Author Topic: Frugality is easier then Investing  (Read 4445 times)

Green Manalishi

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Frugality is easier then Investing
« on: February 17, 2012, 02:44:29 PM »
I think I have several aspects of Mustachianism well nailed down

-frugality and saving a large percentage of my salary
-debt avoidance
-stoicism
-self reliance
-learning some basic skills to reduce my reliance on tradesmen
-home gym with 500 kg of cast iron instead of a commercial gym membership
-10 year old car driven using basic hypermiling techniques

Good so far but I find the investing side troublesome. I have not been burned as such but am ultra conservative with my 'stache.  My "investment" strategy consist of certificates of deposit which are currently giving me net returns of between 0.7 and 1.7% above inflation depending on which measure of inflation I use.

Does anybody else feel the same way? Any fans of certificates of deposit here?

I wonder do people who do well at the frugality side often tend to be very/overly conservative when it comes to investing.   

arebelspy

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Re: Frugality is easier then Investing
« Reply #1 on: February 17, 2012, 03:40:25 PM »
My "investment" strategy consist of certificates of deposit which are currently giving me net returns of between 0.7 and 1.7% above inflation depending on which measure of inflation I use.


Where are you getting CDs with those rates?

Most current CD rates I've seen are at losses after inflation of 2.5-3% ...

Would be very interested in a place to get CDs at 0.7-1.7% above inflation rate!  :)


I wonder do people who do well at the frugality side often tend to be very/overly conservative when it comes to investing.

A strong correlation there wouldn't surprise me.   I think the more you learn, the more your fears will be assuaged.  Today's MMM post about asset allocation is a good place to start.  Educating yourself about investing will help you see, IMO, that it's maybe not as risky as you think.

Or you could read about the Permanent Portfolio, for example.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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Green Manalishi

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Re: Frugality is easier then Investing
« Reply #2 on: February 17, 2012, 04:02:01 PM »
Where are you getting CDs with those rates?

Most current CD rates I've seen are at losses after inflation of 2.5-3% ...

Would be very interested in a place to get CDs at 0.7-1.7% above inflation rate!  :)
Apologies, I should have explained that  I live in Ireland and my CDs are Irish government euro saving products giving up to 3.53% AER net.

As of December 2011 the Consumer Price Index here is +2.5%
While the Harmonised Index of Consumer prices is +1.4%

The lower inflation figure excludes  changes in mortgage interest, building materials, concrete blocks, motor and dwelling insurance and motor tax.

arebelspy

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Re: Frugality is easier then Investing
« Reply #3 on: February 17, 2012, 04:08:46 PM »

Apologies, I should have explained that  I live in Ireland and my CDs are Irish government euro saving products

Ahhh, gotcha. Thought I was missing an amazing offer or something!  That's not as terrible as it could be.

Anyways, like I said, start to read about asset allocation and ease your way into investing. You'll be glad you did.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

catalana

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Re: Frugality is easier then Investing
« Reply #4 on: February 18, 2012, 03:35:17 AM »
You might be right about the correlation!  I started investing when I started to rethink my lifestyle.  At that point it was a bit of a game, so I was gambling more than making the kind of decisions that make for good long term investing strategy.  I lost some money, but luckily the amounts were small.

As time has gone on, my lifestyle has become more and more frugal, and my investing has become more and more conservative.  I am still at the riskier end of the spectrum though, because my pension investments are funds in european small caps / commodities / basic consumer goods / tech and emerging markets.  My S&S ISA has changed a lot though, and now is mostly in dividend paying FTSE100 shares - no more small oil companies for me!

This still feels fairly low risk to me though because a) my early trades were off the scale risk-wise and b) my timescale is long - 25-30 years for the pension.

The timescale is one of the key points, and something you will appreciate if you read some of the recommended books on investing.  IF you have many years before the stash is required to produce an income, then you would be better to look at a growth strategy just now.  If you are already living off the stash then security of income (including an inflationary adjustment) is the key requirement.

Personally, when I start reducing the risk in my ISA and pension and moving to income producing investments, I will look at a mix.  I would anticipate that a mixture of bonds, inflation linked gilts and dividend paying large corporate shares will be what I go with.