In-law advice?

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Catfish Plumber
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In-law advice?

Post by Catfish Plumber » Tue Mar 06, 2018 10:13 pm

DW: I was just talking to my sister. She has $10,000 in the bank! I told her she should open a Roth! And talk to you! You love talking about saving money! She’s coming to visit next week.

Me: :shock: ... yeah.


I’ve been studying personal finance and investing for years and I know nothing. What advice can I give to a younger in-law starting out?


Current thoughts on possibilities:

Explicitly state I am willing to share what I’ve learned and what I do in general but I can’t recommend or not recommend buying stocks/bonds/gold/real estate/whatever. A person’s decisions especially with their own money are their own.

Cover knowing your own total spending/expenses first.

Use the line “Finances are 20% math and 80% habits!”

Briefly talk about 4% rule study now that we have a spending baseline.

Explain 3 fund portfolio and reasoning.

Talk about Vanguard Life Strategy and Target Retirement Funds as low cost, easy options.

Discuss different types of tax advantaged accounts.

Give them a link to the Bogleheads getting started page.

Give them a link to the If a Millenial Can Save 15% PDF.

Let them drive the discussions with questions.

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Watty
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Re: In-law advice?

Post by Watty » Tue Mar 06, 2018 10:37 pm

Catfish Plumber wrote:
Tue Mar 06, 2018 10:13 pm
I’ve been studying personal finance and investing for years and I know nothing. What advice can I give to a younger in-law starting out?
You might give her a copy of the Bogleheads Guide to Investing book for her to read. I gave copies to my three grown nieces and nephews a few years back for Christmas and at least one of them picked up on some of the main points.

https://www.amazon.com/s/?search-alias= ... Bogleheads

Having $10K in the bank is not necessarily a bad idea since that could be her emergency fund or she could be planning to use it for something like buying a car in a few years. If she is likely to move anytime soon then she might also need the money for costs of getting into her next apartment.

It is even possible that she might be able to teach you a thing or two. :D
Last edited by Watty on Wed Mar 07, 2018 10:55 am, edited 3 times in total.

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StevieG72
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Re: In-law advice?

Post by StevieG72 » Tue Mar 06, 2018 10:38 pm

Sounds like you have a good plan.

Good idea to not recommend any specifics.

I had a friend that had his brother in law invest $10,000 just prior to 2008. Stocks tanked, he sold at the bottom and told the whole family about his loss blaming it on the brother in law.
Fools think their own way is right, but the wise listen to others.

texasdiver
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Re: In-law advice?

Post by texasdiver » Tue Mar 06, 2018 10:47 pm

Life strategy or target retirement funds if looking for long-term investments.

Reason being, you can sell it as being the asset allocation recommendations of Vanguard's top professional staff (as opposed to your own personal recommendations).

When my brother asked me the same question I was able to say "I don't really know THAT much about investing and especially how to divide up and allocate money. So I just let the professionals at Vanguard make those decisions for me...the best company around for that sort of thing.

Nothing really to come back to bite me with that sort of advice. And it has the advantage of being pretty good too.

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Sandtrap
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Re: In-law advice?

Post by Sandtrap » Tue Mar 06, 2018 10:51 pm

You are between a "rock" and a "hard place".
If you give advice and it is even partially followed and yields less than optimal results, you may be judged.
If you don't give advice, you will be judged.
If you give great advice and have great results, then you get to do more.

How about a copy of "Little Book on Common Sense Investing" and an email link to the "Bogle library" and forum?
That said,
1
Logical "common sense" suggestions and a variety of options, without specifics, and with nor pressure to conform or comply.
2
Have an "exit strategy".

j :D

delamer
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Re: In-law advice?

Post by delamer » Tue Mar 06, 2018 10:55 pm

If your SIL is pretty young, you could give her this Bernstein paper:

http://www.etf.com/docs/IfYouCan.pdf

Catfish Plumber
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Re: In-law advice?

Post by Catfish Plumber » Tue Mar 06, 2018 11:00 pm

Thanks, everyone!

I’ll probably just end up reading her this thread!

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Cyclesafe
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Re: In-law advice?

Post by Cyclesafe » Wed Mar 07, 2018 12:19 am

DANGER WILL ROBINSON!!!

There is no win here for you. The best you can offer is the blandest asset allocation speech you can muster, that you know nothing about the future (and nor does anybody else), and that low cost index funds offer slightly less than market returns, but that she should build a one year emergency fund and pay off all her debts before investing anything. You will have done your duty, done no harm, and dodged a great big bullet. And she will do what she is going to do.

