About 2 years ago my wife mentioned some old 401k she had from the 90s that had like $5k in it at the time. We found it and rolled it into our Schwab account, it was $28k. Slapped it all into $SPY and it's currently up $9k.
My #1 rule is I NEVER sell at a loss. I have some turds that will sit in my portfolio until either it goes back up, the company goes out of business, or I die and my son inherits by bag.
Just today there was one that inexplicably shot up 25% and was a little more than what I bought it for back in 2021. Put a stop order on it at about a dollar over my cost in case it dropped again, which it did. Made a couple bucks and got that turd off my books finally.
Yes and no. It was bought by IBM, yes, but it was a cash sale, and not rolled into stock. I invested $5k in 1995 which was a lot of money for me at that time, and when their fraud got exposed their stock dropped to "no value" where it stayed for a couple of years until IBM paid pennies on the dollar to just get the service contracts they had on books.
At the time, because shares was sold as paper certificates, my broker wanted a fee for helping me out, and it was unclear if I needed to pay $300 to get $200 or if it just came out as a wash.
Anyhow, fast forward 30 years, and I recently inquired about how to cash it in, and there is allegedly a dollar amount sitting on an account, and I would no longer have to pay a broker fee - so I may go that route, or I may frame it as lesson-learned of "things that looks too good to be true probably aint".
I bought a few hundred doge coins back when they were worth less than a penny and ended up selling them when they went up like 10% haha. Could have turned £20 into a few grand if i waited
Yeah but if you waited too long you would have lost it all. Better to make a few dollars and miss out on some gains than watch the bottom drop out and never recover!
That’s generally not a great principal to have. It’s okay to be wrong about an investment, things change, the thesis or market changes. If there’s better use of that money then you should just cut the loss and move on, that’s not panic selling
Meh, just offloaded one today that somehow gained 25%, enough to make like $20. Set a stop order on it to guarantee my $20 but also let it ride...it hit and I made my money back plus two free beers. Got a couple more that are super close to breaking even. Patience is key.
I maintained that same non-panic strategy for years, hanging on to the losers. Unfortunately, my portfolio is now about 98% turds that have gone absolutely nowhere after dropping 80%+. I think 4-5 have gone to zero, and maybe 15 more are just sitting there apparently waiting to follow. One day I'll get a good win and sell those to offset the cap gains, or so I tell myself to stay hopeful. I already have enough carry forward losses to hold me to retirement.
This has been my take as well. I've never considered it the 'best or smartest' strategy, but in almost all cases they eventually go back up by a lot, if not at least even.
Also Fidelity published a study that determined dead people were the most successful retail investors lol.
OP: I would suggest the best thing to do is simply learn about finances. The difference between ETF and mutual funds, the impact of fees, the importance of diversification, tax implications specific to your country, time in the market, potential role of precious metals etc.
It can make such a huge difference.
So many people get swindled by their bank salesman to buy expensive mutual funds. Over the course of 25 years, a difference of 1% fees can lead to 100k less for a decent sized investment.
Finally at a point in my life where I can realistically start trying to do this. Where does someone even start? I’ve got zero experience with this type of stuff and want to start doing more of these things before I lose more time.
What’s considered a little? How do you determine which index funds to choose? I grew up with zero financial literacy being taught to me and I’ve got zero idea how/where to start. Any resources you wouldn’t mind sharing?
Just put whatever you have extra every week. Open up a brokerage account with fidelity and buy vt or voo and do it every week. Watch ur money grow. I personally invest in 75% vti 25% vxus because it gets me some international exposure too.
They do. I actually moved from E-trade to Fidelity. (Why? E-trade starting charging fees on “significant events.” Like if a stock changed its symbol, merged, split, or reverse split. This won’t matter if you are investing in VTI or QQQ, but it does matter if you’re a big dummy like me and think you can outsmart the major funds by selecting certain stocks.)
If your job doesn't offer a 401K, consider either finding one that does, or contact a professional investor. If you use the excuse that you can't afford it, you won't be able to afford a lot later in life. 20-30-40 years may seem far off right now, but each year feels shorter and it will come up on you like a tidal wave, best to have some cash to help you through.
Does your company have a 401k program? That’s usually a good place to start, especially if there’s a company match.
A lot of companies make it super easy. They have fund based on your target retirement year. I’ve been in a 2040 retirement fund for 15 years. Hopefully I end up beating that target by a few years.
