
Hard-won lessons about money and investing - sethbannon
https://www.mattcutts.com/blog/make-money-investing-tips/
======
j_lev
> If you’re an employee working for salary, it’s going to be hard to reach
> that level of independence. ... You can try to radically lower your
> financial burn rate, but few Americans have taken that step.

So many people are quick to dismiss living well within one's means as a way to
financial independence. Here's the link to the facts again:

[http://www.mrmoneymustache.com/2012/01/13/the-shockingly-
sim...](http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-
behind-early-retirement/)

TL;DR: Live on 35% of your after tax income and you're retired in 10 years.
Get it down to 25% and you retire in 7.

~~~
usaar333
Well, except for how difficult that is. Living on only 35% of after tax income
requires you either A) live extremely cheaply or B) make tons of cash. Roughly
speaking, in California, this requires living off of 20% of pre-tax income.

As an example, to live off $35k/year in SF as a single person (which would be
considered modest in tech circles), you'd need to earn $175k/year.

With a family, this gets more unrealistic. Living off $100k/year (combined)
would require earning something like $500k/year.

~~~
lars
Living on a low percentage of income seems like a great strategy if you're
optimizing for dying with the maximum amount of money in the bank.

I think many people in this thread need to consider if that really is the game
they want to be playing. I'd think people would be better off maximizing their
total happiness. There's research showing that having good memories from the
past positively affects momentary happiness in the present [1]. With that in
mind, it seems like spending money on great experiences now is a good idea,
while excessive saving could be counter productive.

[1]:
[http://www.wjh.harvard.edu/~dtg/DUNN%20GILBERT%20&%20WILSON%...](http://www.wjh.harvard.edu/~dtg/DUNN%20GILBERT%20&%20WILSON%20%282011%29.pdf)

~~~
gbog
But money don't buy good memories. I have much better memories of camping with
friends for near zero euros, than expensive hotels.

~~~
lubos
You need to consider the opportunity cost too. While you were camping in the
bush, you weren't earning.

~~~
aquadrop
I don't know why you were downvoted, your statement is right. For example, if
someone have financial problems for some reason and have to work 2 jobs to
deal with it, he/she hardly could get out camping with friends. Money can buy
you spare time which you can fill with uncostly memories.

------
grimlck
"Google worked out a deal with “full service” broker to give us free accounts"

That is actually really interesting. How much did this broker have to pay to
get this box full of highly lucrative leads - access to a large set of newly
wealthy individuals, many of which don't have experience with managing large
amounts of money. A bunch of people who may be experts of technology, but
probably are not experts on finance.

It seems like inviting the fox into the hen house, and telling the hens what
it deal it was

~~~
j_lev
It also seems at odds with what was said in this article, linked to here on HN
a couple of weeks back:

[http://www.modernluxury.com/san-francisco/story/the-best-
inv...](http://www.modernluxury.com/san-francisco/story/the-best-investment-
advice-youll-never-get)

~~~
Matt_Cutts
Just to answer this thread:

Google did a _fantastic_ job of educating employees before the IPO. They
brought in a ton of smart people to bring us up to speed, emphasize the need
to diversify and minimize risk, etc. Honestly, I couldn't ask for a company to
do a better job of educating us.

In addition, they arranged to give us default accounts with a broker so that
we could sell our shares. My decision to park some money in commercial paper
was strictly my own, and I should have done more research on it first.

------
jandrewrogers
For most people, the easiest way to become financially independent is to save
aggressively.

That aside, I have always invested in a small number of individual stocks,
with minimal management or effort, and only moving positions between companies
slowly over time. Basically, I make bets on long-term trends that I view as
technologically inevitable. I don't invest in sexy companies (though some
become sexy later), I invest in companies that are undervalued relative to the
technology trends. That strategy is pretty trivial but it has allowed me to
beat the S&P index pretty consistently over decades (famous last words) with
the money I don't have a better use for e.g. savings. In fact, the margin by
which I beat the S&P has been slowly improving, which I think reflects the
increasing ability of tech to move the needle on the economy.

Since this is a tech site, this would seem like a repeatable strategy that
anyone could and would use. But apparently people don't. Of course, I could
just be really lucky.

~~~
justin66
Based on what you've written, it doesn't appear that you've measured the
performance of whatever method you're using against an appropriately risk-
adjusted benchmark. For example, beating the S&P 500 over a certain time
period is okay but if you're doing it with a bunch of small- or mid-cap tech
stocks, it's quite possible you're not being compensated adequately for the
risk you're taking.

For instance, if you're investing in companies with a market cap less than $10
billion, the risk and overall effort you're putting in is really indefensible
if you aren't beating the S&P Mid-Cap Index. Which over the last twenty years
- just a sample time period - outperformed the S&P 500 pretty hugely:
[http://finance.yahoo.com/echarts?s=%5EMID+Interactive#%7B%22...](http://finance.yahoo.com/echarts?s=%5EMID+Interactive#%7B%22range%22%3A%7B%22start%22%3A%221994-11-01T16%3A00%3A00.000Z%22%2C%22end%22%3A%222014-11-28T17%3A00%3A00.000Z%22%7D%2C%22scale%22%3A%22linear%22%2C%22comparisons%22%3A%7B%22%5EGSPC%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%7D%7D)

Or do a little better and compare your performance against a real tech sector
index. Do better still and use the tools of modern portfolio theory to measure
your portfolio's performance.

> Of course, I could just be really lucky.

It's probably worth reading The Drunkard's Walk.

~~~
jandrewrogers
I only invest in large caps, ones everyone knows, based on two criteria:

1) They are are fairly or somewhat undervalued given the conventional market
view and metrics.

2) They are likely to be significant beneficiaries of large-scale
technological trends that the market is oblivious to and has not priced into
the stock.

Then I wait a few years for the trend to become more obvious and for the
market to adjust the stock price accordingly for the new upside. My portfolio
is essentially a ladder of different technology trends that take 3-4 years to
mature. Occasionally one does not pan out but, while I may not make much
money, I never lose much money because "good large-cap tech stock".

The only "small caps" I invest in are tech startups. But that is a different
portfolio than what I am talking about here.

Since I spend my days thinking about trends in technology anyway, this whole
exercise takes little additional effort. I might add or remove something from
that list of stocks once a year. When I save money from my paycheck, I semi-
randomly put it in a stock on that list so no thinking required.

Yes, I could do some kind of sophisticated portfolio analysis but that would
defeat the goal of _spending as little time on it as possible_. I only check
against the S&P 500 as a sanity check. My lifetime annualized return (decades)
is about +2 over the S&P 500 but the last five years has been more like +4, so
I can't complain. The annual return relative to the S&P 500 has actually been
surprisingly steady over time, so no undue volatility.

