China moved a step closer to standard real estate investment trusts (Reits) on Wednesday, after the government said it would pilot a product to support the residential leasing market, kick starting a market that could potentially be worth US$1.8 trillion. In a document released by the China Securities Regulatory Commission

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Ching Ho, Restauranteur | Designer | AdventurerRestauranteur | Designer | Adventurer
783 votes by

Oliver Emberton,

Matt DeCelles,

Tracy Chou, (more)Loading…
For the 22-year old, this is a boring yet tried-and-true investment method that will make you rich over time, richer than most rappers who’ll blow their money on cocaine and other stupid shit. Allow me to start with a simple Excel illustration, entitled “How to Make $10 Million Dollars”:

*For illustration purposes only, and like every other method of wealth creation, is subject to tax and inflation. Simply stated (and assuming a decent job), 20% savings smartly invested at a 10% interest rate will get you to the $10MM mark.

My recommendation: 60% stocks 20% bonds 20% real estateBonds & real estate provide necessary diversification, limited downside risk and a continuous stream of dividends. For example, I know that my two-family real estate investments (purchased at a discount, fixed up & rented out) will yield a stable 12% year after year and will probably outperform the stock market.

Some may believe 10% to be an unreasonable rate of return, but 10% is the average return over the entire history of the US stock market – a market that has weathered world war, depression, and hyperinflation.  There is no reason to expect otherwise over a long-term 40-year period (for reference, the most recent 40-year period 1973-2013 yielded 11.43%). Although I may just be lucky, here are four examples of my own personal investments that have more than doubled the S&P-500 benchmark over the past five years (ticker SPY 5% over 5-years).

Some insight into how I chose these investments:

RSP Rydex Equal Weight S&P 500 (7% five-year return): the neglected issue with traditional S&P index funds is that large companies like Apple & Exxon take up 8% of the fund. With an equal 0.2% weight given to each of the 500 companies, you’ll get true diversification & outperformance.

HSCSX Homestead Small Company Stock (13%): I inherently favor small companies and this contrarian fund concentrates on out of favor firms ready to turn around.

FNMIX Fidelity New Markets Income (11% with a 4% yield): as international stocks often don’t outperform those from the USA, I focus my international exposure on high-yielding dollar-denominated emerging market bonds.

FBIOX Fidelity Select Biotechnology (19%): I often invest in sectors I believe to be promising.  Billions of overpopulation? Fat Westerners prone to diabetes? Possible bird flu pandemic?  Genetic sequencing & new drug therapies?  This fund is my #1 performer but possibly overvalued now.


The single most important thing is to invest in yourself.  Be financially literate and learn new skills such as the Excel modeling and asset allocation strategies detailed herein. Be the very best at whatever you do. Continuous education & aggressive professional diligence. (And by education, I don’t mean going $150,000 into debt for an art history degree. Let me be one of few to emphasize that the education industry is quickly turning into a fool’s scam and unless you’re attending a top-20 school, skip it – you’re better off working or going to a decent state subsidized college where you’ll get the same education at 1/4 the price.)

Now assuming you ain’t no scrub – you’re investing in yourself, saving 20% of your professional income, working hard, and learning to be an astute investor, I now revise my Excel and entitle it – “How to Make $20 Million Dollars”:


* Want an extra $5,000,000?  Save 25% instead of 20%!

Finally, DON’T LOSE MONEY.  Wealthy investors understand this concept better than most which is why you sometimes see sharp overcorrections in the market from options & algorithms that automatically trigger a “sell” – they would rather liquidate in advance of a truly scary situation than risk losing a large percentage of their capital:

1) Market crash & asset bubbles, roughly every 10 years:  If an asset class inflated by credit does not generate enough cash to service the debt, divest. Even I had goo… (more)Loading…
For the 22-year old, this is a boring yet tried-and-true investment method that will make you rich over time, richer than most rappers who’ll blow their money on cocaine and other stupid shit. Allow me to start with a simple Excel illustration, entitled “How to Make $10 Million Dollars”:

*For illustration purposes only, and like every other method of wealth creation, is subject to tax and inflation. Simply stated (and assuming a decent job), 20% savings smartly invested at a 10% interest rate will get you to the $10MM mark.

My recommendation: 60% stocks 20% bonds 20% real estateBonds & real estate provide necessary diversification, limited downside risk and a continuous stream of dividends. For example, I know that my two-family real estate investments (purchased at a discount, fixed up & rented out) will yield a stable 12% year after year and will probably outperform the stock market.

Some may believe 10% to be an unreasonable rate of return, but 10% is the average return over the entire history of the US stock market – a market that has weathered world war, depression, and hyperinflation.  There is no reason to expect otherwise over a long-term 40-year period (for reference, the most recent 40-year period 1973-2013 yielded 11.43%). Although I may just be lucky, here are four examples of my own personal investments that have more than doubled the S&P-500 benchmark over the past five years (ticker SPY 5% over 5-years).

Some insight into how I chose these investments:

RSP Rydex Equal Weight S&P 500 (7% five-year return): the neglected issue with traditional S&P index funds is that large companies like Apple & Exxon take up 8% of the fund. With an equal 0.2% weight given to each of the 500 companies, you’ll get true diversification & outperformance.

HSCSX Homestead Small Company Stock (13%): I inherently favor small companies and this contrarian fund concentrates on out of favor firms ready to turn around.

FNMIX Fidelity New Markets Income (11% with a 4% yield): as international stocks often don’t outperform those from the USA, I focus my international exposure on high-yielding dollar-denominated emerging market bonds.

FBIOX Fidelity Select Biotechnology (19%): I often invest in sectors I believe to be promising.  Billions of overpopulation? Fat Westerners prone to diabetes? Possible bird flu pandemic?  Genetic sequencing & new drug therapies?  This fund is my #1 performer but possibly overvalued now.


The single most important thing is to invest in yourself.  Be financially literate and learn new skills such as the Excel modeling and asset allocation strategies detailed herein. Be the very best at whatever you do. Continuous education & aggressive professional diligence. (And by education, I don’t mean going $150,000 into debt for an art history degree. Let me be one of few to emphasize that the education industry is quickly turning into a fool’s scam and unless you’re attending a top-20 school, skip it – you’re better off working or going to a decent state subsidized college where you’ll get the same education at 1/4 the price.)

Now assuming you ain’t no scrub – you’re investing in yourself, saving 20% of your professional income, working hard, and learning to be an astute investor, I now revise my Excel and entitle it – “How to Make $20 Million Dollars”:


* Want an extra $5,000,000?  Save 25% instead of 20%!

Finally, DON’T LOSE MONEY.  Wealthy investors understand this concept better than most which is why you sometimes see sharp overcorrections in the market from options & algorithms that automatically trigger a “sell” – they would rather liquidate in advance of a truly scary situation than risk losing a large percentage of their capital:

1) Market crash & asset bubbles, roughly every 10 years:  If an asset class inflated by credit does not generate enough cash to service the debt, divest. Even I had good enough sense to recognize the pig that was the housing bubble and liquidated every single stock investment a year before that crash. I constantly listen to CNBC and Bloomberg when driving (it annoys my girlfriend, she loves the Kesha).

2) Dumb ass investments – wanna build a restaurant to “entertain your friends?”  Did you hide your money in Cyprus or some equally bad socialist European nation? As soon as you made some money, did you buy a yacht or Porsche  to show others you’ve “made it?”

3) A bad marriage or catastrophic illness – divorce or bad partnerships will wipe out half your net worth. Doing such a thing twice will decimate even a $10 million fortune. Choose wisely, and stay healthy. Don’t race trains and avoid all AIDS situations.

I’m really tempted to model another Excel illustrating how riding market bubbles (bitcoin, anyone?), a fun night in Bangkok and a 50% shave from a bad divorce will affect your net worth. But in this scenario, AIDS will strike you down before I reach line 65… so my advice, which took me 90 minutes to formulate, would be wasted. Anyways, I hope I have been of assistance – thank you for listening and please comment!

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Razvan Baba 27 votes (show)27 votes by

Tom Robinson,

Anonymous,

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Sameer Dhingra,

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San Tia,

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Kristian J Branæs
10% interest? what have you been drinking?
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UpvoteDownvote • Share • Report • 21 Apr

Ching Ho: “Purple kool-aid!  But in al…” and 2 others

 

Anne W Zahra, language is my lifelanguage is my life
60 votes by

Seshank Vemuri,

Trevor Mills,

Ivan Lu, (more)Loading…
I think there is a lot of excellent advice here.  I had just one small suggestion to add for something often overlooked.

