Hard-won lessons about money and investing • Hacker News Board

Re: Hard-won lessons about money and investing

#191

Post by beagle3 » Sun, Nov 30, 2014, 9:11 PM UTC

JoachimSchipper wrote: post #80

Matt_Cutts wrote: post #60

Earlier quoted context omitted.

I agree with your posts except for a couple things: - Most asset managers will try to rip you off, but Vanguard's culture and alignment with your interests makes them a different/better company than anyone else I know of. - I don't know if you were joking when talking about buying shorts, but it's really hard to time the stock market.

Actually, if there really is a 50% drop every 7-10 years, I'd be very surprised if you couldn't make a killing buying cheap, far-out-of-the-money shorts.

You can't make a killing that way.

In general, the market can stay irrational much longer than you can stay solvent. To win, you basically need more information (in the shannon information theoretic sense) than the market, on average, does. And when you actually compute it, "50% drop every 7-10 years, and not even with 95% certainty" is negligible information.

Shorts and short equivalents are either effectively marked to market (e.g. futures are marked daily, short-sales are effectively as well through margin adjustment) or have a limited time horizon (liquid puts are 3m-6m, illiquid ones can be a couple of years, but with a ridiculously large premium).

Let's say a drop of 50% happens over 1 year - then your 3m/6m "50% drop" puts don't actually net you any money, because it only drops 30% in 6 months. But they keep costing you all the time.

And if you use futures/forwards/short-sales, you might (and often will) get margin called and squeezed on earlier appreciations. Unless you have a really large margin, which -- when you actually earn some money, if ever -- significantly reduces your earning in percentage terms.

Re: Hard-won lessons about money and investing

#192

Post by Ecio78 » Sun, Nov 30, 2014, 9:12 PM UTC

decode wrote: post #169

Ecio78 wrote: post #157

Earlier quoted context omitted.

That said, my preferred method is to live in a low cost area and work in a high cost area (telecommute). yes but it also depends how you consider in your calculation the costs of telecommuting (costs of travelling, time lost etc..) I'm thinking about this right in these days, as I'm living and working in a quite rich but expensive country (Luxembourg) where real estate prices (rent&purchase) have grown a lot in the p…

> yes but it also depends how you consider in your calculation the costs of telecommuting (costs of travelling, time lost etc..) Since it seems that English isn't your first language, I thought I'd point out that "telecommuting" means you work from home, and "commuting" means that you travel a long distance to get to work. So, there are no costs or time lost when telecommuting, because you don't have to go anywhere.…

you are right I'm not native English speaker so thanks for spotting that, I've always used "remote working" or "teleworking" for describing that, but not telecommuting (maybe because commuting means "travelling to work" and tele means "over a distance", so the compound doesn't make too much sense for me, at least if you don't put a negation somewhere :D)

Re: Hard-won lessons about money and investing

#193

Post by DanBC » Sun, Nov 30, 2014, 9:15 PM UTC

For a different take people might be interested in "A Mathematician Plays the Stockmarket", by John Allen Paulos (he also wrote the excellent "Innumeracy").

The book explains a bunch of mistakes he made when investing.

http://www.amazon.com/Mathematician-Plays-The-Stock-Market/d...

Re: Hard-won lessons about money and investing

#194

Post by Ecio78 » Sun, Nov 30, 2014, 9:16 PM UTC

g_mifo wrote: post #134

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…

Don't forget health insurance. Everyone forgets hrealth insurance. Having a family is tricky too.

I think I read that MMM was (is?) paying around 250-300$/month for a family of three. So not that much.

Re: Hard-won lessons about money and investing

#195

Post by hnnewguy » Sun, Nov 30, 2014, 9:17 PM UTC

walshemj wrote: post #104

tormeh wrote: post #91

Earlier quoted context omitted.

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

QE doesn't need to be unwound; bonds can roll off into cash.

Re: Hard-won lessons about money and investing

#196

Post by Ecio78 » Sun, Nov 30, 2014, 9:23 PM UTC

ebbv wrote: post #119

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.

I don't think it's impossible to do it (I think I could be around that but I should run some numbers before confirming that.. and no, I'm not homeless :)), but it's also not that easy to do the calculation: it's easy for rent and maybe other expenses (internet access, bills) but when you go to one-shot expenses like furnitures or cars etc.. I think there's not an agreed methodology on how to split them over the years (5 years ? 10?) so those could easily spoil the maths.

Re: Hard-won lessons about money and investing

#197

Post by tempestn » Sun, Nov 30, 2014, 9:26 PM UTC

ForHackernews wrote: post #144

tempestn wrote: post #37

Earlier quoted context omitted.

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.

This is very true. But for people who know nothing about investing and just want to get started, the simplest non-harmful advice I always give is "Vanguard Target Date Fund". That way, at least they are not doing anything wrong that will serious hurt their returns. Later on, when they have more experience or more money, they might want to switch to some other allocation.

Totally. I give similar advice (although we don't have anything quite as good as the Vanguard TD funds up here in Canada yet). Was just thinking for this particular audience it wouldn't hurt to suggest a bit more effort. Still, nothing wrong with a low-cost TD fund to get started, especially with a portfolio in the 4 or 5 figures.

Re: Hard-won lessons about money and investing

#198

Post by [deleted] » Sun, Nov 30, 2014, 9:28 PM UTC

jandrewrogers wrote: post #65

For most people, the easiest way to become financially independent is to save aggressively. That aside, I have always invested in a small number of individual stocks, with minimal management or effort, and only moving positions between companies slowly over time. Basically, I make bets on long-term trends that I view as technologically inevitable. I don't invest in sexy companies (though some become sexy later), I in…

[deleted]

Re: Hard-won lessons about money and investing

#199

Post by dredmorbius » Sun, Nov 30, 2014, 9:28 PM UTC

dredmorbius wrote: post #152

Matt's article (and the linked one of Scott Adams' advice) is a good and basic foundation. Adding to the reading list, I'd very strongly recommend the following: A Random Walk Down Wall Street by Burton G. Malkiel lays out the basics of portfolio diversification. http://www.powells.com/biblio/1-9780393340747-0 The Great Crash: 1929 by John K. Galbraith tells the story and aftermath of the biggest stock market catastr…

Oh, and adding to the book recommendations: pick one of Michael Lewis's books. Lair's Poker, The Big Short, Panic, or Flash Boys.

http://www.powells.com/s3?author=lewis%2C+michael

Re: Hard-won lessons about money and investing

#200

Post by tempestn » Sun, Nov 30, 2014, 9:29 PM UTC

dredmorbius wrote: post #152

Matt's article (and the linked one of Scott Adams' advice) is a good and basic foundation. Adding to the reading list, I'd very strongly recommend the following: A Random Walk Down Wall Street by Burton G. Malkiel lays out the basics of portfolio diversification. http://www.powells.com/biblio/1-9780393340747-0 The Great Crash: 1929 by John K. Galbraith tells the story and aftermath of the biggest stock market catastr…

Another great book is The Four Pillars of Investing by Bill Bernstein. If you're already sold on an index portfolio there isn't a ton of info there (although there are certainly some useful bits), but it's great for making the case.