Advice for a newbie investor?

[+ bigjoey]

8 minutes ago, The Big Guy said:

Not to oversimplify, but my advice is to learn from a recession business environment and apply it in future investment decisions and business cycles.  I have found over 40 years of investing that I made more money by far from the decisions I made during bad times as opposed to the decisions I made during good times. In 2008 - 2010, I nervously chose  to invest in stocks during a terrible recession and have been rewarded well over the Long Term.  Good luck to all.  

Warren Buffett would agree with you and over the last few weeks has been buying while stocks are “on sale.”👍

[mike carey]

6 minutes ago, bigjoey said:

Warren Buffett would agree with you and over the last few weeks has been buying while stocks are “on sale.”👍

At the risk of derailing a discussion that includes potentially useful advice like this, the thread asks for advice for newbies. Trying to pick high and low points in the market is something that professional investors often can't do. New players are often best advised not to attempt it. Plenty of the advice offered has been good, of course.

[+ FrankR]

59 minutes ago, mike carey said:

At the risk of derailing a discussion that includes potentially useful advice like this, the thread asks for advice for newbies. Trying to pick high and low points in the market is something that professional investors often can't do. New players are often best advised not to attempt it. Plenty of the advice offered has been good, of course.

That is fair.  I also doubt a newbie investor will have $200k for a down payment on a $1mil building. 

[+ bigjoey]

45 minutes ago, FrankR said:

That is fair.  I also doubt a newbie investor will have $200k for a down payment on a $1mil building. 

The buildings I have bought have all been in a partnership with members of my family.  There were five of us investors who each put in 20%.  In my example, we would have each put in $40,000 which makes it fairly easy to start building real estate wealth.  Also, that spread the risk as we could buy more properties over time.

[+ FrankR]

13 minutes ago, bigjoey said:

The buildings I have bought have all been in a partnership with members of my family.  There were five of us investors who each put in 20%.  In my example, we would have each put in $40,000 which makes it fairly easy to start building real estate wealth.  Also, that spread the risk as we could buy more properties over time.

Partnerships can be both a blessing and a curse. Partners get married and then you are also married to their crazy spouses…and later ex-spouses. And their high maintenance kids, each with an opinion. No thanks!

For a newbie with a little capital - Low cost, broad based index funds are the way to go, in my experience. Easy, tax efficient, liquid and flexible.

[OCClient]

2 hours ago, mike carey said:

At the risk of derailing a discussion that includes potentially useful advice like this, the thread asks for advice for newbies. Trying to pick high and low points in the market is something that professional investors often can't do. New players are often best advised not to attempt it. Plenty of the advice offered has been good, of course.

 I doubt Buffet would buy anything right now that doesn't fit his value criteria. 

So for the newbie investors, Buffet would remind to look for well run, good companies that are priced at an attractive value.  

 

I have watched investment TV shows that invite guests to talk about including crypto in your portfolio.  I never agreed with that advice.  However, if the newbies choose to branch out into crypto funds, always remember to diversify so that your nest egg is not consumed when one asset class collapses.    A lot of guys where I work are into crypto.   They talk about it a lot!   I do worry about their stakes in crypto with the recent drop in value.

Edited June 19, 2022 by OCClient

[EZEtoGRU]

8 hours ago, bigjoey said:

A second trick with such a piece of property: when the first mortgage is paid off, take out a new mortgage.  That money comes out TAX FREE😀.  Do NOT spend that money but reinvest it in more similar properties.  Rinse and repeat.  This works when you are young and have a long investment window.  It worked for me because I started early and am now 76😇.

Highly simplified example:

1-buy a $1 million dollar building . 20% down and $800,000 mortgage. It needs to be a building with a good tenant and a steady income stream.

2-once that mortgage is paid off, take out a new $800,000 mortgage.  Your basis in the original building drops to $200,000 (for purposes of the example, let’s omit effects of depreciation on basis).  Do not spend the money on personal items but reinvest it.  Buy four new $1 million buildings with 20% down.  You now own five $1 million dollar buildings.  Rinse and repeat.

3-depreciation has sheltered some of your income from rent and gives you a higher after tax return on your investment.

4-the downside is after the second or third mortgage, the building will have a negative basis.  IF you sell the building,  that gives you a huge gain.  HOWEVER, their are alternatives to selling so that money you got with each mortgage remains TAX FREE: 1031 exchange, donate to charity, never sell the building and your heirs get a stepped up basis.

