Investing & Financial Advisors

[AZMark]

Slightly off topic, something I just read this morning that really stuck with me...

From Elon Musk:
"To be clear, I am *not* an investor, I am an engineer. I don’t even own any publicly traded stock besides Tesla.
However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.
Bitcoin is almost as bs as fiat money. The key word is “almost”.
— Elon Musk (@elonmusk) February 19, 2021"

Is this something we should be thinking about? My retirement and investment portfolios are, as far as I know, strictly fiat money... lol

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Haha I’m all fiat as well. I’m not even allowed to own crypto based on my job.
Negative interest rates aren’t great but at least you generally know what a dollar will be worth tomorrow and 5 years from now, even if it’s at a -0.XX% rate. Not the case with cryptocurrency at this point.
I think Elon is a genius of sorts but he’s playing with other people’s money by having Tesla invest so heavily in Bitcoin and also with his sometimes flippant investment comments that many people will follow without having any understanding.
Tesla’s job is to create value through building cars not highly volatile investments. Start a hedge fund if you want to do that stuff.

 

[drewkaree]

On a somewhat related note, I have a Discover card. It's one I've had for easily 20+ years. I just got a notice for another credit line increase. The credit limit I have is more than I ever made in a YEAR before turning 20. I find this hilarious, given that I don't really use it, and when I do, I tend to pay it off that month (or the next month, if using it for large purchases).

I have it set to be my payment for all of my insurances and a few other things, so right around this time every year, I incur a few thousand dollars in a matter of 2-ish weeks. We just bought a new mattress the other day, and I had to call to have them approve it due to "unexpected increase in high dollar purchases". Seems to me to be one of those things where if you looked at the purchases, who would steal my credit card to pay their insurance bills and buy a mattress? LOL I appreciate them looking out for me, really, but it seems like this one should have been a non-issue.

 

[TimW451]

That’s definitely a new, and good topic. I would disentangle fiat currency and negative real interest to better understand both (And I’m not sure if convergence of the two matters/is worse.) At this point almost all government issued currency is fiat currency, like US Dollars. Negative real interest is an interesting (ha-ha) concept for theoretical discussion that wasn’t supposed to get out of the lab.

Slightly off topic, something I just read this morning that really stuck with me...

From Elon Musk:
"To be clear, I am *not* an investor, I am an engineer. I don’t even own any publicly traded stock besides Tesla.
However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.
Bitcoin is almost as bs as fiat money. The key word is “almost”.
— Elon Musk (@elonmusk) February 19, 2021"

Is this something we should be thinking about? My retirement and investment portfolios are, as far as I know, strictly fiat money... lol

--

 

[swatski]

That’s definitely a new, and good topic. I would disentangle fiat currency and negative real interest to better understand both (And I’m not sure if convergence of the two matters/is worse.) At this point almost all government issued currency is fiat currency, like US Dollars. Negative real interest is an interesting (ha-ha) concept for theoretical discussion that wasn’t supposed to get out of the lab.

How is it a theoretical discussion? To me, it is very real and very practical.
Negative real interest concept has a real world corollary: diminishing purchasing power of the $ in this case; so, when it is simply sitting in my bank savings account appended with whatever 1-2% interest rate that money loses value pretty fast; faster than interest rate accrual to offset it. With the prices rising fast, it is hard to call it a purely theoretical concept at this point.
Cryptos seem somewhat immune from that devaluation. At the risk of being backed not by a gov but a bunch of speculators. Not to get political, so I will leave any discussion of what is worse out, lol.
No?
I'm NOT good at money, I just approach it like everything else, it's not magic either. But I may be oversimplifying.

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[swatski]

Haha I’m all fiat as well. I’m not even allowed to own crypto based on my job.
Negative interest rates aren’t great but at least you generally know what a dollar will be worth tomorrow and 5 years from now, even if it’s at a -0.XX% rate. Not the case with cryptocurrency at this point.
I think Elon is a genius of sorts but he’s playing with other people’s money by having Tesla invest so heavily in Bitcoin and also with his sometimes flippant investment comments that many people will follow without having any understanding.
Tesla’s job is to create value through building cars not highly volatile investments. Start a hedge fund if you want to do that stuff.

