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Pollyanna posted:Another log on the whole life trash fire: my parents have a whole life policy as the main method of transferring wealth to their children. I expect to see exactly $0 from them. I am sorry to hear that. It can be very frustrating.
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May 30, 2023 21:11
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So I'm considering investing to offset inflation and hopefully even make money in the long term but I have a certain doubt. If I understand correctly the idea with long term investing is that the market as a whole grows, so if your portfolio is sufficiently diverse and mirrors how well the whole market does, you always make money. But that still means that if I start investing now and take the money out when I retire in 40 years, then I make a sort of bet that the market will always grow on average for the next 40 years. Isn't that still very risky? Because on this kind of time scale the evidence we have so far to suggest that the market always grows is just anecdotal. For example we know that the way we humans live on this earth is causing environmental issues and that we are using up limited resources on this earth. So isn't it quite possible that during the next 40 years there could be some event during which the market drops and then never recovers?
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Jun 2, 2023 17:01
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I wager cash would also be useless if there were a crash of that scale
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Jun 2, 2023 17:07
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EdgyCoffeeMug posted:So I'm considering investing to offset inflation and hopefully even make money in the long term but I have a certain doubt. Read the OP and also this maybe - https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
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Jun 2, 2023 17:14
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EdgyCoffeeMug posted:So isn't it quite possible that during the next 40 years there could be some event during which the market drops and then never recovers? It is also possible that, in lieu of the current powerhouses holding up market indexes, new market favorites would rocket in value relative to their usefulness after the crash. As long as currency and capitalism are afoot, someone will figure out how to make money.
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Jun 2, 2023 17:14
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EdgyCoffeeMug posted:So isn't it quite possible that during the next 40 years there could be some event during which the market drops and then never recovers? Sure any number of mildly to extremely bad things are possible, the question is, what is actually probable? It is very likely that you will grow old and need money to live on. Unexpected expenses, medical problems, family financial needs - these are near certainties over the course of 40 years or more. And, most importantly, long term saving/investing can solve a lot of these problems, or at least make them easier to deal with. If you genuinely think its significantly more likely for the world economy to completely collapse and never recover than it is for you to get old or sick, then you're in the wrong forum.
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Jun 2, 2023 17:23
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I think it’s more likely that companies will rise and fall. Worse case wealthy people decide the stock market is for suckers and all the real growth companies remain private.
nelson fucked around with this message at 17:46 on Jun 2, 2023 |
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Jun 2, 2023 17:42
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nelson posted:I think it’s more likely that companies will rise and fall. Worse case wealthy people decide the stock market is for suckers and all the real growth companies remain private. Luckily wealthy people are flighty and paranoid and only public companies offer a sufficient level of transparency to satisfy their paranoia. The fact that public organizations and funds are essentially forced to operate in the public sphere is a bonus reason that fund flows in the stock market are probably never really going to abate. Plus the government cares about the stock market, especially large public companies, a whole heck of a lot.
