If only Fannie took plastic...
My friend's dad bought a house on a Master Card once.
Self-directed Investing
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My friend's dad bought a house on a Master Card once.
txflyer
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Fly it like you STOL it ♦
If you have debt, personal debt that is not an income producing asset, pay it off.
If you don't have six month's of cold hard cash living expenses saved up, don't invest until you do.
Then buy precious metals until you have minimum 5% of your cash tied up in it, then invest.
This is real money.
Not FRN funny money.
FYI: Precious metals are not from earth. They are created only in supernova's then scattered about the universe. What we have here on earth is finite. All our heavy metals came together when the earth coalesced from a bunch of space junk.
If you don't have six month's of cold hard cash living expenses saved up, don't invest until you do.
Then buy precious metals until you have minimum 5% of your cash tied up in it, then invest.
This is real money.
Not FRN funny money. 
FYI: Precious metals are not from earth. They are created only in supernova's then scattered about the universe. What we have here on earth is finite. All our heavy metals came together when the earth coalesced from a bunch of space junk.
If you have debt, personal debt that is not an income producing asset, pay it off.
If you don't have six month's of cold hard cash living expenses saved up, don't invest until you do.
Then buy precious metals until you have minimum 5% of your cash tied up in it, then invest.
This is real money.
FYI: Precious metals are not from earth. They are created only in supernova's then scattered about the universe. What we have here on earth is finite. All our heavy metals came together when the earth coalesced from a bunch of space junk.
It still has a manipulated speculative value beyond its value as a resource in what you can do with it. The value of these materials is still tied to the value of money which is fraudulent.
comanchepilot
En-Route
Read the description of debt carefully- a student loan AND a 1.99% debt. Theree are NO student loans in pay status any longer under about 4%.
Look - the story here is simple: if your savings make 0.80% and you are paying 2% in one loan and 4% on another - then you need to pay them off - this gives you a rate of return on your money in excess of 2% . . . .
Next - once the debt is gone you should also be saving for the NEXT car - unless you can buy that for under 2% as well.
The general rule of thumb is if your savings [retirement and otherwise] are yielding more than the interest you pay on debt then you should be using debt a leverage. If your savings do not then you need to pay it off.
Most people lack the judgment and the intestinal fortitude to stick to such a path . . .
ClimbnSink
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Greg
How are you going to exchange that stuff or make change? If I was prepping I'd have a still and barrels of hooch. Always a market for that stuff.
comanchepilot
En-Route
Joe, that's pretty good shootin'. Want a new client?
I used to have a broker buy whatever I did - then I changed houses and he stopped being a star . . .
its not hard to generate good returns - find good companies and hold on.
I'm a contrarian investor - I'm buying energy companies now - they're so cheap and as long as you stay out of the oil patch itself - . Oil will not remain at $45 / bbl for very long - all it takes is a little saber rattling and its back to $100. No matter what the Saudi Crown Prince may say. There is more demand for oil than there is supply in the long term.
At the end of the day you're right - time matters more than timing.
Which is why a zero load or almost zero load S&P 500 index fund is what almost everyone needs to dollar cost average into . . .
Yep, booze and weed. If you can be the supplier of those two things, you will have a comfortable place in society.
FormerHangie
En-Route
OK, as promised:
There are two types of financial instruments, debt (bonds) and equity (stocks). Debt is a promise to pay the amount back, plus interest, generally. That's the most common type of bond. There are also bonds that you buy at a certain price, pay no interest while the bond in effect, and pay you the original amount plus interest at maturity.
Bonds can be roughly divided between government and private sector, although there are some government issued bonds that are used to support private sector activity. Some, but not all government bonds, are tax exempt, which is mostly valuable to people in higher tax brackets. Most government bonds are low risk.
In the private sector, you have money market securities, which (so far) always maintain a constant value. Other bonds don't, for reasons we'll get to later. Private sector bonds risk levels range from very low risk to speculative, as in you may not get your money back. Looking at Vanguard's list of funds, on the government side, I see short term (bonds that mature and will be paid back within a year, medium term, which will be paid back in 2 to 5 years, and long term, 5 plus years. There are also mortgage backed bonds and inflation indexed bonds.
In the corporate world, there are also short, medium, and long term bonds available in what is called "investment grade", which is to say low risk. There are also bonds known as "high yield", or "junk", which are high risk. In other words there's a chance the borrower may default, and the bondholder may only get some, or even none of his money back. However, if you hold a well diversified portfolio of these bonds, you may very well get a good return off of them. If we see another downturn, the high yield bonds may start defaulting at a higher rate and you'd lose money.
