- New investor here - Willing to help out with a quick Q ??

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tpm871
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Re: - New investor here - Willing to help out with a quick Q

Post by tpm871 » Sun Nov 20, 2011 10:20 am

I'd suggest thinking about investing differently. Most people tend to think about investing kind of like playing the lottery: "If only I pick the right number [investment] at the right time, I'll do very well." In doing so, you're betting on only one possible future (e.g., a bull market for stocks). I think the key to rational investing is to consider the possibilities of all possible futures, and have a mix of investments that do well under different circumstances.

One example of this is the Harry Brown Permanent Portfolio. While I don't personally invest in this particular approach, I agree with its philosophy: invest in assets that each do well under different conditions. The portfolio consists of 25% stocks, 25% gold, 25% bonds, and 25% cash (others have proposed variations on these). The market tends to go through cycles -- this portfolio would cover an investor in times of prosperity (stocks), inflation (gold), deflation (bonds), and recession (cash). At any given time, at least one of these is likely to do much better than the others. You then can rebalance among these, selling high and buying low each time you rebalance.

Now I'm not necessarily recommending the Permanent Portfolio specifically -- like I said, I don't personally use it. But I think it makes sense to consider different risk factors of the future, and to invest a portion of your money in things that do well under each of those risk conditions. For example:

risk: stock market crash
does well: treasury bonds

risk: weakening dollar
does well: international investments

risk: inflation
does well: inflation protected securities

risk: deflation
does well: long term bonds

A key point is to accept that you can't predict the future, so anytime is as good as any to start investing as long as you are properly diversified. You should stay the course with the asset allocation that you choose regardless of what you think is most likely to happen, because you'll frequently be wrong. The market changes too rapidly to wait for confirmation before taking action.

However, be aware that in doing so you are trading the possibility of a winning lottery ticket for a slow and steady investment return.

retiredjg
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Sun Nov 20, 2011 10:56 am

Very nicely said, tpm871. :D

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Nov 20, 2011 1:42 pm

Instead of quoting 3 more posts, Paul, RetiredJG and tpm871 thank you all very much.

Just about every post I read of yours something new makes sense to me and I understand it better. Thanks!


Well... I am excited to get in. Will probably diversify a little more than previously thought, and put some in IRA's as well. Thanks fellas
Started investing around 21, joined Bogleheads at 23.

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Thu Nov 24, 2011 5:50 pm

Things are not looking very good at all...

http://money.msn.com/investment-advice/ ... 2fa8d6d198
Started investing around 21, joined Bogleheads at 23.

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bearwolf
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Re: - New investor here - Willing to help out with a quick Q

Post by bearwolf » Thu Nov 24, 2011 6:28 pm

MasonSS wrote:Things are not looking very good at all...

http://money.msn.com/investment-advice/ ... 2fa8d6d198
One thing to keep in mind is that things can turn around very quickly. Once politicians finally decide to make the right move sentiment can change and markets shoot up and you miss the upswing. A reasonable approach is to start with a balanced portfolio, 50% stocks 50% bonds. Add to your portfolio each month. If there is bad news you will buy more stocks if there is good news you will buy more bonds. Just keep your portfolio in balance 50/50. Yes things will probably get worse, then they will get better. You have at least 60 years of an investment horizon and what you do this year and next year won't make much difference. The important thing is to get in, start investing. Learn how the market works while your balances are low. Discover what your risk tolerance is. If the market crashes 60% next week and you just bought in this week see how you feel about it. That is when you really know what your risk tolerance is. But remember to make your monthly contribution. Remember stocks are now cheaper (after the 60% crash) guess what, everything is now on sale. When the market recovers in 1 or 2 or 5 years the shares you bought after the crash will be very valuable. Remember you're in it for the long haul 20+ years.

Bearwolf

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dave66
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Re: - New investor here - Willing to help out with a quick Q

Post by dave66 » Thu Nov 24, 2011 7:36 pm

"There's so much bad news going around, it's hard to know where to start."


The part they forget to mention is that, THEY are the ones spreading most of that bad news around. lol

Things aren't great, but don't forget that the media usually multiplies on that by a factor of 5x.

retiredjg
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Thu Nov 24, 2011 7:53 pm

MasonSS wrote:Things are not looking very good at all...
Mason, I think this has been said before, but you are not yet understanding. You need to stop following the financial press. Just stop. Period.

