Before everyone starts leaping and jumping for joy, it is a good idea to put everything in perspective. Since March 2009, stocks have made a remarkable recovery. The bottom had also fallen out of the stock market, so much recovery was needed.
Several people have said they have broken even to where they were before the crash. I offer up scenerios. Those people either weren’t invested heavily in equities or they fed their accounts a lot this past year. For those who have static accounts, the recovery doesn’t come near to breaking even.
According to USA Today:
Once it was clear a collapse wasn’t going to happen, the Standard & Poor’s 500 index roared back 64.8% from its early March low. For the full year, the index rose 23.5%, or 211.85 points, it’s best showing since 2003.
The Dow Jones industrial average rose 1,651.66, or 18.8% for the year. From its March 9 close, the Dow jumped 59.3%. Powered by the recovery in high-tech stocks, the Nasdaq ended 2009 with a gain of 696.12, or 43.9%. Tthe Nasdaq has surged 78.9% from its March low.
Up until March of last year, many people were fearful of opening their statements. If one lost 40% in the crash, and many of us did, it will take a lot more than 40% increase to bring you back even. That’s the math of percentages. I have a 401k that increased by 33.6% but I am not even close to being back to the fall 2007 high water mark. Not even close.
Analysts do not expect the current rate of increase to continue. While the pace will slow, the markets are still expected to do well. There is a great deal of superstition about the first day and week of the new year. I guess we get a sneak peak tomorrow. I am keeping my fingers crossed that we have a bang up day and that the bulls will run hard.
Have investment strategies changed with our readership? Those who went conservative missed out on the the biggest rebound since the Depression. I was too paralyzed by fear to do too much. My account that lost the most was the one I pay to have managed. Go figure. And I like the manager. He is reasonable and knowledgeable. I don’t blame him.
Then there is the dollar scare which I have never figured out. How does this affect how we invest? How about buying gold and silver?
Disclaimer: Any discussion about investment is only discussion, not advice. Call your financial advisor if you want professional advice. If there is any other disclaimer I need to put up, someone tell me!
Pinko, there is very little difference in an IRA, 401K, or 403b. You can set up an IRA if you are self employed.
Cool! Thanks, MH.
THanks MH for clarifying, you know far more about Roth IRA’s than I do. Your point is correct, you definitely have to designate it up front as such so dollars going in there are after tax dollars and then when taken out at a future date don’t get taxed again.
There’s all sorts of limits by age on the different investment methods – a very good table of those limits (including the differences by age) is at http://www.themoneyalert.com/Retirement-Plan-Limits.html
I’m pretty sure everything on there for the 401K’s, IRA’s, and Roth IRA’s is correct. As MH said, there are phase-out limits on Roth IRA’s for high income earners.
Actually, I don’t know much about them at all but thanks, GR. I think you and I sort of team tagged that one. I don’t own one. I investigated owning one. This is a good time to consider owning one if we think taxes are going to rise.
One thing the feds could have done to help out all the people who lost so much during the crash….they could have cut us a break on our Ira type stuff. Get up off the floor and stop laughing! Only banks and car makers get cut breaks!
@Gainesville Resident
GR, that’s an interesting link. I didn’t know there were contribution caps for different ages. Does anyone know why “they” do that? If you are contributing money you were already taxed on and “they” are making money off your interest, doesn’t it behoove them to let you put in as much as you want? Or am I being a simpleton?
It’s a good question on the limits on the Roth IRA. It doesn’t make much sense, I agree – who knows why the gov’t put those limits in place. One can see the limits on the 401K and regular IRA’s – as preventing to much income from being deferred taxation. Anyway, there’s lots of things the gov’t does that makes no sense – guess this is one of them.
Indeed, only the banks and car makers got breaks for sure. In fact, last year the gov’t could have raised the annual limit of $3000 in capital gains losses to maybe $5000 or so, to throw investors a bone at least and let them deduct a little more of their losses in 2008 taxes rather than later on. That would have helped put a little more money back in most investors’ pockets.
I’m still shocked by the news this morning of yet another GM bailout! Again, I refer people to the audio link I posted up above in this thread. Everyone should be outraged by a SECOND bailout of GM. One was more than enough. I think Professor Marici is spot on in what he says really should have been done in regards to GM. He also challenged Geitner to come on WTOP and debate him about this. It was an interesting interview to say the least.
How is your ford stock doing, GR?