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Jun 2, 2023 18:01
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EdgyCoffeeMug posted:if I start investing now and take the money out when I retire in 40 years, then I make a sort of bet that the market will always grow on average for the next 40 years. Isn't that still very risky?? Yes. You can buy a fancy dinner today, or save and hope restaraunts still exist when you retire. It goes both ways though. If you spend everything today and save nothing for the future, odds are very good you will regret that. Wait you're talking about the market vs cash or other(?). Sure, keep some cash too, but ya all in cash isn't a good strat. And add some durable goods, why not. I'd say not guns since you're more likely to experience tragedy with them than whatever fantasy the preppers have. And buy stuff you'll use anyway, not crappy food that will sit there for decades and then be junk (you see these food caches for sale on craigslist etc when the owner gets old enough and no longer fears ~the collapse~) Epitope fucked around with this message at 20:42 on Jun 2, 2023 |
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Jun 2, 2023 19:19
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Right, I think this is the best way to look at things: A) you can't predict the future, nobody can, and every instance in which people claim to have predicted the future previously has generally been blown up once you re-test and it turns out they were just lucky B) you can take past events and make projections about the future, though, which is to say that you can see trends and respond to them C) short-term trends seem to be less reliable, but long-term trends seem to be more reliable D) you have to do something, because doing nothing is still actually doing something D is a little confusing, so to elaborate: you can either spend all your money, or save some, but both of these are decisions. If you've decided to save some of your money, then you have a range of choices about how to save that money. Each of these choices has risks involved. You cannot avoid those risks. There is no such thing as a completely risk free choice. Here in the long-term investing and retirement thread, we regard as very critical the risk of running out of money while you're still alive, and having to live in a cardboard box eating cat food, or you know, that's an exaggeration, but basically living at the near-poverty level that old people with no savings are stuck with when all they have is social security and a few other benefit programs. So long-term investing is itself a hedge against the prospects of poverty in your old age. So what about the investing risks? Yes, absolutely, there is a risk that if you invest in - say - "the markets", events in the future transpire to reduce or even destroy your whole investment. But you must weigh this risk against the above risk of poverty. How do we estimate risks? Well, we use B and C, above. We can say with a confidence borne out by data analysis and math, that short-term investing - that is to say, putting your money into and pulling it out of various investment options, whether that's stocks or bonds or gold or funko pops, appears to be more risky than long-term investing. Especially the long-term investing of the types we advocate here: low-fee, passively-managed index funds invested in the entire stock market, the international market, and (optionally) the entire bond market. Again, and you can check this with references in the OP, the data shows that this long-term investing strategy has, over the course of the last century, performed very well, especially over any period of at least 30 or so years. If you are 30 or 40 years from retirement, you can have a fairly high confidence that this investment strategy will continue to outperform the other options for savings. You mentioned being worried about "the way we humans live on this earth is causing environmental issues and that we are using up limited resources on this earth. So isn't it quite possible that during the next 40 years there could be some event during which the market drops and then never recovers?" And yes, that is true, but you cannot look at that risk in isolation. What would those events do to your other savings options? If you simply hold cash, you will lose value every year to inflation. Even if you hold cash, there is some risk that a collapse of the entire stock market would correlate to the performance of cash - that is to say, the value of cash could also decline, and even if it doesn't decline as much as stocks, you'd already have been behind stocks due to inflation, for decades, eating away at your money's value. Remember A, though? People have always been worried about the future, and they've always been able to cite several specific and well-grounded problems to worry about. 50 years ago, people had very good and well-founded reasons to worry that nuclear war would destroy the earth. In the 1980s, Americans were very worried that Japan would eclipse the United States as the world's technological leader, their markets consuming ours. Demographics experts have long predicted the ascent of China, India, Brazil, and other countries whose populations and resources far outstrip those of the US. What if the EU fully integrated, and we had to compete with them, and couldn't? What if our reproductive rate continues to fall, and immigrants stopped showing up? What will the baby boom do to the economy when they all retire? What about the destruction of the ozone layer, or acid rain? It's easy to point to global climate change and say "that's worse than any of those other things you mentioned, Leper" and that's... well, as a person interested in science, I'd say that's probably true, perhaps excepting global nuclear war. But I refer you to A. Our ability to predict the future, even with a lot of science and facts on hand, has been pretty miserable in the past. But we can follow economic trends, and the economic trend of the last century has been one of growth of both US and global markets. In this thread the consensus is that making a long-term bet