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Nine hard-won lessons about money and investing
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流星99.Run-Feed2News
Nov 29, 2014, 5:23:13 PM11/29/14
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=-= [摘要] -=-
Any time you talk about money, you risk sounding like a jerk. I’m going to take
that risk in this post. I’ll start out by talking about a couple ways I shot myself
in the foot financially and what I learned as a result. Your mileage may vary. Before
we start, you might want to […]
=-=-{内容} =-=-=-=-=-=-=-=-=-=-=-=-=-=-
Any time you talk about money, you risk sounding like a jerk. I’m going to take
that risk in this post. I’ll start out by talking about a couple ways I shot myself
in the foot financially and what I learned as a result. Your mileage may vary. Before
we start, you might want to review this financial advice from Scott Adamsfinancial
advice from Scott Adams.
*You are probably a bad stock picker*
I moved to Silicon Valley in 2000, near the end of the dot com craze. Back then,
an online broker was offering $400 for free if you opened up a stock trading account
with a starting balance of $1000. As a grad student, I had a ~$14,000/year fellowship,
so that was two weeks worth of salary for free. Thinking that I was investing with
“house money,” I signed up.
All the business magazines recommended Cisco as a safe, conservative stock. So I
bought shares of Cisco at about $60/share. Can you guess what happened next? The
dot com crash happened, and shares of Cisco plummeted to $12/share. Shaken and nervous,
I was able to sell at $18/share after a mild bounce.
Despite what all those business magazines said, the first stock I picked to invest
lost *80% of its value almost immediately*. On one hand, losing several hundred
dollars of my own money, in addition to the “free” $400, was an expensive lesson.
On the other hand, what a great lesson–I suck at picking stocks!
It turns out, almost everyone sucks at picking stocks. And the very, very few people
who can do it well probably won’t take your money. If I could encourage you to
read just one short article about picking stocks, read this one about why it’s
a fools gameit_s a fools game. I may add a lot more references here–I’ve read
a lot of books about this over the years–but if you’re trying to pick individual
stocks then you’ll probably get creamed. Like, “amateur football player against
professional NFL football players” creamed.
*No one cares about your money as much as you do*
On to my next mistake! I was very fortunate to join Google when it was small, so
I did well in Google’s IPO. Research says that if you buy nice things, you adapt
to those nice things pretty quickly and then you’re not much happier. I tried to
avoid that trap by stashing my money somewhere and not thinking much about it. That
’s not the mistake, by the way. I still think it’s pretty good advice if you win
the lottery to park your money and take some time to get used to the idea.
My mistake was where I parked my money. Google worked out a deal with “full service
” broker to give us free accounts. When I talked to this broker, they recommended
that I part my money in “commercial papercommercial paper.” I didn’t really know
what commercial paper was, but the broker said it was safe, easy to pull my money
out, and it would provide about 4-5% return on my money.
That worked great for a few years until the entire world financial system almost
fell apart. In the early days of the financial crisis, I called my full service
broker to make sure things were fine. I remember the phrase that the broker used
was that “lightning would have to strike” for there to be any problems. It turns
out, lightning did strike, and then the broker said that I couldn’t get my money
back–the commercial paper market was completely locked up. The money was still
all there, they claimed, but I couldn’t withdraw any of it.
In this case, I lucked out. Someone else filed a class action lawsuit against the
financial company, and the financial company returned peoples’ money relatively
quickly after that. How many stories have you read about a rock star or athlete
who trusted their manager and got burned? It’s your job to pay enough attention
to your finances that you don’t get burned. Don’t expect your stockbroker, bank,
financial advisor, or really anyone handling your money to care about your money
as much as you do.
*Wall Street is not your friend*
Fred Schwed wrote a book called Where Are the Customers’ YachtsWhere Are the Customers_
Yachts. The title comes from a story about how brokers and bankers all seemed to
have yachts, but somehow none of their customers did. *Schwed wrote that book in
1940*. Things on Wall Street aren’t really any better today.
Honestly, I consider this lesson pretty self-evident after the financial crisis.
