Comments on: 5 things to ask your friends who think “this time is different” http://www.iwillteachyoutoberich.com/blog/investing-long-term/ Personal finance blog for college students, recent graduates and everyone else -- including entrepreneurship -- for getting rich. Featured in the Wall Street Journal and New York Times. Sat, 21 Nov 2009 09:24:01 -0800 http://wordpress.org/?v=abc hourly 1 By: Kirk Kinder http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-100078 Kirk Kinder Mon, 01 Jun 2009 21:48:57 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-100078 I think we will be finding folks jumping into the market now that it is up almost 40% from its lows. Of course, this probably means the market will tank as most investors get this completely wrong. I think we will be finding folks jumping into the market now that it is up almost 40% from its lows. Of course, this probably means the market will tank as most investors get this completely wrong.

]]> By: Annuity Guru http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-100057 Annuity Guru Mon, 01 Jun 2009 17:53:36 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-100057 I think the first thing people need to come to terms with is that they should not put any money in the stock market that they can't afford to lose. There are too many variables that can crush a portfolio. I think the first thing people need to come to terms with is that they should not put any money in the stock market that they can’t afford to lose. There are too many variables that can crush a portfolio.

]]> By: Nadine http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-100047 Nadine Mon, 01 Jun 2009 14:25:41 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-100047 And you thought women's magazines talk down to their audience?... (I'm referring to your post of a couple of weeks ago on the different approaches of financial reporting btw women's and men's magazines) You should have heard the tone of this weekend's much-touted "Un-broke" special on ABC (I think it was ABC). I was initially encouraged by Will Smith's promise to cut through the media crap, but all I got out of that hour was ogling Antonio Banderas for a few precious seconds. What a waste of time and resources. And you thought women’s magazines talk down to their audience?… (I’m referring to your post of a couple of weeks ago on the different approaches of financial reporting btw women’s and men’s magazines)

You should have heard the tone of this weekend’s much-touted “Un-broke” special on ABC (I think it was ABC). I was initially encouraged by Will Smith’s promise to cut through the media crap, but all I got out of that hour was ogling Antonio Banderas for a few precious seconds.

What a waste of time and resources.

]]> By: Behavior Gap Round Up http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-100045 Behavior Gap Round Up Mon, 01 Jun 2009 14:06:52 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-100045 [...] also had the pleasure of doing a guest post for Ramit at IWillTeachYoutobeRich.com, 5 Things to Ask Your Friends Who Think “This Time is Different.” Let me know what you think. Have you been saying or thinking, “This time is [...] [...] also had the pleasure of doing a guest post for Ramit at IWillTeachYoutobeRich.com, 5 Things to Ask Your Friends Who Think “This Time is Different.” Let me know what you think. Have you been saying or thinking, “This time is [...]

]]> By: Nate http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-100008 Nate Mon, 01 Jun 2009 03:00:21 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-100008 I've always found conventional wisdom of all kinds suspect, but I agree with the post. It's important to have a plan and adhere to it. If you're an asset-allocating "buy-and-hold" investor the lows from Nov - March were great opportunities to add to your equity holdings at discount prices. I don't agree with conventional asset allocation rules. The formula for holding your age in bonds seems arbitrary, and today, with longer life-spans than ever, the fixed-income investor runs the risk of outliving his or her money. Stocks can provide a combination of growth and income that an investor needs to outlive his/her portfolio. I am a big fan of dividend investing, and my plan is to build a portfolio that throws off enough dividends to cover my living expenses. The dividend payment is a source of peace-of-mind and provides capital to reinvest at lower share prices in a down market. For more info I highly recommend the Single Best Investment by Lowell Miller. I'm 32 and not planning on ever "retiring" in the conventional sense. What do I care if my stocks decline in price as long as they keep cranking out ever-increasing dividends? My portfolio consists mostly of large-cap dividend growth and high-yield stocks with a smattering of precious metals, CEF's and foreign bonds. I’ve always found conventional wisdom of all kinds suspect, but I agree with the post. It’s important to have a plan and adhere to it. If you’re an asset-allocating “buy-and-hold” investor the lows from Nov – March were great opportunities to add to your equity holdings at discount prices.

I don’t agree with conventional asset allocation rules. The formula for holding your age in bonds seems arbitrary, and today, with longer life-spans than ever, the fixed-income investor runs the risk of outliving his or her money.

