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So, what does a young person do these days? First few years out of college were just "max out 401k contributions into some target fund" + build emergency fund,

So, what does a young person do these days? First few years out of college were just "max out 401k contributions into some target fund" + build emergency fund, but now that I've amassed more cash than what an emergency fund requires, what does one do? Originally, my plan was to use it for a house down-payment, but with the mortgage rates having nearly doubled in the last 6 months, that's kind of out of the question at this point (especially having moved to a higher property value area to be closer to friends and family). Everything I've seen in the news for last few months just seems to say "sorry, the last 50 years was a gravy train, it'll never work that way again, you're screwed". Both my parents' and grandparents' entire careers existed (or to this point existed) during the "good times", so I'm honestly feeling like I can't just take their advice directly. Part of me wants to leave my present (tech) job and move to a FAANG type company (for the pay increase), but with all the uncertainty on the horizon, are the big tech companies going to maintain their current headcount or salaries if another '08 style recession (or worse) hits? How stable are their revenues if people start spending way less money on things?

gabereiser 4y ago
Go for the house down payment and refinance once the rates go down. A few percentage points aren’t going to make much difference near term.
- garrickvanburen 4y ago
  To me, <~6% APR is still a buy signal.
cercatrova 4y ago
You do the same thing that was recommended for the past 100 years, invest in VTI and chill.
tootie 4y ago
House prices are at a peak and stocks are in a trough. Try to make clear economic decisions and don't be enamored with home ownership. A house is a huge illiquid asset that you can live in. There's calculators out there to use but know that buying a house usually only makes sense if you're definitely staying for at least 10 years. And don't be swayed by headlines. Big tech is doing extremely well and isn't slowing down.
- aluminaient 4y ago
  The only time stocks have been this expensive was just before the great depression and just before 2008. They are practically the most overvalued they've ever been, ignoring the last year or two of QE, which were intuitively overpriced. Thinking they are cheap now is how you get burned.
  - tootie 4y ago
    By what metric? The P/E ration for the S&P 500 is not historically very high right now.
    - mpalczewski 4y ago
      By just about every metric. Only bested by 2000 and 1929 for some metrics. https://www.advisorperspectives.com/dshort/updates/2022/07/08/is-the-market-still-overvalued https://www.advisorperspectives.com/dshort/updates/2022/07/0... https://www.advisorperspectives.com/dshort/updates/2022/07/07/market-cap-to-gdp-june-buffett-valuation-indicator https://www.advisorperspectives.com/dshort/updates/2022/07/0... https://www.advisorperspectives.com/dshort/updates/2022/07/07/p-e10-june-2022-update https://www.advisorperspectives.com/dshort/updates/2022/07/0...
Swizec 4y ago
> So, what does a young person do these days? Barbell investing from Taleb makes the most sense to me. Cap your downside, go balls out with the rest. And prioritize long-term assets over cashflow. Revenue generating assets are best.
- throwaway894345 4y ago
  > Cap your downside, go balls out with the rest. This doesn’t mean anything to me. Can you elaborate? Also, why are revenue generating assets better, and doesn’t pursuing revenue generating assets imply prioritizing cash flow? Sorry for the noob questions.
  - Swizec 4y ago
    > This doesn’t mean anything to me. Can you elaborate? Taleb elaborates better in his very accessible book(s). The basic idea is to invest/use most of your net worth in “safe” investments, those primarily keeping up with inflation or just barely beating it. If shit hits the fan, you have a cushion to fall back on. Anything beyond keeping you safe and comfortable enough should go chasing the highest returns possible. So you can partake in as much upside as possible. Startup comp follows this logic. Enough salary to fund your life and basic savings, equity to chase high upside. Revenue generating assets are nice because you don’t just need to sell for a higher price to make a return. They have intrinsic value. For example owning a profitable business or a rental property.
    - throwaway894345 4y ago
      Thanks for the explanation. That was very concise and accessible!
    - epups 4y ago
      Can you recommend a specific book that discusses this in the context of private investors? I have read a couple of books from Taleb and he only talks about similar strategies for investment firms.
smallerfish 4y ago
Don't buy a house until the real estate market crashes. Then buy. I bought a fixer-upper in 2008 for 200k; sold it for 425k 5 years later. Recently it sold for 650k (we still get redfin notifications.) In the meantime I bought a house for 625k (nice house with some rough edges) and sold it 18 months ago in covid real estate madness for 950k. We certainly put money into both houses over time, but we'd never have been able to do what we did had we not started at the bottom of the market. Wait a year or two.