We’ve learned about companies packaging up toxic assets and betting against their
customers. We’ve seen multi-billion dollar settlements for fixing foreign exchange
rates and LIBOR (a rate that banks charge each for short-term loans). We’ve seen
companies trading against consumers’ interest in dark pools with high-frequency
trading. We’ve learned that Wall Street traders think of us as muppets, or worse.
Wall Street excels in taking simple financial instruments and making them more complicated.
In that complexity, there’s plenty of shadows for financial companies to hide things
that take advantage of you. If it sounds too good to be true, look out. If you don
’t understand everything going on with your money, you’re increasing your risk.
So far, this has been a downer, so let’s talk about some positive lessons.
*Think about working for equity vs. salary*
As I mentioned in my post about Kevin Kelly’s talk at XOXOKevin Kelly_s talk at
XOXO, there are many different kinds of success, and you should pick your own. One
common financial aspiration is to make enough money that you can live off the interest
and dividends from that money.
If you’re an employee working for salary, it’s going to be hard to reach that
level of independence. That’s one reason I worry about franchisesI worry about
franchises, because tilts the playing field toward more employees and fewer independent
businesses. You can try to radically lower your financial burn rateradically lower
your financial burn rate, but few Americans have taken that step. Of course, starting
a business completely on your own can be stressful and scary too.
One reason I like startups is that they represent a middle way: you can get some
equity or ownership in a business that might turn out very well, but you also get
a salary. You can pick your startup to match your personal profile of risk: from
founder all the way up to companies with hundreds of employees or more. Especially
if you’re young, it can be a good idea to try some more adventurous things like
a startup.
*If you’re investing, prefer index funds*
Okay, let’s suppose you do win the lottery or do well at your own business or startup.
Now what? Well, you could double down on new businesses like Elon Musklike Elon
Musk, but my advice would be to set aside enough money that you can live off the
interest or dividends.
It turns out that investing in low-cost index funds in a diversified portfolio is
a really good idea. In fact, it outperforms the vast majorityvast majority of
“active” investors. Simple is usually better, like many things in life. I’d also
recommend investing in a bond index fund. Bonds tend to do well when stocks do poorly,
and vice versa, so investing in both will tend to reduce your risk.
If you’re a regular person working for salary, you might want 60% of your money
in a stock index fund and 40% of your money in a bond index fund. If you’re young
or adventurous, you can tilt toward more stocks. You want to invest so that you
can sleep well at night without moving your money around based on what you see or
read in the news.
If you’re fortunate enough to win the lottery, you might want an allocation more
like 80% bonds and 20% stocks, or 70%/30%. After all, it’s pretty safe to protect
your money and live off the dividends/interest.
Don’t get paralyzed over choosing your allocation between stocks and bonds. There
’s a great book called The Lazy Person’s Guide to InvestingThe Lazy Person_s Guide
to Investing to walk you through some easy ways to structure your investments. Honestly
a 50/50 mix of stocks and bonds (the so-called “Couch Potato Portfolio”) will
beat many “active” portfolios where you or someone else tries to pick stocks.
For that matter, you can buy a Vanguard LifeStrategy fund that will give most of
what you need with a single purchase. Such funds tilt toward stocks when you’re
younger and then transition toward bonds as you get older. You can pick whatever
retirement target would make you feel most comfortable in terms of risk.
*Prefer credit unions over banks*
Earlier, I basically said much of Wall Street is like carnival sideshow designed
to separate you from your money. So is there anybody on your side? Well, credit
unions can be pretty cool. Credit unions are like banks, except instead of trying
to turn a profit on you, credit unions are controlled by their members. That means
that they can often provide better rates, have better policies, and generally will
try to exploit you less often than megabanks will.
Note that not every credit union is perfect. I once belonged to a credit union that
started adding a $1 monthly fee that went to a foundation that the credit union
ran. The foundation funds a bunch of semi-random things ($3M for a walkway?). I
called up and asked how to remove the fee. “You can’t remove that charge, the
foundation fee is mandatory,” came back the reply. I closed my account with that
credit union and now I don’t pay that fee.
Do your research on any financial institution’s fees, prices, and policies. In
the worst case, check out their website–if the website looks clunky or hard to
use, consider skipping that organization. If a company supports two-factor authentication,
that’s a bonus point in their favor.
