4 ms·

Spend less than you make. Max out your 401k and IRA. Invest in index funds.

mcshicks 9y ago
Pretty much. I would say low fee index funds. This is a pretty good short book with some more details and recommend reading but says basically the same thing. https ://www.etf.com/docs/IfYouCan.pdf
deleted 9y ago
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charlesdm 9y ago
What will be interesting to see is whether this actually stays good advice. Massive amounts of money (trillions) has been flowing into these passive ETFs and index funds -- I would assume this creates some distortions in the financial system.
- throwaway0255 9y ago
  Definitely interesting to think about. My current take is that even if the tiniest minority of activity exists outside of low-turnover ETFs, continued advancements in automated algorithmic trading (whether it's ML or regression or something that hasn't been invented yet) will get us closer to the perfectly efficient market and the only impact to low-turnover ETFs will be reduced volatility. Another possibility is that so much money gets parked in passive ETFs that the valuation of the indexed stocks becomes more tied to the influx of money than to the underlying enterprise value, then once the influx of money slows down the stocks revert to enterprise value and start to consistently depreciate, triggering a massive sell-off. If that happened it'd probably be bigger than the subprime mortgage crisis, right? What's your take?
lhl 9y ago
I'd add to pick a reasonable asset allocation that you will stick to and rebalance regularly (once a year is fine although tax efficiency isn't a concern in tax advantaged investments). This can be done automatically for you via any of the new generations of robo-advisors (although you can get most of the benefits and lower fees with Vanguard LifeStrategy or Target Retirement funds). Tax advantaged account pro-tips: put your least tax efficient instruments (eg income generating assets etc) in the retirement accounts. Use a Roth IRA to be able to maximize amount of tax-advantaged investment per year). Asset allocation wise, there was an interesting article (and followup) entitled "The Benefits of Low Correlation" a few years back I thought was particularly interesting. Link to both: http://www.etf.com/publications/journalofindexes/joi-articles/4684-the-benefits-of-low-correlation-round-ii.html?nopaging=1 http://www.etf.com/publications/journalofindexes/joi-article...

Pretty much. I would say low fee index funds. This is a pretty good short book with some more details and recommend reading but says basically the same thing. https ://www.etf.com/docs/IfYouCan.pdf

deleted 9y ago

[deleted]

charlesdm 9y ago

What will be interesting to see is whether this actually stays good advice. Massive amounts of money (trillions) has been flowing into these passive ETFs and index funds -- I would assume this creates some distortions in the financial system.

throwaway0255 9y ago
Definitely interesting to think about. My current take is that even if the tiniest minority of activity exists outside of low-turnover ETFs, continued advancements in automated algorithmic trading (whether it's ML or regression or something that hasn't been invented yet) will get us closer to the perfectly efficient market and the only impact to low-turnover ETFs will be reduced volatility. Another possibility is that so much money gets parked in passive ETFs that the valuation of the indexed stocks becomes more tied to the influx of money than to the underlying enterprise value, then once the influx of money slows down the stocks revert to enterprise value and start to consistently depreciate, triggering a massive sell-off. If that happened it'd probably be bigger than the subprime mortgage crisis, right? What's your take?

lhl 9y ago

I'd add to pick a reasonable asset allocation that you will stick to and rebalance regularly (once a year is fine although tax efficiency isn't a concern in tax advantaged investments). This can be done automatically for you via any of the new generations of robo-advisors (although you can get most of the benefits and lower fees with Vanguard LifeStrategy or Target Retirement funds). Tax advantaged account pro-tips: put your least tax efficient instruments (eg income generating assets etc) in the retirement accounts. Use a Roth IRA to be able to maximize amount of tax-advantaged investment per year). Asset allocation wise, there was an interesting article (and followup) entitled "The Benefits of Low Correlation" a few years back I thought was particularly interesting. Link to both: http://www.etf.com/publications/journalofindexes/joi-articles/4684-the-benefits-of-low-correlation-round-ii.html?nopaging=1 http://www.etf.com/publications/journalofindexes/joi-article...