Personal Finance Tips

[disneysteve]

I am just trying to get consumers to realize this so they can go into relationships with their eyes open, ask the right questions and be able to tell if the financial professional they are talking to is in fact looking out for the consumers best interests and not their own or their companies.

I think you'll find that most of the folks here are do-it-yourself types who don't work with a financial professional.

As far as Suze goes, her advice sure seems to be geared to who is paying her bills. For years she preached buying used cars and then GM became a sponsor and all of a sudden buying new was the way to go.

I don't listen to her regularly but I don't think I've ever heard her push buying new cars.

wouldn't I be more spamming if I was here talking in specifics about products than to just be giving people some information so they can ask about them to their financial professional? Just a thought.

Not at all. What you were doing sounded an awful lot like pre-spam. Get everybody curious and then start posting the links to some variable whole life annuity company or some other such garbage. If you have a particular investment vehicle that you are a fan of, there is nothing wrong with discussing it here by name. In fact, it is impossible for any of us to have a conversation with you when we don't know what the heck you are talking about. We discuss specific investments here all the time.

Maat, if the way you are talking about is the best and you are so convinced it is the best way- why then does that model not offer any guarantees of lifetime income and guarantee you won't lose your money?

If I was within 20 years of retirement I'd much prefer a way to guarantee me an 8% return on the income base of my money with a guaranteed income for life amount based on my age at the time I begin taking money than to have my money in the market. I'll give up the potential higher returns and potential losses for the certainty and guarantees.

Higher potential returns come with higher potential risks. I think we'd all agree on that. So it comes down to personal comfort level. Your last statement that I bolded is the most important part of your post. If you are willing to give up the possibility of higher returns in exchange for a guaranteed return, go for it. Personally, I'm not willing to make that trade off.

Once again I will ask, though, that you share with us what investment you are talking about that pays a guaranteed 8% return for a 45-year old (20 years from retirement).

[maat55]

[QUOTE]

Averages, that is what the stock market espouses. 70 year time line, isn't there a better time frame that you could use to "prove" the market is the place to be? Isn't a 70 year time line a little longer than the average American's investment time frame? So since the market suffers losses I should just be okay with that? I should just take it? IMO stock market investing glosses over the power AND timing of losses. The power of losses are huge and the fact we don't know when they are coming is even bigger.

You should know that the younger you are, the more equities you can handle, but as you age, you should backdown your equity holdings. Those planning retirements in 2009 should have been diversified into bonds, cash equivolents and possibly some annuities.

I agree it would be great if we could get people proactive in their money, but the truth of it is that they don't. They are scared, they are intimidated, they get a lot and I mean a lot of advice from people that are everything but interested in what is best for the consumer and these financial pros are largely protected by the governing bodies that have the rules set up to protect the company, their representatives and not the consumer.

Having a debtfree lifestyle while saving and investing is not complicated. Mutual funds take the work out of investment education. Target funds automatically lower risk.

Maat, if the way you are talking about is the best and you are so convinced it is the best way- why then does that model not offer any guarantees of lifetime income and guarantee you won't lose your money?

You should also know that there are no guarantees in life. All one can do is stick to a good plan. Our government is supposed to deal with the sharks, not swim with them. As long as they do, noone is safe.

If I was within 20 years of retirement I'd much prefer a way to guarantee me an 8% return on the income base of my money with a guaranteed income for life amount based on my age at the time I begin taking money than to have my money in the market. I'll give up the potential higher returns and potential losses for the certainty and guarantees.

Show me the money.

[jIM_Ohio]

Averages, that is what the stock market espouses. 70 year time line, isn't there a better time frame that you could use to "prove" the market is the place to be? Isn't a 70 year time line a little longer than the average American's investment time frame? So since the market suffers losses I should just be okay with that? I should just take it? IMO stock market investing glosses over the power AND timing of losses. The power of losses are huge and the fact we don't know when they are coming is even bigger.

What about the people that planned to retire in March of 2009? What are their options? Work longer? Get by on less? Hey the market goes up and goes down you just chose the wrong time to want to retire? The problem with the average American and the market is they don't know when the drops are coming (well neither do you or I) and they don't have an exit strategy. I doubt their financial pro does either. That would go against the Wall Street creed of "Buy and Hold!"

I know people that are very successful in the market, they have solid investing strategies, they have exit strategies to limit losses, they do a lot of things to make their clients money. What they don't do is work with lower wealth or lower income people. They focus on the top 5% of the food chain. That doesn't help the other 95%.

I agree it would be great if we could get people proactive in their money, but the truth of it is that they don't. They are scared, they are intimidated, they get a lot and I mean a lot of advice from people that are everything but interested in what is best for the consumer and these financial pros are largely protected by the governing bodies that have the rules set up to protect the company, their representatives and not the consumer.

I am also not pro government, in my opinion they have made a bad situation worse and have increased the possiblity it will happen again. We probably agree more than we disagree, we have just chosen different paths to a similar goal.