*Prefer Vanguard over almost anyone else*
Instead of a regular stock broker, I highly recommend Vanguard. Go with Vanguard
whenever you can.
In the same way that credit unions are controlled by their members and usually better
than banks, VanguardVanguard is owned by their clients and provides a much better
deal than almost any other financial company. Even better, their incentives are
aligned with yours. Vanguard provides well-balanced indexed funds at a very low
cost. You can also buy stocks through Vanguard. At some point, I may write more
about Vanguard, but I consider them one of the only companies on your side in the
financial world. Check them out.
*You probably don’t need a “assets under management” financial advisor*
There’s another way that some people take advantage of you: some financial advisors
charge outsized fees for what they do. Many financial advisors charge a percentage
of “assets under management” (AUM). A 1% fee of assets under management might
not sound like much, but that 1% can take a serious bite out of your returns. Instead,
I recommend making an appointment with a fee-based financial advisor. Or if you
put enough money into Vanguard, they may provide access to a financial planner.
A good financial planner can help you determine your risk tolerance and other special
factors and recommend a good portfolio allocation for you.
Some newer firms like Wealthfront, Betterment, and Personal Capital offer to provide
“robo-advisor” services for lower fees than a human financial advisor. But you
’re still paying ~0.25% of your assets for things like rebalancing your portfolio
when you can do it yourself in 15 minutes a year.
I use such a simple plan that I don’t pay a financial advisor. I just buy low-cost
stock index funds (US and rest-of-world) and bond index funds (US and California).
Don’t let anyone make you feel like you need to pay a financial advisor. Remember:
they don’t care about your money as much as you do, and with a little reading,
you can understand the simple strategies that make up almost all of a diversified,
low-cost, low-risk portfolio.
*Bonus tip: consider municipal bonds*
I have some friends who have left California and moved to lower-tax or no-tax states.
For the most part, I don’t mind higher California taxes–I rationalize it as a
“sunshine” tax for warm, beautiful weather. Plus California provides the atmosphere
where things like Silicon Valley can happen.
But there is a simple trick to minimize your taxes: buy municipal bonds for the
state where you live. For example, Vanguard offers municipal bond funds for many
states, including a bond fund for California. The interest from a California municipal
bond fund is tax-free at the federal and state level. If you’re in a high tax bracket,
getting interest tax-free is like getting a much better interest rate.
I hope some of the mistakes I made and the subsequent lessons are helpful. If you
take this post along with Scott Adams’ financial adviceScott Adams_ financial advice,
I think you’ll be more prepared than most people. Are there other financial lessons
or advice that you would add? Let me know in the comments.
-=--=-=-=-=-=-=-=-=-=-=-=-=-=-===---===-=--====-=
-=-{ =-= }-=-
组：cn.edu.lang.english
标签: Personal
=-={ -=- }=-=
**链接**：
financial advice from Scott Adams
https://www.mattcutts.com/blog/scott-adams-financial-advice/
----
it s a fools game
http://www.businessinsider.com/finally-some-excellent-investment-advice-2011-12
----
commercial paper
https://en.wikipedia.org/wiki/Commercial_paper
----
Where Are the Customers Yachts
http://www.amazon.com/Where-Are-Customers-Yachts-Street/dp/0471770892
----
Kevin Kelly s talk at XOXO
https://www.mattcutts.com/blog/xoxo-thoughts/
----
I worry about franchises
https://www.mattcutts.com/blog/franchises-galapagos-and-groupthink/
----
radically lower your financial burn rate
http://earlyretirementextreme.com/
----
like Elon Musk
http://dealbook.nytimes.com/2010/06/22/sorkin-elon-musk-of-paypal-and-tesla-fame-is-broke/
----
vast majority
http://www.businessinsider.com/finally-some-excellent-investment-advice-2011-12
----
The Lazy Person s Guide to Investing
http://www.amazon.com/Lazy-Persons-Guide-Investing-Procrastinators/dp/0446531685
----
Vanguard
http://www.vanguard.com
----
Scott Adams financial advice
https://www.mattcutts.com/blog/scott-adams-financial-advice/
--
Feed2News：从RSS、ATOM上面转载内容到新闻组里面
作者： NewBlue < beyooo (at) GMail (dot) COM >
管理员：流星99 < liuxing99 (at) GMail (dot) COM >
Any time you talk about money, you risk sounding like a jerk. I’m going to take
that risk in this post. I’ll start out by talking about a couple ways I shot myself
in the foot financially and what I learned as a result. Your mileage may vary. Before
we start, you might want to […]
=-=-{内容} =-=-=-=-=-=-=-=-=-=-=-=-=-=-
Any time you talk about money, you risk sounding like a jerk. I’m going to take
that risk in this post. I’ll start out by talking about a couple ways I shot myself
in the foot financially and what I learned as a result. Your mileage may vary. Before
we start, you might want to review this financial advice from Scott Adamsfinancial
advice from Scott Adams.
