Stock Market: Legit or Gimmick

[webshad]

Tell me, guys.

Can you make money with the stock market or is this all a big gimmick?

Some claim, it's an art, you have to be knowledgeable, you must read a lot, etc etc. To me, it seems like it's nothing more than gambling.

Your answer with some references, if possible, would be nice.

[Spurminator]

If you are treating it like a casino and trying to make a quick buck, there is a good chance you will lose. Some people win. Just like a casino.

If you treat it as an investment and buy strong companies for the long term, you will usually come out ahead when the time comes to cash out.

[DMX7]

Of course you can make money. It's more than tripled since 2008. You can also lose money of course but it's less likely if you manage your risk well.

[SnakeBoy]

It's a gimmick. Best thing to do is put all your money in a savings/money market account and watch it grow by as much as multiple dollars per month without the risk of the stock market.

[ElNono]

It's a gimmick. Best thing to do is put all your money in a savings/money market account and watch it grow by as much as multiple dollars per month without the risk of the stock market.

:lol

then a few months later they figure out that the savings account can't beat inflation...

[InRareForm]

If you want to make a consistent return on average 7% just put your money in index funds.

[spurraider21]

If you do well it's legit and if you do poorly it's a gimmick

imo

[Wild Cobra]

Tell me, guys.

Can you make money with the stock market or is this all a big gimmick?

Some claim, it's an art, you have to be knowledgeable, you must read a lot, etc etc. To me, it seems like it's nothing more than gambling.

Your answer with some references, if possible, would be nice.

It is gambling, unless you understand it very well.

[CosmicCowboy]

If you are young and truly in it for the long haul you are pretty safe with an S&P index fund. Low fee overhead and will track the market. Might go down short term but historically keeps moving up. Since 2008 index funds have beat a lot of high fee market gunslingers.

[SnakeBoy]

Index funds are good long term but the down side is we may be at a peak so you could end up spending many years being down without earning much in the way of capital gains.

I prefer funds that seek growth and income. Over the long term 15+ years a good high yield (junk) bond fund beats most index & growth funds but only if it's in a tax deferred account. Taxes will bone you otherwise.

[Xevious]

It is gambling if all you're doing is buying/selling single stocks. S&P is a safe bet for long term investing, but with some research you can find better mutual funds with long track records of 10-12% growth or so.

[rmt]

Index funds just means that the fund tries to match/track a particular market index. You can get index funds in any number of different areas such as S&P 500, international, small companies. For long term, I'd go to Vanguard and do their test - usually it ends up 70/30 or 60/40? US Total Stock Index/International Index Stock. I would not put all in now as market is at all-time high - buy some on dips. Or you can do what Warren Buffet suggests for his heirs - 95% S&P 500 index fund and 5% short term bonds. But once you're in , stay for the long-term - do not panic and sell when the market drops.

If you decide instead to trade that's a whole 'nother story (very high risk) - in that case, buy low and sell high.

But please, don't leave all your money in a bank CD or savings account - the pitiful amount they give will not keep up with inflation - you should invest in stocks, real estate, business, or something.

[CosmicCowboy]

There have been a lot of ads lately about getting rich in REITs (real estate investment trusts) where you pool your money with others to buy real estate. I would avoid these like the plague. The general partner fees it to death and classic retail commercial real estate market is inevitably heading down as Internet sales increase. Big box stores will be negotiating reduced rents as their revenue falls.

[rmt]

Yes, no commercial real estate. Retail business is going down the tubes because of Amazon. I like residential - 3 bedroom in a decent area - no HOAs, no condos, as few restrictions as possible. Many cannot qualify for homeowner's loan but gotta live somewhere - and then big or extended family piles in.

[CosmicCowboy]

I'm liking residential real estate lately. It's especially good if you don't mind getting your hands dirty and have basic handyman skills.

I can give an example:

I bought a 2000 sq foot house in a nice neighborhood (near the HEB Alon market) 4 years ago for 150K.
Did 2% down at 3.25% so closing costs were under 10K.

The note is $1200. With principal, interest, mortgage insurance, taxes, and interest so payments are about 15k a year

Of that, interest, taxes, mortgage insurance, and "home shield" insurance and depreciation are deductible. So about 16k is deductible. At my 30% rate that saves me $5500. A year making my out of pocket $9500.

