
Ask HN: What kind of personal financial investment do you do? - shelvy
I realize the general consensus around here may be that the best investment would be in yourself (have 25k? start a business!), but surely some people have "normal" investments, too.  How do you hack it?<p>I don't think it'd be very beneficial to discuss <i>specific</i> stocks, funds, etc; but other than that it's a very open ended question.<p>Some thoughts (but post whatever),<p>* Do you have a 401k? IRA? Roth or not? Do you max them? Why or why not?<p>* Do you have an investment account that isn't a retirement account? Why or why not?<p>* Do you pick individual stocks? Do you have someone else? Do you use a managed mutual fund or ETF? Why or why not?<p>* Do you use passive index mutual funds? Bonds? CDs? Why or why not?<p>* And whatever else comes to mind...
======
patio11
A Roth IRA, maxed every year, is my main form of "real" investment. I try to
put about 75% into index funds and 25% into handpicked stocks, which are my
concession to desire to gamble.

I don't buy bonds or CDs -- I'm young enough that short-term loss is a non-
event, since nothing short of "my children are starving on the street" will
induce me to touch the Roth ahead of schedule. Wild volatility doesn't matter
because I only check the account about once a year anyhow -- the only concern
is maximizing expected 40-ish year returns.

I _generally_ try to keep a few thousand in cash to cover unexpected expenses,
although my discipline with that has left something to be desired as of late.
(I'll say this for being a salaryman: I never had to deal with wild swings in
my paycheck, and haven't quite mastered the trick of doing so yet.)

~~~
bradshaw1965
...I don't buy bonds

A lot of people would argue that even for a young person a portfolio with a
small bond allocation is actually _less_ risky with higher returns then a 100%
allocation to stocks.

~~~
seanos
Actually, expected returns will be slightly lower but well worth it as the
reduction in risk from the diversication away from 100% equities is huge. E.g.
20% in bonds will barely diminish expected returns whilst significantly
reducing your overall risk.

~~~
j0
Not always true, According to WSJ
[http://blogs.wsj.com/marketbeat/2011/02/07/depressing-
chart-...](http://blogs.wsj.com/marketbeat/2011/02/07/depressing-chart-of-the-
day-stocks-vs-treasurys/) "Through the close of trading Monday, the investors
in 7-10 year Treasurys would have seen a return of 76% percent over the last
10 years, versus a return of 17.4% for stocks. So you could have socked your
money in supersafe U.S. Treasurys and reaped a risk-free 80% gain. "

------
pragmatic
1\. Get an decent amount in _cash_ savings ($10K)

2\. Payoff all debts (including house and student loans)

3\. Only invest in stock market through IRA's where there is a tax advantage.

3.1 Only invest in company 401(k) to get the match.

3.2 Invest the max in Roths (if you qualify)

3.3 Find an index fund and forget it. You've got better things to do then
worry about stock picking. (I suggest Vanguard, it's investor owned).

4\. Fund your war chest you started in step one. This is cash you can use for
starting your company, investing in real estate, etc.

5\. Find something you know about and stick to it. Whether it's real estate,
starting software companies, etc.

6\. Only buy things you can par for with cash. That includes
cars/computers/TVs.

7\. Beware the mortgage tax deduction. (Not everyone can deduct the
interest/the standard deduction is pretty high already). You need a _lot_ of
expenses to itemize. That means you have a lot of mortgage interest || medical
bills || etc. This is not a good place to be in financially.

You'll be amazed how much money you can accumulate (even if you are a "wage
slave").

~~~
jalada
I know your comment was all in dollars and this is probably generally an
American topic. But regarding number 2, in England a student loan is the
lowest interest loan you will likely ever get, so it's naive to pay it off in
bulk; you might need to take out a real loan one day so keep the money, and
even in today's climate you can probably put that money to good use.

~~~
encoderer
That goes likewise for his "pay off your mortgage" advice. If your note is
4.5% and here in the US mortgage interest is tax deductable making your
nominal interest rate even lower.

So the calculation becomes... paying off that mortgage is like getting a
guaranteed 4% return on your money. But there are many low-risk vehicles that
can eclipse that.

It's possible that you'd want to take that guaranteed 4%, but it's not the
type of thing that, IMO, is just a given.

~~~
arc82
The discount to your mortgage is often quite small since you shouldn't count
the entire mortgage interest write-off as a discount, only the amount above
the standard deduction. Also, this discount will shrink over time as your
interest payments shrink and the standard deduction rises.

~~~
bzbarsky
You mean only the amount past (standard deduction - state taxes), right?

Even a low 6-figure income for a single person will get you pretty close to
the standard deduction in a number of states (California, say) for just the
state taxes.

Now if you're married, you have a lot more standard deduction headroom. But
you might also have two incomes.

------
thushan
A good person to read up on is Vanguard's founder John Bogle. He's the
champion of low-cost/low-fee index funds. I'm pulling this straight from his
wikipedia page:

"Bogle argues for an approach to investing defined by simplicity and common
sense. Below are his eight basic rules for investors:

\- Select low-cost index funds

\- Consider carefully the added costs of advice

\- Do not overrate past fund performance

\- Use past performance to determine consistency and risk

\- Beware of stars (as in, star mutual fund managers)

\- Beware of asset size

\- Don’t own too many funds

\- Buy your fund portfolio – and hold it"

And might I add one more: Take advantage of your company's 401k match
immediately! That's free money on the table.

I've followed that style for my retirement 401k.

When it comes to play money and individual investments, I invest in what I
know and what I believe in. The opinion is that one can't know all the
information about every company out there so at least you can invest in the
companies that you do know confidently about...

I follow Apple - and hence I made a big bet on them since the mid-2000s and
it's paid off nicely... I feel Netflix is another company in its class - all
my friends have accounts with them and have nothing but good things to say
about them. Passionate customers can lead to profitability. I guess that's my
individual stock picking strategy.

~~~
jessriedel
Could you explain "Don’t own too many funds"? Is that just because of fixed
per-fund costs?

~~~
beoba
It hurts your ability to rebalance efficiently, and makes things more
complicated than is necessary.

Additionally, if you're at a fund company with different share classes based
on balance, you also get higher expenses by dividing things up too much. Eg
Vanguard's Admiral shares reward you with a lower expense ratio for having
more money in a given fund, since it lowers their own overhead.

------
mrkurt
Most of my money goes into a high yield savings account to survive with no
income for a while (trying to get 18 months in there!). I do fund an IRA, my
employer 401k (to get the most matching), and two Roth IRAs though. The
investments in those are relatively conservative, I consider investing in my
own products to be my "high risk, high gain" strategy.

Roth IRAs are great, you can take the principle out at any time (since it's
post tax money). It's only gains that are off limits until retirement. Not
only that, you can roll normal IRAs and 401Ks into a Roth IRA and get that
money out after something like 3 years. It's thing #1 I'm going to do when I
quit receiving a paycheck and have a year of very low income to report. I
largely consider the Roth IRA principle as part of my savings fund.

 _If_ I started working harder to manage those investments, I'd head over to
the Bogleheads forum and spend a week or two reading. For now, I have a friend
who knows his shit that just tells me where to stick the money to keep it
reasonably safe. It's mostly no-load mutual funds with a pretty big chunk of
bonds in them.

~~~
encoderer
I do the same with my Roth principle. But it's worth mentioning that, when you
roll a 401k into a Roth you owe taxes on it. And if you have to take a portion
of that 401k principle to pay the taxes, you'd almost certainly be better off
keeping it int he 401k.