Invest in your own health.

Spend what it takes to get the best quality, most nutritious food you can.  I don’t mean restaurant eating, because unless you live in a very large city, you’re not likely to find much restaurant food that’s good for you.  Invest in your intake and cook fresh, healthy food every day.

It’s expensive, and young people pressed for time want to skip this step.  However, nutrition has a direct impact on your productivity now and long into the future.  It provides a high level of energy, helps protect you from infectious disease and prevents chronic disease as you get older.

Health is the greatest wealth anyone can have.  You can’t buy back the years that a poor diet can subtract from your life.  Medicines can’t repair what poor eating destroys.

Take excellent care of yourself and make sure your “three squares” don’t come mostly from a factory.

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Aditya Rathnam  Suggest Bio
369 votes by

Tracy Chou,

Ankit Agarwal,


Sam TetruashviliFollow
Software Engineer at Google
BS in Computer Science from Carnegie Mellon University.
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Bradley Voytek
Sam Tetruashvili, (more)Loading…

  1. The single most important thing to do at 22 with regards to investing is to open a Roth IRA account and make the maximum yearly contribution of 5k. Investing 5k every year should lead to well over a million of tax free money at age 60. You can open a Roth IRA account and pick how you want to invest at any brokerage firm like Vanguard, Fidelity etc.
  2. If your company has a 401K matching program, take advantage of that. If not, decide if you want to do 401K and how much to put into it.
  3. Open a savings account at Emigrant, ING, AllyBank etc. and get the 1-2% interest that they provide instead of having your money sit in a traditional Bank of America account and collect negligible interest. I’d suggest putting 20-25% of your saving in cash regardless of your investment strategy.
  4. Take 5K and invest it in 2 mutual funds/ETFs to get started. Start monitoring the Dow, S&P 500, Nasdaq and ticker symbols of whatever your favorite companies are for a couple weeks. Try and gauge when the price might be at a local minima or maxima and buy when you think it is on the low side. For starters, I’d recommend just picking 2 mutual funds/ETFs – 1 US index fund/ETF (like SPY which tracks the S&P 500) and 1 foreign fund (a general emerging market one like BIK which tracks the top 40 companies in BRIC countries available to US investors … or if you are particularly gung-ho about India/China, look into IIF, IFN, FHKCX).
  5. If you find that you can’t seem to get yourself to follow the stock market every day or at least a couple times a week, stick with the fund approach. Diversify into some bond funds, sector funds, more foreign funds etc.
  6. If you get into it, start looking at individual stocks – follow news on the companies. Diversify across stocks in different sectors, growth companies vs companies that pay dividends etc.
  7. For your specific example in this question, looks like you are looking at about 30K/year post tax and expenses. Maybe put 7.5K in cash at a 1-2% interest place, 15K in 3-4 mutual funds/ETFs, 7.5K in 2-3 stocks. See how things are going in a couple months and tweak.


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Andrew Quin, Research Strategy Coordinator/Private… (more) Research Strategy Coordinator/Private Client Adviser for Patersons one of Australia’s largest stock brokers. The most important element in stock trading success is your psychology/
30 votes by

Justin Lee,

Diana Tan,

Allen Coss, (more)Loading…
How to lower your financial stress right now

Over the years as an economist and stock broker I get to meet many people and naturally the talk comes around to investment and finance.

Many people experience financial stress. But interestingly this can have very little correlation with the amount of money the person earns.

I’ve met doctors and dentists and other professional people on high incomes who nevertheless are financially stressed. People who live in multimillion dollar houses and who drive flash cars, to people of lesser means all pressured financially. Why is this so?

Well the biggest reason these people are stressed is because no matter how high their income they spend up to their limit. It seems there is something in people’s psychology that encourages them to continue to spend no matter the level of their earnings. Meaning a constant financial struggle and stress especially when surprise bills come in.

People tend to live up to their incomes and so many people end up in a first world poverty trap. How does this work?

Basically, income leads to full consumption, leads to no savings, leads to no excess to invest. This sees people simply cycle around on the spot financially and this can go on for decades.

Short of marrying or inheriting money the only legal way money is accumulated is by working for it and also by investing a proportion so that the money works to make more money.

So why do people not save and invest a proportion of their income, it is certainly not rocket science?

Let’s look at how most working people can easily extract themselves from the poverty trap by implementing a few basic strategies.

I have found that a number of things cause people to maintain the poverty trap cycle.

People can lack financial discipline and become caught up in advertising and the consumer race. People put off getting their finances in order because they believe there will be a better time in the future, which never comes. People believe when they get their next pay rise or pull off that big contract then they will be better off. People think it is too difficult and could not possibly spend less.

In the vast majority of cases these beliefs are wrong.

What do people need to do to get out of the poverty cycle trap?

First and foremost they need to follow one small rule.

The rule says 10% of everything I make will be diverted towards saving and then investment.

I always get a number of reactions to this including:

“I can’t do that I’m broke already and could not afford 10%.”

“10% is too little, it’s not worth bothering about.”

“Alright, I’ll try to remember to do that.”

“I’ll start when my pet bird dies and so my expenses reduce”, or similar excuses.

Now remember, if you do not start some type of very basic financial plan like this chances are you will still be under financial stress for years to come, and this will happen no matter what income level you achieve.

Basically, I have found over the years that the biggest obstacle to implementing this very basic stress relief financial plan is lack of discipline, so what I recommend is not to rely on your discipline.

That’s right, do not rely on your discipline, instead set up a structure that forces discipline upon you for your own good.

What I recommend people do is set up two bank accounts. One their income flows into, the other receives an automatic monthly transfer of funds to the value of 10% of your income and this money is initially allowed to accumulate in the second account.

At this point the objection is usually, “10% is too little it is going to take me a year to get any money together.” I just persist, because in almost every case I have found that the people who have done this after a year are much more happy and relaxed people financially.

But more than this, often something clicks in their minds, they suddenly get it and want to do more with their money and invest. No longer are they stressed when the car breaks down, but interestingly I have also found people do not like to touch the second account because they now understand how it is reducing stress in their lives.

Finally there are rules for the second account.

They include that this money can only be used in extreme financial stress if at all, and I have found even in these circumstances that most people would rather leave the money in the account and  work harder to pay unexpected bills from their first account.

But the primary purpose of the second account is to accumulate sufficient funds to eventually start to invest this money to make more money. This is the key to the very start of wealth accumulation by investment, the first step.

This breaks the poverty trap cycle for people and quickly reduces their financial stress. Begin this system today, do not put it off till tomorrow because it is unlikely to be any easier to implement in the future. Good luck!

A book highlighting some of these basic concepts, it really should be given to all children at school is The Richest Man in Babylon: George S. Clason’s Bestselling Guide to Financial Success: Saving Money and Putting It to Work for You

If you found this information interesting or helpful others may too, please feel free to forward the article or make a comment below.

By Andrew Quin
My blog:
http://quintrade.blogspot.com.au

You may also like:

Don’t fail – The myth of stock market perfection
Stock trading is a mind game
Know yourself – Keeping a stock diary

StockCalcs iPhone App – 14 useful stock calculators

Quintrade – STOCKcalcs

Free Listed or Quoted company publicity – Via Gantt chart, and activity posting

StockRays

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Comment Loading… • Share • Thank • Report • 1 Jun

Jonathan Leschinski, Born in 1990Born in 1990
94 votes by

Nino Aquinas,

Evan Thomas,

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I will start with series of questions I feel are relevant in order to give context to my answer.
(I have also included extracts of some of the top answers, though I emplore you to click through and read the rich content within)

  • What do you regret not doing in your 20s?
  • On money: More is not better. There’s a threshold over which you feel secured and free to pursue your dreams. Work constantly to lower this threshold. It frees you from constraints that you set for yourself.
  • On desire/passion: It’s OK that desire/passion changes over time. Someday the dots can be linked. Before that, follow the passion even as it takes leaps and seems without focus.

