The "I have XX money to invest, where should I put it?" Thread

[fanmail]

I think my wording is right. Every person is born with a short housing position.

Here is the blog/article
http://thezikomoletter.com/2012/12/1...short-housing/

Here is the boglehead thread discussing it.
http://www.bogleheads.org/forum/view...?f=10&t=106812

[tyler_cracker]

"we are naturally short housing" does not make sense (to me?) and is not the same as "every person is born with a short housing position". remove "are" and the statements are equivalent.

thanks for the links!

[tyler_cracker]

oic, that's the title of the article. :facepalm: apparently i'm just not familiar with this phraseology. sorry about that.

anyway, an interesting concept. i've seen the opposite argument as well, which is that your home is such a significant part of most people's net worth that as soon as you have significant equity, you're long in real estate.

[Rant]

Originally Posted by Josem

Forgive me for possibly asking a silly question. I'm interested by this concept of diversification.

As I understand it, basically:

equities: higher variance, higher EV
bonds: lower variance, lower EV

if you decide that you want higher EV, then shouldn't you just invest in more diversified equities? While investing into bonds will lower your variance, won't it also lower your EV?

I think that the common argument is that diversification lowers your EV a little but reduces your variance a lot.

The concept of the 'efficient frontier' might help....

http://www.investopedia.com/terms/e/...ntfrontier.asp

Wealthfront has some easy videos and explanations that I don't feel like looking up. 8)

[mg0698]

Country you live in- Land of the Free

Risk Tolerance- Medium I'm not looking to get rich but yielding a decent interest rate is nice

Timeframe for investment- 1-2 years?

Any other information you might have that would help us- I'm 25 in my last semester in school, I play poker as my source of income, and I have about 10k that I want to invest. What should I do? I want to invest in some stock, maybe some ETF's? How do I diversify? Do I buy 10 different ETF's/Stocks 1k each? 5 different 2k each? I have a very small amount in a ETF at the moment but I'm willing to invest around 10k more at the moment what should I do?

[tyler_cracker]

Originally Posted by mg0698

Country you live in- Land of the Free

sorry, i don't know anything about dutch or canadian investment vehicles. :rimshot:

your timeframe is too short to invest purely in stocks with "medium" risk. i'd recommend a Target Retirement fund. 2015 or 2020 might be a reasonable approximation of your risk tolerance. this is not a particularly tax-efficient option, though.

[fanmail]

I agree with tyler. 1-2 years is not a long enough time frame to expect to get a reasonable return in stocks. Sample size is way too small.

[mg0698]

I don't really want to put it in a retirement fund and let it sit there for 30 years because I might possibly use it for other investments in the upcoming years, And i don't want to let it sit in a Money Market fund and earn .0000000001%, Like I said I understand I can lose some money in stocks but isn't the risk worth it? Rather then receiving pennies on a money market.

I respect your opinion, I just want to make sure that you understand my situation. I will look in the Retirement fund if that is truly what you think is smartest.

Thank you

[tyler_cracker]

find my post itt about target retirement funds (or, y'know, read a single word about them on google). cliffs: they're not just for retirement!

[mg0698]

Ok ill do some research thank you

[tyler_cracker]

i went and found it so i could bookmark it. here you go:

http://forumserver.twoplustwo.com/sh...postcount=1512

http://forumserver.twoplustwo.com/30...l#post32036758

[Frenzied Deity]

Hey,

I'm 23 and from the UK. I play poker for a living currently but would slowly move away from poker by the time I'm 30. Looking to have a lot of investments or a business by the time I'm that age and only have poker as a small side income. I currently have no experience or knowledge in investing but have ordered some books to begin my study. [Side Q: Is this something that can be done? Having not studied very much Financial Investment at uni, this obviously leaves me at a disadvantage, but can Investment be self-taught in the same way that poker can be self-taught? It may be possible for me to apply for a post-graduate degree at Uni but would the EV of paying £10k~ outweigh how much I could learn by myself?]

Risk tolerance: Currently low-medium. Have £50k in my liferoll atm that isn't gaining interest at all (used to pay for my rent and expenses), not looking to buy a house or any other large puchases within the next 5 (possibly 10) years. Probably willing to invest £10-£20k of the liferoll.

Income: It varies, but expect to make 6 figs+ a year.

Timeframe: Pretty happy to invest money for 3-8 years, possibly up to 10 years.

Debt: Have student loans of maybe £25k~ but not required to pay back until I earn more than £X per year from a proper job. [Side Q: Is it advisable to clear these out the way ASAP?]

[tyler_cracker]

Originally Posted by Frenzied Deity

I currently have no experience or knowledge in investing but have ordered some books to begin my study. [Side Q: Is this something that can be done? Having not studied very much Financial Investment at uni, this obviously leaves me at a disadvantage, but can Investment be self-taught in the same way that poker can be self-taught? It may be possible for me to apply for a post-graduate degree at Uni but would the EV of paying £10k~ outweigh how much I could learn by myself?]

absolutely it is doable.

1. 13 months ago, i was basically a complete noob. i spent a few months getting my **** together and now i pretend to be knowledgeable about personal finance on the internets!

2. personal finance isn't rocket science. if you can play minimally technical poker, you have more than enough math and basic number sense to handle it.

3. jfyi, there are very few things in life that you cannot teach yourself -- there's a thread in oot about a dude who took off and landed an airplane after only training on a pc simulator. of course, learning from a good teacher is almost always faster.

Debt: Have student loans of maybe £25k~ but not required to pay back until I earn more than £X per year from a proper job. [Side Q: Is it advisable to clear these out the way ASAP?]

impossible to answer this without knowing the vig on the loan. also, does interest not accrue until you start making X?

