At What Age Should A person Get Out Of Investing In Stocks?

[mathjak107]

There is a reason for the question. The basic 'truth' about stocks is that they go up and they go down. As Suze Orman likes to point out, one needs to have a 5+ year horizon, where the money in stocks are not needed, in order to recover from a major downturn. That's really the major issue about stocks. What happens to a 75 year old invested in stocks, and a recession hits?

more nonsense ...

why would a 75 year old be invested in 100% stocks unless it was for legacy money for heirs ? if that is the case they are investing based on the heirs time frame not theirs ... if he maintained a 40-60% equity portfolio stocks would likely never be sold when down in their lifetime , bonds would be sold when rebalancing. think about it , if stocks are down , bonds would be sold to raise cash as well as likely buying more equities , not selling equities .

in fact hypothetically if he was 100% equities all those years , his balance would be so much higher over decades of time that even some equities being sold at a loss would still leave them just fine ...

this example you gave of that 75 year old is what happens if you don't left facts get in the way of a good story line

 

[Aunt Bea]

IMO the 5+ year rule makes sense if you are really saving and not actually investing.

If you are saving for a house, automobile, vacation, etc... then I would follow the 5+ year rule.

If you are a senior with a guaranteed income stream and a cash cushion to cover emergencies then I would not be concerned about the 5+year rule.

IMO we should always listen to the conventional wisdom and then see how it actually applies to our own situation.

 

[Knight]

IMO the 5+ year rule makes sense if you are really saving and not actually investing.

If you are saving for a house, automobile, vacation, etc... then I would follow the 5+ year rule.

If you are a senior with a guaranteed income stream and a cash cushion to cover emergencies then I would not be concerned about the 5+year rule.

IMO we should always listen to the conventional wisdom and then see how it actually applies to our own situation.

I think this by Aunt Bea really sums it up

Quote from quote
"how it actually applies to our own situation"

 

[mathjak107]

I think this by Aunt Bea really sums it up

Quote from quote
"how it actually applies to our own situation"

you need to match money to the time frame ..but remember ,even at 65 you have long term money you won’t eat with for 25 to 30 years .. that can all be aggressively invested ....

even bond funds need to be matched to needs .. I would never use a total bond fund for money I need in less than 6 years since the fund has a 6 year duration .. I would use a short term bond fund

 

[fmdog44]

As to the original poster's question about what age should you get out of investing -- I guess I don't see the point in the question. Why would you get out of investing just because you are older? What would a person do then, keep all their money under their mattress? Put it into a savings account or money market paying almost nothing? It doesn't make sense to me.

I certainly wouldn't want to liquidate now that markets are down, and I don't really see any good reason to liquidate when the markets are down, either.

Why invest if you no longer have to? I started 40 years ago and still have about 35% in the market but I don't need to be there. I invested when I started with the idea I would build a sum that would be my holdings until I die. Is that not the reason to invest? To live without worrying about money? We invest to increase our holdings so we can afford to live a we please. The only, and I mean only reason I am still in is because I love the challenge of winning.

 

[mathjak107]

Why invest if you no longer have to? I started 40 years ago and still have about 35% in the market but I don't need to be there. I invested when I started with the idea I would build a sum that would be my holdings until I die. Is that not the reason to invest? To live without worrying about money? We invest to increase our holdings so we can afford to live a we please. The only, and I mean only reason I am still in is because I love the challenge of winning.

why not invest ? do you know what your money needs will be health wise down the road ? we are hit with all kinds of unexpected unplanned expenses .. my wife and i have been hit with tens of thousands in dental ..we also have no clue as to future inflation .. for those who retired in 1965/1966 inflation was 2.50% -3.50% . who would have guessed in 3 years time it would have doubled and by 1974 it would be 11%. it was crushing to a retiree. but with inflation so low who ever expected a 4x increase coming .

so resting on one's laurels is not a good idea ... it is quite safe investing at 40% equities in broad based funds . something like the permanent portfolio from harry brown can be so boring it's volatility can be like watching paint dry , yet it will keep you well a head of inflation .

there are always things not even on the radar yet just waiting to whack us with major expenses .

 

[Knight]

you need to match money to the time frame ..but remember ,even at 65 you have long term money you won’t eat with for 25 to 30 years .. that can all be aggressively invested ....

even bond funds need to be matched to needs .. I would never use a total bond fund for money I need in less than 6 years since the fund has a 6 year duration .. I would use a short term bond fund

I'm not sure what you intend by this post of yours. Are you agreeing with Aunt Bea when it comes to investing people will think about "how it actually applies to our own situation"?

