I don't buy bonds or CDs -- I'm young enough that short-term loss is a non-event, since nothing short of "my children are starving on the street" will induce me to touch the Roth ahead of schedule. Wild volatility doesn't matter because I only check the account about once a year anyhow -- the only concern is maximizing expected 40-ish year returns.

I generally try to keep a few thousand in cash to cover unexpected expenses, although my discipline with that has left something to be desired as of late. (I'll say this for being a salaryman: I never had to deal with wild swings in my paycheck, and haven't quite mastered the trick of doing so yet.)

A lot of people would argue that even for a young person a portfolio with a small bond allocation is actually less risky with higher returns then a 100% allocation to stocks.

2. it depends what you mean by "risk". arguments claiming bond allocation in your portfolio are less "risky" describe risk as "volatility of returns", which in finance are measured over shorter intervals than 40 years.

patrick is specifically accepting short term volatility in return for the higher EV of returns.

the marketplace prices debt instruments (especially US treasury issued) over the long term with cheaper expectations for returns specifically because it has lower variance of returns.

In practice people tend to increase their relative holdings in stocks, this is highly risky since it's much harder to make up losses and the end of your working life.

For me: Where I live a special accounts for retirment do not exist so I don't have an opinion on those.

The excess cash I'm now started earn will be invested in simple ETF's. They provide good diversification for a small price.

[1] So good for you!

I am still relatively young so my risk profile is more on the risk seeking side right now. I'll seek out more of the funds when I'm 35+, married with children, and have more to lose.

2. Payoff all debts (including house and student loans)

3. Only invest in stock market through IRA's where there is a tax advantage.

3.1 Only invest in company 401(k) to get the match.

3.2 Invest the max in Roths (if you qualify)

3.3 Find an index fund and forget it. You've got better things to do then worry about stock picking. (I suggest Vanguard, it's investor owned).

4. Fund your war chest you started in step one. This is cash you can use for starting your company, investing in real estate, etc.

5. Find something you know about and stick to it. Whether it's real estate, starting software companies, etc.

6. Only buy things you can par for with cash. That includes cars/computers/TVs.

7. Beware the mortgage tax deduction. (Not everyone can deduct the interest/the standard deduction is pretty high already). You need a _lot_ of expenses to itemize. That means you have a lot of mortgage interest || medical bills || etc. This is not a good place to be in financially.

You'll be amazed how much money you can accumulate (even if you are a "wage slave").

So the calculation becomes... paying off that mortgage is like getting a guaranteed 4% return on your money. But there are many low-risk vehicles that can eclipse that.

It's possible that you'd want to take that guaranteed 4%, but it's not the type of thing that, IMO, is just a given.

After maxing out a 401K the rest of my money is going towards my mortgage.

Even a low 6-figure income for a single person will get you pretty close to the standard deduction in a number of states (California, say) for just the state taxes.

Now if you're married, you have a lot more standard deduction headroom. But you might also have two incomes.

In other words, show me a zero risk 5% vehicle and I'll stop trying to pay off my mortgage immediately.

edited for a dumb mistake....

The OP made the "risk-free 4%" one of his top must-do's. My point is, that's not always the case. Paying off debt is not always the best choice in the current times of very cheap borrowing.

YOU have no appetite for risk (judging only by this comment). That's not true of everybody.

Why? The advice I've read is, "invest at least the amount that your employer will match." (i.e. free money) But I've never heard anyone recommend not investing more than that in a 401k.

"Bogle argues for an approach to investing defined by simplicity and common sense. Below are his eight basic rules for investors:

- Select low-cost index funds

- Consider carefully the added costs of advice

- Do not overrate past fund performance

- Use past performance to determine consistency and risk

- Beware of stars (as in, star mutual fund managers)

- Beware of asset size

- Don’t own too many funds

- Buy your fund portfolio – and hold it"

And might I add one more: Take advantage of your company's 401k match immediately! That's free money on the table.

I've followed that style for my retirement 401k.

When it comes to play money and individual investments, I invest in what I know and what I believe in. The opinion is that one can't know all the information about every company out there so at least you can invest in the companies that you do know confidently about...

I follow Apple - and hence I made a big bet on them since the mid-2000s and it's paid off nicely... I feel Netflix is another company in its class - all my friends have accounts with them and have nothing but good things to say about them. Passionate customers can lead to profitability. I guess that's my individual stock picking strategy.

Additionally, if you're at a fund company with different share classes based on balance, you also get higher expenses by dividing things up too much. Eg Vanguard's Admiral shares reward you with a lower expense ratio for having more money in a given fund, since it lowers their own overhead.

Roth IRAs are great, you can take the principle out at any time (since it's post tax money). It's only gains that are off limits until retirement. Not only that, you can roll normal IRAs and 401Ks into a Roth IRA and get that money out after something like 3 years. It's thing #1 I'm going to do when I quit receiving a paycheck and have a year of very low income to report. I largely consider the Roth IRA principle as part of my savings fund.

If I started working harder to manage those investments, I'd head over to the Bogleheads forum and spend a week or two reading. For now, I have a friend who knows his shit that just tells me where to stick the money to keep it reasonably safe. It's mostly no-load mutual funds with a pretty big chunk of bonds in them.

Also, if you imagine you'll have the same tax rate now as you will at retirement, there's no advantage to a roth. Whether you prepay taxes or defer them, it's all the same, the cash available at retirement will be the same.

The real advantage to a Roth is if you think you're paying a lower tax rate now than you will be when you retire.

The bogleheads forum is a fantastic resource with many published authors and other smart folks. I have been an avid reader (and occasional participant) for over 2 years.

It's a quick read and probably tells you a lot of what you already know, but it's well written and explains the basics of the various investment vehicles well.