I want to talk about bond value fluctuation for a bit. Let's say you buy a bond for $10,000 , that has a 4% yield, and will mature (pay you back) in five years. Let's also say that after two years you want to buy a house, and will want to sell your bond. If the prevailing interest rates go up, when you go to sell your bond on the open market, you'll get less than the $10,000 you paid for it. Now, if you keep it until it matures, the bondholder will still pay you the $10,000 you paid for it, but if you need to sell it before that, you will be subject to a capital loss if rates go up, and a possible capital gain if rates go down. Being that rates are very low, it's unlikely they can go down much from where they are. Also, many bonds are callable, that is the bondholder may choose to pay them off before their maturity rate, and they will usually pay you a small premium. So, if you buy bonds when interest rates are high, if that ever happens in our lifetimes, you probably won't be able to turn them for much of a capital gain as the issuer will call them. If you're ever in that situation and want to try to get a capital gain on rate fluctuations, I'd suggest buying stock in a regulated utility, they behave very much like bonds in that their prices go up when rates decrease, since they are mostly valued for dividends.
The closer you get to a bond's maturity date, the less of a rate fluctuation risk there is. For that reason, the yield is lower as well. Since short term bonds are always close to maturity, their yield is the least, while long term bonds usually pay the highest rates and have the greatest rate fluctuation risk. Also, the less credit worthy the bond issuer is, the higher the yield. So, bonds issued by the US goverment have low yields, as opposed to, say, Belarus.
I have to pick up my daughters at dance, I'll get into stocks and a few recommendations when I get back.
There are two types of financial instruments, debt (bonds) and equity (stocks). Debt is a promise to pay the amount back, plus interest, generally. That's the most common type of bond. There are also bonds that you buy at a certain price, pay no interest while the bond in effect, and pay you the original amount plus interest at maturity.
Bonds can be roughly divided between government and private sector, although there are some government issued bonds that are used to support private sector activity. Some, but not all government bonds, are tax exempt, which is mostly valuable to people in higher tax brackets. Most government bonds are low risk.
In the private sector, you have money market securities, which (so far) always maintain a constant value. Other bonds don't, for reasons we'll get to later. Private sector bonds risk levels range from very low risk to speculative, as in you may not get your money back. Looking at Vanguard's list of funds, on the government side, I see short term (bonds that mature and will be paid back within a year, medium term, which will be paid back in 2 to 5 years, and long term, 5 plus years. There are also mortgage backed bonds and inflation indexed bonds.
In the corporate world, there are also short, medium, and long term bonds available in what is called "investment grade", which is to say low risk. There are also bonds known as "high yield", or "junk", which are high risk. In other words there's a chance the borrower may default, and the bondholder may only get some, or even none of his money back. However, if you hold a well diversified portfolio of these bonds, you may very well get a good return off of them. If we see another downturn, the high yield bonds may start defaulting at a higher rate and you'd lose money.
I want to talk about bond value fluctuation for a bit. Let's say you buy a bond for $10,000 , that has a 4% yield, and will mature (pay you back) in five years. Let's also say that after two years you want to buy a house, and will want to sell your bond. If the prevailing interest rates go up, when you go to sell your bond on the open market, you'll get less than the $10,000 you paid for it. Now, if you keep it until it matures, the bondholder will still pay you the $10,000 you paid for it, but if you need to sell it before that, you will be subject to a capital loss if rates go up, and a possible capital gain if rates go down. Being that rates are very low, it's unlikely they can go down much from where they are. Also, many bonds are callable, that is the bondholder may choose to pay them off before their maturity rate, and they will usually pay you a small premium. So, if you buy bonds when interest rates are high, if that ever happens in our lifetimes, you probably won't be able to turn them for much of a capital gain as the issuer will call them. If you're ever in that situation and want to try to get a capital gain on rate fluctuations, I'd suggest buying stock in a regulated utility, they behave very much like bonds in that their prices go up when rates decrease, since they are mostly valued for dividends.
The closer you get to a bond's maturity date, the less of a rate fluctuation risk there is. For that reason, the yield is lower as well. Since short term bonds are always close to maturity, their yield is the least, while long term bonds usually pay the highest rates and have the greatest rate fluctuation risk. Also, the less credit worthy the bond issuer is, the higher the yield. So, bonds issued by the US goverment have low yields, as opposed to, say, Belarus.
I have to pick up my daughters at dance, I'll get into stocks and a few recommendations when I get back.
Each of those instruments are based purely on faith.
bluerooster
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shorty
I have a few stocks. some are doing well, others not so well just now. But over all, my return has been way better than those same dollars sitting in a savings account.
Jimmy cooper
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Scratch tickets?
Index funds! Warren buffet recently announced that when he goes to the big stock market in the sky his will stipulates index funds are where his survivor money is to be invested. ( he hasn't done too badly in the past himself!) vanguard is excellent.
Bill Watson
En-Route
For long term savings that turn into wealth 20 to 30 years from now, keep it simple but do it religiously. Take whatever income you can and want to dedicate to growing long term into a retirement or later life wealth fund, and invest it in a single stock index fund - S&P 500 based is probably the best choice. If you can do it with 401K monies - all the better if you are in a good one with employer match and minimal fees. Pick an approach with absolute minimum/zero fees. Buffet would approve.