5-this works if you are disciplined and reinvest the money and not spend it for personal needs.  It is taking a long term view to build wealth.  Luck is involved as your tenants need to be strong financially with long term leases and the sites need to be good ones and the leases triple net leases (tenants pay all the expenses).

A separate issue that I did NOT do because my properties were all triple net leases, is putting personal expenses onto the rental property.  If you own rental property and manage it yourself: when you are putting in a new parking lot, the contractor puts in a new driveway at your home; when you put in landscaping at the rental property, landscape your own house; appliances, carpet, painting and repairs can all be written off on the rental property as business expenses.  I am NOT advising or advocating this but just note it is often  done.  I list this as an observation only.😇

While interesting, this hardly sounds like advice for a newbie investor.  Please be mindful of the topic at hand.

[+ bigjoey]

37 minutes ago, OCClient said:

 I doubt Buffet would buy anything right now that doesn't fit his value criteria. 

So for the newbie investors, Buffet would remind to look for well run, good companies that are priced at an attractive value.  

 

I have watched investment TV shows that invite guests to talk about including crypto in your portfolio.  I never agreed with that advice.  However, if the newbies choose to branch out into crypto funds, always remember to diversify so that your nest egg is not consumed when one asset class collapses.    A lot of guys where I work are into crypto.   They talk about it a lot!   I do worry about their stakes in crypto with the recent drop in value.

Bill Gates on crypto:  https://amp.cnn.com/cnn/2022/06/15/tech/bill-gates-crypto-nfts-comments/index.html

Warren Buffett on crypto:  https://www.cnbc.com/amp/2022/05/02/warren-buffett-wouldnt-spend-25-on-all-of-the-bitcoin-in-the-world.html

Mark Cuban (who was big on crypto and still SELECTIVELY believes in crypto:   https://cointelegraph.com/news/mark-cuban-says-crypto-crash-highlights-warren-buffett-s-wisdom/amp

I am old enough to see all types of investment crazes. They do not end up well.  Buffett believes in investing in companies that produce products or services; they rise and fall in value with how well they execute that role and how well those products and services are needed and used.

Even museum quality art and antiques go both up and down in value depending on changing tastes and fashions but at least it has some intrinsic value.   To me, crypto seems to be valued solely on the greater fool theory: there will be a greater fool than I who will buy it from me for more than I paid..



 

[+ bigjoey]

1 hour ago, FrankR said:

Partnerships can be both a blessing and a curse. Partners get married and then you are also married to their crazy spouses…and later ex-spouses. And their high maintenance kids, each with an opinion. No thanks!

For a newbie with a little capital - Low cost, broad based index funds are the way to go, in my experience. Easy, tax efficient, liquid and flexible.

Absolutely correct.  With little capital, investing in a low cost index fund should “beat the market” over the long haul.  I would add fixed monthly investment amount to dollar cost average and not try to time the market.  It requires discipline to dollar cost average but that will bring the best results.

[+ bigjoey]

12 minutes ago, EZEtoGRU said:

While interesting, this hardly sounds like advice for a newbie investor.  Please be mindful of the topic at hand.

I feel the newbie investor can do this.  I did after observation of some very wealthy real estate investors.  God isn’t making any more land.  My entire life, there has been inflation that has increased the value of most real estate that equals or exceeds rate of inflation.  Inflation is the enemy of the middle class who does not own a home (first real estate investment).

[+ keroscenefire]

Do you think it would be worth putting another $1000 or so directly into stocks or would it be best to just put more in my index fund? I am inclined toward the latter but there are some good stocks right now that in solid companies that I think would do well in the long-run. 

But maybe it's best that I keep it with index funds. I don't know that I want to be watching stock prices all the time.

[Kevin Slater]

1 hour ago, keroscenefire said:

Do you think it would be worth putting another $1000 or so directly into stocks or would it be best to just put more in my index fund? I am inclined toward the latter but there are some good stocks right now that in solid companies that I think would do well in the long-run. 

But maybe it's best that I keep it with index funds. I don't know that I want to be watching stock prices all the time.

Depending on which individual stocks you have in mind, chances are they'd already be well represented in the broad-based index fund.  Picking individual stocks can be a lot of fun, but to my mind that's a game you play after you have a firm foundation of index funds.  I often tell the guys talk to about investing that they have "permission" to put 10% of their money into individual picks.  That scratches the itch, and often ends up illustrating to them why putting 90% in broad-based funds was a good idea.  You can't go wrong with low-fee index funds, like Fidelity Zero Total Market Index (FZROX, truly zero fee if done within a Fidelity account).  In any case, make sure to look at the net expense ratio (basically, the rake they take to pay for administration).  It oughtn't be greater than ~.5% ($5 for every $1000 invested, yearly), preferably less. 

