EPTBut I don't know what he was trying to hint at with his cryptic messages about real estate investments that don't trigger capital gains. My guess if he had the opportunity to continue posting he'd be talking about something like house flipping which is closer to a full time job than an investment strategy and not really relevant to this thread which is clearly about passive investment and money management tips for people who already have jobs. He didn't really say anything so it's hard for him to be right or wrong
Investing - Page 2
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floor exercise
Canada5847 Posts
But I don't know what he was trying to hint at with his cryptic messages about real estate investments that don't trigger capital gains. My guess if he had the opportunity to continue posting he'd be talking about something like house flipping which is closer to a full time job than an investment strategy and not really relevant to this thread which is clearly about passive investment and money management tips for people who already have jobs. He didn't really say anything so it's hard for him to be right or wrong | ||
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darkponcho
United States262 Posts
The investment institute at my school (which I was in for 1 semester), does all sorts of financial comparisons, and even research into what consumers think about the company. The result? They did worse than the S&P 500. I think it was proven before that you could hang up the ticker symbols of all the stocks, throw darts at random stocks, and you would do better than most "stock gurus." Basically what I'm trying to say is, unless you're the next Warren Buffet, don't spend too much time picking stocks. Instead, pick industries. My current policy is "If the economy is shitty, invest, because eventually you'll make money." And here's a message to all those in college who have saved up money over the course of their life: If you are shying away from investing because of money, just do it. Your first paycheck from your first job out of graduation (assuming you're in a math, science, engineering, finance, or any non-joke major), is going to be at least 5 times greater than your life savings. Who cares if you lose your life savings now if you're going to make it back and 4x more when you graduate? You have very little to lose and so much to gain, so gogogogogo! Here's another overused Buffet quote: "Be fearful when others are greedy, and greedy when others are fearful" - Warren Buffet Qualifications: I'm an engineer with very little background in finance, the above is simply my opinion and could be wrong. | ||
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intrudor
Canada446 Posts
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Sabu113
United States11112 Posts
Wasn't there a thread awhile ago which just savaged that kiyoshi book? | ||
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Durak
Canada3685 Posts
With that said, it depends on your life situation. As darkponcho said, if you're young you can usually afford to try things out and take on more risk. If you're older, there are still safe alternatives to a savings account. For example, T-bills, bonds, money markets, and many other certified investments depending on where you live. I suggest that if you want to start investing, learn a reasonable amount yourself or get professional advice. Investing is like any other complex trade: you spend the time to become proficient or you hire someone else. Is it worth your time and nerves to do your own legal work? Do you want to risk messing up something that important? That depends on your situation. All in all, the Boglehead philosophy is fine for new investors. Here are a few specific caveats I have with the advice: + Show Spoiler + A partner in a big law firm could be raking in $1 million a year. If he spends $1 million a year, then his net worth is theoretically zero. No it isn't. His net worth would consider all of his assets and liabilities. For this example, you don't have enough information to know what his net worth would be. It would be highly unlikely for anyone to have a net worth of zero, even bankrupts. This section illustrates the concept of worth but it's not as simple or accurate as it could be. [*]Live wisely. There is a certain competitive fire in most of us to have the biggest house we can buy or the nicest car we can afford. After all, we worked hard for the money. Why can’t we enjoy using all of it? This mentality is something you have to fight. Save in any way you can. Getting a big house you cannot really afford will cripple you financially. Buying new cars can be a huge money sink. Everyone knows that a new car depreciates faster than a porn star. Consider getting a 2-3 year-old car and keeping it for a long time. If you absolute must get a new car, at least try to make it practical and gas-efficient. Always consider cheaper alternatives to what you’re buying. The title "live wisely" and the tone of the passage is misleading. Investing has nothing to do with how you should live your life. It is your own choice when you want the cash flows. Borrowing is absolutely fine and is essential in our lifestyles and market. This philosophy shouldn't tell me what I should consume and what I shouldn't.[*]Save early and often....A dollar you invest today will be worth much more than that by the time you retire.... Not necessarily; based on assumptions. I suggest you calculate your real rate of return rather than your nominal rate. Your purchasing power might actually decrease due to inflation.Stocks offer a higher return but with significantly higher volatility. Not necessarily. Still, a reasonable assumption. [*]Stay the course.In the long run, stocks and bonds make money, and at a very decent rate. Not necessarily. This is such a dangerous assumption, especially for unknowing investors. See 2008 where even the bluest companies lost all of their value.Edit: formatting | ||
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radar14
United States1437 Posts
