https://www.schwab.com/learn/story/schwabs-long-term-capital-market-expectations

The farther we've gotten into 2023, the more I hear media outlets suggesting 7-8% annualized gains for the foreseeable future (S&P 500) are a pipe dream. Who else is pessimistic about the earning potential of their 401(k)/IRA accounts over the next 40 years?

Combined with the majority of first time would-be millennial homebuyers being priced out of the market, a steep shortage of starter single family home supply, and rising inflation/interest rates, the future for millennials, Gen Z, and Gen Y is looking really bleak.

How are you preparing for the worst?
We're maxing out our 401(k)s and mix of IRAs, and have a housing down payment set aside in a high yield online savings account to use sometime in the next 3 years.

Hate to have cash sitting there, but we need liquidity when an opportunity arises and I'm not dipping into retirement for that. Used to be of the opinion we should wait to buy until the housing market crashes, but if it hasn't happened by now, I just don't see it happening anytime soon. No surge in foreclosures, low housing supply for the more affordable homes…

I will probably open up another brokerage account in the next couple months outside of the retirement accounts we have.

How are you preparing?

Our investment plan will remain the same but I'm using 6% growth in the math and still aiming for the same target

Yeah hopefully that 16 percent run will hold and help makeup up for the blood from 2022. Or could it disappear into thin air? Time will tell.

I'm buying the next 5 months on the way down. Down won't be that extreme. It almost never is.

High dividend income based stocks and funds if you have a bunch of cash just sitting are an option.

Rental property is another option but not until
interest rates come down.

The global economy is floating along like the feather in forest gump.

You can get 5% in returns with cash sitting there, is the upside worth the risk of playing the general market?

I still buy good stocks and hold, but I don't think trying to game the market, or individual stocks, on a time span of even 2-3 years is the best idea.

Durkin Nowitzki said:

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I'm buying the next 5 months on the way down. Down won't be that extreme. It almost never is.

High dividend income based stocks and funds if you have a bunch of cash just sitting are an option.

Rental property is another option but not until
interest rates come down.

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This is what I'm struggling with; I just don't see the argument for waiting to buy real estate anymore. Refinancing is one of the greatest tools out there. The hope is the interest rates eventually fall, but while that is happening, I only see house prices rising back up.

Can someone paint a scenario where the housing market crashes in the next 5-10 years? I don't see it. Low supply, high first time home buyer demand, and inflation that isn't curtailing anytime soon.

Maybe if a republican wins the next election and then gets re-elected that helps get the economy back on track, but I don't see how that translates to a true housing crisis with inventory as low as it is. Foreclosures have hardly been on the rise last I checked

Bloated local governments and school districts will contribute to a housing collapse.

Interest rates may go down but tax rates will continue to be maxxed out every year.

We'll reach a point where its unsustainable.

How soon?

Even if the economy goes down... it goes down for everyone which affects all assets.

If you keep your savings rate and diversification higher than 80% of the people out there (with a buffett mindset), you'll do better than most...

Kind of like winning at Monopoly... the right strategy and time will win out in a nearly zero sum game.

As for my strategy... staying in good funds, maxing all tax savings, significantly increasing the cash and keeping the powder dry (not too many assets look good right now that haven't been previously purchased), and waiting for the right time to acquire assets at fire sale prices.

The cure for high prices is high prices - you will eventually see normalization in the markets.

Might cool off slightly from lower interest rates.

Info Tech sector is up 33% YTD though.

My investment strategy is to hold a mix of sector ETFs.

I developed this approach first by attempting to apply the 80/20 rule. Assume 20% of stocks make up for 80% of the gains. In this case, sectors. So just don't hold the worst performing sectors and you'll beat the average.

The second goal is to reduce volatility, simply don't hold the most volatile sectors.

I assume each sector has its own individual mean reversion, and that I can customize my volatility + returns profile based on how I weight them. Also, some sectors are more strongly correlated to one another than others, and choosing non-correlated sectors can lower portfolio volatility.

This led me to focusing on only the 5 below. This is a mix of low volatile sectors with higher growth high volatility sectors.

Info tech
consumer discretionary,
health,
consumer staples,
utilities.


Notably, tech, health, and utilities seem to be the least correlated with each other so combing them can lower portfolio volatility.

Consumer staples, health, and utilities also tend to do well in bear markets. I believe holding a mix of sectors can simultaneously reduce overall portfolio volatility and increase returns. Weight according your outlook and risk profile. I don't equally weight them, I bias to certain ones, but I aim to not have any one sector be much more than 30%.