 

[mathjak107]

yes , i agree with her ...it is important to match the investment to the time frame ... so even someone using fixed income should not be buying a total bond fund for money they need in less than 5 years ...they should be using a very short term bond fund for money today , a 1-3 year bond fund for those years , etc . while a 50/50 mix works well you still need to put the bond side investments together so the time frames work .

 

[Butterfly]

Why invest if you no longer have to? I started 40 years ago and still have about 35% in the market but I don't need to be there. I invested when I started with the idea I would build a sum that would be my holdings until I die. Is that not the reason to invest? To live without worrying about money? We invest to increase our holdings so we can afford to live a we please. The only, and I mean only reason I am still in is because I love the challenge of winning.

I just don't see the point of keeping your money in a sock or something if it can work for you and at least offset inflation.

 

[retiredtraveler]

I just don't see the point of keeping your money in a sock or something if it can work for you and at least offset inflation.

I agree. The least one can do (and some will only call this saving, not investing), is to put money into CD's or a money market where they make something with virtually no risk. No one should be sitting on a bunch of cash unless it's intended to purchase stocks at some time or is to be used for an anticipated expense.

 

[WhatInThe]

With a longer life span I'd continue to actively invest as long as possible. Nothing big but steady. There income producing income mutual funds out there along with bonds. You'll need money until the day you leave this earth so why stop producing it. Some can stop well before their senior years and others will struggle for income until it's check out time. If nothing else I regret not working much harder or starting serious many more years prior to retiring.

Traditional thinking ie retire don't do poop for a decade or two is all but extinct. I'd love to be in a position to wonder what to do with my time but it gets more used up the older I get. To stay sharp you need to do things like think about investing , closely follow news etc. In other words continue to invest it until it's financially not favorable or you are incapable. That goes for other things as well.

And this brings up another point. Not only should saving/investing continue in their senior years the young need to work harder on it as well. In other words just like learning etc investing, saving for the future is on going process as is the need. If you can live off social security and a pension go for it. But I've found there too many unexpected events that require financial solutions. I will say to that I can make more off investing as a senior than going to work in Walmart or the library. Why should I put myself through the hiring process, subject myself to management and employee shenanigans, work rules, goals, quotas and scheduling issues when I can make just as much if not more from own business of investing.

 

[mathjak107]

people just have a tendency to do the wrong thing financially .. it is rare that what feels good mentally is the right thing financially ... whether it is hiding under a rock avoiding anything volatile or accelerating mortgage payments dumping way to much money in to their home as opposed to other more liquid , greater growth potential investments .

they also do not understand the difference between risk and just volatility

 

[Knight]

It's that I don't want to be a part of or support capitalism. It's inefficient, neurotic, and slavery.

Yes, I've been this way all my life.

I'm curious. Do you think socialism is a better system to live under? If you do then maybe you can explain why people are not trying to enter & live illegally in Venezuela.

I'm really curious about the slavery part. Long time ago I had a conversation with a fellow employee that expressed that same thought. I asked him why he didn't take all his ability & start a business so that he was not a slave to our employer. He didn't have an answer he just parroted something he had heard.

 

[fmdog44]

As to the original poster's question about what age should you get out of investing -- I guess I don't see the point in the question. Why would you get out of investing just because you are older? What would a person do then, keep all their money under their mattress? Put it into a savings account or money market paying almost nothing? It doesn't make sense to me.

I certainly wouldn't want to liquidate now that markets are down, and I don't really see any good reason to liquidate when the markets are down, either.

I never meant to include income investments. I have maybe 10 CDs, an annuity, savings, a large position in a dividend mutual fund and a stock portfolio. I stopped investing in the mutual fund and my stock portfolio years ago and take the yields off the CDs if I feel I need it. If, not I simply roll them over. Age alone is not the issue rather, the safe dollars factored in with age. In 2008 the Dow fell 54% and at the time that was acceptable but today it is not. "Will I outlive my money"? is the point of retirement/investing. If your answer is yes then why throw money in to an aggressive fund or stock? Inflation is 2% and my CDs pay more so I am making money while minimizing risk. I think my OP was misleading and I apologize for that.