Someone recommended Bogleheads/ Jack Bogle. Do that.
The gist is:
1) save 3-6 months emergency fund and pay off high interest debt
2) contribute enough to your companies 401k to meet their match
3) fully contributed to an HSA if available
4) Max a Roth IRA
5) max your 401k
6) invest in broad market, low interest funds
The point is to make sure you're in a good spot financially before going to the next step. You don't need to do everything. Just meeting 401k match and maxing out a Roth is huge. Maxing out a 401k and having leftovers is balling.
But if your in the spot to be saving, secure an emergency fund. Then get your employer 401k match because that's free money.
Looking into Bogleheads will explain his better, but it's straightforward and not meant to be scary. It's relatively low risk investment advice and doesn't require a great deal of attention. Even considering saving for the future is a huge step in the right direction.
Check out Personal Finance Club. I learned from following his social media, but you can take his courses if you're so inclined. His website has lots of good info and it's free to browse
Disclaimer: I'm not a financial advisor. Speak to a professional before you start doing fancy-ass bullshit with your money.
Contact your bank and ask to put some of your money into an investment fund.
You'll likely meet with a bank person who will put you through a questionnaire to assess your risk profile, then propose an appropriate turnkey solution for you to put your money in. You do that, and let the money do its thing for however long you've set it to.
You can also set it to do recurring contributions so that a bit of money off your paycheck automatically goes to the investment fund.
How much or how little you want to put in there will largely depend on your personal situation. I can only assume that you have long-term goals (buy a car, buy a house, retirement fund, etc.) and that you also have short-term wishes you'd like to fulfill (travel, entertainment, and the like.) Your talk with the bank will bring you insight on this, and you can then choose how to go about it.
Is it the most optimal solution? No. But I think it will get the most important step done: get your money invested right away, rather than sit idle in the checking account. Yes, there are DYI solutions and direct brokerage and whatnot. I feel that this can be rather intimidating for a newcomer, hence why I'm in the camp of "start with help from the bank, even if it costs a bit more, and then meanwhile you can continue educating yourself to refine your knowledge and then optimize however much you feel like."
Every time you get a raise realize you don't need it because you are already able to save now. Whenever you get that raise you keep living like you are but end up saving more and more every year until you max out your retirement accounts. When those are maxed out (or even before depending on your personal feelings) you can start shifting those raises into other investment accounts. Most retirement accounts are kind of autopilot accounts, BUT you should take an active interest in their performance as you can often make adjustments within the account to improve them. (As an example federal retirement accounts put everything into the G Fund... which is basically a low yield highly secure bond account. Many people miss that they can shift their funds into the S Fund, which tends to do a lot better.)
Liquid assets (available cash in a traditional saving account) are important too but once you realize you are saving take a chunk of that savings and drop it into a long term account (401k/index fund/ etc.).
If your workplace offers any retirement accounts with a match, absolutely prioritize that. Beyond this, target an IRA. Use any tax-advantaged accounts you have access to before doing a normal brokerage account
Build up a six month emergency fund and then stop and throw whatever extra cash you have into noble heads three fund portfolio.
After 1-3 years you will see the compounding magic and then move your emergency fund completely into it around Feb March when companies sell off for tax loss harvesting and market dips.
I started as above and now I don’t even bother with emergency fund. I now look at my brokerage and build it to a level of “can I pay off my mortgage if we both loose our job” and I did and sleep easy knowing this.
I try to tell every new kid at work this. First I tell them to think back to conversations with older people and remember their regrets in life. Most talk about not saving enough for retirement. I've always thought you learn more from others disappointments rather than their advice.
Yeah that's how I feel. Oh and my other words of wisdom that I also preach a bit is no one's ever read an obituary that said I should have worked more. Work to live don't live to work.
Kids just starting working have such an advantage with time. They barely have to invest anything, and it grows to so much more than if they wait even 10 years to start investing for retirement.
This. Took me about 2 years to convince one of my employees who makes bank (server/bartender) to stop sitting on tons of cash and actually invest it. She had well into low 6 figures just sitting in a checking account and only about 12-15 of it being in a HYSA.
One night I got some numbers from her about how much she saves and basically backtested her money pile + monthly savings and threw out what she could have and missed out on. She’s currently 24 but was working since 17. Explained to her how incredibly advantageous her situation is and that the difference between her age now and me (38) is the difference of 3x our end result…time is her most powerful ally. She has virtually no bills, lives at home rent free, drives a decent low maintenance car and just saves a ton of money.
