# Any stock investors here?



## Snafflebit (Nov 22, 2013)

The past six months have been a welcome change in the market. I finally enjoy looking at the value of my retirement accounts and trading account. I have put money in throughout the recession, and kept faith that things would get better and after five years it may finally be starting. I really would like to start my own business, possibly wine making. A nestegg will help a lot.

I am a member of The Motley Fool, an investment recommendation service for the small investor. Anyone else actively managing their investments?


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## Runningwolf (Nov 22, 2013)

When I was in HR I worked extra hard trying to convince the employees to invest in the 401k plan. It was a tough sell trying to convince people to invest their money in the market while everyone was losing thousands. It was even a tougher sell trying to convince folks to just ride it out and not pull their money out. Those that did ride it out and kept investing made out. I'm not talking about the internet bust in 2000 though. Thats another whole story.


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## wineforfun (Nov 22, 2013)

I definitely keep an eye on my investments, however, I ride through the highs and lows as it will all work out in the end. Dollar cost averaging. It is a great principle to invest by. I know a lot of people that sell off when the market starts dropping, then buy back when it starts going back up. Very, very bad to do. I always tell them to just ride things out, but a lot of people get freaked out when it drops.
You are right on though, right now, it is nice to see the portfolio. However, I am more concerned about it when I am ready to retire.


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## Rocky (Nov 22, 2013)

I believe that Will Rogers had the best advice concerning the stock market. He said, "Buy good stocks when they are low and when they go up, sell them. If they don't go up, don't buy them."

I got hurt pretty good by the tech stock fiasco and I did not have fly by night stocks. I had GE, IBM, Cisco, etc. but they suffered with all the others. Now, against all traditional advice, I am in annuities at 7-8%, which is good enough for me at my age. Remember, Bears make money and Bulls make money. Pigs go broke.


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## Snafflebit (Nov 23, 2013)

Nice to hear that people are planning for the future. Wine making probably teaches patience better than anything. I got stung by the the dot com bubble too when I started my first serious job out of college. Those losses hurt but looking back I have done very well by staying invested through good times and bad. I try to get my friends and family interested in investing. It is difficult but I keep nagging and reminding them. I am a stock picker, mainly as a hobby and I enjoy it and have a few big gains like Apple and Tesla. But disregarding those few picks, I have run some savings calculators and I would have done quite well by putting all my savings in a couple index funds, ignoring it and doing other things with my time! If there are any other stock pickers looking for advice, my Motley Fool membership gives me three free one-year subscriptions to their Stock Advisor service. I have two left. PM me if you are interested.


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## Geronimo (Nov 23, 2013)

I was lucky in the tech bubble, and had an advisor that said to dump everything in March of 2000. I went to bonds and jumped back into funds when the market was down (but not at the bottom yet) so I lost some. This last fiasco was completely unforeseeable and I'm grateful that we're out of the woods again. I also got lucky buying Bank of America stocks as they tumbled. First at 7.50, then at 6.75 and finally (every penny I could scrape up) at 5.25. I sold the whole works at 12.10. Just watching the government gives important clues as to where to watch. Take a look at what Haliburton did during the Bush/Cheney years. You could have made 10x your investment with good timing.


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## jamesngalveston (Nov 23, 2013)

I have invested heavily in property mostly dirt.
When you live on an island it becomes clear that they will not bring dirt in to make it bigger but raise the price to those that want it.
supply and demand...and there is lots of people that want to live on the water......


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## GaDawg (Nov 23, 2013)

I'm retired, so I like dividend paying stocks. I look for stocks that pay about half of earnings out in dividends. I want them to have money to grow the company and my dividends.


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## Runningwolf (Nov 23, 2013)

Geronimo said:


> I was lucky in the tech bubble, and had an advisor that said to dump everything in March of 2000. I went to bonds and jumped back into funds when the market was down (but not at the bottom yet) so I lost some. This last fiasco was completely unforeseeable and I'm grateful that we're out of the woods again. I also got lucky buying Bank of America stocks as they tumbled. First at 7.50, then at 6.75 and finally (every penny I could scrape up) at 5.25. I sold the whole works at 12.10. Just watching the government gives important clues as to where to watch. Take a look at what Haliburton did during the Bush/Cheney years. You could have made 10x your investment with good timing.



I was also one of the lucky ones with the tech bubble (dam lucky). I bought my house that year and took a lot out for the down payment, landscaping, etc. I was reluctant to do so but then BAMMM the bottom hit and I was mostly out (right at the peak of it). To this day I thank my lucky stars I didn't wait another 6 months.


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## geek (Nov 23, 2013)

Interesting topic.
I ride the market and my 401-k has been really good for the last couple years..!!

I watch my account and the market daily...lol


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## Simpsini (Nov 23, 2013)

I tried managing my portfolio for years, but now I have a local firm handeling it. They invest only in mutual funds. I guess I didn't have the patience it takes nor dedicate the time. I've been averaging 8% with them which is very good these days. My goal is a 5% return so right now I'm ahead of the game, but on track for reaching my retirement goal. Hopefully I can retire in 4 years and concentrate on making wine & beef jerky. I hope we all do well, even in these times of uncertainty and big government.


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## sour_grapes (Nov 23, 2013)

All index funds, keep costs low, diversify, make a personal investment policy statement, set it and forget it, stay the course.


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## Snafflebit (Nov 23, 2013)

sour_grapes said:


> All index funds, keep costs low, diversify, make a personal investment policy statement, set it and forget it, stay the course.



Hello fellow Boglehead 

The Boglehead forum (people who follow the basic investing philosophy of Vanguard Funds founder Jack Bogle) has some great reading almost as entertaining as winemakingforum! And it is free.


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## michael-s (Nov 23, 2013)

Something I am very lucky to have and thankful for is my and my wife's pension. My company pension plan was paid for on my behalf not requiring any funds by me. The pension plan, a DB pension plan was set up so that a member could retire, if they chose to, after 30 years with a full pension, regardless of age. I took advantage of that company pension plan this past July 1st. But during the last contract negotiations and a long 1 year strike in 2009 that pension plan setup was cancelled by the company and all new employees hired starting in 2010 have had to open and contribute to their own pension plan, a DC plan, but they own outright all the funds in that plan. My pension plan did not cost me anything but I don't own any of the funds in it. So if I were to die there are no funds to go to my wife or estate, but she would receive for the rest of her life a survivor pension, which is about 1/3 of what I receive from my pension.
My wife's pension plan is similar to mine, fully funded, but being in government they have to reach an age/years of service factor, which is 90. But that number sometimes varies when the government want to reduce employees and lets some retire earlier with a full pension. That is the total of her age added to her years of service and when they reach that number you can retire with a full pension as long as you are older than 55. She starts her full pension January 1st, 2014. She too has a survivor pension when she dies.

