4 ms·

I worry about savings. The inflation vs interest makes it a bad proposition for long term. Short term 6 month buffer zone is good. Does anyone have any advice

by cjsuk 9y ago

I worry about savings. The inflation vs interest makes it a bad proposition for long term. Short term 6 month buffer zone is good. Does anyone have any advice in this area? How can I keep the value of my 10% savings in 30 years time with low risk? I don't want to go to an IFA. They sell me a product.

pjc50 9y ago
Which country are you in, UK? The standard default here would be to put it in some combination of a stocks ISA and a high-interest savings account. If you really want to keep it for 30 years the tax advantages of a pension are unbeatable and your employer is obliged to try to default you into one.
- cjsuk 9y ago
  Yes. I looked at diverse investments but I'm still looking at losing at least 30% of value compared to inflation. I have opted out of the mandatory pensions as I had debt to pay off and it makes more sense to invest in that. I'm not happy with the risk profiles of the investments they offer as well as even the low risk one has a shit return. I'm looking for something different. TBH I'm making a reliable £300/month clear profit for a few hours effort on ebay buying and selling crap which over time has a better investment return sticking it in a low interest account that sticking a portion of salary in high interest. That's working for now but I want something that requires less effort :)
  - hkmurakami 9y ago
    "Losing to inflation" is relative. If inflation is 2%, your goal is to find a strategy that yields higher than 2% after taxes and expenses at a risk tolerable to you. Your eBay endeavors are basically allocating your capital to a closely held business, which is perfectly reasonable though like you said, likely unscalable.
    - cjsuk 9y ago
      Yes scalability is the problem. I'm expecting a shortfall within a couple of years so I need a new strategy. Currently this is running way above inflation which is good but the hill I'm pedaling up is getting steeper.
  - tonyedgecombe 9y ago
    It's not that difficult to keep pace with inflation and beyond over the long term. I'm not going to give financial advice here but if you look there is tons of useful information out there. You will need to educate yourself though, in particular, learn the common mistakes.
mittermayr 9y ago
While I enjoy the odd banter about "what's the best investment planning strategy" — quite frankly, people seem to completely disregard/misjudge the impact of what being persistent and consistent in putting money away for later, vs. trying to find the best interest rates is. Sure, there's all sorts of deflation and opportunity cost eating up some of that money, but the single-most crucial threat to it is yourself. You will eventually rob that account, either for a car, or some other sort of luxury. I don't judge, a good vacation may do more to your health right now than a few hundred dollars down the road. I do have an MBA (also 20-years of SW dev, please don't rip me apart), and due to it, people seem to enjoy asking about investment strategies and saving for retirement. We go into various things, and then the conversation drifts off and we're talking about the next iteration of the Apple Watch and whether or not the person should upgrade. And I get it, it's part of the lifestyle, it's part of enjoying life, but don't come at me with interest-rate optimisation discussions when, clearly, you're sabotaging your own interests here, quite literally. This is not the response you wanted, and I feel terribly sorry for it, but it's something that keeps creeping up when inflation/investment discussions flame up. So, to help, and this is just my very personal suggestion: grab a reasonable amount of your "savings", enough to make an impact (>$5k), but not enough to ruin you (<$100k). Put that into a low-fee stock-trading account (Robinhood, Fidelity, etc.) — wait for one of the very, very big ones (NOT Snapchat), like Amazon, or Apple, or Microsoft to dip a bit below the average going rate for the past few weeks/months. Like Amazon, it's been hovering around $1000 for a bit if I remember correctly, now it dipped below it and everyone wants/expects to see this go over again. Find an opportunity that will net you 3-5%. Amazon was at $955 yesterday, if you expect it to go up to $1000, that's 4.7% of gain (ignoring small fees). So, like many, you'd buy a good chunk of that. Once the order is through, you set two more orders, one for $670 (that's your panic sell), and one for $1000. Then you wait. This either takes a few days, it may take a year. It doesn't matter, if you end up with 4-5%, you take out your original investment, and you leave in whatever dollar amount you just gained. Rinse, repeat. There will be lots of people advising you against this, and that's absolutely correct. If there was a simple system to follow to guarantee you to make all that sweet sweet money, then, by definition of the market, there would be no such system any longer. That said, this strategy has served me (personally) very well over the past 10 years, and I've made much, much more than 5% over the years. The "magic" of it is that you can get out tomorrow, or you get out in five years. If you don't need the money to live, then you are not in a hurry. This allows you to wait until the time is right. The single-biggest enemy here, again, is our own greed. I usually aim to net a meagre $200-$700 before I sell. Even if the stock keeps rising like crazy, I normally get out after $400-$500, and rarely let it sit any longer. It's one of my rules (and others may think this is stupid, which is just as valid as me having that rule). And I speak from experience: I've once had a tough year, after several years of just making easy money on an ever-rising market. So, I invested all I had into Netflix. It was a 'jumpy' stock, but I figured if I time it out right, I'll end up with way, waaay more than my regular 3-5%. I could possibly make a decade of progress in my otherwise tame (but perfectly steady) stock investments. Then, Netflix dipped 40% or so, and it stayed there for quite a while (days, weeks, months...) — and I didn't have a panic-sell in place then. To make it worse, I even doubled-down as any panicked idiot would do, and Netflix dipped further. I didn't log in to my stock account for well over a year, if not almost two years I think. Then, one day, it had made its way back to the original price. I got out without losses, promised myself to never break my own rules again, and continued without a hitch after that. But, holy moly, had I needed that money, I'd not have been in a good place. At this point, someone would usually say, the smart thing is to diversify, to spread the risk. But to me, spreading the risk is like watering things down, you're also watering down the profits. I'd rather know a lot about one stock, at most two stocks (I never do more than two), and watch them carefully, vs. having 15 stocks in my portfolio, where I barely keep up with the basics. Again, that's just me, everyone is different. Also, having small investments in many stocks (vs. one or two stocks) may drive up fees quite a bit, depending on how fast you (have to) move. If you don't want to risk this, then funds and or an index, or a work-place matching investments type-of-plan may be best. It's other people doing the same thing for you, and you pay them a fee, regardless of performance. Which never felt right to me (I still advise to do this if you don't care about stocks or actually taking care of the money). I still firmly believe that someone who continues to save hard, and keep that money far away from your 'usual spending money' will almost always beat someone trying to optimise their investment strategies. Oh, lastly, you obviously have to pay tax on short-term gains. So this will come into effect as well. Depending on your location/tax-jurisdiction, this will be handled differently and it may make sense to optimise based on that (>1 year investments). Just my 2 cents.
hkmurakami 9y ago
Lowest risk would be inflection protected government bonds.

