Author Topic: Why DIY Investment Sucks  (Read 8803 times)

Kaspian

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Why DIY Investment Sucks
« on: June 17, 2016, 12:29:10 PM »
http://www.cbc.ca/news/canada/nova-scotia/retiree-pension-halifax-investing-firefighter-1.3614880

Not Comedy because: Sad for this dude who decided to take a lump-sum instead of his pension, become DIY, spend the majority of it, put some in bad investments, and then rack up debts.

Comedy because:  Seriously--did active financial advisors pay for this article?  The mood and title is why you shouldn't DIY and serves as an alarmist warning as to why not.  PLUS, he's not even a "DIY investor" my mind.  You might have to actually read a book, or at least a blog or two, know some terminology, and not just throw it all into GICs (CD's for the US folks) making less than 2% a year.  This is like calling yourself a "DIY chef" because you boiled a kettle of water for instant soup.

Why do people spend more time planning a vacation or watching cat videos on YouTube than they do their investments for retirement?  (Facepalm.)

mizzourah2006

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Re: Why DIY Investment Sucks
« Reply #1 on: June 17, 2016, 12:44:44 PM »
http://www.cbc.ca/news/canada/nova-scotia/retiree-pension-halifax-investing-firefighter-1.3614880

Not Comedy because: Sad for this dude who decided to take a lump-sum instead of his pension, become DIY, spend the majority of it, put some in bad investments, and then rack up debts.

Comedy because:  Seriously--did active financial advisors pay for this article?  The mood and title is why you shouldn't DIY and serves as an alarmist warning as to why not.  PLUS, he's not even a "DIY investor" my mind.  You might have to actually read a book, or at least a blog or two, know some terminology, and not just throw it all into GICs (CD's for the US folks) making less than 2% a year.  This is like calling yourself a "DIY chef" because you boiled a kettle of water for instant soup.

Why do people spend more time planning a vacation or watching cat videos on YouTube than they do their investments for retirement?  (Facepalm.)

Sounds eerily familiar. My in-laws are both retired firefighters. They got the choice of the pension or the lump sum. They took the pension. Their friend said they were an idiot, took the lump sum. Spent almost all of it and lost most of the rest by panicking during the 2007-9 market collapse.

 For some people DIY investing does indeed suck. They just can't control themselves.

I know people on this forum like to make fun of these people and call them idiots, etc. But the truth is this is likely how the majority would act and is why almost everyone is perpetually broke.

Kaspian

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Re: Why DIY Investment Sucks
« Reply #2 on: June 17, 2016, 01:00:59 PM »
For some people DIY investing does indeed suck. They just can't control themselves.

I know people on this forum like to make fun of these people and call them idiots, etc. But the truth is this is likely how the majority would act and is why almost everyone is perpetually broke.

Exactly.  But it appears we now have to consider "DIY investors" as people who didn't even bother to Google "best retirement strategies".  Nope--show up at the bank, do something stupid, and they're off to the races.  The majority wouldn't show up with a guitar at a talent show if they'd never learned a damn things about playing guitar.  I cannot fathom the lacksadaisal attiude about one of the possibly the most important decisions of your life.  Errr...  I guess for that matter it's the same with children where I live, come to think of it.  The majority of parents here are these stunned-looking 19-year olds pushing carriages around because I guess they never took the time to learn how babies happen.  :(

mizzourah2006

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Re: Why DIY Investment Sucks
« Reply #3 on: June 17, 2016, 01:04:02 PM »
For some people DIY investing does indeed suck. They just can't control themselves.

I know people on this forum like to make fun of these people and call them idiots, etc. But the truth is this is likely how the majority would act and is why almost everyone is perpetually broke.

