General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region Forumsa question about stocks
A few years ago, my retired father rolled his 401K into a Roth IRA. He also has an Edward Jones account he inherited from my grandmother upon her death. He thinks if there's a default, the stocks will temporarily drop until the situation resolves, then bounce right back. I'm not as confident. I don't know that much about stocks and how a government default could affect them. Is he right? Am I being overly paranoid?
blkmusclmachine
(16,149 posts).
jhasp
(101 posts)If your father is past the normal retirement age (mid-60s), he really shouldn't have much exposure to the stock market, especially if he currently relies on returns for his income. That being said, the bond market is not attractive right now because when (not if) rates rise, the values of the bonds will decline. A drop in the stock market is actually a good buying opportunity for high dividend yield stocks.
I am invested in the stock market and have a background in finance (masters and PhD), I'm in my late 30s and am not selling over the potential loss from a default. A default is very, very unlikely. The US has never defaulted on its debt and the rich and powerful (political donors) would lose a lot of money if the US did default, so it isn't likely to happen.
grantcart
(53,061 posts)the issue is if there were to be a calamitous event you are not going to have the long time needed to recover.
He would be well advised to get a financial adviser that can give him advice on a fee for service basis and doesn't sell any financial products.
Response to grantcart (Reply #3)
steve2470 This message was self-deleted by its author.
Warpy
(111,327 posts)and told myself that the worst reason for any financial decision was panic. They sold near the bottom of the market and I did nothing. They were then faced with the misery of trying to buy back what they could as the market improved under Obama, losing money in the process both from the loss of price, the cost of buybacks, and the loss of income from those stocks.
I'm in the enviable position of wondering where I'd stash the money if I did get out. T-bills? Republicans talk openly of default. Bonds? More talk of default. Banks? They're still gambling in the derivatives casino, so they're not terribly robust. Credit unions? They're tied to banks and if the bank goes, so do they. Plus I'd lose my income while I was out of the market.
So I'm staying in, hoping Obama will cite the 14th Amendment and we won't default. I'm also hoping that saner voices will prevail so it isn't necessary, but who in that party is completely sane?
SheilaT
(23,156 posts)to ask what she should do about her investments. Sell? Sell everything?
The stock market never opened that day, and remained closed until the next Monday. In that first week after 9/11, the stock market lost a lot of value. All of which was made up within 30 days. So those who panic sold probably lost.
If you want to panic sell, go right ahead. Others will profit quite nicely from your panic.
geek tragedy
(68,868 posts)B Calm
(28,762 posts)tjwash
(8,219 posts)The Edward Jones accounts are usually tied into brokerage houses and traders, in which a third party does all of the selling / trading for them. Normally the stock would bounce back after the default gets resolved though.
Now, if were a less than honest trader, and were absolutely sure that the government were to default which would cause the market to dive, they could roll all of your Dad's stock in his account into blue-chips, and then short them right before the default, and then buy them all back and pocket the extra shares and place the same amount of original shares back into his account and no one would be the wiser.
I don't really like third party stock traders.
former9thward
(32,065 posts)Those accounts are online and can be checked by the holder 24/7. So yes, someone "would be the wiser".
SheilaT
(23,156 posts)Including the stock market. Someone has misinformed you to tell you otherwise.
B Calm
(28,762 posts)sent to me each month and my money is still growing. Seriously, he should talk with a financial adviser about income funds!
taught_me_patience
(5,477 posts)This won't go on for very long. Business leaders will start putting the screws to the republicans to cave.
geek tragedy
(68,868 posts)former9thward
(32,065 posts)That is true of any investment asset. Any downturn related exclusively to a default will not last long. That does not mean stocks will not go down for other reasons. But if you worry about them dump them.