We found 111 Reddit comments about The Bogleheads' Guide to Investing. Here are the top ones, ranked by their Reddit score.
Not saving any of my disposable income - if I invested even 10% of what I earned in my 20's I'd own a house now that I'm in my 30's, but instead I'm just now trying to catch up with that train.
EDIT: For those interested in learning to invest, I'll share some resources below. As for how I invest - I have 60% in high-interest 5-year CD account (about 3.1% APY) and the rest in mutual funds (VMVFX and VTMFX to be exact). I am putting 10% of my pre-tax income into my employer's 401(k) (they match some of contributions) and am contributing maximum amount possible to my IRA. Finally I keep about 5% of the cash in a savings account which provides a relatively low interest rate of 2% (but I can access that money at any time).
What I'm excited about: moving my investments to ESG (responsible environmental, social, and governance) funds. These funds carefully screen companies for negative impacts in that area - for example, tobacco and alcohol companies would be excluded, as would oil companies, and fashion retailers that use unsustainable labor practices. One such ESG fund is run by Vanguard - VEIGX.
Tips for saving: learn about concept of paying yourself first - that means automatic deductions into a savings account that you can't easily touch that happen after each of your paycheck. This has been the key to saving - automating it so that it's not something I have to think about - like a mortgage or bill payment - makes sure I don't spend the money meant to be saved. Do some budgeting to figure out where your money goes - there's lots of tools online, like Mint, that allow you to easily break down spending by categories and even set a budget. Estimate your living expenses (rent, food, bills, transportation) and prioritize saving for a 6 months worth of living in case of a job loss or accident. Learn about lifestyle creep and always live below your means - buy used not new, avoid cheaply made low quality products, think twice whether you really need the thing you're buying, can you get it used, can you borrow it? How much is the thing you're buying a liability in terms of maintenance, insurance, etc? Prioritize spending on yourself (experiences, learning, self-development) rather than on things.
Here is the mother of all lottery advice comments. I think /u/Rabid_Tanuki may have been inspired by it. It’s entertaining and worth a read.
However, I would point out that £1m is not actually all that much money. It’s a good amount, and it can guarantee you financial security for life if you play your cards right. But in many ways you aren’t in nearly as precarious a situation as the people who win £30m. Even if you did tell people (DON’T!), this still is only enough to buy MAYBE one house in a high cost of living (HCOL) area like London. Your new friends wouldn’t expect Jaguars, just free trips, parties and help with medical expenses.
Still, you need to be careful: it’s surprisingly easy to fritter away a million euros/dollars/pounds/crowns. If you know you have trouble keeping money, then it’s a good idea to get financial advice on setting up some kind of trust. Taxes are another thing to think about. Realize, though, that there are many people who have this much in a standard brokerage account just due to having earned and invested over time. Since this isn’t a stupid amount of lottery money, you could do much worse than just sticking it in some index funds, turning on dividend reinvesting, and forgetting about it. (Which funds? Getting started investing can be scary, but it doesn’t have to be complicated. By far the most important thing is to start. Read this book.)
The reason £1m is able to guarantee you financial security is because of something called the 4% rule. TL;DR: once this is invested, you can safely take £40,000 a year out of it, if need be. As you’re looking for a career in journalism, having a base income of £40k which you can rely on is going to come in REAL handy.
Congratulations: you’ve been shown to the front of the “FI/RE” queue. (There’s a UK version too.) Now don’t fuck it up!
Your question assumes that you are buying low, and selling high very frequently. Day traders attempt to do this. Algorithms attempt to do this with thousands of trades per day (if not per minute). These strategies require vast amounts of data in order to operate. An individual investor has no hope of buying low and selling high in a fraction of a second to make a profit. Mostly because they cannot afford to spend the time gathering the information.
So how do regular people make a profit on the stock market? The less time you have to spend gathering data, the longer you have to wait to take a profit. Fortunately waiting also means that trading expenses are few and far between. However to make any money on the stock market you MUST spend some time learning. (OR you have to pay someone like me to do that for you, I'm a Registered Representative).
The recommended reading section (to the left of the screen) is a great place to start. Begin at the bottom with Bogleheads Guide, and work you way up to Intelligent Investor. II is a great book, but it's written for people who have taken at least a Financial Accounting class or two. So if you haven't or are unwilling to take a course start with Bogleheads, which is written for just about anyone.
If you don't want to take the time to read all those books (please run screaming from the market now, if you are unable or unwilling to learn about it), I'll sum them up for you in the way that I do with my own clients.
You need two things. A Plan and a Skill. The plan I like to use comes from Jack Bogle via the Bogleheads Guide and Bogleheads.org. The skill is recommended by Dan Sheridan (a commodities trader from the Chicago Exchange). Why a plan and a skill? Well because simply putting your money into VTSMX and letting it sit is doomed to failure. "Fire and Forget" is doomed to fail. There are psychological reasons. Humans are very susceptible to a herd mentality. Which leads to 'buy high, sell low'. There are emotional reason. When the market is tanking it HURTS emotionally. And there are negligence issues. People who dump money into an account are prone to forget about it. VTSMX is a fantastic fund, if you keep your eye on it. It's the worst fund in the world if you're not paying attention.