Kevin Slater

[+ FrankR]

7 hours ago, keroscenefire said:

Do you think it would be worth putting another $1000 or so directly into stocks or would it be best to just put more in my index fund? I am inclined toward the latter but there are some good stocks right now that in solid companies that I think would do well in the long-run. 

But maybe it's best that I keep it with index funds. I don't know that I want to be watching stock prices all the time.

It didnt work out for the Beardstown Ladies (in a bull market!), so my honest opinion is that it wont work out for you either. (But Walmart is a good company…their stores are always packed) You do you, but I have walked that road and cannot recommend. 

https://thehustle.co/the-midwestern-grandmas-who-became-stock-market-celebrities/amp/

[+ bigjoey]

5 hours ago, Kevin Slater said:

Depending on which individual stocks you have in mind, chances are they'd already be well represented in the broad-based index fund.  Picking individual stocks can be a lot of fun, but to my mind that's a game you play after you have a firm foundation of index funds.  I often tell the guys talk to about investing that they have "permission" to put 10% of their money into individual picks.  That scratches the itch, and often ends up illustrating to them why putting 90% in broad-based funds was a good idea.  You can't go wrong with low-fee index funds, like Fidelity Zero Total Market Index (FZROX, truly zero fee if done within a Fidelity account).  In any case, make sure to look at the net expense ratio (basically, the rake they take to pay for administration).  It oughtn't be greater than ~.5% ($5 for every $1000 invested, yearly), preferably less. 

Kevin Slater

Agree but I would add the concept of “dollar cost averaging.”  

https://www.finra.org/investors/insights/dollar-cost-averaging#:~:text=Dollar%2Dcost%20averaging%20can%20help,temptation%20to%20time%20the%20market.

 

[+ bigjoey]

16 hours ago, OCClient said:

 I doubt Buffet would buy anything right now that doesn't fit his value criteria. 

So for the newbie investors, Buffet would remind to look for well run, good companies that are priced at an attractive value.  

 

I have watched investment TV shows that invite guests to talk about including crypto in your portfolio.  I never agreed with that advice.  However, if the newbies choose to branch out into crypto funds, always remember to diversify so that your nest egg is not consumed when one asset class collapses.    A lot of guys where I work are into crypto.   They talk about it a lot!   I do worry about their stakes in crypto with the recent drop in value.

Is the crypto party over?  Wonder what your co-workers are saying🤔.

https://www.cnn.com/2022/06/19/investing/bitcoin-price

 

[OCClient]

2 hours ago, bigjoey said:

Is the crypto party over?  Wonder what your co-workers are saying🤔.

https://www.cnn.com/2022/06/19/investing/bitcoin-price

 

By now I know not to bring it up, because they can become quite an ear bender, how they go on and on and on about crypto.  At one point I asked the most knowledgeable of them to define the underlying value and was told "it's similar to how we value gold."   Of course that's ridiculous.  Gold has a track record spanning centuries, has various uses, and is coveted universally.  Crypto is not gold, in my mind.

 

For me that goes back to Warren Buffet's strategy.  I believe he looks for value and avoids anything he doesn't understand.  For me,  crypto coin fails to meet his criteria.

 

But again, for the newbies, if you have an urge to make big money fast and want to include crypto, I recommend instead thinking about your long term strategy, where you want to be in 30 years.    You can end up being the mailman that has a million bucks in your nest egg. or the doctor that has almost nothing saved.   (these are hypothetical examples folks, so no need to clutch your pearls.  Oprah has a show on this called the millionaire next door.)  

Leave your emotions out of it and follow simple rules and strategies.    Educate yourself beyond what you read in this thread.   Find some reputable authors and read up.

Edited June 20, 2022 by OCClient

[+ augustus]

1. Stocks won't go up until they're finished going down.

2. Buy at low prices, sell at high prices, and you'll make a bundle.

That'll be $250 for my insight please.
 

[+ FrankR]

15 minutes ago, augustus said:

1. Stocks won't go up until they're finished going down.

2. Buy at low prices, sell at high prices, and you'll make a bundle.

That'll be $250 for my insight please.
 

That 👆 is not helpful to a newbie investor.  
 

And this, my dear @keroscenefire is why you should avoid advisors and brokers (and your broke cousin with an expert opinion) - they expect to be paid even when they don’t provide value. 

