Hi everyone.
I've been destructively stuck with important financial decisions recently and would like to ask for advice.
1. Description of the situation.
I'm 31, married, no kids, live in Germany. Working full time (science&engineering) and enjoining great mustachian lifestyle - going everywhere (work, groceries etc.) by bike, making stuff by myself, intentional buying of things that add value, happiness, efficient, minimalist lifestyle. Consequently, I do not manage to spend more than approx. 35% of my income.
2. Description of the problem.
I love what I'm doing professionally and get so much consumed by all kinds of other creative projects that as a result have been utterly ignorant about finances. Thus, my savings have been simply piling up in my bank account all these years. Meaning, they have actually been part by part eaten up by inflation + haven't generated any interest, return of investment. Which I now find really annoying and ignorant from my 'past me'.
3. The question.
I would like to finally put my savings to work with a know that (i) they will not be lost (no gambling, stock picking), (ii) they will generate additional income and gradually compound our family closer to financial freedom ("If you don't find a way to make money while you sleep, you will work until you die", to quote Warren Buffet).
But how to rationally solve this problem? Where exactly to invest? I've been doing some research and come to following conclusions:
- For an average person it appears reasonable to invest in an index fund, such as VTSAX and just get back to work, sleep well at night. Here the Simple Path to Wealth by Collins, as well as other great resources have been very helpful.
- My problem with this approach however is the moment in time, economy now. Namely, by reading several pieces about market cycles from people like Ray Dalio or Howard Marks, they seem to anticipate an economic downturn coming. I have also read that no one can time the market, but if this is really true, perhaps putting my savings into stocks is not such a good idea?
Alternatively, I'm considering bonds, commodities or real estate. I was close to buying an apartment (we're renting currently), but reading Why your house is a terrible investment by Collins has changed my view on this. Especially, considering that we might move elsewhere after roughly 3 years.
Commodities seem to be priced relatively low (GSCI), but I have no fundamental reasons to think that they should rise.
So, the hard part is that I can't really understand and calculate the outcomes of all these stock, bond etc. scenarios. It seems rather random and unpredictable to me (I guess because I'm not an investor, economist etc.). Therefore, I'm completely stuck and simply sitting on cash which of course results in a huge opportunity cost.
Any advice on how to proceed here would be highly appreciated!
Many thanks!