—June Chan (just a few of her great points)

  • What are some things that money can’t buy?
  • Unconditional love
  • Time
  • A clean conscience
  • Genuine serenity
  • Genuine human companionship
  • A natural good nights sleep
  • Taste/Class/Character
  • Artistic ability
  • Priceless Items
  • Going back in time
  • Memory
  • Health
  • Immortality
  • Faith
  • Respect
  • Trust
  • Water Pressure

 

  • Can money buy happiness?

“…Most people are spending their money on things that aren’t related to long term happiness. Thus, a lot of people aren’t optimizing their investments and purchases for the goal of long term happiness.”

— Ross Simmonds citing several studies.

With these  questions in mind, and my own personal life experiences, I would have to say: Travel.

At 22 I would argue we are privileged enough to be relatively well off in terms of both time and money.
No longer tied to tertiary education, nor a full time job or family, it is the perfect time to invest in things we just may not get a proper chance to do so later on— due to things as simple as time, family, or health.

  • Invest in experiences.
  • Invest in yourself.
  • Invest in others.

 

How I chose to invest my money in my early 20s

Just my two cents. (get it :P)

Edit:  Just found this one; What would you advise your (hypothetical) 22-year-old college graduate to do with their life?
(hint: top answer is “Consider time your most precious resource”)

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9+ Comments Loading… • Share (4) • Thank • Report • 11 Sep

Abhay Khurana, Duke of New Marketingland (aalio – new marketing, e-commerce, etc. – with a heavy dose of human.)… (more) Duke of New Marketingland (aalio.com), Superdad, Soccer Nut.
18 votes by

Jim Kirkpatrick,

Kunal Pattani,

Devlin Francis, (more)Loading…
First things first – get educated. This doesn’t mean to just become familiar with the different investment vehicles and terminology that surrounds investing. That’s part of it, but you need to try to really understand how money works.

  • If you take a look at today’s economic trends, it’s fairly clear that holding a lot of currency (USD) is probably not the best idea. Holding currency derivatives, like stocks, retirement accounts, etc. are also not so great.
  • The dollar is losing value – try not to hold on to too much of it. If you can, save 10-24 weeks worth of expenses. Then, invest as much as you can in assets that will hedge against the dollar losing value.
  • Things that have traditionally hedged against currency devaluation are 1. Precious Metals and 2. Real Estate
  • Of the two, precious metals are easier to get in and out of and are thus my recommendation.
  • Start with silver if you want more quantity.
  • A good overall portfolio ratio is 9:1 silver:gold.


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Broc Seib  Suggest Bio
23 votes by

LiBing Gavin,

Lilian Wang,

Mustafa Toor, (more)Loading…
1) Save. Wealth can only be accumulated by not spending. Be disciplined in setting aside a certain percentage of everything that comes in. Ten percent is a minimum IMHO. Set it aside, and find a way to make life operate on what’s left. It’s mostly adjusting your habits.

2) Read. You will find endless opinions, advice, tips, insights, books, financial rockstars, etc. Some will be good (maybe great), and many suspect in their authority. But if you consume enough information on finance and investing, you should be able to sort the wheat from the chaff (be keen to scrutinize everything!), and expect yourself to start forming your own point of view on investing. This learning is a constant, long term effort — not a few weeks with a few books. You’ll only do it as much as you really care about it.

3) Do. You should put your knowledge to practice. Apply your research and ideas by laying out a plan for how you’ll invest your money over time to meet your goals. Be prepared to learn from your mistakes, and for the world to not behave exactly as all the books and articles you have read. Adapt your plan over time.

4) Repeat.

Your financial perspective should grow over time, as well as your investing style evolve over years. I wish I knew what I know now when I was twenty two. In fact, I was cognizant enough at 22 to know that I wanted to know then what “others knew now”, yet ironically only time has allowed me to get “here”. And I know I still have much to learn. Maybe you will get there faster than I did.

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3 Comments Loading… • Share • Thank • Report • 11 Dec

John Seiffer, Angel Investor and EntrepreneurAngel Investor and Entrepreneur
13 votes by

Andrew Korzhuev,

Jorge Rybar,

Paul Mulwitz, (more)Loading…
I assume the 22 yr old in question is you so I’ll write as if it is.

The most important thing is living below your means. And stay out of debt. I agree about maxing out your IRA (probably a ROTH IRA at your age). I think you should put it in the stock market – 50% in US equities and 50% in other countries (probably in index funds or ETFs to keep the costs down).

I disagree about rental property – at one point I had 13 different houses – in two different markets and had some staff to help manage them. Even so, they are not as easy as everyone says. And I did OK with them but probably not as well as I’d have done in the market. They are halfway between a job and an investment. You can do great if you hit the market right but not if you don’t.

You should read a very enjoyable and worthy book called “The Only Investment Guide You’ll Ever Need” by Andrew Tobias

And you should beware of free advice like I’m giving. It’s often worth what you pay for it and sometimes less.

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Comment Loading… • Share • Thank • Report • 9 Jan, 2012

Gary Stein, Retired CTORetired CTO
41 votes by

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John Morrow,

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First thing to do is to establish a liquid savings account for emergencies. The old rule of thumb was you should have 3 months of your monthly income in a savings account. For a young person with highly marketable skills that might be enough. I reccomend in today’s job markets, the average person should have one years income in readably available funds like an Internet banks savings account paying around 2% interest.

You should work real hard to get the first three months worth into that account as quickly as you can for safety sake. After that you can slow down and accumulate the last 9 months over the next three years.

If your employer offers a 401k matching program take advantage of it to the maximum amount they offer it’s the best return on an investment there is. If the company offers a dollar for dollar match you make 100% just for participating you can’t do that anywhere else.

If they do not then go to a brokerage or a bank and open up your own retirement account a Roth IRA most likely. You can build cash up in the IRA up to the yearly limit each year and you should do so. Invest that cash in index ETF’s if your not interested in learning how to invest in stocks and for most people you will be better of that way then you would picking stocks.

However if you have an interest and aptitude in finance and can read financial statements you can do quite well for yourself investing a portion of your funds in individual stocks. Just be aware this is talking about investing not day trading. As a young person you can make riskier investments due to the fact that you have the time to recover with the few big winners you will have in relationship to the larger number of small losers you will have. One Apple bought at $75 In October 2006 and selling for $320 a share in December 2010 goes a long ways towards a nice retirement fund. But for each Apple you will have a significant number of failures the trick is learning how to tell the difference as quickly as possible thus minimizing loses and maximizing gains.

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2+ Comments Loading… • Share • Thank • Report • 13 Dec, 2010

Jonathan Eng  Suggest Bio
19 votes by

Jordan Xu,

Charles Ma,

Jane Burton, (more)Loading…
A useful way of breaking down this problem is to address the following orthogonal components:
A) whether/how to save for retirement
B) how to save for medium-term goals like marriage and buying a house
C) what to do with the rest of your money.

This way of structuring the problem implicitly acknowledges that you care about your future self, would like to even out your utility curve over time, and (potentially but not necessarily) want happiness to increase steadily over your life span.
_________________________________________________

A. Investing for retirement
The top answers on this post say to invest in a ROTH IRA. This is NOT necessarily true, and it’s terrible to give one blanket answer when it comes to finances.

You should ask 3 questions regarding retirement investing:
1. Am I making enough money now to save for retirement (and would I be comfortable having this money more or less locked up), or will this money be better used in the next 3-10 years?

2. If I DO want to save for retirement, should I invest in a 401k, IRA, or both?

3. Should I invest in a Roth (401k or IRA) or a traditional (401k or IRA)?

Regarding 1: I’ll let you figure it out on your own, since that depends heavily on the cost of living in your area, the minimum amount your comfortable living on, and the amount your making. I live in San Francisco, and if I were making less than 40k a year I would save little to nothing towards retirement–but that’s just me.

Regarding 2: there exist important differences between 401k and IRA regarding withdrawal penalties and exceptions for withdrawing money. One of the biggest is that you can use IRA money to pay for the downpayment of a first house, with no early withdrawal penalty. More importantly, however, is a) whether your company will match 401k contributions, and b) what funds your company’s 401k plan offers and what management fees apply to those plans. Some companies FUCK YOU OVER by offering shitty investment options for the 401k… you’ll want to invest in a diversified set of index funds, probably covering US, international, and bonds–and possibly emerging markets and real estate if you know what asset allocation you want. (And in case it isn’t clear, having a company match program is the strongest reason to invest in a 401k over an IRA.)

Also recognize that you may be ineligible for traditional IRA tax benefits if your annual income exceeds certain amount (somewhere over $100k), depending on your single/married status.

