Stock Market is the bottom in?

[S.T.Fanatic]

With all due respect, I have a guy who understands this stuff and knows what's available far more than I do.

I don't invest in something I don't understand (ie. bitcoin) but I've got a person I trust handling it and i go back to work finding a way to add more dollars to this equation.

The de-programming books first.

Rich Dad Poor Dad
The Cashflow Quadrant

Then I'd find a basic income tax class, and take it. Beware the ones put on by HRB or any other refund chop shop. You just need to learn to speak the language. Develop some foundational principles and learn the words, then self discovery accelerates. Investment quacks love to use jargon and speak over people. It makes people think they're smart.

Once you've got the mechanics down, you can start reading ideas from people you meet, people on the internet, investing articles, books, and advertisements. I've read most of the books, and they're all good to some extent. At some point, you've got to pick a path that will be how you do it. And that is gonna be influenced by you and your style.

My grandfather started a profit sharing account back in the mid-70's. (family business) Things were pretty good as he was a fantastic businessman. Over the years business profits have decreased because management became to "comfortable" and the minimum was pumped into it for many years. It didn't really matter all that much to them because the gains were far out weighing the inputs. This past year was nearly our best year ever. We put the maximum amount in that we could. To bad it wasn't a year earlier. Our gains were 66.7% this year. We have people still working just to pay the taxes on their mandated disbursement. (which is a shitload).

An example of compounding interest. My parents were divorced a little over 30 years ago. My mom got half of dad's retirement at the time which amounted to 35K. She never touched it and there was no more contribution to it after the divorce. She pulled it all last year and that 35K turned into over 500K without adding a single cent to it other than the gains her money made for her. None of us have a crystal ball but it ended up being a terrible decision to take it out as one year latter we saw the 66.7% gain. OUCH!!!!

I believe the fund hasn't been paid enough attention to over the past couple of decades even though it has done well for us. We manage it entirely in house and have paid exactly $0.00 in brokerage fees. Had we had someone else managing it for us their take would have been easily a million dollars over the years.

Like mentioned by others earlier, I am finally getting to the point where I am starting to have some money left over at the end of the month (kids are expensive these days) Our work retirement plan is great but it also has it's down falls. The employees can not contribute to it, you have to be in it for 30 years before you can pull the money out without penalty (all or nothing) , and all of the taxes also need to paid on it once it is pulled out. I am going to be looking into a roth for myself this year. I will not be able to max it out yet as our kids are still all home for the most part. I will turn 40 this August and am hoping that by the time I pull my work retirement the interest gained in the roth i will be starting is more than enough to pay the taxes on my work fund. I do not have any plans to retire early so Hopefully Gods plans are similar.

My wife's retirement wont be an insane amount, hopfully mine will be enough that we can just donate her's to the church/school where she and our children attended and other local interests that could use some money thrown at them.

Then again the markets could crash and we could all be left with nothing so......

I don't remember who posted it but i really like it. "wealth is measures by feet under the table not by numbers in an account" or something like that.

At the end of the day, it's not what you make, it's what you keep.

As my uncle the dairy farmer says "It's not what you put in the tank, it's what you put in the bank". So true!!

 

[Mortenson]

^^^ That's H20fwlr's tagline! ie the feet under your table

 

[Tree Spud]

What books would you suggest?

Read the "Millionaire Next Door". It identifies the personal characteristics & lifestyle choices of average people who have built wealth. It focus on substance versus style. I read the original version 25 years ago and it changed the way I looked at many things.

Wealth is many different things to many people. At the end of the day wealth building should put you in a position to build security for you and your family and put the control of your destiny in your hands not in the hands of others.

 

[SD51555]

Sage advice!

You are spot on. This stuff is equal halves art, science, and math. It's why I urge people to never consider their home an investment. If you want a home, buy one. My other favorite when it comes to cost/benefit is the outdoors and knowing exactly what you're after. We were talking about this a few days ago on the rebel forum. Take fishing for example. Any group of people will have a varying distribution of ideas of what they want to get out of a day of fishing. If you had to pick a single primary objective, what would be most important?

Peace and quiet
Fish to eat
To say you limited out
A giant
Time with others

With limited resources, a person's got to know the answer to that question and then go after it. If you don't know the answer to that question, it's hard to pick a path.

 

[S.T.Fanatic]

Read the "Millionaire Next Door". It identifies the personal characteristics & lifestyle choices of average people who have built wealth. It focus on substance versus style. I read the original version 25 years ago and it changed the way I looked at many things.