*You are probably a bad stock picker*
I moved to Silicon Valley in 2000, near the end of the dot com craze. Back then,
an online broker was offering $400 for free if you opened up a stock trading account
with a starting balance of $1000. As a grad student, I had a ~$14,000/year fellowship,
so that was two weeks worth of salary for free. Thinking that I was investing with
“house money,” I signed up.
All the business magazines recommended Cisco as a safe, conservative stock. So I
bought shares of Cisco at about $60/share. Can you guess what happened next? The
dot com crash happened, and shares of Cisco plummeted to $12/share. Shaken and nervous,
I was able to sell at $18/share after a mild bounce.
Despite what all those business magazines said, the first stock I picked to invest
lost *80% of its value almost immediately*. On one hand, losing several hundred
dollars of my own money, in addition to the “free” $400, was an expensive lesson.
On the other hand, what a great lesson–I suck at picking stocks!
It turns out, almost everyone sucks at picking stocks. And the very, very few people
who can do it well probably won’t take your money. If I could encourage you to
read just one short article about picking stocks, read this one about why it’s
a fools gameit_s a fools game. I may add a lot more references here–I’ve read
a lot of books about this over the years–but if you’re trying to pick individual
stocks then you’ll probably get creamed. Like, “amateur football player against
professional NFL football players” creamed.
*No one cares about your money as much as you do*
On to my next mistake! I was very fortunate to join Google when it was small, so
I did well in Google’s IPO. Research says that if you buy nice things, you adapt
to those nice things pretty quickly and then you’re not much happier. I tried to
avoid that trap by stashing my money somewhere and not thinking much about it. That
’s not the mistake, by the way. I still think it’s pretty good advice if you win
the lottery to park your money and take some time to get used to the idea.
My mistake was where I parked my money. Google worked out a deal with “full service
” broker to give us free accounts. When I talked to this broker, they recommended
that I part my money in “commercial papercommercial paper.” I didn’t really know
what commercial paper was, but the broker said it was safe, easy to pull my money
out, and it would provide about 4-5% return on my money.
That worked great for a few years until the entire world financial system almost
fell apart. In the early days of the financial crisis, I called my full service
broker to make sure things were fine. I remember the phrase that the broker used
was that “lightning would have to strike” for there to be any problems. It turns
out, lightning did strike, and then the broker said that I couldn’t get my money
back–the commercial paper market was completely locked up. The money was still
all there, they claimed, but I couldn’t withdraw any of it.
In this case, I lucked out. Someone else filed a class action lawsuit against the
financial company, and the financial company returned peoples’ money relatively
quickly after that. How many stories have you read about a rock star or athlete
who trusted their manager and got burned? It’s your job to pay enough attention
to your finances that you don’t get burned. Don’t expect your stockbroker, bank,
financial advisor, or really anyone handling your money to care about your money
as much as you do.
*Wall Street is not your friend*
Fred Schwed wrote a book called Where Are the Customers’ YachtsWhere Are the Customers_
Yachts. The title comes from a story about how brokers and bankers all seemed to
have yachts, but somehow none of their customers did. *Schwed wrote that book in
1940*. Things on Wall Street aren’t really any better today.
Honestly, I consider this lesson pretty self-evident after the financial crisis.
We’ve learned about companies packaging up toxic assets and betting against their
customers. We’ve seen multi-billion dollar settlements for fixing foreign exchange
rates and LIBOR (a rate that banks charge each for short-term loans). We’ve seen
companies trading against consumers’ interest in dark pools with high-frequency
trading. We’ve learned that Wall Street traders think of us as muppets, or worse.