- FooBarWidget 4y ago
  What if the house market crashes in 10 years? Live in a car for 10 years?
  - deleted 4y ago
    [deleted]
  - stavros 4y ago
    Are "buy" and "live in a car" the only two options?
    - FooBarWidget 4y ago
      You can rent, but that's money wasted. The longer you rent, the longer you didn't invest. Also rents are higher than mortgage payments, making it worse.
      - GoldenStake 4y ago
        But are rents higher than the mortgage + insurance + maintenance + lack of liquidity + the potential home value changes. If the expectations is that the home value are dropping, the math seems pretty simple. But in a different financial environment, maybe a few years from now, your expectations might be different and the math works out differently
        4y ago
gumby 4y ago
> Everything I've seen in the news for last few months just seems to say "sorry, the last 50 years was a gravy train, it'll never work that way again, you're screwed". I first came to Palo Alto in 1984. All the houses were underwater (worth less than their mortgages). The tech boom was over and consensus was that it wasn’t coming back. Too bad you missed that! Just keep investing (dollar cost averaging). Pick your poison: “barbell” as some other comments have suggested or just a couple of very broad index funds. Since you have a long time ahead of you, I’d recommend the latter. You can spend some of it on a down payment when that makes sense to you.
- mywittyname 4y ago
  People tend to not appreciate the struggles that the people before us had. We are looking at their situation with the absolute knowledge that things got better. We distort the lives of those in the past much in the same way do the people we follow on social media.
  - nostrademons 4y ago
    Also survivorship bias. We tend to forget the people that died penniless and alone.
anon291 4y ago
> Originally, my plan was to use it for a house down-payment, but with the mortgage rates having nearly doubled in the last 6 months, that's kind of out of the question at this point (especially having moved to a higher property value area to be closer to friends and family). Higher interest rates lead to lower home prices, which should make it easier to make a down payment. Interest rates may double, but mortgage payment amounts typically end up staying the same. You are in a prime position to buy a house. In the next 30 years, mortgage rates will likely decrease and you can refinance to a better rate, and end up paying a lower price for your house than what you would have had mortgage rates stayed low.
- Carp 4y ago
  That's what my plan is. Just waiting/hoping housing prices drop within the next year or two. Been waiting a while now though so who knows if they'll actually come down
  - ricardobayes 4y ago
    It will be tough finding where the sweet spot is of lowest prices vs still acceptable interest rates.
  - anon291 4y ago
    Home prices are coming down in my area of Portland, OR, which was already an overpriced market. Homes have been on the market much longer, and several homes have had price reductions in my neighborhood. Ultimately though, I wouldn't try timing the market, if you can afford the down payment, and the monthly, and like the house, I'd go for it. Always time to refinance later.
    - jokethrowaway 4y ago
      Portland got some pretty negative press in the last few years. I barely knew Portland existed before that and now I just know I wouldn't want to settle there. Real estate seems still up in general, I assume because of a mix of inflation and BlackRock / investors overpaying for it to escape all the other failing assets
loxias 4y ago
> now that I've amassed more cash than what an emergency fund requires, what does one do? Pick a few things you can put your money into, which you have confidence won't lose value given a long enough time horizon. For me, this is SPY (highest alpha but needs 10 years to recover). The traditional 60/40 SPY/TLT mix is great. Currency funds also good. VTI & chill is good. Right now the Euro has Dollar parity (ECB isn't fighting inflation aggressively and won't start reducing its balance sheet for a while), maybe throw some of that into the mix. Sell covered calls to reduce your cost basis. Don't spend cash. Invest cash, borrow against it at favorable interest rates, and make purchases with the borrowed money. SBLOC, portfolio margin (>100k) can unlock some cheap (75bp above prime) cash. If I could send a message to myself 20 years ago it would be the above. All of my words are nonsense, nothing in this comment shall be construed as professional or financial advice. I've been excessively stupid with money far longer than I should.
- sizzle 4y ago
  This sounds like hard fought knowledge, where can I start to build a good foundation for understanding the financial terminology you posted? Thanks for sharing.
  - mariojv 4y ago
    I like Bogleheads: https://www.bogleheads.org/wiki/Getting_started https://www.bogleheads.org/wiki/Getting_started The wiki and forums are great resources.
mlcrypto 4y ago
Born too late to buy 20k House. Born just in time for 20k Bitcoin.

