***OFFICIAL*** Bankroll Management For Real Life, Not Poker

[BennyLaRue]

Sweet, thanks for the quick tip. I finally feel like Im investing properly in my future.

Your swift and effective commune moderation is thanks enough.

[BennyLaRue]

Good and super simple (it's called Couch Potato, to give you an idea) investment strategy for Canadians:

What it is: http://www.canadianbusiness.com/my_m...05_152254_1452

How to do it:
http://www.canadianbusiness.com/my_m...24&ref=related

Well, I say for Canadians since the funds mentioned are Canadian but the general advice is applicable to the US too. It talks about investing in Bond Funds too but if you're younger than 40, I'd say you can get away with 100% equities (ie. stocks) if you don't mind a little risk.

I have no idea about Europe other than I like your women and alcohol.

[Jason]

As for investments, GOLD is a terrible investment. Since Napoleon, it has averaged 2% or so and even less in recent times.

Gold prices were fixed during much of that time period. It's not a fair comparison. Also, you're going to have to explain where you got the 2% number and what you mean by recent. Are those 2004 numbers or something?

By recent, I mean Gold has averaged about 4% over the past 50 years. I guess that's technically better than the lifetime, but I think inflation wasn't so bad way back when. But, the bottom line is it's a bad investment because it's barely keeping up with inflation (4%). A good mutual fund portfolio will give you 12% where 4% will keep up with inflation and 8% is take home. Remember, investments are LONG TERM.

[BennyLaRue]

By recent, I mean Gold has averaged about 4% over the past 50 years.

Buy a new calculator, pls.

Regardless, I agree that the stock market is more attractive than commodities as there are more opportunities for diversification. You should only put all your eggs in one basket if you can be reasonably sure the basket is more awesome than any other basket available to you.

[bode]

By recent, I mean Gold has averaged about 4% over the past 50 years.

Buy a new calculator, pls.

Regardless, I agree that the stock market is more attractive than commodities as there are more opportunities for diversification. You should only put all your eggs in one basket if you can be reasonably sure the basket is more awesome than any other basket available to you.

i'm fairly confident Stars FPP cookie basket is what your talking about here, but maybe i'm wrong.

[BennyLaRue]

i'm fairly confident Stars FPP cookie basket is what your talking about here, but maybe i'm wrong.

ldo

[JL]

Why aren't you on MSN anymore?

Good question! I don't know why.

I do know why I haven't played poker lately, though. It's because I am a lazy ass!

[JL]

If you walk into a bank clueless and just ask them for an RRSP or other type of mutual fund, they'll sell you the fund that they make the most money off of in fees. These fees can absolutely kill your returns. I'm a big believer in index funds (where you invest in the entire TSX, for example, and your returns match those of the market), Exchange Traded Funds (ETFs) in particular. With those, you pay an initial fee to purchase them and if you do it through an online discount broker, you can get them for a flat fee of $15-$30. Annual fees come out of your return and are extremely low (usually less than 0.1% vs. 1% - 6% for mutual funds). Provided you don't make a lot of transactions, ETFs are a very cheap way to invest.

So if I wanted to invest in an index fund, do I have to pay a fee every time I put money into this fund? For example, I put in $2k initially, and then add to it every few months.
Same question for buying stocks. If I buy 100 stocks of microsoft today and another 100 stocks 6 months from now, do I have to pay transaction fees twice?

What's sad is that I'm half way done my BBA for accounting and I don't know the answers to these questions.
Epic fail

[BennyLaRue]

If you buy an ETF or individual shares, yeah, you do pay a fee for each transaction, no matter the length of time between transactions. This is where online discount brokerages are useful and generally cheapest. If you want to make frequent, smaller contributions, a traditional mutual fund is probably a smarter choice. With those, you pay an annual fee as opposed to per transaction...it'll be by %, such as 1% of your investment. You can get index funds that invest you in the whole market with those as well but watch the fees...don't be willing to pay anything over half a percent. That eats right into your profits.

[Tiresman]

Just fyi if you file as a pro gambler you can't put money in a Roth.

Anyone who's self employed in this economy, is a pro gambler.

[spoonitnow]

Just fyi if you file as a pro gambler you can't put money in a Roth.

