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Hard-won lessons about money and investing

mattcutts.com

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Re: Hard-won lessons about money and investing

#41

Post by Ecio78 »

adamio wrote: post #26
j_lev wrote: post #3

> If you’re an employee working for salary, it’s going to be hard to reach that level of independence. ... You can try to radically lower your financial burn rate, but few Americans have taken that step. So many people are quick to dismiss living well within one's means as a way to financial independence. Here's the link to the facts again: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... TL;DR: Live o…

What about rent or mortgage? In most major cities low rent could be easily 35% of after tax income already

Mr. Money Mustache will probably tell you to move to a different place[1], saving time and money by reducing the commuting time[2] etc..

NB I neither agree nor disagree with his ideas (still have to decide.. :))

[1] http://www.mrmoneymustache.com/2011/09/28/get-rich-with-movi... [2] http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-c...

Re: Hard-won lessons about money and investing

#42

Post by wiredfool »

lpolovets wrote: post #24
ForHackernews wrote: post #5

https://www.bogleheads.org/wiki/Getting_started Short version: Open a Vanguard account and invest >=15% of your salary in the appropriate target date fund for the year you want to retire. P.S. Where possible, become a millionaire in Google's IPO.

Have target date funds been successful? The last time I checked, their historical performance (admittedly for only 6-7 years) seemed underwhelming.

The last 6 or 7 years hasn't exactly been average for historical performance in either stocks or bonds. I'd expect that the target date funds would wind up underperforming in this sort of market, and likely outperform in down markets, especially once you factor in ill-advised market timing/panic changes when the bottom drops out.

Re: Hard-won lessons about money and investing

#43

Post by nikcub »

steven2012 wrote: post #8
mcfunley wrote: post #6

> Think about working for equity vs. salary It's really common for people to drastically overestimate the value of startup equity, or to just not understand the basic mechanics of it at all. In my experience people look at the face value of their options and are pretty clueless about how taxes (or even their strike price!) affect what they might actually wind up with.

I agree. It's easy for Matt Cutts to say that you should take more equity, because he has only seen massive success. I've been in the Bay Area exactly as long as he has, and I've had 1 company out of 6 where my options actually made me money. The rest were all worthless.

If you're exchanging salary for equity you have to look at taking a job at a startup like an investment decision. I don't know what the broader startup stats are now, but 1 in 6 sounds about average. It means you should negotiate down vesting periods and try and spend a few years at each startup before figuring out if it will succeed or not.

My anecdotal opinion is that more startups are cashing out for at least something because of acquihires and low-end mergers. I had a friend whose startup ran out of money, he accepted a few points of another startup in exchange for the assets of his failed startup and that startup that bought his assets ended up selling for $100M+ after less than a year earning him a decent return.

On another note - it would be pretty cool if someone did the equivalent of an index fund but for employee options. Get together with 5-6 of your friends at different startups and exchange options with each other to hedge the risk.

Another way to diversify your exposure is to get advisory roles at startups and pick up 25-100 b.p from 4-5 different companies for helping them out. This has worked out pretty well for myself.

There are some VCs who will also invest a small slice on your behalf if you introduce them to a deal they end up investing in, which can also work out pretty well if you are able to spot good investment deals, know the founders, etc.

For a culture where stock options, M&A and investing is so prevalent there really isn't much information out there in terms of making the right investment decisions and how to handle and work with money.

Re: Hard-won lessons about money and investing

#44

Post by Patient0 »

ballstothewalls wrote: post #27

Lesson number 1 is unequivocally wrong and contradictory with the start of the article. He says you shouldn't invest your money in single stocks, but then advocates for you to invest your money (by way of forgoing salary in favor of equity) into a start up company with (by definition) no track record of success or guaranteed future. Not to mention that when the start-up tanks (which it will do statistically) you will…

My thoughts exactly when I read this article.

