i don't know that i agree it is complex. Location, price and time are huge. With rates as low as they currently are, if you plan to stay in an area for the foreseeable future or permanently...

part 2 - you said no to individual stocks, like forever, why?

Thanks a lot for your input, im gonna look into that now!

tylerisright.jpeg

for rent or buy, you have to: figure out where you want to be, find a place that is available.

to rent, you meet the landlord and sign a lease.

to buy, you meet a real estate agent, negotiate a price, secure a mortgage (unless you have a house worth of cash lying around), survive escrow, insure the property.

once you live there:

as a renter, you pay rent every month. you complain to someone if something breaks.

as an owner, you pay your mortgage every month. if something breaks, you fix it yourself or pay someone else to do it. you pay property taxes every year.

if you decide to leave:

as a renter, you give notice and move out.

as an owner, you hire a real estate agent, get an appraisal, put the property on the market, negotiate with would-be buyers, and survive escrow.

i haven't even gotten to the part where you're renting out part of the property to someone else.

so... which one is more complex again?

everyone is different but i've lived in three states since i was 26. twentysomethings are not known for their stability nor for knowing exactly what they want for the next 50+ years of their lives.

diversification.

Tyler and Strike-3, thanks for your responses in regards to my post. You've both given me some things to think about, however I also have some questions. You both seem to advise getting out of individual stocks, but why exactly? too risky? Tyler, you used the word diversification it seems in response to "why no stocks." However, you can diversify a stock portfolio just as you can any investment, correct? The way I look at it, owning individual stocks is a riskier type of investment, but only slightly because it still has a strong return rate over the course of time.

That being said, I may get out of stocks. Tyler you said "tax situation permitting" if I decide to do so. Well, what would be my tax situation being that my portfolio is ytd plus 46% ? Now again, first timer here, so bear with me.

You also asked what my retirement accounts were in and why

401k.... company stock (38%), FID Mid cap stock K (20%), FID contrafund K (16%), PYR ACT LFC 2050 X (9%).. these are the top holdings, the next two holdings are aggressive growth funds and the rest are minimal. Why.. trying to be diversified and aggressive

Roth.... American funds Growth fund of America (100%). Why.. because it was recommended

Thanks for taking a look!

Recommended by who? I took a look at the prospectus, the class A shares have a 5.75% front end load. Nobody, and I mean nobody, should be paying a front end load. You really think they deserve $575 up front for every $10000 you invest? Especially for a fund that is a closet index fund. Look into an S&P 500 index fund and quit paying a sales fee.

i never said "no stocks", i said "no individual stocks". i believe in holding broad market index funds because they provide excellent diversification -- instant ownership in ~10k companies in the us and abroad!

stocks make up 67% of my portfolio, so i definitely believe in owning them!

yes, much riskier

no

individual stocks can go to zero. if the entire us stock market goes to zero, retirement is the least of our worries.


it sounds like you own these stocks in a regular brokerage account, which is in taxable space. when you sell your stocks, you have to pay capital gains tax.

if you are in a high tax bracket right now, this might be so expensive as to not be worth it.[1]

if you are in a low tax bracket and have held the stocks for over a year (so that they are taxed at Long Term Capital Gains rates), you may pay 0% tax! in this case, moving from individual stocks to broadly-diversified index funds is an easier decision.

if all of this money is dedicated to retirement, then i'd consider all your accounts as one bucket and build a http://www.bogleheads.org/wiki/Three-fund_portfolio. note that there are no tax consequences from selling investments in tax-advantaged space like 401ks and IRAs.

you generally want to put a bond fund in your 401k, a total international stock market fund in taxable space, and fill the rest with total us stock market. way, way more details at http://www.bogleheads.org/wiki/Princ...Fund_Placement

also you should probably get out of your company stock right away. 38% of your 401k is invested in a company which you already depend on for your livelihood . too many eggs in one basket. sometimes companies have weird rules about this stuff though so talk to your payroll department.



[1] in this case you might use headroom in your tax bracket to convert slowly, wait until retirement when your income and therefore tax burden is lower, donate or bequeath the appreciated shares, use capital losses to offset the capital gains ("tax loss harvesting"), etc.

well said. i'd consider this a cheap lesson in never following the advice of whomever suggested you own this fund.

To add to that, anyone who recommends a load fund is either: A.) a fool who doesn't understand investing and shouldn't be listened to; or B.) has someone else's interest in mind other than yours (likely their own sales commission) and shouldn't be listened to.