Very informative. I guess at some point you guys will figure out how to securitize BTC for the rest of us, so it can be traded just like MBS without needing to own it.
I've learned the hard way to stay out of it, leave my money to the pros, lol. The less I know the better. It sounds so ignorant, but it's just been my experience, really.

What intrigued me about that Musk comment was how damn accurate and timely it seems.
We have had a part of fencing redone in two places, one was done last Fall, the second is scheduled for this Spring. I've learned from my contractor that a piece of lumber that he was getting from HD for $3 last Fall is now $8. The contractor is not asking to be paid in cryptos, lol, but the same job has a very different price tag. Consquently, we have been pumping all surplus cash into the house' infrastructure projects.

I do use this "logic" to justify things I want, lol. Even the new boat we just purchased was kind of, sort of, in part, justified by not wanting to sit on any cash we don't need. I may be crazy but maybe not. We almost got one in 2019, the same boat cost about 50% more at the end of last year, some have a long wait list. We ordered our new Parker (2320) in October 2020, could not touch the price we paid now, not even close.

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[TimW451]

I am not saying negative real interest doesn’t exist, your example is a good one that it does (especially so, in that many people don’t realize it unless they correlate the two points, whereas central banks literally “paying” negative interest is more obvious). My point is that it is was not expected to occur in the real world, due to the weird outcomes, when it was used as a concept to explain economic theory.

How is it a theoretical discussion? To me, it is very real and very practical.
Negative real interest concept has a real world corollary: diminishing purchasing power of the $ in this case; so, when it is simply sitting in my bank savings account appended with whatever 1-2% interest rate that money loses value pretty fast; faster than interest rate accrual to offset it. With the prices rising fast, it is hard to call it a purely theoretical concept at this point.
Cryptos seem somewhat immune from that devaluation. At the risk of being backed not by a gov but a bunch of speculators. Not to get political, so I will leave any discussion of what is worse out, lol.
No?
I'm NOT good at money, I just approach it like everything else, it's not magic either. But I may be oversimplifying.

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[swatski]

I am not saying negative real interest doesn’t exist, your example is a good one that it does (especially so, in that many people don’t realize it unless they correlate the two points, whereas central banks literally “paying” negative interest is more obvious). My point is that it is was not expected to occur in the real world, due to the weird outcomes, when it was used as a concept to explain economic theory.

Got it. totally makes sense.
Amazing how far we have evolved (departed?) from a monetary system in which the standard economic unit of account is based on a fixed quantity of gold!
Blockchain..., anyone?

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[Jimmers]

Depending on plans and age brackets, if you continue to work beyond 70-1/2 and continue to contribute to your 401K, you do not have to withdraw from it unlike a Roth or IRA. As long as you are working and contributing to your 401K you do not have to withdraw any of it at any age!

 

[BigN8]

Just to clarify this only applies to the 401k with the company you are working for. Required minimum distributions kick in at 72. So for instance you retire from company X with a large 401k and get a job as a Walmart greeter you will be required to start RMDs from company X.

 

[AZMark]

Depending on plans and age brackets, if you continue to work beyond 70-1/2 and continue to contribute to your 401K, you do not have to withdraw from it unlike a Roth or IRA. As long as you are working and contributing to your 401K you do not have to withdraw any of it at any age!

Roth’s don’t have minimum distributions since you already paid the taxes.

 

[Julian]

Definitely max out your 401k and HSA. Dont use the money in your HSA until you retire....its is the best investment you have - triple benefits (no other investment offers that! Pretax deposit, no tax on gains, no tax when you use it.

My investment advisor works for NW mutual. She's done a great job with our Monday. I plan to "retire" at 58. I only put that in quotes because at 58 I plan to do stuff I want to do. I wont NEED to work.

