Domain: vanguard.com
Stories and comments across the archive that link to vanguard.com.
Comments · 40
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Re:It is average for right risk profile
Of course, you have to get an 8% annual return to pull that off, which seems to be considerably above the average.
If you are looking at the averages of all mutual funds, you are getting a number skewed very low because of the presence of a ton of funds that are for very low risk investors.
Someone very young should be putting funds into a much more volatile fund, so that over time you have a better return - if you look at this list of funds from Vanguard, you'll see that returns of 8 over ten years are not uncommon (look at Traditional and Target-Risk). You just need to keep your money in for a while.
You are also totally not factored in the opportunity cost of loss of possible investment that goes to student loans instead. You laugh at someone having 366k in "today's dollars" in retirement but that person is probably a lot happier than someone who lives in our neighborhood who is having social security garnished to pay off student loans, to the point she has to take. job for extra income (the wages of which ALSO are garnished to further service the loan). All the sudden 366k starts to look super awesome.
You mind telling me where I can get that 60k?
Because the only real answer is, "You're parents already have it and gave it to you for you to do with as you please.".
My parents never had 60k to give away, like 95% of parents. I had to take student loans to go to college. Can you get "mutual fund loans"?
Obviously not.
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It is average for right risk profile
Of course, you have to get an 8% annual return to pull that off, which seems to be considerably above the average.
If you are looking at the averages of all mutual funds, you are getting a number skewed very low because of the presence of a ton of funds that are for very low risk investors.
Someone very young should be putting funds into a much more volatile fund, so that over time you have a better return - if you look at this list of funds from Vanguard, you'll see that returns of 8 over ten years are not uncommon (look at Traditional and Target-Risk). You just need to keep your money in for a while.
You are also totally not factored in the opportunity cost of loss of possible investment that goes to student loans instead. You laugh at someone having 366k in "today's dollars" in retirement but that person is probably a lot happier than someone who lives in our neighborhood who is having social security garnished to pay off student loans, to the point she has to take. job for extra income (the wages of which ALSO are garnished to further service the loan). All the sudden 366k starts to look super awesome.
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Re:The missing question:
Most of my retirement savings are in Vanguard index funds. No upfront or backend fees, 0.04% annual maintenance fee.
Here's some free advice:
1. Invest in index funds, and never in actively managed funds.
2. Never take financial advice from someone trying to sell you something.My friend is a retired investment advisor and he recommends both Vanguard and Fidelity - for the reasons you mentioned - and he has some of his investments with both companies. I went with Fidelity for a (new) individual brokerage account as (a) I like their online tools better and (b) my company has their 401k program with them so it was a simple button press for me to create another account with them (as they already had my personal information).
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Re:The missing question:
Mutual funds are pretty much a scam these days with so many fees,
This is nonsense. Fees are lower than ever.
Most of my retirement savings are in Vanguard index funds. No upfront or backend fees, 0.04% annual maintenance fee.
Here's some free advice:
1. Invest in index funds, and never in actively managed funds.
2. Never take financial advice from someone trying to sell you something. -
Re:After a couple of decades of doing income...
Unless of course your investments don't recover
I invest in the total US stock market and the total international stock market. If those don't recover, it means the entire world is fucked and the only reasonable investments are ammunition and canned food anyway.
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Re:After a couple of decades of doing income...
Unless of course your investments don't recover
I invest in the total US stock market and the total international stock market. If those don't recover, it means the entire world is fucked and the only reasonable investments are ammunition and canned food anyway.
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Re:So...
I've seen people hit the lottery for $5 million, quit their job, and come back in a year poor. I can retire on a tenth of that, even planning for long-term inflation.
Of course - if you're OK living on $20k/year that is.
https://personal.vanguard.com/... -
Re: So...
I suspect that on average the opportunity cost of leaving your six months of expenses uninvested exceeds the risk-adjusted cost of taking a loss during a poorly-timed emergency. Not to mention, there's no reason you couldn't temper that possible loss by investing in something like a balanced index fund (as opposed to a total stock market fund).
Besides, for me, six months of expenses would only be $12,000 or so anyway. (I'm on the "live inexpensively so I can retire super early" plan.) Even so, I've opted for springy debt instead.
