Author Topic: Advice for $11,000  (Read 9215 times)

shine88

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Advice for $11,000
« on: May 06, 2014, 10:38:21 PM »
I'm somewhat new to investing and my head is spinning so thought to ask advice. I have about $11,000 to invest and I'm unsure what to do with it.
Background:
-I'm 26 making between 80-90K/year
-I have 4 Vanguard index funds that have reached admiral
-I'm maxing out my pre-tax contributions to my 401k through work
-No debt, no car, no house

Any ideas?

timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #1 on: May 06, 2014, 11:05:30 PM »
although this may sound "anti-mustachian" why not take some and do something for yourself? take a vacation. you cant buy experiences no matter how much you save.   another investment idea is why not another mutual fund? i index some and put some in fpa crescent fund. the guy who runs it, steve romick, is very smart, very conservative. he has outperformed all the indexes over the time i have been in it.
  saving and investing and everything is great but dont forget to live a little too. youre in your prime. THIS is your time, your life is NOW!

pom

  • Bristles
  • ***
  • Posts: 288
  • Location: Paris, France
Re: Advice for $11,000
« Reply #2 on: May 07, 2014, 04:04:49 AM »
Your life is now but it is also yesterday, tomorrow, a week from now and 30 years from now. It is not like the money will disapear if you do not use it right away.

That being said, a vacation can be a good investment but definitely not 11k worth of vacation.

My advice: your young at 26, just throw it into a total market fund and let it swing up and down while you collect the dividends.


Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3116
  • Age: 82
  • Location: The laboratory
  • Ghouls Just Wanna Have Funds!
Re: Advice for $11,000
« Reply #3 on: May 07, 2014, 04:26:37 AM »
Open a Roth IRA (I believe you're under the limits to be able to have a Roth) and fund it to the max ($5,500), in something like a total stock market fund. You can open a Roth with many investment companies, but the best is Vanguard, so VTSMX if there, and other places like Fidelity have their own total stock market funds (FSTMX).

The remaining $5,500 could go into a taxable account with the same fund, but it will produce a small amount of dividends, meaning you'll be paying a small amount on your income taxes depending on your tax bracket (it's not going to be hardly anything tho most likely due to the amount and the efficiency of the fund).

This is assuming that you already have an emergency fund of some kind, so if you don't, I'd locate as high an interest rate for a savings account as possible, and put the remainder in there as an EF.

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Advice for $11,000
« Reply #4 on: May 07, 2014, 10:03:05 AM »
You don't "invest" in a vacation.  The OP says s/he has $11K to invest.  I agree with Frankie's Girl.  Open a Roth IRA and max it out this year and every year in the future.  The other half goes into one of the index funds you already own.  Or two.

Le Dérisoire

  • Stubble
  • **
  • Posts: 105
Re: Advice for $11,000
« Reply #5 on: May 07, 2014, 10:38:35 AM »
although this may sound "anti-mustachian" why not take some and do something for yourself? take a vacation. you cant buy experiences no matter how much you save.   another investment idea is why not another mutual fund? i index some and put some in fpa crescent fund. the guy who runs it, steve romick, is very smart, very conservative. he has outperformed all the indexes over the time i have been in it.
  saving and investing and everything is great but dont forget to live a little too. youre in your prime. THIS is your time, your life is NOW!
This whole post belong in Antimustachian wall of shame and comedy.

It is so wrong on so many levels I don't even know where to start. We have "investing in a vacation", "investing in an active fund that always outperform the market", and "LIVE NOW by spending money". This is exactly why most people will never get ahead and have a middle class net worth all their life, including high-earners.

LuckyMe

  • 5 O'Clock Shadow
  • *
  • Posts: 14
Re: Advice for $11,000
« Reply #6 on: May 07, 2014, 03:56:15 PM »
Here are some places you can put this money in the following order of priority:

1. Emergency Fund - If you don't have one already, this is where extra money should go first.  Put down enough for 3-6 months of living expenses.  Ideally this would be a high yield online savings account or MMA.