Regarding 3: this really comes down to your current tax bracket verses expected tax bracket at the time of retirement. Research Roth vs traditional IRA; the same arguments apply to 401k’s. There’s also a subtle but noteworthy difference–that saving money via Roth allows you to invest MORE money in that tax-advantaged vehicle, since an investment of $17k/year after tax (Roth) is greater than an investment of $17k/year before tax (traditional). Lastly, earnings on a Roth IRA/401k are not taxed, but earnings on a traditional IRA/401k are.
_____________________________________

B. Saving for medium-term goals
Identify what your medium-term priorities are, like marriage, downpayment for house, wedding ring, etc. and weigh those priorities against short-term expenses like food, rent, beer money, nice vacations, etc. Once you  understand those priorities and can weigh them against short-term needs/indulgences, allocate money accordingly. Ramit Sethi has great advice here about what to save for and how to balance short vs long term goals. Here’s a rough breakdown of what you might want to save for:

Marriage: average sticker price is $30k… decide how much of that you’ll want to save yourself.

Downpayment for house: varies widely depending on what kind of first house you’ll want. Also be aware that real estate is not as great an investment as traditional thinking suggests… do your research here before assuming that your house will appreciate in value more than that money would have in an index fund. Also optimal percentage of house price for downpayment depends on market conditions… with mortgage rates as low as they are today, you’d probably be better off paying a lower downpayment, even if you’re capable of paying more, and accept a fixed 3.75% mortgage rate over 30 years.

Wedding ring: I dunno, $3-10k?

Everything else: your call. How important to you is: charity, family contributions, vacations, honeymoon, etc…
_____________________________________

C. How to spend everything else

The nice thing about category C is that you don’t have to do much thinking. Once you’ve figured out your priorities (A and B), you can spend the rest of your money however you want. And you can calculate how much you should allow yourself to spend per week on average, based on your after-tax income, your retirement contributions, and your mid-term savings goals. And this is beautiful because it allows for guilt-free spending, which is the best kind!!

Good luck

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Comment Loading… • Share (1) • Thank • Report • 24 May, 2012

Yuvraj Wadhwani  Suggest Bio
26 votes by

Polin Bow,

Ritwik Sahoo,

Amrit Mann, (more)Loading…
I have recently written answers to similar questions. My answer to this question will be similar to those.

My advice would be not be appreciated by everyone, but I suggest you have an open mind when reading my answer. Comments and questions are welcome.

Let’s begin with some wise words.

Investing is a plan, not a product. Plans have goals.
The question does not specify what is your goal. But since you have asked this question, it means that you are looking to make some money by investing money.

It is wise to divide your investing plan into 3 parts.

  • A plan to be secure
  • A plan to be comfortable
  • A plan to be rich


Let’s take them one by one

Plan to be secure

A plan to be secure should do as it says, make you secure. It should protect you against calamities, health problems, accidents etc. A good insurance plan that covers your medical expenses should be good. Also saving money equivalent to a 3 months salary is wise for a rainy day.

       Everyone should have a plan to be secure

Now before I move on to the second or third plans, it is important to that you define your goals. Ask your this question “Am I wanting to be comfortable or am I wanting to be rich??”

This is an extremely important question to answer, as it will determine your investing plan. I would suggest you to read the rest of the answer to get a better idea about what you will need to do if you chose either plan.

This choice is similar to buying a gym membership. You may choose to have a light jog on the treadmill, or you can sweat it out with weights. The choice of your goal determines your actions.

Plan to be comfortable

Here I would agree with Aditya Rathnam, choose diversified mutual funds, dollar cost your investment, manage your equity to debt ratios, save taxes using all the available options and invest for the long term. Also, have a good financial planner who can guide you with your plan. Leaving any financial calamity aside, you should be reasonably well off in the long term.

Plan to be *Rich*

Q: “What is your advice for the average investor?”

A: “Don’t be average”

Why?

Because average investors depend on the market to make money.
Because average investors make money when the market goes up and lose money when the market goes down.
Because average investors don’t have much control over their financial returns
Because average investors think that they take less risk, but they are the ones who take the most risk.

Average investors buy investments and then hope that they will go up. Rich investors know that hope is a poor way to invest.
Rich investors have a plan for their investment when the market goes up, down or does nothing.
Rich investor seek control

So how is an average investor different from a smart (rich investor)??
I hope the following conversation will make things clearer…. (more)Loading…
Comment Loading… • Share (2) • Thank • Report • 24 Mar

Jim Gordon, 65 years of experience, avoiding havi… (more) 65 years of experience, avoiding having one year’s experience 65 times.
28 votes by

Rob McQueen,

Jess Lin,

Hamza Alsbaihi, (more)Loading…
The wealthiest people I know always limited their investments in the stock market to a small percentage of their assets.  They limit their consumption spending.  They pay as little interest as possible, avoiding debt wherever possible (with a couple of exceptions.)

Live within your means. Pay off your credit cards at the end of the month — In nearly 40 years, I’ve only paid credit card interest a couple of times, for example, splitting the cost of a vacation over two months.  Minimize mortgage or car loan interest, etc, by building up a sizable down payment (which should earn interest while it’s building.)

Save and invest for the time when you can’t work.  When you’re young, save as much as possible, save until it binds, for the long term, medium term and short term.  Long term is retirement and old age.  Medium term is for the big expenses of middle age — sickness, education, etc.  Short term is for lodging and for investments in anything with ANY risk.

A useful tactic is to invest in property that other people will pay to maintain and to finance for you.  Let tenants pay you enough to keep a property up and to pay the mortgage.  After an initial period of years, rents are likely to allow you to save or to accelerate loan principal payments and reduce your interest costs, while keeping the rents reasonable enough that you can always find good tenants.  If you invest in business, take care that the vital capital doesn’t reside in the head of whoever runs the business.

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Comment Loading… • Share • Thank • Report • 3 Jan, 2012

Eric Rosenberg, Finance blogger at Narrow Bridge Finance a… (more) Finance blogger at NarrowBridge.net and finance MBA
7 votes by

Rob McQueen,

Daniel Thomas,

Jane Burton, (more)Loading…
It is important to start investing for retirement when you are young. I have written a lengthy post about how to invest depending on your age here: http://www.narrowbridge.net/2011….

In your 20s, you have a long term investment horizon and can take some risks in your investing strategy. I would make sure to take advantage of the tax benefits of a Roth IRA and max out your company’s 401(k) match to start.

In your investments, a mix of index funds (low fee funds that follow the markets) and diverse mutual funds that give you exposure to small cap stocks, international and emerging market equities, and some fixed income securities for stability.

I also wrote a post specifically on investing for young people at http://www.narrowbridge.net/how-….

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1+ Comments Loading… • Share • Thank • Report • 11 Nov, 2011

John Morrow, Proud of my scars.Proud of my scars.
51 votes by

Josh Siegel,

Toby Thain,

Wellington W. Sculley, (more)Loading…
My personal example, which I strongly recommend you study and then strive to never emulate, involved my strategy.

Roughly one third of my income went towards living expenses.

Another third went towards wine, women and song.

The final third I wasted.

I enjoyed a staggering 0% return on my investment, in financial terms, but a never repeated 100% return in terms of enjoyment of my meager resources.

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2+ Comments Loading… • Share • Thank • Report • 3 Jan, 2012

Keinosuke Johan Miyanaga, 宮永 計之介宮永 計之介
35 votes by

Cameron Ellis,

Hao Nguyen,

Nina Chan, (more)Loading…
Water yourself, not your wallet. You are your #1 asset. Invest in yourself, your passion, and your creations. They all grow and will eventually empower you financially, but also as a good human being. Everything else withers and will suck the life out of you.

If you are 22, the only thing you should be investing in is yourself. Are you young, healthy, ambitious, capable, and have time to spare? There is no money in the world that can match these assets. People pay good money to look or feel young again, to overcome physical challenges, to cope with illness, to be able to dream once again… These are the things you most likely possess now, and in abundance.You are rich already. Yet, money is on your mind? Could it be all peer pressure and social noise? Somewhere you learned money was important. If you could trace the source, you would know if it truly is important for you now.

