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Ezra Ellis
Trad climber
WA, & NC & Idaho
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Nov 28, 2011 - 10:58pm PT
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1. Pay off credit card debt
2. Pay off auto loans
3. Pay off home loan
4. Who the fu*k knows from here... a vacation property will at least make you happy!
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jstan
climber
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Nov 28, 2011 - 11:03pm PT
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SteveW:
Money is profoundly uninteresting. So you need to introduce something to the process that is interesting. I started out with a technique for getting bills and records off my desk that required no effort at all. I staple them, in the chronological order received into a spiral notebook. When full you put the starting and ending dates on the cover. I can find 25 year old records in minutes just based on chronology. Should anyone tell me I owe something, I have all the proof I need, right there. But before I put them in I enter the data into an excel spreadsheet. The sheet allows me to plot out my cost of living and reconcile my accounts each month in minutes. And I can see how cost of living has changed over the years.
When you can do this you know what you need, and can start thinking about investments.
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Fritz
Trad climber
Choss Creek, ID
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Nov 28, 2011 - 11:26pm PT
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Thank you all for sharing advice.
Heidi & I have suffered the investment roller-coaster for the last 25 years, and have participated in many of the investments mentioned.
The only decision I can still look back on, with major satisfaction is:
Placing, most of our investment money into Vanguard Mutual Funds.
Disclaimer!
I don't work for any investment related company.
Vanguard simply charges way lower management fees than any other Mutual Fund company, I know of.
They are one of the largest, and one of the most reputable Mutual Fund Companies. If in doubt: check their Forbes Magazine ratings.
Their funds may not be top rated every year, but you will be saving money on their fees.
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nature
climber
back in Tuscon Aridzona....
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Nov 28, 2011 - 11:43pm PT
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invest in LED technology?
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Hilt
Social climber
Utah
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Nov 28, 2011 - 11:52pm PT
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Rental properties. Just make sure it's in a good location so you always have plenty of clients asking to move in so you can be very picky.
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Ken M
Mountain climber
Los Angeles, Ca
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Nov 29, 2011 - 01:49am PT
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there is a LOT of outstanding advice in this thread, setting aside the trolling.
I've done well in real estate and the market. I'm getting back to pre-recession levels. Key was to sit tight.
I agree that getting rid of high-level debt is key. If you look at the rates being paid on credit cards and even a morgage, it is hard to come up with a safe investment that has that rate of return with no work. Think about it, if you pay off a credit card that is at, say, 15%, it is the same as though you invested in something paying 15%, WITH NO RISK. Where can you get an investment like that??
One thing that has not been covered, is entering into various investments with others. This is a HIGHLY DANGEROUS thing to do, not in terms of physical safety, but in danger to relationships. It is extremely hard to do, but in investing with friends as partners, it is the assumptions that kill you. Often unspoken. If you treat the situation as though you were entering into it with someone you didn't trust, that would at least be a good start. The stories I could tell......
So I agree with many others that getting rid of high-yield dept is the first priority. By the way, making advanced payments of principal for those with some money, but not bagfulls, is also a great investment.
I also agree that one should evaluate one's place in life, age, earning potential, working life. And should create a fiscal plan. And should gain a real handle on expenses.
I think that rental real estate can be very good, if you know what you are doing, are very hands-on, and you live nearby. The leveraging that can be done with real estate, combined with tax advantages, can really create money.
For example, if one had $100,000.00, and purchased 5 $100,000 properties, paying 20% down, and setting it up so that the rent/tax advantage covered the expenses, and paid off the loans in 15 years, you will now own $500,000 worth of property assuming that they did not increase in value, AT ALL.
That is a 500% increase in money in 15 years, or 33% per year.
Assume that the property LOST 20% of it's value over those 15 years.
You now own $400,000 worth of property, a 400% increase, or 26% per year.
If the property appreciates, we're talking about REAL money.
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Ken M
Mountain climber
Los Angeles, Ca
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Nov 29, 2011 - 02:34am PT
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Just for fun, I explored a stock market strategy the last two years, that ended up being interesting. I noticed how, even in a variety of market conditions, that one sees a lot of day-to-day variability, and that often, when one has a down day, one often has a similar up day pretty shortly.
Here is the strategy: First, I developed a list of stocks with certain properties: Large companies that you've heard of that are generally well thought of. Pay dividends, preferrably quarterly. I have a list of about 10 stocks. Dow stocks are nice.