So what is the Plan? Right out of Jack Bogles playbook, the plan is:
"Take your age in bonds." I know, it sounds ludicrous to suggest to a 25 year old that they should have 25% of their funds in, say, VBMFX and 75% in VTSMX. That's way to conservative, right? They should be in 100% risk, right? Well no.
If you all you have is one position in stocks, you don't get to practice the skill! The Skill is critical and you need a second non-correlated fund. If your investment consists of a single fund, you have nothing to exchange with. There's nothing to practice. You need at least two funds to practice The Skill.
What is The Skill.
The first investing skill that you should learn is called 'rebalancing'. You do it at least once a year (more frequently if you can afford the additional costs, or are doing it in a retirement account). Every year on your birthday, you need to get 1% more conservative (see The Plan). So on that day you evaluate where you stocks and bonds are.
You started by investing 75/25, but over a year they will be completely different. The stock market should outpace the bond market. In a good year you could end up 90/10. In a bad stock market year you could end up 50/50. Regardless on the day you rebalance you sell off enough shares of the fund that is higher then it should be, and buy shares in the fund that is lower then it should be. After this transaction your risk is re-balanced from where ever the market took it, back to what it should be for you.
On your 26th birthday you should be 74/26. By re-balancing you have captured some gains (sold high), and have purchased some under-performers (bought low). Why is this better then say 'letting it ride' on the market? By doing this you prevent yourself from being fully susceptible to the market. 100% stock market position is a gamble. You are also making yourself more conservative over time. You are avoiding the high fee's of Target Return Date Funds. You are forcing yourself to monitor your investments, although not too frequently.
So have a plan. And practice a skill. A good plan that you could start with, but you don't have to, is:
Keep Costs Low (buy index or ETF)
Take your age in bonds
Re-balance at least yearly
Strongly consider doing this in a Tax Deferred retirement account (to keep costs low when you buy/sell/exchange shares)
This is how I make money on the stock market and the bond market, and the commodities market. This is not the only way to make money with investments.
In terms of investing, What Can You Expect From the Market in the Long Run? is a nice post on the buying and holding strategy and why you shouldn't sell in down markets.
Investing can be pretty simple these days. Most of the advice on WhiteCoatInvestor (and for young professionals in general) boils down to the following (often called the 'Boglehead' approach, after Vanguard founder Jack Bogle):
First, do some reading about investing:
Next, familiarize yourself with the Sunk Cost Fallacy:
Ignore everything that has happened until now. Looking at the fundamentals of VALE, would it make sense for you to invest in it? If not, sell & get out. It's very unlikely you'll suddenly see that stock recoup its value. The money you currently have invested will likely provide a better return in index funds.
I would suggest ignoring stock alert newsletters, and focus on sober & patient investing. You gambled your life savings on a crap shot, and it didn't work out. Treat it as a lesson learned.
Go to Vanguard.com and open an individual account (or in your case, a Roth IRA account as well). You'll wire money into this account from your bank, and then you can use their interface to purchase shares in any stock you want.
Do NOT buy individual stocks (like AAPL, GOOG, etc). You CANNOT predict what stocks will go up or down, no matter what the "pros" tell you.
You CAN predict (with reasonable confidence given historical data) that the market as a whole will go up 5-7% annually when averaged over 30 years.
If ONLY you could buy shares in the entire market! Wait. You CAN! With these special kinds of stocks called Index Funds which are themselves a large collection of stocks designed to go up and down with the market.
But the market is still volatile and risky. That's why you should also invest in bonds which are lower risk, but lower yield. Rule of thumb is that you should invest your age as a percentage in bonds (if you're 30, 30% of your portfolio should be in bonds). Reason being you don't want riskiness when you're a couple years away from retirement.
If ONLY there were a type of fund that would AUTOMATICALLY adjust your bond holdings as you age. Wait. There IS! With these special kinds of Index Funds called "Target Retirement Funds". Simply buy into the fund for your retirement year, and the adjustments will happen for you as you age! For example, I plan on retiring in 2050, so I have shares in VFIFX.
Now, you can buy as many shares as you want in an individual account, but when you take the money out, you're going to get taxed significantly on your gains (capital gains tax). You can avoid this tax hit by buying your shares from within a Roth IRA account (as opposed to an individual account). There are a lot of restrictions on these IRA accounts, but when you withdraw money at retirement, it will not be taxed (if it's Roth rather than a Traditional IRA).
Lastly, do yourself a massive favor and read this book 8 times: The Boglehead Guide to Personal Investing. I was just like you last year. I read that book, and hung out here in /r/PF, and now I have a fully-implemented retirement strategy.
Read. All the famous investors started reading at a young age and read ferociously (ok maybe not all but most).
Go to the library if you can, they generally will have all the quality investing tomes, without some of the "get rich quick manuals" which only benefit the authors.
Here is a few books to start with:
I highly recommend The Bogleheads Guide To Investing, it definitely gave me the understanding and confidence of index investing, plus, it's great to lend out to other people when they show interest in the topic.