Think of something you take for granted, such as your health, your aspirations, your parents… Now imagine them gone. Now imagine having no money. Which is worse? Think of all the assets you have, and invest in those assets. Money is an asset, but it’s like water. Think of people with huge bank accounts as people with huge water reservoirs in their backyard. Sure, it’s valuable. You need water when you’re thirsty. But would you sacrifice what you have for an abundance of that? Maybe? Don’t!

Investment banking is a huge industry, and there are professionals who live by selling financial advice. So there will always be professionals with good intentions who have something constructive to say about what to do with your money. Just remember though that they are the only ones that get paid regardless. They need you for them to make a living, meaning that ultimately they are serving themselves first. They will sell you on what is sure and safe, but  if it turns out not to be, they will apologize if they are polite, genuinely feel bad if they are sincere, but they will refund your money. In fact, those that truly believe in what they preach probably put there own money somewhere also. When they get burned, they suck it up just like everyone else, except with the added knowledge that they are professionals, and that they lost money other people’s money also. Bernard Madoff compiled a ponzi fund worth billions of dollars with well intended, goodhearted, financial professionals signing up customers wholeheartedly believing it was a good thing. It’s a tough job.

As long as you are making a bet, it is gambling, period. A ton of smart people get burned everyday by the insiders that get away with it everyday. Average people are at a total disadvantage. The last crash kicked people out of homes and wiped out retirement funds. And they were the people playing it safe, most often guided by professionals! Financial planning is for when you have things to plan. Like mortgages, college funds for your children, retirement. It’s not for 22 year-olds. Even then, I say the best stock to own is stock in your own company.

You certainly should have safe guards such as emergency funds for rainy days, etc, but hopefully in a real emergency you have your parents to back you right? Or a good friend’s couch? You should have someone force you to have health insurance and car insurance, but they shouldn’t be on your mind.

Invest in yourself. Invest in your passion. Put your money where your heart is and not with any financial adviser. You are a vibrant human being, not a spending machine. This will earn the highest return guaranteed. If your passion is with investing, then, and only then, so be it.

If this in anyway sounds vague to you, maybe you do not have anything you’re passionate about at the moment. If so keep searching!

The only exception is if you are passionate about investing. Take Warren Buffet or George Soros or your favorite investor guru of choice and ask yourself if they were in it just because they were looking for somewhere to put their money.

Even investing requires passion.

This makes it an example, not an exception to this rule:

Water yourself, not your wallet. You are your #1 asset.

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1+ Comments Loading… • Share (5) • Thank • Report • 12 Mar, 2012

Anshul Shah  Suggest Bio
4 votes by

Tiago Pinto de Sá,

Emilya Burd,

Pawel Czaus, and

Rao Fu
In addition to all the answers here, I would highly recommend that you actively manage a portion of that capital by yourself.

It should be an amount that won’t break your bank if you lose it all, but it should be enough to evoke some kind of emotion in you if you do lose it.

The reason for this is because most people do not understand the concept of risk, until they lose a lot of money. Read The Market Wizards, most of the greatest traders have blown up their accounts more than once before finally achieving superior returns.

Not saying this is the only or best way, but in my opinion, it is much more affordable to potentially lose say $5k when you are young and develop an understanding risk early on as a result, compared to losing $100k when you are older.

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Comment Loading… • Share • Thank • Report • 29 Oct

Terry Peng, Professional InvestorProfessional Investor
To answer the stated question, one should first answer the question “How should a 22 year-old invest his/her capital“. The distinction here is an important one, as financial capital for most 22 year olds is dwarfed by the value of their human capital. Even if the ultimate goal is to maximize financial wealth, consider your career earnings stream using any reasonable assumptions. The present value of this stream of cashflows is likely to be 100x or more of whatever savings has already been accumulated. The conclusion I would have is that your time should be allocated accordingly — not very much time should be spent managing financial capital vs. human capital. There is a non-time-consuming solution which is to invest in a market index fund. Another solution is to hold cash, which incurs no nominal risk but does incur the risk of purchasing power decline through inflation. Either way, the capital at risk is small relative to your overall “portfolio” of financial + human capital. Perhaps the best investment would be an investment in your human capital, which doesn’t necessarily mean formal education, but rather any steps that advance you toward your ultimate goals.

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Comment Loading… • Share • Thank • Report • Tue

Umang Rungta, Number CruncherNumber Cruncher
3 votes by

Stephen Rogers,

Ritwik Sahoo, and

Akash Gangil
The best investment will be in your own education.
But if you are already too bored of studying (like me) then you can try something high risk and high return…….Like start-ups, share market, high risk equity linked bonds, real estate or even Poker !!!
This is because you will only earn more money going forward, so the smaller gains made safely would mean nothing to you and even of you lose all your investment you have all the time in the world to earn it back.

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Comment Loading… • Share • Thank • Report • 17 Sep

Abir Bhattacharyya, I am a software engineer & data analy… (more) I am a software engineer & data analyst & I like making things
4 votes by

Muyiwa Saka,

Kevin Ng’etich,

Alex Marin, and

Anonymous

  1. Simple, start your own business. Put all your money and time into it.  2. Do this for 2 years. 3. Turn 24 4. Ask again on Quora

You will learn infinitely more than putting money in the stock market, which you can & should do later…

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2+ Comments Loading… • Share • Thank • Report • 14 Aug

Pratyush Agarwal, pratyushag.wordpress.compratyushag.wordpress.com
4 votes by

Evan Thomas,

Melissa Tsang,

Kalyan Reddy, and

Samar Singla
Invest in Travel and Education (books, experiences, things that help you grow as a person). The future returns from these investment at an age when you are still quite maleable is very high.

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Comment Loading… • Share • Thank • Report • 5 Nov

Matthew Kane, Co-Founder of HedgeableCo-Founder of Hedgeable
1 vote by

David Shackelford
Most of the discount brokerages do a good job for people in your age group in terms of providing the tools to make good asset allocation decisions. TD, Fidelity, and Schwab let you buy ETFs free these days, so it is really cheap to setup a long-term portfolio. I would caution against just sticking your assets in a Target Date Retirement Mutual Fund, since they are a marketing gimmick and in general a rip-off. They have become the default option on most 401(k) plans and many advisers will want you to allocate to them in an IRA as well.

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Comment Loading… • Share • Thank • Report • 5 Mar, 2011

Femi Fasoyinu  Suggest Bio
1 vote by

Alec Dibble
First, set up pre authorized payments into your savings account. Preferably if you can save in a tax-free shelter, this is where you should put the money. Since you are young (22) you should take on a higher risk profile than someone who is older. Over 50% exposure to stocks. Look for a good dividend paying stock to build as a basis for your portfolio. The compound interest it offers with reinvestment of the dividends (if you should choose this option) will greatly be rewarded as you grow older. Invest in companies you understand. And of course don’t just take my information. Do your own due diligence and seek counsel from your parents or a trusted financial advisor. Good luck!

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1 Comment Loading… • Share • Thank • Report • 17 Jan, 2011

Dana Baldwin, Christian, Husband, Father, Database … (more) Christian, Husband, Father, Database Administrator, Music lover, Humorist
9 votes by

Yousuf Hafuda,

Srikanth Chikkulapelly,

Zoya Ali, (more)Loading…
I didn’t read through all the posts before mine, but there’s some good info here. My spin is a combination of Dave Ramsey meets Bogleheads…

1. Put $1k in the bank and use it for emergencies instead of credit cards (like most of us do)

2. Buy 20 year level premium TERM life insurance now, while you are young & as healthy as you’ll likely ever be. Get 500k in coverage minimum. It’s like $25 a month for young healthy people.

3. Pay off all debt except your house (if you’re buying one)

4. Start saving for your next car so you can pay cash. Put your old car payment into a mutual each month for 4 years, something not too risky like corporate bonds or a balanced stock/bond fund. Consider all costs related to the investment and CHECK OUT VANGUARD for no-load (no sales charge) low fee index funds. Buy a good used car, and repeat this process over the next 4 years.

5. Save 3-6 months of your expenses in cash in a money market fund or regular savings account, meaning someplace safe where you can get to it quick without waiting for securities to sell. Don’t spend it unless you become unemployed or disabled (a real emergency)

6. Start saving for retirement. Invest in your company’s 401k up to the amount they match. If they don’t match, do a Roth 401k, as long as they have low cost index mutual funds that you can diversify with. For details, google “Bogleheads”.