We have continued to save and invest regularly since we were married in the market and we use a Financial Advisor and we meet twice a year for reviews and if suggested, adjustments. Recent returns like others here have said have been excellent, with the markets now in big upswings. During the big market downturns we did not panic and bail but left the funds where they were and they have all recovered to values before the big market downturns and like I said above they are giving big returns now with the market in the shape it is in now.


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## sour_grapes (Nov 23, 2013)

snafflekid said:


> Hello fellow Boglehead
> 
> The Boglehead forum (people who follow the basic investing philosophy of Vanguard Funds founder Jack Bogle) has some great reading almost as entertaining as winemakingforum! And it is free.



Great! Glad to hear it. Have to admit, your comments on stock-picking and active management made me think you were anything BUT a Boglehead, which is largely what prompted me to make my comments. Glad to hear I was wrong!


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## Geronimo (Nov 23, 2013)

Vanguard is the one to watch, that's for sure. Their index funds (especially the admiral funds) are so low on expenses that you'll never find any cheaper. They have some funds for aggressive traders too.


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## Snafflebit (Nov 23, 2013)

sour_grapes said:


> Great! Glad to hear it. Have to admit, your comments on stock-picking and active management made me think you were anything BUT a Boglehead, which is largely what prompted me to make my comments. Glad to hear I was wrong!



I allocate a portion of my money to educated guesses, i.e. stock analysis and picking. It is a hobby, although I intend to make this hobby pay off. I have gained some understanding of business management and financing from learning how to read the income statements, balance sheets and the jargon of companies that gets spoken about in the investing newsgroups. So there is added benefit to diving into the details of stock selection. this might be useful if I try to talk the bank into loaning me some money for a business. The majority is sitting in S&P500 and Russell 2000 funds, growing along with the economy and dividends, away from my daily meddling.


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## Wiz (Nov 23, 2013)

I am retired and am a conservative investor. I stick strictly to mutual as they do not carry to risks of stocks. I was 100% into bond funds and jumped out this passed June when interest rates started to rise and rates of return began tubing. Switched to stock mutual mixed across the board. I lost the monthly dividend return I was enjoying when I sold the bond funds. Gains have off-set the dividend loss and have received a 13% gain since end of June.


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## novalou (Nov 24, 2013)

I invest in no load mutual funds in my retirement account. I stay invested even when things are headed south.

Anyone thinking of taking money out of the market now with the new highs?


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## garymc (Nov 24, 2013)

I have no bonds, about 5% in mutual funds, 5% cash, and the rest in stocks. I mostly buy stocks of companies that have a history of increasing their dividends. As long as they continue with the dividends I don't have to worry about selling. Currently the dividends are being reinvested, but at some point I'll have the dividends for income. Unfortunately, I didn't learn about this approach until the last few years. Brokerages are not keen to tell you to buy stocks that you will probably never sell. Not many brokerages are going to tell you about an approach that involves very few commissions. Oh, yes, my wife and I are retired and both have defined benefit pensions if you're wondering about the allocation.


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## Geronimo (Nov 24, 2013)

I think it's worth mentioning why people dump bonds when interest rates rise. If you buy a bond a 4%, it's fixed. If the prevailing rate rises to 5% your 4% bond is not attractive to anyone. Pretty simple, but most people don't understand why bonds have been so popular the last 10+ years and now everyone wants to run away from them.


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## kryptonitewine (Nov 24, 2013)

I have a mix of stocks, mutuals and ETF's. Most have been recovering however there is talk of another bubble forming. Not going to stop me from Investing but won't be surprised to see a correction. Fortunately I have a long time before I retire, 20 years give or take. That's assuming I ever retire, not the sit around type of guy.


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## novalou (Nov 24, 2013)

Geronimo said:


> I think it's worth mentioning why people dump bonds when interest rates rise. If you buy a bond a 4%, it's fixed. If the prevailing rate rises to 5% your 4% bond is not attractive to anyone. Pretty simple, but most people don't understand why bonds have been so popular the last 10+ years and now everyone wants to run away from them.



Bonds are pretty complicated. If you are holding long term bonds, as interest rates rise, their value will decline. Short term bonds hold their value better in a rising interest rate market.

Corporate bonds pay better yields, but carry more risk.

With the credit fallout a few years ago, people are realizing they are not truly "safe" investments.

You have to know the credit worthiness of the bond issuer, the rate and term, and how long you are willing to hold onto it.


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## Geronimo (Nov 24, 2013)

novalou said:


> Bonds are pretty complicated.



Yeah you have to understand yield (especially yield to maturity) which is way too complex for me to describe. Most people just buy solid bond funds like PIMCO total return (which are down ~0.8% YTD). 

When you could be looking at 25%+ gains in stocks (30% for the best index funds) then even a 10% gain looks weak.


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## jamesngalveston (Nov 24, 2013)

Its funny no one invest in real properties...but no mistake.
you have a huge upfront investment so it makes it harder to play the game.


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## Geronimo (Nov 24, 2013)

There's a lot of work associated with real estate, too. Buying a mutual fund is as easy as a few mouse clicks and forget about it.


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## sour_grapes (Nov 24, 2013)

jamesngalveston said:


> Its funny no one invest in real properties...but no mistake.
> you have a huge upfront investment so it makes it harder to play the game.



I do treat real estate as a separate asset class. I get my exposure to it only through REITs and TIAA-CREF's real estate fund. I have thought about buying a property to rent, but just cannot convince myself that I want to be a landlord! 

Moreover, the areas of my city where I wouldn't mind being a landlord have, of course, a puny capitalization rate. Areas where the cap rate is high are daunting places to be a landlord.