It's actually quite amazing to me that a lot of geeks who would spend literally hundreds of hours researching esoteric technical knowledge on the Internet, won't spend at least a few hours researching how to setup their retirement accounts. With life expectancies on the increase, we can reasonably expect to live 1/3rd or more of our life in retirement. Wouldn't you want to make sure you had enough money to do this?

Also, for someone with an entrepreneurial streak, wouldn't it be nice to "retire early" in your 50s and have the luxury of a steady income while starting a new business? This is ideal - imagine being a founder and not having to worry about paying for food or housing.

i.e. fyi it's generally silly to invest when you have a credit card balance outstanding.

2. Shares. Me and my wife both take turns picking individual stocks. We tend to look at the news, look at what is cheap, a little bit of technical analysis. Mostly we just look at things that are cheap, try and find out why they are cheap, and if we think they will go up we buy. The goal is basically diversification, with a slight preference to smaller, riskier companies. As we age we will probably skew that towards larger, less risky companies, or perhaps indexes.

Oh the government forces us to put a lot of money into some retirement thing, but I think it is unsound, and do not consider it an investment. (The whole thing is based on todays workers funding todays retirees, and relies on an increasing population, whereas the population here is decreasing). I consider it money down the drain / tax.

In the current economic climate, it is pretty much a waste "investing" in anything until you have, say, an 8-figure sum in cash laying around doing nothing. I don't have that, so I am not bothering with "investing". I put "investing" in quotes because I feel the word tends to be perversely used; people really mean speculation, that is, gambling with negligible effects in terms of real-world wealth creation, but the gambling happens on such a huge scale that it distorts market prices hugely. Real investing is when you put money directly into something in order to enable the creation of something that wouldn't have been possible without your capital (as the YC folks do).

Stocks are terrible. If you look at market histories, corrected for inflation (actual inflation, not government-reported inflation, which is always understated, as the government benefits by understating it -- so normalize against something like an alternative inflation index or else straight-up commodities) then the S&P, DJIA, etc have actually not grown in 15 years. 15 years!! I know all of the "just buy an index fund" seems like good advice -- and it did used to be -- but in modern conditions that is no longer true. On top of this fact, pile on the risk of another market crash due to the USA's still-precarious economic situation, and stocks are clearly just not worth being in. (People are starting to realize this; there have been net outflows from equities most of the time for the past 40 weeks, and insider-selling-to-buying ratios are consistently huge.)

You can put money in bonds, but then it is locked up and you have a lot of inflation risk, so then you'd be aiming at short-term bonds, which are going to yield less.

Really what has happened is that US economic policy has become very hostile toward people who are responsible and save money, as an incidental effect of the desire to stimulate consumption (which mainly means taking on more debt and keeping rates tremendously low because if they ever become not-low now, debt burden is going to crush the economy.)

The upshot is that you are better off taking the mental energy you would have expended on "investing" and subsequently worrying about your money, and instead funneling it into your creative endeavors. You will make more money that way, especially when you take a long-term view. (Think about Einstein and the story about him having a closet of identical suits; except what I am talking about here is way less extreme and way more obvious.)

I have a rant about how peoples' "investing" according to the modern American model is actively making the world a much worse place than it ought to be, but this post is already long enough.

Who in their right mind would follow this advice? Let's say we don't worry at all about saving money, and just funnel our energy into "creative endeavors." If those creative endeavors are profitable, what are you going to do with the money?

It doesn't take a lot of energy to setup a 401k or Roth IRA. It doesn't take a lot of energy to pick an asset allocation that protects you from most risks. For example, a bond allocation will protect your money during a period of deflation, while a gold allocation will protect your money during periods of inflation. A stock allocation will grow your money during periods of prosperity. Just pick a good allocation and rebalance yearly. It should only take you a couple hours a year to worry about it, and you'll be exponentially better off at retirement than someone who stuck all their cash in a mattress.

That's pretty clearly not what was said.

The upshot is that you are better off taking the mental energy you would have expended on "investing" and subsequently worrying about your money, and instead funneling it into your creative endeavors

If creative endeavors are profitable, you can use the resulting money to fuel more creative endeavors, thus making the world a better place. Keeping money in a bank account or publicly-traded stock does not particularly make the world a better place.

Once I got approximately into the f-you money level of income, it became crystal clear how fictitious money is in the first place. I wake up one morning, and bam, I am wealthy! Why? Because someone said so and typed a number into a computer. Okay... that's kind of weird.

Given that money is so fictitious and somewhat meaningless, it is a shame to give into primal hoarding impulses, just so one can see the number in one's bank account go up like a high score in a video game. It's much better to make like Elon Musk and use your money for what it is: a way to wield influence to make the world more like you would like it to be.

You can typically loan to yourself, especially for things like first home ownership (considering the average age here, most of us are probably in that bucket).

Why do you say that? It is clear that money can be made investing with less than an 8-figure sum. For instance, the Vanguard S&P500 index fund returned 22% last year and 10.66% since its introduction in 1976. The fund minimum is $3,000.

Yes, money "can" clearly be made investing, if you time the market and are lucky. I am disputing the idea that stocks will always generally go up. I think this used to be true but may have changed. Much like "housing prices always go up", which was shown to be absurd.

A) People who don't invest

B) People who bailed at the bottom of a downswing

Everyone who rode out the recession without panicking has made their money back. I've made a good deal of money over the last 5 years with nothing more than 2 ETFs and automatic contributions each week (dollar cost averaging), and percent based rebalacing. So I do maybe 2 or 3 things a year above and beyond the automatic deductions.

It's really not difficult, and its not all that risky. Check out the Truth About Money by Ric Edelman, or just listen to some of his free podcasts.

See: http://www.ritholtz.com/blog/2010/03/vanguards-broken-buy-ho... & http://www.ritholtz.com/blog/2010/12/buy-hold-vs-trend/ - Yes both sources are the same author but I really respect Barry Ritholtz's views and he's hardly the only one making this argument.