7. Save up for a down payment on a home.

8. Get married, have some kids & live happily ever after

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1+ Comments Loading… • Share • Thank • Report • 10 Dec

Mike Schmidt, EngineerEngineer
2 votes by

Navied Shoushtarian and

Andrea Hobby
I have a philosophy that “things happen for a reason” – if you surround yourself with the right people.

So, after and during Uni I have spent a lof of time building a powerful network – using every cent I could to meet new and exciting people. It just so happens that I fell into the startup scene. First, with the Next 36, then at Queen’s University and more recently FounderFuel in Montreal.

Startups can open doors and give you experiences like no job can. Long story short, I’ve invested all of my time and money learning and building. I’ve met amazing people and gained invaluable experiences. The odds are always against startups, but at the end of the day I am building something that I love with amazing people.

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Comment Loading… • Share (1) • Thank • Report • 12 Nov

David Ross, UI Designer, poker and pool playerUI Designer, poker and pool player
1 vote by

Chung Vo
This is a very good book about how to go about saving for the future. It’s a pretty quick read but full of good info:

The Wealthy Barber, Updated 3rd Edition: Everyone’s Commonsense Guide to Becoming Financially Independent: David Chilton: 9780761513117: Amazon.com: Books

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Comment Loading… • Share • Thank • Report • 18 Dec

Adrian John Cartwood, I answer Quora questions about moneyI answer Quora questions about money
4 votes by

Nicholas Pickering,

Andrew Ferguson,

Sunayana Sen, and

Anonymous
I completely disagree with conventional financial wisdom, as so eloquently laid out in Aditya Rathnam’s answer.

I’m much more in Jonathan Leschinski’s camp, yet as a 22 year old he could use a few ‘adjustments’ to his answer based on the experiences of somebody a little older and, perhaps, financially wiser.

Firstly, what’s wrong with Aditya’s approach?

It’s simple: inflation.

A simple rule of thumb to deal with inflation is to roughly halve the amount that you think you can accumulate for every 20 years that it will take you to get there.

So, at 22 years old, that’s two halvings by 60, or that cool $1 mill really has the purchasing power of just $250k today.

At a 4% withdrawal rate, $1 mill. in ~40 years, will give you a retirement salary of approx. $10,000 (in today’s dollars).

Say you want to retire on the equivalent of $40k, you would need to find a way of saving closer to $4 million by the age of 60 … assuming that you want to aim so low … and, assuming you want to ‘work for The Man’ until you turn 60.

Which brings us to Jonathan:

If you want to travel, have fun, fully experience life and so on, the best way that I can think of is to invest some of a 22 year old’s time & money in starting a part-time business.

If it grows big, well, you won’t have to worry about work for much longer, and you’ll be able to travel and do all that stuff Jonathan wants you to do soon enough.

And, if it doesn’t …

Worst case you learn a lot from failure.

But, the most likely case is that you will earn some part-time additional income that will (a) boost your savings hugely (in which case, you can now meaningfully follow Aditya’s advice) and (b) fund a bit of extra fun, travel, and life experience as Jonathan recommends, as you go along.

Following this strategy, my son has generated $200k in his bank account before he even finished high-school (averaging about half an hour a day of extra-curricular ‘work’ on various online businesses).

What a boost to his travel plans, his investment account, and his Experience Bank …

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1+ Comments Loading… • Share • Thank • Report • 14 Nov

Seth Wagoner, ThinkerThinker
1) if you are a software engineer, or a good entrepreneur, learn what you need to do or join a startup. Learn enough that they want you for your talent, not your money. There are lots of free courses online, don’t bother paying for a placemat from a major institution unless you’re loaded.
2) Read ftalphaville.ft.com and research the big financy words until you can more or less understand everything they write on that blog. This may take months, but until you can do so, you probably don’t know enough about the markets to invest with a reasonable chance of success. Note that this applies to 99% of all investors, but that other 1% will take you to the cleaners. You want to be in that 1%, or it’s a bigger gamble than you realize.
3) in the meantime, diversify into safe-ish low yield bank accounts. There are no safe high yield investments or bank accounts right now – 1% yield is more or less winning, any more than that may mean you are taking on more tail risk than you realize. The Banks in Cyprus were offering 10% or more .. Right up until they went bust. To understand this problem in greater detail, start reading FTAlphaville.
4) Also read ‘Fooled by Randomness’ by Taleb, and/or his later books.

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Comment Loading… • Share • Thank • Report • 22 Apr

Randy Tudy, Teacher, Researcher, BloggerTeacher, Researcher, Blogger
I suggest that to invest your money you must start with investing on yourself.  Educate yourself about investment.  That’s how you make the path towards success.

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Comment Loading… • Share • Thank • Report • 27 Feb

Stefan Kojouharov, Currently, I am involved in a number … (more) Currently, I am involved in a number of business in a number of areas: Bars & Restaurant, Jewelry, Retail, Technology
This depends on a number of different factors such as your income your expenses your goals and the amount of money you’re working. Lastly and most importantly what is your skill set as an investor.

If your goal is to have a safe retirement much of the advice provided herein is sufficient; however, if your goals are very intrapreneurial please read below.

1) The first thing to do, is to lower your expenses. Whatever  level your  expenses are at right now consider lowering them by 20 or 30%.
2) The second thing to do, is to increase your income with a focus on learning and improving your skills.
3) The third thing to do, would be to save at least $10,000 and to have that as a rainy day fund in liquid cash or 3 to 12 months worth of expenses.
4) Once you have reached your rainy day fund goal, put all other moneys aside as an Entrepreneurial fund.
5) Develop business start up ideas that have the following qualities (a)  Within your skill set (b) Fundamentally sound from a cash flow perspective (c) Involve the use of dynamic partnerships and networking (d) In growth sectors (e) Have a high ceiling and potential (f) Comply with the rules of affordable loss: in other words your ideas should have very little start up cost or no start up costs and the worst event you would only be risking money that you can absolutely afford to lose (an example of this would be $3-$500 to test a business idea)

To learn more check out www.howtomoney.org

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Comment Loading… • Share (1) • Thank • Report • 26 Jan

Anonymous
4 votes by

Srikanth Chikkulapelly,

Devlin Francis,

Vinod Rangwani, and

Siddhant Dwivedi
If you have enough capital to pump into real estate, especially land, just go for it over other things. Run a farm on it, do something interesting.

Financial investments will only get you a little far, not too much unless you are a Warren Buffett or JhunJhunwala. Invest in interesting experiences and some of them will definitely help you yield better financial rewards eventually.

And I’m not even talking about all other beautiful things you can do with your life with spare cash when you are 22!

But for financial investments, from a more Indian context:

Max out the Rs 100,000 tax exemption under section 80D/C –

  • The best form of investment here is in the Equity Linked Savings Scheme since they invest in the market for you and interests are also non-taxable with a minimum lock-in period of 3 years. This might not be available post DTC implementation in the 12-13 or 13-14 financial year
  • 5 year lock in fixed deposits. The interest is taxable but you will get a decent return.
  • Insurance – Don’t mix Insurance with investment but do get some cover for youself and your parents.
  • PF, PPF, NPS – All offer a very good tax free long-term (10-15 years) plan around 8-9% p.a growth at no risk. Put around Rs. 50000 in here annually.


Looking at direct investments

  • At 22, you can afford to maximize risk and exposure to equities and likely to get good returns. So put 40-60% of your investment wealth into direct stock market trading, mutual funds (with at least a lock in of 1 year) and 5-8% of this into gilt/metals/commodities. Split your exposure equally between large and medium/small cap companies. Avoid IPOs.
  • The rest you can split and put into medium term debt funds (Some risk, higher post tax returns adjusted for indexation compared to FDs.
  • Fixed Deposits in banks
  • Private company NCDs – Target 12.5% but at risk depending on credit rating of company
  • 5-10% into fun part time projects that might interest you


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Comment Loading… • Share • Thank • Report • 7 Nov

Anonymous
Assuming you are located in the USA:

Do you have a clear direction: skills and motivation? Invest in whatever it takes to further your goals: learning (not the US ‘higher education’ scam which leads to debtors’ prison), networking, maybe starting your own business.

No clear direction? Invest in a backpack and a plane ticket to a foreign country, and promise yourself not to return for at least 6 months. Learn a second (or third) language.

