Ask HN: How would you invest money if you were 25 again?

https://news.ycombinator.com/item?id=1720737

by 25money • 16 years ago

17 37 16 years ago

news.ycombinator.com

I'm trying to learn the best way to invest my money but I can't find much that matches my profile (young, no long term perspective, decent salary, no debt).

I don't want to lock it in long term bonds because I want to be free to take it out whenever I want.

I don't want to risk all of it in stocks but I want a better yield than the net <2% most of it is making now.

It's not much but enought to become pressing to invest (<50k).

How would you do it if you were 25 again ?

eru11• 16 years ago

I am not 25 yet.

> I don't want to lock it in long term bonds because I want to be free to take it out whenever I want.

Lots of bonds have secondary markets, that mean you can sell them at any time. Of course, you find the most liquid secondary markets in government bonds --- and those, in general, do not yield much at the moment.

> I don't want to risk all of it in stocks but I want a better yield than the net <2% most of it is making now.

Are you talking about nominal or real yield?

Whatever you invest in, make sure that you do not pay too many fees. (Low fees are the primary incentive to go for exchange traded index funds.)

And of course, there's always the possibility to invest in yourself.

richardw3• 16 years ago

Seriously, stocks. Over the long term it'll do fine. The last 10 years has been a joke but it won't last forever. Focus on companies that pay an solid and increasing dividend, and don't sell them. That will force you to buy companies that you think will last. Some might not, so diversify. Read the book "Rule #1" - not a bad place to start. Except do what Buffett does - buy stocks that you won't sell (in general).

If you're worried about going all-in (which you should be) use value averaging, in which you put some money in each month, but more as the market drops.

http://en.wikipedia.org/wiki/Value_averaging

eru11• 16 years ago

If you really want to do what Buffet does, read "Security Analysis" by Benjamin Graham, Buffet's mentor, or his more casual "The Intelligent Investor".

If stocks have gone down, that's not the right time to sell. When stocks are valued much more by the market than you think is reasonable, then selling might be interesting.

Avoid transaction costs and other fees as much as possible.

richardw3• 16 years ago

I fricken love places you get downvoted by adding to the conversation. Anyways, Buffett went far further than BG ever did. Charlie Munger played a part in his transformation from picking up cigarette butts to being the investor he is today. BG would never have invested in BYD, for example. Still, for the original poster, a 25-year-old who is currently scared of stocks, I'd still say Rule #1 is a good place to start. Security Analysis isn't exactly light reading.

ww5205• 16 years ago

Real Estate. Real Estate. Real Estate.

Real Estate investment cycle is very long, 6 to 10 years, and very predictable. You are 25. There are plenty of time to catch a few cycles.

eru11• 16 years ago

Are you sure about the predictability aspect? How much money did you make during the last bubble (and its bursting)?

ww5205• 16 years ago

I don't want to reveal personal finance info, suffice to say I was very happy.

Real estate cycle is very predictable. It takes a long time and lot of effort to go up and it has a long leading time before it drops, unlike stocks. Real estate is also more depending on real economic factors which are more trackable and less manipulated by market makers than stocks.

For the last down turn, people had been screaming the housing market was overheated from 2004 to 2006, with graphs after graphs showing it's unsustainable. It's really a matter of whether you listened to them.

For predicting housing bottoming out and rising, check out the rental rate, vacancy rate, interest rate, employment trends, permits issued, housing started, inventory backlog, days on market, etc. If that's too much work, just monitor the long term sales price graph. It's not too late to join the train ride once it starts moving up. The thing about real estate is that once it starts moving up, it's very difficult to stop. There are too many factors to keep pushing it up. Likewise, once it starts falling, it will keep falling for a long time.

Of course, that's only the investment aspect of it. There are many other facets. I would encourage people to study economic, finance, and real estate. Don't dismiss it just because a big burst. It's actually a great opportunity to get in. There's an investment saying, most money are made when blood is running on the street.

fanboy1232• 16 years ago

wow i wish i had the ability to downvote.

eru11• 16 years ago

Please don't. Please use the voting buttons for expressing contribution to the discussion, and not agreeing/disagreeing.

And real estate is not that bad an investment in general, if you do not rely on it going up forever. The real problem is its illiquidity.

ww5205• 16 years ago

Look, OP asked for investment advice. I gave my honest answer and what had work for me. If you have constructive criticism, post them instead of whining about downvote.