gabereiser 4y ago

Go for the house down payment and refinance once the rates go down. A few percentage points aren’t going to make much difference near term.

garrickvanburen 4y ago
To me, <~6% APR is still a buy signal.

cercatrova 4y ago

You do the same thing that was recommended for the past 100 years, invest in VTI and chill.

tootie 4y ago

House prices are at a peak and stocks are in a trough. Try to make clear economic decisions and don't be enamored with home ownership. A house is a huge illiquid asset that you can live in. There's calculators out there to use but know that buying a house usually only makes sense if you're definitely staying for at least 10 years. And don't be swayed by headlines. Big tech is doing extremely well and isn't slowing down.

aluminaient 4y ago
The only time stocks have been this expensive was just before the great depression and just before 2008. They are practically the most overvalued they've ever been, ignoring the last year or two of QE, which were intuitively overpriced. Thinking they are cheap now is how you get burned.
- tootie 4y ago
  By what metric? The P/E ration for the S&P 500 is not historically very high right now.
  - mpalczewski 4y ago
    By just about every metric. Only bested by 2000 and 1929 for some metrics. https://www.advisorperspectives.com/dshort/updates/2022/07/08/is-the-market-still-overvalued https://www.advisorperspectives.com/dshort/updates/2022/07/0... https://www.advisorperspectives.com/dshort/updates/2022/07/07/market-cap-to-gdp-june-buffett-valuation-indicator https://www.advisorperspectives.com/dshort/updates/2022/07/0... https://www.advisorperspectives.com/dshort/updates/2022/07/07/p-e10-june-2022-update https://www.advisorperspectives.com/dshort/updates/2022/07/0...

Swizec 4y ago

> So, what does a young person do these days? Barbell investing from Taleb makes the most sense to me. Cap your downside, go balls out with the rest. And prioritize long-term assets over cashflow. Revenue generating assets are best.

throwaway894345 4y ago
> Cap your downside, go balls out with the rest. This doesn’t mean anything to me. Can you elaborate? Also, why are revenue generating assets better, and doesn’t pursuing revenue generating assets imply prioritizing cash flow? Sorry for the noob questions.
- Swizec 4y ago
  > This doesn’t mean anything to me. Can you elaborate? Taleb elaborates better in his very accessible book(s). The basic idea is to invest/use most of your net worth in “safe” investments, those primarily keeping up with inflation or just barely beating it. If shit hits the fan, you have a cushion to fall back on. Anything beyond keeping you safe and comfortable enough should go chasing the highest returns possible. So you can partake in as much upside as possible. Startup comp follows this logic. Enough salary to fund your life and basic savings, equity to chase high upside. Revenue generating assets are nice because you don’t just need to sell for a higher price to make a return. They have intrinsic value. For example owning a profitable business or a rental property.
  - throwaway894345 4y ago
    Thanks for the explanation. That was very concise and accessible!
  - epups 4y ago
    Can you recommend a specific book that discusses this in the context of private investors? I have read a couple of books from Taleb and he only talks about similar strategies for investment firms.

smallerfish 4y ago

Don't buy a house until the real estate market crashes. Then buy. I bought a fixer-upper in 2008 for 200k; sold it for 425k 5 years later. Recently it sold for 650k (we still get redfin notifications.) In the meantime I bought a house for 625k (nice house with some rough edges) and sold it 18 months ago in covid real estate madness for 950k. We certainly put money into both houses over time, but we'd never have been able to do what we did had we not started at the bottom of the market. Wait a year or two.