~~~
hnnewguy
So, you're investing only in large cap stocks, while spending as little time
as possible doing analysis, and over decades have consistently surpassed the
S&P returns, with low risk and low volatility?

Forgive me if I don't believe this in the least.

~~~
justin66
The tech sector is the third strongest sector (of 11 sectors) over the past
five years:
[http://news.morningstar.com/stockReturns/CapWtdSectorReturns...](http://news.morningstar.com/stockReturns/CapWtdSectorReturns.html)

So what he's describing, beating the S&P 500 by a bit over that period, isn't
implausible. Comparing his portfolio's performance to the S&P 500 is an
obvious mistake and, more importantly, attributing his portfolio's performance
to anything other than luck (good or bad) is very silly.

I didn't pull apart his post as much as I might (it's indicative of a whole
range of bad ideas people have with regard to investing, like his ideas
regarding sector-specific investing) but the notion that really needs to be
attacked is that beating the S&P 500 or total market index can be regarded as
indicative of some special ability without taking into account the portfolio's
risk.

~~~
jandrewrogers
A lot of the investing orthodoxy is predicated on the average investor being
non-observant and ignorant of almost everything important going on in the
economy. I think this is both incorrect and a bit snobbish at least some of
the time; many average people have sophisticated views of their line of
business even if they are not sophisticated investors per se, and their domain
knowledge is improperly discounted due to their lack of sophistication as
investors.

I am not suggesting high-risk, short-term strategies but long-term, buy-and-
hold strategies that leverage the native knowledge and intelligence of Silicon
Valley engineers. I also do high-risk, short-term strategies (options and
similar) based on the same domain expertise, and have done alright with those
too, but I never recommend that to people.

It would be seriously odd if some random guy on Wall Street understood Silicon
Valley and tech better than I do. The technology industry is not driven over
the long-term by financial numbers on a spreadsheet. I've been through many
tech boom-bust cycles in Silicon Valley and understand the dynamics pretty
well. No special magic to this portfolio, and it has been one of the most
consistent producers for me. As long as you are not betting the farm on a
single company, it is difficult for this to go wrong. At least in tech, I can
see the bad things telegraphed long before they materialize in the market
_because I understand the fundamentals_. Even if Wall Street isn't paying
attention.

For the poster below, my returns are consistently worse than every hedge fund
that has ever wanted to hire me. I'd be a terrible hedge fund manager; I am
personally more interested in return on effort than maximum possible returns.
(They wanted to hire me for my theoretical skills, not my investing skills.)

------
dredmorbius
Matt's article (and the linked one of Scott Adams' advice) is a good and basic
foundation.

Adding to the reading list, I'd very strongly recommend the following:

 _A Random Walk Down Wall Street_ by Burton G. Malkiel lays out the basics of
portfolio diversification.
[http://www.powells.com/biblio/1-9780393340747-0](http://www.powells.com/biblio/1-9780393340747-0)

 _The Great Crash: 1929_ by John K. Galbraith tells the story and aftermath of
the biggest stock market catastrophe of the past century. It is a slim, highly
readable, and incredibly informative book. Parts of it read as if it could
have been written yesterday. Much of it provides a background and context on
the Crash that corrected a great many misunderstandings and holes in my own
knowledge. Galbraith has a dry humor and is a strong (and often disliked by
insiders) critic of much of the establishment. Fans of this book are
recommended to view his video series _The Age of Uncertainty_.

[http://www.powells.com/biblio/1-9780395859995-9](http://www.powells.com/biblio/1-9780395859995-9)

[http://www.powells.com/biblio/1-9780395259474-2](http://www.powells.com/biblio/1-9780395259474-2)

[http://fixyt.com/watch?v=KGSID_Uyw7w](http://fixyt.com/watch?v=KGSID_Uyw7w)

And adding to Matt's advice: _have savings_. The flexibility offered by "fuck
you money" as Humphrey Bogart and others have noted is tremendously valuable.

~~~
jseliger
Great comment! I want to emphasize this:

 _A Random Walk Down Wall Street by Burton G. Malkiel lays out the basics of
portfolio diversification._

A Random Walk Down Wall Street is one of the best books I've ever read, and
I'd only add that I think _The Millionaire Next Door_ is also excellent. When
most of us think about millionaires we think about Hollywood stars, tech
company founders, and finance moguls. But most millionaires are actually
normal people who spend below their means and invest what they can, usually in
index funds and sometimes in a house. If they marry they don't divorce
(divorce is very, very expensive and modern marriage is a high-risk endeavor).

Chances are good that most of the millionaires you know don't live like
millionaires—which is why they can be millionaires!

------
err4nt
I'm at the start of a long career and trying to save sacrificially. I know if
i over-save i still have it if i need it, but so far every dollar i have put
into savings has been on a one-way trip!

I wonder and worry about how to save up for later in life, and who knows what
the political landscape will look like then. In my country inflation has been
2.16% on average during the years I've been alive.

Where can I store my money in a way that I know it will be there later whn I
need it?

(I'm a little nervous about the bank, one time I had a court order against my
bank account so it was drained, and I was beingpaid by cheque, but even when I
took my paycheque to the bank to deposit it, until that debt was paid off i
couldnt even take out enough for groceries. I want something that cant be
taken away at a whim without recourse. I negotiated a deal with the collection
agency for a repayment schedule, but they still drained my account 2-3 times
after our agreement just because. Oops!)

~~~
zo1
What little advice I can offer. From what I've gathered, there is no sure-fire
way to protect your capital from constant things such as inflation and wild
things such as economic "incidents", for lack of a better term.

I've lately been thinking that some more reliable means would be to own a
"wealth-generating" business. Or a few of them in varied industries, to
mitigate risk.