Exactly.  But it appears we now have to consider "DIY investors" as people who didn't even bother to Google "best retirement strategies".  Nope--show up at the bank, do something stupid, and they're off to the races.  The majority wouldn't show up with a guitar at a talent show if they'd never learned a damn things about playing guitar.  I cannot fathom the lacksadaisal attiude about one of the possibly the most important decisions of your life. Errr...  I guess for that matter it's the same with children where I live, come to think of it.  The majority of parents here are these stunned-looking 19-year olds pushing carriages around because I guess they never took the time to learn how babies happen.  :(

I fully agree. It boggles my mind at times. People spend their entire working careers earning money, but won't spend an hour to try to understand how to best handle it.

Kaspian

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Re: Why DIY Investment Sucks
« Reply #4 on: June 17, 2016, 01:30:16 PM »
The more I think about it, the crazier it is.

With little to ZERO knowledge or research would you rather:

a) Attempt to repair the engine of your own car.
b) Take apart your laptop to fix an issue where the screen doesn't come on.
c) Do your own dental work.
d) Invest $720,000 and hope it lasts you the rest of your life.

Why in the name of fuck would people never think to do a), b), or c) but think d) is okay?  I mean, with the first two all you can do is maybe a few hundred to tens of thousands in damage, but the last is way more crucial and a three-quarters of a million decision for God sakes.  Many won't even bother to buy a book on the subject.  If anyone can explain this phenomenon to me, I'd really like to understand what's happening in the human brain. 

slugline

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Re: Why DIY Investment Sucks
« Reply #5 on: June 17, 2016, 01:51:39 PM »
Why would someone need to get a line of credit to pay income tax on a cash distribution? Seems like a straightforward case of overspending or "lottery winner syndrome" to me.

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Re: Why DIY Investment Sucks
« Reply #6 on: June 17, 2016, 03:12:09 PM »
Quote
"lottery winner syndrome"

This is totally "lottery winner syndrome". He took a lump sum and wasted most it.

     First he bought 2 new cars and renovated his house. The house for there son was a good idea, but now it sits empty, and should be sold or rented. Heck that would probably solve %90 of his problems right their. "He took out a $49,000 line of credit to pay the tax man. Seven years later, the balance owed has budged only $155" How do you pay a lOC and not make any headway, Oh right, you only pay the interest! His LIF went form $2000 too $1600 because he took out principle, and he wants to take MORE out. Does he not realize that if he gets his way, his monthly payments will be smaller still? In the end, he is going to pay a lawyer, too pay his bills for him? With his own money?

   I'm not even going to touch the blip about the horses.

Beard N Bones

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Re: Why DIY Investment Sucks
« Reply #7 on: June 17, 2016, 04:11:04 PM »
The more I think about it, the crazier it is.

With little to ZERO knowledge or research would you rather:

a) Attempt to repair the engine of your own car.
b) Take apart your laptop to fix an issue where the screen doesn't come on.
c) Do your own dental work.
d) Invest $720,000 and hope it lasts you the rest of your life.

Why in the name of fuck would people never think to do a), b), or c) but think d) is okay?  I mean, with the first two all you can do is maybe a few hundred to tens of thousands in damage, but the last is way more crucial and a three-quarters of a million decision for God sakes.  Many won't even bother to buy a book on the subject.  If anyone can explain this phenomenon to me, I'd really like to understand what's happening in the human brain.

I think Mr. King's statement still rings true.  That's all I've got. 
Do you really want to know "this phenomenon"?!!  Knowing whats going on in their brains would probably make you even more gobsmacked.

kayvent

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Re: Why DIY Investment Sucks
« Reply #8 on: June 17, 2016, 07:11:33 PM »
The more I think about it, the crazier it is.

With little to ZERO knowledge or research would you rather:

a) Attempt to repair the engine of your own car.
b) Take apart your laptop to fix an issue where the screen doesn't come on.
c) Do your own dental work.
d) Invest $720,000 and hope it lasts you the rest of your life.

Why in the name of fuck would people never think to do a), b), or c) but think d) is okay?  I mean, with the first two all you can do is maybe a few hundred to tens of thousands in damage, but the last is way more crucial and a three-quarters of a million decision for God sakes.  Many won't even bother to buy a book on the subject.  If anyone can explain this phenomenon to me, I'd really like to understand what's happening in the human brain.

