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re: Millennials Guide to Investing and Retirement
Posted on 5/6/14 at 1:21 am to Joshjrn
Posted on 5/6/14 at 1:21 am to Joshjrn
quote:
Why on earth would a millennial invest a third in bonds?
So when the stock market tanks and they lose their fricking job they won't have to sell stocks at depressed prices to get by. If they invest the 33% in government bonds they'll likely be able to sell them at a premium, and when the economy recovers and they get their jobs back - they will be a lot closer to retirement than their idiot friends who put 100% in stock and had to sell half their portfolios at shite prices to scrape by.
Its good to think about contingencies.
I'm between 60/40 stock/bond and 50/50.
This post was edited on 5/6/14 at 1:25 am
2
Posted on 5/6/14 at 1:34 am to SpidermanTUba
So why is it that it is either 33% or nothing.
And why is it that you feel it smart to treat your longest term assets with intermediate term contingencies? You do realize that a portfolio by definition has multiple components.
What you just listed is why you should have an emergency fund allociated to such an event.
Many suggest to keep it liquid, but I invest it...although a far higher percentage of bonds than the rest of my portfolio.
And why is it that you feel it smart to treat your longest term assets with intermediate term contingencies? You do realize that a portfolio by definition has multiple components.
What you just listed is why you should have an emergency fund allociated to such an event.
Many suggest to keep it liquid, but I invest it...although a far higher percentage of bonds than the rest of my portfolio.
Posted on 5/6/14 at 7:24 am to Volvagia
Also the 33/33/33 is based on the 3fund portfolio. It's stickied on one of the forums there. It's extremely popular
Posted on 5/6/14 at 7:50 am to SpidermanTUba
Spidy, that's what a liquid emergency fund is for.
Posted on 5/6/14 at 8:21 am to Joshjrn
Just quickly thinking about this, maybe he is thinking a 20 something wouldn't have a 3 month emergency fund yet? Idk, i just saw the thread today and didn't read the book
Posted on 5/6/14 at 8:50 am to Boh
In the book, he advocates for a six month emergency fund. As he doesn't advocate for a reallocation once that goal is met, I doubt that was his intention.
Posted on 5/6/14 at 9:02 am to Volvagia
quote:
So why is it that it is either 33% or nothing.
It isn't.
quote:
And why is it that you feel it smart to treat your longest term assets with intermediate term contingencies?
Why is it you think you are smart enough to predict the future 30 years in advance?
quote:
What you just listed is why you should have an emergency fund allociated to such an event.
I do. It might not be big enough. It would be foolish of me to think I can predict with certainty the size of all of my financial emergencies for the next 30 years.
I guess the zillions of people who had to break into their retirement savings over the most recent recession are just moron outliers that shouldn't even be considered in our 20/20 hindsight. We'll just cross our fingers and pray it doesn't happen again, right?
quote:
Many suggest to keep it liquid, but I invest it...although a far higher percentage of bonds than the rest of my portfolio.
What kind of bonds are you investing in that can't be liquidated within three business days?
Posted on 5/6/14 at 9:06 am to Joshjrn
quote:
Spidy, that's what a liquid emergency fund is for.
Why don't you go tell that to the thousands who had to sell stocks to live. I'm sure that information will be useful to them now.
EVERY time there is a recession - a lot of people who own stocks have to sell them to live on. (If they didn't - stocks wouldn't be depressed in price as much
) A lot of the folks who have to do that DO have `emergency` funds. Or had. Also - the model of investing 100% of everything into an emergency fund until you have 3-6 months means you are putting off investing in stocks for potentially years and years to come. Depends on your income. Its kind of an unrealistic requirement for most people and could actually be horrible advice.
This post was edited on 5/6/14 at 9:06 am
Posted on 5/6/14 at 9:11 am to Boh
quote:
Just quickly thinking about this, maybe he is thinking a 20 something wouldn't have a 3 month emergency fund yet?
They shouldn't. They should be investing in stocks anyway. But not 100%. Like 50/50.
The idea of a statically sized 'emergency' fund whose size is determined by your rate of income is just dumb for many reasons.
1) Are the sizes of your emergencies always directly proportional to one's income? No. If you make 250k a year, rent, and have no dependants, for instance, it might be a bit ridiculous to have a 125k cash emergency fund. On the other hand if you have 8 children in a single breadwinner family bringing home 50k and a 30 year house note - if you can actually save up that much - 125k emergency fund might make sense.
2) How is it we can predict our emergencies will always come in at less than 3-6 months pay? If we can predict that - shouldn't we be able to predict the actual emergencies with a little more effort?
Of course - the folks who need emergency funds the most - are the folks who would have the hardest time saving them up. That's one of those little practical reality facts that people who write investment `advice` books usually outright ignore. They're trying to make money - not account for reality.
The emergency fund model was invented by folks with plenty of money to invest.
I have an investment plan that has worked for many. Write a book telling other people what to invest their money in. Tell them exact proportions of how to invest their money, like 33/33/33 - that way it sounds like you really know your stuff.
You could just ditch those moronic financial advisors and read an author that won't tell you where to invest your money - but will give you the straight dope about the stock market - Nassim Taleb.
This post was edited on 5/6/14 at 9:17 am
Posted on 5/6/14 at 9:26 am to SpidermanTUba
Surprised no one has taken issue with the 3% return for his recommended portfolio. Seems low. If I have time later I'll do some calculations.
