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Money and wealth

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Re: Money and wealth

#181

Post by thedufer »

01Michael10 wrote: post #164
thedufer wrote: post #158

Earlier quoted context omitted.

Where is the bank getting money to pay you interest? By making investments. The fact that you're one level removed from the decision-making doesn't make it less of an investment.

Ummmmm Really? The Bank is taking the risk not you. Never heard of insured accounts? Granted, there are no guarantees in life but money in the bank is pretty solid. You may stuff a couple mill under your mattress if it makes you feel better...

I know of no definitions under which investments must be risky. Investments are "a commitment (of time, money, etc) in order to earn a return" (not a direct quote, but a fusion of Merriam-Webster's definitions of invest and investment). Nowhere in there (or any of the other definitions of invest/investment) is risk mentioned.

Re: Money and wealth

#182

Post by pbhjpbhj »

smackfu wrote: post #104
pbhjpbhj wrote: post #68

Earlier quoted context omitted.

Based on your post it appears you're not profiting at all from your assets - presumably then you're currently selling up? Is this more "first world problems" and in fact you're making a reasonable return given your investment of time and money? I've several friends who're small time landlords - ie own a second residence they let out - they all make a tidy profit and none of them appear to have been exposed any more t…

How did your friends get the second residence? Do they have a mortgage on the rental property? That makes things much harder to break even. For a lot of people, the only rental property they can afford is in lower income neighborhoods, and the return on investment is often much better there too. But the headaches are also much greater.

So far as I can tell it's all buy-to-let; a few couples at retirement age and one younger couple who inherited some money.

Re: Money and wealth

#183

Post by dragontamer »

ronaldx wrote: post #133
dragontamer wrote: post #126

Earlier quoted context omitted.

The stock market has historically never dropped in value over a 15 year period. If you continually invest through a crash, you will make insane amounts of money. Lets say you started investing in 2006 (before the crash), specifically in SPY. Lets say you put $10,000 / year into SPY. You'd have spent $80,000 over those years, and today, your SPY holdings would be worth $118,176.92. You'd make a 47% profit because you…

> The stock market has historically never dropped in value over a 15 year period. Feel free to clarify this, because I don't agree. The records of the FT30 index only go back to 1935[0] - which is not nearly long enough to make reliable predictions about the next 40 years - but still, it dropped in value in the following 15-year periods (before taking into account time value of money): 1936-1951 1959-1974 1994-2009 1…

I believe the American Stock Market has never dropped in value over 15 years. Other countries serve as a good counter-example however.

Your 2nd point is also a solid counter-argument that I won't belabor much further.

Re: Money and wealth

#184

Post by yummyfajitas »

bdcs wrote: post #146
yummyfajitas wrote: post #137

Earlier quoted context omitted.

Historically this has been true, but nowadays it's not (at least in the US). To quote Paul Krugman on the topic, from way back when he still did economics: "...growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story--the rich becoming richer by exploiting the poor. But that's just not a reasonable picture of America in the 1980s. For one thing, most…

Your thesis is fundamentally wrong. >citing the growth in inequality since the 1990s only makes [Krugman's (1990)] point about dollar gains/losses more stark. Actually, nothing is different nowadays as from long ago in history: the class-warfare is still the rich (capital) waging class-warfare on the poor (labor). Krugman, whom you quote, realizes this as well and rescinded his comments from that time: "I think our e…

Neither of the posts you cite contradict Krugman's original argument. They merely argue that the rich have a new way of becoming richer without exploiting or the poor (namely robots).

The mood affiliation is different, certainly. But I'm citing arguments, not tone.

Re: Money and wealth

#185

Post by 01Michael10 »

thedufer wrote: post #181
01Michael10 wrote: post #164

Earlier quoted context omitted.

Ummmmm Really? The Bank is taking the risk not you. Never heard of insured accounts? Granted, there are no guarantees in life but money in the bank is pretty solid. You may stuff a couple mill under your mattress if it makes you feel better...

I know of no definitions under which investments must be risky. Investments are "a commitment (of time, money, etc) in order to earn a return" (not a direct quote, but a fusion of Merriam-Webster's definitions of invest and investment). Nowhere in there (or any of the other definitions of invest/investment) is risk mentioned.

All investments are guaranteed returns? News to me... All my money into Target stock! All investment implies risk and I wouldn't learn financials (or anything) merely from Merriam-Webster definitions.

Re: Money and wealth

#186

Post by grosskur »

aliston wrote: post #160
gizmo wrote: post #18

Earlier quoted context omitted.

Until you've figured out what to do with it, just buy shares VTI. Vanguard Total Stock Market. Or get the admiral version if you're in the US. Essentially it's a tiny fraction of ownership of all publicly traded companies. As long as the economy doesn't go completely down the drain it's a very good place for your money. It's not the optimal place for your money, of course, but compared to sticking your money in a che…

Why isn't it optimal? Any other thoughts on what one should look at in order to find an optimal place to put their money?