I think it has to do with the Dunning–Kruger effect. A person who has never tinkered with electronics, mechanics, or physiology knows they know nothing. But we spend money every single day of our lives. "We've" exhausted our bank almost constantly and money always reappears to replenish it. Perhaps, and this is merely conjecture, that since we deal with personal finance each day we believe that that makes us sufficiently knowledgeable enough to not need to engage it in active study.

okits

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Re: Why DIY Investment Sucks
« Reply #9 on: June 17, 2016, 11:14:48 PM »
The more I think about it, the crazier it is.

With little to ZERO knowledge or research would you rather:

a) Attempt to repair the engine of your own car.
b) Take apart your laptop to fix an issue where the screen doesn't come on.
c) Do your own dental work.
d) Invest $720,000 and hope it lasts you the rest of your life.

Why in the name of fuck would people never think to do a), b), or c) but think d) is okay?  I mean, with the first two all you can do is maybe a few hundred to tens of thousands in damage, but the last is way more crucial and a three-quarters of a million decision for God sakes.  Many won't even bother to buy a book on the subject.  If anyone can explain this phenomenon to me, I'd really like to understand what's happening in the human brain.

I think it has to do with the Dunning–Kruger effect. A person who has never tinkered with electronics, mechanics, or physiology knows they know nothing. But we spend money every single day of our lives. "We've" exhausted our bank almost constantly and money always reappears to replenish it. Perhaps, and this is merely conjecture, that since we deal with personal finance each day we believe that that makes us sufficiently knowledgeable enough to not need to engage it in active study.

I imagine that's a big part of it.  "I spend money every day!  I know how to manage this."

Also, I think people have a hard time mentally grasping big numbers.  "Three quarters of a million dollars!  That's so much money it'll never run out!"  With that mindset, it's easy to buy things to gratify yourself now (new cars, house reno), rather than staunchly guard the principal (no fun! Boring!) so that it continues to grow and pay out for the rest of your life.

That Motley Fool list of reasons why you suck at money has a great line about "you think a million dollars is some glamorously large sum of money when it's really the minimum needed to fund a pretty mediocre [non-Mustachian] retirement."

Sad about the guy in the article.  For some people, the allowance-system of a pension is just what they need. 

sleepyguy

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Re: Why DIY Investment Sucks
« Reply #10 on: June 18, 2016, 08:08:05 AM »
Yeah, it's pretty absurd.  There is the stigma of talking about money and admitting you know zilch.  I've spoken to people who have NO CLUE what they are invested in or what they are paying in fees.  I mean really?  You work 40+ hrs per week... for x amount of years and you have NO CLUE what you are invested it?  I mean just read 1-2 books on the matter to get a grasp.  This is your Financial Life... take control of it.

The more I think about it, the crazier it is.

With little to ZERO knowledge or research would you rather:

a) Attempt to repair the engine of your own car.
b) Take apart your laptop to fix an issue where the screen doesn't come on.
c) Do your own dental work.
d) Invest $720,000 and hope it lasts you the rest of your life.

Why in the name of fuck would people never think to do a), b), or c) but think d) is okay?  I mean, with the first two all you can do is maybe a few hundred to tens of thousands in damage, but the last is way more crucial and a three-quarters of a million decision for God sakes.  Many won't even bother to buy a book on the subject.  If anyone can explain this phenomenon to me, I'd really like to understand what's happening in the human brain.

kayvent

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Re: Why DIY Investment Sucks
« Reply #11 on: June 18, 2016, 10:12:16 AM »
Sad about the guy in the article.  For some people, the allowance-system of a pension is just what they need.

At first I did find the article ludicrous but then realized that this is a real person and it is a sad, devastating position they are in; almost 70, drowning in debt, nominal income inflow etc....

