Everybody’s risk tolerance profile is different. 4-5% in a CD is just fine for some folks who don’t want to risk any part of their principal. Yes, you can earn more with other investments, but you’ll probably have greater risk (higher volatility) to go along with them.
As for Einstein’s quote, it’s only a rumor that he said this: “The most powerful force in the universe is compound interest.”
[quote]TeeVee69 wrote:
Everybody’s risk tolerance profile is different. 4-5% in a CD is just fine for some folks who don’t want to risk any part of their principal. Yes, you can earn more with other investments, but you’ll probably have greater risk (higher volatility) to go along with them.[/quote]
I agree on both counts. The tricky part is to correctly assess one`s risk tolerance. Compounding cannot happen if one bails out of the market (usually) at or near the bottom.
In some cases balanced funds are better for some investors because they smooth the curve, at the cost of lower returns, but if the investor stays the course, then he`ll get better returns than he would have gotten in CDs. Case by case thing, in the end.
[quote]Lonnie123 wrote:
duke wrote:
You say 4, 5 or 6% return maybe good enough for a young fella, but the derivatives market can return 30% or more. I’m aiming at 90% gross return for this year on derivatives. My real estate returns have averaged over 12% compound. Why would anyone, regardless of age, think that 4 to 6 % is okay.
Duke
The reason 4 - 5% it is “okay” to a young fella is because if I lose $5,000 thats a HUUUUGEE chunk of my nestegg. NO ONE else I know my age has ANY money in the bank, so the fact that I have nearly $10,000 at age 21 makes me want to hang onto it and not end up like my fellow youngsters. I’ve worked my ass off to save that, none of that is from my parents or anyone else.
Perhaps as I get older and can actually start investing decents amounts of money, I will laugh at 4%, but not yet.
[/quote]
I think it would be interesting to hear about how you came to have this at your age. What was your motivation or inspiration? I ask because I have 2 children and one of the things I would do differently knowing now what I didn’t know then was to start investing at a young age. I make em put 10% of everything they get into a savings account, but thats just small potatoes.
Anyway, I’d love to hear the story and congrats.
“Buy when the blood is running in the streets.”
— Nathan Rothschild
In other words, look at all the markets (in civilised parts of the world) and find the one that’s performed the worst recently and things appear to be at their worst. Put a FEW of your chips there. The returns can be staggering, once the dust settles.
Note that I said a ‘few’. Your core holdings, IMO, should be defense stocks.
[quote]Headhunter wrote:
Defense stocks. Fidelity offers a fund like this.
If the world becomes a peaceful, joyous place, you’ll lose money.[/quote]
So our money should all be really safe if we invest in defense, huh? 
[quote]btm62 wrote:
Lonnie123 wrote:
I think it would be interesting to hear about how you came to have this at your age. What was your motivation or inspiration? I ask because I have 2 children and one of the things I would do differently knowing now what I didn’t know then was to start investing at a young age. I make em put 10% of everything they get into a savings account, but thats just small potatoes.
Anyway, I’d love to hear the story and congrats.[/quote]
I’d have A LOT more if my girlfriend never came along, but thats besides the point. I guess I was just never really a big spender. Having “Things” was never a top priority in my life so the money I made usually just went to the bank. If I needeed something I would buy it, but I tend to think most things aren’t worth the money. By the time I was 18 I had 3,000 in the bank, but spent most of it the firt few months with my girlfriend. I started over again obviously and now have around 8 or 9 thousand.
I put at least 50 dollars a week away into my savings account, which is EASY to do. I encourage everyone my age to do it, too bad none of them seem to listen.
“Orgies tend to be wildest toward the end”
– Warren Bufffet on the commodities bubble
http://money.cnn.com/2006/05/05/news/newsmakers/buffett_050606/index.htm
Where do people here tend to get their investment advice? I really like Christian Science Monitor for basic advice. I also regularly read Motley Fool. Any other favorites?
[quote]Soco wrote:
Any other favorites?
[/quote]
If you don’t subscribe to Investor’s Business Daily, your not an investor, IMO.
Seriously, it has all the info you need on the markets, and no extraneous crap. Pretty insightful opinion page too.
Not to hijak… But what are your thoughts on a good age to start investing? I have a few friends that invest and just started out with about 500 bucks or so in the market. I’ve been toying with the idea.
Any thoughts on an 18 year old investing?
[quote]Lonnie123 wrote:
duke wrote:
You say 4, 5 or 6% return maybe good enough for a young fella, but the derivatives market can return 30% or more. I’m aiming at 90% gross return for this year on derivatives. My real estate returns have averaged over 12% compound. Why would anyone, regardless of age, think that 4 to 6 % is okay.
Duke
The reason 4 - 5% it is “okay” to a young fella is because if I lose $5,000 thats a HUUUUGEE chunk of my nestegg. NO ONE else I know my age has ANY money in the bank, so the fact that I have nearly $10,000 at age 21 makes me want to hang onto it and not end up like my fellow youngsters. I’ve worked my ass off to save that, none of that is from my parents or anyone else.
Perhaps as I get older and can actually start investing decents amounts of money, I will laugh at 4%, but not yet.
[/quote]
4-5% is fine if it is money you are planning to use in less then 5 years. if this is money for retirement, you should definatly be looking for more then that.
[quote]rrjc5488 wrote:
Not to hijak… But what are your thoughts on a good age to start investing? I have a few friends that invest and just started out with about 500 bucks or so in the market. I’ve been toying with the idea.
Any thoughts on an 18 year old investing? [/quote]
Probably the sooner the better. It’s never too early to make money. At 18, you’re either gonna spend 500 bucks on an XBox or turn it into 750 in the market.
