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One of the problems in our society is most of us learn very little about our own finances... most of america does more research on their refrigerators and their cars then they do anything financial.
no surprise most people committ financial suicide. they do it by believing their own bull-s*it which they convinced themselves from bits and pieces they hear from other un-informed people or myths from their parents or even those morons on the financial channels.
im not in the business, never was , but investing is a hobby of mine.
i write financial articles for a few publications about planning as a hobby..
my wife and i have been featured in money magazine and fidelity investment magazine and im a non staff consultant for the wall street journal...
all without even knowing crap or in the business. ha ha ha . ..
Wish I'd met you about 25 years ago. You obviously know more than my advisers did. Yes, their diversification was all in funds. We didn't have a lot of choice. This fund or that. They generally chose the ones with the greatest returns over 1, 3, 5, and 10 years. Some stocks ("growth funds"), some bonds, some real estate, some foreign (usually 10%), but never gold. I don't think gold was ever an option, but I'm not sure.
guess they didnt do to good of a job, you could have just bought the simple un-managed mix above , rebalanced back to 25% once a year and grew alot of dough.....
none of this is financial advice, only food for thought
One of the problems in our society is most of us learn very little about our own finances... most of america does more research on their refrigerators and their cars then they do anything financial.
Most people don't keep a budget and can't even balance a checkbook, much less keep track of credit cards and on-line purchases. They think if there's money at the end of the month they can go shopping. They don't worry about heating/cooling bills, swimming pools, etc. They buy toys and play like the grasshopper... and then come ask us ants (or the bail-out ants in DC) for shelter when the money runs out and winter arrives.
My wife and I set a standard of living when we were young and when income increased, we invested it instead of spending it. When the nest emptied, we invested even more. We kept the standard of living the same, with modest splurges like 25th anniversary trip to Europe and this year an Alaskan cruise for 35.
By having a level at which we can live our entire lives, our investments didn't have to be huge. I planned with what we had and what we would have (state retirement was predictable). We now have all but guaranteed an income that exceeds expenses (at that same standard of living) by roughly 25% for the rest of our lives (calculated to age 100).
The unknown like inflation, taxes, catastrophe's etc. will impact us, yes, but we have two years+ of expenses in savings instruments available immediately should disaster strike. And we will move (when this house sells) to an area with a lower cost of living (6% to 8% according to my research).
All in all, we are fine. Had we achieved your kinds of returns, we would be wealthy beyond our dreams as measured by our modest standard of living to which we have become accustomed.
actually the point i was trying to make origionally was those returns are nothing special... as an example those 4 funds that i choose to make the above mix are not even managed funds.
they are index type funds ... there was no great insight as far as great managers, lucky investments , good timing. its just something anyone can do with a little knowledge and no great investing skills...
its not about picking hot funds, or the right managers ,its about learning a little on your own and having a plan, a balance , low risk as we get older.......
as we get older its no longer about getting richer but its about not growing poorer and making it thru retirement with no pay check yet not eaten by inflation like banks or cd's are. or whipped out by a single economic event..
throwing money into stock funds blindly in a 401k is not a plan by itself.
Most people don't keep a budget and can't even balance a checkbook, much less keep track of credit cards and on-line purchases. They think if there's money at the end of the month they can go shopping. They don't worry about heating/cooling bills, swimming pools, etc. They buy toys and play like the grasshopper... and then come ask us ants (or the bail-out ants in DC) for shelter when the money runs out and winter arrives.
My wife and I set a standard of living when we were young and when income increased, we invested it instead of spending it. When the nest emptied, we invested even more. We kept the standard of living the same, with modest splurges like 25th anniversary trip to Europe and this year an Alaskan cruise for 35.
By having a level at which we can live our entire lives, our investments didn't have to be huge. I planned with what we had and what we would have (state retirement was predictable). We now have all but guaranteed an income that exceeds expenses (at that same standard of living) by roughly 25% for the rest of our lives (calculated to age 100).