 

[mathjak107]

I never meant to include income investments. I have maybe 10 CDs, an annuity, savings, a large position in a dividend mutual fund and a stock portfolio. I stopped investing in the mutual fund and my stock portfolio years ago and take the yields off the CDs if I feel I need it. If, not I simply roll them over. Age alone is not the issue rather, the safe dollars factored in with age. In 2008 the Dow fell 54% and at the time that was acceptable but today it is not. "Will I outlive my money"? is the point of retirement/investing. If your answer is yes then why throw money in to an aggressive fund or stock? Inflation is 2% and my CDs pay more so I am making money while minimizing risk. I think my OP was misleading and I apologize for that.

inflation was 2.50% prior to 1965 too .. retirees never imagined in a few short years inflation would sore by 4x ....they were blindsided and ended up being the group the 4% safe withdrawal rate was founded on

 

[fmdog44]

inflation was 2.50% prior to 1965 too .. retirees never imagined in a few short years inflation would sore by 4x ....they were blindsided and ended up being the group the 4% safe withdrawal rate was founded on

Prior to 1965 a miniscule percent of Americans had any money invested in anything. What were the interest rates banks were paying back then? By the way who cares about what our parents did with their money?

 

[mathjak107]

Prior to 1965 a miniscule percent of Americans had any money invested in anything. What were the interest rates banks were paying back then? By the way who cares about what our parents did with their money?

the bigger question is what was inflation back then , that is always the wild card . rates and inflation are joined at the hip and negative real returns are losses no matter what the rate was .

out of the last 31 years , regardless of interest rates 17 years had negative real returns after taxes and inflation . that is more than 50% . many were at zero % real return and those were not counted as negative . this has zero to do with investing in equities .. fixed income and inflation have not played nice together regardless of where rates were , the odds of having a positive return with cd's was worse than a coin toss . so so much for that argument !

 

[garyt1957]

It's early here and the coffee hasn't worked it's magic yet and I admit I haven't read your whole post, BUT...what if you need the money so you don't reinvest the dividend? Yes , the stock price goes down but you still have the same number of shares. If you sell non dividend payers to spend you now have less shares. Eventually you'll run out of shares, yet the dividend payer, you'll still have your initial shares?

 

[mathjak107]

It's early here and the coffee hasn't worked it's magic yet and I admit I haven't read your whole post, BUT...what if you need the money so you don't reinvest the dividend? Yes , the stock price goes down but you still have the same number of shares. If you sell non dividend payers to spend you now have less shares. Eventually you'll run out of shares, yet the dividend payer, you'll still have your initial shares?

Not how it works .... in theory if you get a 4% dividend and no appreciation in the stock , each dividend pay out would send the stock lower and lower until it hits zero , so hypothetically you would have all your shares at near zero value ...

so you need at least 4% in appreciation to offset the payout .... pulling 4%from a portfolio of non dividend payers needs the same exact 4% appreciation to stay solvent forever and not run out of shares. Balances would be the same .. the non div payers get no price reduction so over time they are selling less and less shares to generate the same income ...

whether you you have more shares at a lower price or less shares at a higher price they work out the same

 

[OneEyedDiva]

you are confusing the fact your stock goes up with the mechanics and actual benefit of the dividend .


dividends have to lower the share price , it is mandatory....... that does not mean your stock does not go up... you are confusing issues . follow carefully here so you can be one of the few who actually get it .

1000 shares of a 100 dollar stock is 100k invested . lets pretend it pays 4% , so it is MANDATORY by the exchanges that it is to to be reduced when it goes ex div so they drop your value automatically ... so you get 4k and have 96k left for markets to work on . ... now the markets act on 96k which is made up of your 1000 shares at 96 bucks when the bell rings and you have 4k in pocket as a return of investment in that dividend . ..

so you give them back the 4k and buy 41.666 shares effectively returning the same 4k back to them albeit construed differently .... now you have 1041.666 shares at 96 a share which is the exact same 100k you had before it went ex div . it is just arraigned differently .

so lets suppose the market doubled your stock ...so your 1041.666 shares at 96 a share worth 100k grew to 200k if you reinvested , which if you notice is the same as the 100k you were at before it went ex div. in both cases it is the same 100k that had doubled . but if you did not reinvest the dividend you would have had only 96k left for the markets to double so you would only have 192k if you kept the dividend .. see how that works .

your stock went up from whatever you paid for it originally to 100k in value . they gave you back 4k of it , knocked your value to 96k by reducing the price automatically before it can trade , you then hand them back the 4k and say no thanks , keep it invested , so they buy you 4k in more shares at the lowered price and you have the same 100k you had the night before it went ex div .... they merely handed you a piece of your gain back and you returned it .