Trying to pick individual stocks can be a foolish endeavor, but buying trends, whether it is index funds over certain periods, various sector/commodity ETFs, and yes, companies with great stories is what I try to do. I'm young (27), and the advice I've gotten consistently is at your age take some risks. So right now I have a managed portfolio, some bonds/MLP/MLP funds for income, and some short term positions in individual stocks and commodities. Oh, and a short on a particular content farm :)

Step 1 was digging myself out of the hole, which didn't take too long -- paid off the cars and the CC debt.

I use EmigrantDirect for a Savings Account, they pay 0.9% on balances currently, generally they are very competitive. Transfer are easy.

I use an EmigrantDirect Mastercard for all my purchases. If you maintain a greater than $10,000 balance in your savings you get a 1.4% cash back on all purchases. Doing this is a nice way to handle things, all your bills are consolidated, and you get cash back. Of course pay it off in full each month, treat it like a charge card, not a CC.

I do not currently get a match on my 401K, and I do not like the investment options much, therefore I do not use it -- I instead max out a Roth IRA, and put money into a taxable account.

I tried very hard during the downturn to push as much money as I possibly could into stocks, ignoring whatever fear I felt. As things have rebounded I am sitting on a portfolio with very nice paper returns. I favor companies with high ROE and what appear to be sustainable cash flows. I favor international exposure. And I like dividends.

I am however finding it difficult to find that much to invest in currently, my money has been going into cash for some time.

I'm not really sure what comes next...I still consider houses overpriced relative to rents, tho depending on what inflation may do, it might make sense to purchase one. Still pondering that one.

I totally agree on housing. Mortgage rates aren't going to get any cheaper ever again (although I said the same thing in 2003) so it is a good time to lock in a low rate. But, I live in the SF Bay Area and rents are so cheap compared to housing prices (still) that it would be really hard to up our housing costs by 50% (at least) and move into a worse place. Unfortunately, the wife has her heart set on home ownership so we might wind up going that way.

our 401k's are maxed out.

I shop around for the best savings account rate. I wind up changing banks every year or two.

I pick stocks and hold for the LOL's. Currently getting a 12% APY on about $5000 invested. No real plan and not interested in dumping a ton of money there. It's just more interesting than the casino.

We bought the house we're going to die in. paying it off asap.

After the house is paid off we'll probably buy something else. I REALLY want to build a self-storage building on some cheap land. She wants a condo on a beach. We'll see.

Another thing to consider is the banks that offer cash to open an account. I put $2500 in a new ING Direct account for 6 months and they gave me $50

http://www.communitywestbank.com/personal/checking/GreatRate...

Since I last checked they have dropped the rates to 3%.

I'm 100% sure that is a promotional rate.

It does come with minor strings attached. You only get the high interest up to 15k, you have to use the debit card attached to the checking account 10 times per month (which is simple for me) and you have to get your statement electronically, not by mail.

http://www.communitywestbank.com/personal/checking/GreatRate...

If the renter defaults, the storage company typically (through contract) owns the material inside and can sell it off at auction.

There should be an episode of Hoarders where they find crazy people that have been storing junk in self-storage facilities for decades and look at what exactly they have that is so important that they need to lock it up for years and never see it or touch it.

http://www.thisamericanlife.org/radio-archives/episode/399/c...

That said, self-storage isn't just for people who can't stop accumulating stuff. In cities like San Francisco and especially Manhattan, it often makes sense to put rarely-used or not-yet-used items in storage, like camping gear, or heirloom furniture that you don't have the space for at the moment.

I've found self-storage useful when moving between cities -- it's hard to predict exactly when you'll find the right place, so it's a reasonably cheap way to buffer the transfer.

One time he got a corvette. Dissassembled, inside a storage shed.

Apparently the way it works is they open the door and let you look in, but you can't actually go inside and see what's in the boxes or whatever. So it's kind of like gambling, bid on a room and hope you find something good to resell.

I may be crazy but I rather invest in myself that in a company I have no control over. When the time will come, I'll sell it and get most of my money out of it. Maybe reinvesting in another and make more out of a better initial investment.

I already created thousands of dollars from an initial 500$ investment and time.

Does someone else here thinks like that?

its sort of an "all your eggs in one basket" strategy, but if you're going to put all your eggs in any particular basket and you're good at what you do, you're as good a bet as any (and you can make sure your investment manager isn't slacking)

Although, I haven't gotten around to implementing it, I think there could be a powerful concept, which I'll personal hedging. The idea is to think of your investment as a hedge against the costs of things you want to buy in the future. So, suppose you are investing to retire. 1) Track your expenses 2) Figure out what your expenses will be when you retire. 3) Buy proportional share of the value chain for all the companies you will buy stuff from. Presumably, you want it waited to cover all your expenses. Now, this can get tricky because you may spend a lot of money with companies that aren't public, and some industries may be in a bubble. Further, you will have to shift your investments to reflect industry shakeups. For example, if you change your mind about what products you like, you would also change your portfolio. Industry changes would also affect, who in the value chain gets the profits, and conglomerates or weird capital structures can make this a bit tricky, but I think it is a powerful concept.

http://www.cdars.com/

I do try to shelter as much of my portfolio as possible since taxes reduce returns. I have a 401k, 403b, Roth IRA, Traditional IRA, 457(b)... (I've had a lot of jobs).

I have share trading accounts for savings I intend to use before retirement. One is for US shares the other for Australian shares.

The main use of this money would be to buy a house (in australia), if and when this ever makes any sense based on NPV calculations. I independently value any investment I make to the best of my ability.

I do not buy and sell assets frequently as I believe the market is probably very efficient on a short term basis (I know I don't know how to beat it). I tend to focus on longer timescale macro trends which I spend an enormous amount of time thinking about (for enjoyment, regardless of investment purpose). I would like to think (at least some) markets are not efficient on longer timescales (but short compared to my lifespan). I do not know if this is true, but I believe it probably is. This timescale is at least 5 years.

