98

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 the people who lost their shirt trying to flip a house or those who couldn't secure tenants at a good price. If you're interested in the idea of passive real-...


66

There are people (well, companies) who make money doing roughly what you describe, but not exactly. They're called "market makers". Their value for X% is somewhere on the scale of 1% (that is to say: a scale at which almost everything is "volatile"), but they use leverage, shorting and hedging to complicate things to the point where it's nothing like a ...


66

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 individual payment gets lost as a rounding error (three accounts earning 1.4c each will pay you 3c, combined they will pay you 4c). So long as the accounts are at ...


64

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 competing job offers that were offered at a very similar time. While I was laid off from that job, rather abruptly, I had a new job within a short time at age ...


54

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 involves a lot of risk. It's easy to fail at it, and then you have nothing to fall back on. Having a career with a skilled job isn't as dismal as you've made it out ...


51

If they return to their earlier prices Assuming I don't make too many poor choices That's your problem right there: you have no guarantee that stocks, will in fact return to their earlier prices rather than go down some more after the time you buy them. Your strategy only looks good and easy in hindsight when you know the exact point in time when stocks ...


50

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 your tiny gain at $105 (your example) and the stock continues to rise, what then? Your plan requires you to be right, not once, but twice. I remember the crash ...


46

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 him to find things that he thinks are at an attractive price. When people are very worried and the market has crashed, stocks are then priced below their ...


46

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. This is a marathon, not a sprint. [*] just make sure you use a low fee broker(some even offer promotional 0 fees choices) and ETF investing (a mixture of bonds/...


44

I'd prefer having it (more or less) fluent at any time, if possible... And the Swiss National Bank (SNB) will do their darndest to make this a costly option. That's exactly the point of negative interest rates. They don't want to help you saving money. So you will have to choose what to give up: liquidity, or profitability. But for now, you still have ...


41

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, or when you need cash and it's part of your liquidation strategy. You don't know if the stock will go up or down from here, so selling might be the right ...


40

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 rates because it is an owner occupied purchase. Live there for 5 years. Buy another house, get some renters lined up for the first place. Renters cover the ...


33

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 you have to re-analyze the stock. If you'd still buy it at the current price, keep it. If buying it was a mistake, sell it.


33

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 was a negative return. So if, say, the S&P 500 was up 20% over 5 years, then you'd earn 15% on your original investment. If it goes down, you lose nothing. ...


31

Ask yourself a better question: Under my current investment criteria would I buy the stock at this price? If the answer to that question is yes you need to work out at what price you would now sell out of the position. Think of these as totally separate decisions from your original decisions to buy and at what price to sell. If you would buy the stock now ...


31

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 market could be catastrophic from a cash flow point of view. In addition, federal tax debt is arguably the worst kind. The IRS has the authority to garnish ...


30

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 the market as a whole. As the Canon example shows, how a company behaves depends of a lot more than consumer products, and many of those factors are difficult to ...


29

Withdraw your savings as cash and stuff them into your mattress? Less flippantly, would the fees for a safe deposit box at a bank big enough to hold CHF 250'000 be less than the negative interest rate that you'd be penalized with if you kept your money in a normal account?


29

"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 everything on one stock. Betty has stock in Apple, Microsoft, and Google. Compared to Alfred, she is diversified. Charlie looks at Betty and realizes that she is ...


27

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 will tell you, so you're not going to get an accurate answer to the specific question from anyone who isn't an idiot or a fraud. Outside of this point, you clearly ...


26

Yes. There are several downsides to this strategy: You aren't taking into account commissions. If you pay $5 each time you buy or sell a stock, you may greatly reduce or even eliminate any possible gains you would make from trading such small amounts. This next point sounds obvious, but remember that you pay a commission on every trade regardless of profit, ...


26

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. Do you think that stock is the best use of $10.5k? Then hold it. Do you have something better to do with $10.5k? Then sell. The only place where that ...


24

On Black Friday, 1929,the market fell from over 350 to just above 200. If you were following your plan then you would buy in at about 200. But look what the market did for two years after Black Friday. It went down to about 50. You would have lost around 75% of your capital.


23

If you're looking for a quick answer about variable annuities, jump down to the Summary and Citations/Resources sections below. My answer is mostly specific to the US. I'll try to give an overview of variable annuities and some of the benefits and drawbacks to them, since they're both heavily marketed and highly complex. The answer is pretty long because VA'...


22

Annuity is a word that doesn't have one exact meaning, unfortunately. At its very simplest, an immediate annuity (IA) is purchased and you receive a rate that's higher than the market rate in exchange for your money. The cash stream is until you die. For example, today a 65 year old man can get 6.80% by buying the IA. There are a myriad of options for a ...


22

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 losers. Others don't like it if there are transaction costs, or tax impacts. Certainly if you rebalance too often (weekly or monthly) you can be making a lot ...


21

Short answer That ratio is a decent approximation of the market cap distribution in VTSMX, although it's not perfect because the two funds you have access to, VIIIX and VIEIX, overlap somewhat in their holdings. The S&P 500 and the completion index don't. Using the S&P 500 and the completion index as relative weights gives you (14.7+3.4)/14.7 = 81.2% ...


21

Risk is the problem, as others have pointed out. Your fixed mortgage interest rate is for a set period of time only. Let's say your 3% might be good for five years, because that's typical of fixed-rate mortages in Canada. So, what happens in five years if your investment has dropped 50% due to a prolonged bear market, and interest rates have since moved up ...


21

In the United States investing towards donation is a great idea because you can donate appreciated securities directly rather than donating cash. Notice how much this can benefit you: You invest $10000 for 1000 shares of XYZ company (which, for the sake of this example, does not pay dividents to shareholders). Two years later the market price of your ...


21

The technical term for it is "timing the market" and if you can pull it off correctly, you will do quite well. The problem is that it is almost impossible to consistently do well. If it were that easy there would be a lot of billionaires walking around. Even Wall street experts haven't been able to predict the market that well. This idea is almost ...


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