Dicey

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Re: Why DIY Investment Sucks
« Reply #12 on: June 19, 2016, 05:48:48 PM »
For me it was worth it to pay a Certified Financial Planner to manage my retirement savings. I don't want to be a financial idiot, but individual stock picking and huge market swings make me vewy, vewy nervous. I'm willing to pay a small amount to keep my portfolio balanced and rebalanced over a wide spectrum of asset classes, and keep me in the game when markets dump. YMMV, but I'm FIRE and free, so yeah, worth it not to end up like this guy.

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Re: Why DIY Investment Sucks
« Reply #13 on: June 19, 2016, 06:36:26 PM »
In order to do DIY investing you have to….know something about DIY investing.  Not just assume everything will magically work out after spending most of the money. 

I'm surprised that taking a lump sum was an option for him- it wouldn't have been for both myself or my husband (both of us being in Canadian pension plans).  I guess I'm seeing why they don't allow it as an option now!

Kaspian

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Re: Why DIY Investment Sucks
« Reply #14 on: June 20, 2016, 09:35:00 AM »
Also, I think people have a hard time mentally grasping big numbers. 

Wow, suprised you said that--I actually have a secret, arrogant theory that many people can't actually grasp a number larger than $7,000.  They're in shock that an all-inclusive vacation to Costa Rica costs about $3,000 so opt for Mexico at $1,200.  Yet the same people will think nothing about throwing down an extra $9,000 for features on a $35,000 truck or getting in a home bidding war and end up paying $80,000 over asking.   Over $7K it's like the brain switches off and starts accounting for thousands and though they were pennies.  $7,000 is visualized as huge but the difference between $420,000 and $480,000 seems quite trivial in the same mind.  (From my experiences.)  :(
« Last Edit: June 20, 2016, 09:39:28 AM by Kaspian »

MgoSam

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Re: Why DIY Investment Sucks
« Reply #15 on: June 20, 2016, 09:41:32 AM »
Also, I think people have a hard time mentally grasping big numbers. 

Wow, suprised you said that--I actually have a secret, arrogant theory that many people can't actually grasp a number larger than $7,000.  They're in shock that an all-inclusive vacation to Costa Rica costs about $3,000 so opt for Mexico at $1,200.  Yet the same people will think nothing about throwing down an extra $9,000 for features on a $35,000 truck or getting in a home bidding war and end up paying $80,000 over asking.   Over $7K it's like the brain switches off and starts accounting for thousands and though they were pennies.  $7,000 is visualized as huge but the difference between $420,000 and $480,000 seems quite trivial in the same mind.  :(

I think it's all about context. If you had to drive 15 minutes to save $10 on a $20 purchase, many people would do it. But if you had to drive 15 minutes extra to save $40 on a $4000 purchase, most people would decline even though they would be saving way more money for the same drive. Dan Arrielly mentioned it in one of his books and I believe he had a term for it.

I know that when I was buying my house, there was $3000 difference between what I wanted and what the seller wanted and I basically told my Realtor that I was unwilling to budget. She got the price I wanted by simply telling them that. It helps that the home had been on the market for over a year and had it's price lowered 6 times and they were still very little nibbles, but I was fully prepared to walk away and I think even my Realtor was surprised. I know my friends that were following this all were. The extra $300 would cost around $15/month in mortgage payments...

MgoSam

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Re: Why DIY Investment Sucks
« Reply #16 on: June 20, 2016, 10:03:15 AM »
In order to do DIY investing you have to….know something about DIY investing.  Not just assume everything will magically work out after spending most of the money. 

I'm surprised that taking a lump sum was an option for him- it wouldn't have been for both myself or my husband (both of us being in Canadian pension plans).  I guess I'm seeing why they don't allow it as an option now!

Absolutely! I honestly don't know what I would be doing with index funds. I don't really have the appetite for buying and holding stocks, and I know that I would spend a good chunk of my time researching and buying/selling (instead of holding) them instead of doing other productive things with my time. Additionally, I would be stressed during a downturn...instead of rationally knowing that in the long-term things will improve.