Maat, if the way you are talking about is the best and you are so convinced it is the best way- why then does that model not offer any guarantees of lifetime income and guarantee you won't lose your money?

If I was within 20 years of retirement I'd much prefer a way to guarantee me an 8% return on the income base of my money with a guaranteed income for life amount based on my age at the time I begin taking money than to have my money in the market. I'll give up the potential higher returns and potential losses for the certainty and guarantees.

Its much simpler than you posted... risk-reward. To get a good return, you must take on risk.

A common risk for people to take is to own their own business, for that risk, the anticipated reward should be 15-25% returns.

The stock market is less risk than this, and gives 10-11% annual returns (over a 30 year period). To get those 11% average returns, you can expect to see -10% and +30% combined 66% of the time, and -20% and +50% another 20% or so of the time. If that variance (known as volatility) is too much, you need to hold less equities.

If you want a guaranteed 8% returns, so do I, but such things do not exist (if you lower my risk, the reward is lower- so lowering risk from 11% market returns would imply someone else needs to bear that risk, and for them to take on that risk and make a profit, they will offer me about 5-6% returns, not 8% returns.

Yes people lose money... and in 2008, if they wanted to retire in 2010 or 2012 and had more than 40% equites, then its their own fault for not educating themselves, its not the fault of the market that it has risk associated with it.

[jIM_Ohio]

[quote=maat55;263600]

Having a debtfree lifestyle while saving and investing is not complicated. Mutual funds take the work out of investment education. Target funds automatically lower risk.

I disagree with the above

Target funds take some of the education out of the equation (is that a good thing??) but they do not "lower risk" unless you are measuring a risk I am not thinking of right now.

Agreed (as usual) on the other points

[maat55]

I disagree with the above

Target funds take some of the education out of the equation (is that a good thing??) but they do not "lower risk" unless you are measuring a risk I am not thinking of right now.

Agreed (as usual) on the other points

The majority of people want their investments on auto-pilot, target funds provide that avenue. I'm not saying it is the smartest, it is just an option.

[disneysteve]

Target funds automatically lower risk.

Target funds take some of the education out of the equation (is that a good thing??) but they do not "lower risk"

The majority of people want their investments on auto-pilot, target funds provide that avenue. I'm not saying it is the smartest, it is just an option.

I think this is a semantic issue. In a way, target funds do lower risk for the average investor because they create instant diversification and provide for automatic rebalancing and scaling back the equity portion of the portfolio as the investor gets older and closer to retirement. I've often read that asset allocation plays a bigger role in overall returns than does specific investment choices. So by going with a target fund, you avoid the risk of being too heavily weighted in one area - having all of your eggs in one basket. Take an investor who has the bulk of his portfolio in his own company stock and switch him into a target fund and you have certainly lowered his risk level.

On the other hand, lots of people discovered that target funds are not the "set it and forget it" vehicles that they may have thought. During the market meltdown, some of those target funds lost 30-40% of their value for folks who were at or close to retirement. Those funds were too heavily weighted in equities close to the target date. Since then, I believe they have all reallocated their portfolios and gotten a bit more conservative.

[disneysteve]

Do you think we chased off Kjackson25?

[maat55]

Do you think we chased off Kjackson25?

I think he is still looking for that guaranteed 8% return.

[EconoMutt]

I question how valid past returns of the stock market applies to future returns.

I'm not sure how you can compare a 40's,50's,60's economy with today's situation.
That's not to say that the market couldn't double in the next ten years.
I just think people feel warm and fuzzy thinking that because the market has performed
a certain way in the past means that it will act the same in the future.

[maat55]

I question how valid past returns of the stock market applies to future returns.

I'm not sure how you can compare a 40's,50's,60's economy with today's situation.
That's not to say that the market couldn't double in the next ten years.
I just think people feel warm and fuzzy thinking that because the market has performed
a certain way in the past means that it will act the same in the future.

The market is what it is, it represents the free market. The question is: How free is the market? Between government intrusion in housing, education, healthcare and the Federal Reserve dictating interest rates, the market is not truly free.

We can only go by past market performance. I would rather spend as I go as to invest in ways that barely beat inflation.

[DividendInvestor]

All the facts and details are relevant to newbie investor. A perfect planning and research are made our investment good-better-best. Investors take help of financial advisory therefore they get more benefits.

[Byron T.]

All Good Except the Mutual Funds

Very articulate post. I agree with everything except putting money into the stock market. Quantitative easing is giving life support to the stock market and the real estate market at present, and when that becomes unsustainable, look out.

[lewiskelly]

Firstly you should taking stock.Find a method of tracking your personal finances, either with a simple book and paper.budgeting is a main process for business,so keep budgeting.The main factor is saving.Saving funds are really a big help for small business owners

[lewiskelly]

Totally worthful framework.Now i can easily save money for my personal uses.Because for starting any business financing is too essential.Thanks for posting this.

[scarlettwalker]

Personal Finance Tips

Great tips you have given here. Thanks for sharing. I can really use these tips to help myself in the future. Cheers!