Also, if you imagine you'll have the same tax rate now as you will at
retirement, there's no advantage to a roth. Whether you prepay taxes or defer
them, it's all the same, the cash available at retirement will be the same.

The real advantage to a Roth is if you think you're paying a lower tax rate
now than you will be when you retire.

~~~
mrkurt
Oh right. When you rollover, you pay normal income taxes on it. My big point
was that if I have a year where I have minimal income, normal income taxes are
going to be _so low_ that rolling it over makes a ton of sense. I doubt I'll
ever have a lower tax rate than in a year with very little income.

~~~
encoderer
Yeah mostly I was expanding for the benefit of readers. I like your plan.

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danteembermage
I put all my investment funds into a risk free account that pays just about
30% APR with no front end loads, no commissions, and I can make withdrawals
whenever I want at no cost. There's a good chance you can to, it's called
"paying down the balance on visa credit card"

i.e. fyi it's generally silly to invest when you have a credit card balance
outstanding.

------
StudyAnimal
1\. Education. Biggest investment, also bringing biggest returns in terms of
increased earnings, in both me and my wife.

2\. Shares. Me and my wife both take turns picking individual stocks. We tend
to look at the news, look at what is cheap, a little bit of technical
analysis. Mostly we just look at things that are cheap, try and find out why
they are cheap, and if we think they will go up we buy. The goal is basically
diversification, with a slight preference to smaller, riskier companies. As we
age we will probably skew that towards larger, less risky companies, or
perhaps indexes.

Oh the government forces us to put a lot of money into some retirement thing,
but I think it is unsound, and do not consider it an investment. (The whole
thing is based on todays workers funding todays retirees, and relies on an
increasing population, whereas the population here is decreasing). I consider
it money down the drain / tax.

------
jblow
I am kind of shocked by the uniformity of answers here, so I will add a
dissenting voice.

In the current economic climate, it is pretty much a waste "investing" in
anything until you have, say, an 8-figure sum in cash laying around doing
nothing. I don't have that, so I am not bothering with "investing". I put
"investing" in quotes because I feel the word tends to be perversely used;
people really mean speculation, that is, gambling with negligible effects in
terms of real-world wealth creation, but the gambling happens on such a huge
scale that it distorts market prices hugely. Real investing is when you put
money directly into something in order to enable the creation of something
that wouldn't have been possible without your capital (as the YC folks do).

Stocks are terrible. If you look at market histories, corrected for inflation
(actual inflation, not government-reported inflation, which is always
understated, as the government benefits by understating it -- so normalize
against something like an alternative inflation index or else straight-up
commodities) then the S&P, DJIA, etc have actually not grown in 15 years. 15
years!! I know all of the "just buy an index fund" seems like good advice --
and it did used to be -- but in modern conditions that is no longer true. On
top of this fact, pile on the risk of another market crash due to the USA's
still-precarious economic situation, and stocks are clearly just not worth
being in. (People are starting to realize this; there have been net outflows
from equities most of the time for the past 40 weeks, and insider-selling-to-
buying ratios are consistently huge.)

You can put money in bonds, but then it is locked up and you have a lot of
inflation risk, so then you'd be aiming at short-term bonds, which are going
to yield less.

Really what has happened is that US economic policy has become very hostile
toward people who are responsible and save money, as an incidental effect of
the desire to stimulate consumption (which mainly means taking on more debt
and keeping rates tremendously low because if they ever become not-low now,
debt burden is going to crush the economy.)

The upshot is that you are better off taking the mental energy you would have
expended on "investing" and subsequently worrying about your money, and
instead funneling it into your creative endeavors. You will make more money
that way, especially when you take a long-term view. (Think about Einstein and
the story about him having a closet of identical suits; except what I am
talking about here is way less extreme and way more obvious.)

I have a rant about how peoples' "investing" according to the modern American
model is actively making the world a much worse place than it ought to be, but
this post is already long enough.

~~~
illumin8
Your long rant basically says don't invest money at all, just keep cash in
your mattress?

Who in their right mind would follow this advice? Let's say we don't worry at
all about saving money, and just funnel our energy into "creative endeavors."
If those creative endeavors are profitable, what are you going to do with the
money?

It doesn't take a lot of energy to setup a 401k or Roth IRA. It doesn't take a
lot of energy to pick an asset allocation that protects you from most risks.
For example, a bond allocation will protect your money during a period of
deflation, while a gold allocation will protect your money during periods of
inflation. A stock allocation will grow your money during periods of
prosperity. Just pick a good allocation and rebalance yearly. It should only
take you a couple hours a year to worry about it, and you'll be exponentially
better off at retirement than someone who stuck all their cash in a mattress.

~~~
jblow
I actually do have a 401k (as well as an additional retirement fund), but I
only have those things because I have surplus money sitting around. The
problem with something like a 401k is that there is a heavy opportunity cost:
you don't get to use that money, ever, until you retire. If there were
something productive you could have done with the money instead, that were
still relatively safe, maybe you should have done that! (Especially in the
current climate of seemingly-perpetually-low interest rates).

If creative endeavors are profitable, you can use the resulting money to fuel
more creative endeavors, thus making the world a better place. Keeping money
in a bank account or publicly-traded stock does not particularly make the
world a better place.

Once I got approximately into the f-you money level of income, it became
crystal clear how fictitious money is in the first place. I wake up one
morning, and bam, I am wealthy! Why? Because someone said so and typed a
number into a computer. Okay... that's kind of weird.

Given that money is so fictitious and somewhat meaningless, it is a shame to
give into primal hoarding impulses, just so one can see the number in one's
bank account go up like a high score in a video game. It's much better to make
like Elon Musk and use your money for what it is: a way to wield influence to
make the world more like you would like it to be.

~~~
bretthoerner
> you don't get to use that money, ever, until you retire

You can typically loan to yourself, especially for things like first home
ownership (considering the average age here, most of us are probably in that
bucket).

------
jsm386
Looking below the consensus here is on index funds. I think, historically that
was the right strategy, but the notion of buy-and-hold an index fund, broad
basket of stocks, etc is being looked at in a new light. From the early 80s to
the peak of the dot.com bubble you saw a long bull market. Buying and holding
a low cost index fund would have served you well. Since 2000, not so much.

See: [http://www.ritholtz.com/blog/2010/03/vanguards-broken-buy-
ho...](http://www.ritholtz.com/blog/2010/03/vanguards-broken-buy-hold-model/)
& <http://www.ritholtz.com/blog/2010/12/buy-hold-vs-trend/> \- Yes both
sources are the same author but I really respect Barry Ritholtz's views and
he's hardly the only one making this argument.

Trying to pick individual stocks can be a foolish endeavor, but buying trends,
whether it is index funds over certain periods, various sector/commodity ETFs,
and yes, companies with great stories is what I try to do. I'm young (27), and
the advice I've gotten consistently is at your age take some risks. So right
now I have a managed portfolio, some bonds/MLP/MLP funds for income, and some
short term positions in individual stocks and commodities. Oh, and a short on
a particular content farm :)

------
rmrm
After a failed startup where I went without salary for nearly a year, I found
myself 30 years old, with 2 car payments, 15K in credit card debt, and $0 in
the bank. This forced me to reevaluate my relationship with money : )

Step 1 was digging myself out of the hole, which didn't take too long -- paid
off the cars and the CC debt.

I use EmigrantDirect for a Savings Account, they pay 0.9% on balances
currently, generally they are very competitive. Transfer are easy.

I use an EmigrantDirect Mastercard for all my purchases. If you maintain a
greater than $10,000 balance in your savings you get a 1.4% cash back on all
purchases. Doing this is a nice way to handle things, all your bills are
consolidated, and you get cash back. Of course pay it off in full each month,
treat it like a charge card, not a CC.

I do not currently get a match on my 401K, and I do not like the investment
options much, therefore I do not use it -- I instead max out a Roth IRA, and
put money into a taxable account.

I tried very hard during the downturn to push as much money as I possibly
could into stocks, ignoring whatever fear I felt. As things have rebounded I
am sitting on a portfolio with very nice paper returns. I favor companies with
high ROE and what appear to be sustainable cash flows. I favor international
exposure. And I like dividends.

I am however finding it difficult to find that much to invest in currently, my
money has been going into cash for some time.

I'm not really sure what comes next...I still consider houses overpriced
relative to rents, tho depending on what inflation may do, it might make sense
to purchase one. Still pondering that one.