on the continued growth of US and global markets is less risky than betting on cash to hold its value. If you do decide to bet on cash, due to inflation you'll need to save at a much higher rate. Those of us making long-term bets on the markets have seen a historic return of something like 8% above inflation - if you hold only cash, you'll see something like a -2 or -3% real rate of return, due to inflation, putting you about 10% per year behind us, at least based on historic trends. Let's look at some actual numbers. I'm using this savings rate calculator in "advanced mode" and setting inflation at 2% and (since it requires a positive interest rate) 0.5% as your average savings account interest rate. Save $1000 in cash monthly for 40 years, with a 2% inflation rate and a 0.5% interest rate (I'm assuming this is a reasonable average of what your long-term cash account interest rate might be). Your final savings will be $531,465.87, which is $240,695.8, after adjustment for inflation. You lost over half the value of your money to inflation. Deposit $1000 monthly into long-term investments, averaging 9% annual return, with 2% inflation rate. Your final savings will be $4,716,430.17, which is $2,136,026.02, after adjustment for inflation. You doubled your money, after accounting for inflation. This is of course a simplification: most people can't afford to save $1k a month when they're young, but can increase their savings rate over time as they advance in a career. There is also something called sequence-of-returns risk, because a series of bad years can reduce the overall return while a series of good years can enhance it, depending on when in the total sequence each occurs... basically, this is all predictions based on the past. You also don't keep the same balance of investments all the way to the day you retire, and that affects real rate of return. Maybe you can get a better interest rate on your cash - I'd say probably you can, if you're willing to take on very small increased risks by using e.g. CDs or a money market account. But there is a clear message to be had from these numbers, too: if you want to retire with a couple million - which will let you live comfortably for 30 years or more of retirement - you probably cannot do that at all if you just save cash, unless you're going to earn a lot of cash. You'll need to save at something like four times the rate you would if you invested your money, to get a similar final figure to retire on. Are you willing to take on some market risk, if it's the only hope you have for retiring comfortably? You have to do something. You can put your money at risk, or, you can plan a career in which you earn four times as much... and still put your money at some level of risk, just a different set of risks, which are probably still somewhat correlated with the market risk. Leperflesh fucked around with this message at 21:39 on Jun 2, 2023 |
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Jun 2, 2023 21:03
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Epitope posted:Yes. You can buy a fancy dinner today, or save and hope restaraunts still exist when you retire. It goes both ways though. If you spend everything today and save nothing for the future, odds are very good you will regret that. If you really want to hedge against poo poo going to hell, I'd try and get onto a few acres of farmable land. I'd like to do that for other reasons, but I can't deny that having a really big garden, some fruit trees, and some pigs would be awfully nice if a serious depression hit and we were having trouble finding work -- beats the hell out of being in the same situation in an apartment. Hell, they even specifically built some towns around that idea during the New Deal: https://en.wikipedia.org/wiki/Subsistence_Homesteads_Division edit: this obviously takes a lot of work and if the world economy continues to truck along happily, well, you'll have to retire with the unpleasant knowledge that you spent years working outside in the fresh air and eating food you grew yourself, all for nothing Pham Nuwen fucked around with this message at 22:12 on Jun 2, 2023 |
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Jun 2, 2023 21:51
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Also, one should account for good things happening too - would you have guessed the largest state's economy was 82% powered by renewables at the time of this post?  (this data isnt cherry picked, but yes I realize this is not 24/365)
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Jun 2, 2023 22:41
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California has a lot of hydroelectric, that many other states just can't do. But yes. Also a modern farm is heavily reliant on the national infrastructure, for everything from electricity and diesel to chemicals like fertilizer and herbicide to basic stuff like pipes and hoses and tires. Actual, independent, subsistence farming loving sucks and very, very few people today are fully prepared to do that using entirely self-sufficient tools and technology. If poo poo goes to hell for a few months, sure, having an acre of fruit trees and some pigs (are you prepared to slaughter and butcher a pig?) could help you out. But if money doesn't mean anything any more, the economy has gone up in smoke, anarchy reigns, etc. your best bet for survival is to be part of a large and diverse community of capable people who care about each other. Meanwhile, the fact you did or didn't have your money in a bank or in stocks would basically be irrelevant. If we assume anything less than "the apocalypse" then all paths forward probably involve your stock investments outperforming cash on a three or four decade time scale, and even if they don't, they'll probably simply underperform as opposed to vanish and you'll still probably be OK. You can also decide not to do things all-or-nothing. If you are extremely risk averse, you can put less than all of your savings into markets. You'll lose out on earnings, but you can retain a cash reserve. You have to find a level of risk you can tolerate that gives you the best returns you can get.
