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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

#211

Post by hnnewguy »

walshemj wrote: post #89
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

>hold enron to the bitter end.

Holding Enron in a portfolio consisting of hundreds of securities will have little impact on the overall portfolio returns. That's the whole point of diversification.

Re: Hard-won lessons about money and investing

#212

Post by dllthomas »

YZF wrote: post #202
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…

From that link, under assumptions: "You can earn 5% investment returns after inflation during your saving years" If I could earn 5% after inflation without risk I could retire today (well, I'd be retired many years ago, if that's what I want to do). The problem is that's simply not possible. If you have a family you can't take the risk of putting all your money in stocks as there can be periods of well over a decade…

It says "during your saving years", which I understand to mean while you are working. This would seem to leave you the flexibility to adjust if your return doesn't meet your expectations (as compared to an assumption of X% return while retired).

Re: Hard-won lessons about money and investing

#213

Post by Retric »

tacos wrote: post #205
Retric wrote: post #188

Earlier quoted context omitted.

Bonds are paying way less than stocks. If you think there a good idea feel free to defend them but consider this: First off most methods of diversifying bonds (bond funds) add interest rate risks so there not predictable returns. Which means you can buy specific bonds. A 1 year T-Bill pays under 1% before taxes which is hardly worth the hassle for most people. To get better returns in the short term your stuck with i…

Worldwide bond market is $82 trillion. Larger than the entire stock market. Meanwhile "Retric" on HN says bonds are pointless. Hmm.

Because clearly individual small time investors make the majority of all investments... Err, wait no. Sure, there is also a huge market for elemental fluorine that does not mean it's something you want in your house.

Don't get me wrong there generally small risk adjusted net gain in any portfolio if you spend the effort picking the correct set of bonds. The problem is there a far more complex financial instrument than stocks which makes them really easy to mess up. Add to that the current returns and it's just a poor bet for most people.

Also, I note you in no way actually defended them. In there defense a condo association saving up for known long term repairs are basically an ideal bond invester.

PS: A 1/10 th percent gain on 50 billion is worth a lot of effort a 1% percent gain on 50k is not worth much.

Re: Hard-won lessons about money and investing

#214

Post by dllthomas »

pinaceae wrote: post #159
ForHackernews wrote: post #145

Earlier quoted context omitted.

Work remotely. Get paid a SF salary; live in back-of-beyond, Arkansas. Retire at 30.

haha. not adjusting your employee's wages based on their work location, which company is that delusional?

Why is it delusional? The company should be willing to pay an amount based on the benefit they're receiving. Does a feature developed by someone living in NYC or SF make the company more money than the same feature developed by someone living in Ann Arbor or Atlanta? Offering a premium for people to work on-site versus remotely makes sense. Discounting the value based on expected difficulties with linguistic or cultural misunderstandings makes some sense. But I really don't see why you should be adjusting based on the work location in a more general sense.

Re: Hard-won lessons about money and investing

#215

Post by mytochar »

Retric wrote: post #129
usaar333 wrote: post #74

Earlier quoted context omitted.

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…

Living really cheaply in SF is really just a question of cheap rent and never eating out. If your willing to have roommates you can get below 1k/month rent making 25k/year living expenses doable. Granted, Heath issues, dependents, or debt can make this a non starter. But, just because most people you work with spend most of what they make every month means you need to do the same.

25k / year living expenses still works out to about 40k per year. And you have a lot of room mates. But now if it's only a quarter of your income, you need...

100k / (1 - (0.28[1] + 0.093[2])) = 159,489.

Plus if you retire, you're going to be managing your own health insurance, so the required living expenses number increases, probably by thousands of dollars a year. And it's not like you can flip from a frugal living style to a more flagrant one afterward, so you're going to have to live with room mates for the rest of your life, and never eat out, still.

[1] http://federal-tax-brackets.net/2014-federal-tax-brackets.ht...

[2] http://www.tax-rates.org/California/income-tax

Re: Hard-won lessons about money and investing

#216

Post by hnnewguy »

highiquser wrote: post #90
Matt_Cutts wrote: post #57

Earlier quoted context omitted.

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…

>I have done so consistently for the past decade.

We need a rule in financial threads that you can't boast about your investment results unless you're willing to prove it.

>Or you can try an ETF linear combination

Oh, brother. The guy back-tested 4 years of data (one of the all-time great bull runs) with a portfolio of 3 ETFs, one of which is a 3X leveraged QQQ fund. Do you not see the problems with that strategy?

This is why amateurs get crushed. Then they blame the financial world.

Re: Hard-won lessons about money and investing

#217

Post by ingend88 »

I am one of those people who have lived this advice and after 10 years of following some of the recommendations here, I can confirm that it works.

Here are my 5 simple rules that I followed, no lottery/IPO, just a steady single income. - Max out 401K and get company match - Max out Roth IRA for me and my wife - Invest in Vanguard S&P 500 Index Funds, some international funds and some bonds - Invested in a property in India - Lived below 35% of the salary - Always bought a used car and kept the car for as long as it runs

Results - After 10 years, I am financially independent - I am working for Google just because I enjoy working and not because I need a paycheck - My wife works as a teacher and she enjoys her job as well. She is working because she likes to and not because we need a paycheck

What was hard ? - To see friends buying expensive cars just after getting their first job and not doing the same - Friends buying > 1M$ houses while I kept renting since I like the flexibility and staying in a community - Friends going on exotic trips

I think at the end, its worth it.

Re: Hard-won lessons about money and investing

#218

Post by CurtMonash »

I was a #1-ranked stock analyst (computer software and services industry) in the 1980s. I took a portion of my parents' money and doubled it in 18 months, by splitting it among 5 stocks that went to 4X, 3X, 3X, 0X and 0X. Then I left Wall Street, told them I no longer was in a position to do such stock picking, and they should put their money into Vanguard index funds.

They were not pleased, and felt I let them down by not being more active in investing for them.

Re: Hard-won lessons about money and investing

#219

Post by CurtMonash »

I was a #1-ranked stock analyst (computer software and services industry) in the 1980s. I took a portion of my parents' money and doubled it in 18 months, by splitting it among 5 stocks that went to 4X, 3X, 3X, 0X and 0X. Then I left Wall Street, told them I no longer was in a position to do such stock picking, and they should put their money into Vanguard index funds.

They were not pleased, and felt I let them down by not being more active in investing for them.

Re: Hard-won lessons about money and investing

#220

Post by hnnewguy »

CurtMonash wrote: post #218

I was a #1-ranked stock analyst (computer software and services industry) in the 1980s. I took a portion of my parents' money and doubled it in 18 months, by splitting it among 5 stocks that went to 4X, 3X, 3X, 0X and 0X. Then I left Wall Street, told them I no longer was in a position to do such stock picking, and they should put their money into Vanguard index funds. They were not pleased, and felt I let them down…

>it among 5 stocks that went to 4X, 3X, 3X, 0X and 0X

What stocks?

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