Another method that I've also thought about is antique art and possibly high-
quality furniture as well. But that would apply in case of a major war-
situation, assuming you could even get those physical items to safety.

~~~
walshemj
Indexed Link Gilt's or TIPS (in the USA) can do that

~~~
PhantomGremlin
TIPS open up a can of worms that most people probably don't want to deal with,
unless the bonds are held in a tax-advantaged account (such as an IRA). Here's
the skinny straight from the horse's mouth:[1]

    
    
       Form 1099-OID shows the amount by which
       the principal of your TIPS increased due
       to inflation or decreased due to deflation.
       Increases in principal are taxable for the
       year in which they occur, even if your
       TIPS hasn't matured, so you haven't yet
       received a payment of principal.
    

I.e., you must pay annual taxes on an increase in principal for your TIPS
bonds, even though you don't get your cash back from the govt until the bond
matures.

No thanks! Count me out of that one!

As a possible alternative (which has its own problems) there are Series I
savings bonds (which also attempt to compensate for inflation). Those have the
advantage of:[2]

    
    
       Tax reporting of interest can be deferred
       until redemption, final maturity, or other
       taxable disposition, whichever occurs first.
    

[1]
[http://www.treasurydirect.gov/indiv/research/indepth/tips/re...](http://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips_tax.htm)
[2]
[http://www.treasurydirect.gov/indiv/products/prod_tipsvsibon...](http://www.treasurydirect.gov/indiv/products/prod_tipsvsibonds.htm)

------
ballstothewalls
Lesson number 1 is unequivocally wrong and contradictory with the start of the
article. He says you shouldn't invest your money in single stocks, but then
advocates for you to invest your money (by way of forgoing salary in favor of
equity) into a start up company with (by definition) no track record of
success or guaranteed future. Not to mention that when the start-up tanks
(which it will do statistically) you will both lose your salary and your
investments/equity will be worthless.

~~~
burnstek
The assumption is that you work for the startup and have a critical enough
position to earn equity, and therefore have more influence over its
performance than that of a public company.

~~~
Matt_Cutts
That's right. In the same way that Buffett can select a company that he
believes in and then drive it forward with a strategic investment, you're
trying to do the same thing with the startup that you select and drive
forward.

And "startup" doesn't have to be 3-4 people. I remember trying to recruit an
engineer when Google was maybe 150 people. I tried to convince the engineer
that Google was doing well and it wasn't as risky as it looked, but she
decided to go work for Siebel instead.

In other words, don't waste money/time/effort on things where you can't make a
big difference. Find an area where you can have a lot of leverage or expertise
and put your chips there.

~~~
ryandrake
I question the amount of influence one can actually have on the the trajectory
of a start-up, even if you are an early employee. Before I wised up and joined
BigUltraMegaCorp, I worked for a number of small companies, and shared offices
with brilliant, hard-workers, and we all moved mountains to try to make things
work, but at the end of the day, no dice. I'm pretty much convinced at this
point that start-up success is almost 100% luck, and you might as well play
roulette instead of trying to pick the right one to work for early on.

Hindsight being 20/20, for every "She turned down being employee number 151 at
Google to work for Siebel LOL" story, there are 10,000 (maybe 100,000) "I took
a chance with Pets.com and they still owe me 6 months of back pay" stories.

~~~
cma
Pets.com had a successful IPO, seems it could have easily beat out the Seibel
career.

~~~
ryandrake
Possibly bad specific example, although they didn't survive even a year after
their IPO. The point remains though. For every start-up success story, there
are thousands of failures. Who's smart enough to pick the successes ahead of
time AND get a job with one of them?

------
jamesaguilar
Hedonic adaptation is the devil. You'd hope/intuit that spending more
resources would make you happier, but that's just not the way it works. That
said, you can use knowledge of this quirk of human psychology to make you
richer and more secure compared to your higher-consuming self, not sacrificing
any long term contentment or satisfaction to do it. Here's a more in-depth
review of the topic[1].

[1] [http://www.mrmoneymustache.com/2011/10/22/what-is-hedonic-
ad...](http://www.mrmoneymustache.com/2011/10/22/what-is-hedonic-adaptation-
and-how-can-it-turn-you-into-a-sukka/)

------
influx
I use Wealthfront, which allows you to park your money into an account, and
depending on your level of risk, will automatically balance it across the US
Stock Market, dividend stocks, emerging and foreign markets, bonds, and
natural resources.

For account values over $100K, they will do tax loss harvesting for you
automatically, and prevent wash sales. For over $500K account values, they
will actually buy stocks for the entire S&P 500, and allow you to take tax
losses on individual stocks (which you can't claim on ETFs).

I found their presentation to be quite helpful:

[http://www.slideshare.net/adamnash/personal-finance-for-
engi...](http://www.slideshare.net/adamnash/personal-finance-for-engineers-
twitter-2013)

If you want an invite, PM me.

~~~
jpp
An important note on tax loss harvesting: it only defers taxes. If you'll be
in a lower tax bracket in the future, that can be good; but if you'll be in a
higher tax bracket when you need the money (eg house down payment), tax loss
harvesting will actually cost you money, so beware.

~~~
ssanders82
This can be balanced against the fact that you get to invest and compound that
deferred tax until you do end up paying it, possibly several years later. So
instead of multiplying your account by .65 every year (assuming 35% tax rate),
you only multiply it once, at the end.

------
Animats
If you do get a lot of money somehow, read _The Challenges of Wealth_ , by Amy
Domini. Most people who get a reasonably large chunk of cash all at once blow
it, in an average of seven years. A sizable fraction of old pro athletes are
broke. So are a sizable fraction of lottery winners.

As a rule of thumb, any investment where they call you is no good. If it was
any good, it wouldn't need paid sales reps.

~~~
pbhjpbhj
> _If it was any good, it wouldn 't need paid sales reps._ //

Unless they wanted to increase their profits. Just because something is good
doesn't mean that sales reps can't convince more people to want it.

~~~
jacquesm
The idea is that if it was any good there would be plenty of money thrown at
them without having to approach random strangers cutting them in on the action
just because they're such nice people.

Of course they want to increase their profits, but that goes for any outbound
sales effort. Just the fact that they try to convince you to want it doesn't
mean it is good either, most likely it means you don't have the whole story.

So if you do not initiate the contact stay away from investment deals,
_especially_ when they're telephone sales calls.

------
steven2012
I'm of the opinion that the stock markets are now inherently unstable, and
they will continue to crash every 7-10 years. I'm expecting a market crash
somewhere between 2015 and 2017. Most of my money is in cash, but I do hold a
few select stocks like AAPL, GOOG and TSLA.

I also believe that the stock market is a _game_ , not an investment vehicle.
The nature of the market has transformed every since the day trader, quants
and HFT have entered the markets. As long as you understand this, then putting
money in the markets is fine. If you don't want to be a part of the game, then
regular people should buy bonds (not bond funds, but actual bonds that pay
interest).

My opinion is that Wall Street has shifted focus since the 80s to trying to
convince people to dump their money, all their money, into mutual funds. Then
these massive fund managers take their 1-3% in various fees and just move
money back and forth. I don't trust Vanguard any more than I trust any of
these other large mutual fund companies, and I happen to know a lot of people
that work at various asset management companies in the Bay Area. They print
money without ever beating the SP500, instead they try to change the equation
by claiming they beat the SP500 on a risk-weighted basis, etc. The entire
thing is a sham, and as the OP remarked, why do the mutual fund managers have
yachts but none of the clients do? It's because they make their money from the
hundreds of billions of dollars they skim off the top of their customer funds.