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Re: So...
I suspect that on average the opportunity cost of leaving your six months of expenses uninvested exceeds the risk-adjusted cost of taking a loss during a poorly-timed emergency. Not to mention, there's no reason you couldn't temper that possible loss by investing in something like a balanced index fund (as opposed to a total stock market fund).
Besides, for me, six months of expenses would only be $12,000 or so anyway. (I'm on the "live inexpensively so I can retire super early" plan.) Even so, I've opted for springy debt instead.
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Re:Punishes users and good advertisers
Shareholders, where are your votes?
Mostly held in mutual funds inside 401ks and IRAs, which means they get voted according to board-friendly policies like this instead of the will of the actual individual owners. Individual pass-through proxy voting for shares held in mutual funds is yet another long-overdue Wall Street reform that no politicians (that I know of) are seriously considering...
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"Does the Obama Administration..."
"Does the Obama Administration..."
Yes, they understand that.
President Obama is invested in the Vanguard 500 Index Fund as one of his largest holdings, apart from bonds and T-bills -- Source: http://www.davemanuel.com/pols... -- which in turn is invested in:
Telecoms: AT&T Inc., Verizon Communications Inc., Comcast Corp. Class A
Oil companies: Exxon Mobil Corp., Chevron Corp.
Pharma companies: Johnson & Johnson, Pfizer Inc., Merck & Co. Inc., Gilead Sciences Inc., Allergan plc, Amgen Inc.,
Banks: Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., Visa Inc. Class A
Healthcare problem companies: Philip Morris International Inc., Altria Group Inc., McDonald's Corp., Coca-Cola Co., PepsiCo Inc.
Healthcare solution companies: UnitedHealth Group Inc., CVS Health Corp., Medtronic plcAmong others -- Source: https://personal.vanguard.com/...
So perhaps this explains the issues he's interested in, and the things he votes and advocates for and against.
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Not phenomenal: Index Better!
The 2% amounted to $137M and 20% of the growth was $343M, which means that the managers' efforts increased the size of the endowment by $1.7B.
No that is not at all phenomenal and in fact is probably worse than simple index investing and almost certainly has little to do with their efforts. Using your numbers the fund grew by [(1.7-0.343)/(8-1.7)-1]=21.5%. Depending on the exact year in question putting the money in a simple broad US stock market ETF such as one offered by Vanguard would have generated a 33.51% increase in 2013 and 12.58% in 2014 and if this is the amount paid in 2014 it will likely include some or all of the 2013 gains because you cannot pay before you know what the gain is.
Doing this would have cost them a 0.05% expense. It's really easy to make "phenomenal" returns when the stock market is rising as much as it has in the past few years. What I do not understand is why they are paying such exorbitant expenses and, if they want to offer a bonus it should be based on performance above the market not just the total increase which has little to do with a manager's performance. -
Re:Comparable? Not really.
Sure, it's a lot of luck to day trade stocks, you might as well go to Vegas. However, over time the US economy and stock market has consistently gone up. Just buying and holding a broad spectrum of stocks or a good mutual fund has long been a way for average investors to make a pretty good return, just for doing nothing with their money.
If you simply bought an incredibly boring total market mutual fund 5 years ago and held on to it, your money would have doubled already.
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Re:A million is easy
You are wrong. The Vanguard S&P 500 Index Fund, for example, which is a very basic fund that does nothing but track the S&P 500 index, has had an average return of 11% since its inception in 1976.
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Re:Regulation of currency
Recent statements by Warren Buffet suggest that, in his view, most people would be better served by putting 90% of their wealth into the Vanguard SP500 fund, and keeping 10% in cash/short term t bills. He is setting this up for his wife in his will.
Here is the article
The best way to win is not to play, at least the stupid games most investors play. Avoiding 'rookie moves' isn't possible for most people. For the most part, they aren't smart enough, don't have the education, and don't have fast enough access to information. This same advice has been around since Bogle started Vanguard.
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Re:Obligatory Stupidity
The article was imprecise - Vanguard doesn't have any funds based on the DJIA. Dodge & Cox doesn't have any index funds.