I rarely buy individual stocks, but there are some exceptions such as BHP as a proxy for commodities. I tend to buy targeted aggregate securities (ETFs are great) to get exposure to the trends I'm interested in. The less fees the better, so index tracking funds are preferred. I don't trust a random "expert" to be able to beat the market above fees. I know enough people in finance to know the way you get places is ability wear a suit nicely and talk confident (i.e. sell), independent of actual ability.

I rarely make large trades. If I'm moving from one asset (or cash) into another, I'll do so using a number of trades over a number of months.

I'm always diversified on a global basis. I always have some exposure to assets in the currency where my future expenses are likely to be incurred, even when I have a negative outlook on that currency (as is the case currently).

My wife and I both contribute maximum contributions to our 401K's (no employer match). This is ~$16.5K/year, and we pick the funds the 401k allocation is invested in. Like any 401k plan, the options are relatively limited anyway.

Our larger savings and retirement funds, and some other assets, are managed by a professional. We both have a higher-than-average amount of investment knowledge and experience, but it is really a full-time job. We don't have the time to obsessively watch market trends, do research, and then move investments around to maximize our gains.

We also keep (depending on various other factors) ~$70-$120K liquid at any given time. This is money in a decent interest-bearing money market account, short-term CDs (3-6 months), that sort of thing. It's basically our funds for emergency stuff, cover a job-loss (we both work in startup type businesses), buy a car, or things like that.

You can open your own tax-advantaged IRA.

The other issue we've run into is that there is some law that says (and I forget the exact details) 401k contributions from the highly-paid employees can't be more than x% greater than the average employee contribution in the company. So if you work someplace where several other people are not doing 401K allocations, you get a "refund" at the end of the year (has happened to both of us).

http://www.irs.gov/retirement/article/0,,id=202510,00.html:

"The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2011. This limit can be split between a traditional IRA and a Roth IRA but the combined limit is $5,000.The maximum deductible contribution to a traditional IRA and the maximum contribution to a Roth IRA may be reduced depending on your modified adjusted gross income."

Also, this table seems to agree:

http://www.irs.gov/retirement/participant/article/0,,id=2025...

This is for 2011, but my recollection is that 2010 had identical wording.

Ideally, having both accounts would give you 23K of tax-advantaged savings.

Until my loans are paid off, I will be sticking with just those 3 retirement accounts.

I pick my own ETFs because I'm super type A, but it's based on crowd appeal. So if I find 5 experts recommend an ETF, and it has a low management fee, I'm likely to purchase it.

I stick strickly to ETFs (but in all asset classes, such as bonds) because the rate of return generally exceeds CDs and Bonds, and I don't need the money at the moment. Plus, Bonds and CDs pay out so low that I'd rather just have my money in a high interest (hah) savings account.

What else do YOU have in mind? Feel free to find me on any of the networks listed in my profile if you'd like more feedback :)

Since I got out of tax advantaged accounts I now use an online broker to buy exclusively index funds. In the past I was only comfortable investing say 15% of my money (after living expenses), but now I feel comfortable investing 40-50%. I don't need to simultaneously keep a huge amount of cash savings because at any time I can sell my index funds and have the money in less than a month.

You also pay extremely low fees with index funds whereas 401k plans can have pretty high fees depending on the provider.

Right now, you probably have to earn about $23,000 (assuming 30% tax rate) just to invest the same $16,500. Then, you have to pay capital gains taxes or regular income tax every time you receive dividends, yields, or sell a stock at a profit. These taxes can eat anywhere from 20% to 38.5% of your profit on every single transaction.

If you sat down with a calculator and figured out the difference between saving $16,500 in a 401k and saving that much in a non tax advantaged account, you are literally throwing away over $1 million throughout the course of your career.

Not to mention, you can take a loan against your 401k if you really need the money.

Also, I find the concept of taking a loan on my own money detestable.

http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-...

I use municipal bonds to immunize my expenses (http://en.wikipedia.org/wiki/Immunization_%28finance%29). Municipal bonds (affectionately called "munis") are not subject to federal income tax because of a Supreme Court decision in the 1890s. Most states also exempt the interest on their own municipal bonds from their own income tax (of course, if you're in a state with no income tax like TX, then that's not really a problem). Furthermore, some states (like California) are constitutionally obligated to pay the interest on bonds before they allocate money to the the state's general funds.

My immunization strategy is simple: for every $10,000 I put into munis, I get anywhere between $40-50/month (average return on capital is in the 5-6% range these days) in passive income. Keep in mind that since this is not taxed, this translates to a pre-tax rate of return that's closer to 6.94%-8.33%, assuming a federal tax bracket of 28%; in reality it's a lot more because of FICA and state income taxes.

For long term growth and in tax-advantaged accounts, I use zero-coupon munis. Yes, being in a tax-advantaged account diminishes the allure of munis, but some of those bonds are now paying in the 7.5%-8.5% range.

It depends. Munis come in all flavors and sizes; the best ones IMHO are state-level "general obligation" (i.e. backed by state taxpayers) that do NOT fund revenue projects (this will make them taxable anyways). The second best ones, again in my IMHO, are classified as UTX ("Unlimited Taxation"), which gives the local government the power to raise local taxes in order to pay bonds. The ones I would be most worried about defaulting are the ones classified as LTX ("Limited Taxation") that fund revenue projects like local stadiums or toll roads; these bonds are paid back by the money collected by the underlying asset. Obviously, these would be the easiest to issue, as they do not require a referendum vote like UTX bonds, or state legislature approval like GO bonds.

Some states like California are constitutionally required to pay bondholders before any state-funded programs. Some states (like California) are also legally required to maintain a sinking fund, i.e. they can't make interest-only payments, but must also set aside money to pay back the principle owed to bondholders ever year. The "budget crisis" in California is because after paying back the 2 constitutionally mandated budget items, the state doesn't have enough money to keep the same level of spending as before.