~~~
spinlock
I agree with just about everything you're doing. I am still invested in the
market but I know what you're saying about expecting a correction. I actually
used the dip the market took last week to put some more money to work.

I totally agree on housing. Mortgage rates aren't going to get any cheaper
ever again (although I said the same thing in 2003) so it is a good time to
lock in a low rate. But, I live in the SF Bay Area and rents are so cheap
compared to housing prices (still) that it would be really hard to up our
housing costs by 50% (at least) and move into a worse place. Unfortunately,
the wife has her heart set on home ownership so we might wind up going that
way.

------
tricky
we (married) drive shitty cars.

our 401k's are maxed out.

I shop around for the best savings account rate. I wind up changing banks
every year or two.

I pick stocks and hold for the LOL's. Currently getting a 12% APY on about
$5000 invested. No real plan and not interested in dumping a ton of money
there. It's just more interesting than the casino.

We bought the house we're going to die in. paying it off asap.

After the house is paid off we'll probably buy something else. I REALLY want
to build a self-storage building on some cheap land. She wants a condo on a
beach. We'll see.

~~~
jessriedel
What saving account rates have you been able to find lately? My bank in CA
offered a checking account with 5% interest back in 2007, and it's only down
now to 3.5%. Most people I talk to say these are very high rates. Can I do
better?

~~~
tricky
That is amazing. What bank is it? Right now the best I can find is a 1.1%
money market savings account.

Another thing to consider is the banks that offer cash to open an account. I
put $2500 in a new ING Direct account for 6 months and they gave me $50

~~~
jessriedel
Community West "Great Rates" checking.

[http://www.communitywestbank.com/personal/checking/GreatRate...](http://www.communitywestbank.com/personal/checking/GreatRate.aspx)

Since I last checked they have dropped the rates to 3%.

------
dan_sim
I'm building a company and investing in it.

I may be crazy but I rather invest in myself that in a company I have no
control over. When the time will come, I'll sell it and get most of my money
out of it. Maybe reinvesting in another and make more out of a better initial
investment.

I already created thousands of dollars from an initial 500$ investment and
time.

Does someone else here thinks like that?

~~~
arthurdent
yep. i like betting on myself better than betting on most other people.

its sort of an "all your eggs in one basket" strategy, but if you're going to
put all your eggs in any particular basket and you're good at what you do,
you're as good a bet as any (and you can make sure your investment manager
isn't slacking)

------
gersh
You want to diversify. So, if you have a significant portion of your money
invested in a startup, I think you would want to be a lot more conservative
with the rest of your money. You can real safe with bonds or cds. I also look
for old, boring mutual funds, that have been around a long time, and get good
performance.

Although, I haven't gotten around to implementing it, I think there could be a
powerful concept, which I'll personal hedging. The idea is to think of your
investment as a hedge against the costs of things you want to buy in the
future. So, suppose you are investing to retire. 1) Track your expenses 2)
Figure out what your expenses will be when you retire. 3) Buy proportional
share of the value chain for all the companies you will buy stuff from.
Presumably, you want it waited to cover all your expenses. Now, this can get
tricky because you may spend a lot of money with companies that aren't public,
and some industries may be in a bubble. Further, you will have to shift your
investments to reflect industry shakeups. For example, if you change your mind
about what products you like, you would also change your portfolio. Industry
changes would also affect, who in the value chain gets the profits, and
conglomerates or weird capital structures can make this a bit tricky, but I
think it is a powerful concept.

------
riemannzeta
Still chuckling about Bucheit's suggestion of spreading cash out into a huge
number of FDIC-insured savings accounts -- "Think of it as RAID for your cash"
he says, as I recall.

~~~
synacksynack
CDARS is a simplified way to do that with CDs, essentially distributing
amounts past the FDIC limits into different banks behind the scenes, so that
you only have to deal with one account, but get insurance on the entire
amount.

<http://www.cdars.com/>

~~~
riemannzeta
Very interesting. Thanks.

------
Femur
Given the abundance of academic research on the subject of the efficient-
market hypothesis, I think it is futile and foolish to try to "beat the
market" by trying to pick individual stocks that are mispriced. Therefore, I
own low-cost index funds and try to own the market as a whole.

I do try to shelter as much of my portfolio as possible since taxes reduce
returns. I have a 401k, 403b, Roth IRA, Traditional IRA, 457(b)... (I've had a
lot of jobs).

~~~
beoba
You may want to roll some of that into a single account, keeping track of that
isn't going to get any easier...

~~~
spinlock
I just consolidated everything into an IRA, Roth IRA and a separate account
this year (I put them together at the same custodian). It's made my life so
much easier and I actually understand my portfolio now (before it was just a
bunch of assets). The only thing that's left to do is dig a few stock
certificates out of the safety deposit box and have them converted to
electronic shares so that everything really is in one place.

------
math
I make additional contributions above those required to the retirement scheme
in Australia similar to 401k. Obviously, this is because the compounded
savings in tax are large.

I have share trading accounts for savings I intend to use before retirement.
One is for US shares the other for Australian shares.

The main use of this money would be to buy a house (in australia), if and when
this ever makes any sense based on NPV calculations. I independently value any
investment I make to the best of my ability.

I do not buy and sell assets frequently as I believe the market is probably
very efficient on a short term basis (I know I don't know how to beat it). I
tend to focus on longer timescale macro trends which I spend an enormous
amount of time thinking about (for enjoyment, regardless of investment
purpose). I would like to think (at least some) markets are not efficient on
longer timescales (but short compared to my lifespan). I do not know if this
is true, but I believe it probably is. This timescale is at least 5 years.

I rarely buy individual stocks, but there are some exceptions such as BHP as a
proxy for commodities. I tend to buy targeted aggregate securities (ETFs are
great) to get exposure to the trends I'm interested in. The less fees the
better, so index tracking funds are preferred. I don't trust a random "expert"
to be able to beat the market above fees. I know enough people in finance to
know the way you get places is ability wear a suit nicely and talk confident
(i.e. sell), independent of actual ability.

I rarely make large trades. If I'm moving from one asset (or cash) into
another, I'll do so using a number of trades over a number of months.

I'm always diversified on a global basis. I always have some exposure to
assets in the currency where my future expenses are likely to be incurred,
even when I have a negative outlook on that currency (as is the case
currently).

------
brk
Here is a short answer...