Risk tolerance: Currently low-medium. Have £50k in my liferoll atm that isn't gaining interest at all (used to pay for my rent and expenses), not looking to buy a house or any other large puchases within the next 5 (possibly 10) years. Probably willing to invest £10-£20k of the liferoll.

Timeframe: Pretty happy to invest money for 3-8 years, possibly up to 10 years.

that's a pretty wide timeframe. for three years at low-medium risk, i'd recommend leaving it in "high-yield" savings or maybe a very conservative stable income-type fund. at 10 years, a TR fund containing a little stock becomes viable (and should provide a better ROI).

i think a good general rule is to start out conservative and add risk as you get more comfortable with the whole process. this also allows you to gauge your reaction to market downswings: if you're cool, you can get a little more aggressive; if you freak out, stay the conservative course.

[Frenzied Deity]

Originally Posted by tyler_cracker

absolutely it is doable.

1. 13 months ago, i was basically a complete noob. i spent a few months getting my **** together and now i pretend to be knowledgeable about personal finance on the internets!

2. personal finance isn't rocket science. if you can play minimally technical poker, you have more than enough math and basic number sense to handle it.

That's good to hear that there's some hope!

Did you start from 2p2 as well when you were learning?
I've heard people mention bogleheads forum before as being a good forum but a lot of the things go over my head ATM.

I recently bought "the intelligent investor" - benjamin graham and "stock market primer" - claude n. rosenberg as a stepping stone into the investment world after it was recommended in the forums. Do you feel these make good introduction books?

I hope it's not too personal of a question but would you say that a decent % of your income now is from personal finance? How much do you think is a decent % of my savings to start investing with?

Originally Posted by tyler_cracker

3. jfyi, there are very few things in life that you cannot teach yourself -- there's a thread in oot about a dude who took off and landed an airplane after only training on a pc simulator. of course, learning from a good teacher is almost always faster.

Hah, that's pretty interesting. I assume there aren't any sort of licenses/exams or anything you need to have/take to start with investing?

Originally Posted by tyler_cracker

impossible to answer this without knowing the vig on the loan. also, does interest not accrue until you start making X?

I'm not sure on about the interest % on the loan but I do think that interest accrued as soon as I left Uni. So I should probably pay that off as soon as possible, whups... hah.

Originally Posted by tyler_cracker

that's a pretty wide timeframe. for three years at low-medium risk, i'd recommend leaving it in "high-yield" savings or maybe a very conservative stable income-type fund. at 10 years, a TR fund containing a little stock becomes viable (and should provide a better ROI).

i think a good general rule is to start out conservative and add risk as you get more comfortable with the whole process. this also allows you to gauge your reaction to market downswings: if you're cool, you can get a little more aggressive; if you freak out, stay the conservative course.

When you say "high yields savings", you mean just leaving it in a bank's Savings account sort of thing? As an arbitrary number, what do you feel is a good % for a savings account right now?

TR funds are retirement funds that you were talking about earlier in the thread right? I will definitely read up more about how to get into investing ASAP.

I take it that playing conservative would mean that I would never be able to make investment my sole/main income? Obviously, I would not take an aggressive approach when I'm still new but over time, perhaps I can open up my aggressiveness with it.


Sorry for the long message
Thank you for all the help!

[tyler_cracker]

Originally Posted by Frenzied Deity

Did you start from 2p2 as well when you were learning?

yup, started by reading this thread and following links. i also like the motley fool for the basics.

I've heard people mention bogleheads forum before as being a good forum but a lot of the things go over my head ATM.

bogleheads is the 2p2 of personal finance. you'll do fine once you develop a little vocabulary.

I recently bought "the intelligent investor" - benjamin graham and "stock market primer" - claude n. rosenberg as a stepping stone into the investment world after it was recommended in the forums. Do you feel these make good introduction books?

all my learning is from the interwebs so i haven't ready any finance books. i've never heard of the rosenburg book, but _intelligent investor_ is widely renowned as a classic and as a terrific intro for beginners.

I hope it's not too personal of a question but would you say that a decent % of your income now is from personal finance? How much do you think is a decent % of my savings to start investing with?

0% of my income is from investments. that money is socked away for retirement, with a portion set aside for a medium-term goal like buying a house or starting a business or bumming around the globe for a while after i get sick of working.

you've got your second question backwards. first, figure out what your financial goals are. figure out how much you need to achieve that goal, and work the numbers back from there.

if you prefer a short answer: as much as you can. if you save too much, oh noes! you'll just have to retire early!

Hah, that's pretty interesting. I assume there aren't any sort of licenses/exams or anything you need to have/take to start with investing?

nope. if you've got money, you can ride this ride. yay capitalism!

I'm not sure on about the interest % on the loan but I do think that interest accrued as soon as I left Uni. So I should probably pay that off as soon as possible, whups... hah.

sort this out post-haste.

When you say "high yields savings", you mean just leaving it in a bank's Savings account sort of thing? As an arbitrary number, what do you feel is a good % for a savings account right now?

typically you'll find better rates with online banks, but anything that is insured (we have FDIC in the US) will do. i think rates right now are around 1% which is not much, but this is the price you pay for a risk-free[1] investment.

I take it that playing conservative would mean that I would never be able to make investment my sole/main income?

incorrect. for example, if you had $10M, you could live quite comfortably off a conservative portfolio with very moderate growth.

a more aggressive (risky) portfolio should have higher returns over the long run, but at this point the size of your portfolio is going to be dominated by how much you put into it, not value changes in your investments.

looking at this another way, there is a word for people whose sole/main income is their investment porftolio: retired! thinking like that will make it easier to align your goals with the mountain of articles on the topic of personal investment.

gl!

[1] it's not quite risk-free (the government could collapse, e.g.) but close enough for this discussion.