The general point still stands. Vanguard views their role as supporting individual investors by keeping expenses low (which they do very, very well). They don't spend much time or money wielding their shares (3.8% of the company in the case of HP).
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No, don't quit the 401(k).
401(k) plans may suck, but you're investing pre-tax, and your employer may be matching your contributions, in which case you'd be leaving money on the table by not participating. Over the long term, the investment return on the tax savings and an employer match are more important than the mediocre performance of your employer's sucky 401(k) plan. Here's better advice:
- First priority is to contribute to the 401(k) plan up to your employer maximum match. Make sure that you pick the lowest-cost, most diversified investment choices offered in the plan (i.e., the ones that suck the least). Index funds are ideal, so if your 401(k) offers some, pick those up.
- Once you've made the match, your second priority is to put further contributions into an IRA from a good provider. I'll insist that you go with Vanguard.
- Once you've filled up the IRA, then if you have extra money to invest, put it into the 401(k), so you get more of the tax savings.
- When you leave your employer, make sure to roll the 401(k) over to an IRA at a good company like Vanguard.
- Learn about asset allocation and rebalancing, and practice them religiously.
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If only this were about the *real* Vanguard
Remember, there's still time to make an IRA contribution for 2008!
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Mac and Linux users beware?Some financial institutes in the US have this policy as well. Vanguard will reimburse any losses made through fraudulent activity if you've taken some precautions they've outlined which includes the need to "Make certain that any computer you use to access Vanguard.com has up-to-date security and anti-spyware, antivirus, and firewall software."
https://personal.vanguard.com/us/help/SecurityOnlineFraudPledgeContent.jsp
So what happens if you're a Mac or Linux user and those security programs don't exist for your platform or they are unneeded? Can they just deny your claim and you lose all your assets for using an OS with a higher track record of security?
I guess that's better than TreasuryDirect's policy on the issue which states that they're not responsible if someone cleans out your account as long as it was done with your password.
Regulations Governing New TreasuryDirect System 31 CFR Part 363 363.21 Who is liable if someone else accesses my New Treasury Direct account using my password? You are solely responsible for the confidentiality and use of your password. We will treat any transactions conducted using your password as having been authorized by you. We are not liable for any loss, liability, cost or expense that you may incur as a result of transactions made using your password.
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Re:Can they compete?
But for the diversified stock-owner you dont want each and every one of your stocks weighted down by the dead fat they're trying to protect. You want lean companies generating high profits in a single area. If you wanted diverse, you'd _buy_ diverse. And then _sell_ it when a niche looked about to tank.
That's a pretty good point, but I think we can take it further.
If you're an investor, you have two ways to diversify your investments:
- You can buy into the stocks of a wider, more diverse set of companies.
- You can convince the companies you have shares in to diversify their business.
The former will always be easier to do--you just buy more stocks (or just go ahead and buy everything--and everything else, too.
The latter is the only option available to people who are hyper-concentrated in one company's stock and can't trade out--i.e., people who control companies that are really big.
This is not to say that diversifying a company's business makes no sense--there's no reason in principle why it can't work, and in fact, bringing many things under one roof can achieve efficiencies that separate companies can't. But the point is that there is a definite potential for a conflict of interest between majority and minority shareholders.
Diversification [within a single company] is for those with a sentimental attachment to an organization.
And here, as you can guess, I think you're wrong. If you control a company, and that company forms the bulk of your net worth, there is nothing sentimental behind your desire to diversify your business. The only way you can retain all that wealth is by holding on to your stock, and diversifying the business can protect its value.
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Re:Can they compete?
But for the diversified stock-owner you dont want each and every one of your stocks weighted down by the dead fat they're trying to protect. You want lean companies generating high profits in a single area. If you wanted diverse, you'd _buy_ diverse. And then _sell_ it when a niche looked about to tank.
That's a pretty good point, but I think we can take it further.
If you're an investor, you have two ways to diversify your investments:
- You can buy into the stocks of a wider, more diverse set of companies.
- You can convince the companies you have shares in to diversify their business.
The former will always be easier to do--you just buy more stocks (or just go ahead and buy everything--and everything else, too.
The latter is the only option available to people who are hyper-concentrated in one company's stock and can't trade out--i.e., people who control companies that are really big.
