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The wealth-building thread

A Surfer

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Reading all of this almost makes me glad that I don't have enough time left in front of me (or make enough money) to have to figure out what to do about such things. I have always figured that you only invest money that you can truly afford to lose so in my case I couldn't do that. If I put what little I could invest into far more secure investment vehicles, the returns are so low as to not be worth pursuing and better to either use the money to enjoy things while I am still alive, or to ensure that I pay down any high interest debt that I have.

I have a friend who carries so much credit card debt (not by choice, just by poor decision making) and yet when she had a small nest egg from an inheritance come along she barely paid any of her high interest credit card debt and invested much of the money, enough that she could have paid her credit cards off. I tried to get her to think carefully, what investments could she possibly make that would outpace her high interest, compounded credit card debt? Even with the math staring her in the face she still went ahead and just invested. She lost quite a bit at first, like more than 20% of her investment, not sure if it recovered. I doubt it though.

I also wonder about the value in starting investing late in life, such as your 60s if you don't have a good amount to invest. Given that the better pay back periods are when things are diversified and left to work for a few decades, doesn't that really make investing after 60 (without lots of money) not really viable unless you get extremely lucky?
 

RayDunzl

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1631278186290.png


https://www.pewresearch.org/fact-ta...ok-at-who-does-and-doesnt-pay-u-s-income-tax/
 

MRC01

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Reading all of this almost makes me glad that I don't have enough time left in front of me (or make enough money) to have to figure out what to do about such things. I have always figured that you only invest money that you can truly afford to lose so in my case I couldn't do that. If I put what little I could invest into far more secure investment vehicles, the returns are so low as to not be worth pursuing and better to either use the money to enjoy things while I am still alive, or to ensure that I pay down any high interest debt that I have.
...
That's a common fallacy that prevents many people from investing. Risk is a function of time window. The exact same investment can be high risk in the short term while being low risk in the long term. The best long-term investment is very simple: index based equity funds. Get started in that when you're young and you will be set. It's not about "what you can afford to lose", because it's not gambling. As someone who has lived at the poverty level in my youth, I can attest that no matter how little you make, you can always afford to spend less than you earn and invest *some* portion of it.

... I also wonder about the value in starting investing late in life, such as your 60s if you don't have a good amount to invest. Given that the better pay back periods are when things are diversified and left to work for a few decades, doesn't that really make investing after 60 (without lots of money) not really viable unless you get extremely lucky?
This is a valid point. One must start early to take advantage of the power of compounded returns. This is why one of the most valuable things we can teach our children is how to live within their means and invest some portion of what they earn throughout their lives.
 
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RayDunzl

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Buy an index?

Don't buy (and hold) a top...

Dow Jones 1929 to 1959

1965 to 1995

1999 to 2013

Not good spans to be caught in.

You'd get some dividends, but still...

1631283297144.png
 
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PatentLawyer

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Buy an index?

Don't buy a top...

Dow Jones 1929 to 1959

1965 to 1995

1999 to 2013

Not good spans to be caught in.

You'd get some dividends, but still...
That's an interesting chart, but I personally don't think the Dow is the best indicator of the overall market's performance. For another (broader) perspective, how did the S&P 500 do from 65-95?
 

levimax

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Buy an index?

Don't buy a top...

Dow Jones 1929 to 1959

1965 to 1995

1999 to 2013

Not good spans to be caught in.

You'd get some dividends, but still...

View attachment 152479
There is something wrong with this chart, it must be "constant dollar" or something. The Dow topped out in 1929 at 381 and didn't reach that level again until 1954. However by 1995 is was over 4,000. Regarding Dow vs S&P 500 they corelate 0.95 long term.
 

PatentLawyer

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There is something wrong with this chart, it must be "constant dollar" or something. The Dow topped out in 1929 at 381 and didn't reach that level again until 1954. However by 1995 is was over 4,000. Regarding Dow vs S&P 500 they corelate 0.95 long term.

That correlation makes some sense, when you annualize it:

1631287645544.png
 

MRC01

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Buy an index?
Don't buy a top...
Problem is, the top can only be known afterwards. Hindsight is 20/20. Don't try to time the market, it's impossible. Lots of folks think they can and sometimes succeed, falsely attributing their luck to skill.
Same with bottoms.
That said, in the long term you don't have to time the market. Just invest when you can, fasten your seat belt and hang on for the ride.
 