Wealth is many different things to many people. At the end of the day wealth building should put you in a position to build security for you and your family and put the control of your destiny in your hands not in the hands of others.

I see quite a few different books with that title, was there an original author?

 

[Tree Spud]

I see quite a few different books with that title, was there an original author?

Yes, there have been many iterations of it since the original version. Rich Dad, Poor Dad is a spin off of it. A lot of what Dave Ramsey, Suze Orman, etc. talk about was derived from it.

Thomas Stanley put his book out in the early 90's and that is the one I am familiar with.

 

[Mortenson]

My copy is from 1996 by Thomas Stanley. I agree it's a good read. Now that I'm looking at it I may read it again. Another good one is Yes, You Can Still Retire Comfortably! by Ben Stein. My first investing book was by the Beardstown Ladies in '94. I believe they were deemed frauds shortly after, but the message is still on point.

 

[BuckSutherland]

Let's see what type of response we get to this scneario:

1. You have currently have 200k in a CD drawing 3% that you can pull any time for any reason. No penalty. You have had the money sitting there 2 years to buy a farm and have not found one suitable.
2. You have an additional 50k that could be easily added to this for a total investment of $250k looking for a new home.
3. You are 40 years old
4. Already have a SEP IRA and contribute maximum annually for the past 3 years. It gained 39% last year and made you feel like an idiot cause you have 212k in the bank drawing 3% and being outpaced by the printing of new money.
5. Wife already has a healthy 401k
6. Combined income disqualifies the couple from ROTH IRA in most years.
7. Record high stock market
8. High economic uncertainty and a jobs killing administration
9. No vehicle loans, no CC debt, 10k (no interest) medical bills. 15 year mortgage at 2.1%.


Lets start there.

 

[S.T.Fanatic]

Pull the 200K buy and sell Amazon on a daily basis. Make some great money, pay the capital gains, and put 250K back in a CD?


Sent from my iPhone using Tapatalk

 

[roymunson]

Read the "Millionaire Next Door". It identifies the personal characteristics & lifestyle choices of average people who have built wealth. It focus on substance versus style. I read the original version 25 years ago and it changed the way I looked at many things.

Wealth is many different things to many people. At the end of the day wealth building should put you in a position to build security for you and your family and put the control of your destiny in your hands not in the hands of others.

This is a really good book. I don't do everything in it, but one of the main premises of it is to stay out of uber competitive fields because those attract the brightest and best. Being a doc is fine, but it's hard to stand out as a doctor.

I have a new pickup (because my MIL gave me the friends and family discount from FORD) and we built our house 3 1/2 years ago. Other than that, I try to fit the Millionaire Next Door mold as best I can. I know my wife can be very frugal and boy does that help.

Be an excellent HVAC guy and it's easier to rise to the top. I think Chuck Adams said he employed that logic to several of his P&Y quests. Looks for record animals that you're pretty sure you can beat. Odds of shooting the worlds biggest whitetail is extremely low because its so readily available. Way more likely to kill the worlds largest shiras moose.

 

[yoderjac]

There's a few fallacies in there. First, I never said most people aren't allowed to contribute to a Roth. I said for most people a 401k is better. I also said it depends on your tax bracket. The math is a bit complicated, but it's easy to understand, and it's available all over the internet.

Can you contribute to both? Sure. But you should max out your 401k first.

401K and Roth are not mutually exclusive. You can have traditional and Roth IRAs and traditional and Roth 401Ks. I think a better way to put it is that it usually better to contribute to a 401K rather than and IRA because many companies have some kind of matching. For someone who is young, the 401K Roth is the best option.

When I was young, we were told "Defer as much of your income as possible. You will be in a lower tax bracket when you retire." That has not been the case for many. Retirement planners are seeing lots of folks who are not in a lower tax bracket during retirement than when they made most of their contributions. Folks with large traditional 401K or IRAs run into the Required Minimum Distribution (RMD) which can drive them up in tax brackets.

Thanks,

Jack

 

[Hoytvectrix]

401K and Roth are not mutually exclusive. You can have traditional and Roth IRAs and traditional and Roth 401Ks. I think a better way to put it is that it usually better to contribute to a 401K rather than and IRA because many companies have some kind of matching. For someone who is young, the 401K Roth is the best option.

When I was young, we were told "Defer as much of your income as possible. You will be in a lower tax bracket when you retire." That has not been the case for many. Retirement planners are seeing lots of folks who are not in a lower tax bracket during retirement than when they made most of their contributions. Folks with large traditional 401K or IRAs run into the Required Minimum Distribution (RMD) which can drive them up in tax brackets.

