It's okay to buy individual stocks if you pick enough to be diversified.One thing I think we don't do well as a society is talking candidly about money. So I thought I'd start up a thread to encourage people to a) provide their real world insights about money (not "I'm worth this much" but more..."this is what I've found that works"), b) encourage the younger crowd to ask dumb questions, understand what is likely/possible and get advice.
-I remember starting out (seems not that long ago) fresh out of college with somewhere around $10k from working a lot of jobs during high school and college, finishing in 2009. My goal was to graduate with $10k to my name, and I just barely cleared this hurdle but then lost most of it when my dad's company gave him the opportunity as a management member to buy preferred shares with a 12% "guaranteed" return. I put $8k in and lost it all in a few months when gas prices skyrocketed and trucking-related companies (my dad's industry) stopped ordering new trucks, and the company went bankrupt = $8k gone. LESSONS LEARNT: if it sounds too good, it probably is + be careful with single-stock risk. Damned if I haven't had to re-learn these lessons a couple times.
Investment thoughts:
-Leapfrogging from house to house each year (keeping the old one and renting it out) is a decent (if sometimes exhausting) way to build wealth. Wifey and I moved 6 summers in a row, buying (and keeping) a house in 5 out of 6 of those, renting them out. Some things we learned there: 1) the big wins come when you do some rehab, 2) the cheap side of town doesn't appreciate like the 'nice but not rich' side, 3) Section 1031 is your friend, 4) buying condos carries extra risk (our condo board decided to forbid renting, so we had to sell 2 condos and buy other houses, adding a lot of transaction cost), 5) while sometimes you come out making some actual 'cashflow', a lot of the time the game is to just break slightly above even with repairs, vacancies, etc, but each year pay down mortgages, take depreciation-based tax writeoffs, and ride rising real estate values, 6) it's easier to make your money on the buy, 7) for multifamily, go big or stay SFH, 8) if you wouldn't live in it, don't buy it.
-Rent vs buy...too many people are afraid to buy. With FHA, etc, you can buy with a small amount down, and your house payment still be less than your rent. Unless you're moving soon, buy. Rates are super low.
-401k money: go big, esp if married. Money unseen is money unspent. Don't borrow from it unless there's a health emergency.
-Don't buy individual stocks. I know you're special. Just don't. Just...don't (sadly, I still do...it's like a drug)
-Celebrate big financial milestones. Finances are part of your (and your partner's) life, and are worth being celebrated. I remember my wife and I celebrating when we hit big meaningful 'financial markers'. We usually blow $50 on a nice bottle of wine to celebrate!
-Warren Buffett is a stock market genius. You're not. You should follow John Bogle. Go to the Bogleheads site and do what they tell you...basically live cheap, index, and avoid paying fees.
-Options are fun but often a distraction. They (often) rely on predicting market TIMING rather than fundamentals. Theta can kill you. Better to own the underlying security and miss the timing by a month, and a year later be rich vs have your options expire worthless.
-Don't neglect the obvious things: your credit card has to be paid in full every month, you should save minimum 10% of your gross income each month (shoot for 20%), if you're young avoid bonds and go mostly into equities (and real estate if you're scrappy). Of course get any free money first (401k match), then think carefully whether you want to bank Roth or 401k (etc)...fundamentally it's a gamble on your future earnings and future tax rates. On balance, I give a nod to the Roth (better optionality as emergency savings, better down the road vs the ACA, better if you ever leave the country, better if tax rates go up, which I deem likely), but that's a larger topic.
-The Index Card investing philosophy is really good. Google it and see below.
-Never stop learning and don't be afraid to take advantage of company help.
-Live cheap but it's easier to raise your topline most of the time than marginally improve your savings rate, once it is reasonably optimized.
-Don't live so cheap that you don't enjoy the ride. Remember what Warren Zevon said, "Enjoy every sandwich".
Look forward to picking up on some collective wisdom.
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Agreed. Though if you are too diversified, it defeats the purpose of concentration, and you may as well be indexing.
