Jin+Guice wrote: ↑Fri Sep 07, 2018 1:44 pm
@Generation-X:
MSK is only saving 30% of his income though right, he spends the other 70%. So he is going with a 100% index investment strategy in invest funds, no? Maybe I'm misremebering or reading it incorrectly?
Finding a direction - What next?
Post by flyby » Wed Nov 22, 2017 10:58 pm
New learner here with basic knowledge, just finishing the Bogelheads Guide and pondering my future of investing, having a difficult time on deciding where to go next. Quick base line on where I am at and what I am doing,
Just turned 29, married with one child. Mostly single income family with my wife’s small supplemental income on the side from a home business (very little now with a newborn at home). We live in a rural and low cost of living part of the country, bringing in a gross 115k household. Currently maxing 2 Roth IRAs, with my employer 401k at 10% total after match. They just opened up a Roth 401k option which I am moving to (Vanguard 2055 funds for now). Current retirement accounts come to 105k. We do have a 6 month emergency fund. We live fairly modestly but love to travel and I have an expensive aviation habit as well that will soak up a good deal of spare fun money. Hence why we keep a very modest home (below 100k) and lower cost vehicles to enjoy the other areas of life. Only debt load is a 11k vehicle note at 2.9% and 38k left on the house. We intend to have no more debt load than that until we decide to upgrade in home, where we will be rid of any other notes and keep mortgage only debt.
I feel I need to be more aggressive in investing and strategy. I am at a point I feel I need to find an edge to get ahead with more creative investing. I however don’t want to dive into something to regret it. There’s a lot of bait out there for people wanting to get ahead. What will this be? Stay the course and keep investing early and often on the course i am already going? Taking a step back and asking the experienced minds....
Re: Finding a direction - What next?
Post by msk » Sat Nov 25, 2017 3:14 am
Too much paralysis by analysis. Just open a brokerage account (Interactive Brokers is my current favorite), fill out all your tax advantaged opportunities, use your surplus savings to purchase VT (Vanguard Total World) and then spend more time analysing and contemplating what next, how to fine tune, 3 ETFs, etc. Pity, you just missed a ludicrously good, irrationally exuberant stock market year (up 20+%!) while awaiting revelation. Revelation ain't coming. Save and invest 30% of after tax income, year in, year out. What you do with the rest does not matter much. I just worked out what you can look forward to, if the next 50 years is similar to the past 50, totally invested in the SP 500 from age 30 and a $50k income:
Mediocre careers with your incomes just keeping up with inflation: you can retire at age 57 with a Net Worth of $2.5 million
Average careers with your incomes rising at 1% p.a. above inflation: you can retire at age 60 with a Net Worth of $3.8 million
Good careers with incomes rising at 2% p.a. above inflation: you can retire at age 64 with a Net Worth of $6.7 million
I define free-to-retire-age at a point when your Net Worth = 25xIncomex0.7 (since you no longer have to save and invest that 30%). It comes later with better careers since your income rises much higher, but in all cases you do not need to drop your standard of living an iota upon retirement. Save and invest 30% of after tax income, today onwards. That's what matters, the rest are just details that you can analyse ad nauseam over the next 3 decades
https://www.bogleheads.org/forum/viewto ... 0#p3633022
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First time investor looking to jump in market but apprehensive with record highs
Post by metfan99 » Tue Nov 21, 2017 9:30 am
Hi all,
I am a new Boglehead. I was tempted to work with a financial planner, but read repeatedly that it would make more financial sense to go at it alone with the infinite wisdom of friends and this board. My wife and I bought our "forever home" and want to enter the market. We stockpiled a good bunch of money (about $360k), and want to prudently enter the market. We are concerned about entering at all-time highs, but obviously want to make our money grow. We both work for the government, and have a young child with expensive day care costs, so we really are counting on that $360k to be our means to grow money, and pay for things like home renovations down the way. Would appreciate any advice on how to proceed with investments. Would dollar cost averaging over a period of time make sense? Below are some details about us. Any advice on asset allocation, any particular stock or bond funds that would make sense,and how much we should enter at a time would be very much appreciated! We also want to build a 529 fund for our daughter, I know everyone says retirement funding is most important, but the college planning is quite important to us too.
