Here’s a chat transcript of my friend and me talking about investing and asset allocation

Ramit Sethi

A Friend and I had an online chat yesterday and I thought it’d be interesting to paste below. It was a real chat, so most of it is unedited. Below, we cover:

  • Setting up sub-accounts
  • Why my friend makes me mad for being dumb
  • Options for getting higher interest
  • Setting up an asset allocation
  • Why I think stock-trading fees are overrated
  • The barriers that stopped my Friend from getting started
  • Funds vs. specific stocks in asset allocation
  • Why my asset allocation is not perfect

Friend: yo, you said you could set up sub-accounts at ING? how? is this for standard Orange Savings?
Friend: oh shit, it’s a real full-on account
is there anything bad about having several of these?
Me: i havent heard anything bad
lots of praise
Friend: like credit-wise or anything else?
Me: no, search ING sub-accounts
Friend: now if only ING had slightly higher interest

Me: dont make me mad. INVEST THAT SHIT
Me: ps if you read my upcoming book it has this in it
Friend: i have too much cash
Friend: i know

Me: 0.5% is bs, who cares
even lend it at prosper
Friend: really?
what’s the risk?
Me: you can choose your risk
grade A to “very risky”
Friend: but meaning what/
Me: prosper
Friend: jeebus
would you be comfortable dumping $10k++ in there?
Me: no, i am gonna start with 1-3k, gently — like a CD, ladder that
Friend: yeah, that’s what i would have figured
Me: but honestly i prefer to get my money away and working for me, invested. 12% part time is too much time-intensive for me to keep track of
Friend: i agree, i do have a regular investment plan (couple)
Friend: i just significantly overshot the basic auto savings, a LOT, over the past 18 months. and I have shitloads of cash, like, insane amounts
Me: a good problem to have
Me: are you trying to hit on me? do you want to be my sugar daddy
Friend: as jeff said, i could buy a beach house in brazil

Me: have you done a proper asset allocation, aka abroad, large-cap, etc
Friend: no
Me: ok, do this:
start with the david swensen stuff
adjust as necessary (he’s too conservative)
then — research the funds. if you want to shortcut it, use all vanguard. if you are really lazy, i can send you mine
then set up an auto-investing account and allocate it every month, dollar-cost averaging in
Friend: yeah, that’s what’s been blocked
1. finding a reasonable set of funds
2. setting up dollar-cost averaging, since huge up-front buy-in seems stupid
Me: it takes about 3-5 hrs
usually between 1k to 2.5k for buy-in on funds
luckily you have the cash
Friend: i was actually leaning towards ETFs at Zecco lately
Me: those are fine too
Friend: they make lots of sense at Zecco specifically because of the $0 stock trades

Me: well, hopefully you arent trading too much. $20 or $50/month in stock trades is not much if youre putting in a significant enough amount of $. my perspective: people overweight stock $ trading, but whatever gets you going, good

Friend: yeah, i have been retarded on this for too long. since i turned off my E*TRADE S&P auto-investing with the concrete intention to switch to something else immediately, i have spun my wheels way too long
Friend: i’ll do this over thanksgiving and report back
or, in your case, vegan alfalfa
Friend: just needed an ass-kicking on what a sane stupid/automatic setup would be

Friend: question: how do you factor specific personal stock plays into this? do you do those separately or count them against the allocation in your auto-investment pool? like presuming they’re large-cap US companies, do you subtract from your S&P
Me: i have individual stocks and count them towards my allocation. i started by investing in direct stocks and so am waiting for my $ amount to catch up before i round out more in allocation

Friend: do you use this allocation directly in your monthly auto-investment, or do you look at your holdings and have a more exaggerated monthly distribution to try to drive your overall total towards this allocation?
Me: if i were perfect, the allocation i set would be perfect and take certain percentages out of my $
nobody’s situation is perfect. in my case, i already had investments that are throwing off my allocation, so i’m investing more heavily in other parts.
it will take me about 2 yrs to get to the ideal allocation
Friend: makes sense — that’s roughly what i would have assumed (compensate in the monthly plan, but not TOO strongly)
i will let you know how it goes

I’m away for the holidays but if you’re looking for something to read, here are my 4,168 links, including the following tags: future (money-related stuff), entrepreneurship, stupid, , interesting, writing, stories, funny, and psychology.