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## boozehound (Nov 24, 2013)

I started investing in stocks in 2009 when everything was crashing. My dad started me buyn mutual funds when I was young thru his advisor. I was really interested in stocks and wanted to buy them on my own. I opened an account and bought the big company's. CAT, GE, Ford, Bank of America (which I was really nervous about), and 3M. I also bought a couple small stocks that I knew nothing about and that's were I went wrong. A couple of those did come back but others didn't. I have sold off on most of the big ones and toke a good profit. It's hard to get back in when everything's so high now. I tryn to find good penny stocks that will run. Stocks are a lot like winemaking. You have to be patient with the product to get rewarded well. Sometimes it's hard to stick it out and you think it's over but things can change fast and the reward is well worth it!!!


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## BernardSmith (Nov 24, 2013)

I guess I really don't understand the stock market. For every "investor" who thinks is now a good time to sell another "investor" must be willing to buy but since neither the seller nor the buyer actually want the stock at least one of the two must be wrong. My sense is that unless you are a gambler, passively managed index stocks probably are most likely to make most money for most people. But that said, as an expat Scot I have to say that privatizing retirement -requiring Joe Public to invest their money for retirement seems to work best for corporations and royally screws the worker who depends on such funds to live.


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## novalou (Nov 24, 2013)

BernardSmith said:


> I guess I really don't understand the stock market. For every "investor" who thinks is now a good time to sell another "investor" must be willing to buy but since neither the seller nor the buyer actually want the stock at least one of the two must be wrong. My sense is that unless you are a gambler, passively managed index stocks probably are most likely to make most money for most people. But that said, as an expat Scot I have to say that privatizing retirement -requiring Joe Public to invest their money for retirement seems to work best for corporations and royally screws the worker who depends on such funds to live.



This is why good mutual funds are best for most of us. The fund managers have the resources to do all the research. It also gives you diversification. 

The key is to find a fund manager with a good track record and a fund that is "no load". This means front or back loaded.


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## sour_grapes (Nov 24, 2013)

BernardSmith said:


> My sense is that unless you are a gambler, passively managed index stocks probably are most likely to make most money for most people.



Hear hear!



> But that said, as an expat Scot I have to say that privatizing retirement -requiring Joe Public to invest their money for retirement seems to work best for corporations and royally screws the worker who depends on such funds to live.



I agree. A decade or so ago, I realized I "didn't know nuttin' " about investing for retirement. So I threw myself into it, pored through books, websites, forums, and even read a lot of original literature. I came up with a plan I was happy with, and which requires very little yearly maintenance. So, after spending that all that time years ago, I no longer pay much attention to it now.

But I can't help thinking -- what a waste! Why should everyone have to spend the time/effort to figure this out? And what about the ones who don't or can't?


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## Snafflebit (Nov 25, 2013)

There are a lot more knowledgeable investors on this board than I anticipated! Buying passive managed mutual funds or ETFs is the best and simplest choice for the typical person planning on building a retirement. But I believe there is room for individual stocks, MLPs, REITs. Where I have seen friends run into trouble with buying individual stocks is when their choice is based on "I like a product made by X" or "my brother in law recommended X" or "Company X makes high tech stuff and that must be good" etc. etc. This type of selection is not much different than putting all your roulette chips on Red and thus stock selection gets called gambling. If a person is willing to do some basic research and review stock ideas with other like minded people, the cream does rise to the top and odds get stacked in your favor. There are no guarantees but the results are usually a lot better than gambling. But, one must do research. I also do risk-defined trades with options to generate income. Not exactly Jack Bogle like but my retirement funds are solidly in low fee mutual funds, to prevent me from getting too clever and blowing up my chances at living comfortably in my old age.


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## sour_grapes (Nov 25, 2013)

I agree with most of what you said. I am a little torn: I believe in the weak version of the Efficient Market Hypothesis, and it appears that maybe you don't (although you act in an overall prudent matter, and are more likely to generate a little extra moolah than to get killed). However, I fully acknowledge that it is people like you, who put themselves out there, who are _responsible_ for the veracity of the weak version of the Efficient Market Hypothesis!


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## wineforfun (Nov 25, 2013)

sour_grapes said:


> All index funds, keep costs low, diversify, make a personal investment policy statement, set it and forget it, stay the course.



Excellent advice and advice I adhere to. If you invest in mutual funds, definitely use the index funds. Fees are typically 1/4 to 1/10 that of traditional mutual funds.

Along with index funds, I now mostly have invested in Dow dividend paying stocks with at least a 3.0% dividend. Going after mostly companies/products that are always needed or always going to be used, ie: consumer goods, communication, drugs, etc.


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## Geronimo (Nov 26, 2013)

So if you had to pick ONE fund and put it all in, which would you choose?

For me it's *Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)*

With expenses at 0.05% and market leading index fund performance, it's the clear winner!


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## wineforfun (Nov 26, 2013)

Geronimo said:


> So if you had to pick ONE fund and put it all in, which would you choose?
> 
> For me it's *Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)*
> 
> With expenses at 0.05% and market leading index fund performance, it's the clear winner!



Personally, I would never put everything in to one stock or fund. But to play along, I would say you have a good one there. Very nice expense at .05%.


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## sour_grapes (Nov 26, 2013)

Geronimo said:


> So if you had to pick ONE fund and put it all in, which would you choose?
> 
> For me it's *Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)*
> 
> With expenses at 0.05% and market leading index fund performance, it's the clear winner!



A fine choice! The only other contender I can think of is Vanguard's Total World Stock Index (VTWSX), to get exposure to non-US markets in the same fund. However, it does not appear they have Admiral Shares yet, so the ER is 0.35%.

I am very lucky to have access to very, very low-cost funds in my work's retirement plans (most ERs are 0.02 to 0.15). I have calculated the weighted average of my ERs to be 0.15. Ironically, Vanguard, which is where I have my Roth IRA, is the biggest drag on my ER! (This is because I don't have access to institutional shares there, and I use my IRA to get exposure to some sectors that have inherently high costs.)


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## Turock (Nov 26, 2013)

My best advice is to stay diversified. I retired in 2000 and made it thru all the market downturns without having to go back to work. Invest while you're young and while time is on your side. The time to worry about retiring is the first DAY of your first job. Those years fly by quickly.

I stated investing that way at 21 and retired at age 50. Every year, I invested 25% of my gross wages. Just keep at it and make wise decisions--not emotional decisions. Getting rich is a turtle's race.


