8 ms·

But one important part of their success was to invest their income. I know too many people that use their money to consume. Investing early in your life is what

by tomaha 8y ago

But one important part of their success was to invest their income. I know too many people that use their money to consume. Investing early in your life is what makes the difference. It's very easy to spend it on little things and claim to not have anything to invest.

plop_ 8y ago
Do you have advices for young people in long term investments ?
- jacquesm 8y ago
  Go read mr money Mustache (but take it with a grain of salt and ignore the cult bits) and 'the millionaire next door' https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/ (the older stuff is better, he's making bank through the blog so caveat emptor) https://en.wikipedia.org/wiki/The_Millionaire_Next_Door https://en.wikipedia.org/wiki/The_Millionaire_Next_Door
  - falcolas 8y ago
    Keep in mind MMM started with a sizable inheritance to kickstart his nest egg and currently works full time talking about living frugally. Take from that what you will.
    - jogjayr 8y ago
      > Keep in mind MMM started with a sizable inheritance to kickstart his nest egg Please provide proof of this. He's never mentioned it anywhere on his blog. > currently works full time talking about living frugally. This he has talked about: http://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-vs-the-internet-retirement-police/ http://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-... The tl;dr for others is basically, what's someone who is hardworking and driven enough to retire at age 31 actually supposed to do with the rest of their life? Sit in front of the TV? Of course he's going to do some things he enjoys (writing, working on houses, hiking, skiing), and maybe some of those activities will make him money - but he doesn't need the money to maintain his current lifestyle.
      - falcolas 8y ago
        I messed up on the inheritance; it was a house leftover from the house building business and used for rent and a sale later. Their own yearly reports put the second part to a lie - they would have to cut back significantly on their spending if they lost this income. It's possible for them to do without going homeless, but it would be non-trivial. His last reported year, his base costs (food, clothing, electricity, etc) were $30,000 - within the range. But as he himself notes right below that total, they spent around $90,000 on health insurance and a vehicle, which he pretends doesn't belong in the previous category because "the job pays for it". Not holding that job suddenly puts him on the hook for that $90,000, or puts him at risk of not having health insurance and reliable transportation.
        jogjayr 8y ago
        > Not holding that job suddenly puts him on the hook for that $90,000, or puts him at risk of not having health insurance and reliable transportation. He doesn't need a car that expensive and he can move back to Canada if health insurance gets to be too much. He's inflated his lifestyle with his increased earnings (falling short of practicing what he preaches, though in fairness he says he's bought an electric car to support the industry but that's a way to justify the purchase), and would probably dial it back down if the blog stopped throwing off that much cash.
    - falcolas 8y ago
      A correction: The house I was referring to was not actually an inheritance. It was a leftover from an abandoned house building business, funded via the usual business means (some personal money, lots of loans, etc.), acquired prior to 'retirement'. It provided 5-6 years of rental revenue and a $400,000 final payday.
  - bigjimmyk3 8y ago
    TMND is rarely mentioned in these discussions on HN, and I think that's a shame. Despite being a bit over 20 years old, it's a fascinating study of documented high net worth individuals. They also do a good job of contrasting high net worth and high income.
- sokoloff 8y ago
