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Maybe your "backup career" should be the side project of learning how to invest the money you make now to become independently wealthy, or close to it, as soon

by a3n 12y ago

Maybe your "backup career" should be the side project of learning how to invest the money you make now to become independently wealthy, or close to it, as soon as practical.

smt88 12y ago
Seasoned professional investors, such as those who managed hedgefunds or buy real estate, are rarely able to beat inflation by much. I doubt that someone investing a small amount (under $500k) part-time is going to become "independently wealthy". Adjusting one's lifestyle to decrease expenses is a much better way to "create" wealth.
- readme 12y ago
  Where'd you get that information? I thought the average return just from the stock market was 7%.
  - fendale 12y ago
    From the research I have been doing over the past year or two, the UK stock market has shown about 5% real return (after inflation) over the long term. I think the USA stock market is slightly better. I am a total novice, and have fairly little invested, but those are the sort of numbers that pension projects are based on. If you can keep you personal burn rate low, and over time invest a significant amount of money at 5% return for 10 years, the interest really starts to snowball.
  - smt88 12y ago
    "by much" was a key in my comment. If the average return from an index fund is 7% and inflation is, say, 3%, then you're making an extra 4%. If you're investing $100k, you'll double the value of your money in 20 years. That's not great for someone who doesn't have much other cash and could use that $100k over those 20 years for significant lifestyle improvements.
- ryanworl 12y ago
  I think you mean they rarely beat the market index their fund is compared against, which is true. But that is usually (long-run) mid to high single digit percentage growth nominally depending on where you look. Inflation eats some of that, obviously, but not anywhere close to all of it.
  - smt88 12y ago
    I actually meant inflation. In the investing world, index funds are very useful, and they often beat inflation by a few percentage points. But that return is only significant when you have tons of money. As I pointed out in another comment, turning $100k into $200k (adjusted for inflation) would take 20 years, assuming index funds grow 7% every year and inflation is a constant 3%.
- a3n 12y ago
  Yes, and then what do you do with the wealth that you've created by living below your means?
  - smt88 12y ago
    "Storing" money in low-risk investments is a given. But if you have, say, $100k in income and $100k in the bank, you're going to "make" far more money by decreasing your costs by $20k than you could by investing that $100k (on average). Obviously there are people who get lucky buying houses and whatnot, but no one can reliably double $100k in 5 years.

by a3n 12y ago

Maybe your "backup career" should be the side project of learning how to invest the money you make now to become independently wealthy, or close to it, as soon as practical.

smt88 12y ago

Seasoned professional investors, such as those who managed hedgefunds or buy real estate, are rarely able to beat inflation by much. I doubt that someone investing a small amount (under $500k) part-time is going to become "independently wealthy". Adjusting one's lifestyle to decrease expenses is a much better way to "create" wealth.

readme 12y ago
Where'd you get that information? I thought the average return just from the stock market was 7%.
- fendale 12y ago
  From the research I have been doing over the past year or two, the UK stock market has shown about 5% real return (after inflation) over the long term. I think the USA stock market is slightly better. I am a total novice, and have fairly little invested, but those are the sort of numbers that pension projects are based on. If you can keep you personal burn rate low, and over time invest a significant amount of money at 5% return for 10 years, the interest really starts to snowball.
- smt88 12y ago
  "by much" was a key in my comment. If the average return from an index fund is 7% and inflation is, say, 3%, then you're making an extra 4%. If you're investing $100k, you'll double the value of your money in 20 years. That's not great for someone who doesn't have much other cash and could use that $100k over those 20 years for significant lifestyle improvements.
ryanworl 12y ago
I think you mean they rarely beat the market index their fund is compared against, which is true. But that is usually (long-run) mid to high single digit percentage growth nominally depending on where you look. Inflation eats some of that, obviously, but not anywhere close to all of it.
- smt88 12y ago
  I actually meant inflation. In the investing world, index funds are very useful, and they often beat inflation by a few percentage points. But that return is only significant when you have tons of money. As I pointed out in another comment, turning $100k into $200k (adjusted for inflation) would take 20 years, assuming index funds grow 7% every year and inflation is a constant 3%.
a3n 12y ago
Yes, and then what do you do with the wealth that you've created by living below your means?
- smt88 12y ago
  "Storing" money in low-risk investments is a given. But if you have, say, $100k in income and $100k in the bank, you're going to "make" far more money by decreasing your costs by $20k than you could by investing that $100k (on average). Obviously there are people who get lucky buying houses and whatnot, but no one can reliably double $100k in 5 years.