My wife and I both contribute maximum contributions to our 401K's (no employer
match). This is ~$16.5K/year, and we pick the funds the 401k allocation is
invested in. Like any 401k plan, the options are relatively limited anyway.

Our larger savings and retirement funds, and some other assets, are managed by
a professional. We both have a higher-than-average amount of investment
knowledge and experience, but it is really a full-time job. We don't have the
time to obsessively watch market trends, do research, and then move
investments around to maximize our gains.

We also keep (depending on various other factors) ~$70-$120K liquid at any
given time. This is money in a decent interest-bearing money market account,
short-term CDs (3-6 months), that sort of thing. It's basically our funds for
emergency stuff, cover a job-loss (we both work in startup type businesses),
buy a car, or things like that.

~~~
encoderer
If there's no match, it's generally advisable to not do this simply BEACAUSE
the usually crappy fund selection.

You can open your own tax-advantaged IRA.

~~~
ydant
Which is limited to $5,000 per year at best (if not old enough for accelerated
contributions), isn't it? Or am I missing something?

~~~
encoderer
Only Roth IRA is limited to $5k a year.

~~~
ydant
This doesn't agree with my understanding of the tax code as reported on
IRS.gov. For example:

<http://www.irs.gov/retirement/article/0,,id=202510,00.html>:

"The maximum contribution that can be made to a traditional or Roth IRA is the
smaller of $5,000 or the amount of your taxable compensation for 2011. This
limit can be split between a traditional IRA and a Roth IRA but the combined
limit is $5,000.The maximum deductible contribution to a traditional IRA and
the maximum contribution to a Roth IRA may be reduced depending on your
modified adjusted gross income."

Also, this table seems to agree:

[http://www.irs.gov/retirement/participant/article/0,,id=2025...](http://www.irs.gov/retirement/participant/article/0,,id=202517,00.html)

This is for 2011, but my recollection is that 2010 had identical wording.

------
acconrad
I have a 401k, Rollover IRA and Roth IRA. I don't max them because for a
while, my returns were lower than my student loan interest rates and I felt it
be a better use of my money at the time.

Until my loans are paid off, I will be sticking with just those 3 retirement
accounts.

I pick my own ETFs because I'm super type A, but it's based on crowd appeal.
So if I find 5 experts recommend an ETF, and it has a low management fee, I'm
likely to purchase it.

I stick strickly to ETFs (but in all asset classes, such as bonds) because the
rate of return generally exceeds CDs and Bonds, and I don't need the money at
the moment. Plus, Bonds and CDs pay out so low that I'd rather just have my
money in a high interest (hah) savings account.

What else do YOU have in mind? Feel free to find me on any of the networks
listed in my profile if you'd like more feedback :)

~~~
bretthoerner
Why ETFs over mutual funds (such as those with the same holdings)?

------
mberning
I got out of employer 401k. Yes they are tax advantaged, but your money is
hostage and you will be harshly penalized if you ever need it for some
unapproved use. I find that these penalties cause me to be much more
conservative with the amount of money that I am willing to invest.

Since I got out of tax advantaged accounts I now use an online broker to buy
exclusively index funds. In the past I was only comfortable investing say 15%
of my money (after living expenses), but now I feel comfortable investing
40-50%. I don't need to simultaneously keep a huge amount of cash savings
because at any time I can sell my index funds and have the money in less than
a month.

You also pay extremely low fees with index funds whereas 401k plans can have
pretty high fees depending on the provider.

~~~
illumin8
Sorry, but this is terrible advice. You could be sheltering $16,500 per year
from all taxes until retirement, not to mention possible employer matches.

Right now, you probably have to earn about $23,000 (assuming 30% tax rate)
just to invest the same $16,500. Then, you have to pay capital gains taxes or
regular income tax every time you receive dividends, yields, or sell a stock
at a profit. These taxes can eat anywhere from 20% to 38.5% of your profit on
every single transaction.

If you sat down with a calculator and figured out the difference between
saving $16,500 in a 401k and saving that much in a non tax advantaged account,
you are literally throwing away over $1 million throughout the course of your
career.

Not to mention, you can take a loan against your 401k if you really need the
money.

~~~
mberning
It does leave money on the table. I wasn't necessarily giving advice, just
telling what I do.

Also, I find the concept of taking a loan on my own money detestable.

------
bmr
I've seen it mentioned here a few times, but if you haven't heard of the
permanent portfolio, check it out here:

[http://crawlingroad.com/blog/2008/12/22/permanent-
portfolio-...](http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-
historical-returns/)

------
tachibana
Warren Buffet's rules of investing: 1) Never lose money. 2) See rule #1.

I use municipal bonds to immunize my expenses
(<http://en.wikipedia.org/wiki/Immunization_%28finance%29>). Municipal bonds
(affectionately called "munis") are not subject to federal income tax because
of a Supreme Court decision in the 1890s. Most states also exempt the interest
on their own municipal bonds from their own income tax (of course, if you're
in a state with no income tax like TX, then that's not really a problem).
Furthermore, some states (like California) are constitutionally obligated to
pay the interest on bonds before they allocate money to the the state's
general funds.

My immunization strategy is simple: for every $10,000 I put into munis, I get
anywhere between $40-50/month (average return on capital is in the 5-6% range
these days) in passive income. Keep in mind that since this is not taxed, this
translates to a pre-tax rate of return that's closer to 6.94%-8.33%, assuming
a federal tax bracket of 28%; in reality it's a lot more because of FICA and
state income taxes.

For long term growth and in tax-advantaged accounts, I use zero-coupon munis.
Yes, being in a tax-advantaged account diminishes the allure of munis, but
some of those bonds are now paying in the 7.5%-8.5% range.

~~~
khafra
Aren't municipal bonds paying better these days because of fear (justified or
otherwise) that lots of them--especially in California--are going to start
defaulting?

~~~
tachibana
Quick SEC disclaimer... I'm not an investment professional; I'm just sharing
my personal experience.

It depends. Munis come in all flavors and sizes; the best ones IMHO are state-
level "general obligation" (i.e. backed by state taxpayers) that do _NOT_ fund
revenue projects (this will make them taxable anyways). The second best ones,
again in my IMHO, are classified as UTX ("Unlimited Taxation"), which gives
the local government the power to raise local taxes in order to pay bonds. The
ones I would be most worried about defaulting are the ones classified as LTX
("Limited Taxation") that fund revenue projects like local stadiums or toll
roads; these bonds are paid back by the money collected by the underlying
asset. Obviously, these would be the easiest to issue, as they do not require
a referendum vote like UTX bonds, or state legislature approval like GO bonds.

Some states like California are _constitutionally required_ to pay bondholders
before any state-funded programs. Some states (like California) are also
legally required to maintain a sinking fund, i.e. they can't make interest-
only payments, but must also set aside money to pay back the principle owed to
bondholders ever year. The "budget crisis" in California is because after
paying back the 2 constitutionally mandated budget items, the state doesn't
have enough money to keep the same level of spending as before.

In California, The interest on bond payments is an automatically budgeted line
item every year; lawmakers can not change this without making changes to the
state constitution.

~~~
khafra
Interesting, thanks. If I move to a state with income tax, or enter a tax
bracket that warrants it, I'll definitely take a closer look at municipal
bonds.