Anyone who's self employed in this economy, is a pro gambler.

BAM.

[EasyT]

I have Dave Ramsey's book, and I think it's the best advice I've seen for living debt free and acquiring wealth.

One thing that nobody mentioned (I didn't read every word of every post) is that there are studies that show that we spend more when using credit cards than we do when spending cash. It's a psychological thing.

A few folks mentioned that using CCards is better, because of the rewards and such. You will never, never read about some dude that claims his getting rich was somehow due to frequent flyer miles.

If I'm young and just starting out, the first thing for me to do is NOT to open a RothIRA. The first thing I'm going to do is open a savings account and save up a month's worth of expenses. Then if I have credit debt, I'm going to pay those back down to nil. And then I'm going to go back and build that savings account up until I have 6 months worth of living expenses.

Do all of that before starting the IRA. The savings account is my life-cushion, not my down payment for a house. If I want to buy a house, I'm going to need to start a second savings account...

m2c

[KoRnholio]

By recent, I mean Gold has averaged about 4% over the past 50 years.

Buy a new calculator, pls.

Regardless, I agree that the stock market is more attractive than commodities as there are more opportunities for diversification

I agree 99%. Gold does very well in inflationary periods, and is a very good hedge/store of wealth.

Found on google (for the lazy):

DJIA - http://stockcharts.com/charts/historical/djia1900.html
Gold - http://www.research.gold.org/prices/annual/

[JL]

For the Canadians in here, what broker do you use/recommend for purchasing ETFs?

[BennyLaRue]

For the Canadians in here, what broker do you use/recommend for purchasing ETFs?

If it's for your RRSP, you can set up a self-directed RRSP first and then manage it through an online broker. I use TD Waterhouse but there are others, some cheaper. I prefer to keep everything with TD though...less hassle and I have a good relationship with them. Alternatively, you can go right to the bank to do it. Ask at your branch how they handle investments. Lastly, you can do it through a financial planner but this is generally your most expensive option. I can't recommend one as I prefer to do it myself.

Outside of RRSP investing, you can buy ETFs just like stocks, again either through an online broker or IRL financial services provider.

[BennyLaRue]

I agree 99%. Gold does very well in inflationary periods, and is a very good hedge/store of wealth.

Missed this. It is, absolutely, but this hedge and that gained through all commodities is already built into the very nature of a properly diversified index fund thanks to the companies with a vested interest in those commodities. It's not necessary to invest in the commodity itself to realize the benefits.

[a500lbgorilla]

I agree 99%. Gold does very well in inflationary periods, and is a very good hedge/store of wealth.

It is, absolutely, but this hedge and that gained through all commodities is already built into the very nature of a properly diversified index fund thanks to the companies with a vested interest in those commodities.

Please explain:

How is it a hedge? Do people not exchange money for gold to make more money? (A hedge against what? money failing?)

What is an index fund exactly?

What is the very nature of properly diversified index funds?

What is an improperly diversified index fund?

And what do you mean by commodities exactly?

Honestly, one sentence about proper finance can just about make my head explode.

[BennyLaRue]

Just in case that's a level, I'm going to point you this way:

http://www.amazon.com/Complete-Idiot.../dp/1592574440

I'm serious. Learn the terms this way, then question all of the "advice" you read in it once you speak the language. I wouldn't recommend that kind of book for most things, but they're generally good for learning crap like equity types.

And if you're truly looking to be smart with your money, you'll get that book or one like it from the library.

[BankItDrew]

I agree 99%. Gold does very well in inflationary periods, and is a very good hedge/store of wealth.

It is, absolutely, but this hedge and that gained through all commodities is already built into the very nature of a properly diversified index fund thanks to the companies with a vested interest in those commodities.

Please explain:

How is it a hedge? Do people not exchange money for gold to make more money? (A hedge against what? money failing?)

What is an index fund exactly?

What is the very nature of properly diversified index funds?

What is an improperly diversified index fund?

And what do you mean by commodities exactly?

What is money?

What is an exchange rate?

Why is USD worth less than anything?

Where is money made?

Who is Peter Schiff?

Why am I such a n00b?

Honestly, one sentence about proper finance can just about make my head explode.

FYP

[BennyLaRue]

Did you know US money is made of cotton? True story!