FooBarWidget 4y ago
What if the house market crashes in 10 years? Live in a car for 10 years?
- deleted 4y ago
  [deleted]
- stavros 4y ago
  Are "buy" and "live in a car" the only two options?
  - FooBarWidget 4y ago
    You can rent, but that's money wasted. The longer you rent, the longer you didn't invest. Also rents are higher than mortgage payments, making it worse.
    - GoldenStake 4y ago
      But are rents higher than the mortgage + insurance + maintenance + lack of liquidity + the potential home value changes. If the expectations is that the home value are dropping, the math seems pretty simple. But in a different financial environment, maybe a few years from now, your expectations might be different and the math works out differently
      - 4y ago

gumby 4y ago

> Everything I've seen in the news for last few months just seems to say "sorry, the last 50 years was a gravy train, it'll never work that way again, you're screwed". I first came to Palo Alto in 1984. All the houses were underwater (worth less than their mortgages). The tech boom was over and consensus was that it wasn’t coming back. Too bad you missed that! Just keep investing (dollar cost averaging). Pick your poison: “barbell” as some other comments have suggested or just a couple of very broad index funds. Since you have a long time ahead of you, I’d recommend the latter. You can spend some of it on a down payment when that makes sense to you.

mywittyname 4y ago
People tend to not appreciate the struggles that the people before us had. We are looking at their situation with the absolute knowledge that things got better. We distort the lives of those in the past much in the same way do the people we follow on social media.
- nostrademons 4y ago
  Also survivorship bias. We tend to forget the people that died penniless and alone.

anon291 4y ago

> Originally, my plan was to use it for a house down-payment, but with the mortgage rates having nearly doubled in the last 6 months, that's kind of out of the question at this point (especially having moved to a higher property value area to be closer to friends and family). Higher interest rates lead to lower home prices, which should make it easier to make a down payment. Interest rates may double, but mortgage payment amounts typically end up staying the same. You are in a prime position to buy a house. In the next 30 years, mortgage rates will likely decrease and you can refinance to a better rate, and end up paying a lower price for your house than what you would have had mortgage rates stayed low.

Carp 4y ago
That's what my plan is. Just waiting/hoping housing prices drop within the next year or two. Been waiting a while now though so who knows if they'll actually come down
- ricardobayes 4y ago
  It will be tough finding where the sweet spot is of lowest prices vs still acceptable interest rates.
- anon291 4y ago
  Home prices are coming down in my area of Portland, OR, which was already an overpriced market. Homes have been on the market much longer, and several homes have had price reductions in my neighborhood. Ultimately though, I wouldn't try timing the market, if you can afford the down payment, and the monthly, and like the house, I'd go for it. Always time to refinance later.
  - jokethrowaway 4y ago
    Portland got some pretty negative press in the last few years. I barely knew Portland existed before that and now I just know I wouldn't want to settle there. Real estate seems still up in general, I assume because of a mix of inflation and BlackRock / investors overpaying for it to escape all the other failing assets

loxias 4y ago

> now that I've amassed more cash than what an emergency fund requires, what does one do? Pick a few things you can put your money into, which you have confidence won't lose value given a long enough time horizon. For me, this is SPY (highest alpha but needs 10 years to recover). The traditional 60/40 SPY/TLT mix is great. Currency funds also good. VTI & chill is good. Right now the Euro has Dollar parity (ECB isn't fighting inflation aggressively and won't start reducing its balance sheet for a while), maybe throw some of that into the mix. Sell covered calls to reduce your cost basis. Don't spend cash. Invest cash, borrow against it at favorable interest rates, and make purchases with the borrowed money. SBLOC, portfolio margin (>100k) can unlock some cheap (75bp above prime) cash. If I could send a message to myself 20 years ago it would be the above. All of my words are nonsense, nothing in this comment shall be construed as professional or financial advice. I've been excessively stupid with money far longer than I should.

sizzle 4y ago
This sounds like hard fought knowledge, where can I start to build a good foundation for understanding the financial terminology you posted? Thanks for sharing.
- mariojv 4y ago
  I like Bogleheads: https://www.bogleheads.org/wiki/Getting_started https://www.bogleheads.org/wiki/Getting_started The wiki and forums are great resources.

mlcrypto 4y ago

Born too late to buy 20k House. Born just in time for 20k Bitcoin.