The doctor is IN - the JohnT advice thread.

[JohnT]

Originally posted by pchang
JohnT's financial advice is not solid.

...

Actually, you said nothing that I didn't say earlier this year in this thread.

That's also the thread I referred to when I mentioned Saras and his Lithuanian bonds (or whatever they were).

However, the way I answered was based upon the way the particular question put to me, and my knowledge of the poster: it seemed that Pekka (and knowing things he has said in other threads about other things) has a rather... risky streak to him. He's going to do the risky investments, regardless of whether they are the best strategy. So, if that's the case, it's best to amerliorate this aspect of his personality as best as possible, without having him think of investing as drudgery, boring, and not worth doing because it isn't satisfying psychologically.

Sure, the best thing to do is to tell him to invest in a conservative mix, rebalance, and let the growth of the worlds market do his work for him. But Pekka will find that unsatisfying, and the fact is that satisfying oneself psychologically is almost as important as satisfying oneself financially: Because if he is unhappy with "the best" investment strategy, the odds are he won't follow any investment strategy.

Sorry Pchang, but even though you seem a disciple of Bernsteins The Four Pillars of Investing, I stand by my statement in response to the question asked.

[JohnT]

Originally posted by 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.........

No, it's an investment strategy and a pretty smart one as well. 401(k) investments can appreciate... appreciably ( ) or depreciate quite rapidly. There is an element of risk involved, something that doesn't exist (here in the US) if you just stick your excess money in the bank (US bank deposits are insured by the Feds in case the bank fails).

[JohnT]

Even the best of us don't follow our own advice:

Freakin K-Mart is down to $.12/share - take a $20, buy a hundred shares, and spend the rest on lunch.

Kmart closed Friday at $100.28/share.

[Jon Miller]

hmm, if I had invested 20 dollars into it, I would not have the money prolbems I have now

JM

[JohnT]

I'm sure there was a reverse stock split or reorg in there somewhere, but still!

[JohnT]

Originally posted by pchang
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.

However, 95% of businesses go under in the first 5 years.

Better you spend your "play money" learning blackjack.

[JohnT]

you see, you americans have the business down at young age... in this POS commie country it's illegal to make money so I have to learn everything in dark after midnight and be alert if the mind police come and shoot me with tazers and nipplegrinders.

Yeah, I don't know about the others, but my grandparents were teaching me about investing (and saving!) when my age was measured in single digits.

[pchang]

Originally posted by JohnT


However, 95% of businesses go under in the first 5 years.

Better you spend your "play money" learning blackjack.

Says the guy who essentially used his savings to start up his own business (by taking over another company)...,.

[JohnT]

A rather small percentage of my savings, pchang.

[Pekka]

you analyzed me pretty well there.. I see investing as 'saving money' if it's not high risk ..

Well, I definitely need to learn more strategies, because if I keep being this way I might just be the biggest loser in the field.

[JohnT]

Read the book I linked to: The Four Pillars of Investing.

The man has a convincing case, and presents it well. In short it goes something like this (allow me to quote myself, from that earlier thread):

Here is the thing about equity mutual funds: Including survivorship bias, over 95% of all managed funds underperform the market once you account for all fees and taxes. In other words, 95% of the Professional stock pickers out there do worse than the market as a whole. If you include all the funds that have failed and are no longer included in fund comparison charts, you will find that over 99% of all funds have actually underperformed the market.

If these people can't do it, and they have careers and six-figure salaries riding on their ability to pick stocks, why would I even think I have a chance to succeed here? Better to buy a really cheap index fund - that way you are guaranteed to do better than 95% of the professionals.

Coupled with:

The key is rebalancing. The point of rebalancing is to make sure your portfolio maintains the same balance of assets throughout the life of the portfolio. Over time the percentages you assign to various asset classes will change (as you grow older, financially you grow more risk averse), but the concept will remain the same.

If you look at my plan, you will note that I have percentages (relative to the portfolio as a whole) which tells me how I want my money invested. For example, I have 60% of the portfolio in stocks, and 40% in bonds. Over the next year, lets say stock funds gain by 5% over bond funds so that now my portfolio is unbalanced to 65% to 35%.

To rebalance my portfolio, I would have to sell the 5% gain in stocks and reinvest that money into bonds to re-achieve the 60/40 balance that I want in the first place.

Note that rebalancing makes me buy low and sell high. It doesn't allow me to foolishly hang onto stocks/funds that have over-appreciated, nor do I avoid purchasing in the market when it is down.

A portfolio that was 60/40 at the beginning of 1982 would've been 79/21 in 2000 if it had not been rebalanced in all that time. Almost 80% of your retirement money tied up into stocks at the height of a bull frenzy... tsk, tsk, tsk.

Otoh, had you been rebalancing you would've continually been cashing in on stock appreciations (for almost 18 years!), while continually buying into a bond market that is likely poised to be the financial leader in the upcoming years. You would've been only invested in 60% stocks when the bottom fell out, and, after the fall, you would've then put yourself into a major stock buying frenzy precisely at a time when everybody else is selling for pennies what you had been selling them for dollars.

[JohnT]

Originally posted by Pekka
you analyzed me pretty well there.. I see investing as 'saving money' if it's not high risk ..

See? Unlike the other so-called "advice" threads, my advice comes personalized, tailored to suit the choices and personalities of those asking.

A service like this you can't just find anywhere!

[Solomwi]

JohnT:

I have a friend, whom we'll call "David", that I have been friends with a long time. We played pee-wee football together and stayed together all the way through college, where we played together and were roommates at a large and well-known university. Throughout college we would snuggle and have scooter rides that kept us relaxed and the best of friends. The problem is that now our playing days are over and David is a little depressed because I may be a first round pick, while he isn't getting mentioned much at all. I keep telling him that he has plenty of chances to improve his stock, but he won't hear it. He doesn't even like to join me in practicing my celebratory jumping jacks anymore. What can I do to make David see that I care for him just as much as a person whether he gets drafted or not and to let him know how special our bond and the chance I've had to play with him all my life are?

Thanks in advance,

DP, Athens

[JohnT]

Move to Canada, marry the man.

[Solomwi]

Good call, but I don't think the NFL has any Canadian franchises.