This is not to say that diversifying a company's business makes no sense--there's no reason in principle why it can't work, and in fact, bringing many things under one roof can achieve efficiencies that separate companies can't. But the point is that there is a definite potential for a conflict of interest between majority and minority shareholders.
Diversification [within a single company] is for those with a sentimental attachment to an organization.
And here, as you can guess, I think you're wrong. If you control a company, and that company forms the bulk of your net worth, there is nothing sentimental behind your desire to diversify your business. The only way you can retain all that wealth is by holding on to your stock, and diversifying the business can protect its value.
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Opportunity cost
One of the keys here, is paying cash for the Solar Panels (not credit). If you finance the solar panels, your break even point will be MUCH farther out (more than 30 years) and you may not live long enough to break even with your solar purchase.
You're ignoring what your $10,000 could have been doing in the intervening period. If, say, you invested it in the Vanguard S&P 500 tracking fund, it's returned 12.26% per annum over the almost 31-year life of the fund (the returns from year to year vary greatly, obviously).
So, no, you're not "winning" by investing your cash in solar panels, you're losing big, financially, compared to the alternatives. In fact, you could buy high-quality carbon offsets out of the returns from your mutual fund and still be way out in front.
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Sony = Brokers?
Wow, I didn't realize they wanted to get into the stock broker business. I wonder if I'll be able to set up an IRA for my EverQuest characters.
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Re:What age do programmers peak?
An interesting alternative to stock picking:
https://flagship.vanguard.com/VGApp/hnw/FundsByObj ectiveDetail?category=LifeCycle
And you can even moderate your currency risk:
https://flagship.vanguard.com/VGApp/hnw/FundsSnaps hot?FundId=0113&FundIntExt=INT
(They are also in the process of launching an international index fund that includes Canada, which is probably a good idea because they have absurd amounts of natural resources) -
Re:What age do programmers peak?
An interesting alternative to stock picking:
https://flagship.vanguard.com/VGApp/hnw/FundsByObj ectiveDetail?category=LifeCycle
And you can even moderate your currency risk:
https://flagship.vanguard.com/VGApp/hnw/FundsSnaps hot?FundId=0113&FundIntExt=INT
(They are also in the process of launching an international index fund that includes Canada, which is probably a good idea because they have absurd amounts of natural resources) -
Investing on Margin
What you're basically describing is investing on margin (i.e. investing with borrowed money). Most experts steer people away from investing on margin. The possibility exists to lose money that wasn't yours to begin with AS WELL as having to pay interest on that money. And the interest rates are usually high.
You might be thinking that the interest rate on your student loans is really low. But recent legislation changed that. See this article for a description of the recent change. To summarize, the rate on Stafford Loans is going up to 6.8% and PLUS loans are going up to 8.5%. To compare, my mortgage is only 5.375% and my wife's consolidated med school loans are only 2.875%. So the new rates are pretty high.
What I would suggest to you is to find a really high-rate savings account or a money market account. I often see Emigrant Direct mentioned on Ben's Bargains as a good place to park your money. If you want to go down the money market route, I can highly suggest Vanguard's Prime Money Market Fund. Don't bother with the tax-free money market funds. You don't have enough income to make it worth it.
I would definitely steer clear of investing in stocks. It's just to risky to do with borrowed money. Once you have some money of your own that you can put away for a long time (think retirement savings), that's when you turn to stocks. Also avoid bond funds. Unlike individual bonds, bond funds have no maturity date, so they entail risk with little reward.
Others have suggested that it's illegal to invest your student loans. I find that hard to believe since that would preclude putting your loan money in any form of interest-bearing account. Maybe there's an exception for FDIC-insured accounts? -
Investing on Margin
What you're basically describing is investing on margin (i.e. investing with borrowed money). Most experts steer people away from investing on margin. The possibility exists to lose money that wasn't yours to begin with AS WELL as having to pay interest on that money. And the interest rates are usually high.
You might be thinking that the interest rate on your student loans is really low. But recent legislation changed that. See this article for a description of the recent change. To summarize, the rate on Stafford Loans is going up to 6.8% and PLUS loans are going up to 8.5%. To compare, my mortgage is only 5.375% and my wife's consolidated med school loans are only 2.875%. So the new rates are pretty high.