2. Roth IRA - $5.5k annual limit. 

3. Taxable Investment Account - Figure out your desired stock/bond allocation, put the money into low cost index funds, and plan to stick with it for the long haul. 


TGod

  • Stubble
  • **
  • Posts: 125
  • Location: Vancouver Island
Re: Advice for $11,000
« Reply #7 on: May 07, 2014, 04:23:49 PM »
timmoney - do you actually exist or is this all a joke?
Quote
youre in your prime. THIS is your time, your life is NOW!
Did you get lost on the way to www.fastcoolcars.com. You realize you're posting on Mr Money Mustache right? RIGHT?

timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #8 on: May 07, 2014, 06:02:46 PM »
wow everyone hates me. thats ok. what is wrong with taking a couple of thousand dollar and having a once in a lifetime experience. im a life long saver and minimalist. i've been indexing since i was 18 and im now 42. when i was a kid when i got my birthday money my parents would take us to the mall  and i would go the bank and buy savings bonds. i was mustachian before there was a mustache. i have a little house that i afford easily, nearly 650k in savings and investments.  but there is absolutely nothing wrong with taking a bit of the money that you busted your ass to get and doing something for yourself. if you were on a diet youd have a cheat day wouldnt you? and so youd eat right all day and have a bowl of ice cream before bed. nothing wrong with that. just dont do it everyday. the point of life is to LIVE and take your pleasures once in a while. doesnt mean be foolish about it. youre only 26 once. you are preparing admirably for your future and my hat is off to you. youre doing the right thing keep it going. but that doesnt mean you cant have a little life too. youre not a fool with your money so do something you have always dreamed of. traveling and things like that are experiences money cant buy and are NOT a waste of money. so be amazed by the grand canyon, smell the surf in hawaii, watch the sun come up in the land of the rising sun, or maybe go to country of your grandparents or great grand parents, or march up to maachu piccu or get a few friends and go nuts in vegas for a weekend. experience is something no amount of money can buy and i dont care what anyone tells you.  if someone tells you different they havent done anything

timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #9 on: May 07, 2014, 06:32:31 PM »
and one more thing. before taking anyones advice always always always think, then do whats right for you.

for me i never regretted the few lost weekends in vegas, riding a bike along the irish countrside from castle to castle, backpacking in europe, "minding the gap" in london, the churches of rome, the steak in the tuscany, the craziness that went on in cancun, how amazingly beautiful the grand canyon is, zion and yellowstone national park , learning to surf in costa rica.   every one of those little adventures i'd pay anything if i could go back and do it again. and i plan on doing some more. thats called investing in yourself.
   money is extremely important. youre doing great. now do something.

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Advice for $11,000
« Reply #10 on: May 07, 2014, 06:35:55 PM »
You're missing the point Tim.  The OP asked how to invest.  Your idea was to spend it.  If the question was "How should I spend this money" instead of "How should I invest this money" you would've had a good answer.  Also, your speculation that shine88 doesn't travel or live life is based on what exactly?  The fact that s/he has $11k?

No one hates you, we just think you gave particularly bad advice based on the question asked.

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3116
  • Age: 82
  • Location: The laboratory
  • Ghouls Just Wanna Have Funds!
Re: Advice for $11,000
« Reply #11 on: May 07, 2014, 06:44:42 PM »
wow everyone hates me. thats ok. what is wrong with taking a couple of thousand dollar and having a once in a lifetime experience. im a life long saver and minimalist. i've been indexing since i was 18 and im now 42. when i was a kid when i got my birthday money my parents would take us to the mall  and i would go the bank and buy savings bonds. i was mustachian before there was a mustache. i have a little house that i afford easily, nearly 650k in savings and investments.  but there is absolutely nothing wrong with taking a bit of the money that you busted your ass to get and doing something for yourself. if you were on a diet youd have a cheat day wouldnt you? and so youd eat right all day and have a bowl of ice cream before bed. nothing wrong with that. just dont do it everyday. the point of life is to LIVE and take your pleasures once in a while. doesnt mean be foolish about it. youre only 26 once. you are preparing admirably for your future and my hat is off to you. youre doing the right thing keep it going. but that doesnt mean you cant have a little life too. youre not a fool with your money so do something you have always dreamed of. traveling and things like that are experiences money cant buy and are NOT a waste of money. so be amazed by the grand canyon, smell the surf in hawaii, watch the sun come up in the land of the rising sun, or maybe go to country of your grandparents or great grand parents, or march up to maachu piccu or get a few friends and go nuts in vegas for a weekend. experience is something no amount of money can buy and i dont care what anyone tells you.  if someone tells you different they havent done anything