Equally important; take advantage of dollar cost averaging by keeping things simple. No market timing, no fund selection, just invest some fixed percentage of income on a regular schedule (e.g. monthly). Set it up so it's automatic and try to forget about it.
Make sure that if 2008 occurs again that you can leave the money alone even if you have to stop investing. But the best thing you can do is to continue investing the same way, day in and day out, market up, and market down. All the BS tends to balance out in the 10 to 20 to 30 year time frame. The key is being able to just leave the strategy alone as things go up and down. Hands off, autopilot only. We all know how much better the AP can fly than we can.
Equally important; take advantage of dollar cost averaging by keeping things simple. No market timing, no fund selection, just invest some fixed percentage of income on a regular schedule (e.g. monthly). Set it up so it's automatic and try to forget about it.
Make sure that if 2008 occurs again that you can leave the money alone even if you have to stop investing. But the best thing you can do is to continue investing the same way, day in and day out, market up, and market down. All the BS tends to balance out in the 10 to 20 to 30 year time frame. The key is being able to just leave the strategy alone as things go up and down. Hands off, autopilot only. We all know how much better the AP can fly than we can.
Dollar cost averaging = investing a fixed percentage on a regular basis.
Without his staff or focus, index funds are where it's at - even the great WB knows that. KISS and you will win.
JoseCuervo
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JoseCuervo
Some good advice above, and some kind of questionable advice above.
I am on my phone, so I can address all of it.
All the advice on index funds is actually pretty good advice. and for those who don't know exactly what Berkshire Hathaway is for all practical purposes, it is a mutual fund.
And, if you have your money invested in exchange traded funds and you can count that as part of your six months of cash on hand. It is very quick to liquidate exchange traded funds.
Sent from my iPhone using Tapatalk
I am on my phone, so I can address all of it.
All the advice on index funds is actually pretty good advice. and for those who don't know exactly what Berkshire Hathaway is for all practical purposes, it is a mutual fund.
And, if you have your money invested in exchange traded funds and you can count that as part of your six months of cash on hand. It is very quick to liquidate exchange traded funds.
Sent from my iPhone using Tapatalk
Are you pulling out your earnings as they appear?
txflyer
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Fly it like you STOL it ♦
Assuming we don't go full on Mad Max, there will always be a market for silver and gold as there has been for over 5000 years. Federal reserve notes cannot make that boast.
A hacksaw and a scale can suffice, but I also have 90% junk silver and smaller denominations.
Hooch is extremely easy to make. The main thing is using proper materials so you don't poison yourself. Another good investment imo right now are guns. They've come down in price and right now appears to be a calm before the next storm.
NoHeat
Final Approach
Or at least go to the meeting. I've been about ten times. The day-long Q&A with Warren Buffett is great.
And by the way, whenever he's asked what book to read about investing, he recommends The Intelligent Investor, by Benjamin Graham, especially Chapters 8 and 20.
If you search google for books recommended by Warren Buffett, you will find more. Such a list would be a good place to start.
Assuming we don't go full on Mad Max, there will always be a market for silver and gold as there has been for over 5000 years. Federal reserve notes cannot make that boast.
A hacksaw and a scale can suffice, but I also have 90% junk silver and smaller denominations.
Hooch is extremely easy to make. The main thing is using proper materials so you don't poison yourself. Another good investment imo right now are guns. They've come down in price and right now appears to be a calm before the next storm.
Why would you make such an assumption?
There's nothing left to save us, it's all gone away in exchange for promises by liars. What you have that is of value is the ability to produce food, however you probably need water you don't currently have to get maximum production you could. Hay will be the most valuable thing you will be able to produce where you are, and even using optimized grasses, you'll need to irrigate for reliability. What you should be investing in is the ability to produce water. Do you have Natural Gas wells on the property? If so I would invest in a lot of Solid Oxide Fuel Cell capacity. That can get you electricity and water, get natural gas kits for your hay rig equipment. Now you are prepared for the collapse of society.
denverpilot
Tied Down
Contrary advice. The subjects in the Millionaire Next Door didn't want debt. Any debt that didn't create income, anyway. Definitely never on vehicles. The book said the most popular vehicle was a beat up old Ford F-150. Utilitarian, hard to break, cheap.
It's a good book. A little dated at this point but many of the concepts are sound.
A lot of people don't like her style (over-insured) but Suze Ornan's books have some useful information in them, also. Im more a Ramsey guy but he's wrong on some things also. Reading lots and mixing the concepts to your own personal plan that you can love with, is fine.
Student loans are a margin call. We were doing the "pay forever" thing on Karen's and then they started raising her interest rate slowly, charging little "maintenance fees", etc. We sent them a check and as Ramsey says, "Kicked Sally out of the house" and did our part to slightly lower the largest default (bigger than the housing bubble) that's eventually going to happen.