As for how much of your starting income to set aside, the most important part is just to start it, and automate it.
Read the Bogleheads guide to investing. This honestly should be required reading for all Americans. The Bogleheads' Guide to Investing https://www.amazon.com/dp/0470067365/ref=cm_sw_r_cp_api_i_6tBgDbZ99RCSR
good use of ETFs, bond / equity mix. % of bonds in your age and the rest in equities. Vanguard is great for this, this book is excellent to get a grasp of everything
It helps that I work in a very highly paid industry. I would not be able to save nearly as much as I do otherwise.
I cannot recommend this book enough:
the books reccomended in the faq provide abundant info. Specifically,
"The millionaire next door" -- explains the importance of defensive spending and talks about how fiscal responsibility is passed to your kids depending on your money attitude.
"I will teach you to be rich" is a good general primer.
"The boglehead's guide to investing" introduces all the options out there and explains why investing in low-cost index funds is best for the long run.
edit: "I will teach you to be rich" is a more stimulating read, followed by millionaire, and last is boglehead.
edit 2: Millionaire is more "mindset" with not many practical advice except for its section on how financial responsibility is inherited onto kids
If you want to just save/invest passively: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
For most people (who really don't spend the time to understand companies), I'm totally in support of what I call the Ronco Rotisserie method of investing: Set it and forget it! Buy some low MER ETFs and forget about them.
If you want to invest more actively, I like Peter Lynch's books, classics like The Intelligent Investor. For ideas, I'll look to Morning Star, Valuline, Credit Suisse, etc.
I don't trust sources that generate revenues off of views and/or clicks (CNBC, blogs, etc.). Most visibly, you see the militantly bear cases for Uber/Lyft here or militantly bull cases (at least until recently) for Tesla, which I think is impacted by sources that are looking to generate buzz. Then you go read something like Aswath's blog, Morning Star, or Credit Suisse which has a much more balanced view on the company when compared to MSM.
I like the bogleheads approach to investing:
Forums with specifics can be found here:
Both are amazing.
"Knowing what I do now, if at age 21 I'd had my choice of $2,000,000 or the wisdom to understand the concepts in this book, I'd choose wisdom. "
>Man, this subreddit always makes me feel like garbage.
Don't sweat it. Just by reading this and caring you're ahead of most people. The subreddit will self-select for people who have the time and money to invest.
> 401k up to employer match
> Max out Roth IRA
>* Max out 401k
Even if you only get partially through the second step, you're still doing well. The money you invest now will be worth much much more after growing for a couple decades. The habits you develop now on good saving will be even more valuable. :-)
>That's it. I don't really know the difference between stocks and bonds and I have no idea what any of these acronyms are, but I guess that's why I'm here: to learn.
Here are some good books to learn from-- go check your local library for them or even an earlier version:
Probably the best thing you can do is to educate yourself so you can make really good decisions not just with this $10K but with all your future earnings. Start off with The Bogleheads' Guide to Investing (you can also get it free from the library).
Me too! For a little motivation, check out Mr. Money Mustache and Early Retirement Extreme. For some really good information, check out Get Rich Slowly and The Simple Dollar - both have extensive archives on frugality, saving, investing, and debt repayment. I read all of those every day.
Here are some basics:
Mutual funds are probably your best bet for getting started. Super simple, instant diversification; just set it (monthly contributions), forget it, and let compound interest work. Check out this book: The Bogleheads' Guide to Investing.
If you'd like to do something more active, there's nothing wrong with that, it's just very hard to beat the market. Most professionals can't even do it consistently.
You need to study up. Investing $20 in a book or two won't kill you when you have $1M in investments.
I recommend this http://smile.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365/ref=sr_1_1?ie=UTF8&amp;qid=1398314109&amp;sr=8-1&amp;keywords=bogleheads+guide+to+investing
Then call Vanguard and ask them for assistance. With that kind of money you get free help from a financial planner.
I highly recommend reading "The Bogleheads" as a great introduction to investing.
The Bogleheads are basically a group of people following the investment principles of late Jack Bogle, founder of one of the most successful investment companies, Vanguard.
There's also a remarkable forum/ community over there:
I think everyone should read the Bogleheads books to get a start on their retirement and investment planning. Both are easy to read and spell out the basics.
Please do nothing yet. Please do nothing yet.
I think the other advice in this thread is worthwhile, but I don't think you should follow it YET. There is a great book, the Bogleheads Guide to Investing ( http://smile.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365/ref=sr_1_2?ie=UTF8&amp;qid=1421501534&amp;sr=8-2&amp;keywords=bogleheads+guide+to+investing ) very down to Earth, and there's a chapter on windfalls.
The first piece of advice is DO NOTHING for 6 months. Don't give it away, don't spend it, don't invest it, literally park it and do nothing. For 6 months. That ought to be enough time to give you some breathing room, learn how the money will be disbursed and what any potential tax liabilities are, and time to consider your options. Also gives you time to browse the personal finance section!
The cover is tacky and it was published a little while ago, but I highly, highly, highly recommend: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
The principles in this book are very sound for those of us who do not want to be full-time investors (and who couldn't handle the risk anyway).
