Money and wealth

> I strongly disagree with his assertions that saving up for retirement is ill-advised and that traditional investments (stocks, etc.) are too volatile and risky to be useful.

With my retirement age ~40 years away, it's not clear to me that locking my money into traditional investments is a good idea: existing historical records are not statistically convincing (to me) over such a term.

A single stock market crash or economic crisis may not matter over the long term, but I'm sure you're not suggesting there will be only one such occasion: it seems more likely that there will be several, which may or may not be timed in my favour.

When I come to unlock a pension, there's no way to know what the state of the economy will be and where the legislation will have gone. However, if I am dependent on that pension, it puts me in a very vulnerable position where I am likely to be taken advantage of - perhaps by the state or by an uncompetitive financial market.

You talk about tax-advantage, but I would have to retain this over several successive governments. I personally don't believe that it's in the interests of society for significantly wealthy people to retain additional tax advantages. I suppose it's in my personal interest for now to take those advantages, but I don't feel like they can be relied upon, and seem likely be changed over this time period - perhaps even retrospectively.

Anyway, if I am not completely dependent on my retirement savings, but have a means of generating wealth in my retirement, then I am in a much better position.

This is why I find entrepreneurship a good investment: it gives me valued skills that I will most likely retain into older age (even if I fail at first). Whereas, people who remain in traditional jobs have some danger of being obsoleted, or competed out of their jobs in older age.

How did your friends get the second residence? Do they have a mortgage on the rental property? That makes things much harder to break even.

For a lot of people, the only rental property they can afford is in lower income neighborhoods, and the return on investment is often much better there too. But the headaches are also much greater.

I disagree with the blog post (although I agree with one of the points, that money are not a wealth storage mechanism).

There are valid reasons to make savings - accumulate money (or any other liquid asset with high exchange value, not necessarily use value - like gold). According to many economists, this is not true; rationally, one should only invest (exchange money for something producing more money later) or consume (make yourself feel better).

The reason to make savings is to postpone the decision to invest or consume (which is irreversible, due to physical nature of the world), and by doing that, you may gain an edge over other people who are forced to make that decision earlier. In other words, you gain power over other people by saving money (which is kind of what Marx what saying about the goals of capitalist - to make more money, ultimately).

Let me give a couple of examples: A rich capitalist (having a lot of money on hand) can survive a strike of his employees forcing them to reduce their demands; temporarily outlive better competition; react to new challenges by investing into technology already proven elsewhere; temporarily reduce prices to drive competition out of the market, and so on. Although in these examples I talk about capitalists, this is true for anybody, but the effect is not so apparent.

Of course, the extent how much one can do that or how much it will help depends on the money distribution in society. You cannot save all the time, and not everybody can save at the same time - otherwise you get a deflation. Thus it's not a sure-fire way to gain power, because nothing is. The blog post calls it "personal freedom", but it's not just that; that's very individualistic view of what's going on.

And since there are valid reasons to accumulate money, they are not just a medium of exchange. Whether or not the result (power over other people) is "wealth" depends on personal taste, I guess.

> it seems more likely that there will be several, which may or may not be timed in my favour.

This is why people are advised to move into bonds as they get closer to retirement age. Easier said than done though, if you just saw the stock part of your savings get cut in half. Very tempting to stay in stocks until it comes back.

This really depends on your specific goals, your time frame and other aspects of your financial situation. Personal financial planning doesn't have to be complicated, but you need to be aware of your investment options and which are suitable for a given goal and/or time frame.

When will you need the money? In one year, or not until retirement? What are you planning on doing with the money? (If you don't have any plans, at least have an idea of when you might need to withdraw it)

Probably the biggest factor going to be your time frame. If you are going to need the money in 1-5 years (say for a house down payment), I would stay away from equity/stocks; in general, the proportion going towards equity should decrease as the time available decreases, because the volatility can result in negative returns. If you're going to need it in less than a year, just dump it in a savings account or similar where principal is guaranteed.

At the polar opposite is if you're just concerned about long-term growth. Then, I would in invest in a broad-market ETF like some of the Vanguard ones. Come up with an asset-allocation plan that ensures an acceptable level of risk.

Personally, I'm not a huge fan of directly investing real estate for the purposes of producing rental income. I just don't have any concern for property management, maintenance or dealing with tenants.

If you do go down this route, be sure to do the analysis and compare the expected income and risk with the alternatives (i.e. stocks/bonds, etc.)

This is one area the author of the article falls short in. There's lots of mention of "income generating assets" (with somewhat of preference to real assets) but not really any thought given to the different risks associated with each.

There seems to be an oversimplification that the only way to increase your wealth is to own assets that produce a cash flow (i.e. stocks that pay dividends, properties that generate rental income) with no focus given to capital gains. Capital gains have traditionally been a huge part of wealth gains and furthermore, may be more tax-efficient. None of this is mentioned, instead anything that doesn't produce a cash flow is hand-wavingly dismissed as "buy and pray".