OP
JeffS7444

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Wow, no wonder Ramit Sethi hates Wells Fargo! If I am interpreting that the terms of that loan correctly, even if it were applicable to my situation, it sounds as if the bank is empowered to liquidate your holdings and call in the remainder of the loan in the event of a market downturn, and in a crash like the one we saw in 2008, maybe your holdings get liquidated at 30% of their pre-crash values. This is what the crash of 2008 looked like to me, and it's the reason I did not get a Mini Cooper in 2009 (After an oh-so-long recovery period, I just liquidated my shares):
LMVTX.jpg

Ever watched "The Big Short"? Great movie:
A "Brad Miller" character briefly appears in the movie, pooh-poohing the severity of the problem. He is a thinly-disguised representation of a real-life fund manager who was once a Wall Street legend, at the helm of the fund shown above.
 
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bladerunner6

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bladerunner6

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Problem is, the top can only be known afterwards. Hindsight is 20/20. Don't try to time the market, it's impossible. Lots of folks think they can and sometimes succeed, falsely attributing their luck to skill.
Same with bottoms.
That said, in the long term you don't have to time the market. Just invest when you can, fasten your seat belt and hang on for the ride.
Regular, disciplined automatic investing is very easy and it produces great returns over the long run.
 

Chromatischism

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Right now, SEC says:

Bitcoin and Ethereum are "probably not" securities. So if they aren't securities, what are they? Maybe this would be like doing a loan against your gold.

However many others are seemingly being considered securities, depending on factors the SEC isn't being entirely clear about. We'll see what happens regarding any forthcoming regulation. It looks like they are taking issue with earning interest on holdings for some reason.
To follow up on this, the SEC is taking issue with earning interest on stablecoins (like USDC) specifically: https://cointelegraph.com/news/sec-...-celsius-will-have-to-wait-and-see-on-fallout
 

Chromatischism

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Uncertainty. Which is the definition of risk. Which is the same as cost.
Remember that with most decisions in life, not doing something also has risk, just as deciding to do something has risk. I could get into a bad car crash on the way to work. However if I avoid that (small) risk by staying home, the risk I take is not being able to pay my bills.

It is up to you to weigh those risks and act accordingly.

In terms of risk management, Bitcoin is greatly asymmetric. Meaning, the risk in not holding it is higher than the risk of holding it.
 

levimax

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In terms of risk management, Bitcoin is greatly asymmetric. Meaning, the risk in not holding it is higher than the risk of holding it.

At $45,000 there is plenty of risk being in bitcoin. The risk is not at all comparable to the straw man of not driving to work.
 

HiFidFan

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At $45,000 there is plenty of risk being in bitcoin. The risk is not at all comparable to the straw man of not driving to work.

In April BTC was $65k, 60days later it was $30k.
 

TLEDDY

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MRCO1

“As someone who has lived at the poverty level in my youth, I can attest that no matter how little you make, you can always afford to spend less than you earn and invest *some* portion of it.”

I cannot agree with the above...as much as I would like to agree.

Entry level workers, especially those without a high school education, at minimum wage, can barely survive. My WAG (wild-eyed guess) is that an hourly rate of $12.50 might allow for a tiny savings. I would be interested in other’s assessment of such wage.
 

Chromatischism

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In April BTC was $65k, 60days later it was $30k.
And a year ago it was $5k. But thanks for the cherry picking :)

You're quoting a specific time period in which lots of turmoil surrounding China caused a pause to the bull run. It also got a little ahead of itself so it could use some time to cool off. Those issues being resolved, it resumed at the end of July/beginning of August. Those who were watching closely bought at the bottom...for a nice 100-500% on some investments since then.
 
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Chromatischism

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MRCO1

“As someone who has lived at the poverty level in my youth, I can attest that no matter how little you make, you can always afford to spend less than you earn and invest *some* portion of it.”

I cannot agree with the above...as much as I would like to agree.

Entry level workers, especially those without a high school education, at minimum wage, can barely survive. My WAG (wild-eyed guess) is that an hourly rate of $12.50 might allow for a tiny savings. I would be interested in other’s assessment of such wage.
As of a few years ago, a $15/hr wage could not afford a two-bedroom apartment in any state in the United States. That is sticking within the guideline of not spending more than 30% of your income on housing. It is only going to get worse.
 

bladerunner6

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And a year ago it was $5k. But thanks for the cherry picking :)

You're quoting a specific time period in which lots of turmoil surrounding China caused a pause to the bull run. It also got a little ahead of itself so it could use some time to cool off. Those issues being resolved, it resumed at the end of July/beginning of August. Those who were watching closely bought at the bottom...for a nice 100-500% on some investments since then.
And you also picked a specific time frame.

Bitcoin could go down and stay down for a while. It could continually go up or down for years. Someone else might introduce something that makes it obsolete. Any number of things could happen. Cryptocurrency is a new and immature form of exchange.

Maybe 10 years from now you will be proven right. Right now your statement is simply conjecture.
 
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