I have been asked for financial advice three times from my relatives. The first time, my FIL did exactly what I told him NOT to do and he did very well. The second time, I tried to get my BIL to diversify away from his 100% equity position in the company he worked for, he didn't, the market tanked and his company increased 30%. And the third time I told my nephew to pay down his mortgage: he thought I was crazy. RUN!!!

Nate79
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Re: In-law advice?

Post by Nate79 » Wed Mar 07, 2018 1:02 am

Start by discussing Swedroe's asset allocation to small cap value and treasury bonds to reduce tail risk but that some people just tilt to small cap value. Then discuss international allocation and emerging markets and what category she thinks South Korea should fall under. Then get into the reason to hold bonds, age in bonds, and get into duration risk. Perhaps CDs would be better fixed income but you have future inflation risk but have to watch those early redemption fees. But also depends on what the feds do with interest rates. Finally, discuss the various withdrawal methods, 4% or variable withdrawal rates.

Or not.....

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AtlasShrugged?
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Re: In-law advice?

Post by AtlasShrugged? » Wed Mar 07, 2018 6:56 am

Catfish.....My advice is going to sound contrarian. It is not. Embrace it.

Give your in-law a copy of If You Can. Tell your in-law to read it. You might then want to talk briefly about the advantages of starting to invest early (e.g. Compound interest is the eighth wonder of the world). Then I would tell this in-law the greatest threat to their investment is the face staring back at them in the mirror every morning. Stay the course, and master the impulse to 'do something'.

If you are pressed for a specific recommendation, you might suggest a Total Stock Market fund (FSTVX?) for long-term investing.

The point is: Engage. Teach. Mentor. Educate. Encourage.
“If you don't know, the thing to do is not to get scared, but to learn.”

Jack FFR1846
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Re: In-law advice?

Post by Jack FFR1846 » Wed Mar 07, 2018 7:18 am

Tell her to live below her means and to invest in a diversified portfolio of low cost index funds at an allocation appropriate for her risk tolerance and future needs.

Her eyes will glaze over and she'll never bother you about this again.
Bogle: Smart Beta is stupid

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oldcomputerguy
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Re: In-law advice?

Post by oldcomputerguy » Wed Mar 07, 2018 7:33 am

Point her to a copy of William Bernstein's "If You Can". Once she reads that, if she's still wanting advice, give her a copy of the Bogleheads' Guide to Investing.

If she's still wanting more, send her here.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

dkturner
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Re: In-law advice?

Post by dkturner » Wed Mar 07, 2018 8:21 am

If you give an inlaw advice and it turns out to be good advice she’ll forget about who counseled her - she will eventually think it was her idea. OTOH if your advice doesn’t work out to her satisfaction she’ll always remember you, and your poor advice.

jm1495
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Re: In-law advice?

Post by jm1495 » Wed Mar 07, 2018 8:31 am

There's a mantra that I like to follow in situations like this and it is to "Mind your side of the street" If she asks you can talk to her about what you do and why you do it. If she's really interested then about the resources that you used to form your opinions. If she takes something from it and benefits from it then that is her responsibility to manager her money the way she sees fit.

tibbitts
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Re: In-law advice?

Post by tibbitts » Wed Mar 07, 2018 8:37 am

From her perspective, the best advice would probably be to move in with you to save money on rent.

Catfish Plumber
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Re: In-law advice?

Post by Catfish Plumber » Wed Mar 07, 2018 11:30 am

More great suggestions ... and the jokes are cracking me up!

My sister-in-law just bought her first (and likely forever!) house, so moving in with us (again :>) is out.

I’m pretty sure I’ll need to start simple and then plan for going into more detail in the future if she asks. I think at this point focusing on living below your means and how the amount you live below your means greatly affects your savings over time should be the main topic.

I think she is absolutely going in a good direction and I do want to help ... but without souring future relationships.

Dottie57
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Re: In-law advice?

Post by Dottie57 » Wed Mar 07, 2018 11:36 am

delamer wrote:
Tue Mar 06, 2018 10:55 pm
If your SIL is pretty young, you could give her this Bernstein paper:

http://www.etf.com/docs/IfYouCan.pdf

+1

This is good for any age.

hilink73
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Re: In-law advice?

Post by hilink73 » Wed Mar 07, 2018 1:56 pm

Nate79 wrote:
Wed Mar 07, 2018 1:02 am
Start by discussing Swedroe's asset allocation to small cap value and treasury bonds to reduce tail risk but that some people just tilt to small cap value. Then discuss international allocation and emerging markets and what category she thinks South Korea should fall under. Then get into the reason to hold bonds, age in bonds, and get into duration risk. Perhaps CDs would be better fixed income but you have future inflation risk but have to watch those early redemption fees. But also depends on what the feds do with interest rates. Finally, discuss the various withdrawal methods, 4% or variable withdrawal rates.
So much this!