Don't overreact. "Hate" is a strong word, and I doubt anyone feels that strongly about your suggestion. The fact is, however, the OP was saying they had 11K to invest and was posted in the subsection of investor alley, not "I have 11K - what should I do with it?"

Of course experiences are good to spend a bit of cash on sometimes, but your suggestion ignored what the OP was asking and basically was "go blow all that money on fun" (which you're now qualifying as "a couple thousand").

ETA: Eric beat me to it. ;)


timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #12 on: May 07, 2014, 06:53:00 PM »
its o.k eric. hated or not it doesnt matter. i wouldnt take it that personal and its a forum it should all be in fun.  i did offer him advice with my mutual fund suggestion. if you look at the track record of it he'd do bettter than indexing with it based on history and it could be part of a diversified portfolio. every portfolio should give yourself a chance to outperform with some of your money.
    i do think taking a once in lifetime trip is an investment. he's doing great with his savings, he's obviously responsible and im sure he will continue to be. and he's young. doing things when youre young is so much better. its still nice when youre older but theres something about being in your early to mid twenties. its kind of like the party is winding down and grown up life is about to begin. i say embrace it. do your once in a lifetime thing now. you may not get another chance

Hubbard521

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Re: Advice for $11,000
« Reply #13 on: May 08, 2014, 07:41:14 AM »
I would actually like to second Timmoney.  He has an entirely valid point.  While the OP should be mindful of the advice given (emergency fund > Roth > taxable), I think it’s only right to occasionally be reminded that you are in your 20’s and you need to live a little!  I’m 27 and am a VERY aggressive saver and investor – so much so that I occasionally feel like a miser.  It in invaluable to be occasionally reminded that one needs to enjoy themselves and to embrace occasional adventure and experience.

Well said, Timmoney.

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Advice for $11,000
« Reply #14 on: May 08, 2014, 10:33:31 AM »
its o.k eric. hated or not it doesnt matter. i wouldnt take it that personal and its a forum it should all be in fun.  i did offer him advice with my mutual fund suggestion. if you look at the track record of it he'd do bettter than indexing with it based on history and it could be part of a diversified portfolio. every portfolio should give yourself a chance to outperform with some of your money.

I'm sure he'll appreciate the on topic response instead of wild speculation about his (lack of) travel plans.

However, this is still bad advice in my opinion.  Why would you recommend a managed fund over an index fund?  What's the expense ratio that you're paying for these past returns?  Why do you believe that this fund will continually out perform the market in the future?

The fact is that fees are the biggest obstacle to building your 'stache long term.  Paying 1 or 2% is a huge amount over the long term.  That's why Vanguard index funds are so highly recommended here.  They have the lowest expense ratios.  Most fund managers have a chance to beat the market over the short term, but there's little chance that they'll do so consistently over the long term.