Trivia: Did you know that student loan debt is the only commonly held debt that's expunged upon death? Best time to go to college? When your income is nothing, you're retired, and bored. Haha. And leave the debt to the government when you croak. Haha.
As for car loans, there's reliable cars that don't need loans. It's unbelievable how cheaply you can insure older paid off cars. It's not just about the loan. It's about the value of the vehicle and the insurance mandated for it. Boot the car payment to the curb.
Best feeling ever... "I don't need this job. I'm here because I need something to do and I can make a difference."
We didn't ask... Is it a two earner or a single earner household? Between the time the debt is kicked to the curb and now, can you live on one salary?
Really the core concepts don't change.
Spend less than you make.
Save for a rainy day.
Do the math. (Sometimes tax deferment benefits you more than not, sometimes it doesn't. And sometimes it actually makes more money for someone to quit working... All depends on where you fall on the income tax line.)
Make a plan.
Follow the plan.
Review the plan. This is the step where doing the math makes it possible to choose what investments to partake in, etc.
You can always change the plan with rational thought a lot easier when you're following it and it's become a habit. The best habit anyone who wants to be truly free can build is absolute loathing of personal debt.
I'll add another one. Once you have some money, everyone who doesn't will try to sell you something. Including "investments". Note that they're broke and hustling and you're not broke before even entertaining their sales pitch. Never sign at the first sales pitch. Ever. Do the math. Ask why not tomorrow? Anything with a breathless "must do this now or the offer is going to disappear!", is probably a scam. Do the math.
Oh, and as you start reading... Just a warning... Rich Dad, Poor Dad is a fun read, but the guy is a total scammer.
Many have attempted to figure out who the Rich Dad in his life was. He has never been found.
The guy probably took the concepts and wrote a fictional story. A decent fictional story probably that would teach folks something more useful than reading The Hunger Games, but still pure fiction.
And he has a huge ponzi scheme business of folks teaching courses based on the book. Avoid.
NoHeat
Final Approach
No. It is a conglomerate.
It mostly owns many entire companies, from NetJets, to Fruit of the Loom, to the BNSF railroad, to Geico insurance, to Dairy Queen, and on and on. Its insurance subsidiaries have investment portfolios, as do most insurance companies, but that isn't what Berkshire is all about.
At a much earlier stage of the company, it did somewhat resemble a closed end mutual fund, because most of its assets then were shares of other companies. Maybe that is what you are thinking of. It was once small enough that it could do that as its main endeavor. That is no longer so. It is now so big that it must frequently buy more multibillion dollar companies, else cash generated by Geico and the other insurance operations will gather into an unseemly pile.
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bflynn
Final Approach
My method? I throw darts at the WSJ pages, give my broker enough to make me broker, pull out a few Benjamins and burn them, then call it a good day.
More seriously, I'm a believer in value investing. Like Mr. Buffet says, it's fabulous to buy a great company. It's even better to buy a great company cheap. Look for great companies and buy them when they are making a major move or the stock is depressed for artificial reasons (unrelated to their future performance). Bad news will pass and the price will rebound.
I think DISH is one of those companies; their new sling service will be very successful and they're likely to pick up a lot of millennials that never bothered to get service.
On the flip side, beware of companies that have done better than average in the past few years and don't have a good plan for continued success. Nobody grows forever or else they'd wind up owning the entire world.
More seriously, I'm a believer in value investing. Like Mr. Buffet says, it's fabulous to buy a great company. It's even better to buy a great company cheap. Look for great companies and buy them when they are making a major move or the stock is depressed for artificial reasons (unrelated to their future performance). Bad news will pass and the price will rebound.
I think DISH is one of those companies; their new sling service will be very successful and they're likely to pick up a lot of millennials that never bothered to get service.
On the flip side, beware of companies that have done better than average in the past few years and don't have a good plan for continued success. Nobody grows forever or else they'd wind up owning the entire world.
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Yep, that's our Ponzi style "pump to the top, let some slosh and trickle down" economy.
bflynn
Final Approach
Also, I think Einstein's quote on this might be the most critical for young investors - "the most marvelous thing in the world is the power of compounded interest".
You're young, save aggressively now and invest it. $10,000 saved now and grown at 8% interest for 25 years comes out to just $68,000. The same $10,000 saved for 45 years is
over $319,000. $10,000 given to your grandchild at their birth and saved for 67 years becomes 1.7 million.
Time is your temporary friend, use it.
You're young, save aggressively now and invest it. $10,000 saved now and grown at 8% interest for 25 years comes out to just $68,000. The same $10,000 saved for 45 years is
over $319,000. $10,000 given to your grandchild at their birth and saved for 67 years becomes 1.7 million.
Time is your temporary friend, use it.
denverpilot
Tied Down
By the way... When you have the concept of dollar cost averaging figured out, realize that you can direct many investments to reinvest dividends into themselves. Inside some tax deferred accounts, this essentially multiplies your input on top of anything you're allowed to put in. If you hit limits (when you get older and income is higher) on putting money into tax deferred accounts, that doesn't stop the reinvestment happening *inside* the account.