Boglehead's Guide to Investing this book is an amazing comprehensive guide to financial markets, saving, spending, bonds, taxes, etc etc. It is a collective thought project by 3 very wealthy investors with nothing to gain but to teach everyday people about money. It is very well written, well thought out, and covers a lot but does a great job of explaining it to financially illiterate people. I would definitely suggest giving this book a read or at least, checking out a few chapters.
Educate yourself before you start blowing money. Go read a book on investing like Bogelhead's Guide. You won't learn anything of value from blowing money on penny stocks, other than not to blow money on penny stocks. Knowledge is power, but you're seeking it in the wrong places.
General Greeting: I'm 34m, engaged, no kids in our plans. Have lived in Orlando for 16 years since college, and have been making websites and working in software engineering since high school. I absolutely love teaching people how to code and lucked into joining Code School (as you would easily discover looking at my post history).
What brought you to /r/fi: After my mom passed away ~11 years ago, I started reading everything I could to understand what to do with the modest inheritance. This led to reading things like The Bogleheads' Guide to Investing, The Millionaire Next Door and eventually MMM which helped refine and shape my view of investing, consumerism and the role of money in my life.
Other hobbies/interests:: I listen to a lot of audiobooks, and challenge myself to read/listen more. Recently started a site (minafi.com) to write about topics different from my day to day -- minimalism, financial independence and mindfulness. It's been fun having another avenue to write about things that are at the top of my mind, and explore something different from programming. Bunch of other common hobbies - CrossFit, board games, cocktails, eating anything and traveling anywhere.
Picture of yourself if you want: Somehow even though I'm crazy open with personal facts, sharing a photo seems quite intimate. I don't think I've done that before on Reddit, but here goes!.
I mean considering the sub reddit https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365.
Converting a 401k to a Roth IRA will trigger tax. So in general it is a bad idea, unless you are in a very low tax bracket today and expect to be taxed higher later in life.
Converting a 401k to a traditional IRA is tax free. But I tend to dislike that also - it increases your "IRA basis" and makes future conversions painful (e.g. backdoor Roth).
Most obvious choice would be to roll over all older 401ks to your current one - but that's only worth it if the current 401k fund choices are better. If you want to do this, please post the fund choices in the 401ks and I can comment on whether a rollover is a good idea.
Easiest option is to do nothing - and that's not a bad idea at $17k in assets. When you get to $50k-100k, read some books, get knowledgeable about investing and make an informed decision.
I really liked Beyond Paycheck to Paycheck for general personal finance and investing. It assumes absolutely no prior knowledge and really walks you through everything from budgeting to saving to investing to estate planning. I'd start here.
I also liked The Bogleheads' Guide to Investing, which is basically a summary of the low-stress, long-term investing style that the company Vanguard has tried to make possible.
As usual, the For Dummies series also has some very good information, and your library will almost certainly have pretty much any title you want from them.
One word: Vanguard (www.vanguard.com)
Resources I've found helpful for learning purposes:
The Boglehead's Guide to Investing (http://www.amazon.com/gp/aw/d/0470067365)
Tip: first thing, do a google search on the power of compound interest and tax-free growth. That should keep you motivated to get going and start saving now.
This is a good answer.
The reason you'll see so much talk about Vanguard funds are because they are ultra low cost and Vanguard is mutually owned. USAA is a great company and I use them for insurance and banking, but I use Vanguard for all my investing because their funds are lower cost.
If I were you I'd move all the retirement accounts to Vanguard as you wont suffer tax consequences for moving them, and consolidate your holdings into a simple 3 or 4 fund portfolio. You have enough money to tilt (or overweight) your portfolio with higher risk/higher returning asset classes (small cap value, emerging markets) and still have access to the lower cost admiral share mutual funds. I'd recommend reading this book and this book to develop a solid investment plan.
OP, if you're interested in learning about investing and finances, I'd recommend picking up The Boglehead's Guide to Investing. It's a pretty easy read and covers a lot of subjects that you probably have questions about. I'll even go back and read it every couple of years to make sure I'm following its principles which encourages low cost index funds.
Feel free not to answer if you don't want to talk about it, but how'd you lose $17850?
In your defense, last week wasn't a particularly good week anyway ... my small portfolio dropped by over 2k
As for the books and stuff, I started by reading this: http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
The amazon description hits the nail on the head:
> The Bogleheads’ Guide to Investing is a slightly irreverent, straightforward guide to investing for everyone.
It's very basic, but a good foundation if you really don't know anything.
Exactly, there is no way her entire balance should be invested in something like this. I second the idea of putting it into a Vanguard Target Retirement Fund immediately. Then once she has more to invest and you have both done some research, you can start branching out into other investments.
Also, if you're interested in learning more, this is the best $15 you'll ever invest: http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
The #1 criterion that always matters: fees. Vanguard is well known for its low fees, and for a corporate structure that incentivizes low fees. They're good people. You could consider their ETFs, which mirror their mutual funds. (Their mutual funds usually have a $3K starting requirement, but the equivalent ETFs have no minimum and can be purchased in small increments.)