Got a decent income from a J-O-B? Alongside all the ‘solid’ advice about retirement, consider the possibility that: 1) any money you put in a US bank will disappear*; 2) any money you put in a brokerage may well disappear**; 3) any money you put in a government-approved retirement plan WILL disappear.***

* not all at once, but 1/4% interest – 5% inflation = -4.75% return, and it will get much worse
** it is a very rigged game (and not in your favor)
*** no doubt into a ‘safe’ government ‘investment‘ (for your own protection, of course), unless you’re very clever about it

Got serious money? Get your ass and assets out of the United States. Learn about ‘multiple flags.’

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Comment Loading… • Share • Thank • Report • 28 Feb

Philippe Desmarais  Suggest Bio
Travelling around the world is probably the best investment a man can make

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Comment Loading… • Share • Thank • Report • 1h ago

Barbara Meynert, Business leader and philosopherBusiness leader and philosopher
I would just add that however you invest, bear in mind that you will likely live to be 100. By then there will likely be no government pension available. So plan way ahead.

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Comment Loading… • Share • Thank • Report • 7 Feb

Rod Ruhl, Entrepreneur – It’s in the numbers!Entrepreneur – It’s in the numbers!
Ching Ho

Building on your answer to “How should a 22-year-old invest his/her money?

1. Great background research on Cyprus! It’s certainly not socialist and just siffered from over risky banks (with no knowledge of what they do. A common issue with small country banks)

2. Your example (just as you mention educatio being a fool’s scam) is just a fool’s scam itself. You can’t PICK stocks as a small time investor and expect constant 10% returns.

3. The only way to get 10% is what you mention in the end to “ride bubbles” and invest safely in very diversified assets during calm times then shift to more focused assets when bubbles implode.
Tech Bubble? Invest part of your money into  larger safer tech companies and expect a bumpy 12-24 month ride and excellent returns thereafter
Housing Bubble? Invest in small central locations, easy to rent out and sell off at a later stage when the market picks up.

4. It is hard to predict the moment a cycle peaks or hits rock bottom. So you need to understand that you will never get the timing right. But if you don’t follow everybody else, you should be able to achieve 10% over time.

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Comment Loading… • Share • Thank • Report • 16 May

Alex Xu  Suggest Bio
invetst the knowledge which can teach him/she to invest in future.

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Comment Loading… • Share • Thank • Report • 15 Feb

Johan Berg Fossen  Suggest Bio
100-your age(22) = stocks (buy shares of a stock fund in your bank), the rest into variable safer securities. (money market securities e.g.)

78% stocks, 22% safer routes,
next year, 77% stocks, 21% safe.. etc etc

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Comment Loading… • Share • Thank • Report • 22 Feb

Dinis Passarinho  Suggest Bio
Save. When I was younger I used to be way more materialistic in buying the latest fashion trends, modifying my car but now it has changed. I still have the same (if not more) disposable income yet I have decided to allocate it in various other investment products. Take at least 10% of your monthly income and invest it in a mutual fund. I am diversified in a few mutual funds. You will thank yourself in 40 years when you have the ability to cash out and enjoy. I wish I hadn’t spent over $100k on stupid nonsense in my 18-21 year old life period but hey life goes on, right?

Another thing = take risk. Have an idea? Really believe in it? If it will cost you $10,000 to bring it to life, justify the risk and be lean on your approach.

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Comment Loading… • Share • Thank • Report • 13 Jun

Robert Leonetti  Suggest Bio
There are 3 ways that money can work. It can work For you, Against you, or be Neutral. The trick is that we’ve all learned to be good consumers and we overvalue our time, so that money works against most people. We look at money for what we could be buying rather than what it can do for us. Back to our 3 ways, the ‘Neutral’ aspect of money is the way we probably like to think of our finances. Money comes in, money goes out. If your bills are less than your income, you’re ok. If not, then you’re in trouble. In the ‘Against’ model, credit and loans are the big enemies. They lull you into the idea that you can buy now and pay later, but you never do. You pay and pay and pay until your expenses are equal to (or greater than) your income and you slowly drown in your own debt. In the financial world, there is a huge emphasis on ‘establishing credit’ which is basically the gateway drug into this particular addiction. And don’t get me started on student loans. Be assured that someone else will be making money from your pain. And the third way of money is the ‘For’ model. This is where money works for you but it is not easy because it’s not intuitive. As a consumer, we weigh our costs and benefits and ask ourselves if the enjoyment of a thing is worth the cost (most people overvalue our own value by at least a factor of 10). That means that when we see $300, we think about what we would like to do with it, what we could buy with it. The problem with money working for you is that it doesn’t meet that standard. A good investment makes 6%. That means you will make $6 on $100 over the course of a whole year. So you don’t get to spend the $100, just for the privilege of making $6. And if you wanted money to really work for you, say to make $60,000 a year, you’d need $1,000,000. What else could you buy with $1Million? Even a great investment of 10% barely shifts the equation. Why would you tie up $600,000 just to make $60,000? Why not just spend the $600K and have a great time? Well, this is where rich people win and most others lose. Most people blow the $600K, then another $600K (no matter how much money you have, you can always spend more) that they borrowed from a rich guy, who eventually takes all their income, reposesses their house, and lives off the pain of Mr Big Spender. See? Counterintuitive. You have to go without, you have to save, you have to invest, if you want to have real money and not be owned by it. Ask someone in their 40s or 50s. They’ll back me up here.

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Comment Loading… • Share • Thank • Report • 30 Jan

Steve Dicay  Suggest Bio
I would say at any age save at least 10% of your revenue each month. Money that you never touch and use to get interests over years.

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Comment Loading… • Share • Thank • Report • 15 Feb

P.R. Mercado, Contemplative DebaucherContemplative Debaucher
3 votes by

Sebastian Mitchell,

LiBing Gavin, and

Ian Corbin
Booze. You won’t have mansions at 70, but you will have memories.

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1+ Comments Loading… • Share • Thank • Report • 6 Nov

Chase Roberts, BoxBox
The best ways to put your money to work over an extended horizon is to make sure it is well-managed based on your risk tolerance and income needs. Here are a few companies doing just that. They are all venture-backed and boast solid investors. I like their models better than a traditional manager (Edward Jones, UBS, Smith Barney, etc.) b/c they don’t force you to deal with inept managers using obsolete investment techniques + these companies have much lower fees:

  • Wealthfront
  • Betterment
  • FutureAdvisor


To help you choose, here is a Quora article comparing Wealthfront to Betterment. My impression is that the former are a little ahead of FutureAdvisor, but not so much so that the service isn’t compatible with your needs.

The aforementioned companies manage the money for you, while a company called Riskalyze helps you figure out what to invest in and then allows you to do it through your own broker. All 4 of the companies use similar techniques to determine your ‘risk profile’, however, I’ll say Riskalyze is probably the most novel in how they assess it. It’s fun, play around with it. If you choose this route, here is an online broker comparison to help you compare brokers. I use TradeKing personally, and prefer it over Fidelity and TD Ameritrade, both of which I’ve used in the past.

Another one worth considering is Covestor. This firm shows you an investors returns and enables you to automatically make investments that mimic their own. The manager is paid through a small fee (some % of the investment generally less than 1.5%). Its basically like investing in a hedge fund without having to share your returns with the manager via carried interest. They are waving all fees that go to Covestor (cutting that ~1.5% in half) if you sign up before 2013. I would look at Covestor as an aggressive way to make some solid short term gains (>1.5 yrs) and the others as a way to grow your money over the long term. Keep in mind, historical returns are no guarantee of future results.

Hope that helps.

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Comment Loading… • Share • Thank • Report • 23 Jan

Ron Rule, eCommerce Strategist, Social.me FoundereCommerce Strategist, Social.me Founder
I always encourage people to be completely debt free before they invest.  There is no point in investing at today’s return rates if you’re paying interest on loans – your investments can yield no return (or a loss), but your loan interest will always be there.  So take any extra money you have, pay off your credit cards, car, etc.  At 22 years old (or any age for that matter), your greatest tool for building wealth is your income – not a few thousand bucks you have put aside.  If your income is going out the door in the form of monthly payments, imagine how much you would have available to invest if all of those bills were gone.  That’s when real wealth creation begins.

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Comment Loading… • Share • Thank • Report • 3 Feb

Michael A. Braganca  Suggest Bio
1 vote by

Dana Baldwin
If you are investing long term, I would stay away from ETFs and look at no load funds. The fees on ETFs are higher that funds and the purpose for them is if you want to trade intra-day… which you should not be doing if you are investing in your future.