[BennyLaRue]

A few folks mentioned that using CCards is better, because of the rewards and such. You will never, never read about some dude that claims his getting rich was somehow due to frequent flyer miles.

Just caught this post too. While the miles are a nice side benefit, that's not the main reason to use credit to buy everyday items. By doing so, you're delaying your payments by up to 30 days. DUCY that is a good thing?

As for the "spending more" on credit cards comment, if you're not mentally strong enough to have self-control, you'll probably never be rich anyway.

What does Crazy Dave Ramsey suggest you do with the 6-months of cushion, ie. how is it to be invested?

[a500lbgorilla]

It's not a level. Ive had 1 semester of econ and never went. I retained no knowledge and all of this stuff is really inaccessible to me.

I learn in graphs, equations, relations, laws and observations (all the nonsense stuff engineers sink their teeth into). You want me to bust out a NACA table and baby I am alive. http://www.frenchriverland.com/NACA%...NACA%20010.jpg

You wanna talk about portfolio diversification across index funds and Im lost like cat in a catnip field.

I dunno if you've ever had a test where they say "explain the phenomenon of wing-tip vorticies blah blah. Assume the audience knows nothing."

Well, Im an audience that knows nothing and I'm giving feedback to that affect.

[a500lbgorilla]

I agree 99%. Gold does very well in inflationary periods, and is a very good hedge/store of wealth.

It is, absolutely, but this hedge and that gained through all commodities is already built into the very nature of a properly diversified index fund thanks to the companies with a vested interest in those commodities.

Please explain:

How is it a hedge? Do people not exchange money for gold to make more money? (A hedge against what? money failing?)

What is an index fund exactly?

What is the very nature of properly diversified index funds?

What is an improperly diversified index fund?

And what do you mean by commodities exactly?

What is money?

What is an exchange rate?

Why is USD worth less than anything?

Where is money made?

Who is Peter Schiff?

Why am I such a n00b?

Honestly, one sentence about proper finance can just about make my head explode.

FYP

Awe, you're so cute when you try to call me dumb. You even kept it to a theme. ADORABLE!

[BennyLaRue]

It's not a level. Ive had 1 semester of econ and never went. I retained no knowledge

A couple of people have said things to this effect in this thread. Personal finance is completely separate from corporate finance and yet another thing entirely from accounting and hugely different than economics. It's completely understandable that biz grads (of which I am one) know jack about this stuff.

[a500lbgorilla]

Also, what is 'shorting' a stock or a position? Ive heard it bounced around by some rich investors.

[EasyT]

A few folks mentioned that using CCards is better, because of the rewards and such. You will never, never read about some dude that claims his getting rich was somehow due to frequent flyer miles.

Just caught this post too. While the miles are a nice side benefit, that's not the main reason to use credit to buy everyday items. By doing so, you're delaying your payments by up to 30 days. DUCY that is a good thing?

As for the "spending more" on credit cards comment, if you're not mentally strong enough to have self-control, you'll probably never be rich anyway.

What does Crazy Dave Ramsey suggest you do with the 6-months of cushion, ie. how is it to be invested?

The potential profit of keeping the money in your pocket for up to 30 days will be voided the first time you either forget a payment, or the CCCo loses your payment, or they just decide to F with you and crap. They're shady ass companies that make up their own rules and should be avoided. It's as simple as that. They can bump your minimum payment whenever they choose, jack your rate to 29% for no legitimate reason, and so on. If you've never had this garbage happen to you, you're lucky...so far.

The mental strength thing is probably true. And 100% of people you ask will say that they're strong enough to show some backbone. The fact is that most don't. The fact is also that most people won't ever be rich either. It takes discipline.

The 6 month is an emergency fund. It's just going to sit in some low-interest money-market type account, and will be immediately available in case you lose your job, get hurt, wreck your car, decide to have a baby, or whatever. Odds are some day you will need it. Life happens. Be ready for it. Having it allows you to be self-insured against the majority of hiccups that life throws at you.

[drmcboy]

I meant to add that banks sometimes spend your money on hoars, mattress is best imo

[BennyLaRue]

They're shady ass companies that make up their own rules and should be avoided. It's as simple as that. They can bump your minimum payment whenever they choose, jack your rate to 29% for no legitimate reason, and so on. If you've never had this garbage happen to you, you're lucky...so far.

