Stock Market

[OakleyBoss]

@Supero100 So are you in Asset Management or Private Banking?

 

[Supero100]

@Supero100 So are you in Asset Management or Private Banking?

I'm an advisor - which today means I do both. Some discretionary asset management (I don't call you before I trade for you) some non-discretionary asset management (I call, you say ok, I trade). Increasingly my practice is moving towards discretionary as I just don't have enough time to make calls to everyone I need to reach in a timely way.

We provide a lot of the traditional private banking roles - coordinating with CPAs, trust & estate attorneys, customized lending solutions. We know how to qualify a wide variety of wealth management situations and bring specialists or options to the table.

 

[Supero100]

To me options are like the market but on crack.

The action is very addictive.

 

[OakleyBoss]

I'm an advisor - which today means I do both. Some discretionary asset management (I don't call you before I trade for you) some non-discretionary asset management (I call, you say ok, I trade). Increasingly my practice is moving towards discretionary as I just don't have enough time to make calls to everyone I need to reach in a timely way.

We provide a lot of the traditional private banking roles - coordinating with CPAs, trust & estate attorneys, customized lending solutions. We know how to qualify a wide variety of wealth management situations and bring specialists or options to the table.

Ok, that answered exactly what I was wondering. Just was trying to drill down what you were doing.

How long you been in banking?

The action is very addictive.

Yeah it is. Been investing in equities for a few years, and to come from that, where seeing 10-20% is big, and 100% takes years. Now to options, where 200% can be made in ITM call/puts in a week is absolutely insane contrast. The biggest difference I've seen is the need to cut losses. In equities, you can hold on to stocks for years until they eventually go positive, with options, if the momentum shifts, and a stock heads south 5 points, you need to be able to take the loss and walk away, before your out of the money on expiration.

 

[Rustpot]

I have a 401k I think? If my numbers are right, I'm contributing something like 2 grand to it annually. That makes me feel like I'm going to retire penniless. Well, no, if it does nothing but sit there it will be $80k by the time I'm 70, given no increase in contribution, but consistent for the next 40-some years.

I'm an engineer and I'm under 30. While the numbers fascinate me, I just can't get excited about investing. It feels like an old people concern (not to sound demeaning if that's your profession, that's different). My dad likes to sit and play with investments now that he's retired.

I know it's something I need to get serious about, and it doesn't make sense not to. I'm smart. I'm good with maths n stuff. I've put it off a few years already. My money is happy hanging out in a pitiful savings account accumulating all of .05% or some wretchedly horrid amount. But it's not all that much, it's all I've got, and it's available tomorrow should I crash my car or lose a leg or something requiring money NOW.

 

[OakleyFrankFMJ]

I have a 401k I think? If my numbers are right, I'm contributing something like 2 grand to it annually. That makes me feel like I'm going to retire penniless. Well, no, if it does nothing but sit there it will be $80k by the time I'm 70, given no increase in contribution, but consistent for the next 40-some years.

I'm an engineer and I'm under 30. While the numbers fascinate me, I just can't get excited about investing. It feels like an old people concern (not to sound demeaning if that's your profession, that's different). My dad likes to sit and play with investments now that he's retired.

I know it's something I need to get serious about, and it doesn't make sense not to. I'm smart. I'm good with maths n stuff. I've put it off a few years already. My money is happy hanging out in a pitiful savings account accumulating all of .05% or some wretchedly horrid amount. But it's not all that much, it's all I've got, and it's available tomorrow should I crash my car or lose a leg or something requiring money NOW.

I recommend dumping as much as you possibly can into your 401k. I know it's hard to adjust to but even though those funds are there and you "can't" touch them they are still yours....you will have to pay the tax on it sooner or later. If it came down to it you could always "borrow" the money from the 401k which is actually borrowing from yourself anyway.
The sooner you put as much in as you can each year the better......savings accounts just do not grow your money the way your 401k can.....or you can give all your money to a guy like @Supero100 <----(meant in a good way) but make sure you know what you are getting into.

 

[Supero100]

11 years in the industry between when I worked as a portfolio analyst and today as an advisor...

 

[OakleyFrankFMJ]

1. Make sure you're contributing, at an absolute minimum, what your employer will match to a retirement plan like a 401k or 403b.
2. Talk to a financial advisor about your risk tolerance and financial goals. Modern financial planning software is robust. Take advantage of it. No need to pay thousands of dollars for a "plan" though.
3. Decide on an asset allocation that is consistent with your risk tolerance and gives you a chance to both save and invest to meet your financial goals. Stick to your saving and investing discipline.
4. Monitor your investments - stocks, daily; ETFs and mutual funds, weekly to monthly. Focus on the intermediate to long term.
5. Hold your investment accounts at a firm with excellent research available to you for no additional charge.
6. Subscribe to an outside investment newsletter that fits your investing style. A value investor oriented newsletter that I like outside of my firm's research is "Profitable Investing", written by Richard Band. He focuses on high quality stocks and trying to buy them when they're at inexpensive valuations - he has both stock, etf and mutual fund portfolios that provide a good starting point. www.rband.com
7. Do your homework. Nobody will be more interested in the growth of your money than you.
8. Do not be afraid to buy or sell. See suggestion #4 & #7.

My $0.02. I bet @OakleyFrankFMJ has some good tidbits too

I agree with everything you've said.

My tidbits are much simpler though

Always be prepared to invest what you are willing to lose.
If you manage to invest a certain amount and you achieve the satisfaction of seeing your funds grow dramatically, do realize you can pull out your initial funds investement and work with the rest ......just like gambling.
Have patience. Nothing is like the market of the late 90s anymore where drastic moves in the market could have made you a fortune (or lost it) in 24-48 hours.
If you are the type of person who cannot pay attention to what is happening to your money then investing yourself is not for you....consult an expert (suggestion #2 above)

I'm sure there is more to say but I'm not the man of many words.

