Investments & Personal Finance

[La literatura]

I was wondering what some of the more popular basic investment plans practiced in here are.

I don't know much about wealth management, so hopefully this leads to a fruitful discussion. I do know that it's best to start early so 'the miracle of compound interest' can take its course.

Other than that, my understanding is investing in index funds are the safe (and typically smartest) route to go for stock investments, and then treasury bonds and company bonds are a low-risk stable investment.

My understanding of a mutual fund is its a basket of selected investments that a company packages together and sells to you.

If you want to make your own basket of selected investments, you do things like E*Trade and ScottTrade, and it's not advisable to do this as your main investment vehicle (though fun to do on the side if you don't mind the trading fees).

If you invest into an index fund, which one do you use? Where did you go to set it up? If you do online brokerages, which company do you use?

[KC native]

Originally Posted by chefs fan in omaha

Berkshire Hathaway, best mutual fund you can buy. The managers only make $200k a year.

I think most mutual funds are rip offs, you can get the same results by throwing darts at the stock page of the paper without paying some over priced money manager.

Until Warren kicks the bucket. Buffet and Munger have been legendary. But there is no guarantee that their successors will be a good as they have been.

[Amnorix]

Originally Posted by KC native

Yes, the success rate is terrible on new holes. The LP allows all the expenses to pass through to the investors. They do this with real estate a lot as well.

But what is the point of intentionally losing money for a tax advantage. You don't get a dollar for dollar reduction in your income taxes... For every dollar loss that offsets a dollar of income, you save, say, 40 or so cents in taxes. Why lose a buck to save 40 cents?

I never could quite follow that part of tax shelters, but obviously the math must work somehow since I guess people do intentionally do that kind of thing.

[Amnorix]

Originally Posted by KC native

Until Warren kicks the bucket. Buffet and Munger have been legendary. But there is no guarantee that their successors will be a good as they have been.

Yeah, if Buffet was 50, I'd buy some Berkshire Hathaway, but that massive empire may wobble and eventually fall apart after he's gone. That is one GIGANTIC enterprise he's running there.

[tredadda]

Originally Posted by Amnorix

There are many, many books and websites on this, but good general rules of thumb:

1. index funds are the way to go because the fees are lower. Fees eat away at performance and can add up to very substantial amounts over long periods of time. Managed mutual funds tend, over the very long haul, to UNDERperform the broader market, so you're usually paying more in fees to get less return even before the fees are factored in.

2. Keep a rainy day fund worth of cash in a liquid account. Figure on several months of expenses at least.

3. In investing, diversity is important. You can and should diversify across types of investments (real estate, stocks, stocks versus bonds) and across geography (domestic versus international). Being young, you should be heavy on stocks and you will almost inevitably be heavy on domestic. That's not terrible, but just be mindful that diversity is usually good.

4. You can NEVER time the market. Don't try. Forget the miracle of compound interest and learn the joy of dollar cost averaging, which means steadily contributing the same amount of money to your various mutual funds on a monthly basis over a long period of time so that your money gets invested when the market is low (and the price per share is cheap) as well as high. When it's high, don't stop, because it may yet go higher.

5. You don't lose or make money until you sell. Stay the course. If you're 35 and the market is tanking, who cares? You're not taking the money out for 20+ years. STAY THE COURSE. If your plan is good and consistent, you should be fine in the long run.

6. Your friend's hot tip? It ain't hot and it's not a tip.

7. Do what you can to reduce your tax exposure and increase your income. At a minimum that means making sure you understand your employer's tax advantaged retirement plans, if any, and AT LEAST contributing the amount needed to get the maximum match. If they match $1 for every $2 up to $5,000, then do whatever you can to put in $10,000 and get that free money. After that, consider traditional and Roth IRAs. Keep in mind that that money is out of your pocket until retirement age, so you must balance retirement plan savings with "regular" savings.

^ Sage advice there. I would also like to state that the best hold period for stocks is forever. Day traders consistently lose, while the guy who takes it slow and steady over the years usually wins in the end.

[KC native]

Originally Posted by Amnorix

But what is the point of intentionally losing money for a tax advantage. You don't get a dollar for dollar reduction in your income taxes... For every dollar loss that offsets a dollar of income, you save, say, 40 or so cents in taxes. Why lose a buck to save 40 cents?

I never could quite follow that part of tax shelters, but obviously the math must work somehow since I guess people do intentionally do that kind of thing.

I'm not sure. The only people that are using LPs to intentionally lose money are really wealthy.

[KC native]

Originally Posted by tredadda

^ Sage advice there. I would also like to state that the best hold period for stocks is forever. Day traders consistently lose, while the guy who takes it slow and steady over the years usually wins in the end.

That is absolutely incorrect. Buy and hold is a guaranteed money loser.

[KC native]

Originally Posted by Amnorix

Yeah, if Buffet was 50, I'd buy some Berkshire Hathaway, but that massive empire may wobble and eventually fall apart after he's gone. That is one GIGANTIC enterprise he's running there.

Yes, I love reading about Warren and Munger and how they work. They are the best value investors ever.

One of the more interesting things I've learned about Buffet is that they leave the people of the businesses they acquire in charge. They figure that those people can run the business better than them. They will come in with people to help make them more efficient, but for the most part they retain management at firms they acquire.

[mlyonsd]

Originally Posted by KC native

Yes, I love reading about Warren and Munger and how they work. They are the best value investors ever.

One of the more interesting things I've learned about Buffet is that they leave the people of the businesses they acquire in charge. They figure that those people can run the business better than them. They will come in with people to help make them more efficient, but for the most part they retain management at firms they acquire.

Absolutely true.

Also true is how the bottom line is more important than his workers. The people in charge of his businesses do better when they make their companies appear to do well. And the employee at the end of the line suffers.

He's rich for a reason and is either out of touch or doesn't give a shit about who works for him.

You should feel great satisfaction for idolizing him.

[RNR]

Originally Posted by mlyonsd

Absolutely true.

Also true is how the bottom line is more important than his workers. The people in charge of his businesses do better when they make their companies appear to do well. And the employee at the end of the line suffers.

He's rich for a reason and is either out of touch or doesn't give a shit about who works for him.

You should feel great satisfaction for idolizing him.

So you are saying the lottery ticket plan is good or bad?

[go bowe]

Originally Posted by LiveSteam

house payed for
Gold
silver
food
water
guns
ammo

*perk* gold and silver?

how many guns do you have? I'd like to send someone over to pick up a few silver bars, just to be neighborly and all...

[go bowe]

Originally Posted by RedNeckRaider

So you are saying the lottery ticket plan is good or bad?

eh, playing the lottery is just throwing money away...

i'd rather buy a bottle of fine rum...

[RNR]

Originally Posted by go bowe

eh, playing the lottery is just throwing money away...

i'd rather buy a bottle of fine rum...

I do both does that increase my odds?

[go bowe]

Originally Posted by RedNeckRaider

I do both does that increase my odds?

it certainly will increase your odds of having a good time...

[RNR]

Originally Posted by go bowe

it certainly will increase your odds of having a good time...

Winning

[Amnorix]

Originally Posted by KC native

That is absolutely incorrect. Buy and hold is a guaranteed money loser.

For individual stocks, no doubt, though nowhere near as bad as day trading, where you can get burned alot worse alot faster. For mutual funds over the long haul, though, buy and hold is not a bad way to go.

Fundamentally, alot of people just aren't going to pay very close attention to their investments, and/or lack the knowledge/skill/time to move in and out of various types of investments. Buying and holding isn't at all bad over the long run if you have a sufficiently diversified portfolio.