Also strongly consider using index funds (which try to match the market by copying it) instead of managed funds (which try to beat it, and usually fail to, especially when fees are taken into account). But even if choosing a managed fund, fees matter and make a big difference to returns.
Other than that it depends on your goals and time horizon. I'd really encourage you to read some guides to investing -- they're usually pretty short, actually. The Bogleheads' Guide to Investing would be a good investment, if your library doesn't have it.
An important note to what /u/satansbuttplug mentioned, you can ONLY invest $5500 in an IRA or your earned income. Which ever is higher. Since you make ~$1k from your job, in all likelihood you only have an earned income of ~1.2k at the most. This limits your contribution to ANY type of IRA to that.
Like /u/satansbuttplug said, it is more important to save than focus on rate of return. Alternatively, like you mentioned OP, you risk tolerance may be high because he wont be crushed if this money loses its value, just remember to stomach to loses and stay in the market. Learn to bear the markets ups and downs with 3K so that later you can keep your 401k and other assets invested during down turns. Market volatility isnt going anywhere.
There is very little black and white, right and wrong in investing, whatever works for you is probably the best approach for you. Most important is making a plan and sticking to it. Head to the school library and read some investing books, this will help guide your decision. A widely recommended book is this book
The Bogleheads Guide to Investing. Now that I can save more with a new job, I thought it was a good idea to get a start on my retirement fund.
It's basically an introduction guide to investing and a type of investing centered around low risk and steady growth over a long time. It's surprisingly not dry yet very informative. I'm hoping to use this book and others to learn how I might be able to retire early. I recommend it to anyone who needs to learn exactly what the core stuff like stocks, bonds, mutual funds, IRAs, annuities, ETFs, etc., are and what you should probably do with them.
No specific recommendations (sorry), but will second the recommendations to use a fee only planner, and use a tool like Mint to track your spending. Since this is something that will pay dividends (heh) for the rest of your life, I'd suggest finding a good book to go over as well. This is my favorite.
I should write a guide about this... the outline is:
0. Don't be American.
Bogleheads Guide to Investing
Yes, nothing with 5% annual returns in the US is low risk. Anyone who is telling you the returns will be 5% is not someone to listen to.
Investing in real estate is a good way to give yourself very little diversity. If you don't mean, "Operate rental property" but mean "speculate on real estate prices", then you're naive to think that you are making better predictions than professional speculators.
Read some books on investing. http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365 might be interesting to you
I consider myself a novice investor (started about 5 years ago), but I would recommend you start reading a few books to be more familiar with types of savings accounts you have access to, types of funds, etc. The Bogleheads' Guide to Investing was the first book I read and found it very essential. It will explain to you why going for individual stocks is difficult and not the best or appropriate way to invest.
I would opt to build an emergency fund first, because it is for unexpected expenses, even if you have food/bills/rent taken care of already. What about medical expenses, other things that happen. And I think a high-yield savings account would be perfect for this purpose (GSBank is my go-to, but there are others).
You sound like you're thinking about this the right way. Your best asset, other than the money, is your ability to live cheaply. To a normal American, $600k isn't enough to do what you want. But for you, it very well could be.
My suggestion is to read this short book first (it's the Bogleheads book):
Check out the bogleheads.org wiki and forum (very helpful people there too), and spend the next few months learning what to do with the money.
Over the years, taxes are going to be important (they can suck away your gains), and inflation is going to be important long-term. So learn how to minimize taxes and protect against inflation.
Most people your age would go aggressive or highly aggressive since the investment is so long-term.
Btw the Bogleheads book you asked about is here
*edit, I hit save thinking it would save a draft, this post is still in progress Done finally
To be as helpful as possible I'm going to break out of ELIF mode:
Since this post got much larger than I expected, I'm going to cover 4 things in detail in this post, in order of importance IMO:
First off, congrats on maxing out your 2013 contribution. It sounds like you are pretty new to investing. I highly recommend that you read The Bogleheads’ Guide to Investing to get a great basic understanding. And although I usually agree with /u/aBoglehead 's advice, I wouldn't move anything around until you take a breath and get a little more information so you actually understand what you are doing
The tl;dr is that if you have extra savings that you don't know what to do with, a good place for them is either a Roth IRA or your 401k. A lot of people your age don't have extra savings due to student loans, which is fine, but I did, and I had no idea what to do with them. They either languished in a savings account or I put them in a taxable investment account (a no-no if you haven't maxed both Roth IRA and 401k contributions) and invested in mutual funds with high expense ratios (meaning they were costing me more than the index funds I should have been investing in). I also didn't know anything about asset allocation, so I invested pretty randomly.
I'd recommend reading Boglehead's Guide to Investing if you still didn't understand most of what I said, because it's a good introduction to investing the way I (and most of the people on this subreddit) do.
Also, good for you - doing max matching is a great start. Now you just need to learn what to do with any extra money you have!
Check out the Bogleheads wiki and forum. http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
A lot of us on here subscribe to the Boglehead's investment philosophy (simple, low-cost, and passive). You can read a forum dedicated to it here:
And I highly recommend this book to get a grasp on the basics and how to implement this plan:
I was in this situation recently and picked up the book The Bogleheads' Guide to Investing
I set up the lazy 3 fund portfolio with vanguard and have been doing that ever since. I like it because it's super simple, and I don't have to think much. Just invest my amount every paycheck and forget about it.