http://www.dailyfinance.com/2014/05/08/expense-ratio-mutual-fund-statistic-you-cant-afford-ignore/

http://investorplace.com/2013/08/when-does-it-make-sense-to-pay-high-mutual-fund-fees

https://personal.vanguard.com/us/insights/retirement/cost-affect-retirement-spending-tool
« Last Edit: May 08, 2014, 10:39:07 AM by Eric »

timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #15 on: May 08, 2014, 02:16:45 PM »
the fund i recommended has outperformed.  i'd suggest doing a google search on that funds manager, his track record and youtube him also. he runs his fund very smartly. i could go on and on with details. devote 20 minutes to him and his fund i think youll like what you hear. 
so much of investment decisions are individual choice. i actually hold a few individual stocks. two of which have 10% dividend yields.
 i own a number of individual stocks that have outperformed the market too.  that doesnt mean its right for everyone to do so. i enjoy researching and following them. i've had failures in that arena too but with a portion of your portfolio i think its a good thing to do.
  i also like investments called CEF's. theyre closed end funds but trade like stocks. what i like is they have to report their net asset value periodically and many sell at a discount to their assets and pay high yields. many in the municipal bond arena which i dont hear anyone mention municipal bonds here.   theres many different investment types and many ways of doing it. i believe indexing is great and where most of your portfolio should go but i think its smart to give yourself a chance to do even better with a small portion of your portfolio. like everything in life you must have an open mind not a one track mind.  and dont forget to live

Le Dérisoire

  • Stubble
  • **
  • Posts: 105
Re: Advice for $11,000
« Reply #16 on: May 08, 2014, 04:33:39 PM »
Timmoney, I'm sorry my post was harsh. The internet makes the human brain unsociable.

However, I still think that your advices were not appropriate.

On investing in a fund that outperform the market: Research proved over and over that past performance of a mutual fund does not say anything about future performance. The same is true for the apparent skills of the manager. Active investing is a losing bet (compared to indexing) because of the higher MER. It is not an opinion. I suggest some reading on the very famous French and Fama work.

On living NOW: Your advice is based on the very assumption that LIVING costs money. And the more you spend it, the more you live. MMM, not unlike the ancient stoic, is about questioning this assumption. Do people that spend more are happier or lived a better life? My personal experience tells me that the answer is no. The theories of prospective bias and hedonist adaptation also say no to that.

The others already wrote about "investing in a vacation".


timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #17 on: May 08, 2014, 05:08:08 PM »
Le D - no sweat about the harshness. Ultimately we all have similar goals here and interests. No need for any of us to get crazy.   My recommendation is of a particular fund- FPACX is the symbol. Please read about it. It's not a typical fund and the manager is great. His name is Steve romick. Google him. Read his interviews. Watch him on youtube.  He runs what he calls a " go anywhere" fund. I agree 99% of funds are the same and eat your money up with fees. I recommend this as a way of diversifying a portfolio as a way of getting some outperformance. 
   As for vacation recommendation I stand by it. The OP is very conscientious about saving and over time he's going to do great but there is more to life. Money is important but so is living which to me means doing something you don't normally do. When you're 26 you should be thinking BIG with everything you do. That is the time to take your shot at whatever it is you want to do.
   Life tends to beat us all up a little bit.taking pleasures now and again is as important as saving and investing. I have an 80/20 rule. 80% of my money I save and stash as smartly as I can, the other 20 I take investment risks, vacations, dinner out or what ever I want with and I don't worry about it and as I reach my financial goals I plan on making my 80/20  70/30 then 60/40 etc etc. when I'm on my death bed I don't want to think of my vanguard fund. I want to remember the feeling of freshness when waking up in a different place, the way everything feels new again when I come back home, I want to remember the crazy things I did when I was young, I want to remember just how beautiful my girlfriend looked and how great she smelled when we ate in "windows of the world" and even though it was waaaayyyy over priced I'd do it again because I can still see her like that. It's like a picture in my mind.   There's something called money well spent. Get value for the money you spend and then don't feel bad about spending it. Find YOUR balance.

timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #18 on: May 08, 2014, 05:25:01 PM »
But if its investment advice why not further diversify your portfolio
Check out municipal bonds
                How about a floating rate or bank loan fund or etf.
                How about buying an individual stock through loyal3.
                How about just keeping some in cash. Cash IS a position in an investment portfolio.
                Why not open a lending club account
                Why not look up insider buys and see what Bill Gross of PIMCO has been doing with his money. I've piggy backed his investments for years and always had great returns.
               Why not pick a stock or two yourself? Researching them will help feed that primal need to hunt and its not as hard as its made out to be to follow and despite the rumors YOU can beat the market.
            or  Why not buy TIPS or Ibonds