Hi!

Country: Germany

Yearly income:
-Highly unsure. Could be up to 100k$ with poker/other stuff.
-At least 12k$ USD student loan (only have to pay it off after my studies when I get enough income to be able to pay it off, furthermore only 0.5% yearly interest. So figured it would be worth it because interest is so low)

Net worth: 55k$ + 18 (15K$) bitcoins.

Risk Tolerance: high

Timeframe for investment: few years

Debt: 10k$ student loan which I don't have to pay off for at least another 4-5 years, 0.5% interest, only have to pay it off once I get employed.

Monthly expenses: at the moment under 500$

Extra information: second year of my study Economics and living at home atm

Thanks

with a timeline of "a few years", the best you can do is high-yield internet savings or maybe CDs if you have an equivalent.

however, i think you should start saving for retirement immediately given all the cash you have lying around. starting when you're young gives you the benefit of many years of compound interest, which means you can retire earlier than late bloomers like me.

i agree about the loan. unless you're allergic to debt (some folks are and that's fine), i'd bank the extra in something "risk-free" and pocket the difference.

These:
Don't really belong with this.

What will you need the money for in a few years? Is there a certain amount of money you want in a few years? This is a really tough environment for short term investments.

Thoughts on forming an investment group? Me and 4 of my best friends are looking at starting a fund together. Maim reason simply being by having more cash we can diversify more, and also have the ability to enter into investment areas with higher barriers to entry such us residential and eventually commercial property.

The plan at this stage is to put 1k each to start and then just $300 month each over the the next 5 years, then reevaluate.

Does anyone have any experience with something like this? I feel like the o ly potential problems are the fact you have to trust other people, the joint decision making brain trust, and the concern of someone wants to pull out.

Wrt to trust, these are people I've re friends with for years, so no dramas, plus we are putting in money that doesn't affect anyone's livelihood so people won't get too emotionally invested.

We have two lawyers and two accountants in the group, so there will be a written charter etc outlining consequences of leaving, decision making processes etc, and one of the guys is getting into fund management so we have a little bit of expertise.

Any things I should be wary of that haven't been outlined? Any recommendations for investment targets? I think the general consensus was just efts with a few bonds for the majority, then in a few years reevaluate and start looking at property

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don't mix money with friends if you'd like to keep either imo

Any reason why?

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this, this and this

the odds of you all behaving like econ 101 rational actors is equal to 0 and will *** you up in the long run

lol (don't kid yourself) - if thing goes wrong (it will, since you all are not any good at investing) there will be to much negativity in the group dynamic

I'm surprised at the negativity here. It seems such a cynical view that this will fail. I don't really understand why.

If there are written and signed agreements, the money is irrelevant, and all people are mature intelligent adults, I don't see the problems you guys are foreseeing from happening.

Do you guys get emotional upset when a long term investment like your portfolio loses value? I don't. The whole point is that it's a long term game, so there is no reason to get upset with the swings of the investments

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Also re not being good: as I said, one of the guys is in finance with one of the top banks here in aus and transitioning to a funds management role, two of us already have decent portfolios, and the other two are accountants/lawyers with a pretty solid understanding of economics etc.

It's not like it's a group of 20yo students putting aside their rent money

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it seems pretty clear what you've decided to do, so good luck.

Yeah I'm doing it regardless, but was wondering if people had any experience re what specific pitfalls/potential problems to look out for, or any specific advice.

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Agree with others about this. It just seems like more hassle and risk than it's worth. Also, you're talking about a relatively small amount of money. I really don't know what you think it's going to accomplish by forming this fund that gives you such a significant edge to make it worth the hassle and risk straining friendships. Seems bizarre and ill conceived to me.

If you are going to start a club, I would look into these guys. They have been around a long time and should have a lot of boiler plate stuff that can form the legal agreement your club will need.

http://www.betterinvesting.org/Publi...bs/default.htm

Also make sure you know how to figure out average annual return, or you might end up like the Beardstown Ladies:
http://en.wikipedia.org/wiki/Beardstown_Ladies

I have never been in a club, but my advice would be to make sure everything is in writing and legal and that you know the proper tax structure.

