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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

#81

Post by yen223 »

Ecio78 wrote: post #41
adamio wrote: post #26

Earlier quoted context omitted.

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...

By my calculations, it's generally much better to live in a high-cost area while earning a high wage, than to live in a low-cost area while earning a low wage. This is because a lot of products out there have a fixed cost which isn't based on geography (think iPhones). A higher wage makes it easier to purchase those items.

Re: Hard-won lessons about money and investing

#82

Post by zo1 »

err4nt wrote: post #2

I'm at the start of a long career and trying to save sacrificially. I know if i over-save i still have it if i need it, but so far every dollar i have put into savings has been on a one-way trip! I wonder and worry about how to save up for later in life, and who knows what the political landscape will look like then. In my country inflation has been 2.16% on average during the years I've been alive. Where can I store…

What little advice I can offer. From what I've gathered, there is no sure-fire way to protect your capital from constant things such as inflation and wild things such as economic "incidents", for lack of a better term.

I've lately been thinking that some more reliable means would be to own a "wealth-generating" business. Or a few of them in varied industries, to mitigate risk.

Another method that I've also thought about is antique art and possibly high-quality furniture as well. But that would apply in case of a major war-situation, assuming you could even get those physical items to safety.

Re: Hard-won lessons about money and investing

#83

Post by zo1 »

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.

I watched a good documentary about this a while back.

http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

Re: Hard-won lessons about money and investing

#84

Post by netcan »

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

Not that I'm recommending it, but this strategy is radically different from the norm, so it will require you to be abnormal. Mortgage @ 35% of net income is the norm.

Unless you earn 3X the median in your area, living on 35% of your salary means living with below average expenses. Whatever your salary, you will probably think normal is normal for your peer group which usually is closer to whatever you earn than median so even if you earn much more than median you will probably be required to be abnormal. Being abnormal is hard to decide.

However you achieve this, it will probably require you to make lifestyle changes that most people like you consider unacceptable. Move someplace cheap. Start a commune in an old mansion with 6 other families/couples. Live in a cabin. Squat. :) Live with your parents. Don't own a car.

Whatever the specific setup, spending 25-35% of your salary is unlikely to be a moderately different from the norm in your peer group. But, also not impossible.

Consider:

(a) Students, broke artists, unemployed and lots of other people do live on very low incomes. It's possible. If you earn the median, then 10-20% of people in your area live on 35% of what you do. Matt mentioned 14k p/a as a grad student.

(b) This is the "find a way" scenario like a startup. Startups may require you to deal with ungodly stress work, 100 hour weeks and do "impossible" things. If retiring within 10 years is valuable to you, it might be worth it.

Re: Hard-won lessons about money and investing

#85

Post by netcan »

I'm surprised he doesn't mention real estate or investing in friend/family businesses as an option.

This isn't as safe as index funds, but it is an option where you can increase your success rate by being competent. It probably has a risk profile similar to working for equity at a startup, an option only available to people who work in or around startups.

Re: Hard-won lessons about money and investing

#86

Post by briandear »

If you diversify enough, you can ensure a 0% return and a 0% loss. The argument for "diversification" is a recipe for safety, but not real wealth creation. Real wealth creation isn't "sticking your money in an index fund." It's a very middle class approach but as with anything, there's no such thing as a free lunch. If it takes 30 years of index funds to be able to retire, then you're doing it wrong. Investing in actual cash-flow producing assets is how you create wealth. Capital appreciation is only one part, the other part is creating cash flow. That means owning businesses, real estate and other passive income generators (IP, for example.)

Re: Hard-won lessons about money and investing

#87

Post by walshemj »

zo1 wrote: post #82
err4nt wrote: post #2

I'm at the start of a long career and trying to save sacrificially. I know if i over-save i still have it if i need it, but so far every dollar i have put into savings has been on a one-way trip! I wonder and worry about how to save up for later in life, and who knows what the political landscape will look like then. In my country inflation has been 2.16% on average during the years I've been alive. Where can I store…

What little advice I can offer. From what I've gathered, there is no sure-fire way to protect your capital from constant things such as inflation and wild things such as economic "incidents", for lack of a better term. I've lately been thinking that some more reliable means would be to own a "wealth-generating" business. Or a few of them in varied industries, to mitigate risk. Another method that I've also thought ab…

Indexed Link Gilt's or TIPS (in the USA) can do that

Re: Hard-won lessons about money and investing

#88

Post by walshemj »

crdoconnor wrote: post #77
nmjohn wrote: post #71

Earlier quoted context omitted.

You should take a look at stock market returns over the last few years, this year included. If you purchased shares of a s&p500 index fund at just about any point in history, your net gain will be well over 5% annual growth. Even if you bought in at the peak of 2007 - the worst time you could have bought in recent history, before the ~35% decline in 2008, if you are still holding on to it today, it's about 6% annual…

>You should take a look at stock market returns over the last few years, this year included. This is exactly what scares me about it. It's frothy as hell. So is it a nice safe place to stash my retirements savings where it will yield 5% consistently until I retire? I don't think so. >1991 Japan and 2014 United States are no where near similar enough to draw that conclusion Let's see: 1) Huge crash in property prices…

you should not unless your close to retirement have much of your pension fund in cash or cash equivelent's.

And re 5% I have several IT (investment companies) with returns of over 10% pa for the last decade

Re: Hard-won lessons about money and investing

#89

Post by walshemj »

crimsonalucard wrote: post #70

Everybody in the tech world is talking about investing in index funds. Historical evidence says this is the way to go, but when everybody is doing it, it makes me question whether or not it's the right choice. There's a possibility that the market is in another bubble right now.

the trouble with index funds is you participate fully in any crash/dogs eg index funds had to hold enron to the bitter end.

some of my active funds saw the problems with the banks and got out before the crash now no index fund is ever likely to make up the difference - the active fund is now always ahead of the index

Re: Hard-won lessons about money and investing

#90

Post by highiquser »

Matt_Cutts wrote: post #57
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…

Hey Dave, I approved your comment over on my blog--sorry about the delay. I also wrote a response which I'll paste below: Dave L, I concede that someone who is willing to put in the time and effort, they may become good at selecting stocks. Then again, they may not: I have friends who have spent a lot of time and effort studying individual stocks without much to show for it. And don’t even get me started on the finan…

I'm of the tiny, minority unpopular opinion that believes you can beat the market by picking stocks,. I have done so consistently for the past decade. Pick large cap companies with huge growth, high barriers to entry, insulated from economic trends, no debt, and high profit margins.

My favorites:

MA, V, BABA, GOOG, FB, JNJ, GILD, HD

That's not many, but these are some of the best long term investment ideas I can find. Stay away from volatile, macro-sensitive sectors like oil, materials, and retail and stick to healthcare, consumer staples, and utilities. People are getting older and wanting to live longer which is bullish for healthcare, and the web isn't going anywhere even if oil is going to $40.

Or you can try an ETF linear combination http://greyenlightenment.com/?p=1540

There are many strategies that beat the market and provide as good risk adjusted returns as an index fund .

Warren Buffett , btw, broke his on advice of avoiding tech by buying IBM, which has lagged the market considerably. most of the time Warren Buffett doesn't pick stocks in the traditional sense but instead gets special preferred shares that pay huge dividends and other perks. The performance of BRK.B is influenced more by the private companies like Geico and than stocks like Coke.

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