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Advice for $11,000
« Reply #19 on: May 08, 2014, 06:13:22 PM »
My recommendation is of a particular fund- FPACX is the symbol. Please read about it. It's not a typical fund and the manager is great. His name is Steve romick. Google him. Read his interviews. Watch him on youtube.  He runs what he calls a " go anywhere" fund. I agree 99% of funds are the same and eat your money up with fees. I recommend this as a way of diversifying a portfolio as a way of getting some outperformance. 

Why not pick a stock or two yourself? Researching them will help feed that primal need to hunt and its not as hard as its made out to be to follow and despite the rumors YOU can beat the market.

Dude, are you serious?  Or just seriously delusional?  Why are you telling people they can beat the market with your high expense ratio mutual funds or by picking individual stocks?  It's just plain bad advice.

http://www.forbes.com/sites/rickferri/2012/03/12/why-smart-people-fail-to-beat-the-market/

http://web.archive.org/web/20140208003542/http://jlcollinsnh.com/2011/06/02/why-i-cant-pick-winning-stocks-and-you-cant-either/

http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/



timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #20 on: May 08, 2014, 07:41:19 PM »
Eric you're leaping before you look. Why not look at he history of FPACX? Why not check out the manager like I said. I have been in this fund for 8 years and he's beaten my VTSMX.
 EGADS!!! Own an individual stock?!?!? Can't beat the market??? I say yes you can. I have personally. Have you ever tried? Do you ever question what you read?  Don't you think Bogle has a vested interest in making you think you can't? Dont you think statistics have been known to lie?
If you want proof I'll give you my top few stock picks and humor me and watch or we can make a friendly little wager on who out performs and test the theory of who can outperform. Here's my picks:
1- Howard Hughes Corporation- HHC. You like REIT's? How about a REIT that isn't a REIT, yet anyway. Sells for 149 as of today. I own it at 80. They're developing land in various parts of the country. Also has a sweet heart deal to develop the south street seaport in NYC. I live in NYC and can tell you they got that property for pennies on the dollar. Long term plan is to convert to a REIT. I'll bet you over the next two years it has 50% upside and more than that wouldn't surprise me.
2- Corporate resource services- CRRS. Sells for 2.30. I own it at 2.50. It's a staffing company. Obamacare is forcing companies to turn to staffing companies to offset that ridiculous healthcare plan.  These guys are writing a million paychecks a month. This stock will see $5 in the next year or two and I'm willing to bet it sees 3 or higher before June is out. It's 2 bucks so it can be volatile but it will outperform.
3- Fifth Street finance- sells for 9.10. Yields 10%. Net asset value is 9.85. Hows that for a bargain? thats a 7% discount to whats its worth and a 10% dividend on top of it. You won't get a lot of price appreciation but as long as it keeps paying out 10% I wouldn't worry too much about. It's distribution is monthly. As long as they keep paying10% you can double your money in 7.5 years. It's whats called a business development company. It's like lending club for corporations. I'm willing to bet this will at the very least keep pace with VTSMX and its dividend is so much larger even if it lags it by a percentage point or two it will more than make up for it.
    I DO WANT TO SAY 90% OF YOUR MONEY SHOULD BE INDEXED AND DIVERSIFIED- but don't think for one second you can't beat the indexes. You can. It's not that hard. I'll take those 3 stocks and FPACX and put them up against whatever indexes you pick. The gauntlet has been thrown down. What do you say?
   

