71–80 of 259 posts
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Ten years ago a lot of people learned that housing is not as safe as they thought.
It actually is. You just can't be over-leveraged. The bank will give you waaayy more money than should ever responsibly be taken. Combined with emergency savings, you are quite safe as a homeowner.
You don't build wealth by saving. You do it by investing using leverage. The system subsidises debt and risk-taking (within limits) by inflation and the structure of the tax system. You need to let go of the idea that it is immoral. Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good). Use your income to take on…
> You don't build wealth by saving. You do it by investing using leverage. For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"
You have to look at real rates, not nominal rates. The only markets that have negative nominal rates are battling deflation (which the US is not) or have serious liquidity concerns at the moment. The Fed is unlikely to go negative as they face a very different beast. Here's a quick example. Let's say you're in a deflationary environment: in 1 year, your money actually buys you more than it did last year, let's say fo…
> in 1 year, your money actually buys you more than it did last year, let's say for instance, 2% more. Under this weird environment It's worth pointing out that this is not "weird", but rather the natural state of things! The effect is so strong in computing that we still see it, but technological progress means everything in general gets easier to produce. This policy that "prices must always go up" is itself the ab…
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> There are nearly risk-free methods of making investment returns Do you have suggestions for these?
Spot-Futures arbitrage, especially if your brokers allows you to collateralize your futures position with the profits from your spot position which would allow for higher leverage on the futures side. Let's say the futures price is higher than the spot price and there is 3 months left until maturity. You sell the same (USD equivalent) amount in the future (expensive) and buy in the spot (cheap). You just made a profi…
Buy a house and some stocks in growth sectors.
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That's because you don't understand finance. Leverage is the easiest way to make a larger percentage on your money, as long as it's used prudently. Borrowing money to buy real estate and then collect income is a very common way to leverage your money. Over time that builds real wealth. My friend has bought 5 properties and is renting them all out. When he retires, the properties will have been paid for, and the renta…
> Borrowing money to buy real estate and then collect income is a very common way to leverage your money. Over time that builds real wealth. My friend has bought 5 properties and is renting them all out This only "builds real wealth" for one person. For the larger system consisting of all 6 people, it's a net loss (the interest payments are still leaving, upwards). We've built a financial system where it is in everyb…
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Warren Buffett talks about how cash is a bad thing to have over time as it can’t keep up inflation (1). He does advocating having enough on hand to “sleep at night”. But you really can’t build wealth by stocking money away in a savings account. Trump and his administration could have really done something awesome. He essentially got given the golden ticket for presidents: create a legacy. T. Roosevelt had parka, FDR…
In the meantime Buffett currently holds more cash than just about anyone else on the planet - over $120 billion in cash equivalents at the end of last year. Yes, his point that cash loses its value over time is true. No, he didn't get to where he is just by holding cash. Yes, your situation and mine are vastly different from Buffett's. But it just shows that things aren't as simple as "cash=bad".
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Not really binary bets or\day trading are gambling, if you can afford it and have spare cash it would make sense over the long term to invest - though not in individual shares for most. As Benjamin Graham said “Buy when most people, including experts, are pessimistic, and sell when they are actively optimistic.”
My parents retired a year ago. If they'd kept all their money in the stock market until this month they'd be in a lot of trouble, and probably will be for the foreseeable future - how is that not a gamble? "You need to diversify" would be an argument against gambling in the stock market, and getting into something safer.
It absolutely will put you at a huge disadvantage, through no fault of your own. The whole point is to transfer money from savers to debtors.
And, there's no getting away from it, unless you take on large risks. The govt is pushing for more and more inflation. We've already had high inflation for the last couple of years of over 2%, and they're still pushing for more inflation. The only way to protect your money is to get into real assets like real estate and equities. Yes, that entails a lot of risk.
You have to look at real rates, not nominal rates. The only markets that have negative nominal rates are battling deflation (which the US is not) or have serious liquidity concerns at the moment. The Fed is unlikely to go negative as they face a very different beast. Here's a quick example. Let's say you're in a deflationary environment: in 1 year, your money actually buys you more than it did last year, let's say fo…
I'd just put it in a safe, and work from home with guns by my side. Saves the extra 0.5%. Rest of my money is in equities anyways, so I really only need the "emergency savings" in cash. (Obviously big businesses can't do this.)
Earlier quoted context omitted.
Warren Buffett talks about how cash is a bad thing to have over time as it can’t keep up inflation (1). He does advocating having enough on hand to “sleep at night”. But you really can’t build wealth by stocking money away in a savings account. Trump and his administration could have really done something awesome. He essentially got given the golden ticket for presidents: create a legacy. T. Roosevelt had parka, FDR…
In the meantime Buffett currently holds more cash than just about anyone else on the planet - over $120 billion in cash equivalents at the end of last year. Yes, his point that cash loses its value over time is true. No, he didn't get to where he is just by holding cash. Yes, your situation and mine are vastly different from Buffett's. But it just shows that things aren't as simple as "cash=bad".