Kaspian

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Re: Why DIY Investment Sucks
« Reply #17 on: June 20, 2016, 10:06:23 AM »
I know that when I was buying my house, there was $3000 difference between what I wanted and what the seller wanted and I basically told my Realtor that I was unwilling to budget. She got the price I wanted by simply telling them that. It helps that the home had been on the market for over a year and had it's price lowered 6 times and they were still very little nibbles, but I was fully prepared to walk away and I think even my Realtor was surprised. I know my friends that were following this all were. The extra $300 would cost around $15/month in mortgage payments...

Well done!  I order computer equipment for our provincial government and I've noticed how people will quibble if an external hard drive costs $25 more than they expected but won't bat an eyelid if a large order for custom laptops costs $14,200 instead of $13,400.  Our group generally spends way more time with the ministry representatives quarreling over small numbers than large ones.  Penny wise, pound foolish.

MgoSam

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Re: Why DIY Investment Sucks
« Reply #18 on: June 20, 2016, 10:28:16 AM »
I know that when I was buying my house, there was $3000 difference between what I wanted and what the seller wanted and I basically told my Realtor that I was unwilling to budget. She got the price I wanted by simply telling them that. It helps that the home had been on the market for over a year and had it's price lowered 6 times and they were still very little nibbles, but I was fully prepared to walk away and I think even my Realtor was surprised. I know my friends that were following this all were. The extra $300 would cost around $15/month in mortgage payments...

Well done!  I order computer equipment for our provincial government and I've noticed how people will quibble if an external hard drive costs $25 more than they expected but won't bat an eyelid if a large order for custom laptops costs $14,200 instead of $13,400.  Our group generally spends way more time with the ministry representatives quarreling over small numbers than large ones.  Penny wise, pound foolish.

Thanks! I completely agree. For me, I figured that if I didn't get the house at this price, I would look on. Worst case is that I spend more time living with my friend or worst-case moving back in with my parents.

Kaspian

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Re: Why DIY Investment Sucks
« Reply #19 on: June 20, 2016, 12:01:30 PM »
Perhaps, and this is merely conjecture, that since we deal with personal finance each day we believe that that makes us sufficiently knowledgeable enough to not need to engage it in active study.

I think that's probably what it is--erroneous assumptions.  "I've never gone broke before, so I won't this time,"  while not seriously considering that circumstances have completely changed.  I'm pretty adventurous and have already done most of the things people have on their bucket lists, but I always read the instructions carefully and ask others in the know before proceeding.  It's a really dumb move to, because you can swim, dive headfirst into a lake without asking locals (or checking yourself) if there are rocks just beneath the surface.  ...But grown, otherwise intelligent adults still do it every year. 

I think it has to do with the Dunning–Kruger effect. A person who has never tinkered with electronics, mechanics, or physiology knows they know nothing. But we spend money every single day of our lives. "We've" exhausted our bank almost constantly and money always reappears to replenish it. Perhaps, and this is merely conjecture, that since we deal with personal finance each day we believe that that makes us sufficiently knowledgeable enough to not need to engage it in active study.

Thanks for that!!  Fascinating reading.  Hell, I might laminate it to remind myself to not be an idiot.

"The Dunning-Kruger effect...occurs where people fail to adequately assess their level of competence — or specifically, their incompetence — at a task and thus consider themselves much more competent than everyone else. This lack of awareness is attributed to their lower level of competence robbing them of the ability to critically analyse their performance, leading to a significant overestimate of themselves....In simple words it's 'people who are too stupid to know how stupid they are". "

Guses

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Re: Why DIY Investment Sucks
« Reply #20 on: June 20, 2016, 02:13:20 PM »
In order to do DIY investing you have to….know something about DIY investing.  Not just assume everything will magically work out after spending most of the money. 

I'm surprised that taking a lump sum was an option for him- it wouldn't have been for both myself or my husband (both of us being in Canadian pension plans). I guess I'm seeing why they don't allow it as an option now!

That's not why they don't allow it. They don't allow it because the actuarial payout value is much more now that interest rates are at their lowest historical values.