Really, there's no such thing as "optimal" because no one has a crystal ball. A portfolio of 100% VTI is indeed diverse, tax-efficient, and has low expenses. Personally, I'd add some amount of VXUS (international stocks) for further diversification and MUB (tax-free municipal bonds) for safety. You could do very well with just these three ETFs, often known as a "lazy" portfolio:

http://www.bogleheads.org/wiki/Three-fund_portfolio

Keep in mind, though, that there are no guarantees. Stocks will have bad years, and you should expect that some years they will lose 50% of their value. The key is to choose an allocation that you can live with so you don't panic and sell when things get bad. Keep contributing and rebalance regularly (once or twice a year is usually enough). Tune out all the noise and stick to your plan. Even with these dips, most people expect stocks to perform better than any other asset class in the long term (20+ years).

I'd also recommend The Little Book of Common Sense Investing:

http://www.amazon.com/dp/0470102101

It's written by John Bogle, who founded Vanguard to bring diversified, low-cost investing to the masses. Vanguard is different from other companies in that it's client-owned. The Bogleheads forum is pretty good for this kind of investment advice:

http://www.bogleheads.org/

You might also check out Wealthfront and Betterment. They are software-based financial advisors that use Modern Portfolio Theory and the Black-Litterman model to allocate your money optimally given their assumptions about expected returns and correlations between asset classes:

http://www.blacklitterman.org/intro.html

https://www.wealthfront.com/whitepapers/investment-methodolo...

https://www.betterment.com/portfolio/

Re: Money and wealth

#187

Post by sgustard »

dragontamer wrote: post #126
ronaldx wrote: post #102

Earlier quoted context omitted.

> I strongly disagree with his assertions that saving up for retirement is ill-advised and that traditional investments (stocks, etc.) are too volatile and risky to be useful. With my retirement age ~40 years away, it's not clear to me that locking my money into traditional investments is a good idea: existing historical records are not statistically convincing (to me) over such a term. A single stock market crash or…

The stock market has historically never dropped in value over a 15 year period. If you continually invest through a crash, you will make insane amounts of money. Lets say you started investing in 2006 (before the crash), specifically in SPY. Lets say you put $10,000 / year into SPY. You'd have spent $80,000 over those years, and today, your SPY holdings would be worth $118,176.92. You'd make a 47% profit because you…

Nasdaq (which is a stock market) is still underwater from March 2000, so coming up on a 14-year loss.

Re: Money and wealth

#188

Post by jonnathanson »

mcdougle wrote: post #159
jonnathanson wrote: post #26

Earlier quoted context omitted.

I think a lot of people misunderstand what a pain in the ass buying and renting property can be. Unless one is wealthy enough to own multiple properties and have a full-time management company doing all of his work for him, he's going to be taking a fairly hands-on role. Most tennants are flaky. Our perceptions of such might be colored by the fact that -- I assume -- a lot of us here are white-collar professionals ma…

have you checked out BiggerPockets [1]? I'm just getting started in some small-time REI/landlording and that site's been a great inspiration. One great resource is podcast #37 [2] where they interview a guy who does real estate over there in CA pretty successfully. He talks a lot about wholesaling (which I don't care about) but he also explains how he built an automated system around his rentals; he doesn't use an ex…

Have never seen it, but thanks for the tip! Will check it out.

Re: Money and wealth

#189

Post by rphlx »

> ... entire lives in a period of unprecedented monetary stability. Money is so stable nowadays that it sort of looks like a store of wealth

In which country? The USD has lost around 90% of its commodity purchasing power since 1971.

> a small, steady, controlled inflation is really the ideal situation

I would agree up to the rate of population growth (1-2% or so). But US M2 expanded 8.4% last year, which is clearly far beyond what's needed to prevent the atrocious horrors of deflation.

Re: Money and wealth

#190

Post by yummyfajitas »

lmm wrote: post #154
yummyfajitas wrote: post #137

Earlier quoted context omitted.

Historically this has been true, but nowadays it's not (at least in the US). To quote Paul Krugman on the topic, from way back when he still did economics: "...growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story--the rich becoming richer by exploiting the poor. But that's just not a reasonable picture of America in the 1980s. For one thing, most…

I can't read your link. It's my impression that two-worker households are much more common now among the poor, in which case the poor are working more on the whole, and they're certainly being paid a smaller share of the value of their labour (see the worker productivity vs. income graph).

There is no relationship between "worker productivity" (real GDP/worker or real GDP/hour of labor) and the value of labor. When capital substitutes for labor, it reduces the denominator in the GDP/worker equation, thereby increasing productivity without increasing the value of labor.

Further, most graphs of the sort you mention compare mean productivity (you can't measure any other kind in aggregate) to median income, which is a statistical fallacy.

If you have data suggesting the poor work more than in the past, please present it.

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