The unknown like inflation, taxes, catastrophe's etc. will impact us, yes, but we have two years+ of expenses in savings instruments available immediately should disaster strike. And we will move (when this house sells) to an area with a lower cost of living (6% to 8% according to my research).
All in all, we are fine. Had we achieved your kinds of returns, we would be wealthy beyond our dreams as measured by our modest standard of living to which we have become accustomed.
dont worry about not getting great gains, you cut your spending and watched the money carefully. end result is you did well from the bottem up.
which reminds me of another point, we have so many here trying to time things so they catch the housing bottom...
well if they get lucky and catch that bottom they still have to guess right a 2nd time to make it pay off. they need to catch the top...
dont forget the guy who buys today and sells at the peak did the same as someone who guessed right, waited paid 15% less and sold 15% late or early from the peak leaving his extra money on the table......
i always liken to the guy who negotiates on his new car to the last penny and then trades the car back in at the wholesale price later on ..... he could have sold it retail and negotiated less.
Last edited by mathjak107; 11-11-2009 at 12:56 PM..
i have to interject one point, well maybe a few points because it just drives me nuts when i see it posted:
why is it folks like to talk about the retirees who lost money in the stock market and cant retire. i got to tell you there are tens of millions of retirees who can retire because of it including myself.
ill say it plain and simple ,anyone who lost money and isnt up well beyond any other asset class over the time frame they should have been saving for retirement is a speculater and not an investor.. im not the smartest investor but i am a good planner. i have to say anyone who was investing their entire life cant be down,.. they may not have caught the exact high of things but they still grew more money then they would have otherwise . even at the low they had more, forget about the fact if you merely rebalanced things around the low and bought more equity funds you are just about even now.
ITS NOT ABOUT TIMING THE MARKETS-ITS TIME IN THE MARKETS ,thats what makes things work.
anyone who even bought diversified un-managed no brainer index funds would be up big time even with the drop.
my simple portfolio of mutual funds was up from 1987 to the high point before the big drop by over 1300% these are simple nothing special run of the mill funds.. i rolled back to up 1100% now.... do you know how much money that grew even at the low point?" its mind blowing. 100,000 invested when i started saving in 1987 is 1.1 million right now after our drop. my real estate was up about 300% over the same time frame in new york city . to put it in perspective you just about doubled your money in the bank but after inflation and taxes all you got was a guaranteed loss. those are the folks who cant retire, not the investors .
no one can predict what any markets will do today, tomorrow even 10 years out. but long term you are almost guaranteed an amount you will be very happy with.
the dow stood at 1700 in 1987 when i started as a young investor., its over 10,000 today and thats after the 2nd biggest drop in history. that dosnt even reflect properly dividends and splits and dividends account for 1/3 the growth so its actually up more. other indexes are up even more.
anyone saving for retirement had to actually work hard to loose money long term. in fact except for once over the last 100 years you will be hard pressed to find even a long term period of 15 years where markets werent up big time.
speculators attempt to beat the markets returns . they think they are smarter. they are the market timers, they are those that think they can play sectors or trends..
even worse they are grandma and grandpa who think they are investing by buying individual stocks their dopey son inlaw told them to buy or worse their broker.
i have been an investor in all asset classes for over 20 years and i can tell you except for a thrill and speculation im not smart enough to pick a handful of just the right companies at just the right time,in just the right sectors , in just the right market sentiment and even if i guessed right i still dont know what competitors are doing.
mutual funds take out all that company risk, if you diversify they can even take out some market risk. its trying to get better then what the markets give you when folks loose money. the average small investor left to his own devices according to morningstar and ibbotson research get less than a 4% return long term while the markets do 9-11%.... they buy when they should sell and sell at exactly the wrong time and dont rebalance buying more looosers for the next run and taking some winners off the table.
guns dont kill people,, people kill people and markets dont loose money long term , people do, by speculating or treating long term investments like short term money makers or poor planning. (please lets not start a gun debate, you get the idea what im saying)
a simple mix of equity funds, long term treasuries,gold and cash would have been up last year not down 40%...
you actually had to speculate in individual stocks because there is nooooooo way your not retiring now because of the markets. had a long term investor not been invested you wouldnt even have close to what you had even after the drop.
retirements arent killed by bad markets, they are killed by speculating and bad planning. no one knows what the future will bring but with 100 years of history behind it im willing to bet folks will still grow alot of money investing for the next 20 years.