All investments have up and down. Just because there's an overdue big downturn in real estate, it doesn't mean it isn't a viable investment vehicle. Actually your negative reaction to real estate represents the general public sentiment, which is a perfect contrarian indicator. It really points to now it's the time to look into it to invest.

OP is 25 and has just seen the big housing downturn, which is great for him, lessons learned on other people's expenses. He has the next couple years to learn about it and accumulate capital to get into the game. If he asked couple years ago, I would have advised against it.

lzw5• 16 years ago

Normally, stocks are the way to go, but we are not in normal times. The best place for you to put your money that fits your requirements is bullion. Gold, silver or platinum, or a spread of all three.

Right now, were in a high inflation environment, with the interest rates being forced down below the inflation rate. This is very similar to the scenario that created the housing bubble, only there is no longer a mania in housing. We have an ongoing sovereign debt crisis in europe, most of which is not being recognized and an even bigger one in the USA which nearly nobody recognizes, and hasn't even started yet.

This means that the dollar is poised to crash, interest rates will have to rise sharply, and both of these are very bad for bonds. Stocks will rise in an inflationary environment but this is really due to the decline in the value of the dollars used to price them.

I'm sure I'm going to be down voted for saying this because it is popular to believe that inflation is low (by changing the baskets of goods to pretend prices aren't going up) and that the "recession is over" etc. Etc. It is popular because it makes the government's job easier and the government wants to just print money like never before without consequences. But there are always consequences.

I've been around a long time, and when I was 25 I was not wise enough to save. If I'd bought stocks then, it would have been a good investment, but having many hears of investing experience now and having studied investing and studied economics, I have learned a thing or two. After I made a killing from knowing the housing market was going to implode, I got out of every asset with counter party risk. I've done better than %25 a year holding the "dumbest", least fancy investment you can- bullion. Meanwhile, the derivatives bubble is just getting going, with one of the largest bubbles being in paper gold, btw, such as etfs. Buy physical gold, silver and platinum, and hold onto it for a couple years.

2008 was the rough equivilent of 1929. We're just now entering the first part of the truly great depression. If you do want ot invest in stocks anyway, make them Canadian mining companies or canadian royalty trusts. Two reasons- commodity based businesses will do better, and thevcanadian dollar will do better, so assets in Canada and priced in canadian dollars will provide some protection from the decline in paper money.

We have about 90 years of inflation that the us has managed to export to other countries. This means we've benefited from low cost of living by exporting our inflation abroad for a very long time. This only owkrs, though, when you're a major industrial power and the other countries want to finance your debt because they believe you will be able to repay it.

The US has recently passed the levels where repayment is traditionally considered viable, and has inly increased the rhythm of the printing presses...at the same time we are longer the manfuacturing power we were.

This is going to be a very painful crisis.

Retric• 16 years ago

Don't buy Gold it's in the middle of a huge bubble right now.

rphlx• 16 years ago

Debatable. For gold to drop, world govts either need to destroy currency, raise interest rates, or somehow make other asset classes more attractive.

I guess the stock market is becoming more attractive, as mass layoffs have temporarily boosted earnings. That is not sustainable though. Anyway, it hasn't really hurt gold so far.

lzw5• 16 years ago

Gold will be in a bubble when my mentioning it doesn't always produdpce someone like you saying it is in a bubble.

Bonds are a massive bubble that has expanded since 2008 enormously. Rates are at historical lows and the amount of new issuance is at historical highs.

You'll forget about it when it happens, but the next bubble to burst, by 2012, will be the bond bubble. The rest of the world can only buy so much, the fed is printing and buying it's own auctions under the table, and when interest rates have to rise to try and make them attractively, current bonds will crash, most of which are short term and the government is surviving by rolling them over every couple of months...... It's a massive cluster fuck just waiting to happen..... Actually, now that i think about it, I need to figure out a way to short bonds with leverage. Maybe put options on a bond ETF?

eru11• 16 years ago

> Right now, were in a high inflation environment [...]

Have you checked inflation figures recently?

mipnix2• 16 years ago

I'm not sure that is correct.

The fear of inflation is there but the latest figures I am aware of put the inflation rate at below 1.0% (If you never need to buy food or fuel). Some even worry about the prospect of deflation.

lzw5• 16 years ago

You are so ignorant, you don't even know what inflation is. Yet you respond with this snide statement, so confident that, by repeating the nonsense you heard from the airheads on tv that you have sure, shown me!

If you'd made an argument, or thought for a second about why i would say inflation was high, then you might be worth considering as someone capable of learning or thinking. No, you didn't. And at least two equally ignorant dumb asses up voted you and down voted me.