  If you have money to invest, invest in low-cost, broad-based index funds. I personally bias slightly towards small cap (said more precisely: I avoid biasing toward large-cap, but to many people, that looks like biasing towards small caps). One specific choice is VTSAX from Vanguard, but there are many others. Keep an emergency fund of 2-4 months in cash or equivalents, and invest everything else that you can when young. Don’t buy the flashy new car, the rounds of $15 drinks, don’t carry a credit card balance, etc. When the inevitable market gyrations come, do not take the money out. Don’t try to time the market. If you don’t have much money to get started, consider real estate as a second job. The leveraged nature of that bet is one of the few ways to start from relatively little money and build a nest egg. It’s a second job, though. If you pay a PM to manage it, the PM makes more current income than you do in most cases. In addition to jacquesm’s advice to read MMM, I also recommend the jlcollins stock series: http://jlcollinsnh.com/stock-series/ http://jlcollinsnh.com/stock-series/
  - notheguyouthink 8y ago
    Any thoughts on strategy's for not "if your young" people? My wife and I (early 30s) have been getting her school debt settled but with little retirement outside of a small 401k, we've started looking at aggressive retirement plans. At the moment we're just treating everything as the most yield (compounded or not). So her high interest debt is the most yield, however once half of those are out, a lot of investments will yield higher than her debt, so we'll likely shift priorities towards those.
    - sokoloff 8y ago
      30s is still young for retirement purposes, which for at least one of you is likely to extend out to more than 50 years from today. When considering yield, always consider after-tax yield. Having a 6% non-tax-advantaged debt is better to pay off than a taxable 7% investment. Here's a good "order of operations" guideline: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153 https://forum.mrmoneymustache.com/investor-alley/investment-...
    - mbesto 8y ago
- whataretensors 8y ago
  Don't listen to risk-averse engineers. You are young, invest in high risk things you believe in. Make it an active investment if you can. Recognize who is giving you boring advice(index funds), look at the risk levels in their life, and then disregard them if they don't take chances on anything. At a young age your risky investment % should be at it's highest. The exact amount will depend on your appetite.
  - vinceguidry 8y ago
    I like this advice, particularly the warning against risk-averse behavior. Literally anyone can give the most common answers. It takes someone with true insight to actually see what the person needs, in this case how the risk profile changes over time.
  - davedx 8y ago
    Easier said than done. What high risk (low effort) investment opportunities are there for non accredited investors? I guess there's real estate but I don't know if that qualifies as 'high risk'... And cryptocurrencies, but I'd call that 'gambling' not 'investment' :)
    - kd5bjo 8y ago
      The low-effort part is your sticking point. In my experience, most people are best served treating money conservatively and taking large risks with their time investments -- learn a rare craft, start a business, etc.
    - thebigspacefuck 8y ago
      ATMs - put one in a popular spot, there's an app that tells you when it needs to be refilled, go refill it. You can find people selling their ATMs already set up in locations. You have to drive around and refill them so the biggest risk is that someone robs you. Liquor store is another good one. A friend's roommate bought one for $400K and makes $16K/month. He just refills inventory and sits around selling booze. A lot of that goes towards his loan but after that he'll be making way more than I probably ever will. The risk again is that someone robs you. I always check bizbuysell.com to see what kinds of things are out there.
- tomaha 8y ago
  I really liked investing in companies I love to use or just want to succeed because I think they are onto something. More risky but at the same time 'supports' what I like and with more reward if it works out than index funds (which you should do in general).