When I wake up in the morning, and hear how the markets are doing, I look for a DOWN day, where the market has broadly lost more than 1%. I look at my list, and look for stocks that have dropped by 1 1/2 percent. I look to see if there was some specific problem with the stock--there almost never is, it is the "wobble" in the market that has hit that particular stock. I buy the stock, and generally there are 2 or 3, which is best, as I like to diversify by using multiple stocks, and decrease my risk. (although increasing the expenses, as you are charged by the trade)
Now I set an automatic sell order for a 1% gain, so I don't have to sit around and watch the stock on an hourly basis, I'm not trapped on my computer (that was the situation, until I started using the automatic sell orders). I've also gotten a little confused, and did not sell a stock that I thought I had sold. That's ok, I made 3% on that one.
What I'm shooting for, is a turnaround of a day, or a few, for a 1% return on my money-minus the cost of the trades (you can do this for less than $4). If the market stays down, you might have to stay in the stock for awhile, but because it is a solid company (lets say, 3M, GE, Disney, for example), the risk of loss of the investment is very little. You may also collect some dividend money while you are waiting for it to go back up, which boosts your return.
Well, that seems pretty simple. As I considered it, I thought "this is too simple to work, I must be missing something." So, I gave it a try.
I did this rather casually, by which I mean I wasn't sitting by the computer waiting for this to happen.
Over the two years, I made about 30 trys.
Of the 30, it worked...........30 times. I lost no money, at all. On a couple of occasions, I did have to hang onto a stock for more than a month, but eventually sold at the 1% gain. It was a little unnerving, when a stock had dropped by 5%, but it came back up.
This is not a lot of money, each time only 1%. HOWEVER, the principal is the same money, so I actually made 30% appreciation over that 2 years, or 15% per year. (minus expenses) That is better than the bank. If I'd been serious, I could probably have done a buy several times a month, at least.
This is a cousin to the strategy known as "day-trading", but differs in important ways.
Your mileage may differ, and unless you are a sophisticated investor, I would work with one of the brokerages that allow you to make "phantom trades" so that you can see what happens, before you consider risking any money (which I did).
No guarantees, and I admit that I consider market timing to be very closely related to gambling at Vegas.
But don't do what I did, you'll probably lose all your money. :)
If you do, let me know what happens.
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Rattlesnake Arch
Social climber
Home is where we park it
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Nov 29, 2011 - 06:41am PT
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Problems with gold as an investment:
1. It doesn't pay interest. All earnings are capital gains.
2. Taxed as a collectable = 28%. A big bite when you sell.
3. Someone might steal it. Good luck getting insurance.
4. If you want "secure" storage you have to pay which cuts into your gains.
5. New antiterrorism laws force dealers to report gold sales. The IRS is watching.
6. The government has confiscated gold from private citizens in the past, and could do so in the future.
7. A dramatic rise in gold value likely means the dollar has collapsed. You may need a good automatic weapon to go shopping with your American Eagles.
8. Central Banks have huge reserves that they may be tempted to sell to pay their bills.
BTW Electronic gold is not gold, it is just another risky way to speculate.
Otherwise its a good investment...
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steveA
Trad climber
bedford,massachusetts
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Nov 29, 2011 - 07:32am PT
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Much good advice here.
I have to agree with Jstan--if I'm reading him right.
The standard of living has started to swing to a downward trend, and there is going to be an increasingly larger gap between the rich and poor.
The increasing cost of energy will have a significant impact on the world economy. I preached this to my high school students 30 years ago.
Focus on securing a comfortable retirement and get rid of DEBT. Make every effort to own a roof over your head, in an area of your choice, with as little tax burden as possible.
I've made many mistakes playing the market and I have learned from those mistakes. There is a long learning curve and I would NOT recommend gambling your money. I generally do make money now but it is not an activity for a novice.
I like the idea of sticking your money in a secure place and spending a year forming a strategy for the future.
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SteveW
Trad climber
The state of confusion
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Nov 29, 2011 - 07:53am PT
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Jstan
That sounds a bit easier. I used to do something like that after I read
Your Money or Your Life.
I'll have to start that. . .
Thanks!
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Rattlesnake Arch
Social climber
Home is where we park it
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Nov 29, 2011 - 08:11am PT
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All the basic investment strategies still work with todays markets. You need to have discipline and be patient to be a good investor,though.
For instance, take saving for retirement. Advisors recommend Asset Allocation based on your age, with your portfolio divided between stocks, bonds, and cash. Then periodic rebalancing to maintain your desired allocation.
Where people went wrong is "forgetting" to rebalance. The stock market went up, their stock allocation got out of whack. But they didn't want to sell stocks because of the euphoria. Even most professionals lacked the discipline to rebalance.