In California, The interest on bond payments is an automatically budgeted line item every year; lawmakers can not change this without making changes to the state constitution.

"Default" doesn't always mean that the principal won't get paid back. In almost all cases, it means that timely interest payments won't be made. Even in the most recent bond crisis in Puerto Rico, the "risk of default" was somewhat mitigated by the threat of shutting down the government offices (i.e. put the employees on unpaid furlough) just so the Puerto Rico could make their bond payments.

IMHO, it would be political suicide for a municipality or state to let bonds default. Here's an interesting article on this subject:

http://www.publicbonds.org/public_fin/default.htm

The default in the 1975 New York case was for revenue bonds. I don't know the exact details, but they sounded like LTX bonds.

Anything beyond that I go for a regular IRA, although previously I had gone with a Roth IRA when I had a lower salary. The Roth has the advantage of being more flexible (use it on a house, education, medical expenses), but now that I'm in a higher tax bracket I just use the IRA and hope when I'm retired my tax bracket is lower.

I would NOT convert between an IRA and a Roth. In doing so you are betting that you will be paying higher tax rates in retirement than you are today employed.

This may on the surface look like a good bet considering the deficit, but it probably isn't. Nobody seems to have the stomach to lower taxes on the lower/middle class, and that's where you will be in retirement. Right now a couple options being floated are to eliminate all deductions and lower rates or to add more brackets at the top end and soak the rich, either way you are just as likely to be paying lower taxes in retirement as you are to paying hgiher. But one thing is sure, if you convert, you pay a lot of taxes now.

A significant portion of my personal wealth is tied up in my tech company's stock (>50%). Since this is a large position and completely unreasonable in any money management strategy, I attempt to balance it by being extremely conservative elsewhere (note: you can never truly manage such a high-risk exposure). This has led me to invest in gold, treasuries, and/or funds composed mostly of these components.

Having a major in economics and actively trading equities and options for some years, I personally believe it is foolish to try to trade these individually for all but the professionals. Actually, I believe even if you are a professional, you probably don't know how to trade these either, but that's another story. Bottom line: don't play a game when your the sucker.

Currently, I plow all my money back in to my company; I mean, at the moment I seem to be in a slow spot at the moment, but we doubled from 2009 through 2010, so while it's high risk, perhaps, it's likely I'm going to get better returns than I'd get from other investments without putting as much effort into being an investor as I put into being a business guy and sysadmin.

When I was young, this was certainly the right thing to do; When I make business decisions, I think as much about the long-term effect on my reputation as I do about the more short-term consequences for the business. (I'm the only shareholder, so there's no conflict of interest here. Either way, I'm "increasing shareholder value" as it were.) And in part because of that, I'm worth more as a worker than I otherwise would be.

The only real question now is "what point should I start becoming conservative?" if ever? I mean, I think I need to focus on getting myself more of a nest egg to cover unforeseen events, but I don't really have a lot of desire to 'retire idle'

Looking at my grandparents, the happiest of them seem to have an attitude of "I'll work till I drop" - I mean, they have assets that help, but they still work. One of my grandfathers, who is pushing 80 at this point, owns some small apartment complexes out in Illinois. He mows the lawns himself; I've even seen him do plumbing and even roofing himself.

To me, that's what I want out of retirement. Still work, but do so on my own terms. I mean, I don't know if I want that work to be maintaining old buildings, but you know, something combining my skills and my capital.

When it comes down to it, I guess that's what I have now. It would be nice to make a little more money than I'm making now, though.

  For me, bigger bankroll = higher score.
  For my wife, a bigger bankroll = more shopping.

2 Roth IRAs: maxed out (Vanguard S&P500 Index. 1 more year and it'll be 70/30 split with bonds).

1 brokerage: for fun, for research, for programming. Unfunded, no continuing additions. Go big or go home.

3 checking accounts: mine, wife's, joint - the paychecks

2 MMAs: mine, wife's - excess money must go somewhere. One of which is sub-divided into: health, gifts, emergency.

2 savings accounts: tiny siphons ($300/mo) that corrupt my sense of reality. It's money-out that looks like normal transactions.

Hacks: By having a high-deducible health insurance plan, I'm able to put 3k/yr that would have been my insurance premium into a health-related emergency fund. As long as I don't get injured in an at-fault car accident twice in one year, I'm saving tons of money

Edit: formatting.

Financially sophisticated individuals start with an asset allocation. For someone under 40 you should probably allocate around 30% of your assets to fixed income securities (probably half in treasuries and half in TIPS) and the remainder in securities that have more appreciation opportunity (10% in real estate, 35% in US equities, 20% in foreign equities and 5% in emerging market stocks). it's very hard to outperform the market in fixed income so i recommend buying treasury and TIPS ETFs. For your US, foreign and emerging market equity allocation you might want to try wealthfront.com to identify money managers who have outstanding track records (I am a co-founder of wealthfront). Wealthfront currently doesn't offer any real estate managers so a REIT ETF is probably the best bet.

So for me it's a basic auto-deduction 401k split equally into five low fee index and mutual funds. They rebalance annually. It's a dead simple dollar cost averaging approach that does well enough and I don't have to think about it.

Oh and FYI, both my parents are/were bankers. One is investment licensed, and I've worked as a banker in the past. So even with training in this area I choose the simple approach.

An excellent risk-return optimized investment is an ETF short on the bond market, such as TBT. Because it's traded as an ETF, your loss is limited to whatever you pay. Because it's a short on the bond market, whose yields are at multi-decade lows, it's got pretty decent appreciation-potential.

Plus you get the satisfaction of seeing all those financial services insiders (most of whom want a frothy bond market) suffer as you make money.