You seem to be convinced that the sky is going to fall and you keep finding "news" articles that support that notion. Then you are more convinced the sky is going to fall and you are unable to make a plan or put it into action. You've got to stop this vicious cycle and the only way to stop is to stop reading that stuff. Financial TV too. Especially CNN. Replace all that "financial porn" with some reading from our reading list. You'll feel much better for it.

There are good days and bad days. Good weeks and bad weeks. Good years and bad years. Good decades and bad decades. That's just the way it is. That is the way it has always been. You cannot wait till everything is rosy. All this sitting on the fence is just driving you nuts. You need to invest or decide not to invest and get on with life.

If you are not going to invest, you need to start some mighty serious saving. It is difficult to save enough for retirement without investing, but some people do it. If that is what would make you comfortable, do it.

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Thu Nov 24, 2011 10:42 pm

retiredjg wrote:
MasonSS wrote:Things are not looking very good at all...
Mason, I think this has been said before, but you are not yet understanding. You need to stop following the financial press. Just stop. Period.

You seem to be convinced that the sky is going to fall and you keep finding "news" articles that support that notion. Then you are more convinced the sky is going to fall and you are unable to make a plan or put it into action. You've got to stop this vicious cycle and the only way to stop is to stop reading that stuff. Financial TV too. Especially CNN. Replace all that "financial porn" with some reading from our reading list. You'll feel much better for it.

There are good days and bad days. Good weeks and bad weeks. Good years and bad years. Good decades and bad decades. That's just the way it is. That is the way it has always been. You cannot wait till everything is rosy. All this sitting on the fence is just driving you nuts. You need to invest or decide not to invest and get on with life.

If you are not going to invest, you need to start some mighty serious saving. It is difficult to save enough for retirement without investing, but some people do it. If that is what would make you comfortable, do it.
Naturally wanted to get defensive but... I probably shouldn't. You are probably right.

Just so you know my thoughts... I know there are always ups.. downs... big ups, big downs, but with the entire worlds economy threatened like this, I mean this isn't normal news. Our country has never had debt like this before. Never. So times now can not be compared to the past (imo.. again im probably being foolish) but seems to me like our issues right now are more serious and different than the world has experienced. I 100% expect things to get better, but with the EU collapsing, with our congress approval rating at 9%, with our credit about to be downgraded AGAIN (it's going to happen) with more extreme debt than we have ever had.. with Iran, not normal issues that tend to always happen but new threats. With most of Europe in trouble.. I feel like we are not "one good political decision" from being saved and good.. I feel like we are facing some issues now that this country has not faced before. Real, big issues.

I am 100% against doomsday-ers, and not one of them, I know things WILL improve BUT with everything going on right now, i do have that very strong gut feeling things will get worse. significantly worse, before they get better. My guy says to wait out the issues in Europe, greece, germany, ect, then move in. Only because like I said, the issues currently going on economically we have never experienced before. Our issues are not normal ups and downs from what it seems. I don't feel this is just the daily news looking for views, but some Serious collapse of currency issues likely coming.

So.. guy says hold off a month.. if I miss out on some magical miracle and things get great, so be it.

Then... I've got very experienced and people like yourself saying everything is good and get in now, what is going on is no big deal.

Eh.. I'll try to listen. Just going against my gut
Started investing around 21, joined Bogleheads at 23.

retiredjg
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Thu Nov 24, 2011 11:03 pm

I think your knowledge and understanding of history may be limited.

To you, all of this is a really big deal. Some of that is because you are only 23 years old and just starting to understand the world around you. I'm not trying to minimize the seriousness of the current issues. They are serious and none of us know just how it will work out. But if you were to really understand the seriousness of past issues that have been faced - not only in our country, but all around the world - you might realize there is always something that "isn't normal news".

This is not our planet's first rodeo and it probably won't be our last. If it is the last, I doubt that our individual investments will make much difference.

Please don't be defensive. You can't learn anything while being defensive. Try to open your mind to a much bigger picture than just what you are seeing today. Things really will look different if you can get a broader perspective.

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Taylor Larimore
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Misinformed and misled.

Post by Taylor Larimore » Thu Nov 24, 2011 11:53 pm

Hi Mason:
Our country has never had debt like this before. Never. So times now can not be compared to the past (imo.. again im probably being foolish) but seems to me like our issues right now are more serious and different than the world has experienced.
You are misinformed.

