111–120 of 172 posts
Still chuckling about Bucheit's suggestion of spreading cash out into a huge number of FDIC-insured savings accounts -- "Think of it as RAID for your cash" he says, as I recall.
From Andy Rachleff, Vice Chairman, University of Pennsylvania endowment investment committee President & CEO, Wealthfront Inc.: Financially sophisticated individuals start with an asset allocation. For someone under 40 you should probably allocate around 30% of your assets to fixed income securities (probably half in treasuries and half in TIPS) and the remainder in securities that have more appreciation opportunity…
By the way, when buying TIPS (or any kind of Treasurys), you are basically saying "Yes, I like the fact that the USA is deep in debt and I want it to go more into debt rather than balancing its budget!" That is what Treasury bonds are -- the USA borrowing money from you and promising to pay it back. This is where the debt comes from! Somehow I do not think many people realize this...
I am kind of shocked by the uniformity of answers here, so I will add a dissenting voice. In the current economic climate, it is pretty much a waste "investing" in anything until you have, say, an 8-figure sum in cash laying around doing nothing. I don't have that, so I am not bothering with "investing". I put "investing" in quotes because I feel the word tends to be perversely used; people really mean speculation, t…
>In the current economic climate, it is pretty much a waste "investing" in anything until you have, say, an 8-figure sum in cash laying around doing nothing. Why do you say that? It is clear that money can be made investing with less than an 8-figure sum. For instance, the Vanguard S&P500 index fund returned 22% last year and 10.66% since its introduction in 1976. The fund minimum is $3,000.
Yes, money "can" clearly be made investing, if you time the market and are lucky. I am disputing the idea that stocks will always generally go up. I think this used to be true but may have changed. Much like "housing prices always go up", which was shown to be absurd.
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…
Earlier quoted context omitted.
I know your comment was all in dollars and this is probably generally an American topic. But regarding number 2, in England a student loan is the lowest interest loan you will likely ever get, so it's naive to pay it off in bulk; you might need to take out a real loan one day so keep the money, and even in today's climate you can probably put that money to good use.
That goes likewise for his "pay off your mortgage" advice. If your note is 4.5% and here in the US mortgage interest is tax deductable making your nominal interest rate even lower. So the calculation becomes... paying off that mortgage is like getting a guaranteed 4% return on your money. But there are many low-risk vehicles that can eclipse that. It's possible that you'd want to take that guaranteed 4%, but it's not…
In other words, show me a zero risk 5% vehicle and I'll stop trying to pay off my mortgage immediately.
edited for a dumb mistake....
I am kind of shocked by the uniformity of answers here, so I will add a dissenting voice. In the current economic climate, it is pretty much a waste "investing" in anything until you have, say, an 8-figure sum in cash laying around doing nothing. I don't have that, so I am not bothering with "investing". I put "investing" in quotes because I feel the word tends to be perversely used; people really mean speculation, t…
Your long rant basically says don't invest money at all, just keep cash in your mattress? Who in their right mind would follow this advice? Let's say we don't worry at all about saving money, and just funnel our energy into "creative endeavors." If those creative endeavors are profitable, what are you going to do with the money? It doesn't take a lot of energy to setup a 401k or Roth IRA. It doesn't take a lot of ene…
If creative endeavors are profitable, you can use the resulting money to fuel more creative endeavors, thus making the world a better place. Keeping money in a bank account or publicly-traded stock does not particularly make the world a better place.
Once I got approximately into the f-you money level of income, it became crystal clear how fictitious money is in the first place. I wake up one morning, and bam, I am wealthy! Why? Because someone said so and typed a number into a computer. Okay... that's kind of weird.
Given that money is so fictitious and somewhat meaningless, it is a shame to give into primal hoarding impulses, just so one can see the number in one's bank account go up like a high score in a video game. It's much better to make like Elon Musk and use your money for what it is: a way to wield influence to make the world more like you would like it to be.
1. I have a family (meaning I have more costs and more immediate investments I need to make, for example in the education of my children)
2. I believe that investing in my own company where I control the money and the effort involved has a vastly superior return than investing in a company that already had an IPO. There's no way those companies do the return on my funds, like my company does, if for no other reason than that they are already through their major growth phase (they already IPO'd). Add to that the level of control I have in my own thing, and it's clearly advantageous to invest there.
3. I believe stock purchases are akin to gambling. This expands my universe of possibly investments to other forms of gambling. It turns out that with some knowledge and practice it's possible to tilt the odds in your favor.
Given these rules and considerations I have a threefold investment strategy:
Cash is king. I keep large cash deposits available at all times, both in actual cash and in the bank. I invest a regular amount of my earnings from my job into my side business and my side business provides excellent returns and I've developed a way to scale those returns that I'll be testing this month (the ability to use in a leveraged way the money I invest into my side business, but with a higher maximum cap than I could reasonably put into the business). For my high risk, high reward "investment" I cut out the stock market altogether and literally go to a casino.
I suppose the final part of my portfolio might be the most surprising to HN. I can report that I've had excellent results in the casino. Sustainable advantage playing is possible. In 2009, I bought a vehicle outright with the proceeds from this portion of my portfolio.
If I didn't have a family, I'd be doing a more aggressive version of this where I'd have larger cash holdings (no family = way more money left over every month), I'd invest more in my side business, and I'd risk more at the casino.
Your goal should be to produce a machine that makes you money without your involvement, normally this is called a business, but if you have enough money, then the money itself can be this machine (through interest). To have that amount of money where it is sustainable requires roughly $4 million in cash (I've seen this number other places, the fabled "FU" money). It my belief that it's much easier to build a business that produces say $100k a year with minimal involvement on your part than it is to produce $4 million in cash (though it should be noted that if you produce a business that produces that much profit you're on your way to being able to trade it for $4 million in cash).
Earlier quoted context omitted.
By the way, when buying TIPS (or any kind of Treasurys), you are basically saying "Yes, I like the fact that the USA is deep in debt and I want it to go more into debt rather than balancing its budget!" That is what Treasury bonds are -- the USA borrowing money from you and promising to pay it back. This is where the debt comes from! Somehow I do not think many people realize this...
There is zero default risk in US Treasuries because the government has the capability of printing more money. Can you name any other type of bond or fixed income that has zero default risk?
I'm curious to hear from those of you who deal with investment real estate, either self-managed or handled by a property management company.
The expected cap rate (annual rent / purchase price) in on both the East Coast and West Coast is roughly 5-7%. In places like Texas and Ohio, the cap rate is roughly 10% Since a "competent" property manager (like myself =P) usually charges about 10-15% of gross rent, this means your expected cap rate will drop to about 4.5%-6.3%.
Expense rates are roughly mortgage (7-10%) + taxes (1-2%) + maintenance (1-2%). Most commercial properties also don't have a high expense ratio because tenants typically like to keep their places of business up and running. However, keep in mind that commercial properties are usually paid back a faster schedule (usually 10-20 years) than residential mortgages (usually 15 or 30 years), so there are much larger monthly payments.
People usually do real estate for the tax benefits; there are many common, legal and IRS sanctioned ways to create tax-free income streams. However, to get to that stage requires starting with a significant amount of equity.