I fiddled around with the market when I was 18, Turned 500 into about 800, then lost it all on a DUMB ASS investment. My biggest piece of advice: Don’t put all your eggs in one (shitty) basket.
[quote]rrjc5488 wrote:
Not to hijak… But what are your thoughts on a good age to start investing? I have a few friends that invest and just started out with about 500 bucks or so in the market. I’ve been toying with the idea.
Any thoughts on an 18 year old investing? [/quote]
Right now is the best time, no matter what your age is. If you’re saving your money while you look for something to invest in, then invest in yourself by learning the various vehicles that can lead to continued wealth… Property, Shares, Business. My step kids are 17 & 19, I’m teaching them how to invest but they’re more interested in spending it. Fair enough too, they’re young and having fun, but when the time comes for them to get serious, they’ll have my knowledge in their heads already.
You’re smarter and already thinking about your future, If my step kids listened to me, I’d tell them to use their savings to buy real estate while they concentrate on their jobs and careers, that will lay a foundation for later on when they’ve had some capital growth in the properties and then they can leverage this into the share market or business activities.
Think about it, retirement by 30 is entirely possible for you.
Start as early as possible.
I started a private pension with Zurich about 2 years ago. I put in 30,000yen a month. Its been getting 17 percent growth so Im not complaining. Its with Zurich so I feel pretty confident trusting them with my money.
My brother and I recently invested in property in Dubai. The place is booming.
Also land banking is a pretty good option.
Save from 18. Invest safley and wisely to start. Dont play with more than you can afford to lose. Play your cards right and you could be retired from full time work before you hit 40. Im aiming to be out at 51 (27 now) so wish me luck!!
[quote]Lonnie123 wrote:
My biggest piece of advice: Don’t put all your eggs in one (shitty) basket.[/quote]
The cynic in me calls this deworsification.
(Minor hijack.) Investing seen from an Engineer`s point-of-view. Applied.
Ever wondered how luck can impact your investing future? When is it time to call it quits when retirement is around the corner? How do you protect yourself from entering a bear market too soon? Etc.
After reading this stuff, the average 6% return, plugged in your retirement calculator, won`t look the same.
Oh, well, see for yourselves: http://www.cotar.org/articles/index.htm
Best articles: Time value of fluctuations, Minimizing bad luck, Unveiling the myth, and Right Road, Wrong Map.
(End minor hijack.)
I’m only sixteen and I would love to learn more about investing, but I have no idea where to look. Are there any books I should read? I’d love to even know just how a person invests in anything. What exactly one would do. That’s how little I know. :\
[quote]grew7 wrote:
I’m only sixteen and I would love to learn more about investing, but I have no idea where to look. Are there any books I should read? I’d love to even know just how a person invests in anything. What exactly one would do. That’s how little I know. :[/quote]
I would start at www.fool.com. Great pieces of wisdom that everyone should have. Just start reading and you will know a lot by the time you really need the knowledge.
I also recommend reading “Rich Dad, Poor Dad” it is only five or ten bucks at Costco and can be easily finished in a day.
I really think at your age you need to keep out of debt and invest in yourself (get a decent education so you can get a good paying job).
[quote]Soco wrote:
grew7 wrote:
I’m only sixteen and I would love to learn more about investing, but I have no idea where to look. Are there any books I should read? I’d love to even know just how a person invests in anything. What exactly one would do. That’s how little I know. :\
I would start at www.fool.com. Great pieces of wisdom that everyone should have. Just start reading and you will know a lot by the time you really need the knowledge.
I also recommend reading “Rich Dad, Poor Dad” it is only five or ten bucks at Costco and can be easily finished in a day.
I really think at your age you need to keep out of debt and invest in yourself (get a decent education so you can get a good paying job). [/quote]
The motley fool is “gimmicky”, IMO. Rich Dad, Poor Dad is BS. If you want to learn about investing, read text books. Finance, marketing, accounting, HR/OB, all of it. I think that the more you understand business, the better an investor you’ll be. The other option, of course, is to be a high-stakes gambler.
[quote]Aleksandr wrote:
The motley fool is “gimmicky”, IMO. Rich Dad, Poor Dad is BS. If you want to learn about investing, read text books. Finance, marketing, accounting, HR/OB, all of it. I think that the more you understand business, the better an investor you’ll be. The other option, of course, is to be a high-stakes gambler.[/quote]
I really think the average person needs to get their personal finances in order before they spend too much time thinking about investing. Sure if you read everything out there, you might get a slightly better than average return but if you are paying 18% interest on credit card bills than it doesn’t matter.
I personally am more of an index investor , so I am admittedly biased.
I’m a young guy without a whole lot of money in the bank, but here’s what I’ve gleaned from books and those wiser than me.
IMO, where you want to invest depends on how much time you want to spend investing. Sure, you can earn a 90% return on derivatives in a year, but truly understanding (and thus exploiting) derivatives takes a lot of study, which is why investment banks and hedge funds pay recent Ivy League grads six figures to study them!
For almost everyone, the asset allocation decision is the most important. Are you going to put your money in stocks (including derivatives), bonds, or alternative investments (real estate, commodities, etc.)? After that, if you have the time, you can worry about the particular stocks.
A good book to start with in “The Intelligent Investor” by Benjamin Graham. It’s a relatively old book (though frequently updated), but its words are true today as well. He basically proposes from a 75/25 equity/bond split (for an aggressive fellow) to a 50/50 split (for the more conservative folks). After that, it’s up to you.
And you can’t go wrong with a good financial dictionary. Investopedia.com is a good site to visit. I like Fool.com as well, but it’s sort of annoying to try to filter through their advertisements.
Good luck!