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## Boatboy24 (Nov 26, 2013)

Turock,

Your words should be hammered into every college student in this nation. My father gave me very similar advice and I took several years to start following it. Had I listened to him early on, I'd be a millionaire in my early 40's. Instead, I'm trying to make up for lost time. I got a relatively early start, but lost 8 or 9 years of "serious" investing in my 401k. Still in good shape, relative to many, but I could be much better off. 

I hope I can convince my two boys to start earlier than I did.


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## sour_grapes (Nov 26, 2013)

Turock said:


> Getting rich is a turtle's race.



This. (and this text is just to reach the 10-character limit).


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## Geronimo (Nov 26, 2013)

wineforfun said:


> Personally, I would never put everything in to one stock or fund. But to play along, I would say you have a good one there. Very nice expense at .05%.



The thing with that fund is that it diversifies you across the entire market.


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## Hokapsig (Nov 26, 2013)

Listen to what I say, not what I do. When we got married in 1987, we had $1000 left over from the wedding. A stock was coming out on Nasdaq (BSBL) selling for $.09 per share. I asked my wife about this and she said "OHHHH NOOOO. We are saving for a house." For $1000 bucks, I figure I could have bought 10,000 shares. Two years later, the stock hit a high of $46 5/8. So much for paying cash for a house.....


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## Turock (Nov 27, 2013)

My other piece of advice is to live below your means, and stay out of debt. The only debt I ever allowed myself was a house--and a car when I was young. I bought my first house at 23 and had it paid for by the time I was 39. And as my income grew, I paid cash for cars to avoid interest rates. In 1999 I built and paid for a house on 6 acres in the country--and then retired the next year.

I was always of the opinion that there are 2 prices when you go to buy a big ticket item. One price is the cost of the item--the second price is a much higher one because it includes interest. Buying on a credit card and not paying it off when the bill comes is like saying,"gee, I'd rather pay the higher cost for this item--that seems fair." I always avoided that. Instead, I'd delay gratification until I saved up the money to buy it outright.

I always said to myself,"I GET interest rates--I DON'T pay them." I always got lots of criticism for my frugal ways and dedication to investing. But the people who criticized me were still working for a living while I was retired and pursuing my avocations.

I'm telling you about my experiences--not to brag--but to give others the confidence to follow your dreams and not follow what everyone else is doing. Being a good steward to your money and earning potential will give you freedom of choice down the road. When I was young, I worked very hard--had a full time job plus rental property I managed and repaired on my own, plus my house I was remodeling. I always thought that's the way it should be--work hard when young so you don't have to work hard when older, because maybe you won't be able to,then.


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## wineforfun (Nov 27, 2013)

Excellent writing Turock.


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## Turock (Nov 27, 2013)

I hope my experiences will inspire everyone to follow THEIR path. Being true to oneself and being your own hero to rely upon is everything. Take advantage of all your potential in life, so that life doesn't take advantage of YOU.


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## sour_grapes (Nov 27, 2013)

Turock said:


> My other piece of advice is to live below your means, and stay out of debt.



Yes! This is Item #0 on my Investment Policy Statement! (It literally is.)



On the other hand, here is a little ditty, apropos of nothing, that I composed on my walk to work this morning:

A rich spinster, Eileen McGonigle
Lived a long life most economical.
Ere she drew her last breath,
Her heirs fêted her death,
A spree both lavish and ironical.


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## GaDawg (Nov 27, 2013)

My other piece of advice is to live below your means, and stay out of debt. 
**********************
I have done that all my life, now that I am retired I find it hard not to live below your means


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## GaDawg (Nov 27, 2013)

I have to be myself, everyone else is already taken


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## pjd (Nov 27, 2013)

I invest in me! I lost my entire 401k a few years back and decided that I could do better managing my portfolio than my broker did. Today, my business nets about 15% of revenue and I spend half of my year in Florida. I also have invested in Real Estate and now control around 20 residential units and 6 commercial units. Life is good!


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## Turock (Nov 28, 2013)

I did the same thing as you,pjd--I found I was better at analyzing a stock than my broker was so I always followed my own path. However, he taught me many other basics of good investing--I was young and needed that kind of info. We'd sit in his office and talk for a couple hours at a time. I was always anxious to acquire knowledge.

sour grapes---That's pretty good!! I'm surprised to hear that. My dad always said,"It's cheaper to borrow from yourself." That made so much sense to me. Can you imagine how much more money some people would have if they never paid interest rates? It really piles up over a lifetime!! Then the compounded interest rate that money COULD have earned. If you figured it up, the amount would be staggering. People put themselves in lifetime debt for the love of "stuff." Seems dumb to me.

Loved the llimerick--my brother makes up limericks and some of them just KILL me. Great stuff.

All of you make me smile--seems you're ALL alot like me. Nice to know that not everyone is just out throwing money around buying "stuff" that they end up selling in a garage sale in 5 years!! Keep up the good work!!

By the way--I totally agree about the low expense mutual funds. Paying for the expenses on mutual funds takes a big toll on your accumulated wealth in those funds over a lifetime. Another thing to consider is muni bond funds so that you have another income stream in retirement that is tax exempt. A muni bond fund is better than an annuity.


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## Runningwolf (Nov 28, 2013)

I also manage a portion of my portfolio. My 401k has been doing fantastic since I transferred it out of my last company to a private investor so I leave it there. For my stocks I like TD Ameritrade for the low commission and I'm able to do my own stock research on there. I like looking at good funds that are out there and then dissecting them to find new and interesting stocks I haven't thought of before.


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## GreginND (Nov 28, 2013)

As for retirement, I set up my TIAA-CREF for growth some time ago and it has been on autopilot. I still have 20 years or so before I retire and will slowly shift things away from riskier growth investments as I get closer. I know I should be paying more attention to it and investing more in retirement.

But, I have been playing with some "extra" money in the stock market for several years. I tend to invest in things I use and believe in. I have done really well with Apple - got in pretty early. It is helping me get my winery off the ground. After the crash in 2008 I picked up Ford, Starbux (It has done great! wish I had more invested in it) and some energy stocks.