TomTX

  • Magnum Stache
  • ******
  • Posts: 3975
  • Location: Texas
Re: Advice for $11,000
« Reply #21 on: May 08, 2014, 08:34:01 PM »
although this may sound "anti-mustachian" why not take some and do something for yourself? take a vacation. you cant buy experiences no matter how much you save.   another investment idea is why not another mutual fund? i index some and put some in fpa crescent fund. the guy who runs it, steve romick, is very smart, very conservative. he has outperformed all the indexes over the time i have been in it.
  saving and investing and everything is great but dont forget to live a little too. youre in your prime. THIS is your time, your life is NOW!

Expense ratio of 1.26%. Vomit-worthy.

What exactly is your relationship with FPA Crescent and/or Steve Romick?

And to quote the official FPA Crescent website: "Past performance is not indicative of future performance. "
« Last Edit: May 08, 2014, 08:37:21 PM by TomTX »

timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #22 on: May 08, 2014, 09:21:27 PM »
The post started with someone looking for something different to invest in. I have no relationship with FPA capital. I'm a nurse from New York. But I have invested in FPACX for the past 8 years and its been more profitable even after their fees than the vanguard total stock market index. I was simply sharing something that worked for me. FPACX isn't a typical mutual fund. It's basically a hedge fund in a mutual fund costume. Basically they can invest in anything they want. They can long long stocks, short stocks, buy bonds of any type, they have even bought things like hotels in Asia and farmland in the past. I first heard of them when romick was interviewed a few years ago when gold was running wild. He was asked what he thought the price of gold was going to and I loved his answer. I looked into him further and he's great. Kip lingers recommends him in  their top funds for years. Morningstar has honored him also a number of times. As for his answer on gold at the time he said "I don't know". He then went on to say he had bought some and did something else with it to I can't remember exactly and don't want misquote but finished by saying  "so if it goes up we're going to make some money and if it goes down we're going to make some money" and I thought that someone I want investing for me. Listen to his conference calls and he often says " with this fund if the market is up 20% we'll probably be up 15 but when the markets down 20% we'll probably only be down 15 and over time we expect to outperform" and the guy has for the past 8. And past performance isn't indicative of future performance with any investment. No one can tell the future. And if you want to judge based on the past FPACX wins over VTSMX.

SDREMNGR

  • Bristles
  • ***
  • Posts: 324
Re: Advice for $11,000
« Reply #23 on: May 09, 2014, 09:18:31 AM »
It's a free country.  I'm also heavily invested in Vanguard indexes but there are other ways to make money.  I own my own company which makes me money, and I own real estate directly which has also made me money.

The Internet Bogle heads are so cultist that they think their way is the only way.  For beginners, I do think it's the best way to get started,  but it's not the only way. 

For the OP, perhaps it is solid advice.  Really, anyone seeking investing advice from an online forum probably should stick to low fee index etfs, but to say it's the only way to invest is really idiotic.  Tell that to Zuckerberg and how "investing" his time and money on a dumb Internet website is worse than investing it in an index fund.  Or to Buffett that buying individual stocks (he buys them in gigantic sums) is dumb.

The hubris of the people who think it's the only way is disappointing.  And yes, I have read Malkiel, French, Fama, etc.  I took classes with Schiller in college.  All great people, all smart people.  But by definition some people are above average, some people are below average.

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Advice for $11,000
« Reply #24 on: May 09, 2014, 02:05:16 PM »
Eric you're leaping before you look. Why not look at he history of FPACX? Why not check out the manager like I said. I have been in this fund for 8 years and he's beaten my VTSMX.
Why would I care about the history?  Is that some sort of indicator for future success?  Of course it's not.  The only thing that's certain is that the expenses of this fund will outweigh the expenses of an index fund.

EGADS!!! Own an individual stock?!?!? Can't beat the market??? I say yes you can. I have personally. Have you ever tried? Do you ever question what you read?  Don't you think Bogle has a vested interest in making you think you can't? Dont you think statistics have been known to lie?
The majority of professional money managers don't beat indexes.  Why would I, as an amateur, think that I could do better than a professional?  I have no doubt that someone could get better than average returns in the short run, but over the long run it's unlikely to continue.  So no, I do not own any individual stocks because I do believe in statistics.  All the evidence is there in my previous links.  You're free to disregard it, but I prefer to make my decisions based on data.