What I would suggest to you is to find a really high-rate savings account or a money market account. I often see Emigrant Direct mentioned on Ben's Bargains as a good place to park your money. If you want to go down the money market route, I can highly suggest Vanguard's Prime Money Market Fund. Don't bother with the tax-free money market funds. You don't have enough income to make it worth it.
I would definitely steer clear of investing in stocks. It's just to risky to do with borrowed money. Once you have some money of your own that you can put away for a long time (think retirement savings), that's when you turn to stocks. Also avoid bond funds. Unlike individual bonds, bond funds have no maturity date, so they entail risk with little reward.
Others have suggested that it's illegal to invest your student loans. I find that hard to believe since that would preclude putting your loan money in any form of interest-bearing account. Maybe there's an exception for FDIC-insured accounts? -
Re:Ethical Investing
Yes, there, are. Vanguard has the FTSE Social Index Fund, which screens its stocks for social and environmental criteria.
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Re:Ethical Investing
Yes, there, are. Vanguard has the FTSE Social Index Fund, which screens its stocks for social and environmental criteria.
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Invest in a money market account
If this is money you may need in the near term, I highly recommend investing in a money market account. Not the money market account at your bank or credit union, which probably have a low-percentage rate of return, but rather something like Vanguard's Prime Money Market Fund, or Emigrant Direct. Both are paying around 5%, which is pretty darn good. Money market accounts are insured up to $100K by the FDIC. And both Vanguard and Emigrant direct offer all the services you might need, such as being able to write checks against the account, schedule automatic deposits or withdrawals from other accounts, etc.
Don't fool around with the stock market or mutual funds if you plan to need this money in the next few years. If you want to invest it for the long term, put it in something like Vanguard's Total Stock Market Index fund and let it sit. Better yet, set up a Roth IRA account with Vanguard, contribute the maximum amount each year, and don't touch it until you retire. This will be one of your smartest moves.
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Invest in a money market account
If this is money you may need in the near term, I highly recommend investing in a money market account. Not the money market account at your bank or credit union, which probably have a low-percentage rate of return, but rather something like Vanguard's Prime Money Market Fund, or Emigrant Direct. Both are paying around 5%, which is pretty darn good. Money market accounts are insured up to $100K by the FDIC. And both Vanguard and Emigrant direct offer all the services you might need, such as being able to write checks against the account, schedule automatic deposits or withdrawals from other accounts, etc.
Don't fool around with the stock market or mutual funds if you plan to need this money in the next few years. If you want to invest it for the long term, put it in something like Vanguard's Total Stock Market Index fund and let it sit. Better yet, set up a Roth IRA account with Vanguard, contribute the maximum amount each year, and don't touch it until you retire. This will be one of your smartest moves.
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Loans, Interest (expense and revenue), and Taxes
Finance is quite interesting, since you can leverage loans to the point that you can make money on borrowed money. Although a number of comments say that any existing loans should be paid down over keeping the money in the bank, careful consideration should be placed on three factors: access to cash, interest rate variability, and tax impact on earnings. Do a cost/benefit analyis to see if it would make more sense to hang on to the cash.
* Access to Cash - Taking out a loan of any type and dumping the proceeds into a short-term savings account gives access to cash on a short notice. If the interest revenue on the deposit matches (taking into account taxes) or is close to the interest expense for the loan, then you can use this deposit to assure that cash will be available when needed without the worry of securing a loan in more-stressful situations (e.g., between part-time jobs). Having a loan balance can also help establish a credit history.
* Interest Rate Variability - Loans and investments can have fixed or variable rate interest. You want to acquire variable rate loans and fixed rate investments when you expect market interest rates to go down, while fixed rate loans and variable rate investments are better when market interest rates are likely to go up. For example, those who acquired variable rate mortgages three years ago are paying much more in interest now than those who acquired fixed rate (and at the time more expensive) loans.