------
krschultz
I put exactly what my employer matches into a 401k (which for me is 6% of my
pre-tax income, including bonus). In that account I'm 50% in a S&P500 index
and 50% in a small cap index. I only have a few other options (cash, the
company stock, 3 crappy mutal funds, a bond fund) that I don't like so I skip
them.

Anything beyond that I go for a regular IRA, although previously I had gone
with a Roth IRA when I had a lower salary. The Roth has the advantage of being
more flexible (use it on a house, education, medical expenses), but now that
I'm in a higher tax bracket I just use the IRA and hope when I'm retired my
tax bracket is lower.

I would _NOT_ convert between an IRA and a Roth. In doing so you are betting
that you will be paying higher tax rates in retirement than you are today
employed.

This may on the surface look like a good bet considering the deficit, but it
probably isn't. Nobody seems to have the stomach to lower taxes on the
lower/middle class, and that's where you will be in retirement. Right now a
couple options being floated are to eliminate all deductions and lower rates
or to add more brackets at the top end and soak the rich, either way you are
just as likely to be paying lower taxes in retirement as you are to paying
hgiher. But one thing is sure, if you convert, you pay a lot of taxes now.

------
netmau5
I keep a Roth at max contribution. It is my preferred retirement vehicle as
you can withdrawal your contributions without penalty. I'm still young and
naive enough to believe that I won't actually need to have a retirement plan
because I'll get rich before then, so a Roth was a good compromise of
maintaining control over my money versus not having a backup plan at all.

A significant portion of my personal wealth is tied up in my tech company's
stock (>50%). Since this is a large position and completely unreasonable in
any money management strategy, I attempt to balance it by being extremely
conservative elsewhere (note: you can never truly manage such a high-risk
exposure). This has led me to invest in gold, treasuries, and/or funds
composed mostly of these components.

Having a major in economics and actively trading equities and options for some
years, I personally believe it is foolish to try to trade these individually
for all but the professionals. Actually, I believe even if you are a
professional, you probably don't know how to trade these either, but that's
another story. Bottom line: don't play a game when your the sucker.

------
bobf
Some people suggest paying off all debt before investing, if X% interest on
the debt is greater than %Y expected return on investments. In theory, that's
fine; however, if you apply that to Roth/Traditional IRA contributions you
have to be aware that they have an annual cap ($5000 for a Roth), and you can
only make contributions for a given tax year until April 15 of the following
year.

------
lsc
I turned 30 this year, so it's time for me to start re-evaluating this
question myself.

Currently, I plow all my money back in to my company; I mean, at the moment I
seem to be in a slow spot at the moment, but we doubled from 2009 through
2010, so while it's high risk, perhaps, it's likely I'm going to get better
returns than I'd get from other investments without putting as much effort
into being an investor as I put into being a business guy and sysadmin.

When I was young, this was certainly the right thing to do; When I make
business decisions, I think as much about the long-term effect on my
reputation as I do about the more short-term consequences for the business.
(I'm the only shareholder, so there's no conflict of interest here. Either
way, I'm "increasing shareholder value" as it were.) And in part because of
that, I'm worth more as a worker than I otherwise would be.

The only real question now is "what point should I start becoming
conservative?" if ever? I mean, I think I need to focus on getting myself more
of a nest egg to cover unforeseen events, but I don't really have a lot of
desire to 'retire idle'

Looking at my grandparents, the happiest of them seem to have an attitude of
"I'll work till I drop" - I mean, they have assets that help, but they still
work. One of my grandfathers, who is pushing 80 at this point, owns some small
apartment complexes out in Illinois. He mows the lawns himself; I've even seen
him do plumbing and even roofing himself.

To me, that's what I want out of retirement. Still work, but do so on my own
terms. I mean, I don't know if I want that work to be maintaining old
buildings, but you know, something combining my skills and my capital.

When it comes down to it, I guess that's what I have now. It would be nice to
make a little more money than I'm making now, though.

------
carucez
It boils down to the relationship you have with your money.

    
    
      For me, bigger bankroll = higher score.
      For my wife, a bigger bankroll = more shopping.
    

The trick is to break your money up into several purpose-driven accounts and
automate that.

2 _Roth IRAs_ : maxed out (Vanguard S&P500 Index. 1 more year and it'll be
70/30 split with bonds).

1 _brokerage_ : for fun, for research, for programming. Unfunded, no
continuing additions. Go big or go home.

3 _checking accounts_ : mine, wife's, joint - the paychecks

2 _MMAs_ : mine, wife's - excess money must go somewhere. One of which is sub-
divided into: health, gifts, emergency.

2 _savings accounts_ : tiny siphons ($300/mo) that corrupt my sense of
reality. It's money-out that looks like normal transactions.

Hacks: By having a high-deducible health insurance plan, I'm able to put 3k/yr
that would have been my insurance premium into a health-related emergency
fund. As long as I don't get injured in an at-fault car accident twice in one
year, I'm saving tons of money

Edit: formatting.

------
pascal-louis
From Andy Rachleff, Vice Chairman, University of Pennsylvania endowment
investment committee President & CEO, Wealthfront Inc.:

Financially sophisticated individuals start with an asset allocation. For
someone under 40 you should probably allocate around 30% of your assets to
fixed income securities (probably half in treasuries and half in TIPS) and the
remainder in securities that have more appreciation opportunity (10% in real
estate, 35% in US equities, 20% in foreign equities and 5% in emerging market
stocks). it's very hard to outperform the market in fixed income so i
recommend buying treasury and TIPS ETFs. For your US, foreign and emerging
market equity allocation you might want to try wealthfront.com to identify
money managers who have outstanding track records (I am a co-founder of
wealthfront). Wealthfront currently doesn't offer any real estate managers so
a REIT ETF is probably the best bet.

~~~
jblow
By the way, when buying TIPS (or any kind of Treasurys), you are basically
saying "Yes, I like the fact that the USA is deep in debt and I want it to go
more into debt rather than balancing its budget!" That is what Treasury bonds
are -- the USA borrowing money from you and promising to pay it back. This is
where the debt comes from!

Somehow I do not think many people realize this...