~~~
justincpollard
One of the nice things about Vanguard is that the fee structure is much less
than 1-3% for many of their funds. I invest with them in some of their index
funds and pay no more than 0.4% in fees; usually much less than that.

~~~
wiredfool
Vanguard is owned by their funds, so incentives are aligned with the
shareholders of the funds. They are very different than most fund companies.

~~~
g_mifo
That's a bit of a gimmick. Management still pays themselves from the % of
invested funds, not fund performance. Same issue as with a nonprofit -- the
corporate profit structure is only one source of moral hazard.

~~~
wiredfool
Their expense ratios are really low. Wellington, an actively managed fund, has
an expense ratio of .25%. Their non-actively managed funds, such as the
Index500, are under .2%. Those are very low fees compared to other similar
investments. To compare with doing it yourself, at retail trade rates, that's
about one potential trade per year per $2-3k invested.

Vanguard actively moves clients from their baseline funds to the lower
cost/higher minimum Admiral versions.

I just don't see moral hazard in Vanguard, compared to other financial firms
with remotely similar capabilities and offerings.

~~~
wiredfool
Edit, but too late to actually edit --

The expense ratio of Admiral Index 500 is .05%, not .2%. So even better than
I'd remembered.

------
ForHackernews
[https://www.bogleheads.org/wiki/Getting_started](https://www.bogleheads.org/wiki/Getting_started)

Short version: Open a Vanguard account and invest >=15% of your salary in the
appropriate target date fund for the year you want to retire.

P.S. Where possible, become a millionaire in Google's IPO.

~~~
lpolovets
Have target date funds been successful? The last time I checked, their
historical performance (admittedly for only 6-7 years) seemed underwhelming.

~~~
JoshTriplett
If you care about a 6-7 year window, especially the most recent 6-7 year
window, target date funds aren't for you. They'll underperform when the market
is doing well. They'll also suffer less when the market tanks. Overall,
they're a safer investment if you really do have a fixed target date and want
to retire close to that date, and thus you have much less tolerance for risk.
In particular, they tune for less risk the closer you get to the target date,
to limit unexpected surprises.

If you're near the beginning of your career, you don't have a fixed retirement
date in mind, and you're investing a substantial enough fraction of your
income that you will likely retire earlier than average, then you might want
to pick a standard index fund with a fixed proportion of stocks and bonds
based on your tolerance for risk, and leave it that way.

------
mcfunley
> Think about working for equity vs. salary

It's really common for people to drastically overestimate the value of startup
equity, or to just not understand the basic mechanics of it at all. In my
experience people look at the face value of their options and are pretty
clueless about how taxes (or even their strike price!) affect what they might
actually wind up with.

~~~
steven2012
I agree. It's easy for Matt Cutts to say that you should take more equity,
because he has only seen massive success. I've been in the Bay Area exactly as
long as he has, and I've had 1 company out of 6 where my options actually made
me money. The rest were all worthless.

~~~
nikcub
If you're exchanging salary for equity you have to look at taking a job at a
startup like an investment decision. I don't know what the broader startup
stats are now, but 1 in 6 sounds about average. It means you should negotiate
down vesting periods and try and spend a few years at each startup before
figuring out if it will succeed or not.

My anecdotal opinion is that more startups are cashing out for at least
something because of acquihires and low-end mergers. I had a friend whose
startup ran out of money, he accepted a few points of another startup in
exchange for the assets of his failed startup and that startup that bought his
assets ended up selling for $100M+ after less than a year earning him a decent
return.

On another note - it would be pretty cool if someone did the equivalent of an
index fund but for employee options. Get together with 5-6 of your friends at
different startups and exchange options with each other to hedge the risk.

Another way to diversify your exposure is to get advisory roles at startups
and pick up 25-100 b.p from 4-5 different companies for helping them out. This
has worked out pretty well for myself.

There are some VCs who will also invest a small slice on your behalf if you
introduce them to a deal they end up investing in, which can also work out
pretty well if you are able to spot good investment deals, know the founders,
etc.

For a culture where stock options, M&A and investing is so prevalent there
really isn't much information out there in terms of making the right
investment decisions and how to handle and work with money.

~~~
ryandrake
> On another note - it would be pretty cool if someone did the equivalent of
> an index fund but for employee options. Get together with 5-6 of your
> friends at different startups and exchange options with each other to hedge
> the risk.

This is a pretty cool idea, but you'll have to find a lot of friends for it to
work. Chances are, your 5-6 friends' options will also end up worthless. Then
again, if we're talking about a pool of maybe 1,000 start-ups, then you need
to believe that a diverse bundle of start-ups will outperform the S&P500 on
average, otherwise it's pointless.

~~~
nikcub
or create a web-based matchmaking market. I think the reason why it may not
have happen already is because of regulations _shrug_ \- i'll ask the next
time i'm speaking to a lawyer

------
dave1619
I added a comment on Matt's blog post but it's waiting moderation so I'll post
it here to hear other folks' input.

"Hi Matt, I usually enjoy your posts but I felt this one lacking in a major
way.

Investing is something that has huge potential (ie., 100 fold). This is
something that I’m sure you’re aware of as an early Google employee (you were
invested in the company via stock options, etc). On the other hand, investing
has huge downside as well (you can lose all your money).

Many people are advocating people to take a mindless approach to investing by
investing in low-cost index funds. I personally think this is decent/good
advice for most people who don’t have the time, energy, experience, skills to
make investing a lifetime passion. In other words, for the typical person who
just wants to focus on his 9-to-5 job and other hobbies and not deal with the
world of investing, then sure low-cost index funds are the way to go.