Wall Street excels in taking simple financial instruments and making them more complicated.
In that complexity, there’s plenty of shadows for financial companies to hide things
that take advantage of you. If it sounds too good to be true, look out. If you don
’t understand everything going on with your money, you’re increasing your risk.
So far, this has been a downer, so let’s talk about some positive lessons.
*Think about working for equity vs. salary*
As I mentioned in my post about Kevin Kelly’s talk at XOXOKevin Kelly_s talk at
XOXO, there are many different kinds of success, and you should pick your own. One
common financial aspiration is to make enough money that you can live off the interest
and dividends from that money.
If you’re an employee working for salary, it’s going to be hard to reach that
level of independence. That’s one reason I worry about franchisesI worry about
franchises, because tilts the playing field toward more employees and fewer independent
businesses. You can try to radically lower your financial burn rateradically lower
your financial burn rate, but few Americans have taken that step. Of course, starting
a business completely on your own can be stressful and scary too.
One reason I like startups is that they represent a middle way: you can get some
equity or ownership in a business that might turn out very well, but you also get
a salary. You can pick your startup to match your personal profile of risk: from
founder all the way up to companies with hundreds of employees or more. Especially
if you’re young, it can be a good idea to try some more adventurous things like
a startup.
*If you’re investing, prefer index funds*
Okay, let’s suppose you do win the lottery or do well at your own business or startup.
Now what? Well, you could double down on new businesses like Elon Musklike Elon
Musk, but my advice would be to set aside enough money that you can live off the
interest or dividends.
It turns out that investing in low-cost index funds in a diversified portfolio is
a really good idea. In fact, it outperforms the vast majorityvast majority of
“active” investors. Simple is usually better, like many things in life. I’d also
recommend investing in a bond index fund. Bonds tend to do well when stocks do poorly,
and vice versa, so investing in both will tend to reduce your risk.
If you’re a regular person working for salary, you might want 60% of your money
in a stock index fund and 40% of your money in a bond index fund. If you’re young
or adventurous, you can tilt toward more stocks. You want to invest so that you
can sleep well at night without moving your money around based on what you see or
read in the news.
If you’re fortunate enough to win the lottery, you might want an allocation more
like 80% bonds and 20% stocks, or 70%/30%. After all, it’s pretty safe to protect
your money and live off the dividends/interest.
Don’t get paralyzed over choosing your allocation between stocks and bonds. There
’s a great book called The Lazy Person’s Guide to InvestingThe Lazy Person_s Guide
to Investing to walk you through some easy ways to structure your investments. Honestly
a 50/50 mix of stocks and bonds (the so-called “Couch Potato Portfolio”) will
beat many “active” portfolios where you or someone else tries to pick stocks.
For that matter, you can buy a Vanguard LifeStrategy fund that will give most of
what you need with a single purchase. Such funds tilt toward stocks when you’re
younger and then transition toward bonds as you get older. You can pick whatever
retirement target would make you feel most comfortable in terms of risk.
*Prefer credit unions over banks*
Earlier, I basically said much of Wall Street is like carnival sideshow designed
to separate you from your money. So is there anybody on your side? Well, credit
unions can be pretty cool. Credit unions are like banks, except instead of trying
to turn a profit on you, credit unions are controlled by their members. That means
that they can often provide better rates, have better policies, and generally will
try to exploit you less often than megabanks will.
Note that not every credit union is perfect. I once belonged to a credit union that
started adding a $1 monthly fee that went to a foundation that the credit union
ran. The foundation funds a bunch of semi-random things ($3M for a walkway?). I
called up and asked how to remove the fee. “You can’t remove that charge, the
foundation fee is mandatory,” came back the reply. I closed my account with that
credit union and now I don’t pay that fee.
Do your research on any financial institution’s fees, prices, and policies. In
the worst case, check out their website–if the website looks clunky or hard to
use, consider skipping that organization. If a company supports two-factor authentication,
that’s a bonus point in their favor.
*Prefer Vanguard over almost anyone else*
Instead of a regular stock broker, I highly recommend Vanguard. Go with Vanguard
whenever you can.