Another basic strategy is buy and hold. You pick a portfolio of stocks with good fundamentals, buy them, then be patient. If you bought 10 stocks, 9 can be dogs if you picked one Apple.
If you lack patience and discipline, stay out. I believe the stock market is rigged, there is much inside trading and the little guy will get squashed if he tries trading strategies.
Oh, BTW I learned about 10 years ago that I lack the discipline to be a good stock investor.
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Reilly
Mountain climber
The Other Monrovia- CA
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Nov 29, 2011 - 11:30am PT
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Many people who attempt to trade on insider info wind up in jail.
Unless you're a congressman: NYTimesInsiderTrading
Sorry for the thread drift, sort of. Back when I was in commodities then
we could have talked about some funny business! It was all about insider
trades in the most literal sense. "Oops, I seem to have dropped that sell
order for that schmuck in Poughkeepsie! Oh well, we'll reconcile him at the
end of the day."
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Ken M
Mountain climber
Los Angeles, Ca
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Nov 29, 2011 - 11:40am PT
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If one is tempted to have a broker give advice and/or do trades for you, an educational read is "Liars Poker" by Michael Lewis, who was such a trader. You'll never do it again.
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Jingy
climber
Somewhere out there
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Nov 29, 2011 - 11:44am PT
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Never really thought about it.
Never found myself with a $400K paycheck, IRS refund or bonus.
I guess I'm just not applying myself enough.... I can do it, I just have to believe in myself
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Rattlesnake Arch
Social climber
Home is where we park it
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Nov 29, 2011 - 11:50am PT
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Except for your comment about rebalancing, you are completely wrong I take that as a complement. Thank you.
Many people who attempt to trade on insider info wind up in jail
True, there are some high profile cases - they even got Martha Stewart. But we will never know the true extent of insider trading.
I'm entitled to my opinion that the tables are rigged to take advantage of the "dumb money" - people with 401(k)'s and the like. There is more than just inside trading involved.
Jim Cramer told us how he used to do it:
"A lot of times when I was short at my hedge fund . . . meaning I needed (a stock) down, I would create a level of activity beforehand that could drive the futures," said Cramer. "It's a fun game and it's a lucrative game."
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FRUMY
Trad climber
SHERMAN OAKS,CA
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Nov 29, 2011 - 12:37pm PT
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Rebalancing is a joke. It's a brokers way to get movement on your portfolio. They make their money when you buy & sell.
If you buy ten stocks hoping to get one Apple you are making a major mistake.
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FRUMY
Trad climber
SHERMAN OAKS,CA
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Nov 29, 2011 - 01:43pm PT
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I'M WITH YOU FATTRAD. THATS WHY I SAID YOU WERE SPOT ON.
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Inner City
Trad climber
East Bay
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Nov 29, 2011 - 02:00pm PT
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There are a lot of platitudes being thrown around on this thread which seem to suggest that someone knows the actual 'right' thing for a person to do. The truth is deeper. Mighty Hiker seems closest to the truth because his post shows a number of variables which need to be considered.
Further, large investment houses are not for most. Transactional business tends to cause financial 'advisors' to act in their own interest, whereas a fee-based RIA (Registered Invesment Advisor) has his interests aligned with the client by charging a fee based on the amount of a client's assets under management (AUM).
Look for a couple of well-respected RIA's in your area and do a preliminary interview. By rule, an RIA cannot do old school (transactional) biz. The industry is moving away from this type of stuff.
I work in this field and speak to financial advisors on the phone each day.
Investing is a challenging business right now, and it is going through some big changes. Many clients are reassessing their own risk tolerance in the wake of the market upheaval of '08.
This (off-)topic is important and smart decisions are not easy to come by.
Be thoughtful and beware of someone who thinks they have all the answers, as the smarter person knows how much they don't know.
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Rattlesnake Arch
Social climber
Home is where we park it
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Nov 29, 2011 - 02:23pm PT
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Rebalancing is a joke. It's a brokers way to get movement on your portfolio. They make their money when you buy & sell.
The point is to remove the average investor from market timing decisions, which he/she will screw up (myself included). Of course the brokerages generate commissions this way and you will never get rich listening to them.
If you buy ten stocks hoping to get one Apple you are making a major mistake. Agreed. My example was simplistic. As an average buy and hold investor you would do the best you can to pick say 10 good companies. You are hoping the overall market will rise over the long term, also that you will be lucky.
I am not recommending these strategies as a way to invest $400k because I think the stock market has a small number of winners, the majority of us are lucky if we get our money back. But whatever you do, follow a strategy you understand and make your own decisions about where you put your money.
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