since then.

Since WWII, I can find only two flat periods of a decade or longer, including reinvested dividends: 12/31/1999 - 12/31/2009. Also 12/31/1998 - 12/31/2008.

Unfortunately the stern.nyu.edu link above only has one year granularity -- all values are year-end. I'd be happy to look at any source with more granularity that includes reinvested dividends, given that nobody tosses dividends away. The best I've been able to find -- which goes back to January 1980 -- is Vanguard's VFINX S&P 500 index fund.
https://finance.yahoo.com/quote/VFINX/history

It's not an exact match of course to the S&P 500, but it's an actual fund with expenses that one can invest in, and would have gotten the returns shown for the time periods shown (the Adjusted Close column is with distributions reinvested).

In the AAII Journal January 2023 issue there's a graph of VFINX (total return) from 1993 onward, and it was a 12 year flat spot from a little after the beginning of 2000 to the beginning of 2012.

... Indexed funds are to be avoided at the peak.

... When the markets are beaten up, when crashes are headlines, when Wall Street firms are laying off thousands - that's the time to buy index funds and blue chip growth stocks. It takes expertise and experience to do the latter. Real stock brokers can have a solid place in any investment plan.

Of course on the first sentence. Except knowing when the peak is the tricky part. About 90% of the time people are screaming "bubble bubble". Like a broken clock, they are inevitably right, there will be a market crash, some day, some year. We just don't know when. And how many market doublings will we miss out of for fear of one TEMPORARY halving?

If I was out of the market all the times Jeremy Grantham or Stock Market Watch was screeching "bubble bubble" and predicting an imminent crash, I would be in a precarious financial situation.

Being a disciple of "buy and hold", I generally disparage trying to time market tops and bottoms. I'm mostly a devotee of "time in the market works better than trying to time the market". Sure, if I time the market right, I will do better than the returns in post #9 above. But since I can't, I just stick to pretty much buy and hold and accept those meager thin-gruel-like returns shown in post #9.

Also, when the market does get off its bottom, it usually goes up rather quickly. So if one waits for say a year from the most recent bottom to reinvest, they've missed out on most of the rise (I forget the numbers, but have seen several articles where they do simulations like this, and their returns are hammered compared to buy-and-hold).

I wish I could call peaks and troughs, but I can't. But I do admit to a little market timing - I go above my usual equity allocation percentage when the market drops by 20% or more.

As for "real stock brokers", whatever that means. Given that most active fund managers can't beat the indexes on average, I suspect the percentage of "real stock brokers" who can do that is even fewer. In my experience with professional stock brokers is that they are always talking up the market, no matter what.

Like A Heretic I Am (see quote in post #9), I strongly suggest new and intermediate investors do not try to beat the market by picking individual stocks. Again, the cautionary tale is that even most active fund managers don't beat the market over the long run. And the volatility of individual stocks is much higher than that of broad market index funds -- resulting in a much stronger tendency of investors in the former to panic sell. And not sleep very well.