However, there are some people who can benefit in huge ways by becoming
experts in investing (whether this be in stocks, real estate, businesses,
etc). A few disclaimers first… becoming an expert investor is extremely
difficult and most people underestimate what it takes. It’s not about
“picking” stocks or getting lucky. Rather, it’s about accumulating the skills,
experience and expertise to evaluate investment opportunities in a wise and
discerning manner, and to do it exceedingly well. I think it requires an
immense amount of time and dedication. And I don’t think 98% of the people out
there practically have the time, energy, motivation or focus to develop such
skills. But for the 1-2%, I think it’s a possibility if they treat it as a
serious lifetime endeavor."

~~~
Matt_Cutts
Hey Dave, I approved your comment over on my blog--sorry about the delay. I
also wrote a response which I'll paste below:

Dave L, I concede that someone who is willing to put in the time and effort,
they may become good at selecting stocks. Then again, they may not: I have
friends who have spent a lot of time and effort studying individual stocks
without much to show for it. And don’t even get me started on the financial
press that’s there to distract and mislead investors into bad choices–yikes!

In short, I believe that a passive index fund will outperform a majority of
professional active money managers, and it’s the best choice for the vast
majority of people.

Furthermore, who would most people name as the greatest investor of the last
50 years? Probably Warren Buffett. Well, guess how Warren Buffett wants his
money left to his wife when he dies? Buffett wants the money in an index fund
(!). Here’s the article:
[http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/24/w...](http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/24/warren-
buffett-reveals-the-one-stock-fund-you-need-to-invest-in/) and I’ll just quote
a bit:

"My advice to the trustee could not be more simple: Put 10% of the cash in
short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I
suggest Vanguard’s.) I believe the trust’s long-term results from this policy
will be superior to those attained by most investors — whether pension funds,
institutions, or individuals — who employ high-fee managers."

So you have to ask yourself: are you smarter than Warren Buffett? Because
Buffett is counting on an index fund when he dies.

~~~
highiquser
I'm of the tiny, minority unpopular opinion that believes you can beat the
market by picking stocks,. I have done so consistently for the past decade.
Pick large cap companies with huge growth, high barriers to entry, insulated
from economic trends, no debt, and high profit margins.

My favorites:

MA, V, BABA, GOOG, FB, JNJ, GILD, HD

That's not many, but these are some of the best long term investment ideas I
can find. Stay away from volatile, macro-sensitive sectors like oil,
materials, and retail and stick to healthcare, consumer staples, and
utilities. People are getting older and wanting to live longer which is
bullish for healthcare, and the web isn't going anywhere even if oil is going
to $40.

Or you can try an ETF linear combination
[http://greyenlightenment.com/?p=1540](http://greyenlightenment.com/?p=1540)

There are many strategies that beat the market and provide as good risk
adjusted returns as an index fund .

Warren Buffett , btw, broke his on advice of avoiding tech by buying IBM,
which has lagged the market considerably. most of the time Warren Buffett
doesn't pick stocks in the traditional sense but instead gets special
preferred shares that pay huge dividends and other perks. The performance of
BRK.B is influenced more by the private companies like Geico and than stocks
like Coke.

~~~
t3rseCode
Good to hear that even if it's tiny, there is a small contingent who agrees. I
took a portion of my savings in order to invest and have outperformed the
index funds and basic allocations in my 401k and retirement accounts. I don't
have a long enough track record (3 years thus far) to assume it can continue
but my overall returns have consistently beaten SPY/DJI.

My sense is that investing is a skill and that you have to practice in order
to get better. I've enjoyed the books of Thomas Bulkowski
([http://thepatternsite.com/mybooks.html](http://thepatternsite.com/mybooks.html))
and had fun doing it. Because it's not my primary retirement or savings it is
less pressure and I try to minimize the gambling aspect instead relying on
something more mechanistic.

With that said the current bull market keeps me humble; right now it's easy
but if things take a turn I will try to be honest with myself and, if
necessary, reallocate everything in index funds.

------
applecore
Regarding most of these lessons, in 2004, Google brought in experts on
personal investing to educate employees heading into its initial public
offering:

[http://www.modernluxury.com/san-francisco/story/the-best-
inv...](http://www.modernluxury.com/san-francisco/story/the-best-investment-
advice-youll-never-get)

TL;DR: Put your money into some broad-based, low-cost index funds.

~~~
walshemj
ah so why do the Rothschilds put a good chunk of family money in an active
fund aka RIT Capital partners.

index funds are fine for some one with only a couple of grand spare - with the
sort of money that comes from a good ipo you need to be a bit more
sophisticated than that.

------
ingend88
I am one of those people who have lived this advice and after 10 years of
following some of the recommendations here, I can confirm that it works.

Here are my 5 simple rules that I followed, no lottery/IPO, just a steady
single income. \- Max out 401K and get company match \- Max out Roth IRA for
me and my wife \- Invest in Vanguard S&P 500 Index Funds, some international
funds and some bonds \- Invested in a property in India \- Lived below 35% of
the salary \- Always bought a used car and kept the car for as long as it runs

Results \- After 10 years, I am financially independent \- I am working for
Google just because I enjoy working and not because I need a paycheck \- My
wife works as a teacher and she enjoys her job as well. She is working because
she likes to and not because we need a paycheck

What was hard ? \- To see friends buying expensive cars just after getting
their first job and not doing the same \- Friends buying > 1M$ houses while I
kept renting since I like the flexibility and staying in a community \-
Friends going on exotic trips

I think at the end, its worth it.

~~~
chatmasta
This is good advice but may also have some element of survivorship bias. If
you haven't noticed, not everybody works for Google. In fact, not everybody
works for a company that will match their 401(k). If you're lucky enough to be
taking home a six figure salary (not to mention one that grows with bonuses as
you progress) every year, maybe this advice is good. But you should consider
in your advice that not everyone is taking home $xxx,xxx per year, plus
bonuses, plus full company 401(k) matching and all benefits. You are very
lucky that you were able to live below 35% of salary.

Still, I wonder if advice would be different for people who are making less?

~~~
ingend88
I think the mindset still applies. Surprisingly, I know people who get 6
figure salaries and yet are not financially independent.

The secret here is to start early since the expenses rise exponentially after
wife and kids.