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Jun 2, 2023 23:40
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Pham Nuwen posted:If you really want to hedge against poo poo going to hell, I'd try and get onto a few acres of farmable land. I'd like to do that for other reasons, but I can't deny that having a really big garden, some fruit trees, and some pigs would be awfully nice if a serious depression hit and we were having trouble finding work -- beats the hell out of being in the same situation in an apartment. Hell, they even specifically built some towns around that idea during the New Deal: https://en.wikipedia.org/wiki/Subsistence_Homesteads_Division There's actually a thriving genre of youtube videos of modern, tech savvy young people starting homesteads and growing their own food (and youtube subscribers). I wouldn't necessarily recommend it, but it's a thing that the algorithm feeds me. I ended up moving to a home on a well and septic tank system mostly by chance, so even though I felt pretty silly and like I was imitating those crazy survivalists I decided to add on a solar and battery setup, partly to be green but also because I liked the idea of knowing it could be self sufficient if necessary. Then I got told in no small words that I needed to get more exercise so I've been spending an hour or so a day putting in a garden and some fruit trees. I was curious and did the math and if I went all out and planted only potatoes (Mark Watney style) and the trees did well it might produce about enough calories to feed one human on a minimal diet, but probably not. It takes a lot more than you might think. Also if things seriously did go that much to hell I'd probably just end up murdered for my stuff anyways, because I wasn't actually enough of a crazy survivalist to go the firearms and bunker route (and to be clear I agree - the chances of things going that bad are considerably lower than the chances of me accidentally shooting myself trying to prepare for it). Bremen fucked around with this message at 15:22 on Jun 4, 2023 |
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Jun 3, 2023 04:01
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Thanks to everyone for the replies. Yes, what I was debating on was not spending vs. investment, but saving in a low interest bank account vs. saving in investments. Leperflesh posted:Save $1000 in cash monthly for 40 years, with a 2% inflation rate and a 0.5% interest rate (I'm assuming this is a reasonable average of what your long-term cash account interest rate might be). Your final savings will be $531,465.87, which is $240,695.8, after adjustment for inflation. You lost over half the value of your money to inflation. This is along the lines of what I suspected, but it's helpful to see the actual numbers. I guess its true that just saving the money is also akin a bet, but one that you'll almost surely lose. I'm still not convinced that I'll make the amount of money with this that the historic data shows, but I get the argument that if something catastrophic happens, then cash is also screwed, and if something less-than-catastrophic does, then my investments will not be screwed, but just fail to make me any money. So let's say that I go with 50% investment of savings. I've been looking at what I can do from Europe and it Vanguard is offering a service that operates directly from where I'm located, they're considered to be a good choice right? Going with them, two possible choices that seem attractive to me are: (1) Vanguard LifeStrategy 60/40 (IE00BMVB5P51). This seems like the simplest possible choice but is it too simple? The cost is 0,25% p.a. I'm guessing it's slightly higher than most of their other stuff since they also pay someone to put together the stocks/bonds in that portfolio, so this would be trading convenience for higher cost? (2) Vanguard Global Stock Index Fund (IE00B03HD316) + Vanguard Global Bond Index Fund (IE00B18GC888), managed by me at that 60/40 rate. The costs there are 0,18% p.a. and 0,15% p.a., respectively. My reasoning is that these sort of replicate what should be in that LifeStrategy thing, but at lower cost, and they resemble what's suggested in that .pdf in the OP. Would any of these be a good choice? If both then is there a significant difference between the two?
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Jun 3, 2023 10:40
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What's the largest bank these days that offers a good high yield savings account that's easy to transfer too? Capital one seems to have a 4%, and I'm sick of bank of america's really low yields.
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Jun 3, 2023 16:54
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EdgyCoffeeMug posted:So let's say that I go with 50% investment of savings. This combined with a 60/40 fund would mean an overall equity asset allocation of 30%, which would be very low for a long term investment. If its up from 0% and you aren't comfortable investing more, its a start. We dont get many Europeans in the thread, so considerations may be different for you. I think for Americans 40 years from retirement, most in this thread would recommend 80-100% equities in long term investments.