Edited June 20, 2022 by FrankR

[BonVivant]

Basic advice: it all depends on your time horizon. If it is 20-30 years (i.e. you won’t touch it and you’ll let it grow that long) then buy index or mutual funds and reinvest the dividends (eg Vanguard has low cost ones). Contribute to it every month. Let it grow. The rule of 72 can be useful. Basically you divide 72 by the interest/dividend/growth rate. So if your money grows 10% per year, your money will double every 7.2 years. Etc. 
 

Don’t look at it every day. Ignore price swings. Don’t watch CNBC (all the headlines are for day and swing traders). 
 

There are free growth calculators online that u can use to model your future stash. 
 

Live and enjoy life. Use your money to also have a lil fun along the way. 

[+ Coolwave35]

I’m 38. My advice is not to invest in anything you don’t understand, no matter what anyone else is doing, or how hard they sell you on it. 
 

I’ve recently begun to offer hard money loans at 10% interest, and plop large sums in real estate syndication. I wouldn’t risk the hard money loans if I were you, but the real estate syndication deals I’ve chosen have been quite lucrative for me and there are a whole host of potential tax benefits. 
 

Some of the stock market advice you’ve been given has been really good in my opinion, stick with what you know. 

[+ bigjoey]

I would hold off on crypto investment right now.  From “The Economist” this morning:     The summer of crypto’s discontent

PHOTO: GETTY IMAGES

On Wednesday, Iran will cut off electricity to its 118 authorised crypto-mining firms, hoping to relieve the country’s strained power network. It is a fitting move, as the mood darkens in the wider cryptoverse. The price of bitcoin fell nearly 15% on Saturday alone, triggering some $1bn in liquidation as traders who had borrowed money to make big bets failed to put up more collateral. Other crypto-coins tumbled too, although most have since recovered and the market appears to have stabilised. But bitcoin remains nearly 70% below its peak in November. That is wreaking havoc across the industry.    Lenders have suspended withdrawals, hedge funds have failed to meet margin calls and one exchange halted transactions altogether, fearing it might run out of funds. Even giant firms have been hit. Many—notably Coinbase—have announced layoffs of up to 20% of their workforces. This summer of discontent could evolve into a long winter for the fading stars of crypto.

[+ keroscenefire]

A close friend of mine actually lost a lot of money in a cryptocurrency scam, so I'm not touching anything crypto with a 10-foot pole. 

[coriolis888]

On 6/16/2022 at 3:48 AM, 5280Dane said:

Annuities can be very worthwhile investments depending upon where you are at in your retirement, what your risk tolerance is and what your objectives are.  They are one of the only investments where some will guarantee you income for life.

For a newbie though, and someone in their mid 30s - it’s probably not a consideration at the moment as they can take on more risk.

Annuities are not insured.  Some annuities guarantee income for life.  But, if the annuity securities go bankrupt, that is the end of their promise for life.

https://www.fisherinvestments.com/en-us/campaigns/air/nc?PC=GOOB993K28&CC=8JH8&gclid=CjwKCAjwwdWVBhA4EiwAjcYJEJsVIztEwHDGm558V8rrMedookyOOlVdbNYF050_u5CB1qyNRd7OShoCx8UQAvD_BwE

[+ augustus]

On 6/25/2022 at 12:57 AM, coriolis888 said:

Annuities are not insured.  Some annuities guarantee income for life.  But, if the annuity securities go bankrupt, that is the end of their promise for life.

https://www.fisherinvestments.com/en-us/campaigns/air/nc?PC=GOOB993K28&CC=8JH8&gclid=CjwKCAjwwdWVBhA4EiwAjcYJEJsVIztEwHDGm558V8rrMedookyOOlVdbNYF050_u5CB1qyNRd7OShoCx8UQAvD_BwE

You buy from highly rated insurance companies like NY Life, Mass Mutual and Northwestern.  In any event, annuity holders are priority creditors if an insurance company gets into trouble, and that is extremely rare.  Fisher Investments has built a business lying about annuities.  His investment advice is no better than Fidelity, Morgan Stanley, etc.  You can choose your own stocks or buy a low cost mutual fund.  Fisher hasn't done any better than others.

[coriolis888]

2 hours ago, augustus said:

(1) snip snip - - - - "annuity holders are priority creditors if an insurance company gets into trouble, and that is extremely rare."
___________________________________

(2)  Fisher Investments has built a business lying about annuities.  

(1)  True, it is rare, but it happens.  If it does happen, even if an annuity holder is among the first in line to get assets, what happens if there are no unattached assets?  Again, annuities are not insured. 

(2) Fisher lies to investors?  Strange they do not have the SEC after them for lying.  

I guess you do not like Fisher.