* Impact of Taxes - Remember that you have to pay taxes at your marginal tax rate (e.g. 15% or 25%) for any interest or unqualified dividends you earn. One who pays income taxes at the 25% rate will only net 3% on a 4% yield investment. Likewise, only some types of loans will give you a tax break on interest you pay. A student loan at 6% only costs you 4.5% when you factor in the tax break, but 6% credit card interest costs you a full 6%.
I recommend Vanguard's Prime Money Market Fund. It currently yields 5.04%, you virtually can't lose money since the share price is fixed at $1, and you can write checks out of the account for immediate access to the funds. You'll earn higher rates than in a bank, but you need a $3000 minimum deposit.
http://flagship2.vanguard.com/VGApp/hnw/FundsSnaps hot?FundId=0030&FundIntExt=INT -
target funds
I'm a huge fan of target funds. A target fund is a fund that's "targeted" for a particular year: e.g., the "target 2035" fund is what you'd use if you intend/want to retire in 2035. In the early years, the fund invests mostly in higher-risk, higher-yield stock market opportunities, but as you get closer to the target date, the fund moves to more conservative investments automatically for you.
I think they're ideal for people like me who don't have the time, skill or patience to keep careful, constant track of investments; who would like to invest relatively safely, but not too conservatively, with minimal effort; and who want to feel confident knowing that their investment is being reallocated more or less as it should be as you grow older without having to sweat the details. (One article I read called them the good option for people who want to put their investments "on autopilot.")
We use them for retirement (targeted 30 yrs from now) and to save for our kids' college educations (targeted for when each turns 18). We went with Vanguard for both (Vanguard Target Retirement fund, Vanguard age-based fund) because Vanguard is big and reliable and, when I was doing the research, had the lowest fees; but a lot of the big investment houses have them now, so you can check around. This recent Money article likes the ones from Vanguard, Fidelity, and T. Rowe Price.
The only knocks I've heard against target funds are that they sometimes (1) charge higher than necessary fees and (2) have overly conservative strategies. But the fees issue is fading as they gain in popularity and are competing for investment dollars, and it doesn't take much shopping to find pretty low fees -- e.g., Vanguard's fees top out at .21, which is pretty damn cheap; and if you want to be more aggressive than the funds that match your age, you can just invest in a "younger" target fund -- e.g., if you want to retire in 2030, invest in a "target 2040" fund.
Just my $0.02.
(sorry, couldn't resist) -
Re:Call me offtopic, but...
Banks don't pay 10% interest, but banks are a lousy place to invest your money. Mutual Funds tend to be a relatively safe investment which usually yield higher returns... of course there are no guarantees. My friend's family is investing in real estate. They just put down a $40,000 down payment and renters are meeting their mortgage + tax + insurance. This translates into $1200 per month straight into their equity and because of their set up, they're probably not going to have too many overhead expenses. So $1200 * 12 = $14,000 per year on a $40,000 investment... and that's not even counting the increasing value of the property. Higher risk, higher reward.
The best bank rates I see are close to 5%. That's long term cds. If you just put your money in a normal savings account, you're probably actually losing money because very few savings accounts pay interest matching the rate of inflation.
Seriously, if you're interested in investing, you should be looking into work options like 401Ks, maximizing your Roth or Traditional IRA contributions and in general maximizing your pre-tax investments. I think a book like Wealthy Barber is a good place to start. It's an easy read covering basics and it can be read in a couple of hours. -
But can players buy in-game....
....mutual funds? Link
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Sigh... IP? Anyone?
I've read the Folding@Home FAQ looking for information about what they plan to do (from an IP standpoint) with the information they get. The "answers" they provide are pretty vague on the details.
Unlike other distributed computing projects, Folding@home is run by an academic institution (specifically the Pande Group, at Stanford University's Chemistry Department), which is a non-profit institution dedicated to science research and education. We will not sell the data or make any money off of it.
Ok, they won't make any money off it, but who might? Who owns any patents? What actually is done with the data? And the non-profit bit tells me nothing. The Vanguard Group is a non-profit too, but that doesn't mean they aren't interested in money. (Vanguard is owned by the investors, hence non-profit, but not really) Just because it is a non-profit institution doesn't tell me much. Universities are non-profit but they make a ton of money off of IP. They can do whatever they want but before I commit my processor cycles to helping I'd like to know specifically what I'm helping.
