06-04-2014, 04:24 AM
I'm confused 
Allow me to to present 2 scenarios which I think are likely:
Let's assume the market will rise another 5% and then fall 10% in 6 months (which I think is realistic)
Scenario 1:
I purchase stocks worth of $10,000 in companies with yearly dividends of 3% today and growth potential.
During the next 6 months the stocks rise for 5% to (10,000+500=) $10,500 and I receive dividends of 1.5% totaling $150.
After 12 months the stock market dives the 10% and my stocks are worth (10,500-1,500=) $9,000
Add to that the $150 dividends and my net worth is $9,150.
Scenario 2:
I stick to mutual fund based on bonds (like I did in the past decade) with valuation decrease of 1.2% and gain 3% yearly interest without growth potential.
After 6 months my bonds are worth (10,000-60=) $9,940 and I received interest of 1.5% totaling 150$.
My net worth at this scenario is (9,940+150=) $10,090.
At this point I can purchase more stocks from the same companies I had in scenario 1
Am I missing something in my calculations?
I punched in the following numbers in an excel worksheet:
1. stocks value increase 5% per year. (what I expect from the stocks)
2. Dividend rate 3% (what I expect from the stocks)
3. Bonds value decline of 1.2% per year (what I have now)
4. Bonds interest rate 3% (what I have now)
5. A dive of 10% in stock price at the (semi-)near future.
According to my calculations if the stock market will dive those 10% before February 2016 than I'm better off sticking with bonds.
At February 16th my 'stocks scenario" net worth will be $10,327.91 while my "bonds scenario" net worth will be $10,321.67.
If I'm reading this right than I need to decide if I believe that the market will take the 10% dive within 19 months from today or not.
So my question is, with the market as it is now, who believes it'll take a 10% dive in the next 18 months?
Allow me to to present 2 scenarios which I think are likely:
Let's assume the market will rise another 5% and then fall 10% in 6 months (which I think is realistic)
Scenario 1:
I purchase stocks worth of $10,000 in companies with yearly dividends of 3% today and growth potential.
During the next 6 months the stocks rise for 5% to (10,000+500=) $10,500 and I receive dividends of 1.5% totaling $150.
After 12 months the stock market dives the 10% and my stocks are worth (10,500-1,500=) $9,000
Add to that the $150 dividends and my net worth is $9,150.
Scenario 2:
I stick to mutual fund based on bonds (like I did in the past decade) with valuation decrease of 1.2% and gain 3% yearly interest without growth potential.
After 6 months my bonds are worth (10,000-60=) $9,940 and I received interest of 1.5% totaling 150$.
My net worth at this scenario is (9,940+150=) $10,090.
At this point I can purchase more stocks from the same companies I had in scenario 1
Am I missing something in my calculations?
I punched in the following numbers in an excel worksheet:
1. stocks value increase 5% per year. (what I expect from the stocks)
2. Dividend rate 3% (what I expect from the stocks)
3. Bonds value decline of 1.2% per year (what I have now)
4. Bonds interest rate 3% (what I have now)
5. A dive of 10% in stock price at the (semi-)near future.
According to my calculations if the stock market will dive those 10% before February 2016 than I'm better off sticking with bonds.
At February 16th my 'stocks scenario" net worth will be $10,327.91 while my "bonds scenario" net worth will be $10,321.67.
If I'm reading this right than I need to decide if I believe that the market will take the 10% dive within 19 months from today or not.
So my question is, with the market as it is now, who believes it'll take a 10% dive in the next 18 months?