 

[Supero100]

I agree with everything you've said.

My tidbits are much simpler though

Always be prepared to invest what you are willing to lose.
If you manage to invest a certain amount and you achieve the satisfaction of seeing your funds grow dramatically, do realize you can pull out your initial funds investement and work with the rest ......just like gambling.
Have patience. Nothing is like the market of the late 90s anymore where drastic moves in the market could have made you a fortune (or lost it) in 24-48 hours.
If you are the type of person who cannot pay attention to what is happening to your money then investing yourself is not for you....consult an expert (suggestion #2 above)

I'm sure there is more to say but I'm not the man of many words.

That was like your second longest post ever!

Two more things came to mind:

For somewhat passive investors who want to own stock, buy the highest quality you can (think of things like Proctor & Gamble or ExxonMobil or Johnson & Johnson, for example) and set it to dividend reinvest... And leave it alone for a decade you will be quite pleased. I've met a lot of multi millionaires who saved, lived within their means, and took advantage of dividend reinvestments over like 30 years of saving.

Second, you should make an annual Roth IRA contribution if your income level is under the phaseout. If your income is above the phaseout, you should make a non deductible IRA contribution and then convert it to a Roth IRA, realizing this will cost you some additional tax pain in the year that you convert.

Traditional IRAs grow tax free, but when you withdraw money post age 59.5, those withdrawals are taxed as ordinary income. Roth IRAs grow tax free AND withdrawals are tax free! This is a HUGE deal. If you save in a Roth IRA every year that you're eligible (suppose that's 40 years in a career) and never spend a penny of it (maybe another 30 years in retirement), that asset will grow tax free for 70 years in this example... AND withdrawals will be tax free. But you're not going to spend a penny of it; in fact, you're going to leave it to your grandchildren. If they have an advisor worth a damn, they will instruct the grandchild to do a "stretch IRA distribution" wherein the annual amount distributed is calculated based on the grandchild's age... Let's say they're 30 when they get the Roth from your estate. The Roth will continue to grow tax free - and spit $ out to your grandchildren, TAX FREE, for ANOTHER 65 years.

If you average 7.2% annual returns over your lifetime in the Roth, the value of the Roth will double every 10 years. Suppose you put just $10,000 into it and then forget about it and never make another contribution. 70 years later, your account has 7 doubles of growth: $10k => $20k => $40k => $80k => $160k => $320k => $640k => $1.28mm

$1.28mm to your spoiled grandkids. But I'm not done...

Let's assume the average net rate of return over your grandkids lifetime drops to 3.6% per year. Because they have to take some $ out every year, the poor dears. And that amount increases as they get older. Boo hoo. So now a double in value takes 20 years... And the mandatory distributions are sprinkling wealth in the grandkids families every year along the way...

$1.28mm => $2.56mm => $5.12mm => $10.24mm+

It all started with $10k in a Roth IRA you forgot about... 135 years end to end of wealth creation from that foolish Roth IRA... Tax free compound growth is quite a thing...

 

[OakleyBoss]

That was like your second longest post ever!

Two more things came to mind:

For somewhat passive investors who want to own stock, buy the highest quality you can (think of things like Proctor & Gamble or ExxonMobil or Johnson & Johnson, for example) and set it to dividend reinvest... And leave it alone for a decade you will be quite pleased. I've met a lot of multi millionaires who saved, lived within their means, and took advantage of dividend reinvestments over like 30 years of saving.

Second, you should make an annual Roth IRA contribution if your income level is under the phaseout. If your income is above the phaseout, you should make a non deductible IRA contribution and then convert it to a Roth IRA, realizing this will cost you some additional tax pain in the year that you convert.

Traditional IRAs grow tax free, but when you withdraw money post age 59.5, those withdrawals are taxed as ordinary income. Roth IRAs grow tax free AND withdrawals are tax free! This is a HUGE deal. If you save in a Roth IRA every year that you're eligible (suppose that's 40 years in a career) and never spend a penny of it (maybe another 30 years in retirement), that asset will grow tax free for 70 years in this example... AND withdrawals will be tax free. But you're not going to spend a penny of it; in fact, you're going to leave it to your grandchildren. If they have an advisor worth a damn, they will instruct the grandchild to do a "stretch IRA distribution" wherein the annual amount distributed is calculated based on the grandchild's age... Let's say they're 30 when they get the Roth from your estate. The Roth will continue to grow tax free - and spit $ out to your grandchildren, TAX FREE, for ANOTHER 65 years.

If you average 7.2% annual returns over your lifetime in the Roth, the value of the Roth will double every 10 years. Suppose you put just $10,000 into it and then forget about it and never make another contribution. 70 years later, your account has 6 doubles of growth: $10k => $20k => $40k => $80k => $160k => $320k => $640k => $1.28mm

$1.28mm to your spoiled grandkids. But I'm not done...

Let's assume the average net rate of return over your grandkids lifetime drops to 3.6% per year. Because they have to take some $ out every year, the poor dears. And that amount increases as they get older. Boo hoo. So now a double in value takes 20 years... And the mandatory distributions are sprinkling wealth in the grandkids families every year along the way...

$1.28mm => $2.56mm => $5.12mm => $10.24mm+

It all started with $10k in a Roth IRA you forgot about... 135 years end to end of wealth creation from that foolish Roth IRA... Tax free compound growth is quite a thing...

Wow this was really a great illustration thats going to change how I save in the future. Going to start to have to contribute to a Roth IRA! Thanks