:-D

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Raymond
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Re: In-law advice?

Post by Raymond » Wed Mar 07, 2018 2:08 pm

Just hope both your wife and her sister have such a great time visiting with each other that they forget to ask you about financial advice :happy

If your SIL does ask, just point her towards the already-mentioned "If You Can" and the Bogleheads guide.

Then yell, "Who wants to go out for ice cream?!" and run out to the car.
"Ritter, Tod und Teufel"

alex_686
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Re: In-law advice?

Post by alex_686 » Wed Mar 07, 2018 2:16 pm

Catfish Plumber wrote:
Tue Mar 06, 2018 10:13 pm
I’ve been studying personal finance and investing for years and I know nothing. What advice can I give to a younger in-law starting out?
I would actually start by skipping most of the advice you have given. I would start by asking questions, then listening. What does she want to learn. What are you goals? What is your risk tolerance? Then encourage her to start filling out a IPS. You can't figure out a asset allocation until you cover goals and risk tolerance. This is all dull as dishwater but it is the place to start.

Zero Alpha
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Re: In-law advice?

Post by Zero Alpha » Wed Mar 07, 2018 2:52 pm

I generally recommend the If You Can PDF and reading the Bogleheads.org wiki or watching the videos. I have also given the Bogleheads Guide to Investing as a gift. I don't think it has had much of an effect on anyone yet. People generally have little interest in talking about investing unless it is Bitcoin. Evangelizing can be difficult.

Khanmots
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Re: In-law advice?

Post by Khanmots » Wed Mar 07, 2018 2:54 pm

Discussions I've had with various people I focus on:
1) The importance of compounding and investing early
2) That they don't have better information and analysis tools than the army of analysts out there working as parts of large teams with huge amounts of computing power. Don't try to day-trade or play with individual stocks/options/whatnot, you're not on an even playing field.
3) You can't predict which funds/managers are going to outperform, studies show that (with the exception of really BAD ones), it's random luck from year to year on who beats the average. You can't ID the "good" ones until afterwards.
4) Focus on what you can control. Reducing costs and taxes while investing in the market as a whole (so you get that army of analysts working for you for free)
5) Manage your risk!
6) Discuss the importance of diversification
7) Importance of staying the course. Give them stats regarding individual investors earning FAR less than the market as a whole over the decades because they hop in and out as they get nervous/scared.

I'll also suggest they read a lot of the books and guides others have mentioned.

Then I offer to let them bounce ideas off of you, serve as a smart search engine for them as they have questions, and help handhold through setting things up once they've made their decisions. And leave it up to them to engage me or not.

Don't try to push them in making any specific decision. Most I'd do on that line is if they ask for feedback on decision Y that you internally think is a mistake, ask if they considered X when making it. If they say yes, leave it lie.

spencer99
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Re: In-law advice?

Post by spencer99 » Wed Mar 07, 2018 3:36 pm

I used the outline below when asked to speak to a young relative. I kept things very general but volunteered to send background/reference material should he want more detail.

1. Live below your means
2. No debt except a mortgage
3. Emergency fund
4. Save for the near-term – wants (be your own bank)
5. Save for the long-term (retirement)
6. Invest long-term savings
7. Invest tax deferred (maybe some Roth, but know why)
8. Diversify investments (and know what effective diversification is)
9. Lowest cost investments (typically index funds)
10. Neither too much nor too little risk (asset allocation)
11. Simplicity (investment vehicles, accounts)
12. Stay the course (stick with your plan through thick and thin)

mouses
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Re: In-law advice?

Post by mouses » Wed Mar 07, 2018 3:45 pm

She's just bought a house (by herself, presumably, no mention of a DH or partner) and she has $10K tucked away, I don't think she needs your advice. Unless there are credit card debts or somesuch. It sounds like she's also saving, to have come up with the down payment.

$10,000 sounds like the start of an emergency fund, esp. given house maintenance items, not an investable amount.

I'm actually a little worried that your DW's instant reaction that $10k is money that should be tossed at risky investments instead of being an emergency fund.

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abuss368
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Re: In-law advice?

Post by abuss368 » Wed Mar 07, 2018 4:38 pm

Consider buying them a copy of any of The Bogleheads books and also Jack Bogle's "The Little Book of Common Sense Investing". Jack Brennan's "Straight Talk on Investing" is an excellent choice as well.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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