Hi I'm new and need to learn about investing

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Randy
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Hi I'm new and need to learn about investing

Post by Randy » Mon Mar 05, 2018 9:32 am

Hi all,

I've found ERE just less than a week ago so I'm still all warm and fuzzy that there are so many people (and well thought out strategies from these people) dedicated to living life outside of consumerism and a 9-5 job. I've only had an income for about two years now and I've been saving about 50% of it without much effort because it vaguely seemed like A Good Thing To Do, so I'm excited to see what I accomplish once I actually start tracking my spending.

But right now my most urgent topic I'd like to tackle is learning about investing. Dipping my toe into the water is what led me to ERE in the first place (it was the second book I read, after somewhat haphazardly choosing The Simple Path to Wealth by JLColins first). I need to learn what to do with my savings to make it sustainable. That being said, I'd be very happy for recommendations on Investing 101. Ideally I would like to find a general overview of different strategies condensed into one book, and then I can go into more detail based on the strategies I'm interested in. Also as a disclaimer, investment strategies is not a topic I consider myself naturally drawn to. I'm learning more out of the desire to have freedom in my lifestyle.

I hope it's okay to ask for recommendations on my introductory post :)

Happy to meet y'all!

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daylen
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Re: Hi I'm new and need to learn about investing

Post by daylen » Mon Mar 05, 2018 11:14 am

First off, investing shouldn't be an urgent topic. Investing rewards the patient, so I recommend taking it slow while you learn more about potential contingencies.

Randy
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Re: Hi I'm new and need to learn about investing

Post by Randy » Mon Mar 05, 2018 11:44 am

You’re right, poor phrasing on my part. I have no intentions on jumping into anything except learning

wolf
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Re: Hi I'm new and need to learn about investing

Post by wolf » Mon Mar 05, 2018 12:10 pm

Welcome Randy!

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plantingourpennies
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Re: Hi I'm new and need to learn about investing

Post by plantingourpennies » Thu Mar 08, 2018 1:36 pm

Randy wrote:
Mon Mar 05, 2018 9:32 am
But right now my most urgent topic I'd like to tackle is learning about investing....Ideally I would like to find a general overview of different strategies condensed into one book, and then I can go into more detail based on the strategies I'm interested in.
Welcome Randy!

I'm not sure there one one book that contains the overview that you're looking for. Here is how I see the investment landscape addressed most frequently on different FIRE forums/blogs. Don't forget, what actually gets you to FIRE is your savings rate, not your investing acumen.

Low cost index funds-This is the approach popularized by John Bogle through books like "Little book of common sense investing" and through forums like Bogleheads. Many FIRE bloggers use this method, including MMM. Rules of thumb are to keep costs low, buy the market, and rebalance asset classes when required.

Dividend investing This is an approach that seemed to be more popular directly after the 2008 crisis, but is still around. This method targets companies with attractive dividend yields that are unlikely to be cut in another downturn.

Value Investing- This is a form of stock picking that was popularized by Benjamin Graham and also formed the early backbone of Buffett's strategy. It relies on purchasing companies (possibly those who are undergoing some sort of stress or bad publicity) whose stock is trading at a very low multiple of their earnings (p/e ratio). The downside is that sometimes these companies are pretty marginal, any the stock price may never recover, or may simply go to zero. It's like picking up a cigar butt on the sidewalk-you might only get one more puff, but the price was right!

Real Estate- There are many different styles here. You can invest in income producing properties (sometimes in marginal neighborhoods, or in the midwest) and live on the rent checks, but you can also buy foreclosures in up and coming areas and try to flip them. If you like Real Estate as an asset class but don't like sweat equity then REITs may be an option for you. Real Estate investing can be very local in nature.

Exotics/Niche- These systems tend to be focused on one or two asset classes, or are created from a specific world view ("The world is running out of Oil, so a barrel will be worth $1,000 in 2022" or "Fiat money inevitably leads to collapse, so it's best to invest in precious metals or crypto currencies.")

I'm sure some forum members will be along to improve my explanations-hope this helps in the meantime!

SavingWithBabies
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Re: Hi I'm new and need to learn about investing

Post by SavingWithBabies » Thu Mar 08, 2018 5:11 pm

From Jacob: A startup curriculum for finance, economics, and investing. Read the comments on that page for a suggested order to read them in and/or more details.