- we are both in our mid-30s
- mortgage of $550K (very high property taxes of $21k), 3.5%
- each have approximately $145K in a TSP lifecycle fund, we each contribute $7,800 per year Roth
- $360k currently in a 1.1% money market (want to keep 60k of that for emergency fund but invest the rest)
- $5k in Utah Vanguard 529 plan (contribute $500 per month towards it)
- we want to be able to create long term savings, but also have some accessible money for things like kitchen renovation in next 3-5 years
- for now we could probably save an additional $10k per year, but if we have a second child, we'll break even living off salaries
Thanks so much!
Re: First time investor looking to jump in market but apprehensive with record highs
Post by msk » Tue Nov 21, 2017 10:15 am
I lived by these rules-of-thumb since my student days, retired early at 55, now at 73. Your life trajectory will be different, but these rules did well by me, currently at 8 figures NW:
1. Save and invest 30% of after tax income. Payment of principal on a home mortgage counts, but not interest.
2. Never buy a house worth more than 3x annual income, or 2.5x joint income. You may afford the monthly payments but expensive homes carry expensive maintenance commitments, be it landscaping or air conditioning.
3. Never acquire a car (or cars if multiple), by purchase or lease, worth more than 6 months income.
The most important one is 1. If you practise that diligently you never have to think of when you are jumping in, timing, since your investments in subsequent years will be much larger than your initial buy into the stock market. The stock market is almost always at its highest, so trying to time it is a toss up, with you as the probable loser. If the stock market makes you terribly nervous, perhaps you can repay some of that large mortgage. It'll 'earn' you an interest rate higher than bonds, and unless you have been very unlucky in choosing your home, its value ought to keep up with inflation, perhaps even rise beyond that, possibly even well beyond inflation in a HCOL area. IMHO there is no such thing as a forever home in your 30s. If you satisfy 1. above you will almost certainly be much wealthier in your late 40s than you are now, and probably will wish to upgrade... Anyway, I have always considered paying off the mortgage on my home as a high priority, if only for the feeling of security. Keeping a lot of cash aside for possible renovations, etc. is IMHO a waste of investment time. Fund the renovations from next year's 30% savings, or the following years'...
https://www.bogleheads.org/forum/viewtopic.php?t=232788
The act of investing is a risk. The longer one stays in the market, the higher the risk.
There is no guarantee of an investment return.
Therefore, one limits the risk by risking only the amount that one can afford to lose. What worked for MSK was 30% of his after tax income. He still kept 70% of his after tax income.
So MSK's play book is a limited risk, leveraged gain attempt at investing that does not take too much time and is pretty much on auto pilot.
It relies on historical observation that on the average, the market moves up more than it moves down, and given long enough time (>30 years), generally comes out ahead.
What it does require is a long exposure to market risk (> 30 years) and consistency (30% after tax income contributed year in year out).
To quote MSK: "Save and invest 30% of after tax income, today onwards. That's what matters, the rest are just details that you can analyse ad nauseam over the next 3 decades "
*** Note that currently, the stock market is highest it has ever been in history. Everyone knows it will fall some time. But what no one can tell you, is WHEN, BY HOW MUCH and WHEN WILL IT BOUNCE BACK AGAIN after falling. Because no one knows the future.
Why bet the farm? Investing is a risk. There is no guarantee of an investment return. What MSK has supposedly experienced is that, for him, risking just 30% of his after tax income each year, year in and year out and staying invested for 50 years has worked out for him.
Time is your greatest asset. Be consistent and be patient with an investment horizon that's > 30 years. Risk what you can afford to lose.
IMHO, it takes a life time to get a sense of investing in the stock market (and then some). The books listed are textbooks for undergraduate course in finance and the like and will provide the basics.
Best way to learn is by doing - there is nothing like experience.
Problem is, it will be a full time job. And experience costs money because mistakes usually mean losing money. One may experience losses for years before becoming profitable.
There are additional skills that one must be competent in than just buying or selling stocks in order to make investment profitable. In addition to ample hours spent in research and analysis, being able to manage money, taking risks and controlling emotions will be critical - not something one learns by taking classes in college nor can they be learned overnight. You will meet yourself in the process.
You will also become intimate with IRS rules and filing taxes - because they affect investment returns. By the time you get this far, you will probably know most, if not all, of the stock tickers listed in the s&p500.
And before you can do any of these things, first you must learn to become a saver and have enough cash to invest with. Else have a stable income that provides enough spare cash after living expenses. After all, investing is an act of forgoing and delaying present consumption and taking chances for possible future gains.
It will be a lot of work. No guarantee that success will be proportional to time spent in the process. There is a reason why index investing is advocated for most people.
Are you truly prepared for this?