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The terrifying market

Well, I guess people aren't retiring this year or the next. The Baby Boomers are so screwed. But then again, so are the rest of us young middle class folks. My 401k continues to be battered, though it's not losing as much money as the market is, but that's not saying much. When I ask people how their 401k is doing, their response is: "I just don't look at it". Yep, that's what they teach you to do. Unless you're retiring, but I guess you won't for a while.

From the nytimes today, economix:
"Forget about Dow 10,000. Keep your eye on S.&P. 967.

At 11:15 this morning, the Standard & Poor 500-stock index was trading around 1,048. That left it 46 percent below its inflation-adjusted high, which it hit in the summer of 2000. If shares keep falling and the index hits 967, it will be a remarkable 50 percent below its peak. That has happened only two other times since 1929 — during the Great Depression and during the 1970s.

It is easy to overlook just how steep the decline in stocks has been in the last eight years. Stock prices and indexes tend to be described in nominal terms, rather than inflation-adjusted terms. (In nominal terms, the S.&P. 500 is down about 33 percent from its peak.) But it makes much more sense to adjust share prices for inflation, just as it makes sense to adjust the price of just about anything — food, houses, incomes — for inflation."

--

Oh.. and the much touted Vanguard 500 Index fund? I bought some in 2004, and it's the only thing I don't touch in my playbox.

In Oct 2004, I bought $2939.34 worth of it at a share price of 102.97
today in Oct 2008, it's back to 101.23, and I've a total of $3182.67.

Woo! So in another 4 years, I will have... $3350?

Seriously, I should've just put it in a CD. In fact... maybe I still should. If I can find a bank that won't collapse. Grrr.

Can someone let me know when we've hit the bottom so I can get rich from my 401k suddenly increasing in price?

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Comments

medryn
Oct. 6th, 2008 05:11 pm (UTC)
I wouldn't feel so sorry for the Baby Boomers. On average they started investing in the stock market in 1980, when the S&P was at something like 114. So even with the recent losses, they've seen the market increase 8-fold during their working years. Do you think that the market will increase 8-fold during our generation's working years? I do not.

Furthermore, Baby Boomers for the most part purchased homes at low prices and haven't suffered the insane mortgage payments required of anyone who has purchased a first home in the last 10 years.

Most CDs are FDIC insured, so bank collapse shouldn't be a huge concern, unless you think that the FDIC itself is going to collapse. :-)
ripresa
Oct. 6th, 2008 06:57 pm (UTC)
Yeah, I guess the people who cashed out two years ago are lucky :)

Seriously, if you see anything returning 4% or %5 that doesn't look fishy, let me know. A bunch of my savings is moneymarket in UFCU, but I think it's like 2%ish.
medryn
Oct. 6th, 2008 07:11 pm (UTC)
http://www.fatwallet.com/forums/finance/783099/

Right now you can get 4% with no risk (assuming you believe in the FDIC). There are some weird accounts that give you 5%+ on your first 25k, but require you to jump through some annoying hoops.

http://www.fatwallet.com/forums/finance/682884/

You can take a look at CDs also. I don't have much of an intuition right now for whether interest rates are going to rise or fall in the near future.
ripresa
Oct. 6th, 2008 07:01 pm (UTC)
seriously though, another 700+ drop???