~~~
illumin8
There is zero default risk in US Treasuries because the government has the
capability of printing more money. Can you name any other type of bond or
fixed income that has zero default risk?

~~~
jblow
Okay, but I never said anything about default, so I don't know what this has
to do with anything! As you know, when the government prints more money, it
dilutes the value of the existing money. So then, when you buy Treasurys and
they get paid back, you made your money by silently leaching it out of the
pockets of all other Americans, with the government as intermediary. What a
great financial model!

------
johngalt
Investing is one of those things that can take a lot of additional time for
rapidly diminishing returns. You could spend 40 hours a week trying to pick
stocks and come out under the performance of a good index fund that you can
set and forget. Even if I could do slightly better, my time has value
associated with it. I'd liken it to real estate. Go ahead and buy the house
you plan to live in, but once you own multiple properties you become a
landlord. Whatever other profession you have quickly becomes secondary.

So for me it's a basic auto-deduction 401k split equally into five low fee
index and mutual funds. They rebalance annually. It's a dead simple dollar
cost averaging approach that does well enough and I don't have to think about
it.

Oh and FYI, both my parents are/were bankers. One is investment licensed, and
I've worked as a banker in the past. So even with training in this area I
choose the simple approach.

------
riemannzeta
Any large cash positions are vulnerable to the high rate of inflation that is
an inevitable result of Fed policy in the last few years. Best bet in this
economy if you want safety is large cap equity issues from companies with
highest quality brands, which will permit them to raise prices with their
increasing costs. Another good bet is real estate, but diligence in that
market requires too much time for my taste.

An excellent risk-return optimized investment is an ETF short on the bond
market, such as TBT. Because it's traded as an ETF, your loss is limited to
whatever you pay. Because it's a short on the bond market, whose yields are at
multi-decade lows, it's got pretty decent appreciation-potential.

Plus you get the satisfaction of seeing all those financial services insiders
(most of whom want a frothy bond market) suffer as you make money.

------
spinlock
I have an IRA, Roth IRA, private account, and a large investment in my
business. I just hired a portfolio manager to handle the private account this
summer. That has been great because it is now invested in individual equities
(which is great for tax purposes) except for an emerging markets ETF. The IRA
and Roth IRA are managed individually by me and I've decided to put them into
an S&P index fund and forget it. I'd actually like to manage the 3 accounts in
tandem to avoid paying taxes. The idea would be to load up the non-taxable
accounts with the higher risk/return investments - which should outperform
over time - so that I'm selling them without taking a tax penalty when it
comes time to rebalance. The problem is, my portfolio manager won't touch them
because they don't meet his minimum.

------
sp_
I just moved from Germany to the US and my US visa expires after one year.
Having no idea in what country I will end up next, things like a 401k or any
other country-specific investment form makes no sense to me.

As such I have already given up on establishing a state-sanctioned retirement
fund any time soon. Instead, I live frugally and save more than 50% of my
post-tax income. Some of that is invested in funds because I can easily keep
those wherever I will move to in the future.

Right now I am investing some of that in managed funds but I am not very happy
with this and will probably move to index funds soon. I don't have enough
confidence that my actively managed funds will beat the average market.

------
Dylanlacey
I'm an Australian, so my goals are slightly different.

* I get 9% into my Superannuation account from every employer, period. I add to this an amount to make the government co-contribute (Up to $1500), but I'm no longer doing this as my income is now over the threshold where they will co-contribute. Although in some ways this is "Money in the bank", I'm not doing it ATM as I want to:

* Pay off my debt. I have a credit card and a car loan that I want to nuke. Once they're gone, I'll invest the money I'm using to pay them down.

* Then I'll save up 6 months worth of expenses, and keep that around.

* Then my plan is to invest Warren Buffet style: Pick an industry, learn voraciously, and invest in stocks for their dividend return.

------
mfrye
* Trading 'high risk - high reward' in a taxable account with margin (ex: put in 10k and they give me $30k extra). About 15-20 trades per month, 30% day trades and the rest 5-10 day hold periods. I use stop losses to minimize risk. I have no losses YTD. I use Twitter to find stocks in play and trade based on technicals.

* Max Roth IRA in long term trades.

* 401k up to employer match

* No mortgage, no car, no kids, paying under 10k school loan off

* I rent in the city, walk to work (no public transit costs) and each year I can upgrade or downgrade my monthly rent based on my income changes.

I'm thinking about buying a detached property (minor HOA fees) in Miami or Las
Vegas in cash to move and dedicate full time working on my startup and
trading.

------
bantic
I use mint.com to get a high-level overview of all my finances. I have a
couple different credit cards (I got them to get different frequent-flyer
mileage awards and other rewards), and it's very useful to see a snapshot of
all of them at once in mint than to check them each individually. For
investing, I've given up on picking individual stocks and just buy index-
tracking funds. I like zecco.com as a broker because they are total no-frills
and if you maintain a high-enough balance (25k?) you get 30 free trades a
month. But I also have a smaller amount of money at covestor.com (I think USV
invests in it and that's how I found out about it).

------
akg_67
I do and have all the things you listed

* 401k maxed out to IRS limit every year primarily for tax benefit and retirement saving. Don't qualify for Roth and IRA.

* Two non-retirement investment accounts. Our expenses are lot less than income so all savings go to one investment account.

* One investment account has managed and index mutual funds and ETFs. Another smallish one is a 'play' account primarily with individual stocks, typically use quantitative trading strategies and macroeconomic trends.

* A saving account with emergency funds (six months net pay)

* No debt other than a smallish mortgage.

* We drive 10 year old cars. May buy a new one in late 2011.

------
kevinburke
I'm in college, I have a Roth IRA that I set up using the money from my
internship last summer. I use Sharebuilder, you can get trades for $4 a share.
When I get a job I'm gonna max my 401k and Roth IRA each year, no question.

My investment philosophy comes more or less from this interview:
<http://www.kirkreport.info/2009/03/qa-with-less-antman.html>

I only own 3 ETF's - 50% VT, 20% RWO and 30% PCRDX. I'm investing for the
super long run and think of stock downturns as a great time to buy more
shares.

------
TimLangley
Income: Run start-up and consulting income

Investments: Purchasing rental property in the UK

------
jhi247
99% of my net worth is in my business which I started 10 years ago. I am still
young therefore I trade personal diversification against business
independence. Eventually I will have to change that.

------
abyssknight
I'm definitely not an investor, nor do I know what I'm doing but...

* 401k, maxed to what my employer will match

* Stocks just for fun

* Bought a house when the market was extremely low

* Invested in myself; getting a Master's degree through my employer's gracious reimbursement plan

My father always told me to start young; max out the 401k and put even more
away just in case. I wish I'd done more of that, as the longer I waited, the
harder it became. Thankfully I started the 401k very early and never knew what
I was missing. It helps to not see the money at all; checking on it every once
in awhile instead.

~~~
fefzero
Starting young is great. You're hinting at one of the other keys that has
helped me, which is to make it automatic. This is often more important than
the vehicle you choose for investment. If I automatically invest a certain
amount each month it's just like you say - I never miss it because I never see
it. Make saving as easy as possible (and what's easier than automatic?) and
spending as hard as possible and that will drive your savings rate way up.

------
allwein
Whenever I'm working somewhere with a 401K, I always max it out, especially if
there's some sort of match. I'm currently a 1099 contractor, so I'm doing the
IRA thing. And yeah, I max that out too. It's advantageous to current and
future taxes, so no reason not to.

In addition, I do have an investment account with Vanguard. My primary
investments there are weekly contributions to one of their index funds. I also
have some minor investments in various stocks. I've been buying Apple pretty
consistently for the past two years.

------
lessthanideal
My saving/investing strategy is governed by a few guidelines and realities:

1\. I have a family (meaning I have more costs and more immediate investments
I need to make, for example in the education of my children)

2\. I believe that investing in my own company where I control the money and
the effort involved has a vastly superior return than investing in a company
that already had an IPO. There's no way those companies do the return on my
funds, like my company does, if for no other reason than that they are already
through their major growth phase (they already IPO'd). Add to that the level
of control I have in my own thing, and it's clearly advantageous to invest
there.

3\. I believe stock purchases are akin to gambling. This expands my universe
of possibly investments to other forms of gambling. It turns out that with
some knowledge and practice it's possible to tilt the odds in your favor.

Given these rules and considerations I have a threefold investment strategy:

Cash is king. I keep large cash deposits available at all times, both in
actual cash and in the bank. I invest a regular amount of my earnings from my
job into my side business and my side business provides excellent returns and
I've developed a way to scale those returns that I'll be testing this month
(the ability to use in a leveraged way the money I invest into my side
business, but with a higher maximum cap than I could reasonably put into the
business). For my high risk, high reward "investment" I cut out the stock
market altogether and literally go to a casino.

