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Ask YC: How do you invest your money for long term growth?

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Re: Ask YC: How do you invest your money for long term growth?

#31

Post by gcv »

Two recommendations for reading: A Random Walk Down Wall Street (mentioned in another post, long, detailed, and entertaining), and The Coffeehouse Investor (short and funny). Both lay out the principles behind the theory of efficient markets, and make a great case for it.

In a nutshell: buy the cheapest unmanaged index funds you can find. Come up with an allocation you're comfortable with (e.g., 50% large cap, 20% mid-cap, 20% small-cap, 10% international equity). Reallocate once a year so that your investments still follow the same rough percentages; that way you won't have more risk exposure to any particular asset class just because it happened to have done well or poorly in any given year. That's it. You will not outperform the market by picking your own investments or playing hedging games with derivatives, and, over the medium-to-long term, neither will any fund manager. Since you're in this for the long term, have fun in life and don't bother checking your balances except when you get your quarterly statements.

Re: Ask YC: How do you invest your money for long term growth?

#32

Post by adk »

Here is what I do - I keep 2 months' worth of income in a high-yield saving account (a la ING) This amounts to about 5 months of living expenses for me, so it is a good safety net. - I stash away a small majority (say, 60%) of my long-term savings into index funds and relatively safe, stable stocks - Since I am fairly young (27), I invest a sizeable chunk (but still a minority; say, 40%) of my savings into riskier stocks with a potential to be a home-run down the road. I only invest into companies and technologies that interest or excite me. This makes research a pleasure rather than a chore.

The ratios will tip towards the conservative side as I get older.

Re: Ask YC: How do you invest your money for long term growth?

#33

Post by cpr »

I highly recommend the Agora Financial Group and their various newsletters.

Back when I had a little money to play with, I was following a couple of them (Penny Investor and another), and was able to gain 40% in a year (someone else was doing the actual work for me). But that's just anecdotal evidence.

I also like their whole philosophy; they've had several NYT #1 bestsellers, 'cause it's both commonsensical and also exceedingly contrarian at the same time. (Addison Wiggins and Bill Bonner.)

Re: Ask YC: How do you invest your money for long term growth?

#34

Post by noodle »

go to vanguard and invest your money in several different, diverse, low-cost funds. index funds are great, but you can't buy only index funds and be diverse. buy some REITs, some bonds, etc..

spread the money out, no more than 20% in any single fund unless the fund itself is diverse.

sit on it for a long time.

thats it.

Re: Ask YC: How do you invest your money for long term growth?

#35

Post by epi0Bauqu »

noodle wrote: post #34

go to vanguard and invest your money in several different, diverse, low-cost funds. index funds are great, but you can't buy only index funds and be diverse. buy some REITs, some bonds, etc.. spread the money out, no more than 20% in any single fund unless the fund itself is diverse. sit on it for a long time. thats it.

What %s do you suggest in particular across the various asset classes?

Re: Ask YC: How do you invest your money for long term growth?

#36

Post by epi0Bauqu »

Retric wrote: post #29
epi0Bauqu wrote: post #6

The comments so far are espousing passive investment strategy and good asset allocation, which I agree with, but I was looking for something a little more concrete. So in effort to engender some discussion with hard %s, the following is where I am right now (excluding equity in primary residence). The accuracy (beyond decimal point) is certainly irrelevant, but it came right off a spreadsheet and I left it in because…

That looks insanely conservative. I would basically drop Large Cap, Cash, and bond from any long term investment strategy. I would bump Emerging Mark's and US Small cap stocks to 25% each and spread the rest over Mid Cap, Commodities, Real Estate, and International Equities.

Does your advice depend on how much money you are investing, i.e. 100K vs 1M vs 10M?

In my case, the bonds and cash are mainly for capital preservation. I set aside an amount for that, and invested the rest in the various asset classes.

Re: Ask YC: How do you invest your money for long term growth?

#37

Post by epi0Bauqu »

gcv wrote: post #31

Two recommendations for reading: A Random Walk Down Wall Street (mentioned in another post, long, detailed, and entertaining), and The Coffeehouse Investor (short and funny). Both lay out the principles behind the theory of efficient markets, and make a great case for it. In a nutshell: buy the cheapest unmanaged index funds you can find. Come up with an allocation you're comfortable with (e.g., 50% large cap, 20% mi…

Are those the asset allocation % you use? Also, what about commodities, real estate, infrastructure, and other asset classes?

Re: Ask YC: How do you invest your money for long term growth?

#38

Post by redorb »

epi0Bauqu wrote: post #9
redorb wrote: post #8

I know its cheesy, but I really would rather invest in myself (Education, Business suit etc)

The question assumes you have money set aside in a thirty year time horizon with the goal of long term growth. Or are you saying that you put all your retirement money into your startups? Also, for the purposes of the question, assume you have enough money where education expenditures don't impact this portion.

I would bet on myself (I know more about that subject)

Re: Ask YC: How do you invest your money for long term growth?

#39

Post by jdroid »

redorb wrote: post #38
epi0Bauqu wrote: post #9

Earlier quoted context omitted.

The question assumes you have money set aside in a thirty year time horizon with the goal of long term growth. Or are you saying that you put all your retirement money into your startups? Also, for the purposes of the question, assume you have enough money where education expenditures don't impact this portion.

I would bet on myself (I know more about that subject)

What do you do with the money you're not spending?

Re: Ask YC: How do you invest your money for long term growth?

#40

Post by noodle »

epi0Bauqu wrote: post #35
noodle wrote: post #34

go to vanguard and invest your money in several different, diverse, low-cost funds. index funds are great, but you can't buy only index funds and be diverse. buy some REITs, some bonds, etc.. spread the money out, no more than 20% in any single fund unless the fund itself is diverse. sit on it for a long time. thats it.

What %s do you suggest in particular across the various asset classes?

well, this is how i invest, specifically. i'm young and more aggressive:

35% domestic 500 index

15% foreign developed markets

20% foreign developing markets

10% REITs

10% intermediate-term bonds

10% inflation-protected bonds

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