Stocks can provide a combination of growth and income that an investor needs to outlive his/her portfolio. I am a big fan of dividend investing, and my plan is to build a portfolio that throws off enough dividends to cover my living expenses. The dividend payment is a source of peace-of-mind and provides capital to reinvest at lower share prices in a down market. For more info I highly recommend the Single Best Investment by Lowell Miller.

I’m 32 and not planning on ever “retiring” in the conventional sense. What do I care if my stocks decline in price as long as they keep cranking out ever-increasing dividends? My portfolio consists mostly of large-cap dividend growth and high-yield stocks with a smattering of precious metals, CEF’s and foreign bonds.

]]> By: Ken Siew http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-99981 Ken Siew Sun, 31 May 2009 20:09:51 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-99981 This is great post! I've always been fascinated by the psychology in investing and these articles are truly good reads. It's interesting how frequently people would be driven by their emotions rather than their rationale even when it comes to their hard earned money (sounds like relationship too!). This will continue to be a struggle among most people even when more people are becoming sophisticated investors centuries down the road (hopefully that the latter is true). But if we can help change the world, one person at a time, by teaching them the fundamentals to "buy low and sell high" in their investment, I think our efforts will not go to waste. Keep up the great work, Ramit! P.S.: By the way, behaviorgap.com is definitely a good site to visit! I've learned about so many great sites through your blog/twitter, Ramit. I will share them with my friends/readers. Thanks! This is great post! I’ve always been fascinated by the psychology in investing and these articles are truly good reads. It’s interesting how frequently people would be driven by their emotions rather than their rationale even when it comes to their hard earned money (sounds like relationship too!). This will continue to be a struggle among most people even when more people are becoming sophisticated investors centuries down the road (hopefully that the latter is true). But if we can help change the world, one person at a time, by teaching them the fundamentals to “buy low and sell high” in their investment, I think our efforts will not go to waste. Keep up the great work, Ramit!

P.S.: By the way, behaviorgap.com is definitely a good site to visit! I’ve learned about so many great sites through your blog/twitter, Ramit. I will share them with my friends/readers. Thanks!

]]> By: Bill Schultheis http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-99752 Bill Schultheis Fri, 29 May 2009 02:56:12 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-99752 Shawanda, In my opinion your thoughts and approach to investing are light-years ahead of the average investor. In fact for anyone who has another 40 years before retirement, they should be hoping the stock market drops another 3000 points and then keep on investing. You commented . . . "Many people approaching retirement shouldn’t have been so heavily invested in stock in the first place. You are absolutely correct on that. For folks who are soon to be retiring and lost 50 percent of portfolio in recent downturn, likely means they had close to 100 percent in stocks. Dumb, dumb, dumb. Need to remember Vanguard founder John Bogle's rule of thumb, matching your allocation in bonds to your age. A good rule to consider. While i agree with you that lots of folks promote "buy and hold,", the sad reality is that most advisors/brokers in the financial industry are obsessed with beating the market and thus pushing top stocks and funds to their clients. This, along with the emotions of DIY investors, causes incredibly high turnover of investments for the masses who profess to be long term buy and hold investors. Ironically, the following article appeared in yesterday's local paper. Sums it up pretty good, and reflects the behavior gap Carl is trying to address. http://seattletimes.nwsource.com/html/businesstechnology/2009265488_stoxcenter27.html Shawanda,

In my opinion your thoughts and approach to investing are light-years ahead of the average investor. In fact for anyone who has another 40 years before retirement, they should be hoping the stock market drops another 3000 points and then keep on investing.

You commented . . .
“Many people approaching retirement shouldn’t have been so heavily invested in stock in the first place.

You are absolutely correct on that. For folks who are soon to be retiring and lost 50 percent of portfolio in recent downturn, likely means they had close to 100 percent in stocks. Dumb, dumb, dumb. Need to remember Vanguard founder John Bogle’s rule of thumb, matching your allocation in bonds to your age. A good rule to consider.

While i agree with you that lots of folks promote “buy and hold,”, the sad reality is that most advisors/brokers in the financial industry are obsessed with beating the market and thus pushing top stocks and funds to their clients. This, along with the emotions of DIY investors, causes incredibly high turnover of investments for the masses who profess to be long term buy and hold investors.