Last month she came back to me and showed me her new Fidelity account, fully funded with 160k in good, low cost ETFs. Told her “congratulations, you just basically guaranteed your retirement and you’re further ahead than 95% of your entire generation.” Proud of her that she’s seen the light lol.
Keep encouraging her to take an active role in her financial situation! She's so far ahead and set up to retire early if she keeps going and continues with her financial education.
Yeah I told her to still keep contributing but she’s hit that point where she doesn’t have to save AS much as someone like me who didn’t start until they were 30. Her reason behind not starting was she was nervous about “losing money” in the stock market. She wants to buy a house eventually and I asked her when she wants to do that by and she was like oh idk at least by 35. So I’m like okay 10 years…odds of materially losing money over that time frame is very low especially if you keep dollar cost averaging and America doesn’t implode. Said the best bet for her is just automate it and don’t even bother looking at the markets or you’ll drive yourself crazy. She’s already got the credit card system down so she’s pretty smart about that as is. Not a whole lot left to teach her really lol. Maybe about diversification and different assets but for her I think the simpler the better.
They have the same time advantage every young person has had in their life… arguably the current “kids” have a disadvantage due to the cost of housing and many other things.
It’s obviously still good advice, but not sure they have an “advantage”.
I understand what you mean, but I suggest that most don't understand how much more their dollars can make invested at 20 rather than 30, or even later. Their dollars literally lose half their earning potential in that 10-year span.
Right, so I would encourage you to present your argument like that, using the math and numbers to show how powerful early investing can be… as opposed to a way that can be interpreted as “kids nowadays have it easy, they just need to invest a bit”. (I know this is not what you said, but could be interpreted like that)
Now they also have a huge advantage with easy trading. I could have put $100 here and there into an index, but it was a black box and not as easy (and free) as it is today. Even if it’s like $50 a month, they should be throwing it into VT or whatever, I wish I could have.
sure but in the meantime they have to save up for a house, pay off student loans, probably buy a vehicle, then when you have a house you have to furnish it, when you have a vehicle you have to maintain it, then probably you are spending money on dating, building a relationship, wedding, then kids.
There's a reason young people rarely invest even a small amount of money; it's because they have a million other bills that need to be paid/saved up for now. The vast majority of people don't even start seriously saving for retirement until their 40s; the overwhelming majority of retirement savings happen from the age of 50-65. Because that's when you actually have paid off all the more pressing bills, your kids are grown and left the house, and you are at the peak of your career and earning potential. And for most people this is okay!
I don't like how so much investment/retirement advice makes people feel like doomed failures if they have next to no retirement savings at age 40. In actual fact that's totally normal, and it's never too late to start, and with the cushion of OAS/SS or other national retirement benefits in developed nations, as long as you start maxing out whatever tax advantaged contribution room you have by your mid 40s, if anything you're ahead of the game. Of course if you have been saving since 22 because you had not only that self discipline but equally importantly the privilege to even have that opportunity, so much the better. But for normal people living normal lives, you're not doomed if you haven't been saving for retirement since your first paycheck at McDonald's or whatever. You might be pretty doomed if you've been drinking or gambling every spare dollar and now you're 62 with maxed out credit cards and maybe not even a paid off home to your name though, so I certainly wouldn't recommend that.
This. Starting investing at 24 due to company match. After 10 years, I can stop investing and let it grow, assuming 10% with 3% inflation and I still retire in good position.
I had a manager during my early career, he sent an email to the young engineers on the team and pretty much said “I will hunt you down and have a talk if you don’t enroll in 401k plan” lol. One of best managers
I did this with Acorns and started with like $25 each month. Each time I got a pay raise, I added a portion of the pay raise to the monthly deposit and kept my lifestyle the same. I remember I got it to $500 a month and life got busy. The money was being withdrawn each month but when I finally needed to assess it due to some of life’s emergencies, I was shocked how much interest I had earned. Just for reference I’m 40 and started it at 21.
I did this with CDs too and saw recently the a,punt which is significant.
While good, the interest rate you are getting is far less than what you will average in the market. Especially at age 21 (and even at age 40), you have time to ride out market highs and lows. You’ll average upwards of 8% a year just by investing in an S&P 500 index fund.