The FAQ goes on to say:
Moreover, we will make the data available for others to use. In particular, the results from Folding@home will be made available on several levels. Most importantly, analysis of the simulations will be submitted to scientific journals for publication, and these journal articles will be posted on the web page after publication. Next, after publication of these scientific articles which analyze the data, the raw data of the folding runs will be available for everyone, including other researchers, here on this web site.
So the data is going to be available. How? What "levels"? To whom? For how much? Just saying it will be published in journals tells me little. What else will be done with it? Who stands to benefit from the data? (aside from the obvious)
Basically I want to know and am not impressed with their answers. I'd like some candor when it comes to something this important. With SETI@home, who really cares? That won't affect my life. Folding@home might.
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Re:Economists expect this
If you're debating whether to buy index funds or actively managed funds, remember that the success of index funds doesn't even depend on the efficient market hypothesis. Just the fact that their expenses are lower insures that you'll beat the average return of all actively-managed funds, and the principle of "regression to the mean" guarantees that it's impossible to pick actively-managed funds that will beat the average return. For more on this topic, and to find out why an S&P 500 fund is NOT the best index fund to buy, check out this speech by Vanguard's Chairman John Bogle.
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What do you need the money for?
If you've been accepted into just about any Ph.D. program in an engineering/CS school, your tuition is getting paid, and they're giving you money to live on (albeit not as much as you'd get at your lucrative start-up).
It sounds to me like what you want is a suggestion for "how to save money to maintain (some) lifestyle", not "how to save money to afford to attend graduate school." (Although, if you're that set on a particular lifestyle, the two may be synonomous.)
With "lifestyle maintenance" as an objective, here's my advice: A Roth IRA is a great deal for a retirement account, but you can only put $2000 per year in it. If you're planning on going back to graduate school soon -- when you're still current on the research -- that's not going to be enough, and it's not going to grow enough. If you're used to academia, you won't have any problem living on $30k/year and saving $50k, especially if you're single and have no kids. (That's assuming a fairly lean -- by industry standards -- salary.) Put that $50k in an index fund, or even a money market account. Be sure to check the penalties for early withdrawal. (That sounds pretty obscene, no?)
- Here is a page at fidelity.com describing how to invest for growth.
- Here is "Vanguard University."
- Vanguard's recommended links
Good luck with the company, and if you're interested in databases, allow me to suggest an excellent program for your return to academia. (I may be a little biased, though.)
best,
~wog -
What do you need the money for?
If you've been accepted into just about any Ph.D. program in an engineering/CS school, your tuition is getting paid, and they're giving you money to live on (albeit not as much as you'd get at your lucrative start-up).
It sounds to me like what you want is a suggestion for "how to save money to maintain (some) lifestyle", not "how to save money to afford to attend graduate school." (Although, if you're that set on a particular lifestyle, the two may be synonomous.)
With "lifestyle maintenance" as an objective, here's my advice: A Roth IRA is a great deal for a retirement account, but you can only put $2000 per year in it. If you're planning on going back to graduate school soon -- when you're still current on the research -- that's not going to be enough, and it's not going to grow enough. If you're used to academia, you won't have any problem living on $30k/year and saving $50k, especially if you're single and have no kids. (That's assuming a fairly lean -- by industry standards -- salary.) Put that $50k in an index fund, or even a money market account. Be sure to check the penalties for early withdrawal. (That sounds pretty obscene, no?)
- Here is a page at fidelity.com describing how to invest for growth.
- Here is "Vanguard University."
- Vanguard's recommended links
Good luck with the company, and if you're interested in databases, allow me to suggest an excellent program for your return to academia. (I may be a little biased, though.)
best,
~wog -
Re:Beat the monkey score
A random stock does *not* have a 50/50 chance of beating the S&P500, at it hasn't in the past few years. The index is *capitalization weighted*, so huge companies like Microsoft & Intel represent larger portions (2-4% each) of the index than smaller companies. Most stocks were actually *down* last year... so the market-weighted average is up, while the median stock was down. The S&P is also mostly large companies, which have run up a lot. Many people recommend index funds tracking even larger indices like the Wilshire 5000 (see Vaguard's Plain Talk on Indexing).