In the same way that credit unions are controlled by their members and usually better
than banks, VanguardVanguard is owned by their clients and provides a much better
deal than almost any other financial company. Even better, their incentives are
aligned with yours. Vanguard provides well-balanced indexed funds at a very low
cost. You can also buy stocks through Vanguard. At some point, I may write more
about Vanguard, but I consider them one of the only companies on your side in the
financial world. Check them out.
*You probably don’t need a “assets under management” financial advisor*
There’s another way that some people take advantage of you: some financial advisors
charge outsized fees for what they do. Many financial advisors charge a percentage
of “assets under management” (AUM). A 1% fee of assets under management might
not sound like much, but that 1% can take a serious bite out of your returns. Instead,
I recommend making an appointment with a fee-based financial advisor. Or if you
put enough money into Vanguard, they may provide access to a financial planner.
A good financial planner can help you determine your risk tolerance and other special
factors and recommend a good portfolio allocation for you.
Some newer firms like Wealthfront, Betterment, and Personal Capital offer to provide
“robo-advisor” services for lower fees than a human financial advisor. But you
’re still paying ~0.25% of your assets for things like rebalancing your portfolio
when you can do it yourself in 15 minutes a year.
I use such a simple plan that I don’t pay a financial advisor. I just buy low-cost
stock index funds (US and rest-of-world) and bond index funds (US and California).
Don’t let anyone make you feel like you need to pay a financial advisor. Remember:
they don’t care about your money as much as you do, and with a little reading,
you can understand the simple strategies that make up almost all of a diversified,
low-cost, low-risk portfolio.
*Bonus tip: consider municipal bonds*
I have some friends who have left California and moved to lower-tax or no-tax states.
For the most part, I don’t mind higher California taxes–I rationalize it as a
“sunshine” tax for warm, beautiful weather. Plus California provides the atmosphere
where things like Silicon Valley can happen.
But there is a simple trick to minimize your taxes: buy municipal bonds for the
state where you live. For example, Vanguard offers municipal bond funds for many
states, including a bond fund for California. The interest from a California municipal
bond fund is tax-free at the federal and state level. If you’re in a high tax bracket,
getting interest tax-free is like getting a much better interest rate.
I hope some of the mistakes I made and the subsequent lessons are helpful. If you
take this post along with Scott Adams’ financial adviceScott Adams_ financial advice,
I think you’ll be more prepared than most people. Are there other financial lessons
or advice that you would add? Let me know in the comments.
-=--=-=-=-=-=-=-=-=-=-=-=-=-=-===---===-=--====-=
-=-{ =-= }-=-
组：cn.edu.lang.english
标签: Personal
=-={ -=- }=-=
**链接**：
financial advice from Scott Adams
https://www.mattcutts.com/blog/scott-adams-financial-advice/
----
it s a fools game
http://www.businessinsider.com/finally-some-excellent-investment-advice-2011-12
----
commercial paper
https://en.wikipedia.org/wiki/Commercial_paper
----
Where Are the Customers Yachts
http://www.amazon.com/Where-Are-Customers-Yachts-Street/dp/0471770892
----
Kevin Kelly s talk at XOXO
https://www.mattcutts.com/blog/xoxo-thoughts/
----
I worry about franchises
https://www.mattcutts.com/blog/franchises-galapagos-and-groupthink/
----
radically lower your financial burn rate
http://earlyretirementextreme.com/
----
like Elon Musk
http://dealbook.nytimes.com/2010/06/22/sorkin-elon-musk-of-paypal-and-tesla-fame-is-broke/
----
vast majority
http://www.businessinsider.com/finally-some-excellent-investment-advice-2011-12
----
The Lazy Person s Guide to Investing
http://www.amazon.com/Lazy-Persons-Guide-Investing-Procrastinators/dp/0446531685
----
Vanguard
http://www.vanguard.com
----
Scott Adams financial advice
https://www.mattcutts.com/blog/scott-adams-financial-advice/
--
Feed2News：从RSS、ATOM上面转载内容到新闻组里面
作者： NewBlue < beyooo (at) GMail (dot) COM >
管理员：流星99 < liuxing99 (at) GMail (dot) COM >
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