128
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Accepted
Why doesn't common investment advice include the idea of pulling out of the market during downturns?
Getting out of the market is a good idea if it will go down after you sold (and if you buy back early enough). Yes, if you can do that correctly, you earn money.
Having a loss of 5% before you sell is ...
- 2,993
121
votes
Accepted
Why is the rate of return for website investments so high? Are websites a good investment?
Because if you buy a website and just sit on it as an investment, its revenue and value will quickly collapse. You need to keep doing a lot of work to keep it current. You’re not buying an investment, ...
- 23.7k
102
votes
Why does it seem the best way to make a living is to invest in real estate?
I think this might be an instance of "survivor bias" in that you only tend to hear from the people who were successful at it and made a lot of money off of it. Conversely you don't hear as much from ...
- 2,592
72
votes
Can my sibling double his portion of our inherited property by buying us out and then selling?
You’re thinking about it wrong. To make the maths easier, assume the estate has just $600K in cash and the $300K property. If you each inherit equally, you each end up with $200K and a third of the ...
- 23.7k
71
votes
Accepted
Would compound interest work better if all my accounts were combined into one?
No. The compounding is a multiplier, and multiplication is distributive over addition. So
1.1 * (x + y) = (1.1 * x) + (1.1 * y).
That is assuming that the accounts are large enough that no ...
- 7,576
64
votes
Why does it seem the best way to make a living is to invest in real estate?
What is the truth about this?
Pretty much no truth.
At 48 years old, I received an offer for a job where I was paid far more than any other employment I had previously. I chose it over two other ...
- 79.6k
58
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Why does it seem the best way to make a living is to invest in real estate?
Several other good answers that get into the details, but I think there are a few obvious things that need to be said here:
Real estate isn't a risk-free golden ticket - investing in real estate ...
- 17.1k
54
votes
Why doesn't common investment advice include the idea of pulling out of the market during downturns?
Because such a strategy, when back-tested, probably fails. Badly.
5% off peak, I sell. I watch the selloff reverse and buy back at the peak, perhaps days later. I just lost 5%. 5% selloffs are common ...
51
votes
Accepted
Should I sell mutual funds that are performing well or poorly first?
In most situations it doesn't matter, but not because it is gambling. The only reason it would matter is if you had a bump in income and are expecting a higher marginal tax bracket in the year you ...
- 53.5k
50
votes
Trading stock more quickly vs. holding it
What you are missing is that over the long run, the market expectation is positive, and for the S&P, about 10%/yr. But, day to day, any given day is very close to a flip of a coin. When you take ...
47
votes
Realistically, how much do you need to start investing?
Any amount greater than 0 is fine really.*
Investing great lump sums is akin to timing the market, just set a monthly target and stick to it.** Consistency over the long term is the key to success. ...
- 4,107
46
votes
Why does Warren Buffett say his fund performance, relatively, is likely to be better in a bear market than in a bull market?
Buffett is a value investor. His goal is to buy good companies when the market is overly worried and prices them below intrinsic value. When the market is highly priced it is much more difficult for ...
- 4,017
46
votes
Can a small family retire early with 1.2M + a part time job?
Can a small family retire early with 1.2M + a part time job?
With the right sacrifices, almost certainly. Can you retire early in the scenario you described? No.
You're spending more per year than ...
- 71.2k
45
votes
Why does it seem the best way to make a living is to invest in real estate?
The sales pitch:
A few decades ago, I had a friend that was starting out in real estate investing. He explained his reasoning like this:
Buy a starter home. Get a decent house/condo with the best ...
42
votes
Is it an OK strategy to sell whenever an investment gains value above a threshold?
This sounds like "timing the market" and is not a viable long-term strategy. You buy when you think a stock will go up, and sell when you think it goes down, or when you want to diversify, ...
- 142k
37
votes
Is there a threshold (in effort, or capital) beyond which it makes sense to be an active investor?
It's worth it to be an active investor when, net of fees, your careful stock picking can reliably beat the performance of an index fund charging 0.07% expense ratio.
However, it is not enough to beat ...
34
votes
Can a small family retire early with 1.2M + a part time job?
$90K expenses. Less $12,000 Income. That’s $78,000.
You are asking if $78,000 can be returned from an investment of $1.2M.
As a rule of thumb, we talk about a 4% safe withdrawal rate. But even then, ...
33
votes
Accepted
What investment strategy is currently being hawked on FM radio commercials?
The one that I have heard of (others may be different) is a form of capital protection investment. The basic premise was that you receive a percentage of positive returns, and lose nothing if there ...
- 142k
33
votes
Is it a good idea to make one additional monthly payment to a mortgage?
Unless you plan on skipping a payment in the future, you'll be better off paying extra to principal rather than "banking" a payment early. If you "bank" a payment early, I'm ...
- 142k
32
votes
When stock falls, wait until it rises for not losing money?
If the reasons you bought the stock are still valid then it's a bargain, and the low price gives you an opportunity to buy more. If the drop in price means that your initial analysis was wrong then ...
- 5,522
31
votes
Accepted
Why pay estimated taxes?
Same argument and answer for investing instead of paying off debt, or borrowing to invest. Risk. What happens if the stocks drop by 10%? Sure, you might come out ahead on average, but a drop in the ...
- 142k
30
votes
Is my investment strategy a form of fundamental indexing?
I would call that strategy "waste of time":
Your individual purchase decisions are not meaningful for the bottom line of the company.
A single individual (you) simply isn't representative enough of ...
- 2,565
29
votes
Accepted
What does a well diversified self-managed investment portfolio look like?
"Diversified" is relative.
Alfred has all his money in Apple. He's done very well over the last 10 years, but I think most investors would say that he's taking an incredible risk by putting ...
- 116k
27
votes
Is it an OK strategy to sell whenever an investment gains value above a threshold?
This feels like a variant of a sunk-cost fallacy. Don't consider the $10k at all in your investing; there's nothing you can do to get it back.
Instead, suppose someone gave you $10.5k worth of stock. ...
- 409
27
votes
Accepted
Should I invest or should I wait while having foreign currency?
Fundamentally here you're asking for a sound prediction on direction of currency markets (and in a secondary respect the direction of the stock market). No one credible who even vaguely knows this ...
- 5,768
27
votes
Can my sibling double his portion of our inherited property by buying us out and then selling?
Imagine if there was no money in the inheritance, just the house. However your brother has his own $200k account with money he saved from his day job. He starts with $200k, inherits $100k worth of ...
- 5,327
25
votes
Is there a threshold (in effort, or capital) beyond which it makes sense to be an active investor?
There is some things to consider to put this quote and your thoughts into the right place.
The book is old. The latest original is about 50 years old and the version with a commentary that I own is 20 ...
- 7,462
23
votes
Is it possible to protect against investors stealing business ideas?
Sure, this is what non-disclosure agreements are used for. Non-disclosure agreements ask the other party to not "disclose" (ie, tell) any private information you tell them, and sets ...
- 35.9k
23
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Why doesn't common investment advice include the idea of pulling out of the market during downturns?
The other two answers (the difficulty of timing) are both correct, but there is another issue: this approach requires you to change from being a passive investor to an active one, because you need to ...
- 1,458
22
votes
Is it a reasonable strategy to keep the ratio of investments constant?
What you are talking about is rebalancing your investments. Some people do that once or twice a year. Others never rebalance.
Some people don't like it because it hurts to sell winners and buy more ...
- 145k
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