51–60 of 264 posts
Earlier quoted context omitted.
he clearly qualifies it for "when things go wrong", so the suggestion is more like some kind of insurance in case that happens
They have insurance for that. Why isn't that suggested then? No, someone thought they'd be cute and throw a political jab in there.
Except for the 'never buy a security' bit, I fully agree.
Are you a professional stock market trader?
If you answered yes to the first question but no to the second, why?
Almost all of this is excellent advice, except for one point: "save 20% of your money". That's a bare minimum, which will let you retire after about 37 years of working. Bump it to 35% and you'll retire after 25 years. Bump it to 50% and retire in 17. Bump it to two-thirds and retire in 10 years. That's one of the most important factors in your personal finances: not how much you make off your investments, not whethe…
One of the recommendations is actually wrong, and in fact outright harmful. "Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20xx funds." Yeah, no. Mutual funds, even those by Vanguard, have high expense ratios, and there is absolutely no evidence that they outperform their equivalent index funds. Jack Bogle, founder and retired CEO of Vanguard, himself recommends index funds over mutual funds…
http://www.forbes.com/sites/baldwin/2013/06/05/the-trouble-w...
I consider it to be a huge oversight that they left off building an emergency fund. Before buying a house, buying individual securities, or maxing any retirement contributions, you need enough liquidity in your investments to get you through an illness or layoff that leaves you without income for a year. It amazes me how otherwise intelligent peers of mine will be paying extra on mortgages, student loans, and retirem…
This sounds like the kind of failure mode better addressed by solutions like insurance instead of upfront savings.
Earlier quoted context omitted.
So in the ideal world everyone around you is doing the same thing as the card. If that is true, then when something goes wrong there will be plenty of safeguards already in place. It takes a special kind of hubris to social welfare benefits believing you will never need them.
> So in the ideal world everyone around you is doing the same thing as the card. That still doesn't constitute financial advice, unless your choice to follow the card somehow influences others to follow the same card, which is unlikely at any measurable level.
That's not true. We are social creatures. If the people start behaving a certain way that exerts a very powerful influence on those around them to adopt that behavior. (Unfortunately, this phenomenon holds for negative behaviors as well as positive ones.)
Earlier quoted context omitted.
This is really interesting and inspiring for someone like me who is in his mid twenties. Burning question: what to do when you have (education) debt? Do you put every spare dollar in repaying it or still inculcate a habit of saving 20%?
What's the interest rate on the debt, and how much are you making on your investments? To a first approximation, you can treat the debt as an investment with a guaranteed rate of return. If you have debt that's not at such a ludicrously low interest rate that it makes sense to hang onto the money and invest it (rare), then your savings should be going straight into paying off that debt. The savings rate still applies…
I'd caution that you should still keep a small cash reserve for emergencies, of course. Savings are liquid: student loans are not.
Earlier quoted context omitted.
One of the recommendations is actually wrong, and in fact outright harmful. "Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20xx funds." Yeah, no. Mutual funds, even those by Vanguard, have high expense ratios, and there is absolutely no evidence that they outperform their equivalent index funds. Jack Bogle, founder and retired CEO of Vanguard, himself recommends index funds over mutual funds…
Vanguard Target funds are nothing but a collection of passively managed index funds. The ER is slightly higher than doing it a la carte, but it re-balances without having to worry about it.
There's also the fact that not everyone's 401k is offered through Vanguard. For example, if you're stuck with Fidelity like I am, then you will definitely need to avoid their mutual funds and choose their index funds instead. (With 401k, you cannot pick a fund outside of the broker that manages it.)
Seems like good advice, though a great many Americans are at a disadvantage because their employer doesn't offer a 401k. Even with no employer match, a 401k allows an individual to save much more money in a tax-advantaged account ($17,500 for a 401k vs. $5500 for an IRA). If you're a W-2 employee but your employer doesn't offer a 401k then you're pretty much stuck paying higher tax rates on any savings beyond $5500/y…
I consider it to be a huge oversight that they left off building an emergency fund. Before buying a house, buying individual securities, or maxing any retirement contributions, you need enough liquidity in your investments to get you through an illness or layoff that leaves you without income for a year. It amazes me how otherwise intelligent peers of mine will be paying extra on mortgages, student loans, and retirem…
Am I alone in wondering if the advice about broad index funds is no longer good? We're still below the s&p inflation adjusted high from ~2000 -- almost 14 years later. When will the gains finally arrive? I worry that there is some systemic problem in our economy that has leaders playing whack-a-crisis every five or ten years that erases years of gains. I've read John Bogle and I want to believe . But a few years ago…
More generally it seems like all pop financial advice is based on the premise that the next 40 years will look much like the last 40 years. Historically that's been a bad bet. For example, you never hear about hedging for a deflationary crash, because that's unthinkable given recent history.