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Comment Loading… • Share • Thank • Report • 20 Dec

Bobby Walter, Just a guy in CO.Just a guy in CO.
1 vote by

Sweta Reddy
Start reading Mr. Money Mustache and find your own happy medium – Mr. Money Mustache.

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Comment Loading… • Share • Thank • Report • 28 Dec

Jesse Neufield, JPLEDLighting pays for itself in less… (more) JPLEDLighting pays for itself in less than a year
1 vote by

Micah Williams
Buy real estate.

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Comment Loading… • Share • Thank • Report • 1 Jan

Lenin VJ Nair  Suggest Bio
Of course. I started investing when I was 20. You should invest your money mainly in technology stocks. Well, I would suggest looking through Wall Street and see which companies are doing good and which are expected to in the future, and decide. It is risky, but still decide.

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Comment Loading… • Share • Thank • Report • 11 Jan

Paras Trehan  Suggest Bio
You got savings at 22!

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Comment Loading… • Share • Thank • Report • 5 Mar

Garima Kalra  Suggest Bio
I would advise you to first understand how to invest in stocks safely by learning a few basics of stock investing. Read some books written by well known stock investors like Warren Buffet, Peter Lynch etc and know their strategy of analyzing stocks fundamentally. There are a lot many websites which guide their users in taking right investment decisions. One such site is http://www.moneyworks4me.com/abo…

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Comment Loading… • Share • Thank • Report • 4 Jun

Raksha Bhatia, Blogger at http://www.velagyan.comBlogger at www.velagyan.com
1 vote by

Swathi Dharshna Naidu
Make Three Parts – Invest First Part in Financial Schemes | Invest Second Part in Personal Growth (Education,Skills) | Spend the rest the third part.

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Comment Loading… • Share • Thank • Report • 17 Dec

Ben Hubbard, Founder @olimdives.comFounder @olimdives.com
2 votes by

Royce Quintana and

Prateek Chandra Jha
Knowing where to invest and how to invest are both important. I always reccomend practicing before you invest in the stock market. Try Olim Dives, it is a social network for investors where you can follow active traders in real time and ask questions etc. The Investment Network – Olim Dives

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Comment Loading… • Share • Thank • Report • 8 Dec

Mark Simchock  Suggest Bio
1 vote by

Anonymous
Invest it in yourself in such ways that you will eventually be in a position to start/own your own company.

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Comment Loading… • Share • Thank • Report • 12 Mar, 2012

Paul Mulwitz, Retired Electrical Engineer, Light Pl… (more) Retired Electrical Engineer, Light Plane Pilot and amateur Builder, Investor – mostly in common stocks of US companies.
I realize I am echoing several previous answers to this question, but I will do so anyway.

The most important part of anyone’s personal financial plan is savings.  You should always save some of your income for future use.  Avoid borrowing at all costs.  The more you save the more wealth you will accumulate.  As soon as you start borrowing money you will be in debt for the rest of your life.  (OK, it may be good to borrow money to buy a house.  Of course this depends on the age old wisdom that real estate prices can only go up.  OOPS, they went down, big time, a few years ago and have stayed there.)

There are many ways to invest your savings.  You must decide whether to focus on capital preservation or maximizing income and gains from your investments.  The classic advice on this topic is to focus on gains when you are young and allow your priority to change to capital preservation as your nest-egg grows.  For the best gains you can expect with reasonable risk the best investment over the last 100 years has been common stock in US companies.  These have gained an average return of 10 percent per year over that time.  Diversification is the only protection you can have with this sort of investment.  That means investing in a varied assortment of things rather than putting all your eggs in one basket.

Back to basics.  The key to accumulating wealth is to save money.  When you get a raise put the extra income in your savings account instead of increasing your level of living.  The harder you fight the urge to spend all your money and any more others will lend you the better off you will be.

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Comment Loading… • Share • Thank • Report • 1 Sep

Pravin Cumar, ITC, Marketing.ITC, Marketing.
5 votes by

Rick Rick,

Ritwik Sahoo,

Shekar Ram Loganathan, (more)Loading…
Warren buffet once said that “I have wasted 11 years of my life without investing“.Its better to start early investing. Better idea is starting wth SIPs systematic investment plan , where you can invest a particular amount every month. Your money gets compounded and you can yield great returns after some 10 years.

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Comment Loading… • Share • Thank • Report • 4 Feb

Martin von Braun, Scientist & DesignerScientist & Designer
Invest it in your education.
Go to university and enjoy your life while being still young. 😉

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Comment Loading… • Share • Thank • Report • 7 Jan

Sunny p. Badalera  Suggest Bio
Why not start a business

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Comment Loading… • Share • Thank • Report • 9 Jan

Qrrbrrbirberel bob Smith  Suggest Bio
The Official Site for the Infinite Banking Concept – R. Nelson Nash

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Comment Loading… • Share • Thank • Report • 2 Apr

Angela Marder, I am a Soc/Pro Minor Writer…from UC… (more) I am a Soc/Pro Minor Writer…from UCSB…Represent!!!
Save

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Comment Loading… • Share • Thank • Report • 16 Dec

Teresa Farrell, Addicted to freedomAddicted to freedom
Invest in yourself. Listen to your heart. You need to be responsible and take care of your obligations but between saving the money and expanding your knowledge, abilities, experience, I would say this…have enough money in savings to carry you for several months if needed. Make sure you have heath insurance, etc. and then listen to your heart…some experiences are only for the young and cannot be repeated. If you run across something like that and your heart jumps at it….GO!  You cannot save your way into security. Money is only energy…saving or hoarding it can stop the flow…

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Comment Loading… • Share • Thank • Report • 17 Feb

Ankit Agarwal, Learning To Make My Money Work For It… (more) Learning To Make My Money Work For Itself Everyday
I may not be an authority on the subject and the question is again generic.

Also, there is no thumb rule when it comes to investing because things like risk appetite vary significantly from one person to another. However, here are some points for a start

1) Create a rough budget with what your near term and long term goals are and what is the corpus that you need to achieve them
2) Also identify how much cash can you spare every month come what may. One needs to account for the rainy day so it is expected that you have some liquid cash stacked up in the bank account
3) Now for the investment plan. A good starting point could be to get an idea of your risk profile. ( Say, you are comfortable with a 10% appreciation with a 2% depreciation or a more risky 40% gain with 30% depreciation instrument)
4) Given the age (22), majority of the investments should ideally rest in Equities since they are most rewarding. Given the age and possibility of increasing wages, around 80-80% of invested capital could go into stock markets.
5) Develop some understanding of investing in Stock Markets before you make the plunge. However, if direct investments sound risky you can consider investing in Mutual Funds ( Equity, Index etc.)
6) Personally given the lack of time, i have found Mutual Funds work best for me since i dont have to actively watch the market frequently
7) Rest 10% is something that i split across buying Insurance and some bonds. This is primarily to save taxes but other than that, i dont really see the point in them

A long answer but i hope it made some sense

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1+ Comments Loading… • Share • Thank • Report • 13 Dec, 2010

Justin Pollard  Suggest Bio
I recently came across a website by the name of wealthfront.com, which seems a pretty low maintenance way to invest.

Outside of wealthfront, you want to look for the funds with the lowest management fees. Vanguard is unbeaten in that regard.

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Comment Loading… • Share • Thank • Report • 26 Sep

Harsh Saraswat  Suggest Bio
Believing the Indian Growth Story and Keeping 2020 in Mind any 22 years old should Invest only in two things : Real Estate and Equities.

As the savings of a 22 year old won’t be enough to buy a decent Real Estate straight away looking at the prices in India , he should simply buy real estate in some schemes given by builders or Take a Loan and Invest in Real Estate without fearing that he doesn’t have enough funds as of now to buy real estate.

Secondly , But Very Importantly 50% of savings must be invested in Equities, Many Indian Companies specially the Infrastructure companies and Power Companies are ruling at a very low and attractive valuation and if you believe in the Indian Growth Story then these companies would do wonders in coming years. I have known people who have bought shares of companies as low as 20 paisa and have sold them for Rs.200 But it is a risky class of asset so you should always identify companies with good management and good corporate governance and expert guidance is always beneficial.

There are not many people who have great businesses or salaries but they have made great wealth because of their saving capabilities and making right investments at correct time.