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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

#101

Post by pbhjpbhj »

Animats wrote: post #39

If you do get a lot of money somehow, read The Challenges of Wealth , by Amy Domini. Most people who get a reasonably large chunk of cash all at once blow it, in an average of seven years. A sizable fraction of old pro athletes are broke. So are a sizable fraction of lottery winners. As a rule of thumb, any investment where they call you is no good. If it was any good, it wouldn't need paid sales reps.

>If it was any good, it wouldn't need paid sales reps. //

Unless they wanted to increase their profits. Just because something is good doesn't mean that sales reps can't convince more people to want it.

Re: Hard-won lessons about money and investing

#102

Post by ryandrake »

Matt_Cutts wrote: post #52
burnstek wrote: post #30

Earlier quoted context omitted.

The assumption is that you work for the startup and have a critical enough position to earn equity, and therefore have more influence over its performance than that of a public company.

That's right. In the same way that Buffett can select a company that he believes in and then drive it forward with a strategic investment, you're trying to do the same thing with the startup that you select and drive forward. And "startup" doesn't have to be 3-4 people. I remember trying to recruit an engineer when Google was maybe 150 people. I tried to convince the engineer that Google was doing well and it wasn't…

I question the amount of influence one can actually have on the the trajectory of a start-up, even if you are an early employee. Before I wised up and joined BigUltraMegaCorp, I worked for a number of small companies, and shared offices with brilliant, hard-workers, and we all moved mountains to try to make things work, but at the end of the day, no dice. I'm pretty much convinced at this point that start-up success is almost 100% luck, and you might as well play roulette instead of trying to pick the right one to work for early on.

Hindsight being 20/20, for every "She turned down being employee number 151 at Google to work for Siebel LOL" story, there are 10,000 (maybe 100,000) "I took a chance with Pets.com and they still owe me 6 months of back pay" stories.

Re: Hard-won lessons about money and investing

#103

Post by jacquesm »

usaar333 wrote: post #74
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…

Well, except for how difficult that is. Living on only 35% of after tax income requires you either A) live extremely cheaply or B) make tons of cash. Roughly speaking, in California, this requires living off of 20% of pre-tax income. As an example, to live off $35k/year in SF as a single person (which would be considered modest in tech circles), you'd need to earn $175k/year. With a family, this gets more unrealistic…

Except that you don't need to live off $100K/year.

It all depends on what you define as 'comfortably' and how well you are able to control your spending on things you don't strictly need. That way you can build up some capital, make that work for you and relax your spending constraints when you are making more money passively.

Re: Hard-won lessons about money and investing

#104

Post by walshemj »

tormeh wrote: post #91
crdoconnor wrote: post #77

Earlier quoted context omitted.

>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…

There are other, safer, kinds of funds beside stock funds. It sounds like what you want is a fund holding government bonds. Those are pretty safe, and will probably give you better return than the bank.

you do have to be aware of the effect when QE is unwound which will depress the price of gilts

Re: Hard-won lessons about money and investing

#105

Post by jacquesm »

yen223 wrote: post #81
Ecio78 wrote: post #41

Earlier quoted context omitted.

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.

So, the optimum would then seem to be to live in a low cost area making a high wage.

Re: Hard-won lessons about money and investing

#106

Post by oscilloscope »

briandear wrote: post #86

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 act…

Diversification is considered to be one of the only "free lunches" in finance. It can both increase your return and decrease your risk, with almost no downside.

For example, going from 100% bonds to 80% bonds and 20% stocks will significantly increase a portfolio's expected return with reduced risk. Another example is owning the Total Stock market (small and mid-caps included) rather than just the S&P 500.

http://bucks.blogs.nytimes.com/2011/09/06/why-and-how-divers...

Re: Hard-won lessons about money and investing

#107

Post by jacquesm »

pbhjpbhj wrote: post #101
Animats wrote: post #39

If you do get a lot of money somehow, read The Challenges of Wealth , by Amy Domini. Most people who get a reasonably large chunk of cash all at once blow it, in an average of seven years. A sizable fraction of old pro athletes are broke. So are a sizable fraction of lottery winners. As a rule of thumb, any investment where they call you is no good. If it was any good, it wouldn't need paid sales reps.

> If it was any good, it wouldn't need paid sales reps. // Unless they wanted to increase their profits. Just because something is good doesn't mean that sales reps can't convince more people to want it.

The idea is that if it was any good there would be plenty of money thrown at them without having to approach random strangers cutting them in on the action just because they're such nice people.

Of course they want to increase their profits, but that goes for any outbound sales effort. Just the fact that they try to convince you to want it doesn't mean it is good either, most likely it means you don't have the whole story.

So if you do not initiate the contact stay away from investment deals, especially when they're telephone sales calls.

Re: Hard-won lessons about money and investing

#108

Post by jpp »

influx wrote: post #31

I use Wealthfront, which allows you to park your money into an account, and depending on your level of risk, will automatically balance it across the US Stock Market, dividend stocks, emerging and foreign markets, bonds, and natural resources. For account values over $100K, they will do tax loss harvesting for you automatically, and prevent wash sales. For over $500K account values, they will actually buy stocks for…

An important note on tax loss harvesting: it only defers taxes. If you'll be in a lower tax bracket in the future, that can be good; but if you'll be in a higher tax bracket when you need the money (eg house down payment), tax loss harvesting will actually cost you money, so beware.

Re: Hard-won lessons about money and investing

#109

Post by jpp »

arkem wrote: post #10

I've been considering moving from holding Vanguard ETFs (one of their Total Retirement funds) over to Betterment or Wealthfront to take advantage of their automated tax loss harvesting. Does anyone have any thoughts about whether automated tax loss harvesting is worth the 0.15-0.25% fees that the robo-advisers charge?

I made a comment elsewhere in this thread, but will reiterate it here: tax loss harvesting only shifts the tax burden to the future. If you put in $100k today (post tax dollars), and tax loss harvesting is able to fully "realize" that $100k, you'll have to pay tax on that $100k when you go to sell it (because the basis will be down to $0).

Yes, you get the potential gain on the difference in your net worth; consider it a loan from Uncle Sam to you until you need the capital. It's a much more minimal gain than it seems, though. The only real place I see tax loss harvesting being a no-brainer is in estate planning for money left upon your death.

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