Fund Trader Pro, LLC
Chief Investment Officer
William 'Bill' DeShurko started in the investment industry in 1987, learning early the financial perils of bear markets during Black Monday (October 1987) when the DOW dropped more than 20% in a single day. That lesson has guided Bill's investment strategy ever since. During the "Tech Wreck"in 2000 - 2001, frustrated by the losses in typical "buy and hold/diversified" portfolios, Bill created the computer based algorithm used today at www.FundTraderPro.com. The strategy behind the algorithm was tested using data from 1972 - 2005 by Professors Samuel L. Tibbs and Stanley G. Eakins. The results were co-authored with Mr. DeShurko and resulted in the paper, "Using Style Index Momentum to Generate Alpha" that won the Charles H. Dow Award in 2007. The Charles H. Dow Award is the most prestigious annual award given for the best paper that advances technical analysis in the year. The award is granted by the Market Technicians Association, the home of the Chartered Market Technician® (CMT) Program, the preeminent, global designation for technical analysis.
His blog can be found at: www.deshurkoblog.com
Author of: "The Naked Truth About Your Money" a primer for the Millennial Generation and all new investors to help with making responsible financial decisions. Available at: https://www.amazon.com/Naked-Truth-About-Your-Money/dp/1592576508/ref=sr_1_1?ie=UTF8&qid=1485467128&sr=8-1&keywords=deshurko
Contributor to multiple financial news sites including; www.HorsesMouth.com, www.MarketWatch.com. www.Kiplinger.com, www.theStreet.com and more...
Bill is also a board and finance committee member for Homefull Inc. a non-profit group seeking to end homelessness in Dayton Ohio.
Managing Member and owner of 401 Advisor, LLC a registered investment advisor, since 2004
BA. Economics, University of Rochester
The opinions expressed are those of Bill DeShurko. Past performance is not a guarantee of future success. Consider all risks before investing and it is always advisable to consult with a professional before making investment decisions.
AI Marketing Video Bill DeShurko
Not only are taxes lower on dividends then an IRA withdraw, but think of it this way; if you take regular distributions from a mutual fund within your IRA, what happens if the market declines? You would be liquidating shares of your mutual funds to meet your distribution requirements. This depreciation accelerates the lower and longer the market declines. When the market does recover, your account will be worth less than what you started with because you have fewer shares.
On the other hand, if you have a portfolio of solid dividend stocks, you can live off your dividends and not sell any shares of stock even during a market downturn. When the market recovers, your portfolio should too.
Even though you lose the tax advantage, I recommend using dividend stocks in your IRA as well and match your distributions to the portfolio's dividend yield.
How about both? Invest in a portfolio of stocks that pay a dividend and have historically increased their dividend over time. Receive the dividends as cash and use the added income to pay extra on your mortgage, or reduce your out of pocket mortgage expenses. In the end, you will have a paid off home AND a nice portfolio.
If only it were that easy everyone would be driving a Mercedes! Just for background info understand that anyone can create an index...and sometimes I think about everyone has. An index is simply a rules based systematic way of buying and selling a specific set of investments. An index fund then replicates the buy and sell rules created for the index. Most Exchange Traded Funds are based on some index.
Index funds are generally inexpensive, a big plus. But the most popular index, the S&P 500 is also very volatile. Yes it is doing great now...but only a fool would invest assuming it will do nothing but go up in value into the foreseeable future. From 2000 - 2002 the S&P 500 dropped about 50% and again from 2007 - 2009. A holder of the index on January 1, 2000 did not see their account show a permamnet gain until 2013! Despite this, the S&P 500 has historically outperformed other asset classes over the very long run - 20 year+ periods of time. Just want to make sure you understand the risk before jumping in.
One way to lower your risk is to dollar cost average into the index. One way to do this would be to move money into a savings account. Open an account directly with Vanguard, and make an initial investment into their S&P 500 index fund. On the application you can sign up for systematic investments. Have them take an amount from your savings account every month to invest in the fund. I would divide the amount you want to ultimately put in the fund by 36 and have that amount invested monthly over the next three years. If the market crashes you'll have cash available to buy in at the bottom.
For someone in your situation that invested $75,000 in a lump sum in 2000 in an S&P 500 Index fund, they had lost roughly half their investment by the end of 2002, regained their balance by 2007, lost over half again by 2009 and then finally regained their balance in 2013. If that is an acceptable possible outcome then go ahead and invest!
There are many ways to invest and mitigate risk...and yes with such low-interest rates it is hard having that much money earning so little. At a minimum keep any money you will need to pull out in a lump sum in the next 5 years in savings. You need to find an advisor that will help you invest a portion of your funds in a low-risk portfolio. One strategy we use to moderate risk is to buy stocks that pay dividends, and paid and actually increased them during the above-mentioned market turmoil. Here is a link to a definition of the Dividend Aristocrats - a good place to start: http://www.investopedia.com/terms/d/dividend-aristocrat.asp
An easy way to invest in these high-quality stocks is through an ETF by ProShares that does it for you, ticker symbol is: NOBL With this strategy the value of your portfolio will go down in a correction, but based on 25 years of history, your income from dividend payments will likely increase even through market drops.
Reinvest, reinvest, reinvest!! Albert Einstein is usually credited with saying that compound interest is the eighth wonder of the world. By reinvesting your dividends, you take advantage of compounding interest. Don't argue with Albert.