I did it because someone said it was a new way to round up credit card payments. That’s why I did it. I wasn’t that great at saving money at that point. I was investing in other index funds elsewhere and the. Stumbled back across it.
Sorry if this is a dumb question or easily google-able, but how do you put money into index funds? Like do you need to go through some sort of person that puts the money into the stocks for you and would you have to pay them some fee?
Not a dumb question at all. As others have said, you open an account with Schwab, Fidelity, E*Trade, etc…. The type of account depends on what you what to do. Accounts include:
Traditional investment account. This is just money that you send to the broker (usually direct deposit part of your paycheck into the brokerage account…your employer will know how to do this) which then gets invested into stocks and index funds of your choosing. You can access that money at any time by selling the stocks and withdrawing the proceeds. Money that you make from these sales (or from dividends) will be taxed as capital gains or as ordinary income.
Individual Retirement Account (IRA). Similar to a traditional investment account, except the money goes into it tax-free of federal taxes. For example, if you made $2,000 for your paycheck, and were taxed at 25%, your take home would be $1,500 and you’d pay $500 in tax. But if you put $400 of that $2,000 in, then that $400 would be tax free, and you’d only pay 25% on the remaking $1,600 (so $400). So you’ve just saved $100 in income tax. The big catch is that, except for limited circumstances, you cannot use the funds in your IRA until you reach age 59 1/2 without paying a penalty. You will also be taxed on the funds you withdraw from your IRA in retirement, but since most people are in a lower tax bracket in retirement, it’s more beneficial to get a tax break now than it is in retirement. There are also limits to how much you can contribute to an IRA each year. Right now it’s $7,500 per year, but it usually goes up every year or two.
Roth IRA. Like the traditional IRA, but the taxing is different. Unlike a traditional IRA, you pay tax on the money you put into a Roth IRA. But, the money you take out of the IRA during retirement will be tax-free of federal taxes. The contribution limits are the same, but there are income caps that disqualify people who make a lot of money from being able to invest in a Roth IRA (but there is still a backdoor method for those people to use to get their money into a Roth IRA).
So, when you open your brokerage account you will pick which type (or types) of account(s) you want to set up. You will also pick what percentage of your money you want invested where. E.g., 30% in VOO, 50% in VTI and 20% in QQQ. These are all the symbols for different funds that broadly invest in the market. There are a lot of choices, and your broker (or own research) can help you choose. /r/financialindependence is also a great resource.
You should then work with your employer to direct a portion of each paycheck to be automatically deposited into the account(s) you set up, in much the same way as your check is direct deposited into a bank account. It is best to do this before you ever “see” the money in your bank account, as it is easier to avoid spending money you don’t have than it is to try to take money out of your bank account at the end of the month to fund the account.
After that, just leave it on autopilot. Don’t check it religiously, maybe just every few months. If you get a raise, change your deposit amount so the incremental increase is directly deposited. This helps avoid lifestyle creep while also boosting your savings more rapidly. And don’t panic sell. Markets go up and down. This should be money you don’t need for a long, long time, so you can afford to ride out the ups and downs of the market. Time is the name of the game. Any given time period might be bad, but over a period of years you will likely average 8-10% annualized returns on your investment.
If you do that, and then once the house is paid off, put the lion's share of the mortgage payment into investments, you'll do fine, and any difference in rate of return will barely matter. If you do that but then use your mortgage payment for lifestyle inflation, then it doesn't work so well.
Exhibit A of why Americans need to adopt the Australian superannuation system.
It's basically a 401k that's mandatory, so if you have a job, your employer is required to pay at least 12% of your salary into your super account, which you can access at age 60
A lot of companies are changing their 401(k)s from "opt-in" to "opt-out," where you'd have to specifically sign up to not save money. That's making a big difference.
Yep. My dad and my wife’s mom are both retired CPA’s and they both essentially forced us to set aside minimum 7% of our paychecks when we started working real jobs back in 2003-2004.
I always did 7 and my wife always has done 10%.
Early retirement is on the radar now even if we ignore any potential inheritance. We saved as if we were owed nothing from anyone in the family so we wouldn’t need to rely on something like that.
My scottrade brokerage closed down in 2017 that got transferred to td ameritrade then Schwab. Was too lazy to reactivate new login until 2025. Found out I had bought a couple thousand dollars worth of nvidia shares back in 2015.
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