The house rents for $1500 a month so net revenue every year is about $8000 a year.

Meanwhile, in 4 years I have knocked principal owed down to 133k and the house has appreciated and now appraises at 190k.

So basically a initial 10k investment streams $8000 gross income a year and built 50k of equity (net worth) in 4 years.

Tax rates and appreciation rates vary so your mileage may vary,

[rmt]

Insist on 3 months - preferably cash. I no longer even do background check. What I look for is fit - do prospective tenants fit into the neighborhood - are they similar - age, culture, background - more likely to put down roots and stay a long time - less turnover is good.

[CosmicCowboy]

Fwiw on my more recent buys I have put down 20% on 15 year notes to avoid mortgage insurance and get a lower interest rate so the annual returns don't look quite as gaudy but net worth gets built a lot faster.

[Spurminator]

I generally distrust any investment option that has ads on the radio.

[LaMarcus Bryant]

Market has been running so hot, theres gotta be an epic bubble on the horizon

[rmt]

Diversify as much as possible to spread risk. Home, stocks, (residential [investment] real estate), bit coin/physical gold/even (gasp) guns/ammo. In stocks, US/Intl, big/medium/small - even in the type of vehicle - Roth/traditional retirement/taxable - so that you have flexibility in what to use when in retirement and estate planning. If you're at the point where this matters, congratulations and remember Roth IRAs pass on to heirs tax-free and distribution is based on lifetime of heir (so younger the better). IOW, give Roths to children and real estate to older people - not vice versa. Better still, go see a tax/estate lawyer.

And make sure any financial planner is FIDUCIARY.

[pgardn]

Take your cash and put it under your bed to buy IHOP pancakes.

Come back in 15 years and head for IHOP only to find out your stash won't cover the flatjacks.

Then take a bow to the God of Inflation.

[pgardn]

Market has been running so hot, theres gotta be an epic bubble on the horizon

When?

Or ask CC for me. I needs to know.

[Xevious]

I'm liking residential real estate lately. It's especially good if you don't mind getting your hands dirty and have basic handyman skills.

I can give an example:

I bought a 2000 sq foot house in a nice neighborhood (near the HEB Alon market) 4 years ago for 150K.
Did 2% down at 3.25% so closing costs were under 10K.

The note is $1200. With principal, interest, mortgage insurance, taxes, and interest so payments are about 15k a year

Of that, interest, taxes, mortgage insurance, and "home shield" insurance and depreciation are deductible. So about 16k is deductible. At my 30% rate that saves me $5500. A year making my out of pocket $9500.

The house rents for $1500 a month so net revenue every year is about $8000 a year.

Meanwhile, in 4 years I have knocked principal owed down to 133k and the house has appreciated and now appraises at 190k.

So basically a initial 10k investment streams $8000 gross income a year and built 50k of equity (net worth) in 4 years.

Tax rates and appreciation rates vary so your mileage may vary,
While real estate is a solid investment, now is not the time with house prices souring. Interest rates are going up so one has to assume that home values are going to level off or decrease in some markets.

Never pay retail for investment property, and pay cash if possible. Having a rental sit empty for a couple months while you're still making payments sucks ass.

[CosmicCowboy]

I can afford to make the payments if it sits empty and paying cash (although very conservative) reduces your ability to leverage other investments. I don't always agree with Dave Ramsey. I've made a lot of money over the years with borrowed money.

[rmt]

Interest rates are still low. My interest rate was 6.75% when we bought our home - have refinanced since but it was still a good buy since house prices have appreciated. I disagree with the buying for cash - put down the lowest down payment so you don't have to pay mortgage insurance (usually 22-23?%) and get the longest (30 year) mortgage - leverage your down payment.

Wish I were in TX when I hear your house prices and rent - much higher here in FL although our residential property tax is capped at 3% compared to your 10% - but our home insurance is much higher than yours due to hurricanes.

[rmt]

I meant put 22-23% downpayment - not mortgage insurance.

[CosmicCowboy]

I just did another 200K house last month at 3.25% @ 15 years with 20% down (no mortgage insurance)

[InRareForm]

Market has been running so hot, theres gotta be an epic bubble on the horizon

which means time for buying bargain stocks