It's the reverse of Ramsey's "debt snowball" concept where you pay off the highest interest debt first and make minimum payments on the rest, then when you pay off that first one, you take ALL of the money you were paying off the first with and send it directly to the next highest interest debt, and by the end you're sending huge payments to that last debt account... And your cash outlay never changed.
Inside an investment account, compound interest/dividends with continuous reinvestment is the stuff of magic. Especially if you can add to it.
It's the reverse of Ramsey's "debt snowball" concept where you pay off the highest interest debt first and make minimum payments on the rest, then when you pay off that first one, you take ALL of the money you were paying off the first with and send it directly to the next highest interest debt, and by the end you're sending huge payments to that last debt account... And your cash outlay never changed.
Inside an investment account, compound interest/dividends with continuous reinvestment is the stuff of magic. Especially if you can add to it.
txflyer
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Fly it like you STOL it ♦
Why would you make such an assumption?
That's pretty interesting because we do have Ngas.
I grow a lot of hay. But not on the property that has the gas. It's down South here where we don't need irrigation in normal years.
I finally have a good Tifton 85 patch after about five years since it was sprigged.
That's the Tifton on the left.
Look at that hog trail through my Tifton! Son of a ... !@$*#%^%!!
Nice looking hayfields. The NGas may be able to turn the other field into a hay field as well. I wouldn't be cussing those hogs, I'd be managing the herd best I could, they make fine eating and eat a lot of other pests for the damage they do. Just cinch down you seat belt. 
paflyer
Final Approach
Toilet paper and tampons. And 9mm.
asechrest
En-Route
Great comments. Thanks for taking the time to comment, especially those who've written long, detailed posts. I'd comment specifically on each of them but that'd be an unwieldy reply. Know that I'm reading everything.
I'm a single income household at the moment (long-time girlfriend and I have yet to unite money/households). I'm real solidly middle class, so I've got a long way to go before I worry about $500k investment accounts. :wink2: My lingering student loan is a 2.33% subsidized Stafford Loan. My car was purchased last year: used 2010 Corolla. Cost was roughly $15k. I was wrong about my loan rate -- it's 1.75%. 1.99% is what they tried to give me with their in-house financing, but I held my ground on 1.75% because I'd done my homework and knew what I could get. I paid $5k down and financed the rest. Loan term is 72 months with no early payment penalties. CC debt is 0% interest for at least another year, and I could seemingly keep it 0% interest in perpetuity because my other $0 balance CC accounts keep giving me balance transfer offers at 0% interest, though there is usually a balance transfer fee. I have no mortgage.
I have roughly 7 months of salary in savings. Considering I'm able to put money in savings each month, that should be at least 7 months of living costs set aside. (And the older I get, the more I realize that's truly not a lot.)
I have no retirement savings options at my place of (small) business, so I'm on my own.
Points well taken about getting my interest-bearing debt paid down. I don't think I want to do it lump sum, but I could certainly expedite it. I'm a bit impatient to invest but I may just have to suck it up.
My overall goal? Retire with enough money to live comfortably, which I envision will involve a decent home with an adjacent more-than-decent hangar, with a decent plane in said hangar, and enough spending money for decent fun and some travel. I'm partial to Willis Gliderport. Henning may know it.
I'm a single income household at the moment (long-time girlfriend and I have yet to unite money/households). I'm real solidly middle class, so I've got a long way to go before I worry about $500k investment accounts. :wink2: My lingering student loan is a 2.33% subsidized Stafford Loan. My car was purchased last year: used 2010 Corolla. Cost was roughly $15k. I was wrong about my loan rate -- it's 1.75%. 1.99% is what they tried to give me with their in-house financing, but I held my ground on 1.75% because I'd done my homework and knew what I could get. I paid $5k down and financed the rest. Loan term is 72 months with no early payment penalties. CC debt is 0% interest for at least another year, and I could seemingly keep it 0% interest in perpetuity because my other $0 balance CC accounts keep giving me balance transfer offers at 0% interest, though there is usually a balance transfer fee. I have no mortgage.
I have roughly 7 months of salary in savings. Considering I'm able to put money in savings each month, that should be at least 7 months of living costs set aside. (And the older I get, the more I realize that's truly not a lot.)
I have no retirement savings options at my place of (small) business, so I'm on my own.
Points well taken about getting my interest-bearing debt paid down. I don't think I want to do it lump sum, but I could certainly expedite it. I'm a bit impatient to invest but I may just have to suck it up.
My overall goal? Retire with enough money to live comfortably, which I envision will involve a decent home with an adjacent more-than-decent hangar, with a decent plane in said hangar, and enough spending money for decent fun and some travel. I'm partial to Willis Gliderport. Henning may know it.
