Investing 101

16 comments

time and investing
Whether it’s having an emergency fund grow in an online savings account or asset allocation within our 401k accounts, successful investing plays a huge part in our wealth building strategies.┬áIt’s very important that we lay out a plan based on our true risk tolerance and time horizon. And most important of all, diversify, diversify and diversify.

The Case for Low Cost Index Funds

I’m not the person who will tell you that you have a low chance of beating the stock market benchmarks by yourself because you can, as I’ve done over the years. I’m the person to tell you though that even if you can do it, you should most likely just stick with index funds. For one thing, you probably have a real job where you should focus your energy in because beating the market takes a lot of time out of every single day and energy out of you. Sure, you might be missing an opportunity on the investment end by going with low cost index funds but when you can concentrate more on your family and career, you get so much more.

Housing Related

401k, IRA and Retirement

Retirement should always be on our minds when we make financial decisions. How is this change going to affect me long term? Chances are good that since you are here, you already know a bit about discipline and investor behaviors. Here are some articles on more detailed notes on various situations and retirement vehicles.

Stock Broker Reviews and Other Investing Options

And finally, where should you actually put your money to work once you know what to invest in? Most people talk about the types of investments but not many people will talk about the companies (brokerage firms) that help you buy and sell equities. Here are a few reviews of popular stock brokers where you not only can read what I think, but what many others think of the company too.

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{ 16 comments… read them below or add one }

david stokes June 8, 2011 at 9:55 am

this is more of a tax question: what can you do to minimize penalty for withdrawing 401k funds used for business expense needs?

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John August 12, 2011 at 12:03 pm

I believe it’s being controlled…just like we all are financially. 401k? Create your own! It’s only 25% tax for awhile, until you stop spending and retire by age 30 or less, then your tax on long term capital gains is 5% or on dividends is 0%. Any money you do make you can then reinvest, spend, or do whatever you want with. What’s with this controlled waiting til age 70+ to retire on YOUR MONEY! F*** 401ks, Roth IRA, Banks, etc. They just want your money so they can loan it out and make fortunes. It’s time you CONTROL your money and YOUR FORTUNES! Spend Less, avoid taxes, Save More, and Invest/loan with your decisions and your rates!!!!!!!! Retire extremely young and have fun and be happy!!! That’s what I am doing now and loving it. Don’t be lazy and controlled by governments and corporations. Make your own governments and corporations!!! The Vatican does it and owns almost everything. Why not follow God’s will? (P.S. Save all your posts and write your own book/blog/podcast/videos/movies/games/etc, create your own websites/apps, don’t let others get rich off of your entertaining posts!!!)

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mr. mullen October 3, 2012 at 1:23 am

Mr. john you made some great points there and I sort of had an epiphany with what you wrote there at the end! I’m being serious when I say “I want to learn what you have learned”. How can I get in on this free-form out of the box style of creative thought? In addition, what do you believe to be a good starting point for first time investors searching for a safe but lucrative enterprise?

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Andrew November 17, 2011 at 2:27 pm

For long term investors, low cost index funds are great. They are also easy in easy out if they want to learn to be a touch more active. I cover more of the trading aspect at http://www.seeitmarket.com but each individual needs to access what there passion is and how much time they have to dedicate to investing. Enjoyable blog here.

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Gavin June 1, 2012 at 7:43 am

Hi David, Fantastic blog you have here, very informative and well put together. I’d like to echo Andrew’s comments and encourage everyone to check out SeeItMarket, it’s a great site that I visit every day. Another thing investors should think about is learning options trading. I know some people view options as WMFD’s, but use correctly they can really improve your returns and also minimize your risk. There are some simple strategies to protect yourself from selloffs such as we have had recently.

Keep up the good work, will look forward to your future articles.

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Carlos Sera November 13, 2012 at 10:37 am

Like Andrew, I’m a big advocate for index funds, especially if don’t want to hire an advisor. Finding an advisor who will work with small accounts can be difficult. If you can sit through the draw downs of index funds, then you’ll be fine.

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Jonathan November 30, 2012 at 1:44 pm

You make an excellent point that beating the market is a real time and energy draining investment. Sadly many people think that they can throw a few thousand pounds at the market and they’ll be rich, and when it doesn’t work out they quickly lose interest. In my experience it’s all about medium term investments, which don’t always yield an instant return. It’s about researching your market and knowing how it’s going to respond to a certain situation. Thanks for teaching us that it all boils down to hard work…..

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Chad January 27, 2013 at 8:46 pm

I agree with the do it yourself approach but make sure you know your investments and your broker and their specialties. I personally choose ETFs for a variety of reasons that I cover on my blog. Additionally I would read up on some technical analysis basics that will help you understand how markets move.

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zimmy@moneyandpotatoes.com May 25, 2013 at 12:28 pm

I have access to a 457 plan at work because I have a city job. The plan is very similar to a 401k but in this case has no employer matching money. I can still deposit up to 17k a year and this is in addition to the structured retirement plan that takes 7% of my paycheck every two weeks. If I stick around at my job for another 15 years or so, we should be doing well during retirement.

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Keith Smith October 1, 2013 at 5:48 pm

I have been doing research on the Dow Jones Industrial average for over 10 years. A current stock bubble exists and the index will retest lows in the $11,025 to $12,025 range in the next 6 months. Why? Because these levels haven’t been tested as a base. $10,000 to $11,025 level has been tested and index will not fall below this level again. Most critical period is now thru Nov 30th. I can’t tell you what event will trigger bubble burst but it will happen as sure as the sun will rise tomorrow.

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Richy W October 9, 2013 at 7:11 am

I agree. I moved my relatively small investment in stocks towards cash and fixed returns until the crash comes. My adviser says I am mad, but we shall see. Nobody can second guess the market, but this is October when crashes tend to happen and Keith is likely to be right. We shall see.

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John U February 11, 2014 at 8:27 am

What happened? No crash?

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Jay S February 12, 2014 at 8:30 pm

Lol. No expert can predict the stock market. Best strategy is to make wise investments and stick to it for longer term.

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Mr Ikonz @ Projectikonz February 28, 2014 at 1:55 am

I’m a huge fan of beta investing, using very low cost index funds, like Vanguard ETFs. Saves me a lot of money and means I don’t need to select individual stocks.

You’re the third blog I’ve read today that mentions building an emergency fund. I really need to get onto it quickly! I keep spending it on unplanned expenses!

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E Cook March 8, 2014 at 2:39 pm

Diversification is key, but even then things can still go wrong. Being over weighted in bonds the last couple of years would really hurt.

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Marvin May 5, 2014 at 5:40 pm

I definitely believe through long term dividend investing you can beat the market year after year but it does take some work. I would also like to point out that diversification isn’t always your friend, I think the better option is proper asset allocation, never have all your eggs in one basket.

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