------
briandear
If you diversify enough, you can ensure a 0% return and a 0% loss. The
argument for "diversification" is a recipe for safety, but not real wealth
creation. Real wealth creation isn't "sticking your money in an index fund."
It's a very middle class approach but as with anything, there's no such thing
as a free lunch. If it takes 30 years of index funds to be able to retire,
then you're doing it wrong. Investing in actual cash-flow producing assets is
how you create wealth. Capital appreciation is only one part, the other part
is creating cash flow. That means owning businesses, real estate and other
passive income generators (IP, for example.)

~~~
oscilloscope
Diversification is considered to be one of the only "free lunches" in finance.
It can both increase your return and decrease your risk, with almost no
downside.

For example, going from 100% bonds to 80% bonds and 20% stocks will
significantly increase a portfolio's expected return with reduced risk.
Another example is owning the Total Stock market (small and mid-caps included)
rather than just the S&P 500.

[http://bucks.blogs.nytimes.com/2011/09/06/why-and-how-
divers...](http://bucks.blogs.nytimes.com/2011/09/06/why-and-how-diversified-
investors-win/)

------
FiReaNG3L
Literally everywhere for the past years I see the advice to invest in index
funds - the only question I have is what happens when a critical mass of
people do just that? Wouldn't that influence the market in some way?

~~~
markovbling
that's the paradox of the efficient market hypothesis - if everyone is a
passive investor then who keeps the market efficient?

(...which is a common counter-argument for the markets being efficient. The
reasoning behind passive investment is that, net of fees, it's difficult to
out-perform the market although of course, everyone can't outperform the
market because everyone collectively IS the market)

~~~
j_lev
Companies themselves buy and sell their own stock when they believe it is
under/overvalued. And there will always be people out there who believe they
have an edge and can pick undervalued stocks.

These days I think in reality most people who have been into indexing for a
while give themselves a bit of play money to invest in something more
speculative.

------
netcan
There is an economics article I’ve brought up several times on HN. It has a
lot of non obvious deep implications: “ _The Nature of the Firm ' (1937), By
Ronal Coase_” It tries to answer the question of why companies exist rather
than bilaterally trade of goods and services between individuals in a market.
IE, if centralised economies are so bad, why are free market economies
dominated by enormous companies that are internally run like a Stalinist
country. Instead of Apple making all the software and hardware and the
babushka doll of precursor software and hardware, couldn’t we have Apple
replaced by a market?

The economics of the time (especially among proponents of centralized systems)
focused a lot on “inefficiencies.” Why produce hundreds of iPad screen designs
when only one is needed. Economies of scale. Coase’s answer to the question
was transaction costs. The “cost” of weighing all the options and negotiating
a deal to have you write a thousand lines of code to go into my bigger bundle
of code.

In modern companies like Apple this is extreme. But, if you think about it in
a manufacturing economy, it makes more sense.

Anyway, as I said, the more I think about it the deeper some of the concepts
and implications seem to be. For example: (a) There are inefficiencies out
there on the scale of East/West Germany. (b) Transactions costs are at the
root of many/most major inefficiencies.

The part of this blog that got me thinking about this was “ _working for
equity vs. salary_.”

I think that for most people, the choice company they work for wass 80% chance
and 20% uninformed bias. Applying for a job and interviewing is a big overhead
(transaction cost) and your ability understand the company’s chances of
success and the magnitude of this success isn’t very good. The fact that many
people don’t know what percentage of the company their stock represents is the
glaring proof. Prospective employees don’t have anywhere near the information
that investors do. How much money is in the bank? What are revenues? Burn
rate? Valuation at previous rounds?

The poverty of information and the fact that transaction costs make it
impossible for one to consider more than the tiniest semi-random sample of
opportunities is exactly the kind of dynamic I think Coase’s work implies.

------
netcan
I'm surprised he doesn't mention real estate or investing in friend/family
businesses as an option.

This isn't as safe as index funds, but it is an option where you can increase
your success rate by being competent. It probably has a risk profile similar
to working for equity at a startup, an option only available to people who
work in or around startups.

~~~
Sven7
Nor did he mention Facebook stock. Weird.

~~~
netcan
I'm not sure I understand your point. Are you just implying the FB is a bad
investment and so are the ones I mentioned?

------
arkem
I've been considering moving from holding Vanguard ETFs (one of their Total
Retirement funds) over to Betterment or Wealthfront to take advantage of their
automated tax loss harvesting.

Does anyone have any thoughts about whether automated tax loss harvesting is
worth the 0.15-0.25% fees that the robo-advisers charge?

~~~
ForHackernews
Probably not worth it unless you have a very large portfolio and you're too
lazy to do the tax loss harvesting yourself. It's especially not worth it if
you're correctly holding most of your retirement savings in tax-advantaged
accounts (401k/403b/IRA/HSA). You are, right?

Also, it's worth noting that Schwab is launching a free robo-advisor service
early next year[0] so that may be the nail in the coffin for startups like
Betterment.

[0] [http://www.reuters.com/article/2014/10/03/us-charles-
schwab-...](http://www.reuters.com/article/2014/10/03/us-charles-schwab-robo-
advice-idUSKCN0HS1UV20141003)

~~~
arkem
Thanks for the tip about Schwab, looks interesting, especially the 'free'
part.

Thinking about it, basis points feel too expensive for something that's done
entirely in software. I suspect competition from existing players will drive
the price right down.

------
gfodor
This is the typical investment advice, and it's generally outdated and wrong
to just invest in index funds based on asset classes if your goal is to
diversify away volatility.

For a layman's treatment debunking this view (don't mind the title):

[http://www.amazon.com/Jackass-Investing-Dont-
Profit/dp/09835...](http://www.amazon.com/Jackass-Investing-Dont-
Profit/dp/0983504008)

for a more academic flavor:

[http://www.amazon.com/Expected-Returns-Investors-
Harvesting-...](http://www.amazon.com/Expected-Returns-Investors-Harvesting-
Rewards/dp/1119990726)

the best book on stock picking i've read:

[http://www.amazon.com/Quantitative-Value-Web-Site-
Practition...](http://www.amazon.com/Quantitative-Value-Web-Site-
Practitioners/dp/1118328078)

------
crimsonalucard
Everybody in the tech world is talking about investing in index funds.
Historical evidence says this is the way to go, but when everybody is doing
it, it makes me question whether or not it's the right choice.

There's a possibility that the market is in another bubble right now.