As such I have already given up on establishing a state-sanctioned retirement fund any time soon. Instead, I live frugally and save more than 50% of my post-tax income. Some of that is invested in funds because I can easily keep those wherever I will move to in the future.

Right now I am investing some of that in managed funds but I am not very happy with this and will probably move to index funds soon. I don't have enough confidence that my actively managed funds will beat the average market.

* I get 9% into my Superannuation account from every employer, period. I add to this an amount to make the government co-contribute (Up to $1500), but I'm no longer doing this as my income is now over the threshold where they will co-contribute. Although in some ways this is "Money in the bank", I'm not doing it ATM as I want to:

* Pay off my debt. I have a credit card and a car loan that I want to nuke. Once they're gone, I'll invest the money I'm using to pay them down.

* Then I'll save up 6 months worth of expenses, and keep that around.

* Then my plan is to invest Warren Buffet style: Pick an industry, learn voraciously, and invest in stocks for their dividend return.

* Max Roth IRA in long term trades.

* 401k up to employer match

* No mortgage, no car, no kids, paying under 10k school loan off

* I rent in the city, walk to work (no public transit costs) and each year I can upgrade or downgrade my monthly rent based on my income changes.

I'm thinking about buying a detached property (minor HOA fees) in Miami or Las Vegas in cash to move and dedicate full time working on my startup and trading.

* 401k maxed out to IRS limit every year primarily for tax benefit and retirement saving. Don't qualify for Roth and IRA.

* Two non-retirement investment accounts. Our expenses are lot less than income so all savings go to one investment account.

* One investment account has managed and index mutual funds and ETFs. Another smallish one is a 'play' account primarily with individual stocks, typically use quantitative trading strategies and macroeconomic trends.

* A saving account with emergency funds (six months net pay)

* No debt other than a smallish mortgage.

* We drive 10 year old cars. May buy a new one in late 2011.

My investment philosophy comes more or less from this interview: http://www.kirkreport.info/2009/03/qa-with-less-antman.html

I only own 3 ETF's - 50% VT, 20% RWO and 30% PCRDX. I'm investing for the super long run and think of stock downturns as a great time to buy more shares.

Investments: Purchasing rental property in the UK

* 401k, maxed to what my employer will match

* Stocks just for fun

* Bought a house when the market was extremely low

* Invested in myself; getting a Master's degree through my employer's gracious reimbursement plan

My father always told me to start young; max out the 401k and put even more away just in case. I wish I'd done more of that, as the longer I waited, the harder it became. Thankfully I started the 401k very early and never knew what I was missing. It helps to not see the money at all; checking on it every once in awhile instead.

In addition, I do have an investment account with Vanguard. My primary investments there are weekly contributions to one of their index funds. I also have some minor investments in various stocks. I've been buying Apple pretty consistently for the past two years.

1. I have a family (meaning I have more costs and more immediate investments I need to make, for example in the education of my children)

2. I believe that investing in my own company where I control the money and the effort involved has a vastly superior return than investing in a company that already had an IPO. There's no way those companies do the return on my funds, like my company does, if for no other reason than that they are already through their major growth phase (they already IPO'd). Add to that the level of control I have in my own thing, and it's clearly advantageous to invest there.

3. I believe stock purchases are akin to gambling. This expands my universe of possibly investments to other forms of gambling. It turns out that with some knowledge and practice it's possible to tilt the odds in your favor.

Given these rules and considerations I have a threefold investment strategy:

Cash is king. I keep large cash deposits available at all times, both in actual cash and in the bank. I invest a regular amount of my earnings from my job into my side business and my side business provides excellent returns and I've developed a way to scale those returns that I'll be testing this month (the ability to use in a leveraged way the money I invest into my side business, but with a higher maximum cap than I could reasonably put into the business). For my high risk, high reward "investment" I cut out the stock market altogether and literally go to a casino.

I suppose the final part of my portfolio might be the most surprising to HN. I can report that I've had excellent results in the casino. Sustainable advantage playing is possible. In 2009, I bought a vehicle outright with the proceeds from this portion of my portfolio.

If I didn't have a family, I'd be doing a more aggressive version of this where I'd have larger cash holdings (no family = way more money left over every month), I'd invest more in my side business, and I'd risk more at the casino.

Your goal should be to produce a machine that makes you money without your involvement, normally this is called a business, but if you have enough money, then the money itself can be this machine (through interest). To have that amount of money where it is sustainable requires roughly $4 million in cash (I've seen this number other places, the fabled "FU" money). It my belief that it's much easier to build a business that produces say $100k a year with minimal involvement on your part than it is to produce $4 million in cash (though it should be noted that if you produce a business that produces that much profit you're on your way to being able to trade it for $4 million in cash).

My personal opinion is that most stocks are over-valued, and my confidence is low in most of our current central banks. But hey, that's just based on my value system, your mileage may vary.

I'd recommend Roth to anyone who might want the cash for other investments later, especially entrepreneurs, unless you're in a top income bracket with literally no other tax writeoffs.

* Additional $200/month into a (taxable) mutual fund

* Whole life insurance through a solid insurer (Northwestern Mutual in my case).

* Rolled over all old 401(k)'s into a rollover IRA through my financial advisor.

Plan is to not have to work past 55.

I mostly invest in the s&p500 ETF (IVV) and high dividend yielding stocks. I also have AAPL and GOOG from long ago that I'm still invested in. Unfortunately I didn't buy very many shares of those. I have other individual stocks. I'm not a trader, I hold onto those stocks for a while.

I have a 30year mortgage for my house. I'm not in a big hurry to pay it off, even though we pre-pay a little. I rather use the money to put it into my savings or investment accounts.

Any last remaining dollars go into building equity and creating value for my shareholders (me and co founders).

well.. he will try to sell some of the bank services, but finally he was able to convice us to roll over IRA to our bank's IRA.

