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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

#111

Post by PavleMiha »

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.

And even if all costs scaled completely linearly with your earnings saving 20% of your income in a high-cost/high-wage are will earn you more money than 20% in a low wage area.

You can always move to the low-cost area when you are ready to stop working.

Re: Hard-won lessons about money and investing

#112

Post by markovbling »

FiReaNG3L wrote: post #110

Literally everywhere for the past years I see the advice to invest in index funds - the only question I have is what happens when a critical mass of people do just that? Wouldn't that influence the market in some way?

that's the paradox of the efficient market hypothesis - if everyone is a passive investor then who keeps the market efficient?

(...which is a common counter-argument for the markets being efficient. The reasoning behind passive investment is that, net of fees, it's difficult to out-perform the market although of course, everyone can't outperform the market because everyone collectively IS the market)

Re: Hard-won lessons about money and investing

#113

Post by j_lev »

grimlck wrote: post #78

"Google worked out a deal with “full service” broker to give us free accounts" That is actually really interesting. How much did this broker have to pay to get this box full of highly lucrative leads - access to a large set of newly wealthy individuals, many of which don't have experience with managing large amounts of money. A bunch of people who may be experts of technology, but probably are not experts on finance.…

It also seems at odds with what was said in this article, linked to here on HN a couple of weeks back:

http://www.modernluxury.com/san-francisco/story/the-best-inv...

Re: Hard-won lessons about money and investing

#114

Post by SteveGerencser »

jacquesm wrote: post #105
yen223 wrote: post #81

Earlier quoted context omitted.

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.

It can be done. My wife and I both work remotely and are able to earn significantly more than the average income for our area. She is an hourly engineer and I work as a consultant. We get to live where we want and do the work we want. We could both make significant;y more if we were to relocate, and we have in the past, but we enjoy the lifestyle here and are happy to give up some top end income for quality of life.

Re: Hard-won lessons about money and investing

#115

Post by kasey_junk »

eps wrote: post #62
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…

> I'm expecting a market crash somewhere between 2015 and 2017. And so does everyone else who tracks the markets, exactly because markets exhibit inherently cyclic behavior and because they haven't been down in a while. An easy-peasy prediction to make.

Not only is it easy to make there is no downside to making it. If the markets don't turn down then, he can claim that they will in a couple more years, or the fed is juicing the stats, or something else.

What would be more compelling would be a screen shot of his portfolio that shows that he is much more invested in short positions than longs, or has moved his investment into something besides equity markets.

What would be downright highly profitable for him, is if he could show over a long series of years that his ability to "imagine" future market conditions outperformed a strategy of just buying the market over the highs and lows and averaging the return.

Re: Hard-won lessons about money and investing

#116

Post by mcfunley »

Matt_Cutts wrote: post #53
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.

Great point. I'd recommend the book "Consider your Options" when you're accepting a job with stock options: http://www.amazon.com/Consider-Your-Options-Equity-Compensat... It can be dense reading, but no one cares about your money more than you do, so it's your responsibility to make sure you understand what's going on. Doing that research saved me making more mistakes down the road. Another common mistake with pre-I…

Exactly--a company I worked for did a stock split that was at least partially rationalized by being able to offer candidates higher share counts. Companies also hand out explainer sheets with their grants that don't really help, inasmuch as they seem to be intended to get you excited about the value of the shares disregarding the exercise price (and the fact that in most scenarios, you're paying normal tax rates on what's left).

Re: Hard-won lessons about money and investing

#117

Post by ryandrake »

nikcub wrote: post #43
steven2012 wrote: post #8

Earlier quoted context omitted.

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 some…

> 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.

This is a pretty cool idea, but you'll have to find a lot of friends for it to work. Chances are, your 5-6 friends' options will also end up worthless. Then again, if we're talking about a pool of maybe 1,000 start-ups, then you need to believe that a diverse bundle of start-ups will outperform the S&P500 on average, otherwise it's pointless.

Re: Hard-won lessons about money and investing

#118

Post by thejteam »

FiReaNG3L wrote: post #110

Literally everywhere for the past years I see the advice to invest in index funds - the only question I have is what happens when a critical mass of people do just that? Wouldn't that influence the market in some way?

And just like engineering standards, the nice thing about stock indexes is that there are so many to choose from.

Re: Hard-won lessons about money and investing

#119

Post by ebbv »

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…

> TL;DR: Live on 35% of your after tax income and you're retired in 10 years. Get it down to 25% and you retire in 7.

You might as well say:

TL:DR; Move out into the forest and live off the land and you retire today!

Come on, man. 35% of AFTER TAX income? I make good money and I'd have to live like a homeeless man for 10 years in order to do that. While working as hard as I do. That's absurd.

Re: Hard-won lessons about money and investing

#120

Post by alecco »

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…

Perhaps that means SF might not be a great place to work in spite of 6 figure salaries.
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