Re: Hard-won lessons about money and investing

#45

Post by lbotos »

adamio wrote: post #26
j_lev wrote: post #3

> If you’re an employee working for salary, it’s going to be hard to reach that level of independence. ... You can try to radically lower your financial burn rate, but few Americans have taken that step. So many people are quick to dismiss living well within one's means as a way to financial independence. Here's the link to the facts again: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim... TL;DR: Live o…

What about rent or mortgage? In most major cities low rent could be easily 35% of after tax income already

So I just did the math. I work at a startup in NYC and could probably make more money at $BigCo. I should be able to save %50 of my current salary and be able to pay rent and have a decent daily spend to the point that it's 2AM and I'm furiously recalculating a lot of scenarios. That has to count for something. :)

Re: Hard-won lessons about money and investing

#46

Post by saryant »

tempestn wrote: post #37
ForHackernews wrote: post #5

https://www.bogleheads.org/wiki/Getting_started Short version: Open a Vanguard account and invest >=15% of your salary in the appropriate target date fund for the year you want to retire. P.S. Where possible, become a millionaire in Google's IPO.

Bogleheads is a great resource, but I expect most HN readers can handle managing their asset allocation manually (using a simple "three-fund portfolio" or similar), which allows you to save a bit on expenses compared to a target date fund, as well as take more advantage of tax management techniques like municipal bonds and tax loss harvesting.

In Vanguard's case, the TD funds generally make sense starting out given their lower minimum investment requirements ($1000 vs $3000 for most others). Once you reach $10-20k and can starting using Admiral funds, then you can switch to a three-fund portfolio and take advantage of lower ERs.

Re: Hard-won lessons about money and investing

#47

Post by wiredfool »

justincpollard wrote: post #17
steven2012 wrote: post #7

I'm of the opinion that the stock markets are now inherently unstable, and they will continue to crash every 7-10 years. I'm expecting a market crash somewhere between 2015 and 2017. Most of my money is in cash, but I do hold a few select stocks like AAPL, GOOG and TSLA. I also believe that the stock market is a game , not an investment vehicle. The nature of the market has transformed every since the day trader, qua…

One of the nice things about Vanguard is that the fee structure is much less than 1-3% for many of their funds. I invest with them in some of their index funds and pay no more than 0.4% in fees; usually much less than that.

Vanguard is owned by their funds, so incentives are aligned with the shareholders of the funds. They are very different than most fund companies.

Re: Hard-won lessons about money and investing

#48

Post by steven2012 »

JoachimSchipper wrote: post #33
steven2012 wrote: post #19

Earlier quoted context omitted.

I'm not talking bear markets, I truly believe there will be 50%+ drops every 7-10 years, which is something that you wouldn't expect pre-2000, except 1987. I think the stock market is a battle ground for amoral participants who are willing to break the stock markets in order to make as much money as they can, and the NYSE and NASDAQ don't seem to care.

So buy shorts.

I will when the time is right. Right now, I'm long.

Re: Hard-won lessons about money and investing

#49

Post by ploxiln »

ballstothewalls wrote: post #27

Lesson number 1 is unequivocally wrong and contradictory with the start of the article. He says you shouldn't invest your money in single stocks, but then advocates for you to invest your money (by way of forgoing salary in favor of equity) into a start up company with (by definition) no track record of success or guaranteed future. Not to mention that when the start-up tanks (which it will do statistically) you will…

If we all lost our money in our own startups, instead of to money-managers on Wall Street, I think the world would be a better place. My 2c

Re: Hard-won lessons about money and investing

#50

Post by arasmussen »

dave1619 wrote: post #22

I added a comment on Matt's blog post but it's waiting moderation so I'll post it here to hear other folks' input. "Hi Matt, I usually enjoy your posts but I felt this one lacking in a major way. Investing is something that has huge potential (ie., 100 fold). This is something that I’m sure you’re aware of as an early Google employee (you were invested in the company via stock options, etc). On the other hand, invest…

I don't know why this has been downvoted, I couldn't agree more.
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