EminiTrader
Cleared for Takeoff
I'm a full time trader. I earn my living from trading so its a bit different from where I stand as I rely on the markets to eat. If you have a great job with bennys' then contribute to the 401k and if you are looking for people that consistently beat the market - PM me.
Here's a trade I put on today in case anyone gives a rats ass - It's a synthetic short with protection:
Long the SPY DEC(2015) 205 PUT 14.98
Long the SPY DEC 215 Call 6.90
Short the SPY DEC 210 Call for 9.40
Basically this is a play that the market will go down. For every 1 contract I put on - the max loss is about $1700. So my loss is defined before I ever enter the position.
My max gain is theoretically unlimited - but of course there is a limit on a short trade and the SPY wont go to zero.
I basically put these positions on with LIMITED RISK and maximum gain for a living. I use options that expires 10 + months out but I seldom keep a trade more than a few weeks. It's a good living.. .work about 30 minutes per day...
My point? It's worth learning how to manage your own money - in my opinion...
Here's a trade I put on today in case anyone gives a rats ass - It's a synthetic short with protection:
Long the SPY DEC(2015) 205 PUT 14.98
Long the SPY DEC 215 Call 6.90
Short the SPY DEC 210 Call for 9.40
Basically this is a play that the market will go down. For every 1 contract I put on - the max loss is about $1700. So my loss is defined before I ever enter the position.
My max gain is theoretically unlimited - but of course there is a limit on a short trade and the SPY wont go to zero.
I basically put these positions on with LIMITED RISK and maximum gain for a living. I use options that expires 10 + months out but I seldom keep a trade more than a few weeks. It's a good living.. .work about 30 minutes per day...
My point? It's worth learning how to manage your own money - in my opinion...
Alexb2000
En-Route
I have made a pretty fair amount of money on investments. I think the most important thing is to do it vs. wait, time is your friend at this point. I would start by opening a trade account at your favorite brokerage. Start piling cash in a money market while you wait for a buying opportunity. There are ALWAYS market corrections, always, wait for one of those, have a shopping list prepared well in advance, and buy carefully (dollar cost averaging will help you net out as low as possible). Then forget all the day to day market swings, I don't even check the market everyday. What I do is spend the time reading, studying, trying to keep abreast of everything going on with the companies I have invested in. That means you can't have 100's, I would say a dozen or less. There should be strong diversity as well. I also REALLY like dividends, possibly the only remaining good hedge in a down market.
In terms of what companies to pick, I like those that have legal monopolies, or close to it. I hate companies that are "me to" in nature. I also avoid companies that have strong foreign competition.
Couple of examples:
I like Con Edison in the utility sector, they have the steam plants that supply heat to Manhattan buildings (a virtual monopoly), they have 40 years of dividend growth and average just under 4% on the dividend alone. IF they pull back, I buy more.
I like any of the railroads, Burlington used to be my favorite until it was acquired, now I like Union Pacific, but in general I like rail for transportation. It can't be outsourced, no foreign competition, tracks are privately owned, rail moves a ton of freight 450 miles on a gallon of diesel. Nothing can replace them, so they are a monopoly of sorts.
There are many other examples. I also own a bond fund DODIX, just for diversity. Bonds are pretty tough lately.
I don't own metals, they take the stairs up and the elevator down.
I own some foreign growth funds, more diversity.
I would start simple, make some money, don't get greedy, just like gambling lots of people tout mega returns that blow away the S&P. If they could do that consistently or even the majority of the time, they would be paid millions a year to work on Wall Street.
My next buy is an oil futures ETF. $50 oil is a short term thing IMO, can't happen for long when the deep water and shale service cost is above that. ETF's are a great way to play something like oil.
Fun stuff.
In terms of what companies to pick, I like those that have legal monopolies, or close to it. I hate companies that are "me to" in nature. I also avoid companies that have strong foreign competition.
Couple of examples:
I like Con Edison in the utility sector, they have the steam plants that supply heat to Manhattan buildings (a virtual monopoly), they have 40 years of dividend growth and average just under 4% on the dividend alone. IF they pull back, I buy more.
I like any of the railroads, Burlington used to be my favorite until it was acquired, now I like Union Pacific, but in general I like rail for transportation. It can't be outsourced, no foreign competition, tracks are privately owned, rail moves a ton of freight 450 miles on a gallon of diesel. Nothing can replace them, so they are a monopoly of sorts.
There are many other examples. I also own a bond fund DODIX, just for diversity. Bonds are pretty tough lately.
I don't own metals, they take the stairs up and the elevator down.
I own some foreign growth funds, more diversity.
I would start simple, make some money, don't get greedy, just like gambling lots of people tout mega returns that blow away the S&P. If they could do that consistently or even the majority of the time, they would be paid millions a year to work on Wall Street.
My next buy is an oil futures ETF. $50 oil is a short term thing IMO, can't happen for long when the deep water and shale service cost is above that. ETF's are a great way to play something like oil.