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## Hokapsig (Nov 28, 2013)

Again, do what I say, not what I do. In 1978, I was working as a busboy at a local restaurant for $1.85 an hour. After working the entire summer, I had finally accumulated $1000. My friends father was a stockbroker for a major brokerage house in Pittsburgh and I had started to invest with him. One day he called and asked if I was a gambling man. At 16 and flush with more money than I had ever had, I said sure. He had a deal which was high risk/high reward and was I interested. An entrepaneur was seeking 10 investors to put in $200K, guaranteeing that in 2 years I would either recieve 100x what I put in, or I would lose everything. I asked what the business was. He said the guy was going to start a new television station. I asked how would he compete against ABC, NBC and CBS. I was told he would go on cable. I said that my grandmother in suburban Pittsburgh couldn't get good cable reception from Stuebenville OH and where would this guy be broadcasting from? He said the guy would have his studios in Atlanta. I said, "nah, that will never work". And that is how Ted Turner never got my money.

Opportunity keeps knocking on my door. I keep telling it to get the hell off my porch....


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## jswordy (Nov 28, 2013)

I actively manage two 401(k) accounts, a retail account and a 457(b) deferred compensation account. Benjamin Graham remains my hero.

The tech thing was crazy. I remember owning a stock with a symbol that was close to one that was a red-hot tech stock one week, and seeing my stock triple in value just from newbies who did not know what they were investing in. Crazy. I am seeing some of the same "dumb money" approach to social networking stocks, and wonder if a bubble may form there too. Not saying they are "bad" just watching the price versus performance and it looks sorta familiar. More social IPOs coming to mop up that newbie money, too. 

I got out of my retail account at the top of the tech bubble. I remember calling to tell the funds I owned that I was closing out my positions, and how they begged me to stay in. I put that retail account money in CDs and waited until March 2009 to re-establish a retail account. People were panicked back in '09, and I was buying stuff like Ford at $1.98 (I knew Ford had its finances in order and thought I could not lose at less than the price of a Big Mac for a share of stock) and John Deere at $35. Iconic companies at rock-bottom prices. So I've done pretty well during the past 4 years.

I let our 401(k)s both ride out the tech bubble bust, maxxing out the contributions, since we were in effect buying cheap stocks by doing that, too. The 457(b) is a new account I just opened in the past year.

I also have a "frozen" pension that's at 2010 levels of payment from my old job, my wife has two small pensions from jobs she has held, and if I choose and am able to work until 65 I will have another pension from my current job.

I'm cautious in the market right now. It is showing the signs of a mature bull and a lot of the support we're seeing is from retail investors and sideline money rather than fundamentals, I think. This is the playground of the large, manipulative investors, who can exert extreme control on the market to squeeze out gains at the expense of retail investors, so I am a cautious man right now. I always remember I am a flea on the butt of a Doberman, and I never know when he'll scratch! There may be another year or so of modest gains, but I'm thinking we'll see some significant corrections, too. I'm into "defensive" high-yield dividend stocks now. I may miss the frothiest parts but I get good income and solid investments.


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## Geronimo (Nov 28, 2013)

The market typically portends the economy (bubbles aside) and I believe we're in for a few years of stable growth. Yes, the social media market is stupid but at least FB started with a major dip. That's not all bad IMO. Twitter is stupid money IMO. 

Europe and Asia are both on the cusp of a turn around which will buoy our economy further. If you look at long term planning (look at major airlines ordering new planes) everyone believes we're coming out of a major snafu and heading into a period of stability. I smell a correction coming but it's extremely unusual to see one in December of January. 

The most encouraging fact is that every major economy on the planet did whatever it had to do to stabilize. All it would have taken is 1 or 2 idiots to instigate a cascade failure. 

I believe all that adds up to stable growth based on reality.


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## sour_grapes (Nov 28, 2013)

Turock said:


> sour grapes---That's pretty good!! I'm surprised to hear that. My dad always said,"It's cheaper to borrow from yourself." That made so much sense to me. Can you imagine how much more money some people would have if they never paid interest rates? It really piles up over a lifetime!! Then the compounded interest rate that money COULD have earned. If you figured it up, the amount would be staggering. People put themselves in lifetime debt for the love of "stuff." Seems dumb to me.



Well, as you know, it _occasionally_ makes sense to borrow money. (Perhaps buying a house, or financing an education or a new business.) Here is the best-ever description I have heard of how you should think of this:

*Taking on debt is the "future you," sending money back in time to the "present you" (along with a hefty fee to the bank). The question is, will the "future you" think that that this was a good idea or not?*


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## Rocky (Nov 28, 2013)

It _always_ makes sense to borrow money when your rate of return on the money you borrow is greater than the interest rate you pay on it. In the US, we call this the "banking industry."


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## Turock (Nov 28, 2013)

sour grapes---I was talking about people who are buying things they want--not need. To me, the only allowable debt is for a house--and then, not mortgaging more than what is proper for your income level.

Curiously enough, if I had borrowed the money to build this house instead of paying outright for it in 1999 I would have been in big trouble. As it turns out, I paid for it with money that wasn't even there--if you consider how the value of everything dropped from 2000 on and then again in 2007. Stocks had inflated so much by 1999 that I paid for this house by selling only 3 shares of a stock!! No way was I going to pay interest rates again. I always said to myself," No one can take things away from you, if something bad happens, when you own things free and clear." Well, A WHOLE lot of bad things DID ending up happening! I'm happy with the insight I had. 

And after 1999, no growth was left to be had--and we actually lost alot of what had been built up in portfolios in the past many years. So the money I meant to invest and grow by taking out a mortgage and not paying outright for it, wouldn't have panned out too well!! Very interesting.

Do any of you know where the Dow was in 1999? It was big news--it hit 14,000. Look how far we had to come just to get back THERE!!! Our money has lazed around doing nothing for 14 years! If we figured this out, we might find out it would take another 100 years of investing, without major setbacks, to make up for what we lost in those 14 years. There are many bankers out there who need to go sit in prison, if you ask me.


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## Turock (Nov 28, 2013)

Hokapsig---Man, you're cracking me up!!! You may not be a very good stock picker, but your comedic talent is priceless!!!!


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## sour_grapes (Nov 28, 2013)

Turock said:


> sour grapes---I was talking about people who are buying things they want--not need. To me, the only allowable debt is for a house--and then, not mortgaging more than what is proper for your income level.



For what it is worth, there was not a soupcon of intent on my part to contradict you. I was _agreeing_ with you, and building off of your post to relate what, to me, is a useful metric for deciding which debts are worthwhile ones.


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## Turock (Nov 29, 2013)

LOL--OK sour grapes. Sometimes on this medium you just don't know how people are saying things!! Not being able to hear people's voices has a crippling affect on how you read a statement.