pre div you had 100k and 1000 shares at 100 a share equaling 100k , after the div and reinvestment you have 1041.666 shares at 96 a share worth the same 100k . markets open and go up 100% , you picked a fabulous stock and it soared . in both cases you have the same exact 200k ...



no different than a portfolio of non div stocks ... if you have a portfolio of non div payers worth 100k and you take out 4% you have the same 96k left and 4k in hand . if your stocks double you have the same 192k left and 4k in hand ,,, if you reinvest the 4k back in you have the same 200k .

both the dividend payers and non payers are both redistributing the exact same gains ... it is not how many shares you have that make up those dollars , it is the total dollars you have that is compounded on . that is why a stock split is a wash .


you can learn more about how it works here

https://finance.zacks.com/dont-investors-buy-stock-just-before-dividend-date-then-sell-9577.html


https://www.investopedia.com/ask/answers/buy-before-dividend-then-sell/

It's taken me a while to respond because I haven't been on here much with all that's gone on in my life the last couple of months. But I'm not confusing anything Mathjak. The articles you shared are nothing new to me, I "inhale" financial articles and have done so for years. YOU seem to be the one who is confused. It seems you keep talking about dividend shares that are distributed and have no time to grow in value. Yes dividends lower stock prices (in my case mutual funds and ETFs). That only affects the value of the dividends (zero vs an increase) IF THOSE DIVIDENDS ARE DISTRIBUTED. If they stay in the portfolio and are allowed to grow as share prices increase...then the investor has made a profit off the dividend shares. For instance, the self tallying spreadsheets I use to track each dividend by purchase share price, amount of shares purchased, total amount paid for the shares, total amount of the dividend, current share price and current net amount of the shares tells me instantly upon viewing how much each set of dividend shares purchased has increased or decreased in value. Since I rarely take distributions, the dividend shares on those spreadsheets have increased in value by thousands of dollars. I keep another set of spreadsheets that tally the values of the original shares. So I cannot get confused as the numbers are plain as day right in front of my face.

 

[mathjak107]

It's taken me a while to respond because I haven't been on here much with all that's gone on in my life the last couple of months. But I'm not confusing anything Mathjak. The articles you shared are nothing new to me, I "inhale" financial articles and have done so for years. YOU seem to be the one who is confused. It seems you keep talking about dividend shares that are distributed and have no time to grow in value. Yes dividends lower stock prices (in my case mutual funds and ETFs). That only affects the value of the dividends (zero vs an increase) IF THOSE DIVIDENDS ARE DISTRIBUTED. If they stay in the portfolio and are allowed to grow as share prices increase...then the investor has made a profit off the dividend shares. For instance, the self tallying spreadsheets I use to track each dividend by purchase share price, amount of shares purchased, total amount paid for the shares, total amount of the dividend, current share price and current net amount of the shares tells me instantly upon viewing how much each set of dividend shares purchased has increased or decreased in value. Since I rarely take distributions, the dividend shares on those spreadsheets have increased in value by thousands of dollars. I keep another set of spreadsheets that tally the values of the original shares. So I cannot get confused as the numbers are plain as day right in front of my face.

follow carefully .. the growth is not any different reinvesting the dividends then the growth of a portfolio of non dividends with the same or greater total return .
reinvesting merely switches the existing value around so it is configured differently but adds no more new dollars . in fact it does the opposite if you do not reinvest and leaves you with less dollars starting out being acted on .

if you have 1000 shares of a 100 dollar stock, that is 100k invested

if it pays a pays a 10% dividend you will have 90k left invested after the mandatory roll back and 10k in pocket so you have 1000 shares at 90 a share left for markets to act upon or 90k. if you reinvest the 10k back in back in at this reduced price of 90 dollars you will have 1,110 shares at 90.00 dollars .or the same 100k you had .pre dividend ... i t just consists of more shares at a reduced price for markets to act on .

if markets double your stock with the reinvested dividends it is the same 200k you would have had if the stock paid no dividend and the original 100k just doubled without you being handed the money and giving it back ..

the paying of a dividend is no different then taking the same draw from a portfolio of non div payers assuming the same or greater total return ..

the effect of putting the money back in again will be the same in both cases .

it is no different than a fund distribution where you have x-amount in the fund , you reinvest the distribution and have more shares at a lower price equaling just what you had the day before ... the distribution is just a return of a piece of the share price to you .