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Jun 3, 2023 17:40
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GordonComstock posted:What's the largest bank these days that offers a good high yield savings account that's easy to transfer too? Capital one seems to have a 4%, and I'm sick of bank of america's really low yields. Marcus (Goldman Sachs) is 4.15% and easy to use if you want to stick with a large bank. You might also consider https://www.savebetter.com/. Haven't personally used them but it sounds nice, you get access to a lot of competitive rates at different banks from a single account. Several over 5% right now.
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Jun 3, 2023 17:46
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whats the best brokerage to open a roth ira with if I want to be very hands off? like "i point at a list of 3 types of investment strategies and go 'uhhh that one'" sort of hands off
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Jun 3, 2023 18:37
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Farg posted:whats the best brokerage to open a roth ira with if I want to be very hands off? like "i point at a list of 3 types of investment strategies and go 'uhhh that one'" sort of hands off Fidelity and Vanguard are both fine. I like Fidelity's customer service. Buy more of the same target date fund every year and do nothing else until retirement and that's about as hands-off as you can be. This thread can help direct you to which target date fund ticker symbol to use.
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Jun 3, 2023 18:44
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Farg posted:whats the best brokerage to open a roth ira with if I want to be very hands off? like "i point at a list of 3 types of investment strategies and go 'uhhh that one'" sort of hands off Does a target date fund suit your requirements? It’s a type of mutual fund that automatically rebalances itself as you approach the retirement year that you selected when you bought the fund. They’re designed to be set-and-forget.
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Jun 3, 2023 18:48
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GordonComstock posted:What's the largest bank these days that offers a good high yield savings account that's easy to transfer too? Capital one seems to have a 4%, and I'm sick of bank of america's really low yields. Vanguard has a Cash Plus Account that is 4.5%. I don't know anything about it other than seeing the emails and website advertising it tho.
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Jun 3, 2023 18:50
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drk posted:Marcus (Goldman Sachs) is 4.15% and easy to use if you want to stick with a large bank. I use Western Alliance HYSA via SaveBetter. Right now at 5.05%
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Jun 3, 2023 18:50
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Leperflesh posted:California has a lot of hydroelectric, that many other states just can't do. But yes. He said the largest state, not California. It's weird because when I look up Alaska, I'm seeing their renewables at about 33%.
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Jun 3, 2023 22:57
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Any of you still sticking with Ally for HYSA? They have been increasing it periodically but they're only up to 3.85%. Feel like I'm missing out on the 4-5% HYSA. Is this the kind of thing where I could call Ally and be like hey I'm gonna move my $$ unless you can increase the rate? Does that kind of bank customer retention exist in the world?
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Jun 4, 2023 05:07
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Just open an account somewhere else and move the money. I use Marcus.
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Jun 4, 2023 06:06
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I still have my HYSA with Capital One which is now like 3.9% last I looked, but have moved most of my idle cash to my Vanguard brokerage account sitting in the Federal Money Market (VMFXX) which is yielding over 5% currently.
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Jun 4, 2023 06:54
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MrLogan posted:He said the largest state, not California. I assumed he meant the largest state by population, which would be CA, and CA has hit 100% renewables when usage is at its minimum, and is generally well above 50% except in the most extreme summer events where we have to import a lot of power from other states. Alaska's such a low population state that I'd be surprised if they can efficiently deliver renewables, and of course, it's not a great climate for solar although maybe wind is an option and they certainly have plenty of volcanic activity for hydrothermal. 
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Jun 4, 2023 06:59
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zaurg posted:
Not as like a retail customer, I get away with that for commercial banking but not personal accounts. Even then you maybe pick up 100-125 basis points.
