Distrust of Market

fasteddie911 · Post by **fasteddie911** » Sat Jul 30, 2011 9:02 pm

Hi,

I am ERE follower here, not to the extreme as some of those around here, but I enjoy the ideas shared and they reflect my personal views as well. Now, I had a question about investing. I have some stock investments and such, however as time has passed especially in recent years, I have become more and more distrusting of the stock market and the people who run it, which now seems to be the government and speculators. Often times our retirement funds are so dependent on this stocks, but yet they seem so out of our control. I'm not the most knowledgeable when it comes to stocks and stuff, but one of my views on ERE, and it may not be a common views, is "detaching" from the system, so that no matter what happens outside, I would be affected as little as possible and I control my life as much as possible. So this could include things such as gardening, solar power/heating, and investing. I am just thinking out loud here, but what are your guys thoughts on this?

JohnnyH · Post by **JohnnyH** » Sat Jul 30, 2011 9:43 pm

I distrust the market also... But not as much as I distrust the dollar!

The permanent portfolio might be a good match for you.

teewonk · Post by **teewonk** » Sat Jul 30, 2011 9:43 pm

Jacob wrote a good article about this.

http://interestingtimesmagazine.com/archive/IT07.pdf

Starts on page 34.
Several people on the forum are landlords, which isn't really detachment, but it seems to give you more control than with stocks.

sky · Post by **sky** » Sun Jul 31, 2011 3:00 am

If you don't like stocks and corporations, rule number one is to own your own home and property free and clear. Use your property to grow and preserve food.
Second is to own and/or operate a small business that provides a desired and needed service, preferably one that can operate under the radar and doesn't take all your time.

KevinW · Post by **KevinW** » Sun Jul 31, 2011 6:52 am

A good investing guideline is to never invest in something you don't understand. So I wouldn't invest in stocks until you feel like you're comfortable with how they work.
Another guideline is to diversify. In general it's difficult to keep investments under your direct control while also being diversified. For example a portfolio of rental houses in your vicinity could be wiped out by a natural disaster, or a new unfavorable law.
Zvi Bodie advocates investing only in TIPS bonds ( http://www.zvibodie.com/Worry_Free_Investing ). This avoids stock market risks, and instead bets the farm on the government's CPI calculations being fair and accurate.
Any investment involves some kind of risks. The million dollar question is, which risks should you personally take on? Pick your poison.
I agree that the permanent portfolio is a good way of earning moderate returns while keeping the stock market on a short leash. It may be a good match for you.

fasteddie911 · Post by **fasteddie911** » Sun Jul 31, 2011 8:12 pm

Thanks for the thoughts. It seems that unless you're truly self sustainable, the only way to make a return on your money is thru some type of risk, whether its real estate, business, or the stock market. I have considered at times to using just CD's, but with rates the way they are now, I'm not so sure about that. But again I was just thinking out loud and I'd still love to hear others thoughts on this matter.

SF · Post by SF » Sun Jul 31, 2011 10:02 pm

Zvi Bodie advocates investing only in TIPS bonds ( http://www.zvibodie.com/Worry_Free_Investing ).

Also in his book is this intriguing strategy to participate in the broad market with limited downside risk:

with 90% of your portfolio, buy stable investments: TIPS, or CDs, or mix the two

with the remaining 10%, buy LEAPS, or SPY or VTI future options that expire in one year

If the market does well, you get a payout from the options. If the market falls, your worthless options expire, but you still have 90% of your investment.
Rebalance when the options expire.
It's really simple, so it does make some simplifying assumptions. It assumes that the chances of the market rising a greater than falling, otherwise you'd want to buy a put on the market.
It probably beats the "buy high, sell low" strategy of emotional investing that many investors take.