If you want proof I'll give you my top few stock picks and humor me and watch or we can make a friendly little wager on who out performs and test the theory of who can outperform. Here's my picks:
1- Howard Hughes Corporation- HHC.
2- Corporate resource services- CRRS.
3- Fifth Street finance
I don't care about your picks.  I hope they all return 1000%.  The point was, and is, that telling a new investor that they should be picking individual stocks to beat the market is bad advice.  New investors should be in index funds.  Once they're no longer new investors, they can then decide for themselves if they think they're smarter and can do better than professional investors.  You're welcome to tell experienced investors your thoughts.  I could not care less.  But for this poster, who is a new investor, looking to invest for the long haul, the best thing they can do is avoid fees and get the average market return using an index fund.

    I DO WANT TO SAY 90% OF YOUR MONEY SHOULD BE INDEXED AND DIVERSIFIED- but don't think for one second you can't beat the indexes. You can. It's not that hard. I'll take those 3 stocks and FPACX and put them up against whatever indexes you pick. The gauntlet has been thrown down. What do you say?
If it's not that hard to beat indexes, why would you invest in index funds at all?  You could be FIRE'd way earlier with these higher than market returns that you feel are not hard to get.

----------------------------------------------------
but to say it's the only way to invest is really idiotic.  Tell that to Zuckerberg and how "investing" his time and money on a dumb Internet website is worse than investing it in an index fund.  Or to Buffett that buying individual stocks (he buys them in gigantic sums) is dumb.

The hubris of the people who think it's the only way is disappointing.  And yes, I have read Malkiel, French, Fama, etc.  I took classes with Schiller in college.  All great people, all smart people.  But by definition some people are above average, some people are below average.

I don't believe that I nor any other poster said that it's the only way to invest.  Of course investing in your own company or in real estate has merits.  Considering that the OP did not state that he owned his own company, I didn't believe it was an option in this case.  I also am not a real estate expert, so I have no opinions to offer the OP on that subject.  If he's so inclined, there's a whole subsection dedicated to that.

It was my opinion, based on the original post, that the poster was a new investor looking for how he should further invest.  It seems you agree that in this case, the OP may be better off in index funds than investing in individual stocks or taking a vacation.

It's a free country.  I'm also heavily invested in Vanguard indexes but there are other ways to make money.  I own my own company which makes me money, and I own real estate directly which has also made me money.

The Internet Bogle heads are so cultist that they think their way is the only way.  For beginners, I do think it's the best way to get started,  but it's not the only way. 

For the OP, perhaps it is solid advice.  Really, anyone seeking investing advice from an online forum probably should stick to low fee index etfs

timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #25 on: May 09, 2014, 02:53:06 PM »
there are many ways to invest. ultimately you must choose whats right for you. i find researching and following stocks and stuff fun. i would still index 90% because im not a professional. i even offered a fund that has outperformed yet the best you can come back with is past performance doesnt indicate future results- it says the same thing on vanguards site and fidelity and all of them. and your argument for index funds is also based on past results so your point doesnt hold water. you criticize my suggestion yet you never looked into the facts behind the suggestion. youre not really that closed minded? are you?
    i happen to think your advice is irresponsible. to just blindly throw your money into something and just look away without monitoring different things that can affect your principal is crazy. ask the people who left there money in the nasdaq 15 years ago when that went bust. theyre still waiting to get their money back. and there are major risk factors out there right now. dont you think everyone should have a plan in case a 2008/2009 scenario happens again? do we not have a unique situation ongoing right now as they attempt to end quantitative easing? that doesnt mean take your money and run right now but everyone should have a plan for if/when the shit hits the fan again.
 its also a good idea in my opinion to take profits every time you reach a certain percentage gain in your portfolio. i would keep contributing personally but whats wrong in taking a percentage of your portfolio off the table when it's up a certain percentage? protecting yourself if a major part of investing, in my view.  your view may be different and thats ok. we may both be right, we may both be wrong who knows but isnt the spirit of the whole forum to share ideas? or is this a whacked out cult where youre only allowed to think what MMM thinks?     when investing or making any life decision i suggest looking at and considering things from all angles