 

[vanefras]

I'm sorry, guys, but do you seriously trust these financial advisors? I mean, those people only have the aim to get more and more money from their customers. From my point of view, the best "financial advisor" for any of us is a good accountant who actually knows what you should do with your money and how to do it all. If you are looking to invest some big money anywhere, I would recommend you the services of Front page. They are not those stupid financial advisors, and they are specialists that can provide you with great options.

 

[Adrian @ JB Solutions]

My focus has shifted. Max out 401k, contribute to HSA and leave untouched. Business money will go into rental properties.

 

[jlcj7]

Definitely max out your 401k and HSA. Dont use the money in your HSA until you retire....its is the best investment you have - triple benefits (no other investment offers that! Pretax deposit, no tax on gains, no tax when you use it.

My investment advisor works for NW mutual. She's done a great job with our Monday. I plan to "retire" at 58. I only put that in quotes because at 58 I plan to do stuff I want to do. I wont NEED to work.

this is the best advise. Especially the HSA. It adds up quick and then you can invest it for better returns. Be careful not to over-contribute, my company contributes seed money and I try to max out the allowable amount and they pay penalties at tax time.
My HSA account lets me load the receipts but not have to claim the withdrawal. Makes it easy for later in life to withdraw tax free to pay myself back.

 

[BigN8]

Remember if your married and you are in the year you turn 50 or are already 50 your 401k max contribution is $26,500. I turn the big 5-0 this year and have already adjusted.

 

[Adrian @ JB Solutions]

Remember if your married and you are in the year you turn 50 or are already 50 your 401k max contribution is $26,500. I turn the big 5-0 this year and have already adjusted.

I have a long way to go for that one lol

 

[Ericd]

Vanguard and other fund companies offer Index 500 (Invests in S&P 500 Index Cos) Most advisors don’t outperform this S&P 500 Index, especially when their fees are included. Do some research…on S&P 500 Index Funds.

 

[jlcj7]

Vanguard and other fund companies offer Index 500 (Invests in S&P 500 Index Cos) Most advisors don’t outperform this S&P 500 Index, especially when their fees are included. Do some research…on S&P 500 Index Funds.

this is mainly what I do. Overtime it is hard to beat the S&P for the normal non-professional investor. After maxing out 401k I put another few percent of income into either IVV (ETF that mirrors the S&P) or VOOG (Vanguard S&P growth fund).

 

[thefortunes]

I'm sorry, guys, but do you seriously trust these financial advisors? I mean, those people only have the aim to get more and more money from their customers. From my point of view, the best "financial advisor" for any of us is a good accountant who actually knows what you should do with your money and how to do it all.

As a CPA who was also an advisor I would STRONGLY disagree with this comment.

I can't begin to tell you how many of my clients relied on investment advice from their accountant or their lawyer to their detriment.

Would you go to the doctor for advice on your car?

Accountant =! financial advisor. They are two very distinct and separate knowledge sets.

Can one person have both? I was an example that it is possible, but in my professional circles (both professions) it was VERY rare.

 

[BlkGS]

At 31, IMO, you've still got plenty of time. 10% doesn't sound super aggressive and should be achievable.

You must not remember 08. 10% is very high on average, I think the long term average is roughly 7%. That's not taking into account the hyper volatility of our current financial markets due to algorithm trading, insane leverage for people who don't get how it works, and the reality that we don't typically have pensions of social security to fall back on. The fact that most people's entire life savings for retirent is put into the stock market should scare everyone.


A few thoughts... 401ks are inherently good ideas now because they avoid taxes today. Roth IRAs are I herently stupid because you have to trust that our government (that borrows trillions more every year) doesn't go back on its promise to not tax you later, which they absolutely will.

The guys saying to max out your 401k are right, it only hurts at first, you get used to it pretty quickly and it becomes your new normal revenue stream.

Financial advisors are not made equal. Merrill Lynch FAs are basically in a pyramid scheme where they have to bring in ever increasing amounts of business until they have a big enough book of business to have their own branch. Your FA makes maybe 45k a year and is essentially in investment retail sales, and they're trained just enough to know words to say. If you find a good FA, stick with them.

That said, FAs are quickly becoming a thing of the past. When you can just buy shares in managed funds, the FA becomes a needless middleman.