They touch on it in the article. If all the retirees elected to take the payout, it would basically bankrupt the fund.




johnny847

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Re: Why DIY Investment Sucks
« Reply #21 on: June 20, 2016, 02:18:57 PM »
Also, I think people have a hard time mentally grasping big numbers. 

Wow, suprised you said that--I actually have a secret, arrogant theory that many people can't actually grasp a number larger than $7,000.  They're in shock that an all-inclusive vacation to Costa Rica costs about $3,000 so opt for Mexico at $1,200.  Yet the same people will think nothing about throwing down an extra $9,000 for features on a $35,000 truck or getting in a home bidding war and end up paying $80,000 over asking.   Over $7K it's like the brain switches off and starts accounting for thousands and though they were pennies.  $7,000 is visualized as huge but the difference between $420,000 and $480,000 seems quite trivial in the same mind.  :(

I think it's all about context. If you had to drive 15 minutes to save $10 on a $20 purchase, many people would do it. But if you had to drive 15 minutes extra to save $40 on a $4000 purchase, most people would decline even though they would be saving way more money for the same drive. Dan Arrielly mentioned it in one of his books and I believe he had a term for it.

I know that when I was buying my house, there was $3000 difference between what I wanted and what the seller wanted and I basically told my Realtor that I was unwilling to budget. She got the price I wanted by simply telling them that. It helps that the home had been on the market for over a year and had it's price lowered 6 times and they were still very little nibbles, but I was fully prepared to walk away and I think even my Realtor was surprised. I know my friends that were following this all were. The extra $300 would cost around $15/month in mortgage payments...

It's utterly ridiculous how many times I've seen people make money relative this way. It's so deeply ingrained they they don't even realize what they're doing!

And then some people still don't understand how this is a fallacy after I explain it to them. Sigh

MgoSam

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Re: Why DIY Investment Sucks
« Reply #22 on: June 20, 2016, 07:00:32 PM »
Also, I think people have a hard time mentally grasping big numbers. 

Wow, suprised you said that--I actually have a secret, arrogant theory that many people can't actually grasp a number larger than $7,000.  They're in shock that an all-inclusive vacation to Costa Rica costs about $3,000 so opt for Mexico at $1,200.  Yet the same people will think nothing about throwing down an extra $9,000 for features on a $35,000 truck or getting in a home bidding war and end up paying $80,000 over asking.   Over $7K it's like the brain switches off and starts accounting for thousands and though they were pennies.  $7,000 is visualized as huge but the difference between $420,000 and $480,000 seems quite trivial in the same mind.  :(

I think it's all about context. If you had to drive 15 minutes to save $10 on a $20 purchase, many people would do it. But if you had to drive 15 minutes extra to save $40 on a $4000 purchase, most people would decline even though they would be saving way more money for the same drive. Dan Arrielly mentioned it in one of his books and I believe he had a term for it.

I know that when I was buying my house, there was $3000 difference between what I wanted and what the seller wanted and I basically told my Realtor that I was unwilling to budget. She got the price I wanted by simply telling them that. It helps that the home had been on the market for over a year and had it's price lowered 6 times and they were still very little nibbles, but I was fully prepared to walk away and I think even my Realtor was surprised. I know my friends that were following this all were. The extra $300 would cost around $15/month in mortgage payments...

It's utterly ridiculous how many times I've seen people make money relative this way. It's so deeply ingrained they they don't even realize what they're doing!

And then some people still don't understand how this is a fallacy after I explain it to them. Sigh

I just realize that I made a colossal typo. Instead of saying, "I refuse to budge," I wrote, "refuse to budget."

I feel like this is a blunder so large, I should be the one to point it out.

Kaspian

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Re: Why DIY Investment Sucks
« Reply #23 on: June 21, 2016, 12:00:22 AM »

I just realize that I made a colossal typo. Instead of saying, "I refuse to budge," I wrote, "refuse to budget."

I feel like this is a blunder so large, I should be the one to point it out.

Haha...  Only a Mustachian's hands would be so used to typing "budget" they'd just do it automatically if the same key sequence began a different word.

