Have you checked your 401K lately?

[moneymaker]

Pleasantly surprised to see that I have averaged 10.7% over the last 5 years. Not bad! Especially considering what interest rates have been like over the last 5 years.

[spdrun]

Meaning it’s high time for a good CRASH. 🙂

[carlsbadworker]

10.7% actually seems a little bit low. I am pretty conservative with my 401K and I got higher than that.

This is not sustainable though. I don’t think it will crash anytime soon but it is definitely very over-valued at the moment.

[moneymaker]

Yes I think I did do something stupid like get out at 10500 and then back in, in the 11000’s. But all in all I’m actually quite happy with 10.7% annually over the last 5 years. This year was like 20.7% or so. Perhaps now is a good time to get out. Ok, I’m out. On the sidelines with lots of company looks like. There’s $129 Billion in the money market I bought.

[CA renter]

Good for you, MM!

[livinincali]

[quote=moneymaker] On the sidelines with lots of company looks like. There’s $129 Billion in the money market I bought.[/quote]

Here comes the money on the sidelines fallacy again. When you sell assets in exchange for cash or cash equivalent there’s a party on the other side of that transaction that must get that cash or cash equivalent from somewhere. Guess where that cash you got for your assets came from. Probably something pretty close to that “sidelines” money market fund that you put it in. Net change to money on the sidelines almost zero minus some transaction costs.

There is one major exception to that. If the buying party borrowed the money from a bank that created it out of thin air using fiat banking then it is possible that the net change for the apparent money on the sidelines goes up. Of course there is a balance sheet liability entry at a bank that balances that increase out.

Money on the sidelines is a myth, there will always be money on the sidelines by definition. For every party getting off the sidelines and buying assets there is another party selling assets and getting on the sidelines.

[moneymaker]

Yes, when I sold my stock on Monday, that is probably why the market went down Monday. Just kidding! I’m just going by my gut feeling that there will be a gradual slide down in the market. I do plan on buying back in later this year, probably in late December when people are foolishly selling their losers to take the tax write off.

[bobby]

I am just sorry I took all my money out 2 years ago. The stupid bank required my assets to be “liquid” to approve the loan. the fact that it was in stock was not allowed. I have been waiting to go back into the market but for the past two years, the price had been sooooo high. I’m just hoping for 12,500. not sure if that will ever happen.

[UCGal]

[quote=bobby]I am just sorry I took all my money out 2 years ago. The stupid bank required my assets to be “liquid” to approve the loan. the fact that it was in stock was not allowed. I have been waiting to go back into the market but for the past two years, the price had been sooooo high. I’m just hoping for 12,500. not sure if that will ever happen.[/quote]
Yikes.

Have you considered dollar cost averaging back in? Waiting for a specific target is kind of a crap shoot.

Lets say you have $120k on the sidelines. Decide the period over which you want to re-invest. Lets say it’s 1 year. (The DOW is very unlikely to go as low as 12500 in the next year.) Each month, invest $10k in an investment of your choice – that fits your overall asset allocation. Rinse and repeat each month till it’s all invested.

In this ZIRP environment, money on the sidelines is not earning anything.

[SD Realtor]

I don’t necessarly think that the bank requires that your money be in cash. If that one particular lender requires that, then you need to work with a different lender. As long as you can show through documentation that the money has been in the account and has been seasoned for a few months, it doesn’t matter if it is in equities or money market. I have gotten plenty of loans with my etrade account as the primary account and those funds were in equities.

[moneymaker]

I don’t think we will see 12,500 in the next 12 months either. I’m just looking for a 10% or so correction, then when I buy back in I will be ahead 10%. I guess you could say I’m shorting the market with no expiration date.

[bobby]

UCG, I don’t know if 12500 will be reach ever. I may just be sitting on cash waiting forever.
I am lucky to be making decent income and save a fair chunk (growing up poor does that to you). Jumped in 08-09 and watched it appreciate. Now I kick myself every time I hear “the dow reached new high today”.

SDR, the bank is wellsfargo. The thing was, they required the 20% down to be liquid (cash) but also another extra $100K be pulled out of stock. when I asked why, the answer was “just the bank’s rule”. I also used another banker (US Bank) but the banker ignored me for weeks on end so I didn’t go with her. Wellsfargo’s banker was very good otherwise.

In the end I am glad I purchased 2 years prior b/c housing price in the BA has appreciated at least 20% since. I am just sore about teh lost opportunities.

[spdrun]

If they required $100k to be liquid at time of signing, could you have put the $100k back into stock after the loan was closed? Or did they require you to keep it in some sort of escrow account with them?

Seems like an odd requirement.

[UCGal]

[quote=spdrun]If they required $100k to be liquid at time of signing, could you have put the $100k back into stock after the loan was closed? Or did they require you to keep it in some sort of escrow account with them?

Seems like an odd requirement.[/quote]

More importantly – do they cover the capital gains you incur by selling? Seriously… I would have been seriously steamed. I assume this wasn’t liquid cash in a tax deferred account (401k or IRA) – what would be the point of that?

[bobby]

I don’t remember if I was allowed to plunk it all back into the market once we closed. Maybe I was allowed but by then the market had appreciated so much I felt foolish selling low then buying high. Ahh well.. win some.. lose some…

of course the bank doesn’t cover capital gain by selling.
luckily it wasn’t IRA. We have saved enough to cover teh 20% down and more but WF required that the extra also be liquid.
had I left the money in SP50, there’s no telling that I wouldn’t have pulled out once DOW hits 15000. I’m kind of a nervous investor that way.
I still am saving and just hoping for a big correction – who knows if it will ever comes.

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