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
SETTING UP SUB-ACCOUNTS
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
FRIEND MAKES ME MAD
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
OPTIONS FOR GETTING HIGHER INTEREST (Kiva, Prosper, etc)
Me: 0.5% is bs, who cares
even lend it at prosper
what’s the risk?
Me: you can choose your risk
grade A to “very risky”
Friend: but meaning what/
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
SETTING UP AN ASSET ALLOCATION
Me: have you done a proper asset allocation, aka abroad, large-cap, etc
Me: ok, do this: delicious.com/ramitsethi/asset-allocation
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
RAMIT SAYS STOCK TRADING FEES ARE OVERRATED
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
THE BARRIERS THAT STOPPED MY FRIEND FROM INVESTING
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
I LOVE IT
TURKEY AND INVESTING
AMERICANA AT ITS FINEST
or, in your case, vegan alfalfa
Friend: just needed an ass-kicking on what a sane stupid/automatic setup would be
FUNDS VS. SPECIFIC STOCKS IN ASSET ALLOCATIONS
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
WHY MY ASSET ALLOCATION IS NOT PERFECT
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 del.icio.us links, including the following tags: future (money-related stuff), entrepreneurship, stupid, , interesting, writing, stories, funny, and psychology.
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