NOW BACK TO YOUR REGULARLY SCHEDULED PROGRAM.
You must have a lot of time on your hands to write these long posts. Frankly, I do not agree with many of your posts but you are entittled to post them. I will continue to post based on my experiences and my point of view. I do not need a financial lesson from you. I am doing quite well. Thank you.
- Purchase home for $240,000
- 5.0% interest rate / 30 years
- 5% ($12,050) down
- Taxes $1700/year
- PMI $140/year
- Insurance $650/year
Total Monthly Mortgage $1,600 (rounded up a few bucks)
Lets say I live in this house for 10 years. Now lets calculate how much it cost me to live in this house for 10 years. I am going to add $2,000/year for maintenance and upgrades, so that's $20,000 in maintenance/upgrades for the 10 years. Could be lower, could be higher, but I think this is a good estimate.
So, $1,600 x 120 months (10 years) is $192,000. Add the $12,050 downpayment and the $20,000 in maintenance/upgrades, the total cost is $224,050, but we'll round up to $225,000. So the grand total of living in my house for 10 years is $225,000, yikes! After 120 months of making payments, the prinicpal balance on my loan is $187,620, but we'll round up to $188,000. Sweet.
Now let's say I sold the house for what I bought for it 10 years later (highly not likely, but let's just assume). Sold price $240,000 - $188,000 (what I owe on the house) = $52,000 in my pocket. So it cost me $225,000 - $52,000 = $173,000 to live there for 120 months, or $1440/month. Not bad for a 2700 sq. ft house that was mine. Now lets say I sold the house for $300,000 with a $59,000 appreciation in 10 years. $300,000 - $188,000 = $112,000 in my pocket. Even better. So it cost me $225,000 - $112,000 = $113,000 to live there for 120 months, or $941/month. I could probably at this point buy a condo for $112,000 somewhere in the good o'l USA for cash if I didn't want to carry a mortgage anymore, or at least put 50% down on a nice pad.
These calculations don't include tax savings but also don't include realtor fees/property taxes/insurance increasing. Definitely some margin for error, but it's still very close. Also don't include getting rid of PMI after 5 years.
So my conculsion is that it will always cost you money no matter if you rent or buy. The goal is however to pay off the mortgage completely or make enough money in selling to buy a cheaper house in cash, which is how you win. But I think you can work the numbers out to show that buying will ultimately cost the same or even less than renting, so why not? Ultimately, renters will always be renting and buyers will eventually own the house (assuming they don't keep upgradeing every 7 years).
You must have a lot of time on your hands to write these long posts. Frankly, I do not agree with many of your posts but you are entittled to post them. I will continue to post based on my experiences and my point of view. I do not need a financial lesson from you. I am doing quite well. Thank you.
i wish i had lots of time, i just feel it important enough that with all the myths and old wives tales out there that get people thinking for themselves.
most folks have so little understanding about anything in the financial world that i just enjoy bringing up points that they may not know. no one says my view is right but its not wrong.. in financial markets there is no right or wrong as its all predicting the future. it should just spurr someone to look at what they belive and make sure they arent running on myth and what they heard from the next un-informed person.
your certainly entitled to your opinion , and my opinion is i dis-agree with your blanket statement about retirees being whiped out because of the markets.
thats not a fact.. a fact is that the markets provided more growth oppertunity then any other asset class over the the last 15 years or longer..