A lot of ERE/FI inclined people are in the index fund approach. I count myself among them mostly because I'm in the same boat as you -- I don't know enough about investing to be comfortable to go out on my own with the majority of my holdings. But that approach has some here and in other places worried. Think about it -- those of us practicing this with our 401ks and/or post-tax monies are regularly dumping money into the market. That is/has/will shape the market and alter it. Perhaps this approach is one reason that the market seems so overvalued -- that money has to be invested somewhere and there is an awful lot pouring in every month. I do take the warnings to heart but I don't know what to do about it yet.
Last edited by SavingWithBabies on Thu Mar 08, 2018 5:33 pm, edited 1 time in total.

sky
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Re: Hi I'm new and need to learn about investing

Post by sky » Thu Mar 08, 2018 5:31 pm

I used target retirement funds to successfully retire early. I found that my own efforts to pick stocks did not do as well. It simplifies things quite a bit.


https://investor.vanguard.com/mutual-fu ... etirement/#/

jacob
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Re: Hi I'm new and need to learn about investing

Post by jacob » Fri Mar 09, 2018 2:38 pm

To add to what PoP said, there's also

High cost mutual funds- Everybody hates these these days. They used to comprise most of the market and thus one could easily prove (by definition) that the average minus high fees did worse than the average (an index fund by construction) minus a low fee. Out of all of them some did better than average and some did worse. However, it was not trivial to figure out which ones were what in advance. These days, index funds are probably over half the market (last number I have for sure is 42% from 2016 ... but indexing has grown rapidly in popularity from under 10% in 2009). Key here is to find a manager that has their customers interest in mind (principal agent problem) and not their personal yachts. This requires one to understand (and agree with) the investment philosophy of the manager.

Asset Allocation- @Tyler9000 is the guru here and he has his own website too. This idea is under the theory that while individual asset classes are efficiently priced internally (you can't value or time an individual stock or bond) they're not efficiently priced externally (you can value or time a whole asset class). [Insert hand-waving and mumble something about "risk-adjustment"]. Hence, it can be implemented by trading^H^H^H^H..rebalancing ETFs. So this strategy is about selecting the right mix of e.g. US stock, Int. stock, bonds, gold, real estate, ... The Permanent Portfolio is a classic method. So are balanced funds---the old rule of thumb about bond%=100-your age. I hear the optimists have moved that up to 120-age.

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Tyler9000
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Re: Hi I'm new and need to learn about investing

Post by Tyler9000 » Fri Mar 09, 2018 4:14 pm

jacob wrote:
Fri Mar 09, 2018 2:38 pm
Asset Allocation- @Tyler9000 is the guru here and he has his own website too. This idea is under the theory that while individual asset classes are efficiently priced internally (you can't value or time an individual stock or bond) they're not efficiently priced externally (you can value or time a whole asset class).
Unless you're playing with momentum strategies, I personally don't see asset allocation as timing asset classes. I prefer to think of it as diversifying your markets and capturing natural macro-level cash flows between asset types with minimum effort.

Here's the site Jacob mentioned. https://portfoliocharts.com/. If you're just starting to learn about investing and want to know more about asset allocation as an option, I recommend starting here: https://portfoliocharts.com/portfolio/basic-concepts/. Alternatively, you might try browsing the portfolio options and reading a few supporting books.

slowtraveler
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Re: Hi I'm new and need to learn about investing

Post by slowtraveler » Fri Mar 09, 2018 10:09 pm

There's also investing in great businesses at a fair price. The method Warren Buffet used to make most of his money. Charlie Munger talks about it in his book, Poor Charlie's Almanac.

Bogleheads is one school of thought likely to work out well if you have a balanced portfolio.

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FBeyer
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Re: Hi I'm new and need to learn about investing

Post by FBeyer » Sat Mar 10, 2018 2:11 am

Randy wrote:
Mon Mar 05, 2018 9:32 am
Hi all,
... I need to learn what to do with my savings to make it sustainable...
Then develop the right skillset and mindset. Investing exists as a subset of the skillset, but it's the one aspect that is the easiest to get lost in, and so 'newbies' tend to overfocus on the investing part, and not nearly enough on the antifragility/robustness/systems thinking/philosophy part, which is actually where the sustainability comes from.

Take my word for it. Getting better at investing is NOT the 20 percent of the 20/80 rule. Not yet.

So take it easy. Stash away some pennies, and declutter your house, find a cheap place to live, and restructure your existence first. :mrgreen:

Randy
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Re: Hi I'm new and need to learn about investing

Post by Randy » Sun Mar 11, 2018 5:54 am

Thanks for all the replies guys! This is plenty of information for me to start off with. On first glance I’m leaning toward dividend investments or real estate since these create some income instead of only growing over time.

@Tyler9000, I’ve visited your portfolio charts website and found it to be a helpful source, but currently a lot of it goes over my head. I’m sure I’ll be visiting it as I continue to learn

I plan on starting a journal soon once I get a little more organized :)

Jason
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Re: Hi I'm new and need to learn about investing

Post by Jason » Sun Mar 11, 2018 7:44 am

When I first started investing, I was bukkaked by the retail investing rolex watch wearing crew. However, they still made me money, just not as much as I would have if I kept it simple and did indexing or something of that nature. This point lends itself to the idea that saving is the engine and its just a matter of you becoming a better driver during your travels.

dropoutretire
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Re: Hi I'm new and need to learn about investing

Post by dropoutretire » Fri Mar 23, 2018 12:17 pm

Randy wrote:
Mon Mar 05, 2018 9:32 am
Hello, 1st question do you have any debt ? If so I would tackle that and then invest later. The power of focus is an amazing thing.

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