I'm not sure how interest rates and minimum payments are relevant if the intent is to pay off your balance in full every month and you deal with reputable credit card companies. But hey, if that's your personal choice, no prob. Some people just don't like borrowing money, even for 30 days. It's not ideal but I guess it's understandable for some.

The 6 month is an emergency fund. It's just going to sit in some low-interest money-market type account, and will be immediately available in case you lose your job, get hurt, wreck your car, decide to have a baby, or whatever. Odds are some day you will need it. Life happens. Be ready for it.

Yeah, life does happen. Often. So, if your priority will always be to keep this 6-month fund topped up because you have to dip into it from time to time, you'll find it very difficult to make investments that earn you the most money, allowing compound interest to do its thing over the maximum amount of time. The opportunity cost of choosing to "save" at 1 to 2% over investing at 9% is huge. In poker terms, both situations have positive expected value, but you want to choose the action that maximizes your EV and isn't necessarily only +EV. I don't mind the suggestion of having a cushion, but 6-months is massive for a young person, a young single person in particular. If you lost your job for whatever reason, are you really going to keep up your current standard of living, requiring 6-months of today's expenses? And about the other possible disaster scenarios like smashing up your car or leg or a tree falling on your house, this is what insurance is for and where insurance doesn't cover you, these are the sorts of emergencies are what low-interest lines of credit (mine is 5.5%) are for (and what parents are for, if you're lucky enough). Yes, in the case of lines of credit, you will end up paying interest but in all but the most extreme cases, the positive effect of compound interest on your investments over the long run will exceed the interest you pay on short term lines of credit.

I guess I'm kind of a life-nit but that sort of cushion is way too nitty even for me.

I don't want to come off like I'm trashing your choices. I do think if you found a system that works for you, that's great and preferable to not thinking about money at all. But understand that systems don't always make you the most money and that's all I'm saying here. You've made a positive choice but not the one that will make you the most money. It's preferable that people understand what makes and costs them money instead of just putting faith in someone else's system and following rules.

[BennyLaRue]

I meant to add that banks sometimes spend your money on hoars, mattress is best imo

First place hoars look after you pass out, imo.

(Did you take down the Stud $320 yesterday? I randomly opened a table and there you was.)

[drmcboy]

No, 34th, stud is such a bleh game, sometimes I even like razz better. The best part was much earlier when I had one BB left and 9876 vs what turned out to be 555x (two tens were also dead) and I caught the case 5 to like quarzupple up.

[Galapogos]

Also, what is 'shorting' a stock or a position? Ive heard it bounced around by some rich investors.

I could be a bit off on this, but I believe it's when someone tries to make a profit off a stock where they predict the stock's price will drop.

An investor will "borrow" an amount of stocks off a third party for a set amount of time. They will sell the stocks when they first buy them. When their borrowing period is over they will have to buy those stocks again to give back to the lender. If all has gone as predicted the stock will now be available for a cheaper price than they sold them for initially.

cue someone to come in here and straighten my shoddy understanding and tell me I'm a tarded.

[BennyLaRue]

Let me make it super simple. What I'm talking about invests you in the whole stock market, not individual things.

Walk into a bank. Tell the pretty lady or handsome dude that you want to buy this:
VTI - Vanguard Total Stock Market ETF Stock quote - CNNMoney.com

Give them your mobnies.

A 32.3% return in just over 18 months? Yes, please.

[Vi-Zer0Skill]

great thread, thanks Jason for starting it and Benny for the sage advice.

I've been invested in an IRA for two years but only 50/month. Now I want to bump that to 150/month for the next several months

[givememyleg]

good bump, good advice.

i don't have an ira, nor do i really know how to set one up. i'm just getting like 1% at ing... anyone have any advice for moving this money into an ira? i'm a complete noob/idiot when it comes to this stuff.

[BooG690]

good bump, good advice.

i don't have an ira, nor do i really know how to set one up. i'm just getting like 1% at ing... anyone have any advice for moving this money into an ira? i'm a complete noob/idiot when it comes to this stuff.

+1

[fjuanl]

What is a Roth IRA and Why Should You Care?