Fun stuff.
FormerHangie
En-Route
On to equities. Stocks are equity investments, you are a part owner of the company. While you are an owner, you don't really have any say so in how the company is run, you are basically a passive investor. As far as mutual fund investments go, the US stock market is generally categorized by company size, into small, medium, and large capitalization, hence the term "large cap" or "small cap". There are also sector specific funds that specialize in individual industries, such as energy or health care.
There are also international funds, which are roughly divided into developed world and developing world. These carry an additional risk, in that exchange rates may shift and make your investment less valuable when converted back to dollars. The markets in most developing countries are not as well developed as those in the US, Europe, Japan, and Australia/New Zealand, and I'd consider them to be speculative, and right now, not very appealing.
You may have heard of something called a REIT. REIT stands for Real Estate Investment Trust, and these invest in income generating properties, more typically commercial, but in some cases residential.
For stock mutual funds, some are considered to be actively managed, while others are index based. Probably the most famous index that is used in the mutual fund busines is the Standard and Poor's 500. An S&P 500 index fund will have its investments in the stocks of companies in that index, in the proportion of each company's capitalization. Another index is the Russell 2000, which is of small cap stocks. There are two major benefits to index funds, their expense ratios are low, and because they do very little buying and selling of stocks during the course of a year, any capital gains are deferred until you sell the fund. Actively managed funds have higher expense ratios, since the manager gets paid as an advisor, higher expenses because they trade more often, and you will realize more capital gains each year, meaning you will pay the capital gains tax yearly instead of when you sell.
If you are looking for long term appreciation, I'd suggest a total US stock market index fund. Buy in over a number of months, just in case the market makes some short term moves, and plan on holding it for a number of years. If you are only investing for a short time, you might consider a CD, all the short term options are terrible right now.
There are also international funds, which are roughly divided into developed world and developing world. These carry an additional risk, in that exchange rates may shift and make your investment less valuable when converted back to dollars. The markets in most developing countries are not as well developed as those in the US, Europe, Japan, and Australia/New Zealand, and I'd consider them to be speculative, and right now, not very appealing.
You may have heard of something called a REIT. REIT stands for Real Estate Investment Trust, and these invest in income generating properties, more typically commercial, but in some cases residential.
For stock mutual funds, some are considered to be actively managed, while others are index based. Probably the most famous index that is used in the mutual fund busines is the Standard and Poor's 500. An S&P 500 index fund will have its investments in the stocks of companies in that index, in the proportion of each company's capitalization. Another index is the Russell 2000, which is of small cap stocks. There are two major benefits to index funds, their expense ratios are low, and because they do very little buying and selling of stocks during the course of a year, any capital gains are deferred until you sell the fund. Actively managed funds have higher expense ratios, since the manager gets paid as an advisor, higher expenses because they trade more often, and you will realize more capital gains each year, meaning you will pay the capital gains tax yearly instead of when you sell.
If you are looking for long term appreciation, I'd suggest a total US stock market index fund. Buy in over a number of months, just in case the market makes some short term moves, and plan on holding it for a number of years. If you are only investing for a short time, you might consider a CD, all the short term options are terrible right now.
asechrest
En-Route
The other part of this is that I really thirst for knowledge and new projects (where the hell was that desire in college?). I like to pick something and dive into it. Investing (and trading, honestly) really tickles that fancy. The idea of it, at least. I'm confident I can do well investing. I'm less confident I could do well trading. Lots of folks smarter than I get taken to the cleaners. Plus, I don't believe I have the liquid cash to get a good start in trading just yet.
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FormerHangie: Thanks for those two real detailed posts.
Alexb2000: Thanks for the company suggestions, will take a look.
EminiTrader: I've seen ya' around here and wondered if you'd comment. Even Googled "emini" and read about it one time. I dabbled (in every sense of the word) in swing trading with my now-dormant TradeKing account. Set aside a thousand or two and toyed with it after a few months of reading about swing trading. I broke even before putting it on hold because I decided that was far too little cash to do well with, and the commission eats small-time investors alive.
AggieMike & DenverPilot: Dave Ramsey books appear to be in my future.
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FormerHangie: Thanks for those two real detailed posts.
Alexb2000: Thanks for the company suggestions, will take a look.
EminiTrader: I've seen ya' around here and wondered if you'd comment. Even Googled "emini" and read about it one time. I dabbled (in every sense of the word) in swing trading with my now-dormant TradeKing account. Set aside a thousand or two and toyed with it after a few months of reading about swing trading. I broke even before putting it on hold because I decided that was far too little cash to do well with, and the commission eats small-time investors alive.
AggieMike & DenverPilot: Dave Ramsey books appear to be in my future.
PaulS
Touchdown! Greaser!
Great comments. Thanks for taking the time to comment, especially those who've written long, detailed posts. I'd comment specifically on each of them but that'd be an unwieldy reply. Know that I'm reading everything.