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## Hokapsig (Nov 29, 2013)

I'm funding my retirement by contributing 6% to my company IRA. They match 50 cents on the dollar up to 6%. Then I fund my $5,500 into my work Roth IRA. I then add the 6% to the $5500 and figure out what percentage that is of my pay. I want to save at least 15% of my total pay, so the difference between what is invested at work and the 15% is what I add to my personal IRA. According to my retirement calculator at work, at age 67 I should be able to retire on $7K to $13K per month based on monthly expenses of $4500 per month. I look for Growth stock mutual funds that have a 10 year track record of growth and do dividend reinvestment. But I'm always a sucker for single stocks.

Of course I am debt free except for the house and next year I don't have to lay out for college tuition at Pitt.


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## Hokapsig (Nov 29, 2013)

Let me ask this question: Would you pay off your house if you could? I want to pay mine off, but my tax advisor tells me not to and take the deduction on my taxes. The way I figure it, for every $10,000 that I send the bank in interest, I don't have to pay the goverment $2800 (my tax bracket is 28% for this example). Would it be smart to pay the house off (not send the bank $10000 in interest) and PAY the government the $2800, thereby saving ME the $7200??? This also reduces my risk exposure and increases my cashflow on a monthly basis (I wouldn't have a house payment)?

I am down to essentially a car payment to paying off my house and could write a check and pay it off today, but is that the smart thing to do?


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## Boatboy24 (Nov 29, 2013)

Hokapsig said:


> Let me ask this question: Would you pay off your house if you could? I want to pay mine off, but my tax advisor tells me not to and take the deduction on my taxes. The way I figure it, for every $10,000 that I send the bank in interest, I don't have to pay the goverment $2800 (my tax bracket is 28% for this example). Would it be smart to pay the house off (not send the bank $10000 in interest) and PAY the government the $2800, thereby saving ME the $7200??? This also reduces my risk exposure and increases my cashflow on a monthly basis (I wouldn't have a house payment)?
> 
> I am down to essentially a car payment to paying off my house and could write a check and pay it off today, but is that the smart thing to do?



Yes you would lose a 2,800 tax deduction, but that 2,800 costs you 7,200 in interest expense. Sounds like you need a new tax advisor.


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## Rocky (Nov 29, 2013)

Hokapsig, Everyone's situation is different. The answer depends on many factors but essentially two questions that you need to answer are:

1. What is the interest rate you are paying on your mortgage currently?
2. What could you do with the money you would use to pay off the mortgage and what would be the return on that money?

For example, if my current mortgage rate were 3% and I have money invested at 8%, it would not make sense for me to pay off the mortgage and lose 5% per year. On the other hand, if my mortgage rate were 6% and the best return I could get on investments was 4%, it would be sensible to pay off the loan and save 2% per year. Admittedly, these examples do not consider tax implications which would change the figures _slightly_.

The argument that one _needs_ a mortgage for a "tax deduction" never made sense to me for the reason that Jim states. People talk about getting a $2000 "deduction" but what they are actually getting back is only is a _portion_ of what they paid.


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## sour_grapes (Nov 29, 2013)

Turock said:


> LOL--OK sour grapes. Sometimes on this medium you just don't know how people are saying things!! Not being able to hear people's voices has a crippling affect on how you read a statement.



So true, Turock, so true. I believe a good term would be "affect," that is, it is difficult to infer the writer's affect on a post. 

Ironically, I often use italics (as well as smilies) to try to convey the tone of voice that I mean. However, even that can be ambiguous. As an experiment, I tried to read my earlier post with the thought in mind that it was intending to contradict you. To my "mind's ear," the italicized word could be read differently than I meant it, so as to imply a degree of contradiction. Sigh. Such is the potential pitfall of this medium.


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## GaDawg (Nov 29, 2013)

As I think Rocky said. Is paying off your mortgage more important than your cash flow? If you have a good interest rate 3-5%? you then should factor in your tax deduction. That could lower your real interest rate to 2-3%. Can you make that return on the money you would use to pay off that mortgage? I think the bottom line is you need to run the numbers, and you need to sleep at night


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## Geronimo (Nov 29, 2013)

Hokapsig said:


> I am down to essentially a car payment to paying off my house and could write a check and pay it off today, but is that the smart thing to do?



Like Rocky said, it's complicated, but IMO over the long term paying off the debts should be the #1 priority. You can't know how much you'll gain on those dollars next year if you invest them, but you DO know how much that mortgage costs you in interest.

Once you're out of debt, the compounded gains will add up very fast and you'll have a much larger sum to leverage to stay out of debt for all other purchases.

My debt philosophy is simple; if you can get rates below nominal inflation (~3.2%), then get the longest term you can on that debt and use the capital for investments. Otherwise don't go into debt. Also, if you're 20 years into a 30 year mortgage at relatively low interest (4% or less) then ride it out. The compounding of inflation, investment gains and the tax break will make it worth keeping the debt.


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## michael-s (Nov 30, 2013)

Following and reading here made me decide to add to what I said earlier. My girlfriend and I, (wife now since Aug. 1980) when I was 21 and she 19 (35 years ago) opened up what was called then an "Ontario Home Ownership Savings Plan". (no longer available) It was set up to allow Ontarians a way to save for a home, you were allowed to put in $1,000.00 a year and all interest earned was tax free. You were allowed up $10,000.00 and we each had 1 setup. We were married when I was 23 and she 21 and we chose to continue with that HOSP and save the maximum. We chose to put off having children for 7 years and during that time we were in a big saving mode. (I was cheap) Also when we both started a full time job we both opened and contributed the maximum allowed into a "Registered Retirement Savings Plan" (RRSP's). During those early years our friends bought their toys but we stuck to our plan. We enjoyed ourselves but the plan was to save for that first house. With the full HOSP and savings in the bank we were able to pay cash for our first house ($47,000.00) Two years after we bought our home prices in our area went crazy and our house value doubled. We decided after 3 years to sell and build our home that we are presently in. With the money from the sale of our first house and some bank savings we were able to move into this house also mortgage free. Every year, all our working years, we continued to maximize contributions to our RRSP's. I made my last contribution to my RRSP this year because now being on pension I don't have an earned income that allows me to contribute any more. In Canada you contribute based on your earned income and pension income does not qualify.
Because we both have pensions we will probably not touch our RRSP's until the Canadian government forces us to starting when we turn 71. My personal belief is you have to save, every year, make goals for yourself and stick to them. Don't spend above your means. Because of our personal choices we are in a comfortable situation now that allows us to enjoy retirement, my wife retires January 1st, 2014.