Tyler and I have very different investment styles. I like real estate...it is not liquid or sexy it just produces month after month and year after year. Think about it, where else do you get leverage 80/20 on your investment money. Obviously you need to have a plan and basic understanding of the current market but the risk in my opinion if you buy with discipline is very low. In fairness it takes time to grow but when you tip over the balance to cash producing there is nothing like it. I am settled in my area for life so time is not an issue. if you are moving all around real estate may not be the best play for you. I pay people to manage mine, it comes at a cost (however it still more then covers itself), I have primary business to run and at this point of my life I chose to not be involved with the managing of apartments

Stocks / funds for me are handled by a pro, they have X amount to what they want with, the objective is growth. I evaluate the performance of them once a year and decide if they should keep the account or move it. The current guys have treated me well, I don't even know what I own on monthly basis, I do typically look at the quarterly statement so I have clue what is going on!! They have me in more different things then I would ever know about so it is good.

I have another guy that does options on commodities for me…I am going to guess Tyler would certainly frown upon this as well!! Nothing like doubling up on the price of corn or soy beans.

Individual stocks in my opinion are for when you want to take shot with a company, they have more risk both directions. Again it all comes down to your stomach and how many things you own. If a stock I take a shot on goes to nothing….well I knew that was possible – and it has happened. I have also done VERY well on some!!

I hate paying taxes on mutual funds that I didn’t cash out on!! That drives me bat**** crazy and is a big reason I am willing to move individual stocks. At least I control my tax bill to a degree.

You are young and just getting started – first keep investing in your 401k – keep forcing income higher – then decide what type of investor you want to be.

agreed. mine is based on lots of research and math. what is your based on?

bolded is false. have you already forgotten 2007?

nowhere, because most people recognize that 80/20 leverage is extremely dangerous.

incorrect. discipline is important but it does not mitigate the very real risks associated with owning real estate.


this is tragilarious.

1. that pro you pay -- the studies all say that he is not going to beat the index over the long-term. you are paying him to lose your money!

2. performance over the course of a year for high-volatility investments such as equities is completely meaningless. stocks are a long game.

3. your portfolio is so complicated that you can't understand it and that's a good thing? i guess given your attitude about buy vs rent this isn't all that surprising.

4. financial "professionals" WANT you to think that finance is super complicated so that people will pay them money to "deal with the hassle". meanwhile the Three Fund Portfolio routinely destroys active traders while being simple enough that your grandma can understand it.

paying someone to speculate for me on commodities, a sector with a dubious case for diversity and increased performance. yes, i frown on that.

i did smile at your appeal to greed -- just buy corn or soy beans and 100% roi! wow!

i prefer to make financial decisions with my brain rather than my gut.

what? are you referring to non-qualified dividends or something?

mutual fund investing can be very tax-efficient. it involves tax-advantaged space and proper placement of asset classes based on their tax profile. http://www.bogleheads.org/wiki/Princ...Fund_Placement

I don't know how to break down the quote into sections like you did...or i would respond item by item.... i will do my best below.

I invest off of math, advice, knowledge – combination of things. If I buy a business as investment regardless if it is a stock, private company, angel investor or whatever it is based off varying things depending on the deal.

2007 was a year, I actually don’t recall if I bought anything of size or not, I know bought property before and after so it is just a point in time. I bought my first investment property almost 18 years ago and yes…year after year it produces!! I have continued to buy and hold and buy and sell.

Sorry but we are just not going to agree that real estate is extremely risky – it is about as safe as anything I know of. I am talking about buy and hold long term here, at any random point any investment could be argued to be very risky. So please no monsters in closet arguments.

I had to look up tragilarious…LOL thanks for that! That being said…

- My investment guy does things I don’t have time for like managing the money.
- Performance over the course of a year is absolutely meaningful – I can use markets for a baseline and the majority of my job is making evaluations. Because I evaluate once a year doesn’t mean the result of staying or leaving a manager is based off only one year.
- I never said I didn’t understand – I said I didn’t know about it. They are totally different items.
- Again, never said finance is super complicated…not even sure where you got that from. I don’t have the time or the inclination to research for myself, I would rather pay them. that is a choice based on the big picture of my life and my finances.

Commodities – LOL they are not for everyone, they are fun and when I look at the history of them they have done ok, plus I enjoy them… some people play pit games because it is fun… they aren’t the body of the portfolio

Mutual funds – I buy and hold, at the end of the year I as the owner pay tax on the fund due to the transactions and dividend and whatever else…if I buy a stock and don’t sell it…no tax until I do. I seldom buy dividend stocks because I am not looking for income at this point in my life.

Again different styles – you remember the movie Back to School? I am Rodney Dangerfield – you are the business professor.