At the end there's links for Part 2-4

I don't know much about setting one up myself, but I thought that article was easy to understand

[Roid_Rage]

Just subscribing to awsumness.

I don't know jack about this stuff either A+ work on the thread Benny. Please post moar.

[BennyLaRue]

Sure. What do you want to know?

[Roid_Rage]

Give me a day or two, a week max and I'll research some stuff and ask any questions I have in here.

[kevster]

Also, as for retirement, START NOW! I'm 22 and I've had an IRA since I was 18. Deposit $100 a month into your IRA and you will have >$1 million for your retirement. Plan for the future.

It's a sound plan but consider how much >$1M will be worth when you retire.

[lolzzz_321]

Benny, which Vanguard fund would you use for Roth IRA?

[BennyLaRue]

Benny, which Vanguard fund would you use for Roth IRA?

I'm not going to pick specific products for you, beyond the one fund I mentioned as an example of what I meant by cheap management fee index funds. I'm advocating you learning how to fish, not asking others for fish. You'll want to pick low-fee products that suit when and how you invest as well as what kind of returns you're expecting and risk you can tolerate.

Besides, you'll probably want an American opinion when it comes to picking specifically what you need in your portfolio. I have only a basic idea of what is available to you guys.

[givememyleg]

What is a Roth IRA and Why Should You Care?

At the end there's links for Part 2-4

I don't know much about setting one up myself, but I thought that article was easy to understand

Awesome, thanks for the articles. ING has IRA accounts, but still need to do some more research. Compare IRAs: Traditional IRA & Roth IRAs

[lolzzz_321]

Thanks, Benny.

I looked at it a little more and picked target retirement 2045

[profnabeshin]

Any suggestions for when you are almost homeless? I had a gambling problem

I am 35K in debt to credit cards.. I would file bankruptcy (cost $1100); also I need to file taxes (owe $2000)
Currently I have $40 and get paid in 2 weeks. All my credit cards are frozen. I make just enough to cover bills with no extra right now while gf lives with me, but she will move out soon and I will make total bills - $300/month.

Advice? Other than try to live cheaper... I already have cut food cost down and I only drive to work as well as living in a bad part of town because its a little cheaper. I would work more, but there are no jobs... 16% unemployment in Las Vegas
Also, any advice on the taxes? I don't have any money but I owe and have to file in 2 weeks.

PS. I currently make about 24K/ year

[BennyLaRue]

Get a roommate and professional help. I'd imagine if you look hard enough, there are free financial planning resources through your city, county or state gov't. GL.

[mrhappy333]

A 32.3% return in just over 18 months? Yes, please.

I checked into the VTI etf, but I was also looking at REINX for my kids college savings.
Invesco Real Estate Investor: REINX quotes & news - Google Finance

11% since inception

Also as a gamble I was looking into MITI, they are a biotech that is working on cancer cures with some promising results. Some investment emailing i was getting was Hawking this company saying it could get up to %1000 return. IDK?

Micromet Inc.: NASDAQ:MITI quotes & news - Google Finance

Thoughts?

[kingnat]

good bump, good advice.

i don't have an ira, nor do i really know how to set one up. i'm just getting like 1% at ing... anyone have any advice for moving this money into an ira? i'm a complete noob/idiot when it comes to this stuff.

I didn't see anybody answer this explicitly... If you have an ING account, it's easy peasy. You can even get a free $25 iirc. Just open a ShareBuilder account, it'll be auto-linked to your ING account. I used that to buy my Target stock and such when the economy was in the pooper. Incredibly simply and I'm 99% sure they have an option to open a ROTH IRA account as opposed to something else. Let me know if you need any other help.

[BooG690]

Any suggestions for when you are almost homeless? I had a gambling problem

Go to 2+2. They'll take care of you.

[BennyLaRue]

I checked into the VTI etf, but I was also looking at REINX for my kids college savings.
Invesco Real Estate Investor: REINX quotes & news - Google Finance

11% since inception

Also as a gamble I was looking into MITI, they are a biotech that is working on cancer cures with some promising results. Some investment emailing i was getting was Hawking this company saying it could get up to %1000 return. IDK?

Micromet Inc.: NASDAQ:MITI quotes & news - Google Finance

Thoughts?

My thoughts are you need to reread this thread.