by cjsuk 9y ago

pjc50 9y ago

Which country are you in, UK? The standard default here would be to put it in some combination of a stocks ISA and a high-interest savings account. If you really want to keep it for 30 years the tax advantages of a pension are unbeatable and your employer is obliged to try to default you into one.

cjsuk 9y ago
Yes. I looked at diverse investments but I'm still looking at losing at least 30% of value compared to inflation. I have opted out of the mandatory pensions as I had debt to pay off and it makes more sense to invest in that. I'm not happy with the risk profiles of the investments they offer as well as even the low risk one has a shit return. I'm looking for something different. TBH I'm making a reliable £300/month clear profit for a few hours effort on ebay buying and selling crap which over time has a better investment return sticking it in a low interest account that sticking a portion of salary in high interest. That's working for now but I want something that requires less effort :)
- hkmurakami 9y ago
  "Losing to inflation" is relative. If inflation is 2%, your goal is to find a strategy that yields higher than 2% after taxes and expenses at a risk tolerable to you. Your eBay endeavors are basically allocating your capital to a closely held business, which is perfectly reasonable though like you said, likely unscalable.
  - cjsuk 9y ago
    Yes scalability is the problem. I'm expecting a shortfall within a couple of years so I need a new strategy. Currently this is running way above inflation which is good but the hill I'm pedaling up is getting steeper.
- tonyedgecombe 9y ago
  It's not that difficult to keep pace with inflation and beyond over the long term. I'm not going to give financial advice here but if you look there is tons of useful information out there. You will need to educate yourself though, in particular, learn the common mistakes.