Not really. You're not trying to get 7% every year, rather 7% average growth over a long period of time (assuming you're young-ish, <40). Take a look at https://personal.vanguard.com/us/FundsByName and scroll down to "Target Retirement" line of funds. They all hover around 7% return since inception, give or take a little bit. They start off fairly aggressive 90/10 for stocks/bonds but adjust over time as retirement gets nearer to ~50/50 or so allocation. This is pretty typical, and the longer you're in the market the more average you're going to see.
Keep in mind the market has a 200 year history now, and there's never been a 15 year period that shows negative growth. The chances of a 10 year period giving negative growth is low, around a 4% chance historically speaking. If you're not looking to get-rich-quick on the stock market, or turn a thousand a month into 25 million or some absurd number by the time you retire, then a 7% average return from the market is a reasonable assumption to make over a long period of time.
I just finished reading it, but I've found a lot of great information in the book I referenced the previous post. I'd definitely take a look at it as it specifically tailors to long term investments and safety, not money grabbing and stock chasing which can be inherently risky.
The amount of money a financial adviser would charge would overwhelm the benefit that they could help you achieve. I know of some people who would charge you $500 feel, plus 1% of what they invest.
Why don't you read some books and do it yourself? Int the long run- you will get ahead faster.
Get this book (maybe the library has it).
you can also try r/personalfinance
As far as a frugal & straightforward approach to investing, I prefer the John Bogle approach:
I found this book incredibly comprehensive and useful: http://smile.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
This has been my favorite / most informative read so far.
Why are you only looking to invest for 1-2yrs? This is a fairly short term investment for someone your age and a guaranteed 2.55% isn't terrible, it will probably keep up with inflation.
When looking at investment choices you need to think about how long you want to invest, how much risk you want to take and what type of returns you hope to get. For many people around here they are investing for 10 years plus, looking for low risk and hoping for about 7-10% in returns per year. To get these types of number they are investing in EFT and index funds with low expense ratios.
If you are looking at a managed fund you need to take a close look at their expenses and then calculate how much it will cost to use them. In most cases they end up being much more expensive with no guarantee they will provide enough extra returns to justify the cost.
Ultimately it's your decision so you should spend some time learning a bit more and decided what's best for you. Check out /r/fiaustralia for some tips specific to Australia and read through the side bar here in /r/financialindependence. Maybe buy a book or two and have a read through them. I suggest The Coffeehouse Investor and the Boglehead's Guide to Investing
As always I recommend relaxing for a bit and taking some proper time to learn about investing and find a plan that suits you personally. Good luck :)
There are a lot of resources and book suggestions in the sidebar. For someone young who knows nothing about retirement planning and investing I would personally recommend starting with the Boggleheads Guide to Investing. It does a really good job explaining fees on funds, index funds and how to start investing.
Lots of people will recommend reading Benjamin Graham and while those books are the bible of investing they can be a little hard to follow if you don't have any basic knowledge first.
To address the title of your post as to whether or not this is a reliable and safe way to get into the stock market I'd advise against it.
I can't speak to whether or not this guy is 'reliable' (though I share fcb98292's misgivings about him), but trading on signals (while simple to understand) is somewhat of an advanced level of investing. You still need to decide when to trade. You could blindly follow the advice and do exactly as they say when they say it, but you may run out of money before your performance meets what they claim are their average returns (if ever). It might seem reliable and safe following the advice of an (maybe) expert, but the experience of signal trading can feel very different. There are plenty of ways to appear wealthy and many more ways to make money telling people what to invest in (with little risk to yourself). I can't say that this particular guy is not legitimate, but I've seen my fair share of folks that look like investing gurus but that get their money from those they advise and not the market itself.
If you're interested in getting into investing in a safe and reliable way, I'd recommend starting simple with an index or mutual fund and branching out from those once you feel more comfortable. The Bogglehead's Guide to Investing is a great resource if you're looking to start (though given your links, there may be better resources if you live in the UK). I'd also suggest you visit r/personalfinance for advice when it comes to getting into investing. r/investing may be better if you're more interested in doing more than sitting and holding stocks and bonds. I hope this helps. No matter what you choose to do, best of luck with your adventures in investing.
The target retirement funds are pretty great, especially if you are new to investing and haven't figured out the particulars. You can check out the Bogleheads' wiki or get the Bogleheads' guide to investing if you want to understand simple investing strategies a bit better. I would say that if you want to retire early you should save more than the IRA limits, but if you don't have an employer sponsored 401k, you will need to research the tax-sheltered investment options available to you. Compound interest is pretty awesome; assuming a somewhat conservative long term rate of return at 7% from your two IRAs, you will have over $1 million saved in 30 years, but your contributions will only be about $330 thousand!
What funds do you have available? If you have no Roth option I would definitely only invest up to the match and do a separate Roth IRA.
As for picking funds that consistently beat the market, its a fools errand. Minimize fees and match the market. Here is some reading if you'd like to learn more: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
Dave would tell you to invest in high fee retail mutual funds with a load. That is not good advice.