I recognize my pick of sectors has a lot of recency bias, and is mostly based on their performance and volatility over the last 15 years. We can't predict which sectors will be the super stars for the next 10 or 20 years, but I think recent trends are a good starting point.

Ghost of Bisbee said:

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How soon?

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When we look at this tax situation combined with the recent spike in homeowners insurance discussed on another thread …

Could we see a situation where some homes become unmarketable because they are uninsurable?

Something to think about.

Stat Monitor Repairman said:

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Ghost of Bisbee said:

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How soon?

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When we look at this tax situation combined with the recent spike in homeowners insurance discussed on another thread …

Could we see a situation where some homes become unmarketable because they are uninsurable?

Something to think about.

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Home prices will have to drop or people settle for smaller homes.

People still spend $1,500,000 in Los Angeles for an old tiny house in a decent area.

Supply and demand will still rule the day, and prices will reflect demand factoring for added costs like insurance, interest, and taxes.

The S&P has returned approximately 10% annually over the last 100 years. It is battle tested. That 10% includes winners and losers. The challenge is to pick the winners and ride them. Like the one poster advised, be like Buffett and buy great companies at good prices and hold them for decades.

Quote:

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be like Buffett and buy great companies at good prices and hold them for decades.

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Recently found out that Buffett has plans to donate the bulk of his fortune to the Bill & Melinda Gates Foundation.

$30 billion is what I heard.

I prepare by just continuing to do what I'm doing. I mean nobody knows the unknown.

But at the end of the day the market isn't a vacuum, which people act like it is. They say things like stocks are going to tank but will then say home values are never going down.....

Same just goes for the market in general. All I can control is myself. Don't overextend, be prepared, and keep plugging away at saving. I know I've saved more than most Americans. If the market goes to such **** that I'm screwed, so be it. We'll be in the same boat as everyone else and just have to figure it out. Not much I could've done different outside of not enjoying life at all....

htxag09 said:

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I prepare by just continuing to do what I'm doing. I mean nobody knows the unknown.

But at the end of the day the market isn't a vacuum, which people act like it is. They say things like stocks are going to tank but will then say home values are never going down.....

Same just goes for the market in general. All I can control is myself. Don't overextend, be prepared, and keep plugging away at saving. I know I've saved more than most Americans. If the market goes to such **** that I'm screwed, so be it. We'll be in the same boat as everyone else and just have to figure it out. Not much I could've done different outside of not enjoying life at all....

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True, and good mindset, but I think a hedge would be to own real assets like home/land/gold.

and guns...

Too much riding on the US stock market, don't think it will fail.

Ghost of Bisbee said:

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Can someone paint a scenario where the housing market crashes in the next 5-10 years? I don't see it. Low supply, high first time home buyer demand, and inflation that isn't curtailing anytime soon.

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The scenario is painted for you. Look at blue states, that's where you'll see crashes, if they're not already occurring there.

RE is still one of the best investment vehicles you can get do, whether on your own or through passive investing.

Meanwhile, if you're not in MLP's, you're missing out.

What I'm thinking is try to have a retirement portfolio that pays 4% d & I and then any appreciation is lagniappe. Trying to assess if that's realistic or
Not.

You can always claim it's bleak and can always think your generation is facing such a tough time.

I finished at A&M in 2001. 9/11 had just happened and the economy was frozen. I had a 3.9 in finance and had to work the Aggie network HARD to land ANY job in finance. The dot-com bubble of the late 90's was over and tech was "dead".

I finished my MBA in May 2008. The fall of 2008 Lehman collapsed. Housing crisis ensued and the great recession commenced. I bought a house in summer 2008 (at what I thought was a discount) that I immediately lost another 20-25% in value on. (Now it's 2X what I paid.)

The equities market has been on a run since 2008. A number of times people said it was over. They've all been proven wrong.

It's a tough time to buy a house for sure. 7-8% mortgage is more expensive but my parents' first mortgage in the 1970's was 14% (so it could be worse).

The equities market is at a healthy valuation. Buy some bonds with equities now. When interest rates are cut (ZIRP will probably come back over the next 5-10 years), you'll do even better on your return than the stated interest rate.

It takes time and hard work but you can do it. Nobody wants to hear your whining about how you've had it harder than anyone before you.

IslandAg76 said:

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The market will go down, sometimes a lot and then the market will go up, ALWAYS a lot

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FIFY