mittermayr 9y ago

While I enjoy the odd banter about "what's the best investment planning strategy" — quite frankly, people seem to completely disregard/misjudge the impact of what being persistent and consistent in putting money away for later, vs. trying to find the best interest rates is. Sure, there's all sorts of deflation and opportunity cost eating up some of that money, but the single-most crucial threat to it is yourself. You will eventually rob that account, either for a car, or some other sort of luxury. I don't judge, a good vacation may do more to your health right now than a few hundred dollars down the road. I do have an MBA (also 20-years of SW dev, please don't rip me apart), and due to it, people seem to enjoy asking about investment strategies and saving for retirement. We go into various things, and then the conversation drifts off and we're talking about the next iteration of the Apple Watch and whether or not the person should upgrade. And I get it, it's part of the lifestyle, it's part of enjoying life, but don't come at me with interest-rate optimisation discussions when, clearly, you're sabotaging your own interests here, quite literally. This is not the response you wanted, and I feel terribly sorry for it, but it's something that keeps creeping up when inflation/investment discussions flame up. So, to help, and this is just my very personal suggestion: grab a reasonable amount of your "savings", enough to make an impact (>$5k), but not enough to ruin you (<$100k). Put that into a low-fee stock-trading account (Robinhood, Fidelity, etc.) — wait for one of the very, very big ones (NOT Snapchat), like Amazon, or Apple, or Microsoft to dip a bit below the average going rate for the past few weeks/months. Like Amazon, it's been hovering around $1000 for a bit if I remember correctly, now it dipped below it and everyone wants/expects to see this go over again. Find an opportunity that will net you 3-5%. Amazon was at $955 yesterday, if you expect it to go up to $1000, that's 4.7% of gain (ignoring small fees). So, like many, you'd buy a good chunk of that. Once the order is through, you set two more orders, one for $670 (that's your panic sell), and one for $1000. Then you wait. This either takes a few days, it may take a year. It doesn't matter, if you end up with 4-5%, you take out your original investment, and you leave in whatever dollar amount you just gained. Rinse, repeat. There will be lots of people advising you against this, and that's absolutely correct. If there was a simple system to follow to guarantee you to make all that sweet sweet money, then, by definition of the market, there would be no such system any longer. That said, this strategy has served me (personally) very well over the past 10 years, and I've made much, much more than 5% over the years. The "magic" of it is that you can get out tomorrow, or you get out in five years. If you don't need the money to live, then you are not in a hurry. This allows you to wait until the time is right. The single-biggest enemy here, again, is our own greed. I usually aim to net a meagre $200-$700 before I sell. Even if the stock keeps rising like crazy, I normally get out after $400-$500, and rarely let it sit any longer. It's one of my rules (and others may think this is stupid, which is just as valid as me having that rule). And I speak from experience: I've once had a tough year, after several years of just making easy money on an ever-rising market. So, I invested all I had into Netflix. It was a 'jumpy' stock, but I figured if I time it out right, I'll end up with way, waaay more than my regular 3-5%. I could possibly make a decade of progress in my otherwise tame (but perfectly steady) stock investments. Then, Netflix dipped 40% or so, and it stayed there for quite a while (days, weeks, months...) — and I didn't have a panic-sell in place then. To make it worse, I even doubled-down as any panicked idiot would do, and Netflix dipped further. I didn't log in to my stock account for well over a year, if not almost two years I think. Then, one day, it had made its way back to the original price. I got out without losses, promised myself to never break my own rules again, and continued without a hitch after that. But, holy moly, had I needed that money, I'd not have been in a good place. At this point, someone would usually say, the smart thing is to diversify, to spread the risk. But to me, spreading the risk is like watering things down, you're also watering down the profits. I'd rather know a lot about one stock, at most two stocks (I never do more than two), and watch them carefully, vs. having 15 stocks in my portfolio, where I barely keep up with the basics. Again, that's just me, everyone is different. Also, having small investments in many stocks (vs. one or two stocks) may drive up fees quite a bit, depending on how fast you (have to) move. If you don't want to risk this, then funds and or an index, or a work-place matching investments type-of-plan may be best. It's other people doing the same thing for you, and you pay them a fee, regardless of performance. Which never felt right to me (I still advise to do this if you don't care about stocks or actually taking care of the money). I still firmly believe that someone who continues to save hard, and keep that money far away from your 'usual spending money' will almost always beat someone trying to optimise their investment strategies. Oh, lastly, you obviously have to pay tax on short-term gains. So this will come into effect as well. Depending on your location/tax-jurisdiction, this will be handled differently and it may make sense to optimise based on that (>1 year investments). Just my 2 cents.

hkmurakami 9y ago

Lowest risk would be inflection protected government bonds.