Don't judge it by it's goofy cover, it's a great place to start if you are trying to learn about investing. You could have it finished by next week and you will know a lot more after that.
You're going to need about 2 million saved/invested if you don't want to eat your seed corn (so to speak) and make that money last another 40 plus years.
You can invest directly with Vanguard, Schwab or Fidelity and avoid the sleazy bankers.
Are you in the military and have a TSP? It is a very good program. If you are working for a private contractor do they have a 401K and you should be investing in a Roth IRA.
I would recommend Four books to get you started:
I like https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
I guess you can stand to lose $500, if worst comes to worst...
Err, I would look at The Boglehead's Guide to Investing, also a website: blog posts about investing. I read many more books, I would advise visiting the library, surfing the web, visiting a book store.
Also read the book. Easy read and pretty damn interesting
Any of the Boglehead books are great.
Congrats! You've done very well for yourself and should be proud! I disagree that you need a financial planner considering how far you have come yourself and what you have learned, I would recommend you do the same with your money.
My recommendation would be to hit the library and reserve this book
There is a forum for bogleheads and the name itself refers to folks who subscribed to index investing which John Bogle sorta kicked off with vanguard. It covers other topics outside of retirement like life insurance and such as well.
You should read the Boglehead's Guide
It lays out the investment path you are on, and it's pretty easy to read.
The NYSE closes at 4pm EST. I think that's 1pm PST.
I recommend reading this book while you safely invest your money in a 6-month municipal bond, CD, or money market account.
After you have finished that book and any others you feel relevant, then invest your money slowly and methodically.
The best advice I can think of:
This stock series really opened my eyes to the investing world, and now I've dived in deeper. I'm currently reading The Bogleheads Guide to Investing and it's also really really interesting.
The main thing I keep trying to tell myself is to not touch it. Buy a few solid things (ETFs for me), and let them sit. I won't get rich overnight, but I don't need the money tomorrow, either.
At your age, it's more important to set good savings habits, avoid debt and 'lifestyle inflation'. Remember, compound interest means that even small amounts you save/invest now will end up being huge by the time you retire.
Bogleheads guide to investing.
Read the stock series on JLCollinsNH's blog too
Well that guy is full of it, but there are a wealth of resources on the subject. For a very conservative but highly effective approach Id suggest a book centered around diversification and index funds.
If you have time read this relatively short book. I recently began investing for my retirement after graduating college and landing a job.
It has some really good information even if you have already begun investing and have happened upon a large sum of money (I think the chapter is titled "how to survive a windfall" or something like that).
Also, do not rush into a decision because it "sounds" like a good idea. It would be wise to even sit down with someone that you trust who has been investing (and doing well) to chat about how best to invest the money. Your father sounds like a good start!
Read this http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
I disagree with you about the accessibility. Podcasts are the perfect way to choose what you want to listen to, instead of the hit-or-miss nature of traditional radio. And sometimes it is easier to pop in headphones than to read an article, like on the bus, while working out, or even in the car (over the car's speakers).
And for the OP, I really like the Dave Ramsey show for basic budgeting and debt management. He can get a little too religious occasionally and sometimes he gets political, but for the most part he has a great common sense approach to handling money. Oh and I would also advice anyone to ignore his investment advice, and instead to look into something like Boglehead's Guide to Investing.
Your best payoff would be to invest the money. The odds are overwhelmingly in your favor when it comes to earning more than 4.75%, plus you can write off the mortgage interest on your taxes. I'm guessing you're in the 25% tax bracket.
Here's how I assess the situation:
I just read The Bogleheads' Guide to Investing, and I couldn't recommend it more for someone just getting started.
Boggleheads guide to investing:
Libro para aprender de investing, recomendado por Yeiner
For the basics of investing in low-fee funds,
read The Boglehead's Guide to Investing. It'll answer most of the questions you ask here, and show you how to build a simple portfolio. The advice runs a bit on the conservative side, but it's easy to see how to adjust it if you want to be a bit more aggressive.
Economics in One Lesson by Henry Hazlitt. I studied economics in college, this is the best introductory book I have come across. Many books on the subject are dry, but Hazlitt is concise and engaging.
I've also read quite a few books on investing. I think more people should take the time to learn basic money management principles. It doesn't take long to learn the basics and, if applied, it can have a big impact on your finances in the long run. Two great books that require no prior knowledge on the subject are: (1) The Bogleheads' Guide to Investing and (2) The Four Pillars of Investing.
Start with a Vanguard or Schwab Target Date fund. Get a good book on investing that focuses on the advantages of index funds and read it. Then decide whether you want to move to a custom portfolio of index funds or just keep the Target Date fund.
Your wife really needs to read jlcollinsnh. Keeping that amount of money in cash is an absolutely terrible idea.
After that, go read The Bogleheads' Guide to Investing.
When I tend to read every related material that I am interested about on the internet, it tends to overwhelm me because the material usually have different perspectives, proposals, approaches, etc. and turns me into a scatterbrain. May want to read a book with a more coherent approach, then go from there.