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## sour_grapes (Nov 30, 2013)

Michael, thanks for sharing your inspiring story. You deserve kudos for having a good plan while young, AND for executing it!


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## michael-s (Nov 30, 2013)

Thank you very much.......... young people starting out should have some kind of long term plan......... they will benefit at the end.


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## Rocky (Nov 30, 2013)

I agree that it is critical to have a plan. It is also critical to realize that a plan is based on certain factors, situations and inputs. Over time, these things can change and that requires one to re-evaluate his "plan" on a regular basis to see if it is still viable. I have a concern when I hear people say, "Make a plan and stick to it!" Remember, Custer had a plan.


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## Geronimo (Nov 30, 2013)

The plan is 90% of the battle. I didn't even realize I made a plan, but when I got started using amortization software I quickly realized I could save 200,000 over the next 30 years by paying down my mortgage quickly. Then we refinanced from 9% to 6% and paid even faster. After 11 years we were out of debt. I still see it as a good deal to have the mortgage because we weren't paying rent. Before we had the mortgage paid up I started looking at the saving options. We currently max out all of our retirement options. If everything goes according to plan, we'll have almost twice the income in retirement than we've ever had working.

It all starts with a plan.


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## michael-s (Nov 30, 2013)

Yes Rocky I agree that during one's life there are road bumps, personal or otherwise, along the way. We all have some. Myself, being a tradesman in the mining industry the world markets for nickel and copper, the primary products of the company I worked for went thru good and terrible price cycles. I was laid off on 2 separate occasions by Inco (at the time, now called Vale) directly because of low prices for nickel. So during those tough times I was forced to make some changes but each time when markets returned to profitable rates and thankfully I was able to get back on with the company we continued with our goals. My parents were not born into money and I was not born into money. I have to say it again. People cannot rely on winning the big lotteries to take care of them in retirement. We have lotteries in Canada too but never reaching the value of that large one you have in the U.S., powerball is the name I think. So you have to, during your working years, do something so you have something for your later years. That is a financial plan of some kind, whatever one that is designed to work for your personal situation and stick with it as best you can.


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## Snafflebit (Nov 30, 2013)

One of my friends keeps pestering me about why I am not spending my money. I should be driving a Porsche like him, "or at least a BMW" LOL! Thanks, I have a plan. Don't need his help spending my money!

He is still young.


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## GaDawg (Dec 1, 2013)

I think one of my biggest accomplishments in life was to get my daughter to invest in her 401K from day one on her 1st job out of college.


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## jswordy (Dec 2, 2013)

I believe this should be required study for every high school senior and every college senior before they graduate:

http://www.amazon.com/Your-Money-Life-Transforming-Relationship/dp/0143115766

The companion website:

http://www.financialintegrity.org/index.php?title=Main_Page

The more you think of purchase decisions as involving your time, the easier it is to say no. 

It's not: Oh, I want the new red BMW and I deserve it!"

It's: "The new red BMW is $45,000, not counting interest if I take out a loan. That $45,000, and at my current salary of say $25 an hour, takes me 1,800 hours to earn, and that is BEFORE PAYROLL TAXES or loan interest. Is it worth it? Or would a new red Toyota at $20,000 get me to work just as well at half the time investment? Maybe I can even buy it outright and eliminate the loan?"

The fallacy of loans is that you are borrowing against your future time to get something now. It's easier to do it if you think the thing you are buying will appreciate in value, but that is only a thought. There is no guarantee that what you think will happen. Yes, loans allow you to buy something real big you can't now afford, but you are crimping your future wealth and keeping yourself enslaved economically for that privilege, and all that has to be weighed.

Loan leverage is good. We bought our farm in two pieces with loans, but our farm has been paid off for years through advance payments we made every month to rid ourselves of that debt. Do not fall into the trap of spending your dollar to get 28 cents in deduction from Uncle Sam. I had to explain that to my accountant, too, when he kept telling me to go into debt for equipment "so you'll get more back from the government." No, I'm AHEAD by 72 cents by not buying it.

We buy our cars with cash and we run them until they die. My 1993 Sentra (which we bought new) is just about to turn 280,000 miles this week. Think I'm strange? Go to the library and read this book: http://www.amazon.com/s/?ie=UTF8&ke...vptwo=&hvqmt=b&hvdev=c&ref=pd_sl_64mmbwf2f2_b

So very easy to be truly content with my lot in life when I remember money = time. MY time. I can spend it all, and even more than I have now with loans, on stuff that decays from the moment it is bought. Or I can keep and invest it, and grow more.

Every kid should learn that. Above a subsistence level, it's not so much what you earn, it is what you save. As Turock pointed out, getting wealthy is a turtle's game. I'd add that there is a big difference between INCOME and WEALTH, and they are not interchangeable terms. Some of the poorest net worth people are making mid to high 6 figure incomes.

Hey, I can live my life running to catch up. Or I can live it watching money pile up. Some of you may remember that I lost my job during this economic debacle, and am making 40% less now than I did then. If I had lived it up to the hilt when I was making that big money, I'd be ruined now. As it is, I sheltered my entire salary from income taxes last year. Your money or your life - indeed!


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## BernardSmith (Dec 3, 2013)

Jim, I agree with everything you say but I would add one point. Sometimes it does make good sense to borrow and that is if what you are buying will increase your real worth tomorrow. So , it CAN make good sense to borrow to invest in your own development. I say, "can" because I think you can invest in your own education in ways that don't make a great deal of sense (If I am 60 and I want to begin a doctoral degree I am not sure that that investment makes a great deal of sense although the same commitment and approach to self -education without paying for the credential may make a lot of sense. So borrowing to go on vacation or to buy a new car may not be very wise (although sometimes you need the vehicle to get to work and the purchase of a reliable car may be a necessity) but borrowing to invest in yourself (or for the community to invest in itself) may be just what is needed.