~~~
walshemj
the trouble with index funds is you participate fully in any crash/dogs eg
index funds had to hold enron to the bitter end.

some of my active funds saw the problems with the banks and got out before the
crash now no index fund is ever likely to make up the difference - the active
fund is now always ahead of the index

~~~
sumedh
> the active fund is now always ahead of the index

but the question is how do you select the active fund which will consistently
beat the market in the future.

~~~
walshemj
look for ones that have been around for 100 plus years and with 30-40 years of
increasing dividend payments

~~~
Matt_Cutts
This guy named Bernie Madoff was able to outperform the market for years and
years, I hear.

------
armansu
Made me think (as most of the lessons coincide) about the book I'm reading at
the moment - 'Money: Master the Game' by Tony Robbins:
[http://moneymasterthegame.com/](http://moneymasterthegame.com/)

~~~
clamprecht
Want to see how hard it is to predict the market? Watch this message from Tony
Robbins to his followers in 2010:
[https://www.youtube.com/watch?v=KzREzgDoaZg](https://www.youtube.com/watch?v=KzREzgDoaZg)

He says he believes the market may be entering a dangerous period and all but
advises getting out of stocks. (Watch part 1 and part 2). If you followed his
advice from 2010 until now, you've lost out big time. My point isn't that Tony
Robbins was wrong, it's that it is very hard to predict the market.

------
g_mifo
Most of this is standard sane advice, but the tip about "work for equity [in
the next Google] instead of chasing salary": well if we all could pick stocks
like that, we would not need the rest of his advice!

------
vpeters25
> You are probably a bad stock picker

You might find a stock that looks good, you check financials, fillings, read
forum posts and "expert" financial blogs such as Seeking Alpha. They all
concur: stock looks good, BUY! BUY! BUY!

So you buy the stock thinking you are making an informed decision only for it
to crash the next day after their latest SEC filing hits the wires.

There you learn they all knew the filing was coming, so they pimped the stock
hard so suckers like us bite. Corp officials, analysts, "expert" financial
bloggers, even the SEC. They are all on it.

~~~
mistermann
I doubt you'll believe me, but there are a lot of 100% independent investors
that are on twitter and forums as well as write in-depth blogs who
consistently outperform the market and do not resort to any sort of tricks
like this.

Of course, you have to find them (and I'm certainly not going to share as I
have made a significant investment of time finding these people, and many of
the stocks they buy are small caps), and you also have to (or should) do your
own due diligence on every purchase.

Seeking Alpha specifically is mostly full of people like you describe, but
there is also _some_ honest, legitimate advice there.

------
dirtyaura
What is especially hard in investing is timing. If you followed Matt's advice
and put all your investments to index fund (say Vanguard Total Stock Market
ETF,
[https://www.google.com/finance?q=NYSEARCA](https://www.google.com/finance?q=NYSEARCA))
in the late 2007, you would have lost almost 50% of your savings in a year.
And this example is not far fetched. My startup got acquired in 2007 and I
invested some of that money to the stock market in late 2007. Not all,
fortunately.

~~~
n72
This is a terrible way of looking at things, since your time horizon is far
too short. If you had put your money in the market at the height and kept it
in until now, you would have made money. On Oct 5, 2007, VTSAX was trading at
37.72. It is currently trading at 51.87. Moreover, what was the alternative?
Cash would have lost value due to inflation. Fixed income would have gotten
you less and also been vulnerable to inflation.

------
CurtMonash
I was a #1-ranked stock analyst (computer software and services industry) in
the 1980s. I took a portion of my parents' money and doubled it in 18 months,
by splitting it among 5 stocks that went to 4X, 3X, 3X, 0X and 0X. Then I left
Wall Street, told them I no longer was in a position to do such stock picking,
and they should put their money into Vanguard index funds.

They were not pleased, and felt I let them down by not being more active in
investing for them.

~~~
hnnewguy
> _it among 5 stocks that went to 4X, 3X, 3X, 0X and 0X_

What stocks?

~~~
CurtMonash
Symbolics was one of the bankruptcies. American Management Systems and Lotus
were two of the winners. I've forgotten the others.

------
maguirre
Interesting topic and one that really resonates with me. I have always been
interested in learning how to make money the way "people with money" make it.
Personally I have come to the conclusion that a few solid stocks paired with
protective puts and/or call options (to make a little extra money for sideways
markets) provides a decent way to generate some extra income and greatly
reduces risk of losing everything from a single mistake

------
DanBC
For a different take people might be interested in "A Mathematician Plays the
Stockmarket", by John Allen Paulos (he also wrote the excellent "Innumeracy").

The book explains a bunch of mistakes he made when investing.

[http://www.amazon.com/Mathematician-Plays-The-Stock-
Market/d...](http://www.amazon.com/Mathematician-Plays-The-Stock-
Market/dp/0465054811)

------
kirillzubovsky
FYI, if "tax loss harvesting" is something you'd like to consider, there're
companies out there which (for a fee), would do it for you. Their entire
business model is to lose money for you, in a smart way. That said, if you
need to use this method, you're probably wealthy enough to know how/where to
use it.

~~~
tempestn
Honestly IMO tax loss harvesting becomes very straightforward if you have a
nice, simple portfolio of index funds. Your entire portfolio will be maybe 3-5
funds, so there really isn't much to keep track of. A few minutes reading the
superficial loss rules for your jurisdiction should do it. (Generally, as long
as you sell a fund at a loss and replace it with something similar, but
tracking a different index, you're fine.)

------
applecore
How many people are actually living entirely off passive income from interest,
dividends, and capital gains? I feel that goal—which requires millions of
dollars in investable financial assets—is only realistic for a tiny percentage
of the population.

~~~
walshemj
You could live quite well off only a £million or so in the UK so 2 mill in the
USA will give you a nice life style - baring any catastrophic health issues

------
mbesto
> _Instead of a regular stock broker, I highly recommend Vanguard. Go with
> Vanguard whenever you can._

This is good advice. YMMV but my retirement fund with Vanguard has been
yielding ~10% annually (VWELX).

------
mathattack
Remarkably good ideas, and I tend to view most posts like this as Snake Oil.

Almost everyone should be doing most of their equity investments through a
passive low cost index like Vanguard's.