if someone lost money or didnt do well it wasnt the markets fault. all markets are up big time over that period unless you stuck all your money in japan., thats my point. the markets are usually higher highs and higher lows.
fact is you would be hard pressed to find any index of hundreds or thousands of stocks that werent up big time over the last 15 years or longer, even nasdaq stood at 800 , the dow at 4,000. so if almost every market is up and someone is down its something they did wrong , not the markets... if they dont have at least a 15 year time frame then their mistake is even being in a long term investment like equities which take years to shine and smooth out..
money you threw in your 401k over the last decade is still new money and needs time to grow. while new money may be off the high theres a pretty good chance you will be more then thrilled where your 401k grew to off in
time ,. even a 60 year old still has long term money that wont be used to eat god willing for 30 more years.
people look at the money they put in to their equity investments over the last few years and go what a loser.. but thats money that hasnt matured yet. its like looking at a great steak that hasnt finished cooking yet and going yeeech im not going to eat that bloody thing.... once it finishes cooking the steak is great but it needs time... you wouldnt buy the steak if you needed to eat something in 5 minutes , but if you wait until its done it will be well worth it.
because we generally contribute more to our investments as we get older the money that has been in the investments for a long period of time and already up nicely is constantly getting diluted by the new money coming in.. that new money needs growing time too..
lets all meet back here in 15 years from today and tell us how you did, in fact lets see in 5 years how you did..
Last edited by mathjak107; 11-12-2009 at 03:41 AM..
i wish i had lots of time, i just feel it important enough that with all the myths and old wives tales out there that get people thinking for themselves.
most folks have so little understanding about anything in the financial world that i just enjoy bringing up points that they may not know. no one says my view is right but its not wrong.. in financial markets there is no right or wrong as its all predicting the future. it should just spurr someone to look at what they belive and make sure they arent running on myth and what they heard from the next un-informed person.
your certainly entitled to your opinion , and my opinion is i dis-agree with your blanket statement about retirees being whiped out because of the markets.
thats not a fact.. a fact is that the markets provided more growth oppertunity then any other asset class over the the last 15 years or longer..
if someone lost money or didnt do well it wasnt the markets fault. all markets are up big time over that period unless you stuck all your money in japan., thats my point. the markets are usually higher highs and higher lows.
fact is you would be hard pressed to find any index of hundreds or thousands of stocks that werent up big time over the last 15 years or longer, even nasdaq stood at 800 , the dow at 4,000. so if almost every market is up and someone is down its something they did wrong , not the markets... if they dont have at least a 15 year time frame then their mistake is even being in a long term investment like equities which take years to shine and smooth out..
money you threw in your 401k over the last decade is still new money and needs time to grow. while new money may be off the high theres a pretty good chance you will be more then thrilled where your 401k grew to off in
time ,. even a 60 year old still has long term money that wont be used to eat god willing for 30 more years.
people look at the money they put in to their equity investments over the last few years and go what a loser.. but thats money that hasnt matured yet. its like looking at a great steak that hasnt finished cooking yet and going yeeech im not going to eat that bloody thing.... once it finishes cooking the steak is great but it needs time... you wouldnt buy the steak if you needed to eat something in 5 minutes , but if you wait until its done it will be well worth it.
because we generally contribute more to our investments as we get older the money that has been in the investments for a long period of time and already up nicely is constantly getting diluted by the new money coming in.. that new money needs growing time too..
lets all meet back here in 15 years from today and tell us how you did, in fact lets see in 5 years how you did..
It is a fact that many people lost a lot of money in the stock market. It is also a fact that people are unable to retire because of it. Some people do not have the time to recoup costs.
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You obviously know more than my advisers did. Yes, their diversification was all in funds. We didn't have a lot of choice. This fund or that. They generally chose the ones with the greatest returns over 1, 3, 5, and 10 years. Some stocks ("growth funds"), some bonds, some real estate, some foreign (usually 10%), but never gold. I don't think gold was ever an option, but I'm not sure.