Yet if any of you had picked up a paper in the last decade you would have seen the federal reserve talking about their inflationary monetary policy, or "easement" or "low interest rates" all of which are admissions that they are inflating. Or the ever increasing, massive deficits that our government has been running up. You thinking that money came in taxes? If it had it wouldn't be deficits. You think it grows on trees? Even if it did, it would still be inflationary. How stupid are you? Record deficits and there's no inflation? Really?

Frankly, when I am constantly reminded, not only of the mass ignorance of americans, but of the steadfast determination to hold onto that ignorance, and to attack anyone who attempts to enlighten you, well... I kinda start to get gleeful at the catastrophe that is going to befall you very soon. I spent much of the last 10 years attempting to enlighten people about the housing market, and I made a fortune when you wouldn't listen, and when you made nonsense responses like you just made to me.

Now I see the bullshit NPR is feeding you about the 2008 crash, and I see you being set up to be shorn again.

Baah baah, stupid fucker.

tjpick2• 16 years ago

when I was 25 I was getting 8% by shoving it in a savings account. I'd shove twice as much in if I was 25 again.

eru11• 16 years ago

What was the inflation rate back then?

tjpick2• 16 years ago

3 years ago http://www.rbnz.govt.nz/keygraphs/fig1.html

crsmith• 16 years ago

If you choose to invest in stocks, invest in the S&P 500.

vabmit• 16 years ago

I'd invest in a way that didn't consume thousands of hours worth of my time.

I'd do what Mark Cuban recommended people like those found on HN (young entrepreneurs who want to launch a start-up) do: 6 month term back CD's:

http://blogmaverick.com/2010/08/20/the-stock-market-is-still...

When I was in my early 20's the president of a start-up I was working for (whom was a former professional stock trader) essentially gave me the same great advice Mark Cuban gave everyone. He told me to not focus on investing in the stock market because the amount of time I'd need to invest to do well would never yield as good of a return as I could get from investing that time instead on my computing and start-up related skills. He advised me to stick to what I was good at (computers) rather than trying to take on essentially a second job and build a second career in trading.

Looking back, I'm 100% sure he was absolutely right. In the last ten years, I've spent thousands and thousands of hours reading books on the investing, reading financial news, watching Bloomberg and CNBC programs, doing research on companies, developing and testing trading strategies, doing simulated trading, and trading. From all that time investment, my return was probably -5%. It was almost flat. That isn't bad considering that the markets have been so bad over the last 10 years. In fact, it's pretty good. But, had I spent all those thousands of hours on start-ups I probably would have had at least one big success by now.

I also would have been a lot less stressed and lived a lot happier life. I vividly remember the sick feelings I got during the crashes and upon watching the fallout from unforeseeable things like the bail-outs and the oil super spike.

Even if I didn't do bank CD's, I could have just bought index funds and done better with out all the work and wasted time. I think CD's are the way to go. If you really want stocks, it's index funds.

I almost got involved in the real estate market and other types of investments. I'm glad I didn't. Again, it would have taken a huge amount of time investment to compete with other involved professional investors. And, looking back now, I can almost say for sure I would have come out essentially flat if I made very good decisions and with heavy losses if didn't.

lzw5• 16 years ago

Stock investing takes maybe 20 hours a year of time. Meanwhile, those bank CDs are going to not let you keep pace with inflation.... If You had used bank CDs anytime in the last decade you would have lost money in real terms.

I am amazed that people are so ignorant of history that this kind of dumb ass advice gets offered and people think it is so wise, and of course the dumbasses who know nothing of investing or economics mod it up.

Reminds me of the responses I've gotten in the past when I tried to share how much success I was having investing myself-- was told that it was better to leave it up to a broker or fund manager because "I'm and expert bin programming ,they are experts in finance". I was shocked that people were proud of their ignorance.

mipnix2• 16 years ago

It all depends on what your plan for the money is and when you might need it. Don't play with your living expenses. Don't play with your beer money.

Assume that what you play with will lose value-that is not what you are striving for but if you take that approach you're already a winner. You'll sleep better.

Pay yourself first. Avoid credit at ALL costs.

Live beneath your means:

"Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." -Dickens

Have some money with which to make outrageous and stupid bets on the market.

Beyond that, there is no magic. Nobody knows what the market is going to do and if they tell you they do, clench your sphincter muscle.

Diversify. Everything in moderation...including moderation.

Cheers.

Ask HN: How would you invest money if you were 25 again?

Related Stories