- davedx 8y ago
  Put as much of your monthly income into a Vanguard fund as you can afford. Most of my money is in this one: https://americas.vanguard.com/institutional/mvc/detail/mf/overview?portId=9900&assetCode=EQUITY##overview https://americas.vanguard.com/institutional/mvc/detail/mf/ov... You might want to put some into a fund that comprises bonds, though they've performed poorly (for my investments) in recent years. If you're young (<40), I would put as much, if not all, in a fund consisting of stocks. Also: this is a long play. Leave it there.
  - alanfranz 8y ago
    All those indexed funds suggestions are biased by the fact that the stock market, overall, has increased in value OVER TIME: http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart http://www.macrotrends.net/1319/dow-jones-100-year-historica... Remember, the stock market does not create money, it's not a fundamental advancement for humanity. That just means that more people poured money into stocks, rather than other investments or savings. There's absolutely, ABSOLUTELY no reason for which this growth should keep going on in the future.
    - gieksosz 8y ago
      This is not exactly like that: - new companies go IPO, they do it because there is liquidity in the market, so they can count on someone buying their shares and cashing in. - some blue-chip companies pay out dividends - as much as many people hate on that, profitable companies engage in shares buy backs which is a way to return money earned by the company to its shareholders. If the company makes no profit, it has less to do buy-backs with. - in the end a share is a piece of a company, big part of their long term valuation will always be driven by their fundamentals like a ratio between profit and revenue or how likely they are going to default on their debts, no one wants to own a piece of company that is going to disappear in summary, there is quite some connection to the real economy, but I agree that part of the valuation is just because other people pour money in it is just not that bad.
      - alanfranzoni 8y ago
- bigpicture 8y ago
  While not providing any specific investment advice, this is a wonderful, free resource for understanding the risks and benefits of long-term investing: http://www.crsp.com/resources/investments-illustrated-charts http://www.crsp.com/resources/investments-illustrated-charts Check out the "Big Picture 2018" pdf, especially. Edit - there is one specific piece of advice that you can see very clearly in the chart - reinvest your dividends!!!
Aaargh20318 8y ago
> I know too many people that use their money to consume. All those dumb poor people wasting their money on food.
- tomaha 8y ago
  There is a difference between consuming and getting what you need to live.
  - Aaargh20318 8y ago
    To consume, verb. 1. eat, drink, or ingest (food or drink).
  - sokoloff 8y ago
    Philosophically, perhaps. Economically? No.
- jerguismi 8y ago
  Well, if you really use money only for basic food and essentials, I think you can survive with very, very little money. I did that when I was a student. Life can be just quite dull if you eat that kind of food from day to day. What I see is that most people just appreciate the luxury today more than the savings which would enable more luxury tomorrow. I think there's nothing wrong with that. You might die any day in a traffic accident, so why bother saving all that money? Those are quite subjective decisions.
  - CompelTechnic 8y ago
    Hyperbolic discounting is the term economists use to describe people liking things a lot more now than later: https://en.wikipedia.org/wiki/Hyperbolic_discounting https://en.wikipedia.org/wiki/Hyperbolic_discounting The hedonic treadmill is, in a nutshell, the reason we become complacent to newly acquired luxuries: https://en.wikipedia.org/wiki/Hedonic_treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill So not only do we want fancier things now, but we don't really appreciate them when we have them! Humans are silly.