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  1. Tom


  2. Sra

    Yowza, I’m gonna vote against posting in chat format. Confusing!

  3. p

    When is your book coming out? Will it be out in time for Christmas? I want to give it to my younger brother.

  4. Maikeru

    I’ve been away from the site for a while but since I’ve come back it seems like you’ve been taken over by flashing ads (10,000th visitor with a flashing green and red background, 999,999th visitor with a flashing red border). I’ve nothing against ads, even animated ones but these ones make it difficult to focus and generally unpleasant to read your site. Any chance you could swap them out for less obnoxious ones? (I’m talking about the optimized by PubMatic ads).

    Apart from that, thanks for the post, I’m particularly interested in asset allocation so I’ll be looking through those links. Appreciate all the work you’re putting into the site.

  5. Ramit Sethi

    P, the book will be out sometime in 2008 — not soon enough for this Christmas! Sorry about that.

    Maikeru, thanks for the comment about the ads. I’ve just gotten a couple other similar emails today, so I’m talking with my ad guy about removing them. I take all comments about my advertising experiment seriously, so I appreciate your comment.

  6. JohnofScribbleSheet

    I think asset allocation is one of those things people forget about. They obsess too much on the investment method (property, stocks, art etc) and forget that its the strategy (asset allocation being crucial to this) which truly matters.

  7. Joe

    Ramit: “if you are really lazy, i can send you mine”

    How about posting yours? I think I’d learn a lot more from an example here than from a list of links.

  8. Alexis Neely

    Hey Ramit,

    I loved the SFGate article.

    I’ve got a great asset allocation option for you to look at. It’s at and was started by a friend of mine who is a Fee-Only financial advisor and can really only work with people with 1-2 million in investable assets, minimum.

    But, he wanted to give people with less investable assets access to the same awesome asset allocation he can provide his large clients.

    Check out the portfolios and let me know what you think.

    From what he says, you can’t get better fee ratios and it’s for people who are looking to pretty much set it and forget it. The portfolios are well tax-managed as well.

    I’d love to hear your thoughts on it as a less time-intensive option for busy folks whose eyes glaze over when the words asset allocation are spoken.


  9. Patoka

    I enjoy reading your blog and learning new money making tips…however…due to the economic pit falls (NAFTA, corporate bankruptcies, downsizing…I’ve been hit with them all) I have no money to invest in these plans. In fact I need to add to my income substantially. Any advice?

    I have a degree but work on a production line since I cannot find another job in my area. I work all the overtime possible. Due to othe economy, my credit is trashed. Where am I to go from here?

  10. Moolanomy weekly roundup #16: “Prosper” edition | Moolanomy

    […] I Will Teach You To Be Rich suggested Prosper to his friend. […]

  11. Build & Succeed - My Personal Finance Blog » Top 5 Personal Finance Links

    […] Chat Transcript of my friend and me talking about investing and asset allocation  Ramit at I Will Teach You To Be Rich posted an entertaining post yesterday which is simply a conversation with his friend. Pretty funny. […]

  12. CN

    Kiva sounds like a great organization, but from what I could tell at their website, their loans charge no interest at the moment. If that’s the case, I’d suggest re-categorizing it as a charitable organization rather than a ‘high-interest’ option.

    I’m a relatively new member to Prosper, but that shows great promise and has a good track record from those who referred me. Would definitely recommend this (or similar lending websites) on a small amount trial basis, at least.

  13. Carlin

    I wouldn’t call Kiva charitable because you’re getting repaid. You aren’t making a donation. Also, stimulating economies by offering entreprenuers capital can indirectly benefit the lender in the long run. As their businesses and economy grows, they’re more likely to want or need goods and services that companies we run, work at, etc provide, which indirectly benefits us.
    It’d be difficult to put an exact dollar amount on it, but I would think that the trade opportunities that arise over time could be considered “interest”.

  14. 2million's personal finance blog

    I opened several ING sub accounts when they first became known and ING quickly closed my accounts and transferred all my money back into my linked account with no explanation.