Ironically, the following article appeared in yesterday’s local paper. Sums it up pretty good, and reflects the behavior gap Carl is trying to address.

http://seattletimes.nwsource.com/html/businesstechnology/2009265488_stoxcenter27.html

]]> By: Shawanda http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-99749 Shawanda Fri, 29 May 2009 02:19:15 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-99749 There is no investment strategy touted more than "buy and hold." I've consumed information from many personal finance books, magazines, articles, and television shows. Almost without fail, they point to the fact that most millionaires acquire their fortune through long-term, disciplined investing. Many people approaching retirement shouldn't have been so heavily invested in stock in the first place. They also should've owned their home outright. It's easy to have a high risk tolerance when the value of your stock is shooting up. It was the same with the real estate market. All of sudden, every idiot who qualified for a mortgage became a real estate guru. I maintained that real estate is a highly illiquid, highly leveraged, and thus extremely high risk investment that shouldn't be approached by those who are uninformed and thinly capitalized. Today a friend of mine asked me if you lose money when the value of the investments in your Roth account go down. I told her you won't lose anything until you sell. It's easy to forget that you don't gain anything either unless you sell when your investments are up. Retirement for me, by today's standards, is 40 years from now. I can ride this wave out. When the stock market went sour, I reallocated the investments in my retirement accounts to even riskier investments. Not because I was trying to time the market, but because I believed (and still do) that my current allocations will yield the greatest returns in the long run. We'll see if I'm right. There is no investment strategy touted more than “buy and hold.” I’ve consumed information from many personal finance books, magazines, articles, and television shows. Almost without fail, they point to the fact that most millionaires acquire their fortune through long-term, disciplined investing.

Many people approaching retirement shouldn’t have been so heavily invested in stock in the first place. They also should’ve owned their home outright. It’s easy to have a high risk tolerance when the value of your stock is shooting up. It was the same with the real estate market. All of sudden, every idiot who qualified for a mortgage became a real estate guru. I maintained that real estate is a highly illiquid, highly leveraged, and thus extremely high risk investment that shouldn’t be approached by those who are uninformed and thinly capitalized.

Today a friend of mine asked me if you lose money when the value of the investments in your Roth account go down. I told her you won’t lose anything until you sell. It’s easy to forget that you don’t gain anything either unless you sell when your investments are up.

Retirement for me, by today’s standards, is 40 years from now. I can ride this wave out. When the stock market went sour, I reallocated the investments in my retirement accounts to even riskier investments. Not because I was trying to time the market, but because I believed (and still do) that my current allocations will yield the greatest returns in the long run. We’ll see if I’m right.

]]> By: PPC4 http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-99748 PPC4 Fri, 29 May 2009 01:57:02 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-99748 To all- Great discussion. I would suggest all get ahold of "Poor Charlie's Almanack" for alot of thought provoking material on thinking, investing, and behavior. Charlie is Charlie Munger. I promise you that you won't be disappointed in reading it for an enhancement to your intellectual and investing life. Best Regards, PPC4 To all-

Great discussion. I would suggest all get ahold of “Poor Charlie’s Almanack” for alot of thought provoking material on thinking, investing, and behavior. Charlie is Charlie Munger. I promise you that you won’t be disappointed in reading it for an enhancement to your intellectual and investing life.

Best Regards,

PPC4

]]> By: dream http://www.iwillteachyoutoberich.com/blog/investing-long-term/comment-page-1/#comment-99743 dream Fri, 29 May 2009 01:20:50 +0000 http://www.iwillteachyoutoberich.com/blog/?p=1476#comment-99743 Personally I moved my retirement account from low risk, low yield to a split between high and medium risk stock portfolios. That was 2 months ago and the current balance is up over 10%. ( YES, I AM aware that it could drop just as drastically but I don't retire for another 20 years) My next planned investment is a home. Not because real estate always goes up, but because I am a good DIYer so can invest my spare time and just material costs to make improvements. Plus houses where I live are down tremendously and expected to fall for another 1 to 2 years. I may get one this year anyway since the houses I am looking at currently sell for 45 to 50k, and the tax credit will result in an extra 10% rebate. That in itself should offset further value reductions. Personally I moved my retirement account from low risk, low yield to a split between high and medium risk stock portfolios. That was 2 months ago and the current balance is up over 10%. ( YES, I AM aware that it could drop just as drastically but I don’t retire for another 20 years) My next planned investment is a home. Not because real estate always goes up, but because I am a good DIYer so can invest my spare time and just material costs to make improvements. Plus houses where I live are down tremendously and expected to fall for another 1 to 2 years. I may get one this year anyway since the houses I am looking at currently sell for 45 to 50k, and the tax credit will result in an extra 10% rebate. That in itself should offset further value reductions.

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