Ask HN: What kind of personal financial investment do you do? • Hacker News Board

Re: Ask HN: What kind of personal financial investment do you do?

#131

Post by krschultz » Wed, Feb 09, 2011, 6:26 PM UTC

I put exactly what my employer matches into a 401k (which for me is 6% of my pre-tax income, including bonus). In that account I'm 50% in a S&P500 index and 50% in a small cap index. I only have a few other options (cash, the company stock, 3 crappy mutal funds, a bond fund) that I don't like so I skip them.

Anything beyond that I go for a regular IRA, although previously I had gone with a Roth IRA when I had a lower salary. The Roth has the advantage of being more flexible (use it on a house, education, medical expenses), but now that I'm in a higher tax bracket I just use the IRA and hope when I'm retired my tax bracket is lower.

I would NOT convert between an IRA and a Roth. In doing so you are betting that you will be paying higher tax rates in retirement than you are today employed.

This may on the surface look like a good bet considering the deficit, but it probably isn't. Nobody seems to have the stomach to lower taxes on the lower/middle class, and that's where you will be in retirement. Right now a couple options being floated are to eliminate all deductions and lower rates or to add more brackets at the top end and soak the rich, either way you are just as likely to be paying lower taxes in retirement as you are to paying hgiher. But one thing is sure, if you convert, you pay a lot of taxes now.

Re: Ask HN: What kind of personal financial investment do you do?

#132

Post by stewiecat » Wed, Feb 09, 2011, 6:33 PM UTC

tastybites wrote: post #64

What I'm about to say might be controversial. It goes against the grain of the 'Look at me I'm so frugal' meme/arms race here on HN. The financial crash of 08/09 left such a bad taste in my mouth (as in I lost many tens of thousands of dollars) that I have completely lost faith in the stock market and anything associated with it such as ETFs, mutual funds, 401k, etc. Getting a 'real' job and putting money into my ret…

Retirement savings is the longest-term of all long-term investments.

My 401K got torn to pieces during this recession. My first reaction was "How can I buy more?". That's when I started maxing out the 401K and buying additional stock in the form of index funds. Those actions have made my personal recovery from the market plummet much quicker with the upside that I now own stock with a lower dollar-cost-average.

Re: Ask HN: What kind of personal financial investment do you do?

#133

Post by tastybites » Wed, Feb 09, 2011, 6:42 PM UTC

stewiecat wrote: post #132

tastybites wrote: post #64

What I'm about to say might be controversial. It goes against the grain of the 'Look at me I'm so frugal' meme/arms race here on HN. The financial crash of 08/09 left such a bad taste in my mouth (as in I lost many tens of thousands of dollars) that I have completely lost faith in the stock market and anything associated with it such as ETFs, mutual funds, 401k, etc. Getting a 'real' job and putting money into my ret…

Retirement savings is the longest-term of all long-term investments. My 401K got torn to pieces during this recession. My first reaction was "How can I buy more?". That's when I started maxing out the 401K and buying additional stock in the form of index funds. Those actions have made my personal recovery from the market plummet much quicker with the upside that I now own stock with a lower dollar-cost-average.

If I didn't lose my job things would have been different - I possibly would have bought more.

But remove that cashflow and the options start to dwindle.

Re: Ask HN: What kind of personal financial investment do you do?

#134

Post by scottkrager » Wed, Feb 09, 2011, 6:43 PM UTC

jessriedel wrote: post #115

tricky wrote: post #21

we (married) drive shitty cars. our 401k's are maxed out. I shop around for the best savings account rate. I wind up changing banks every year or two. I pick stocks and hold for the LOL's. Currently getting a 12% APY on about $5000 invested. No real plan and not interested in dumping a ton of money there. It's just more interesting than the casino. We bought the house we're going to die in. paying it off asap. After…

What saving account rates have you been able to find lately? My bank in CA offered a checking account with 5% interest back in 2007, and it's only down now to 3.5%. Most people I talk to say these are very high rates. Can I do better?

3.5% is insanely high right now.

I'm 100% sure that is a promotional rate.

Re: Ask HN: What kind of personal financial investment do you do?

#135

Post by Xurinos » Wed, Feb 09, 2011, 6:51 PM UTC

tricky wrote: post #125

jessriedel wrote: post #115

Earlier quoted context omitted.

What saving account rates have you been able to find lately? My bank in CA offered a checking account with 5% interest back in 2007, and it's only down now to 3.5%. Most people I talk to say these are very high rates. Can I do better?

That is amazing. What bank is it? Right now the best I can find is a 1.1% money market savings account. Another thing to consider is the banks that offer cash to open an account. I put $2500 in a new ING Direct account for 6 months and they gave me $50

Check your local credit unions. The competition between them and banks has been amazing.

Re: Ask HN: What kind of personal financial investment do you do?