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Jun 4, 2023 07:20
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zaurg posted:Any of you still sticking with Ally for HYSA? They have been increasing it periodically but they're only up to 3.85%. Feel like I'm missing out on the 4-5% HYSA. I don't really care to chase rates for my emergency fund. So my checking and savings are still at Ally.
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Jun 4, 2023 13:20
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Thread consensus is this tranche of I Bonds is still a better buy than a HYSA? Don’t plan to cash them until 2025 (house down payment). Or should I hold long term and count it towards my bond mix? I got last year and the eye popping 9% too in ‘21
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Jun 4, 2023 15:40
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Guinness posted:I still have my HYSA with Capital One which is now like 3.9% last I looked, but have moved most of my idle cash to my Vanguard brokerage account sitting in the Federal Money Market (VMFXX) which is yielding over 5% currently. Same. Maybe if Ally feels like being competitive at some point I’ll move it back.
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Jun 4, 2023 16:37
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To settle the debate about my poorly worded renewable energy derail, it was California. page here: https://www.caiso.com/Pages/default.aspxcheese eats mouse posted:Thread consensus is this tranche of I Bonds is still a better buy than a HYSA? Don’t plan to cash them until 2025 (house down payment). Or should I hold long term and count it towards my bond mix? I got last year and the eye popping 9% too in ‘21 Its a good time to buy I Bonds for long term holding since the fixed rate is above 0% (currently 0.9%). As an asset for a 2025 savings goal... probably not? Its not bad, but you can earn more than I bonds with CDs, treasuries, or money markets. I'd personally probably buy a treasury with a maturity a little before you need the money.
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Jun 4, 2023 18:48
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cheese eats mouse posted:Thread consensus is this tranche of I Bonds is still a better buy than a HYSA? Don’t plan to cash them until 2025 (house down payment). Or should I hold long term and count it towards my bond mix? I got last year and the eye popping 9% too in ‘21 If you're just aiming for 2025 I'd go with HYSA over I-Bonds. The advantage I-Bonds have is the high fixed rate which means they'll keep paying well even if interest rates drop down, but that's not likely to happen fast. And they have a penalty of 3 months interest if you cash out in less than 5 years. I bought I-Bonds but I'm planning on holding them at least 5 years and probably more, with the option to cash out early if something comes up just being a bonus. Bremen fucked around with this message at 21:52 on Jun 4, 2023 |
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Jun 4, 2023 21:50
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Bremen posted:If you're just aiming for 2025 I'd go with HYSA over I-Bonds. The advantage I-Bonds have is the high fixed rate which means they'll keep paying well even if interest rates drop down, but that's not likely to happen fast. And they have a penalty of 3 months interest if you cash out in less than 5 years. Are HYSA paying as much as T-Bills?
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Jun 5, 2023 07:39
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Most HYSA are hovering around 4% while T-bills are over 5%. But they can fluctuate at any time and the T-bill situation right now is very unusual so I don't expect the rates to last very long.
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Jun 5, 2023 14:54
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Guinness posted:I still have my HYSA with Capital One which is now like 3.9% last I looked, but have moved most of my idle cash to my Vanguard brokerage account sitting in the Federal Money Market (VMFXX) which is yielding over 5% currently. I looked this up and the fine print for VMFXX seemed to indicate it’s not FDIC insured and as far as risk goes can lose money. Does that sound right?
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Jun 5, 2023 14:56
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Huh, I have a few grand of t-bills on auto roll at Fidelity and I got an email this morning saying they couldn't find inventory to auto roll. Is this due to debt ceiling fuckery?
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Jun 5, 2023 15:26
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GordonComstock posted:I looked this up and the fine print for VMFXX seemed to indicate it’s not FDIC insured and as far as risk goes can lose money. Does that sound right? Federal money market funds can lose money if the US government defaults on its obligations. Technically possible, extremely unlikely. In that scenario, FDIC insurance isnt really any safer.
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Jun 5, 2023 18:20
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Is there any reason to invest in bond ETFs like BND or BNDX over money market funds (e.g. VMFXX, VUSXX) while the latter is giving higher yields?
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Jun 6, 2023 16:27
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