Although, there's definitely value in getting help from specialists in certain areas (estate planning, taxes).

Also, you'd probably want to go with a more broad-based index than DJIA or S&P500. Many fund companies have a "total stock market" funds where they attempt to literally buy a piece of every US stock, weighted by market cap, so you'd effectively be owning "the US stock market", rather than just large companies. There are also total international funds which do the same thing for all non-US stocks.

Also also, you should include bonds if you aren't already. Like with stocks, there are total bond market index funds for this.

In fact, if you just picked an allocation across "total stock", "total international" and "total bond" you'd pretty much be set. This is what Vanguard does for their target retirement funds: https://personal.vanguard.com/us/funds/vanguard/TargetRetire...

The expected cap rate (annual rent / purchase price) in on both the East Coast and West Coast is roughly 5-7%. In places like Texas and Ohio, the cap rate is roughly 10% Since a "competent" property manager (like myself =P) usually charges about 10-15% of gross rent, this means your expected cap rate will drop to about 4.5%-6.3%.

Expense rates are roughly mortgage (7-10%) + taxes (1-2%) + maintenance (1-2%). Most commercial properties also don't have a high expense ratio because tenants typically like to keep their places of business up and running. However, keep in mind that commercial properties are usually paid back a faster schedule (usually 10-20 years) than residential mortgages (usually 15 or 30 years), so there are much larger monthly payments.

People usually do real estate for the tax benefits; there are many common, legal and IRS sanctioned ways to create tax-free income streams. However, to get to that stage requires starting with a significant amount of equity.

I don't want to sound like I'm lying, so I'll provide a very benign example of the "common, legal, and IRS sanctioned" income streams,

Let's suppose that I have a house that's paid off. Instead of selling it and incurring all sorts of taxes, why don't I: 1) take out a mortgage against it 2) rent it out

The mortgage is not really income, according to the IRS, but a valid business expense. By renting it out, I get the tenants to pay back the mortgage for me.

The financial crash of 08/09 left such a bad taste in my mouth (as in I lost many tens of thousands of dollars) that I have completely lost faith in the stock market and anything associated with it such as ETFs, mutual funds, 401k, etc.

Getting a 'real' job and putting money into my retirement accounts lost me tens of thousands of dollars in savings (so think about how much lost time that is) and the job that paid for it all. Yes, it absolutely sucked. I was furious, with myself, with others, with my parents (who advised me), etc. It was a terrible time. I drank.

I was forced into doing a startup in Dec. of 08. It's been profitable since the first month. You would be surprised at how well you can focus when you lose your job and half of the money in your bank accounts in the course of one business quarter.

I now keep large cash savings, put a small amount into my retirement funds, invest the majority of my 'extra' money back into my startup.

I bought myself an expensive Porsche, an expensive condo, and started spending WAY more on luxury goods / eating out because losing $XX,000 after being 'responsible' makes you realize how TOTALLY unpredictable this life is, especially when it comes to financial matters.

After working about 3x as hard on a day-to-day basis and changing my spending habits to purchasing much more expensive things, I now have way more money than I ever did (in cash and cash equivalents as well as equity in a business). Go figure.

This post isn't advice, it's just an honest recollection of the financial transformation I went through in the past 2.5 years.

That's not to say that your startup isn't a better investment, though.

Maybe it's not the new normal, and maybe stock markets will start rising again as they have historically, but when you see a lull this long, it at least suggests the strong possibility of a pattern break.

It really makes me wonder about investing my savings into my tracker fund when I saw that. I'm in the UK, and my guess is, due to very tight correlation between the markets we did the same sort of performance.

So long term, market beating, savings beating growth, is not assured. Especially not in "developed" countries. If you think the GDPs of Western countries is going to start increasing (significantly) any time soon, please explain why!

So if it isn't assured, I've been looking into index tracked funds in other markets, particularly APAC. Not sure if it's a great idea, but probably better than a UK indexed fund. I figure it's probably worth a try.

It's totally about when you put in. My parents are still down on a couple of their funds from 1999 ish. Break even happened just recently for them. They'd have been better off with that cash in a long term cash bond.

Why are there so many angel investors right now? Because only high-tech is offering any appreciable growth in the USA.

* max out the company pension scheme in terms of contributions.

* continue to max out the UK tax free savings & investment schemes. It's only £10k ish a year but it starts adding up pretty quick.

* Currently almost half my cash savings are not in the UK, as interest rates here now are poor. I am considering an additional offshore savings account in an interesting APAC country. Maybe Singapore, as many rich people in APAC do their banking there.

* property - I expect I will look into forming a Ltd company as a holding company, where any income is heavily re-invested. This will probably be seeded with a small inheritance, or my cash savings if I don't burn through them when I get my business off the ground

* Yes, I will be investing in myself. One month in to 2011, progress is slow, but I will have a spare time business running by the end of the year.

Didn't John Keynes say:

"The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again."

Though apparently, he was talking about inflation in this case... but the point is, the nature of risk is such that while it works out on average, you still end up with an individual outcome at a fixed point in time which may vary a lot from the expected payoff. Not that I do completely agree with tastybites, but I see the logic.

That's not really the point, I think the point is that I shouldn't have been investing in something that could evaporate on paper in 3 months.

Either way, yes, the point is I'm a terrible equities/retirement investor and a better small business person. Everyone here has excellent reading comprehension, as I would expect on HN.

> That's not to say that your startup isn't a better investment, though.

I didn't sell at the first sign of danger (first of all - selling at the first sign of danger would have been a GOOD idea, but my father, the successful older investor, told me to hold on as it crashed.). I sold after the market had come back by around 60-70% from the lows. That was good enough for me, especially since another 'double dip' was a very real possibility in the beginning of 2010.

If I had sold at the bottom I would have lost nearly everything. But I finally liquidated after my startup was consistently making money and I actually wanted the cash to put back into the business / spend.