by tomaha 8y ago

plop_ 8y ago

Do you have advices for young people in long term investments ?

jacquesm 8y ago
Go read mr money Mustache (but take it with a grain of salt and ignore the cult bits) and 'the millionaire next door' https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/ (the older stuff is better, he's making bank through the blog so caveat emptor) https://en.wikipedia.org/wiki/The_Millionaire_Next_Door https://en.wikipedia.org/wiki/The_Millionaire_Next_Door
- falcolas 8y ago
  Keep in mind MMM started with a sizable inheritance to kickstart his nest egg and currently works full time talking about living frugally. Take from that what you will.
  - jogjayr 8y ago
    > Keep in mind MMM started with a sizable inheritance to kickstart his nest egg Please provide proof of this. He's never mentioned it anywhere on his blog. > currently works full time talking about living frugally. This he has talked about: http://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-vs-the-internet-retirement-police/ http://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-... The tl;dr for others is basically, what's someone who is hardworking and driven enough to retire at age 31 actually supposed to do with the rest of their life? Sit in front of the TV? Of course he's going to do some things he enjoys (writing, working on houses, hiking, skiing), and maybe some of those activities will make him money - but he doesn't need the money to maintain his current lifestyle.
    - falcolas 8y ago
      I messed up on the inheritance; it was a house leftover from the house building business and used for rent and a sale later. Their own yearly reports put the second part to a lie - they would have to cut back significantly on their spending if they lost this income. It's possible for them to do without going homeless, but it would be non-trivial. His last reported year, his base costs (food, clothing, electricity, etc) were $30,000 - within the range. But as he himself notes right below that total, they spent around $90,000 on health insurance and a vehicle, which he pretends doesn't belong in the previous category because "the job pays for it". Not holding that job suddenly puts him on the hook for that $90,000, or puts him at risk of not having health insurance and reliable transportation.
      - jogjayr 8y ago
        > Not holding that job suddenly puts him on the hook for that $90,000, or puts him at risk of not having health insurance and reliable transportation. He doesn't need a car that expensive and he can move back to Canada if health insurance gets to be too much. He's inflated his lifestyle with his increased earnings (falling short of practicing what he preaches, though in fairness he says he's bought an electric car to support the industry but that's a way to justify the purchase), and would probably dial it back down if the blog stopped throwing off that much cash.
  - falcolas 8y ago
    A correction: The house I was referring to was not actually an inheritance. It was a leftover from an abandoned house building business, funded via the usual business means (some personal money, lots of loans, etc.), acquired prior to 'retirement'. It provided 5-6 years of rental revenue and a $400,000 final payday.
- bigjimmyk3 8y ago
  TMND is rarely mentioned in these discussions on HN, and I think that's a shame. Despite being a bit over 20 years old, it's a fascinating study of documented high net worth individuals. They also do a good job of contrasting high net worth and high income.
sokoloff 8y ago
If you have money to invest, invest in low-cost, broad-based index funds. I personally bias slightly towards small cap (said more precisely: I avoid biasing toward large-cap, but to many people, that looks like biasing towards small caps). One specific choice is VTSAX from Vanguard, but there are many others. Keep an emergency fund of 2-4 months in cash or equivalents, and invest everything else that you can when young. Don’t buy the flashy new car, the rounds of $15 drinks, don’t carry a credit card balance, etc. When the inevitable market gyrations come, do not take the money out. Don’t try to time the market. If you don’t have much money to get started, consider real estate as a second job. The leveraged nature of that bet is one of the few ways to start from relatively little money and build a nest egg. It’s a second job, though. If you pay a PM to manage it, the PM makes more current income than you do in most cases. In addition to jacquesm’s advice to read MMM, I also recommend the jlcollins stock series: http://jlcollinsnh.com/stock-series/ http://jlcollinsnh.com/stock-series/
- notheguyouthink 8y ago
  Any thoughts on strategy's for not "if your young" people? My wife and I (early 30s) have been getting her school debt settled but with little retirement outside of a small 401k, we've started looking at aggressive retirement plans. At the moment we're just treating everything as the most yield (compounded or not). So her high interest debt is the most yield, however once half of those are out, a lot of investments will yield higher than her debt, so we'll likely shift priorities towards those.
  - sokoloff 8y ago
    30s is still young for retirement purposes, which for at least one of you is likely to extend out to more than 50 years from today. When considering yield, always consider after-tax yield. Having a 6% non-tax-advantaged debt is better to pay off than a taxable 7% investment. Here's a good "order of operations" guideline: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153 https://forum.mrmoneymustache.com/investor-alley/investment-...
  - mbesto 8y ago
whataretensors 8y ago
Don't listen to risk-averse engineers. You are young, invest in high risk things you believe in. Make it an active investment if you can. Recognize who is giving you boring advice(index funds), look at the risk levels in their life, and then disregard them if they don't take chances on anything. At a young age your risky investment % should be at it's highest. The exact amount will depend on your appetite.
