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271 votes

Why do people save so much?

When people over 60 reflect back on their life, they generally do not say: I wish I took out more student loans. I wish I bought more expensive cars. I wish I bought fancier clothes. I wish I didn't ...
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215 votes

Why do people save so much?

Why do they need so much money as old people? The future is unexpected. My country has universal healthcare, so medical expenses are not a worry. Will it have UHC in 50 years? Probably... but ...
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109 votes

Why do people save so much?

The reason some people save so much so young is that they understand the growth potential of COMPOUND INTEREST. Every dollar that I put away for my daughter at 2 years old can be worth $1,000 when she ...
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105 votes
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If a broad long-term investment in the stock market is such a good deal, why don't banks do the "obvious" things?

Fundamentally, I think there's a high level (and perhaps unsatisfying) answer to this. It's because that's not "banking" as a business, and a bank is established to do banking, not to get ...
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80 votes
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Why does the introduction of chip & pin appear to be so controversial in the United States?

The way credit and debit cards work in the US, all liability for unauthorized purchases is on the card issuer and/or merchant, not on the cardholder. Customers have no reason to want measures that ...
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71 votes

Why does risk level matter?

Because we don't have the rest of time to recover our losses. Since we'll all want to actually spend our money in a few decades at most, an investment that may have suffered a sharp fall at the time ...
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  • 22.2k
67 votes

Why does risk level matter?

Before getting into a practical example, I think it would be valuable to define what "risk" actually is. Risk is by definition the magnitude of variance in possible results. When you put $1k in the ...
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60 votes

Why do people save so much?

For myself, I saved because having accumulated a nice pile of money - enough to live modestly on the income (what I call being "independently poor") is both security and freedom. Take security. What ...
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  • 11.1k
57 votes
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How risky is real estate?

Where is the risk? The short answer is... Property damage from weather, termites, tenants, whatever. How about tenants who stop paying the rent and you need to go through legal channels to evict ...
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  • 73.9k
55 votes

Why cannot LLCs be used to negate increased risks when doing leveraged investments?

Answer: Due diligence by the lender. It occasionally happens, and sometimes the lending officer is in on a scam, but banks do not tend to loan money where there is a large chance that they will not ...
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  • 75k
50 votes

Why do people save so much?

I'll be living in my own house that is already paid off at that point, so no rent or mortgage payments. This very much depends on where you live. In the major cities of the costal USA many folks ...
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44 votes
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Is putting money in a 401(k) plan risky?

Mutual fund investments within a 401(k) plan (or outside a 401(k) plan for that matter,) are NOT covered by the FDIC regardless of whether the plan administrator is FDIC-insured or not; they are not ...
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41 votes

Why do people save so much?

My country has universal healthcare, so medical expenses are not a worry. People in their 20s (and 30s) thinking about the future may choose not to gamble that the government in 50 years will look ...
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38 votes
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Why I cannot find a "Pure Cash" option in 401k investments?

Holding pure cash is a problem for 401K companies because they would then have follow banking rules because they would be holding your cash on their balance sheets. They don't want to be in that ...
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  • 3,795
37 votes

Why does the introduction of chip & pin appear to be so controversial in the United States?

An article describing the risks of "chip and pin", along with related economics and regulatory issues, appeared last year in Communications of the ACM. The ACM is one of the two major organizations ...
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  • 371
37 votes

Why should I hold stocks for the long term when the risk of more companies going bankrupt increases over time?

Whenever I see advice for "long term investing" it usually includes the caveat of making those investments into diversified index funds such as VOO or VTI. As opposed to investments into ...
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  • 8,017
34 votes

Does dollar-cost averaging just means taking risk later?

The paper you are referring to is likely the Vanguard report Dollar-cost averaging just means taking risk later. The thrust of the paper is that lump sum investing outperforms dollar cost averaging ...
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  • 5,077
31 votes
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Must a company have a specific number of employees to do an IPO?

While there is no legal reason to have a minimum number of employees, there can be a practical reason. They want to look like a good solid investment so that investors will give them money, which ...
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30 votes
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Why would long-term investor care about volatility?

If you really do not need to withdraw the money, it is just for psychological reasons. Excessive volatility makes many people uneasy and probably rightfully so given the amount of money involved after ...
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  • 6,708
29 votes

Why does the introduction of chip & pin appear to be so controversial in the United States?

It isn't controversial, per se -- it's just expensive. We have a huge established base of magstripe -- or keypad! -- billing terminals, and of software to support them. The credit card companies don't ...
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  • 31.8k
29 votes
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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 ...
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28 votes

Is putting money in a 401(k) plan risky?

Investments are usually insured by SIPC instead of FDIC, however it is a different kind of protection. Essentially it just protects you from the broker going under, not the investment losing value. ...
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  • 51.6k
27 votes

Why cannot LLCs be used to negate increased risks when doing leveraged investments?

Alright, so the bank would still, then, agree to lend 10K against the 10K in equity, right? That still significantly increases profits (24% vs 15%) and would afford the same loophole. As a general ...
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  • 20.8k
26 votes

Must a company have a specific number of employees to do an IPO?

No, there is no minimum employee limit in order for a company to initiate an initial public offering.
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  • 48.6k
25 votes
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Should I be worried that I won't be given a receipt if I pay with cash?

If this is because he wants to avoid paying taxes, will I get in trouble if I agree to have him work on my vehicle? You should check your state and local sales tax laws to be certain, but in my state ...
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  • 116k
25 votes

How risky is real estate?

where is the risk? Losing renters Damage done by renters Unexpected maintenance Legal liability Capital losses Other factors that should be included in expenses: Routine maintenance Paying the ...
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  • 116k
23 votes
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Risks of using a "free" (non-fee-only) financial planner for investing a substantial sum?

The risk is that the "free" service may be supporting itself by steering customers to products which part a sales commission, or that are products of the company/bank that employees then, rather than ...
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  • 31.8k
23 votes
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As a 22-year-old, how risky should I be with my 401(k) investments?

At 50 years old, and a dozen years or so from retirement, I am close to 100% in equities in my retirement accounts. Most financial planners would say this is way too risky, which sort of addresses ...
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  • 75k
22 votes

Why do people save so much?

Everyone has different retirement goals. Some people want to retire before they are 70, the earlier they want to retire the more they need to save now. Other people want to travel in retirement and ...
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  • 64.6k
22 votes

Risks of using home equity for high risk market investing

The United States (S&P 500) is a great example of Survivorship Bias. There is no reason to believe it will continue to deliver returns as good as the last hundred years going forwards. There are ...
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