The doctor is IN - the JohnT advice thread.

[JohnT]

Generally, you should invest no more than 5%, 10% at the most, of your savings in higher-risk investments... "throw away" money, if you prefer.

So, if you are going to invest 500 Euros a month, you should put no more than 50 of them in those "high-quality" Lithuanian bonds that Saras was trying to palm off me earlier this year.

And remember: money isn't made when you sell, but when you buy.

[Pekka]

Sounds like a reasonably good advice. Thanks, I'll be sure to keep that in mind

[Ted Striker]

Originally posted by David Floyd
I'm gonna share an irrelevant observation about meeting women, as it relates to me and a couple of good friends I know - meeting women comes in spurts. 6 months ago, I probably met a couple of women a week (in the context of either getting a number/date/whatever). Right now, I'm hardly meeting any, but that's not a problem because the pendulum swings back and forth all the time (and frankly it's a good thing because I'm way too busy at work to do anything other than have a random hook up once in a while).

I think that is typical for how it works with most people. Women come in spurts and I'm still not sure why that is other than crazy esoteric observations and explanations.

[Ted Striker]

Originally posted by JohnT
Generally, you should invest no more than 5%, 10% at the most, of your savings in higher-risk investments... "throw away" money, if you prefer.

So, if you are going to invest 500 Euros a month, you should put no more than 50 of them in those "high-quality" Lithuanian bonds that Saras was trying to palm off me earlier this year.

And remember: money isn't made when you sell, but when you buy.

That's pretty solid advice.

Money management is the key to making money investing. It lets you make mistakes so you can try again. When you throw in everything at once, if you make one mistake, you may learn from that mistake, but you can't try again if your money is all gone!

[pchang]

JohnT's financial advice is not solid. I wish someone had explained this to me when I was your age, but here is the real deal:

1) Save as much money as you can in your youth. Savings in your youth will give you more money in your old age than twice that amount of savings when you are nearing retirement. Compounding is amazing.

2) You want a portfolio mix that maximizes return while minimizing risk. In the US, historically, this has been a mix of about 25% cash, 33% bonds, and 42% stocks. At least 1/3 of the stocks should be international. For your case, 1/3 of the stocks should be in companies based outside the Eurozone. Use the lost cost index funds that you can find for the bonds and stocks. Use the highest interest rate money market funds for the cash.

3) And this is the really important part. You need to regularly rebalance your portfolio to maintain the above percentages. You should do this at least once a year, and if you have a means that can minimize the transaction fees, as often as once per quarter. Rebalancing forces you to sell high and buy low. In fact, there are target year retirement funds available now that do steps 2 and 3 automatically for you.

[pchang]

Originally posted by Ted Striker
Women come in spurts

In my experience, it is men who come in spurts....

[Ted Striker]

Well pchang, it really depends on what your goals are.

Your advice is what I do with my 401K. I diversify it and keep money in funds that are safe but make money.

I also have a riskier account, with proper management, you can take chances.

So I think a mix of the two are the best.

[Ted Striker]

Originally posted by pchang


In my experience, it is men who come in spurts....

[pchang]

Riskier stuff is pure gambling. It is not much different than playing poker, going to the casino, or buying lottery tickets.

If you really want to hit a home run, your best bet is to gamble on yourself. Use your savings to start your own business.

[Ted Striker]

Yup, I do agree

I invest the bulk of money money the way you have laid out

I do think it may be important to have a bit of play money on the side though to satisfy that gambling urge when it comes to investing

[Pekka]

What? Is pchang gay too? Oh man, this is the gay conspiracy I KNEW IT WAS TRUE ALL ALONG!

Anyways, so what you suggest is that in fact I should be saving more in cash for now, and then later on push that money on bonds and stocks?

Where does that third of investments should be abroad? Is that to secure the chance of local zone going bunkers, so you'd end up wiht at least something? What I'm looking at is active portfolio. Not a .. a portfolio like a trustfund, but a portfolio that changes and expands. I'm not looking for quick sells, I'm looking to buy buy and buy and IF necessary, sell the bad stocks away before they start going to the rock bottom. I figure it's better to own that way than in cash. And then later on I'd like to buy some land or real estate. But we'll see..

The fees and taxes in here are also pain in the butt, so buying and selling is not a great idea for quick buck. They also tax you like bastards, taking that into account when calculating your net worth (when taxing) so they're POS people, jealous commies.

[Ted Striker]

Pekka,

The best way is to have a program that takes money out of your paycheck, that way you don't have to think about it, or you don't spend the money you are trying to save.

You could have that money going directly into an account that invests in stock and bond funds.

In the US, we call it a 401k.

It works out pretty good.

[Pekka]

That's basically what you call saving.

While that's the thing I need to be doing, the thing I really need to be doing is make it grow. Now with these percentages you get on bank, it's basically no worth unless you have big bucks. So while I'm not expecting to do lots of high risk investments, I'm expecting to do moves that actually gives some return.........

[Ted Striker]

Well, the 401K that I'm in has made me some really good returns this year.

If your employer doesn't have a 401K, there are probably other investment programs that you can do on your own that are similar.

We have something you can do on your own called a Roth IRA.

[pchang]

No. No. No.

Save as much money as you can as soon as you can. Period. Saving when you are 20 is more than twice as effective as saving when you are 40.

Invest what you save in money market funds (25%), a broad bond index fund (33%), and a broad stock fund that has one third of its assets based outside the Eurozone (42%).

You could also invest in 2 stock funds. A broad Eurozone Stock fund (28%) and a US/Asia stock fund (14%).

As time goes by, you will discover that the percentages of your portfolio will deviate from this because its parts will experience different rates of return. In order to maintain your percentages, you will have to sell the ones that have done well recently, and buy the ones that have done poorly recently. If you are continuing to save money, you could just make sure to buy more of the underrepresented assets with future money (this is one strategy to avoid transaction costs). The key is that rebalancing (or buying what you are low on) causes you to sell high and buy low. Almost all individual investors make the mistake of buying high and selling low.