Net worth: You're right that the way I wrote it is vague. What I should write is something like, "if he blew $1 million a year on hookers and blow, then his work income is not increasing his net worth." Live wisely: Investing, as YOU define it, may have nothing to do with how you live your life. The Boglehead philosophy is to save whenever possible and try to be frugal in all endeavors. That is simply the ideal with regards to attaining financial freedom. Now, does everyone who believes in these principles follow everything to the letter? Probably not. That does not mean it is not worth considering with every purchase. Debt is fine if it is necessary and useful debt, such as a reasonable mortgage or student loans. Credit card debt, for example, is never useful. It is negative wealth. The long run: 2008 is a blip in the context of your entire investing timeline. THAT is what I mean when I say "long run." Since 1973 there have been five bear markets: 1973-4, 1987, 1990, 2000-2002, and the recent one. Staying the course during those tough times is absolutely essential. Of course, this is easier said than done, which is why you need to assess your own risk-adversity and assign an appropriate percentage of your portfolio to bonds. | ||
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Durak
Canada3685 Posts
On October 07 2010 11:04 radar14 wrote: Live wisely: Investing, as YOU define it, may have nothing to do with how you live your life. The Boglehead philosophy is to save whenever possible and try to be frugal in all endeavors. That is simply the ideal with regards to attaining financial freedom. Now, does everyone who believes in these principles follow everything to the letter? Probably not. That does not mean it is not worth considering with every purchase. Debt is fine if it is necessary and useful debt, such as a reasonable mortgage or student loans. Credit card debt, for example, is never useful. It is negative wealth. The choice is between consuming now or saving for consumption later. Choosing if and how to invest my savings are different. The money that I choose to save should be invested optimally. My point is that "save whenever possible and try to be frugal" is a lifestyle recommendation. Sure, if I never consume anything, I'll have tons of money to invest (unless I die from hunger). However, these aren't investing guidelines. They are tips for finding more money to save. On October 07 2010 11:04 radar14 wrote: The long run: 2008 is a blip in the context of your entire investing timeline. THAT is what I mean when I say "long run." Since 1973 there have been five bear markets: 1973-4, 1987, 1990, 2000-2002, and the recent one. Staying the course during those tough times is absolutely essential. Of course, this is easier said than done, which is why you need to assess your own risk-adversity and assign an appropriate percentage of your portfolio to bonds. It is a common misconception that markets always go up in the long term. Financial markets aren't magical money makers for anyone who wants to buy an index fund. There aren't just a few market-wide events you need to worry about when investing. I won't try to change your opinion if this is one of your beliefs though. | ||
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jalstar
United States8198 Posts
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Empyrean
17082 Posts
On October 07 2010 08:08 fwaaahh wrote: Never.Die is not completely wrong guys... there's a book called Rich Dad Poor Dad by Kiyosaki, who also wrote other good Real Estate investing books, that shows how lucrative real estate investing actually is compared to other forms of investing. The bottom line is consistent profits that can compound over the years, while saving tons of your income on tax shelters http://en.wikipedia.org/wiki/Rich_Dad,_Poor_Dad#Criticism  Also @mOnion, how are we so different? :< | ||
thedeadhaji
39489 Posts
What's stated in OP is sound advice but may not be good to follow "to the dot" depending on the person. For instance, a 25 year old who has 100million to his name probably shouldn't be putting 75% of his portfolio into equity. Look at your situation and figure out what's best for your unique situation. FWIW, the bond market is doing terribly now b/c interest rates are so low. It's "risky" so to speak, to buy bonds right now because being stuck with a 10 year note once interests increase (and thus the yields increase), your bonds aren't going to be worth face value. Also, California Municipal bonds (tax free) are pretty scary right now because the State is in serious danger of defaulting. On another note, I don't know why you guys like the Vanguard ETF's for the S&P500 index. Their expense ratios aren't competitive with the SPDR's ETF. Lastly, be careful when considering "international" equity. WTF is international? It's anything non-us based, so it doesn't necessarily even mean "emerging markets" which some people will surely confuse "international" with. Also, "emerging markets" includes Brazil, Russia, and Eastern European countries that some of you may not want exposure to. In this case you'd want to choose something along the lines of "Asia excluding Japan". | ||
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s h 1 k 4 i
United States21 Posts
On October 07 2010 13:35 jalstar wrote: If you want to learn a bit of hedging strategies check out Options, Futures, and Other Derivatives by John Hull. It's a bit mathematical in some parts but anyone should be able to learn the basics. If you don't actually work in finance, I'd advise against investing in derivatives. One of the earliest things you learn about derivatives is that you only trade them as a way of investing in asset classes (i.e. volatility), which is probably beyond what "average" people have time to worry about. If you're looking at derivatives to hedge your positions, most brokerage accounts will allow you to place limit and stop-loss orders, which serve pretty much the same purpose from a hedging standpoint and also save you the trouble of making a big mistake when constructing spreads. If you want to learn about hedging just for fun, Sheldon Natenberg's book is probably a better resource. It's a lot less academic and makes you think about what you're actually doing a lot more. On October 07 2010 08:44 darkponcho wrote: People like to shy away from stocks because they call it "gambling." I call them ignorant. A lot of friends kept trying to convince me not to invest, but finally I invested $3000 1 year ago (I'm 21 years old) and made about 25% profit. All I did was invest in blue chip stocks and a S&P500 ETF. I barely even looked at the financials of the companies. Instead, I banked on the volatility of the economy to make me some big money. Basically my logic was "the economy is recovering, therefore stock prices will go up," and they did. Qualifications: I'm an engineer with very little background in finance, the above is simply my opinion and could be wrong. Having made money doesn't change the nature of what you're doing. Phil Ivey wins the World Series of Poker and makes money more often than he loses it. He's still gambling isn't he? All you're doing is potentially improving your odds. The risk is always still there. | ||
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