Posted on 5/6/14 at 10:34 am to Sigma
Sigma, 3% is his expected return because a third of your money is wallowing in bonds. Plus, its real return after inflation, not nominal return.
Spidy, leave your appeals to emotion on the PT. This entire discussion is about how to be responsible with one's retirement. If someone is disciplined enough to set aside 15% of their income, there is no reason for them not to have an emergency fund. The people who have to sell stock during downturns are not the people reading investment advice. They are the ones contributing the minimum in whichever fund their HR person tells them to invest in. Hardly the target audience of this piece.
Spidy, leave your appeals to emotion on the PT. This entire discussion is about how to be responsible with one's retirement. If someone is disciplined enough to set aside 15% of their income, there is no reason for them not to have an emergency fund. The people who have to sell stock during downturns are not the people reading investment advice. They are the ones contributing the minimum in whichever fund their HR person tells them to invest in. Hardly the target audience of this piece.
This post was edited on 5/6/14 at 10:57 am
Posted on 5/6/14 at 10:36 am to SpidermanTUba
It's not about knowing exactly what your emergencies will cost. It's about making a reasonable guess as to what they could be. Of course crazy shite can happen that you will be unprepared for, but that's life, and you will deal with it accordingly. But to say it's "dumb" to make a reasonable estimation of how much money you would need if say, you lost your job, is pretty obtuse on your part.
Investing books such as these are really just to give you a general idea about personal finance. One strategy isn't going to work for everybody. The people who read these books really have no idea, at that point in time, how to budget money, let alone invest their money. People want numbers, they want to be told exactly what to do. Most people out there hate thinking for themselves therefore a book that simply outlines the theory of investing will do the average person no good. They'll throw the book out saying it provided no concrete plan.
Investing books such as these are really just to give you a general idea about personal finance. One strategy isn't going to work for everybody. The people who read these books really have no idea, at that point in time, how to budget money, let alone invest their money. People want numbers, they want to be told exactly what to do. Most people out there hate thinking for themselves therefore a book that simply outlines the theory of investing will do the average person no good. They'll throw the book out saying it provided no concrete plan.
Posted on 5/6/14 at 10:42 am to Sigma
This is nitpicky, but why exclude the 401k match? 15% is 15%, if you get matched %5, you are saving 20%...if he thinks 20% is right, why not just say 20%?
Posted on 5/6/14 at 10:45 am to NukemVol
As long as the 10-year treasury yield is south of 4%, I'm not putting 1/3 of my money in bonds. No way, no how.
Posted on 5/6/14 at 10:54 am to Joshjrn
quote:
Sigma, 3% is his expected return because a third of your money is wallowing in bonds. Plus, it's real return after inflation, not nominal return.
I know, but it's still low. Look at VWELX. Roughly the same stock/bond ratio, and its real return is well above 3%.
Posted on 5/6/14 at 10:56 am to NukemVol
quote:
This is nitpicky, but why exclude the 401k match? 15% is 15%, if you get matched %5, you are saving 20%...if he thinks 20% is right, why not just say 20%?
Sorry, I was typing on my phone when I made the list and trying to be brief. He recommends contributing to your 401k up to the match, even while you are in debt. Then pump up to 15% once you are out of debt.
Posted on 5/6/14 at 10:59 am to Sigma
Speaking of debt, I disagree with him on how to handle student loan debt. With generous repayment plans and long term forgiveness packages, I see no reason to miss out on years of IRA contributions just to pay down student loan debt.
Posted on 5/6/14 at 11:06 am to Joshjrn
quote:
generous repayment plans and long term forgiveness packages,
Curious to see how much longer those are still available.
Posted on 5/6/14 at 12:02 pm to SpidermanTUba
quote:
It isn't.
Oh, so you were being disingenuous. Again.
Because you counterargument to people saying that 33% in bonds were too high was to bring up "idiot friends who invested 100% in stocks."
quote:
Why is it you think you are smart enough to predict the future 30 years in advance?
There is nothing about predicting the future in having variable risk/time horizons in your investments.
In fact, its the exact opposite: it is preparing yourself for a multitude of contingencies.
quote:
I guess the zillions of people who had to break into their retirement savings over the most recent recession are just moron outliers that shouldn't even be considered in our 20/20 hindsight
Well....yes.
I would like to see your statistics though on the zillions of people who both had fully funded six month emergency funds and had to dip into their retirement funds as a result of a job loss in 2008/2009.
I suspect that most of them had fairly little in the way of savings, and lived basically paycheck to paycheck.
Which is the only way you can get to "zillions," because that is how the vast majority of Americans live regardless of their income
Which, yes, is financially moronic.
quote:
What kind of bonds are you investing in that can't be liquidated within three business days?
Now you are showing that you aren't listening.
That's my stance of why I invest my emergency fund. With a high bond percentage and given time of growth to offset potential losses...I don't see the risk of investing.
I was just saying that everyone uses conversative assets for emergency funds, be it money or bonds.
But it is stupid to treat your retirement 401k assets with the same considerations.
Posted on 5/6/14 at 12:11 pm to Cold Cous Cous
quote:
Curious to see how much longer those are still available.
Hard to say for sure, but I see them only strengthening. You already have pols saying they are worried about the fact that millennials are putting off large purchases like cars and houses, "depressing" the economy. There is talk of pushing loan refinancing at lower interests rates this term. A couple of years ago, there was talk of shortening the required payment period before forgiveness.
Now, neither of those things might ever happen, but I think it's telling that precisely nobody is discussing making it tougher on student loan debt holders.
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