Thanks,

Jack

Roth IRAs do not have RMDs. But you are absolutely correct to point out the dilemma of changing tax brackets.

 

[Tree Spud]

Let's see what type of response we get to this scneario:

1. You have currently have 200k in a CD drawing 3% that you can pull any time for any reason. No penalty. You have had the money sitting there 2 years to buy a farm and have not found one suitable.
2. You have an additional 50k that could be easily added to this for a total investment of $250k looking for a new home.
3. You are 40 years old
4. Already have a SEP IRA and contribute maximum annually for the past 3 years. It gained 39% last year and made you feel like an idiot cause you have 212k in the bank drawing 3% and being outpaced by the printing of new money.
5. Wife already has a healthy 401k
6. Combined income disqualifies the couple from ROTH IRA in most years.
7. Record high stock market
8. High economic uncertainty and a jobs killing administration
9. No vehicle loans, no CC debt, 10k (no interest) medical bills. 15 year mortgage at 2.1%.


Lets start there.

You have a very good blueprint and plan that is working well. I would change very little. The reason you are at where you are is the you have developed a consistent, methodical approach to building your financial foundation. Low debt tied to a personal or business property with a short mortgage cycle, no consumer debt, and a good balance of cash & equities.

I wouldn't worry about what your SEP made versus having cash set aside, you have a plan for that cash and are prepared to to take advantage of a land opportunity when it arises. As a business owner you have probably learned that the unexpected "oh shitz" stuff can happen and better be in a position to handle when it does.

With the new administration, I would be very worried about energy prices. Canceling the Keystone pipeline, drilling, and I am sure they will go after fracking will very soon double to triple energy costs the same as Obutt Head did when he was in charge.

Or you could go and set-up a day trading account and become the next Gordon Gekko ...

 

[Bowsnbucks]

Any investment info source I've ever read (many) advises people to max out on their 401-k's to get the company match. It's free money. If you put in $500, and the company matches that, you have a 100% gain on YOUR investment. You doubled your money in your 401-k. Personally ......... I can't understand why folks don't take advantage of their company match, whether it's dollar-for-dollar, or 50 cents on the dollar.

Also keep in mind that it's OK to invest in other ways beside your 401-k. My wife and I have invested in LOW-COST mutual funds our entire work lives, beside our 401-k's, pensions, and other retirement plans from our employers. Dollar-cost-averaging is the best way for most folks to buy shares "on sale" so to speak. For those who don't know what dollar-cost-averaging is - you pick a set amount of money to invest off every pay check, or every month (you pick the time interval) - and you keep that up WITHOUT FAIL for YEARS. What this does is - it forces you to buy more shares when the prices are lower. If you invest say, $100 from every pay check - that $100 will buy you more shares of "AJAX" fund when the share prices are low ............. and fewer shares of "AJAX" when the prices are higher. That formula reduces your "cost to buy" and increases your total return. And IF you designate your dividends and interest to automatically be reinvested in more shares of "AJAX" fund - your wad of money becomes like a ball of snow rolling downhill ............ it collects more & more as it rolls (time) and the "miracle of compounding" gains you lots more "free snow" = money.

The lower your "costs" to invest - the greater your return. There are MANY places to invest in funds these days with NO "loads", sales commissions, 12b-1 fees, etc. to SUCK more money out of your pockets. Big mutual fund companies have numerous choices where the expense ratios are less than 1/2 of 1%, and some much less than that. Index funds are by far the cheapest way to invest for most people. (Anyone can still invest in single stocks if they wish, - beside mutual funds - but owning a slice of the broad markets in index funds (diversity) is a MUCH safer play for most individuals.

Tax laws change and shift with political whims, which makes retiring securely after say, 40 years of working - like trying to hit a moving target. (I think that's the actual plan - from BOTH sides.) You make certain monetary / investment moves based on current laws in a given period in your work history, only to find the retirement-legislative landscape has shifted beneath your feet. If we had the sense to enact retirement savings / investing / planning laws .............. and made them permanent, so you could PLAN with some certainty as to your outcome ............... then we'd have something. And those laws MUST apply to ALL income levels. If the often trumpeted chorus of "we want people to retire with financial security" is genuine ........................ S-T-O-P changing the laws surrounding retirement savings / investing!!!! Also take into consideration that not all people are sharp enough to keep up with constantly-shifting tax bracket changes and savings / investment laws. Those people shouldn't be seen as "low-hanging fruit" to be taken advantage of by greedy money managers & financial advisers .................... or political figures looking to pacify a block of donors. That's why we need strong fiduciary laws to protect ALL people from the vultures. (John Bogle was THE champion of strong fiduciary laws & standards, so the "little guy" would get a fair shake when investing). If everyone had a level, FAIR environment in which to save / invest for their retirement, we might actually be able to achieve retirement financial security for a lot more folks. - - - - Wouldn't that "lighten the load" on our economic "system" ???