the dividends are not 'magic money' that appears from fairies and is sprinkled on investors - it comes out of the underlying value of the stock price. If paying dividends was the sign of a 'better than average' stock, there would be active mutual funds with managers picking these fairy dust emitting stocks, and routinely outperforming the market on a total return basis

 

[OneEyedDiva]

follow carefully .. the growth is not any different reinvesting the dividends then the growth of a portfolio of non dividends with the same or greater total return .
reinvesting merely switches the existing value around so it is configured differently but adds no more new dollars . in fact it does the opposite if you do not reinvest and leaves you with less dollars starting out being acted on .

if you have 1000 shares of a 100 dollar stock, that is 100k invested

if it pays a pays a 10% dividend you will have 90k left invested after the mandatory roll back and 10k in pocket so you have 1000 shares at 90 a share left for markets to act upon or 90k. if you reinvest the 10k back in back in at this reduced price of 90 dollars you will have 1,110 shares at 90.00 dollars .or the same 100k you had .pre dividend ... i t just consists of more shares at a reduced price for markets to act on .

if markets double your stock with the reinvested dividends it is the same 200k you would have had if the stock paid no dividend and the original 100k just doubled without you being handed the money and giving it back ..

the paying of a dividend is no different then taking the same draw from a portfolio of non div payers assuming the same or greater total return ..

the effect of putting the money back in again will be the same in both cases .

it is no different than a fund distribution where you have x-amount in the fund , you reinvest the distribution and have more shares at a lower price equaling just what you had the day before ... the distribution is just a return of a piece of the share price to you .

the dividends are not 'magic money' that appears from fairies and is sprinkled on investors - it comes out of the underlying value of the stock price. If paying dividends was the sign of a 'better than average' stock, there would be active mutual funds with managers picking these fairy dust emitting stocks, and routinely outperforming the market on a total return basis

OMG...I had to make your reply bigger so I could read it!! What happened in your mind to when the funds and ETFs INCREASE IN PRICE. Then NO you don't have the same 90K, you have what your portfolio shares have increased by. For instance, during this quarter my portfolio has increased by 12% over it was worth at year's end. Some of that is because the price that was reduced by distributions has gone back up (in some instances more than what it was before the distributions) and some due to the distributions themselves. To me it seems you are fixated on the value of investments (share prices) staying the same after distributions have taken place. But you can't dispute the figures that are right in front of my eyes. And FYI I have read several articles in which financial "experts" contend that dividend paying investments can fare better in down markets or at least help to "soften the blow" of the downturns. I'm done with it. I'm getting off this merry-go-round. We're never going to be on the same page about this. "See ya" in some other post.

 

[mathjak107]

bottom line is there is noooooooooooooooooooo difference between balances between dividend payers and non dividend payers when the total returns are the same---period .... GETTING A PIECE OF THE EXISTING SHARE PRICE BACK IN YOUR HAND AND PUTTING IT BACK IN STILL LEAVES YOU THE SAME AS YOU HAD THE NIGHT BEFORE IN BALANCE ... THE MARKET ACTION WILL BE THE SAME WHETHER YOU GOT THE DIVIDEND OR NOT. DIVIDEND PAYOUTS ARE A WASH WHEN REINVESTED . your gain comes from the appreciation on the stock in all instances ..... it is no different then a stock split where you had x-amount of shares , now you have more shares at a lower value being compounded on ... if the stock goes up 10% it is the same thing . if a dividend was magic fairy money we would not own the stock ... we would buy it the day before it goes ex div and then sell it... but the fact is like a fund distribution it is nothing gained nothing lost balance wise ..

EVERY STOCK THAT PAYS A DIVIDEND NEEDS TO SEE THE SHARE PRICE APPRECIATE AT LEAST AS MUCH OR YOUR RETURN IS ZERO .. HYPOTHETICALLY A STOCK THAT JUST PAID OUT A DIVIDEND BUT FAILED TO APPRECIATE AT LEAST AS MUCH WOULD LEAVE YOU WITH A WHOLE LOT MORE SHARES AT NEAR ZERO VALUE IF IT WENT ON LONG ENOUGH .

IT IS NOT THE DIVIDEND GIVING YOU THE GROWTH , IT IS SHARE PRICE APPRECIATION . the dividend just gives you back a piece of the share price that already exists . you reinvest it back in getting more shares but at a lower price then it was , the dollars invested which is what gets compounded on is equal to just what you had predividend . ... 1 share at 2.oo dollars is the same as 2 shares at 1.00 .. if either doubles you have 4.00

https://www.investopedia.com/ask/answers/buy-before-dividend-then-sell/