I suppose the final part of my portfolio might be the most surprising to HN. I
can report that I've had excellent results in the casino. Sustainable
advantage playing is possible. In 2009, I bought a vehicle outright with the
proceeds from this portion of my portfolio.

If I didn't have a family, I'd be doing a more aggressive version of this
where I'd have larger cash holdings (no family = way more money left over
every month), I'd invest more in my side business, and I'd risk more at the
casino.

Your goal should be to produce a machine that makes you money without your
involvement, normally this is called a business, but if you have enough money,
then the money itself can be this machine (through interest). To have that
amount of money where it is sustainable requires roughly $4 million in cash
(I've seen this number other places, the fabled "FU" money). It my belief that
it's much easier to build a business that produces say $100k a year with
minimal involvement on your part than it is to produce $4 million in cash
(though it should be noted that if you produce a business that produces that
much profit you're on your way to being able to trade it for $4 million in
cash).

------
raintrees
I paid off bad debt (no income from loan's purpose), stashed some in precious
metals (hedge against fiat currency), and am now learning to acquire real
estate income properties (rentals) for another revenue source for my excess
cash.

My personal opinion is that most stocks are over-valued, and my confidence is
low in most of our current central banks. But hey, that's just based on my
value system, your mileage may vary.

------
lionhearted
Re: Roth IRA vs. Traditional IRA, I did a lot of research on it. I chose Roth
because you can withdraw up to the amount you deposited without penalty at any
time - this was big for me in case I needed the cash later for other things.

I'd recommend Roth to anyone who might want the cash for other investments
later, especially entrepreneurs, unless you're in a top income bracket with
literally no other tax writeoffs.

------
joshuaheard
Google "Investment pyramid". It basically says have mostly safe investments; I
use long term income real estate. Have some mildly risky, medium yield
investments; I use a mix of stocks, bonds, and mutual funds (this includes my
401k). Then have a small amount of high risk high yield investment; I have
some speculative stock. This would be the place for your start-up investment.

------
anthonycerra
I gave a talk at Ignite Chicago about this. Though I have a 401k, I don't pay
much attention to it. I keep it on autopilot, as most people do. The
difference is I'm not relying on that for retirement. To do so is foolish I
think. I put most of my money into rental property and my own business - two
things I have (almost) complete control over.

------
markkat
Roth IRAs maxed, stocks, company-matched retirement. Got a short-sold house
which we are paying off ASAP. Drive used cars.

------
stewiecat
* 401(k) through employer, maxed out (or close to) every year.

* Additional $200/month into a (taxable) mutual fund

* Whole life insurance through a solid insurer (Northwestern Mutual in my case).

* Rolled over all old 401(k)'s into a rollover IRA through my financial advisor.

Plan is to not have to work past 55.

------
meowzero
max out Roth IRA every year. max out 401k every year. I have a savings account
from ING with an emergency fund that should last us about 4-5 months if we
both lost our jobs. I also have an individual stock account.

I mostly invest in the s&p500 ETF (IVV) and high dividend yielding stocks. I
also have AAPL and GOOG from long ago that I'm still invested in.
Unfortunately I didn't buy very many shares of those. I have other individual
stocks. I'm not a trader, I hold onto those stocks for a while.

I have a 30year mortgage for my house. I'm not in a big hurry to pay it off,
even though we pre-pay a little. I rather use the money to put it into my
savings or investment accounts.

------
sarahqb
Those of us trying to start companies have so much risk tied up in our income;
it makes sense to me to be more conservative than the average person of the
same age with assets that have been invested in public markets.

------
iamelgringo
Right now, 403(b) with investments in index funds. Pension plan from the
hospital I moonlight at 3 nights a week.

Any last remaining dollars go into building equity and creating value for my
shareholders (me and co founders).

------
cfontes
Stocks in Bovespa ( Brazil )

------
bpeters
See a financial advisor and figure out what plan is right for you. Not only is
this question open ended, but answers are and should be tailored to the
individuals needs, plans, and long-term goals.

To "hack" investing, just focus on figuring out what type of long-term goals
you have. 5, 10, 15 years, and retirement, what do you want to have achieved
or saved by then. When do you want to retire?

Are you wanting to manage your money, or pay fees to have experts do it for
you?

Do you have a family? Who do you support financially. All these factor in what
type of personal investing you should do.

Once you have figure out all these, the main goal in investing is diversity of
your portfolio. Diversity in the risk versus payoff, but also in type of
investment, region, and industry.

~~~
RoadRunner_23
Your local Credit Union Bank, will offer free financial advise, if you have an
account with them. Our credit union advisor, was really patient in answering
pretty much all our questions..

well.. he will try to sell some of the bank services, but finally he was able
to convice us to roll over IRA to our bank's IRA.

------
meric
Individual stocks, although I'm thinking of switching to just index funds
(e.g. if dow jones index go up I earn money.) since constantly researching on
companies become quite time consuming.

~~~
beoba
If you find stock trading interesting, you could also allocate a portion of
your money as "play money", then leave the rest in funds.

Also, you'd probably want to go with a more broad-based index than DJIA or
S&P500. Many fund companies have a "total stock market" funds where they
attempt to literally buy a piece of every US stock, weighted by market cap, so
you'd effectively be owning "the US stock market", rather than just large
companies. There are also total international funds which do the same thing
for all non-US stocks.

Also also, you should include bonds if you aren't already. Like with stocks,
there are total bond market index funds for this.

In fact, if you just picked an allocation across "total stock", "total
international" and "total bond" you'd pretty much be set. This is what
Vanguard does for their target retirement funds:
[https://personal.vanguard.com/us/funds/vanguard/TargetRetire...](https://personal.vanguard.com/us/funds/vanguard/TargetRetirementList)

------
ipsin
I'm curious to hear from those of you who deal with investment real estate,
either self-managed or handled by a property management company.

~~~
tachibana
I've worked as a professional real estate manager for 15+ years, mostly in
California but with also in a couple of places

The expected cap rate (annual rent / purchase price) in on both the East Coast
and West Coast is roughly 5-7%. In places like Texas and Ohio, the cap rate is
roughly 10% Since a "competent" property manager (like myself =P) usually
charges about 10-15% of gross rent, this means your expected cap rate will
drop to about 4.5%-6.3%.

Expense rates are roughly mortgage (7-10%) + taxes (1-2%) + maintenance
(1-2%). Most commercial properties also don't have a high expense ratio
because tenants typically like to keep their places of business up and
running. However, keep in mind that commercial properties are usually paid
back a faster schedule (usually 10-20 years) than residential mortgages
(usually 15 or 30 years), so there are much larger monthly payments.

People usually do real estate for the tax benefits; there are many common,
legal and IRS sanctioned ways to create tax-free income streams. However, to
get to that stage requires starting with a significant amount of equity.

------
kiba
Some of my earning is saved in a cryptocurrency called bitcoin. It's high risk
but potentially extremely high reward.

------
jfb
I went all in on my startup. Jury's still out, but it felt like the right
thing to do.

------
georgecmu
Roth IRA, maxed every year. I'm buying individual stocks with that account.

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trustfundbaby
Anybody do any investing in Foreign Markets? Would love to hear about that.

~~~
seanos
I am heavily invested in Australia - huge natural resources and located close
to the growing asian markets.

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ylem
"A Random Walk Down WallStreet" is still an excellent read.

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tastybites
What I'm about to say might be controversial. It goes against the grain of the
'Look at me I'm so frugal' meme/arms race here on HN.