- vinceguidry 8y ago
  I like this advice, particularly the warning against risk-averse behavior. Literally anyone can give the most common answers. It takes someone with true insight to actually see what the person needs, in this case how the risk profile changes over time.
- davedx 8y ago
  Easier said than done. What high risk (low effort) investment opportunities are there for non accredited investors? I guess there's real estate but I don't know if that qualifies as 'high risk'... And cryptocurrencies, but I'd call that 'gambling' not 'investment' :)
  - kd5bjo 8y ago
    The low-effort part is your sticking point. In my experience, most people are best served treating money conservatively and taking large risks with their time investments -- learn a rare craft, start a business, etc.
  - thebigspacefuck 8y ago
    ATMs - put one in a popular spot, there's an app that tells you when it needs to be refilled, go refill it. You can find people selling their ATMs already set up in locations. You have to drive around and refill them so the biggest risk is that someone robs you. Liquor store is another good one. A friend's roommate bought one for $400K and makes $16K/month. He just refills inventory and sits around selling booze. A lot of that goes towards his loan but after that he'll be making way more than I probably ever will. The risk again is that someone robs you. I always check bizbuysell.com to see what kinds of things are out there.
tomaha 8y ago
I really liked investing in companies I love to use or just want to succeed because I think they are onto something. More risky but at the same time 'supports' what I like and with more reward if it works out than index funds (which you should do in general).
davedx 8y ago
Put as much of your monthly income into a Vanguard fund as you can afford. Most of my money is in this one: https://americas.vanguard.com/institutional/mvc/detail/mf/overview?portId=9900&assetCode=EQUITY##overview https://americas.vanguard.com/institutional/mvc/detail/mf/ov... You might want to put some into a fund that comprises bonds, though they've performed poorly (for my investments) in recent years. If you're young (<40), I would put as much, if not all, in a fund consisting of stocks. Also: this is a long play. Leave it there.
- alanfranz 8y ago
  All those indexed funds suggestions are biased by the fact that the stock market, overall, has increased in value OVER TIME: http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart http://www.macrotrends.net/1319/dow-jones-100-year-historica... Remember, the stock market does not create money, it's not a fundamental advancement for humanity. That just means that more people poured money into stocks, rather than other investments or savings. There's absolutely, ABSOLUTELY no reason for which this growth should keep going on in the future.
  - gieksosz 8y ago
    This is not exactly like that: - new companies go IPO, they do it because there is liquidity in the market, so they can count on someone buying their shares and cashing in. - some blue-chip companies pay out dividends - as much as many people hate on that, profitable companies engage in shares buy backs which is a way to return money earned by the company to its shareholders. If the company makes no profit, it has less to do buy-backs with. - in the end a share is a piece of a company, big part of their long term valuation will always be driven by their fundamentals like a ratio between profit and revenue or how likely they are going to default on their debts, no one wants to own a piece of company that is going to disappear in summary, there is quite some connection to the real economy, but I agree that part of the valuation is just because other people pour money in it is just not that bad.
    - alanfranzoni 8y ago
bigpicture 8y ago
While not providing any specific investment advice, this is a wonderful, free resource for understanding the risks and benefits of long-term investing: http://www.crsp.com/resources/investments-illustrated-charts http://www.crsp.com/resources/investments-illustrated-charts Check out the "Big Picture 2018" pdf, especially. Edit - there is one specific piece of advice that you can see very clearly in the chart - reinvest your dividends!!!

Aaargh20318 8y ago

> I know too many people that use their money to consume. All those dumb poor people wasting their money on food.

tomaha 8y ago
There is a difference between consuming and getting what you need to live.
- Aaargh20318 8y ago
  To consume, verb. 1. eat, drink, or ingest (food or drink).
- sokoloff 8y ago
  Philosophically, perhaps. Economically? No.
jerguismi 8y ago
Well, if you really use money only for basic food and essentials, I think you can survive with very, very little money. I did that when I was a student. Life can be just quite dull if you eat that kind of food from day to day. What I see is that most people just appreciate the luxury today more than the savings which would enable more luxury tomorrow. I think there's nothing wrong with that. You might die any day in a traffic accident, so why bother saving all that money? Those are quite subjective decisions.
- CompelTechnic 8y ago
  Hyperbolic discounting is the term economists use to describe people liking things a lot more now than later: https://en.wikipedia.org/wiki/Hyperbolic_discounting https://en.wikipedia.org/wiki/Hyperbolic_discounting The hedonic treadmill is, in a nutshell, the reason we become complacent to newly acquired luxuries: https://en.wikipedia.org/wiki/Hedonic_treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill So not only do we want fancier things now, but we don't really appreciate them when we have them! Humans are silly.