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Re: Why DIY Investment Sucks
« Reply #24 on: June 21, 2016, 04:30:43 PM »
The extra $300 would cost around $15/month in mortgage payments...

All posters have valid points, but in my anecdotal experience ^^^ this is is how people think.  With large purchases most people finance and in finance the only thing that matters is monthly payment.  What's an extra 15 or even $100/mo in a home bidding war, when you REALLY want the house?  Well, at today's rates its 25K!! Not to mention future value. This is why the YMOYL or expected value perspective on spending/investing is so crucial for financial success.

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Re: Why DIY Investment Sucks
« Reply #25 on: June 21, 2016, 05:45:56 PM »

Quote
Freeman [a CFP] says there might be another option for people in Ballard's situation. Freeman says LIF owners can buy a life annuity, which are sold by insurance companies and some financial planners. Freeman says "it freezes the damage" by allowing the investor to lock into a guaranteed payment for life, similar to a pension.

From one shithole to another.

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Re: Why DIY Investment Sucks
« Reply #26 on: June 29, 2016, 09:02:32 AM »
The extra $300 would cost around $15/month in mortgage payments...

All posters have valid points, but in my anecdotal experience ^^^ this is is how people think.  With large purchases most people finance and in finance the only thing that matters is monthly payment.  What's an extra 15 or even $100/mo in a home bidding war, when you REALLY want the house?  Well, at today's rates its 25K!! Not to mention future value. This is why the YMOYL or expected value perspective on spending/investing is so crucial for financial success.

Sadly I agree completely. There's a reason that many restaurants don't bat an eye at swiping credit cards even though it eats up a sizable portion of their revenue, and that's because people are spending way more than they would had they paid with just cash. Dan Arrielly has written about how the further someone gets from physical cash, the less valuable they think it (paraphrasing his argument). I feel like restaurants have raised their prices by like 10% minimum and no one has noticed because they simply offer their card.

sleepyguy

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Re: Why DIY Investment Sucks
« Reply #27 on: June 29, 2016, 01:13:21 PM »
If it helps you sleep at night and playing a "financial professional" fees... then all to you.  But keeping a basic ETF asset allocation and basic (once to twice) a year is so easy imho.  Setting up the accounts is probably the most difficult part (here in Canada anyway).  For us as we become more risk adverse we'll just change the allocation to more bonds vs equities... zero "stock" picking and stress.  And playing ultra low fees, and just $10 or less per transaction.

Mutual funds in canada are highway robbery... on top of that if you use a "financial planner" all kinds of front load, backload bullshit... it's really is absurd how much people are paying for zero service to be honest.

Now if there was tax planning, tax efficiency, asset planning etc etc... yes that is worth paying for... but those joesmoe advisors know jack shit about that.

For me it was worth it to pay a Certified Financial Planner to manage my retirement savings. I don't want to be a financial idiot, but individual stock picking and huge market swings make me vewy, vewy nervous. I'm willing to pay a small amount to keep my portfolio balanced and rebalanced over a wide spectrum of asset classes, and keep me in the game when markets dump. YMMV, but I'm FIRE and free, so yeah, worth it not to end up like this guy.

Jack

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Re: Why DIY Investment Sucks
« Reply #28 on: June 29, 2016, 01:35:57 PM »
Errr...  I guess for that matter it's the same with children where I live, come to think of it.  The majority of parents here are these stunned-looking 19-year olds pushing carriages around because I guess they never took the time to learn how babies happen.  :(

http://fusion.net/story/293354/young-unplanned-motherhood/

(I'm not endorsing the mindset presented in this article, but I found the explanation of it interesting.)

With little to ZERO knowledge or research would you rather:

a) Attempt to repair the engine of your own car.
b) Take apart your laptop to fix an issue where the screen doesn't come on.
c) Do your own dental work.
d) Invest $720,000 and hope it lasts you the rest of your life.

Don't know about (c), but the sad thing is that none of the other three are even hard -- if you do the research first.