I'm a single income household at the moment (long-time girlfriend and I have yet to unite money/households). I'm real solidly middle class, so I've got a long way to go before I worry about $500k investment accounts. :wink2: My lingering student loan is a 2.33% subsidized Stafford Loan. My car was purchased last year: used 2010 Corolla. Cost was roughly $15k. I was wrong about my loan rate -- it's 1.75%. 1.99% is what they tried to give me with their in-house financing, but I held my ground on 1.75% because I'd done my homework and knew what I could get. I paid $5k down and financed the rest. Loan term is 72 months with no early payment penalties. CC debt is 0% interest for at least another year, and I could seemingly keep it 0% interest in perpetuity because my other $0 balance CC accounts keep giving me balance transfer offers at 0% interest, though there is usually a balance transfer fee. I have no mortgage.
I have roughly 7 months of salary in savings. Considering I'm able to put money in savings each month, that should be at least 7 months of living costs set aside. (And the older I get, the more I realize that's truly not a lot.)
I have no retirement savings options at my place of (small) business, so I'm on my own.
Points well taken about getting my interest-bearing debt paid down. I don't think I want to do it lump sum, but I could certainly expedite it. I'm a bit impatient to invest but I may just have to suck it up.
My overall goal? Retire with enough money to live comfortably, which I envision will involve a decent home with an adjacent more-than-decent hangar, with a decent plane in said hangar, and enough spending money for decent fun and some travel. I'm partial to Willis Gliderport. Henning may know it.
So it is costing you $157 this year to use $9k of the car company's cash this year, I'd keep the loan and work on savings. Same with the school loan, that's costing you $225 per $10,000, not a big deal in the grand scheme of things. Look at as you'll be paying the loans back in depreciated cash over the next few years. The qualm I'd have over the car loan is the term, in 5 years your car will be 9 years old and probably need to be replaced, you can pay an extra $50 a month to bring that in a little in anticipation of needing another one. If you want to buy a home then you should not be putting that money in the stock market unless you think it is really a long way off. I would focus on that goal first by putting it in savings or cds with maybe a small amount invested and some type of retirement account established.
I haven't done a home ownership analysis in many years, but I'll tell you, I am paying $750 a month in taxes for the privilege of living in my own home, that's a mortgage payment in an of itself, home ownership isn't as great as it used to be. People talk about compounding interest, here in Massachusetts we have property tax increase limitation of 2 1/2 percent per year. That was a trivial amount when it was voted in 30 years ago, now, since the "principle" has compounded, the increases are not so trivial.
My question, how big is your yacht?
denverpilot
Tied Down
See? He did the math!
Holy hell Paul, I pay LESS than a couple grand a year in property taxes. You need to come West!
It's probably more boring than Massachusetts, but we can go shooting or ask the neighbor if we can ride the horse around a bit.
Or we could "invest" some of your property tax savings in a four wheeler that goes really fast.
And even though they find ways around it regularly, we have the Colorado TABOR law that forces tax increases to be voted on by the People. The taxists claim that our society will fall apart because of it, of course. Haha.
$750/mo in property taxes. Good lord. The politicians really do own most of the population out east, don't they? I mean really OWN. That's sad.
asechrest
En-Route
I had an option on the term, chose the max available only because there was no early payment penalty. So I'm at least in the driver's seat if I want to cut that well short of the full loan term; and I do.
I suggest you split your investing kitty into two piles: one big one that goes into the index funds following the strategies noted above, and another MUCH smaller pile of "betting money" that you use to buy individual stocks. That way, you can scratch the "I'd be a good investor" itch and not screw with your retirement.
Oh, and a third pile of sea shells so that you can trade in Henning's economy of the future.
EminiTrader
Cleared for Takeoff
I hate to admit this... I had a searay sundancer 320... but I crashed it
After the insurance fixed it and all that I sold it and got into aviation ...Problem with trading for a living is that you NEED THE CAPITAL.. if you take it out and spend it - you are out of business really quick
At least sea shells are made of calcium, something of use in agriculture. Seashells have more value after social collapse than cash or other financial instruments.
What people should invest in is their own supply of energy and water, preferably portable. Something they can use to save them money now, especially on off grid properties, but also able to sell electricity back to the grid in all practical senses (economics only work if you are in a state that has laws dictating fair market access to all providers.) and make money while helping back up the grid against failures, even catastrophic ones. We should be investing in things that will help regardless the circumstances of the future.
What people should invest in is their own supply of energy and water, preferably portable. Something they can use to save them money now, especially on off grid properties, but also able to sell electricity back to the grid in all practical senses (economics only work if you are in a state that has laws dictating fair market access to all providers.) and make money while helping back up the grid against failures, even catastrophic ones. We should be investing in things that will help regardless the circumstances of the future.
comanchepilot
En-Route
The traditional rule of thumb is that of every 5 stocks one is a star, one is a dog and three track the market. . .