 

[Telemark]

Best way to build wealth is to eliminate debt (credit cards, mortgage, car loans, etc.), max out your 401k at work especially if they have a matching program

That's not exactly true. You should definitely pay off your credit cards, but a mortgage can be an excellent way to build wealth. If I could borrow 100,000 dollars at 3% I would do it in a heartbeat. Likewise, if I had a paid-off mortgage I would go right back to the bank and take a home equity loan. Even a HELOC could have been used to build wealth this year.

 

[Telemark]

Any investment info source I've ever read (many) advises people to max out on their 401-k's to get the company match. It's free money. If you put in $500, and the company matches that, you have a 100% gain on YOUR investment. You doubled your money in your 401-k. Personally ......... I can't understand why folks don't take advantage of their company match, whether it's dollar-for-dollar, or 50 cents on the dollar.

I totally agree with this.

 

[Telemark]

It more depends on age than tax bracket. You can't beat matching funds if your company does that. Many 401Ks now have both traditional and Roth options. I think young folks benefit more from a Roth as they have a much longer time horizon for the earnings to grow tax free. When you get old and your time horizon is shorter, transferring money from traditional to Roth does depend on your tax bracket. It is one way to reduce the higher bracket that RMD can cause, but when your transfer to Roth you've reduced what you have to invest by paying the tax. With a shorter time horizon, this may not make sense as there may not be enough time for the tax free earnings to compensate. I wish they had Roth when I was young.

Thanks,

Jack

No, it depends on your tax bracket, since taxation is the main difference. Age has very little to do with it. A Roth can be an excellent investment vehicle for people close to retirement as well, especially when the stock market is on a rip like it was this year.

 

[Telemark]

Let's see what type of response we get to this scneario:

1. You have currently have 200k in a CD drawing 3% that you can pull any time for any reason. No penalty. You have had the money sitting there 2 years to buy a farm and have not found one suitable.
2. You have an additional 50k that could be easily added to this for a total investment of $250k looking for a new home.
3. You are 40 years old
4. Already have a SEP IRA and contribute maximum annually for the past 3 years. It gained 39% last year and made you feel like an idiot cause you have 212k in the bank drawing 3% and being outpaced by the printing of new money.
5. Wife already has a healthy 401k
6. Combined income disqualifies the couple from ROTH IRA in most years.
7. Record high stock market
8. High economic uncertainty and a jobs killing administration
9. No vehicle loans, no CC debt, 10k (no interest) medical bills. 15 year mortgage at 2.1%.


Lets start there.

I would buy 5 rental properties.

 

[yoderjac]

No, it depends on your tax bracket, since taxation is the main difference. Age has very little to do with it. A Roth can be an excellent investment vehicle for people close to retirement as well, especially when the stock market is on a rip like it was this year.

It has a lot to do with time horizon which generally equates to age. The advantage of Roth is that the earnings on the tax investment are not taxed, but since you pay the tax up front on your money, you have roughly 1/3 less to invest than in a traditional account. With traditional you pay earned income tax when you withdraw but you had roughly 30% more to invest since it was not taxed on the front end.

Roth can be part of a plan as you near retirement, but you need to game out the options. In many scenarios, you are better leaving money in a traditional rather than transferring it to Roth. It depends both on the tax bracket and time horizon..

Roth IRAs do not have RMDs. But you are absolutely correct to point out the dilemma of changing tax brackets.

Correct, but traditional do. So, as you approach and hit retirement, depending on tax bracket and time horizon, sometimes it is better to transfer money from traditional to Roth and sometimes it is better to keep it in traditional. You just need to run the numbers in your situation.

For young folks starting out, retirement is very far out. Roth is generally the best bet all other things being equal. (For Telmark, that is Roth 401K.)

Thanks,

Jack

 

[Bszweda]

I recently setup a Charles Schwab account for personal investing. Its very convenient I am able to transfer money from my bank directly into it. This is more for educational purposes/ gain experience for when I am older. I think it beats keeping large amounts of cash in your savings account.