That Motley Fool list of reasons why you suck at money has a great line about "you think a million dollars is some glamorously large sum of money when it's really the minimum needed to fund a pretty mediocre [non-Mustachian] retirement."

Yep, people still think in terms of Guilded Age robber-barons, neglecting the century of inflation between then and now. "Billionaire" is the new "millionaire."

jinga nation

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Re: Why DIY Investment Sucks
« Reply #29 on: June 29, 2016, 01:55:56 PM »
The extra $300 would cost around $15/month in mortgage payments...

All posters have valid points, but in my anecdotal experience ^^^ this is is how people think.  With large purchases most people finance and in finance the only thing that matters is monthly payment.  What's an extra 15 or even $100/mo in a home bidding war, when you REALLY want the house?  Well, at today's rates its 25K!! Not to mention future value. This is why the YMOYL or expected value perspective on spending/investing is so crucial for financial success.

Sadly I agree completely. There's a reason that many restaurants don't bat an eye at swiping credit cards even though it eats up a sizable portion of their revenue, and that's because people are spending way more than they would had they paid with just cash. Dan Arrielly has written about how the further someone gets from physical cash, the less valuable they think it (paraphrasing his argument). I feel like restaurants have raised their prices by like 10% minimum and no one has noticed because they simply offer their card.

Also patrons are desensitized to price hikes with the miles/points/rewards earned via spending, especially if there are bonuses for dining.

AlanStache

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Re: Why DIY Investment Sucks
« Reply #30 on: June 29, 2016, 03:11:57 PM »
Kaspian you have talked to people IRL, like outside MMM?

I have nearly twisted family members arms to switch from expensive cell phone plains, the best I can work out why they dont is they dont want to spend 100-200$ up front on a new phone, I tell them that they will save that back in under a year and they think that is some idiotically long time.  Or maybe it is just change for them?  I dont know.  My mom actually said something like "I bet you even worked out the break even point", yeah I did, it took like 4 seconds, I pay 150$ up front but I spend 30$ less per month...  lets see here....

I think if anyone in the MMM forum with 100 or more posts looked at an actual budget from a random person in the US/Canada the words, "are you shitting me?" would be said a dozen times.


dandarc

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Re: Why DIY Investment Sucks
« Reply #31 on: June 29, 2016, 03:29:05 PM »
The extra $300 would cost around $15/month in mortgage payments...

All posters have valid points, but in my anecdotal experience ^^^ this is is how people think.  With large purchases most people finance and in finance the only thing that matters is monthly payment.  What's an extra 15 or even $100/mo in a home bidding war, when you REALLY want the house?  Well, at today's rates its 25K!! Not to mention future value. This is why the YMOYL or expected value perspective on spending/investing is so crucial for financial success.

Sadly I agree completely. There's a reason that many restaurants don't bat an eye at swiping credit cards even though it eats up a sizable portion of their revenue, and that's because people are spending way more than they would had they paid with just cash. Dan Arrielly has written about how the further someone gets from physical cash, the less valuable they think it (paraphrasing his argument). I feel like restaurants have raised their prices by like 10% minimum and no one has noticed because they simply offer their card.
No doubt this is the main reason - if we make it easier for people to spend more money, they will spend more money.  But another factor is that handling cash is not free.  Can be shockingly expensive - you have to count it and count it again and then the bank has to count it twice as well.  A lot of banks charge businesses for handling cash, or will start charging after a certain amount of cash is transacted in a month.  Easy for mistakes to be made, easy to be stolen - cash is not necessarily the great thing for a business that it is usually assumed to be by us regular-folk. 

Lots of downsides to cash for a retail business, although you pretty much have to take it, so some of the overhead is just going to be there regardless.  The variable component is enough that CC's can make sense on largely cost-of-business terms.

Sibley

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Re: Why DIY Investment Sucks
« Reply #32 on: July 03, 2016, 02:01:28 PM »
Thank god, my dad asked me about his pension. The company is trying to get him to cash out, and he wasn't sure what to do. I convinced him to leave it rather than cashing out.