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## jswordy (Dec 3, 2013)

BernardSmith said:


> Jim, I agree with everything you say but I would add one point. Sometimes it does make good sense to borrow and that is if what you are buying will increase your real worth tomorrow. So , it CAN make good sense to borrow to invest in your own development. I say, "can" because I think you can invest in your own education in ways that don't make a great deal of sense (If I am 60 and I want to begin a doctoral degree I am not sure that that investment makes a great deal of sense although the same commitment and approach to self -education without paying for the credential may make a lot of sense. So borrowing to go on vacation or to buy a new car may not be very wise (although sometimes you need the vehicle to get to work and the purchase of a reliable car may be a necessity) but borrowing to invest in yourself (or for the community to invest in itself) may be just what is needed.



I respectfully disagree. The fact that an individual has invested in a degree has little if any direct bearing on income ability in life. There are general statistics that show that degreed individuals in the aggregate make more than those without post-secondary education. However, on an individualized basis, the actual results are widely variable, and there are many studies showing that.

The one certain thing going into debt for college does is it ties you to payments when you are least able to afford them. If not somehow overcome by increasing salary, that has a lasting long-term effect on your future net worth. In today's economy steep salary increases are generally not in the cards.

That's why I took no loans to get my degree. I worked 80 hours a week every summer, worked during my breaks, and worked part-time while attending classes during my senior year in college to pay as I went.

I emerged in the depths of the early-80s collapse, went unhired for 6 months, then got on at a ridiculously low salary. I could endure that because I had no debt. Contrast that with the "play then pay" generation today, who get their own credit cards at 18. They come out of college saddled with debt.

Again, though there is a correlation there is no direct link between higher education and income. The education that is really needed is the economic education about how to build personal wealth that students are not getting.


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## bkisel (Dec 3, 2013)

As a guideline I've long subscribed to the Rule of One Hundred with regards to my investments ( today 110-120 might be better advice for the young investor). Stay diversified. Only swing for the fence with your "mad" money. Make charitable giving/sharing your blessings part of your financial planning - what goes around comes around. For most a comfortable financial retirement will follow. Well, at least these priciples have worked for me.


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## Turock (Dec 6, 2013)

Jim--I agree with so much of what you're saying. The only debt I ever had was for real estate. I do the same thing with vehicles---drive them until you have to kick them into the ditch. It's the only way to get your money's worth out of them. I have a very low tolerance for debt. After I sold all my rental property, I no longer had any debts. Living debt free is REAL freedom. It's great not to be beholding to others.

I liked the BMW story. Chasing after "the world" and things "of this world" is nothing more than a prison. BEING is so much more important than HAVING. And you can only have so much crap, anyway--and then you have all the responsiblity of taking care of it. In this case, less is truly MORE. By not buying into what the world thinks is important,this will give you the money you need to have financial security later on. THEN--maybe you can go out and buy that toy--maybe even TWO of them.


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## kevinlfifer (Dec 6, 2013)

I am a Registered Investment Advisor. I clear thru RBC.

Anyone thats wants to PM me I'll be glad to talk strategy and address some common pitfalls.

Investments are not a gamble, they are managed risk/reward that require research and analysis.


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## jswordy (Dec 9, 2013)

Here is a perfect example of confusing income with wealth:

http://www.chron.com/news/us/articl...aches-affluence-5047261.php?cmpid=usworldhcat

The story claims the mass affluent are people making a certain amount of money per year. Note that it goes on to talk about how marketers are working hard to take that money off this folks as they make it. And it never says anything about how much the mass affluent keep. (That's the wealth part.)

Then you read about the druggist who's making $200,000 a year and says he'll feel rich when "I don't have to go to work every single day." To which I say, keep buying those expensive shoes and trips, and you'll never get there. 

Turock, there is no way I could have weathered taking a 40% reduction in pay without the principles you laid out in your excellent email. Like you, my goal is to be beholden to few and ideally to no one. Zero debt is the way to go!


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## wineforfun (Dec 9, 2013)

Turock,
Excellent, excellent points and ones to which I adhere too. I drive a 2003 car (paid for), clothes for work come off the 60%-70% off rack at JC Penneys and my credit card is paid off every month, and used only because I am paid cash back on all charges.

Jim,
I hear you loud and clear on the college loans. Unfortunately, my daughter is looking at 30K worth of them and does not have a job in her collegiate field yet. She is just working a regular job and having a hard time making the student loan payments.


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## sour_grapes (Dec 9, 2013)

jswordy said:


> Here is a perfect example of confusing income with wealth:



Jim, I agree with your points, and I agree that it is shortsighted that people (as in this article) conflate, confuse, and confound "wealth" and "income." However, to be fair, the original meaning of _affluent_ was that you had a large income stream. (The root of the word is _fluere_, to flow.)


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## jswordy (Dec 9, 2013)

sour_grapes said:


> Jim, I agree with your points, and I agree that it is shortsighted that people (as in this article) conflate, confuse, and confound "wealth" and "income." However, to be fair, the original meaning of _affluent_ was that you had a large income stream. (The root of the word is _fluere_, to flow.)



All well and good. My point is, from where does the stream come? Does it come from your wealth or your labor? Go back a few pages and see "Your Money or Your Life," then go to the library and check it out for free. Or go to the website posted.

If you grab "The Millionaire Next Door" while you are at the library, and read about the wealth millionaires all over who are below the radar because of their lifestyles, it will make your jaw drop. The marketers have their work cut out for them with this group.

The media and the society constantly tell us it is necessary to buy, buy. buy; that we need to make ourselves feel better with material things. To me, it's a form of enslavement. When you buy, you sell them your time - which you cannot get back, whether it is in the form of cash or a loan - to have this thing now.

I know someone who owns a great and productive business. He and his family live the highest-class lifestyle with the finest of everything. Yet he complains that he has a hard time sleeping at night and he is plagued by anxiety, restlessness and fear. He's worried the tap will be turned off and he'll lose it all, because he buys as fast as he earns.

Guess who the worst are at accumulating net worth, as a profession? Doctors and dentists. Amazing.


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## sour_grapes (Dec 9, 2013)

Yes, I got your point initially. I don't have to check the books you mention; I have been living that lifestyle since I was a kid! 

I totally agree, it is quite liberating to ignore marketing, and gratifying to simply sidestep the hedonic treadmill.



jswordy said:


> All well and good. My point is, from where does the [income] stream come? Does it come from your wealth or your labor?



I think the definition of "income" is fairly unambiguous. It may be from labor, or it may be from return on capital (i.e., wealth), but it does not mean your wealth itself.


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