#136

Post by jlhamilton » Wed, Feb 09, 2011, 6:55 PM UTC

rabidsnail wrote: post #81

tastybites wrote: post #64

What I'm about to say might be controversial. It goes against the grain of the 'Look at me I'm so frugal' meme/arms race here on HN. The financial crash of 08/09 left such a bad taste in my mouth (as in I lost many tens of thousands of dollars) that I have completely lost faith in the stock market and anything associated with it such as ETFs, mutual funds, 401k, etc. Getting a 'real' job and putting money into my ret…

Your time horizon is too short. If you had left your money where it was instead of taking it out at the first sign of danger then it's likely you would have made it all back by now. There's a lot of volatility in the stock market (that's why the returns are higher than savings, money markets, etc), but the spikes and dips average out if you're thinking in terms of decades and not months. That's not to say that your s…

There is a chart at http://www.nytimes.com/interactive/2011/01/02/business/20110... that shows the average annual return for an investment in the stock market broken down by year of the start and end points. The returns are high if you invest early in a bull market and sell before the next crash, otherwise the returns are rather low. The conventional wisdom that holding stocks for several decades and getting annual returns of 7% or more seems wrong.

Re: Ask HN: What kind of personal financial investment do you do?

#137

Post by georgieporgie » Wed, Feb 09, 2011, 6:55 PM UTC

Here's what I do, and hence my advice:

* Maximum contribution percentage to a 401k, whenever possible.

* Maximum contribution to a Roth IRA. The 401k reduces your AGI, allowing this until you reach quite a nice income level. Even during unemployment, I contribute to my Roth IRA.

* Reduce fees! 0.25% interest is wiped out by a single $9.95 fee. I've moved to Charles Schwab for personal money, since they have no balance fees, decent investment options, and they fully refund all ATM fees around the world. I've rolled over old 401k's into a Vanguard IRA, since Vanguard has the lowest fund management fees in the industry.

* Don't be jumpy. If you're like me, you're actually horrible at individual stock investment. So, stick to mutual funds, and only look at them and reinvest once or twice per year. I suggest looking at targeted retirement funds (like the Vanguard 2040 that I use), and index funds.

* Keep 1 - 2 years of cash on hand. Everyone used to laugh at this figure, since who would be unemployed that long? That cash means that, instead of sitting at home, waiting for the market to improve, I was able to sell my stuff and spend extended periods traveling.

Most of you on HN are quite young. The younger you are, the more valuable it is to begin investing right now. Hell, if you're 17, do everything you can to throw $500 into an IRA. Even if you're working at McDonald's and dreaming of a startup, you can use an IRA contribution to cut your taxes.

Re: Ask HN: What kind of personal financial investment do you do?

#138

Post by georgieporgie » Wed, Feb 09, 2011, 6:58 PM UTC

tastybites wrote: post #133

stewiecat wrote: post #132

Earlier quoted context omitted.

Retirement savings is the longest-term of all long-term investments. My 401K got torn to pieces during this recession. My first reaction was "How can I buy more?". That's when I started maxing out the 401K and buying additional stock in the form of index funds. Those actions have made my personal recovery from the market plummet much quicker with the upside that I now own stock with a lower dollar-cost-average.

If I didn't lose my job things would have been different - I possibly would have bought more. But remove that cashflow and the options start to dwindle.

Even without a job, I contributed what I could to an IRA. The $1500 I contributed in 2009 was roughly equivalent to $3000 contributed in 2007...

Re: Ask HN: What kind of personal financial investment do you do?

#139

Post by jbooth » Wed, Feb 09, 2011, 6:59 PM UTC

ydant wrote: post #100

tocomment wrote: post #67

Earlier quoted context omitted.

self storage building? What's that?

Self-storage might be a US phenomenon. It's basically someone building a bunch of windowless locked garages of varying sizes (some the size of a small closet, some bigger than a car) for people to store their excess stuff. The price per square foot is pretty high, and a lot of people will rent for years - never even interacting with the stuff. If the renter defaults, the storage company typically (through contract) o…

A high school friend of mine's dad made an entire career out of buying the crap from those storage contract defaults and re-selling it. Has his own furniture business and everything now.

One time he got a corvette. Dissassembled, inside a storage shed.

Apparently the way it works is they open the door and let you look in, but you can't actually go inside and see what's in the boxes or whatever. So it's kind of like gambling, bid on a room and hope you find something good to resell.

Re: Ask HN: What kind of personal financial investment do you do?

#140

Post by georgieporgie » Wed, Feb 09, 2011, 7:00 PM UTC

pragmatic wrote: post #44

1. Get an decent amount in _cash_ savings ($10K) 2. Payoff all debts (including house and student loans) 3. Only invest in stock market through IRA's where there is a tax advantage. 3.1 Only invest in company 401(k) to get the match. 3.2 Invest the max in Roths (if you qualify) 3.3 Find an index fund and forget it. You've got better things to do then worry about stock picking. (I suggest Vanguard, it's investor owned…

> 3.1 Only invest in company 401(k) to get the match.

Why? The advice I've read is, "invest at least the amount that your employer will match." (i.e. free money) But I've never heard anyone recommend not investing more than that in a 401k.