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Advice for $11,000
« Reply #26 on: May 09, 2014, 03:25:37 PM »
i even offered a fund that has outperformed yet the best you can come back with is past performance doesnt indicate future results- it says the same thing on vanguards site and fidelity and all of them.
That's because it's true.  Why would I need to "come back" with something other than that?  It's the truth.  Past performance really DOES NOT have any bearing on future returns.

and your argument for index funds is also based on past results so your point doesnt hold water.
Huh?  You understand how index funds work, right?  Past results of index funds will have the exact same outcome as future results -- the market average.  That's the definition of an index fund.  Notice that the advice is not based on past performance, but low fees and average, non-market-beating returns for the future.  It's impossible to not get the market average return.  Along with extra low fees, that's the beauty!


you criticize my suggestion yet you never looked into the facts behind the suggestion. youre not really that closed minded? are you?
The suggestion that a new investor buy random individual stocks or high fee mutual funds?  What facts have you supplied?  Past performance isn't much to go on.


dont you think everyone should have a plan in case a 2008/2009 scenario happens again?
Of course.  And for a 26 year old, that plan should be to do nothing.  Keep investing regularly as usual.

do we not have a unique situation ongoing right now as they attempt to end quantitative easing?

No

that doesnt mean take your money and run right now but everyone should have a plan for if/when the shit hits the fan again.
 its also a good idea in my opinion to take profits every time you reach a certain percentage gain in your portfolio. i would keep contributing personally but whats wrong in taking a percentage of your portfolio off the table when it's up a certain percentage?

So you invest in high fee mutual funds, buy individual stocks, and you're a market timer.  Great!  I think that's the trifecta of things that a new investor should not do. 

protecting yourself if a major part of investing, in my view.  your view may be different and thats ok. we may both be right, we may both be wrong who knows but isnt the spirit of the whole forum to share ideas? or is this a whacked out cult where youre only allowed to think what MMM thinks?     when investing or making any life decision i suggest looking at and considering things from all angles

You're allowed to think and share whatever you like.  I happen to think you're wrong, and I've actually posted links as to why.


I'm sure we've shared enough that the OP can make up his mind as to whether the suggestions of a Roth IRA and Vanguard index funds would make more sense than managed mutual funds, individual stocks, and vacations.  Therefore, feel free to have the last word if you'd like.  I'm going to move on.

timmoney

  • 5 O'Clock Shadow
  • *
  • Posts: 40
Re: Advice for $11,000
« Reply #27 on: May 09, 2014, 05:30:42 PM »
Ok I'll take the last word.
1- just because you're in an index fund that does not guarantee profits. Just because an index has given 7% historically doesn't mean it will in the future.
2- it is possible to choose a fund that beats indexing. Be selective and do your research. It's not hard
    The manager who runs it will have a big effect  on its performance. There aren't many that do it consistently but it does happen. Check for yourself.
3- learn to research stocks. It will help you in many ways in understanding how all varieties of investments work.
4- investing is an individual decision. What's right for one person isn't necessarily right for another. It's my opinion that a small portion of your portfolio should be used for risk. I also believe its ok to take profits and that doing so isn't market timing.
5- we are in a unique position. The government took a number measures to keep interest rates low as a result all assets have been inflated in value. They are now stopping these measures. The result of their stopping these measures is unknown because it has never happened before. That doesn't mean take your money and run but deciding on plan of action to take to preserve your capital in the event of a scenario similar to 2008/2009 is sensible and responsible.
6- if you're a new investor or old investor learn all you can. Join the NAIC or AAII or both. Read Peter
    Lynchs books. Use the Internet. The information is out there. Investing should be enjoyable. It's
    Full of possibilities. And don't listen to anyone and BE OPEN MINDED. Dont take anybody's word for it until you see for yourself