------
n72
The tragic thing is that these lessons don't have to be "hard-won". I find it
astonishing that a majority of even intelligent people don't do more basic
research before making major decisions with something as important as their
money. A few hours of research should turn up things like bogleheads.org,
Bernstein, Malkiel, etc. Heck, a simple google of "site:ycombinator.com
investing advice" should get you on the right track to all the advice you need
in a few clicks.

------
brentiumbrent
Simple advice: just use Wealthfront and take all of this advice at once,
automatically. [http://wlth.fr/1fsdN6t](http://wlth.fr/1fsdN6t)

------
tacos
The tone is far too authoritative given the narrow experience of the author.
Reading an Googler's quickie blogpost investment guide isn't the path to
financial independence. It's barely the bot-filled advice of
/r/personalfinance with a better PageRank.

Microsoft pushed giving and 30 years later there are still people blindly
pumping money into United Way. (Maybe not the best charity!) Google seems to
have pushed their smart people into another half-baked set of assumptions.

I'm forcing myself NOT to get involved on this one (the solution to one
person's narrow experience isn't another guy with different narrow experience
ranting in the comments) but I will point out that Schwab Charitable (their
DAF) has lower minimums and fees than Vanguard.

A lot of nerds spend more time researching a graphics card than a stock pick
or charity. Like anything else, put the time in and you'll be rewarded over
the long term.

~~~
7Figures2Commas
I agree. One of the most cringe-worthy parts of this post is the author's
multiple references to bond funds. Owning bond funds is not the same thing as
owning bonds and every bond investor should know the difference.

Bond prices have an inverse relationship with interest rates. Bond prices fall
when interest rates rise. When you own individual bonds, you cannot lose your
principal if you hold to maturity unless the issuer defaults. Most bond funds
do not hold bonds to maturity, so investors in bond funds have significant
exposure to interest rate risk. This is especially true today given the
interest rate environment.

There _are_ other ways to address interest rate risk with bond funds,
especially if you have a longer horizon. You can buy short-term bond funds,
and there are even defined maturity funds. But you don't find any mention of
those in the post. It's just bonds = bond funds.

It all comes back to your comment, "put the time in and you'll be rewarded
over the long term." Even seemingly simple financial advice ("buy a bond
fund!") is insufficient because it requires more time and effort to execute
correctly than most people are willing to put in.

~~~
gfodor
This is oft-cited difference between bonds and bond funds is a red herring
when it comes to determining the proper investment of the two. The reason a
single bond keeps you from losing your principal is because it has a declining
duration, whereas bond funds generally have a fixed duration (more or less)
since maturing bonds in the portfolio are usually reinvested into bonds of the
same time to maturity.

You can simulate the behavior of a single bond by rolling your investments
into shorter and shorter duration bond funds over time. The reason you would
do this is if you have a known date for when you are going to need the
principal. (This is the same justification you would use for buying an
individual bond.) By controlling the duration via reinvestment into bond
funds, you are diversifying away a majority of of the default risk ( _the_
major risk of owning bonds) while still being able to ensure your bonds are
worth at least as much as your principal on a fixed date determined at the
beginning of the investment.

As an aside, concern about the market price of a bond is usually a good
example of focusing on the wrong thing. If a bond's price has declined because
of increased default risk, this is obviously bad. But if a bond's price has
declined because of increased interest rates, this means you will be able to
re-invest the coupon at a larger yield, so depending on your investment goals
(such as having a robust inflation adjusted income stream for retirement) this
may not be strictly a bad thing.

[http://www.bogleheads.org/wiki/Individual_bonds_vs_a_bond_fu...](http://www.bogleheads.org/wiki/Individual_bonds_vs_a_bond_fund)

~~~
7Figures2Commas
> You can simulate the behavior of a single bond by rolling your investments
> into shorter and shorter duration bond funds over time.

As I noted, there are ways to address interest rate risk with bond funds, but
you're ignoring the most important question in the context of this discussion:
how many retail investors who put money into bond funds actually know about
laddering strategies?

> But if a bond's price has declined because of increased interest rates, this
> means you will be able to re-invest the coupon at a larger yield...

This is true, but you have to wait until maturity unless you're willing to
sell your bond at a loss. Despite the low interest rate environment, there are
still a good number of retail investors buying exposure to long-dated bonds
because they don't take the time to understand their investments. Many of
these investors will either have to realize potentially painful losses or wait
a long time before they have the opportunity to buy new bonds with higher
yields.

~~~
gfodor
I don't think you read the article I linked. Reducing the effective duration
on the bond fund portion of your portfolio boils down to the same thing you'd
do in any healthy portfolio: yearly rebalancing.

Also, the point is not to hedge 'interest rate risk' by just buying shorter
duration funds, full stop. Interest rates do not pose a risk unless you had a
set date to liquidate your investment. If you are not planning on liquidating
your bonds then interest rates pose no risk, they just affect the growth of
the income stream.

The point is, if you are concerned about getting your principal returned,
decide upon how many years down the road you need it back. That is your
initial duration. To maximize your return under that constraint, buy a fund at
that duration. Then yearly rebalance with other shorter duration funds (while
reinvesting coupons properly) to taper the net duration down over the course
of the investment period. There you go, you've just simulated a single bond
but now are no longer exposed to default risk.

Again: perpetuating the idea that 'getting your principal back' is a feature
only found if you buy individual bonds directly is untrue and can result in
_terrible_ investment decisions. It presents a false dilemma between a 'secure
principal' and diversification. Forgoing diversification in _bonds_ is one of
the most dangerous things you can do. More than any other asset class, bonds
benefit immeasurably from diversification (and probably also active
management) since default risk is the major risk the investor faces.

~~~
7Figures2Commas
I don't think you understand the context of this discussion. As I explicitly
stated, "there are other ways to address interest rate risk with bond funds."
But this isn't a technical discussion about bond buying strategies. This is a
discussion about high-level financial "advice" that was woefully inadequate
for the intended audience (retail investors).

To highlight this, I used the author's lack of distinction between bonds and
bond funds and the most simple difference between _how they function as
employed by your average retail investor_. You're obviously free to go off on
a wild tangent detailing in more depth the way that bond funds _can_ be used,
but ironically you're only proving my original point: this is not nearly as
simple as the OP's advice ("buy a bond fund!") and requires an investment of
time and effort that exceeds what the vast majority of people are willing to
put in.

------
jafaku
Consider also buying a bunch of bitcoins. The reward/risk ratio is too high in
my opinion.