I was age 21 at the end of World War II in 1945. Our debt as a percentage of GDP was bigger than than now. Europe was in shambles. Much, much worse than now. The Dow was under 150.

Guess what? Ten years later, in June 1955, the Dow was over 450 (and this does not include dividends).

Ignore the media. Market timing does not work. Instead, develop a suitable long-term asset allocation plan--then stay the course.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Thu Nov 24, 2011 11:55 pm

retiredjg wrote:I think your knowledge and understanding of history may be limited.

To you, all of this is a really big deal. Some of that is because you are only 23 years old and just starting to understand the world around you. I'm not trying to minimize the seriousness of the current issues. They are serious and none of us know just how it will work out. But if you were to really understand the seriousness of past issues that have been faced - not only in our country, but all around the world - you might realize there is always something that "isn't normal news".

This is not our planet's first rodeo and it probably won't be our last. If it is the last, I doubt that our individual investments will make much difference.

Please don't be defensive. You can't learn anything while being defensive. Try to open your mind to a much bigger picture than just what you are seeing today. Things really will look different if you can get a broader perspective.

Hmmmm.

I think you are right. I am brand new to the world and understanding it... have only really been grasping situations for the last two-three years.

That's what I needed to hear. I'm in. honest. Thank you
Started investing around 21, joined Bogleheads at 23.

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YoungBoglehead
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Re: Misinformed and misled.

Post by YoungBoglehead » Thu Nov 24, 2011 11:56 pm

Taylor Larimore wrote:Hi Mason:
You are misinformed.

I was age 21 at the end of World War II in 1945. Our debt as a percentage of GDP was bigger than than now. Europe was in shambles. Much, much worse than now. The Dow was under 150.

Guess what? Ten years later, in June 1955, the Dow was over 450 (and this does not include dividends).

Ignore the media. Market timing does not work. Instead, develop a suitable long-term asset allocation plan--then stay the course.

Best wishes.
Taylor
You guys got me. Im in. 100% honest. Thank you. edit: Shouldn't say got me, I've just realized I am listening to much more experienced people with the best intentions in their advice. I'm following you guys now

edit edit: It is awesome to get advice from somebody who has So much time on me. Decades. somebody who has seen so much. 21 in 45? Thank you
Started investing around 21, joined Bogleheads at 23.

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dave66
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Re: - New investor here - Willing to help out with a quick Q

Post by dave66 » Fri Nov 25, 2011 12:20 am

Like has been said before, nobody says you have to go 100% stocks. Go 30% stocks with the rest bonds for now. That way you can get your feet wet and still not feel like you're going to lose your shirt. I assume your tax bracket is low, so you could do treasury bonds until it goes up. Maybe 20% TSM and the rest short term treasury VFISX. And that will help counteract any lows in the stock side. Then if you're OK with that after a while, you can start adding more to the stock side. And yes, it will go down at times, but it will come back up.

retiredjg
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Fri Nov 25, 2011 12:27 am

Please give some serious thought to my earlier suggestion of starting at 50% or 60% stock and working your way up as you gain experience. There is no reason not to do this - with a small portfolio, it does not matter much what your stock percentage is. But it does matter that you get some experience under your belt.

You think you have a high risk tolerance, but your actions say differently. Again, it is kind of like kids - you don't know what it feels like till you actually do it. Your first stock market crash is going to be a shocker no matter how you invest. You might as well experience that with a lower stock percentage rather than a higher one.

Good luck!

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Fri Nov 25, 2011 12:50 am

retiredjg wrote:Please give some serious thought to my earlier suggestion of starting at 50% or 60% stock and working your way up as you gain experience. There is no reason not to do this - with a small portfolio, it does not matter much what your stock percentage is. But it does matter that you get some experience under your belt.

You think you have a high risk tolerance, but your actions say differently. Again, it is kind of like kids - you don't know what it feels like till you actually do it. Your first stock market crash is going to be a shocker no matter how you invest. You might as well experience that with a lower stock percentage rather than a higher one.

Good luck!
Honestly I feel it won't be a shocker to me. Im usually pretty good at predicting my reactions. I've put 80% of my net worth into an investment before and had it crash the next month and lost about 50% of it. Wasn't worried and didn't stress.

About your option of % in stocks, actually as I type this a member here just PM'd me telling he he had been reading this thread and was suggesting almost exactly what you are. It seems like the smartest way to go. I'll probably be doing that.
Started investing around 21, joined Bogleheads at 23.

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