Of course, picking the right book is critical! I can't say that I've read a lot about personal finance, but I just started reading The Boglehead's Guide to Investing, and it's functioning as a foundation for my personal financial motivations.
Do you hope to stay in the US forever?
If not, where do you expect to end up?
What is your goal for this money?
You say you want a "safe conservative approach but one that's not as bad as the almost zero interest rate i get in this savings account", but due to the current macroeconomic climate, that is prettymuch impossible. Risk is always required for high returns, and currently risk is required for even small meaningful returns.
http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365 is one oft-recommended book for the layperson on investing.
Making that enormous amount of money per time and considering that he probably has already saved a lot, it's really stupid not to dedicate some time to learn about investing. He would get a gigantic extra return for just dedicating some time to studying. Consider how much means to get an extra 5% per year for investing in index funds instead of saving accounts (if he has let's say 5 millions, that already means 250 000 extra per year). Just reading this book may be enough: http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
Here is the desktop version of your link
The Bogleheads' Guide to Investing is a great read for anyone looking to understand the "basics" of investment. It is based on John Bogle's investment strategy, the founder of Vanguard, who is very much a proponent of low cost, low maintenance index funds. If you're looking for something about solely picking individual stocks, day trading, or getting rich quick, this book is not for you. Check out the link below for more information.
I always liked the Bogleheads' Guide to Investing. It's a bit dated but the advice for beginners and intermediate investors is timeless. Kind of like the FAQ here on investing but in more detail and with references. http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
I've actually never read any of the books. My parents work in Finance and my dad spent time with a brokerage for a while so I was kinda instilled with a curiosity for investments from an early age. That said, The Bogleheads Guide to Investing seems to pop up fairly regularly as recommended reading for new investors.
You'll have to re-balance occasionally to keep your 3 fund at the percentages you want. Do yourself a favor and make your first purchase from the windfall. Buy this book, now.
Bogleheads' Guide to Investing is a great entry level read and goes into almost everything someone in your position needs to tackle and will be faced with. I've been investing for 15 years and still go back to that book regularly.
thank you.. I will start my investments by investing in this book
Yea I bought it off of Amazon:
no, it's a book. not very long and easy to read. https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
An individual investor should NEVER invest in single stocks.
Read this and this to understand why.
You should read the Bogleheads' Guide to Investing. You'll probably find out that you don't need a bank to manage your wealth.
Timing the market mainly refers to buying something with the expectation it will change in price fairly soon and you'll be able to sell for profit. Timing the market is a short-term strategy, but as you know, as an investor you should focus on long-term strategy so switching over your 20% to a index now would be a good move. If your company just starting offering index funds and your portfolio already consists of 80% index, I'm assuming you are pretty early on in your investment lifespan so making the switch now is much better than waiting to do it down the road or just leaving the 20% in the managed funds until you retire. Managed funds almost never match the market year after year, which is the appeal of index funds. Also, the lower costs will mean more of your money remains yours and it leaves more available to compound over the years.
I'd recommend this book for you, it's fairly short, but contains a lot of great information for someone newer to investing. I learned a lot from it. A Random Walk Down Wall Street is another one I'd recommend.
A few months ago I didn't really know anything about investing, but after reading those two and The Boglehead's Guide to Investing, I've learned quite a bit and feel pretty comfortable with the investment knowledge I've gained from them.
Before paying someone, spend some time poking around on here. They also have a couple helpful books that sum everything up in layman's terms.
Take $15 and buy this book. Invest the remaining $49,985 in this Vanguard Target Retirement 2050 Fund.
If you head on over to /r/personalfinance, you'll eventually hear about the book The Bogleheads' Guide to Investing.
Many of the people there base a lot of their advice on concepts within that book. It's a great book, and I highly recommend checking it out.
> The second is how, and where, you save it.
Asset allocation is far more important than whether or not you put money in a tax-advantaged account.
80/20 fund is fine for now. Read a couple books and you can adjust as you see fit down the line. The Boglehead's Guide is excellent.
I highly recommend The Bogleheads Guide to Investing and All About Asset Allocation to start with. They are both very understandable and you can read them in one weekend. It's your money and your life so it's worth it to spend a few bucks and an afternoon here and there to learn answers to questions you never even thought of asking before.
>at least half of American households have the majority of their networth in real estate.
Correct. Many/most Americans buy way too much house and are undiversified with a massive illiquid asset on their balance sheet. It costs them money and time to maintain while trapping them in one location and limits employment options. A healthy investment portfolio would have cash, bonds, stock, and some real estate.
Your original post asked specifically about real estate but I'm urging you to consider developing a long term workable plan beyond speculation and rental properties, which IMHO is shortsighted. You and your wife have a real shot at tremendous success because you are young DINKs with good income but you need to broaden your horizons a bit beyond the typical "let's buy real estate" idea.
Te recomiendo este libro. Está pensado para la bolsa de EUA, pero aplica también para México. https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
Yes pay it off. Student loans never go away - pay it off then invest your money to get a decent low cost index fund that easily gets 7% rate of return over the long haul.
Edit: Read Bogleheads' Guide to Investing - either buy it or rent it from your local library