The financial crash of 08/09 left such a bad taste in my mouth (as in I lost
many tens of thousands of dollars) that I have completely lost faith in the
stock market and anything associated with it such as ETFs, mutual funds, 401k,
etc.

Getting a 'real' job and putting money into my retirement accounts lost me
_tens of thousands of dollars_ in savings (so think about how much lost time
that is) and the job that paid for it all. Yes, it absolutely sucked. I was
furious, with myself, with others, with my parents (who advised me), etc. It
was a terrible time. I drank.

I was forced into doing a startup in Dec. of 08. It's been profitable since
the first month. You would be surprised at how well you can focus when you
lose your job and half of the money in your bank accounts in the course of one
business quarter.

I now keep large cash savings, put a small amount into my retirement funds,
invest the majority of my 'extra' money back into my startup.

I bought myself an expensive Porsche, an expensive condo, and started spending
WAY more on luxury goods / eating out because losing $XX,000 after being
'responsible' makes you realize how TOTALLY unpredictable this life is,
especially when it comes to financial matters.

After working about 3x as hard on a day-to-day basis and changing my spending
habits to purchasing much more expensive things, I now have way more money
than I ever did (in cash and cash equivalents as well as equity in a
business). Go figure.

This post isn't advice, it's just an honest recollection of the financial
transformation I went through in the past 2.5 years.

~~~
rabidsnail
Your time horizon is too short. If you had left your money where it was
instead of taking it out at the first sign of danger then it's likely you
would have made it all back by now. There's a lot of volatility in the stock
market (that's why the returns are higher than savings, money markets, etc),
but the spikes and dips average out if you're thinking in terms of decades and
not months.

That's not to say that your startup isn't a better investment, though.

~~~
tastybites
> Your time horizon is too short

That's not really the point, I think the point is that I shouldn't have been
investing in something that could evaporate on paper in 3 months.

Either way, yes, the point is I'm a terrible equities/retirement investor and
a better small business person. Everyone here has excellent reading
comprehension, as I would expect on HN.

> That's not to say that your startup isn't a better investment, though.

I didn't sell at the first sign of danger (first of all - selling at the first
sign of danger would have been a GOOD idea, but my father, the successful
older investor, told me to hold on as it crashed.). I sold after the market
had come back by around 60-70% from the lows. That was good enough for me,
especially since another 'double dip' was a very real possibility in the
beginning of 2010.

If I had sold at the bottom I would have lost nearly everything. But I finally
liquidated after my startup was consistently making money and I actually
wanted the cash to put back into the business / spend.

Keep in mind I was never broke - I just had a large proportion disappear for a
while. That drove me to do 'smarter' things with it after some of it came
back.

Having said all that, "You should have held on to it" is standard 20/20
hindsight that makes a market crash sound so predictable. I think I had pretty
good forward-sight given the situation.

~~~
jpiasetz
Everything can evaporate in 3 months. The world is a risky place, tomorrow
someone could come out with something to make your startup irrelevant. Houses
prices dropped, used car values drop with the GM and Ford bail out, we mine
more gold every year. You show me an investment that is always going to beat
inflation and I'll show you a scam.

The only way to real be secure is diversification and never stop innovating
and hustling. If you do you'll get burnt no matter what you have your wealth
in.

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rorrr
* 401k (from an old job) and an IRA (maxed out). I also trade for my wife's IRA.

* I have a Zecco trading account (it used to be nice, cheap trades)

* I pick individual stocks only, doing my own research. Mutual funds and ETFs are OK for long term investment. I've looked at at stock recommendation sites like covestor.com, kaching.com and collective2.com, and they do have some amazing traders, so you can just mirror them (I'm kind of hesitant to do that, not sure why).

~~~
spinlock
>they do have some amazing traders, so you can just mirror them (I'm kind of
hesitant to do that, not sure why).

I'd be hesitant to do that because even a broken clock is right twice a day. I
haven't looked at covestor in a while but, IIRC, you couldn't see what the
other guy was invested in until you committed capital. If I can't see his
investments or perform other due diligence, I have no idea what kind of risks
he's taking to generate those returns. I'm much happier with my portfolio -
which is designed to track the MSCI World Index and reduce risk - than I would
be with some crazy trader gambling with my money. I beat the MSCI by 3 points
last year which is an acceptable return and I sleep like a baby :)

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dtby
I own a lot of physical gold and I bet a lot on sports. On reflection, that's
not as "normal" an investment strategy as I was thinking.

~~~
kgtm
To chime in, sports odds arbitrage is a great investment vehicle for smaller
funds. One can also kick-start the process with some bonus bagging...

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georgieporgie
Here's what I do, and hence my advice:

* Maximum contribution percentage to a 401k, whenever possible.

* Maximum contribution to a Roth IRA. The 401k reduces your AGI, allowing this until you reach quite a nice income level. Even during unemployment, I contribute to my Roth IRA.

* Reduce fees! 0.25% interest is wiped out by a single $9.95 fee. I've moved to Charles Schwab for personal money, since they have no balance fees, decent investment options, and they fully refund _all_ ATM fees around the world. I've rolled over old 401k's into a Vanguard IRA, since Vanguard has the lowest fund management fees in the industry.

* Don't be jumpy. If you're like me, you're actually horrible at individual stock investment. So, stick to mutual funds, and only look at them and reinvest once or twice per year. I suggest looking at targeted retirement funds (like the Vanguard 2040 that I use), and index funds.

* Keep 1 - 2 years of cash on hand. Everyone used to laugh at this figure, since who would be unemployed that long? That cash means that, instead of sitting at home, waiting for the market to improve, I was able to sell my stuff and spend extended periods traveling.

Most of you on HN are quite young. The younger you are, the more valuable it
is to begin investing _right now_. Hell, if you're 17, do everything you can
to throw $500 into an IRA. Even if you're working at McDonald's and dreaming
of a startup, you can use an IRA contribution to cut your taxes.

~~~
willgodfrey
1-2 years cash on hand sounds excessive, though I understand your point. FWIW,
I keep approximately 6 months cash on hand and another year's worth in
something slightly less liquid but still liquid enough I could get to it in <6
months time. Like a CD ladder.

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shareme
My short answer is individual stock investing is fools path to being poor as
you are betting against a full deck stacked against you.

Index funds is slightly better than mutual funds by-itself but not much
better.

~~~
RyanHolliday
If you wouldn't recommend individual stock picking, mutuals, or ETFs, what
investment vehicle would you recommend? I want to invest but feel like I
really just know enough to get myself burned.

~~~
amh
I'm not that other guy, but my advice:

There's no substitute for doing your own reading and research. Some good
authors to start with are John Bogle, Larry Swedroe, Rick Ferri, Peter
Bernstein, Nassim Taleb, William Bernstein, Burton Malkiel, Harry Browne.
Don't invest in anything you don't understand, and don't trust any investing
concept that can't be explained to you in 5-10 minutes.

The learning process should take you at least 6 months. Whenever you think
you've got it figured out (most financial authors present their ideas in a
very convincing, absolutist way), keep reading, because the next book might
change your mind. In the meantime, put your money in a safe place -- bank CDs
or short-term Treasurys -- and don't touch it.

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alnayyir
I do the same thing as tastybites, sans expensive car.

I might buy rental properties later or something.

I'd rather die sitting on a motorcycle than on a bunch of equity that won't
help me in the grave. I'm not an Egyptian Pharaoh.