Keep in mind I was never broke - I just had a large proportion disappear for a while. That drove me to do 'smarter' things with it after some of it came back.

Having said all that, "You should have held on to it" is standard 20/20 hindsight that makes a market crash sound so predictable. I think I had pretty good forward-sight given the situation.

The only way to real be secure is diversification and never stop innovating and hustling. If you do you'll get burnt no matter what you have your wealth in.

"You should have held on to it" is not hindsight, that's typically stock market investment advice. Unless a company's stats have changed to the point where it's now a bad investment, you should hold it and ride out the storm.

You must have missed the part where I didn't sell at the bottom, started a profitable company, liquidated the equities to invest into myself at +60% off lows, and then came out ahead 2.5 years later.

'Oh you should have held' is hindsight advice, it's not real advice. It isn't even really saying anything at all. It's just something you say after you hear someone's story about how they lost money.

  > 'Oh you should have held' is hindsight advice, it's not real advice.

I think at this point you're just trolling me now, so I'll end it with one more point:

If you know anything about Warren Buffett, you'd know his main thesis is to invest in only the things you understand. That's the advice I ultimately followed to end up in a better place.

Holding onto investments that you don't understand is not his advice at all - that's just a shitty platitude.

Selling before the bottom and buying before the climb is the right thing to do, but if you can do that, you're not spending time reading HN, you're either working hard as a trader or relaxing on your desert island.

"I realize the general consensus around here may be that the best investment would be in yourself (have 25k? start a business!), but surely some people have "normal" investments, too. How do you hack it?"

Congrats on making this decision to do a startup, but that's not what he is looking for.

For what it's worth, I think that the way "big money" wins and "little guy" loses is exactly because of this. When people lose a ton of money, they lose confidence in the market and don't get to make much of it back in the subsequent rebound. To answer the OP's point, I invest in tech stocks/ETFs that I understand. I cut my losses very quickly, but buy more shares on my way up if it's going up. That's how after taking only a 10% loss in the market collapse I grew my portfolio about 80% the past 2 years in the recovery. Good luck! If you want more thoughts/ideas definitely email me- in profile. I'd be happy to discuss.

I put a small amount into my retirement accounts while spending or investing mostly on my startup business, real estate, sports cars, and keeping cash.

Which post was more interesting to read?

My 401K got torn to pieces during this recession. My first reaction was "How can I buy more?". That's when I started maxing out the 401K and buying additional stock in the form of index funds. Those actions have made my personal recovery from the market plummet much quicker with the upside that I now own stock with a lower dollar-cost-average.

But remove that cashflow and the options start to dwindle.

For one thing, I generally advise people to try to be prepared for future financial catastrophic events (job loss), but also enjoy the fruits of your labor in the short-term.

Also, most of history has proven out that the most reliable path to wealth is self-employment/entrepreneurship. However this also has very high risks, so if you're not ready to FULLY commit, your best option might be a 9-to-5 and a slightly less spendy lifestyle.

* I have a Zecco trading account (it used to be nice, cheap trades)

* I pick individual stocks only, doing my own research. Mutual funds and ETFs are OK for long term investment. I've looked at at stock recommendation sites like covestor.com, kaching.com and collective2.com, and they do have some amazing traders, so you can just mirror them (I'm kind of hesitant to do that, not sure why).

I'd be hesitant to do that because even a broken clock is right twice a day. I haven't looked at covestor in a while but, IIRC, you couldn't see what the other guy was invested in until you committed capital. If I can't see his investments or perform other due diligence, I have no idea what kind of risks he's taking to generate those returns. I'm much happier with my portfolio - which is designed to track the MSCI World Index and reduce risk - than I would be with some crazy trader gambling with my money. I beat the MSCI by 3 points last year which is an acceptable return and I sleep like a baby :)

* Maximum contribution percentage to a 401k, whenever possible.

* Maximum contribution to a Roth IRA. The 401k reduces your AGI, allowing this until you reach quite a nice income level. Even during unemployment, I contribute to my Roth IRA.

* Reduce fees! 0.25% interest is wiped out by a single $9.95 fee. I've moved to Charles Schwab for personal money, since they have no balance fees, decent investment options, and they fully refund all ATM fees around the world. I've rolled over old 401k's into a Vanguard IRA, since Vanguard has the lowest fund management fees in the industry.

* Don't be jumpy. If you're like me, you're actually horrible at individual stock investment. So, stick to mutual funds, and only look at them and reinvest once or twice per year. I suggest looking at targeted retirement funds (like the Vanguard 2040 that I use), and index funds.

* Keep 1 - 2 years of cash on hand. Everyone used to laugh at this figure, since who would be unemployed that long? That cash means that, instead of sitting at home, waiting for the market to improve, I was able to sell my stuff and spend extended periods traveling.

Most of you on HN are quite young. The younger you are, the more valuable it is to begin investing right now. Hell, if you're 17, do everything you can to throw $500 into an IRA. Even if you're working at McDonald's and dreaming of a startup, you can use an IRA contribution to cut your taxes.

Index funds is slightly better than mutual funds by-itself but not much better.

There's no substitute for doing your own reading and research. Some good authors to start with are John Bogle, Larry Swedroe, Rick Ferri, Peter Bernstein, Nassim Taleb, William Bernstein, Burton Malkiel, Harry Browne. Don't invest in anything you don't understand, and don't trust any investing concept that can't be explained to you in 5-10 minutes.

The learning process should take you at least 6 months. Whenever you think you've got it figured out (most financial authors present their ideas in a very convincing, absolutist way), keep reading, because the next book might change your mind. In the meantime, put your money in a safe place -- bank CDs or short-term Treasurys -- and don't touch it.

I might buy rental properties later or something.

I'd rather die sitting on a motorcycle than on a bunch of equity that won't help me in the grave. I'm not an Egyptian Pharaoh.