You should think about your retirement plans as soon as possible.

McGrrr

Facetious
is a Contributor Alumnus
Oh wait, you work part time, have credit card debt, rent to pay, and student loans...? Nevermind.

Pensions are underfunded, actuaries live in a fantasy world of 7%+ assumed annualised returns, fund managers have been forced out along the risk curve in search of yield, and equity markets are once again in a bubble. There are also bubbles in real estate, crypto, bonds, and even your mother. In fact, she's the biggest bubble of all.

The developed world is overdue for a massive recession; leading indicators suggest a recession is coming in the second half of 2018. I'd be surprised if governments and central banks are able to kick the can beyond that. The baby boomers are retiring now and what little retirement assets they have is going to take a significant hair cut in that recession.

This is going to be ugly. And painful. And fascinating to watch.

Seriously though, the sooner you start planning for your retirement, the better. You need to be financially savvy for your own good.
 
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McGrrr, I recently maxed out my ROTH IRA for 2017 (just opened it this year). I invest in Vanguard's 500 Index and a 2060 Retirement Plan. Should I look into a total international index fund over one of those? Are index funds still the way to go? (I'm 23).

I also match my employer's 403(B) %, which comes out to about 10% of my total income/year. It gets invested into whatever 20xx year my age group is expected to retire according to TIAA. Am I putting too many eggs in one basket given what I've said above?

Appreciate any and all advice. :)
 

McGrrr

Facetious
is a Contributor Alumnus
Appreciate any and all advice. :)
Markets are broken. Central banks have broken them with their lower-for-longer interest rate policies that have skewed economic incentives beyond recognition. Traditional value investing is virtually impossible in this climate because of all the noise. Equities seem to bounce back within moments of bad news as people buy every dip; it's truly extraordinary. Equity valuations have never been so disconnected with fundamentals, and the problem is that pension funds are increasingly piling into them because the risk free rate of return (i.e. treasury bills) is essentially zero.

I'd suggest holding some cash because assets will be very cheap after the inevitable crash. However, your guess is as good as mine beyond that. All I know is that the smartest people in the room are nervous as they continue to take their money off the table.
 
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You should think about your retirement plans as soon as possible.
The developed world is overdue for a massive recession
I agree.

I'd suggest holding some cash because assets will be very cheap after the inevitable crash
How do you feel about hedging into precious metals such as gold and silver? Seem like it could be a stronger play than straight out losing to inflation with cash, no?
 

McGrrr

Facetious
is a Contributor Alumnus
How do you feel about hedging into precious metals such as gold and silver? Seem like it could be a stronger play than straight out losing to inflation with cash, no?
If you have a significant amount of capital, say... $100k+ I'd certainly hold some physical precious metals as insurance. The allocation should correspond with how bearish you are, but I'd put a minimum at 5%. The problem when you have much less capital to invest is that spreads/premiums are high for small amounts of gold/silver, and (without a cheap option to own both bars and coins) you'll have to choose between cheaper illiquid bullion bars and expensive more liquid bullion coins. Silver also incurs value added tax in the UK (not sure about the tax situation elsewhere), which at 20% is just too much on top of premiums.

There are options like https://www.bullionvault.com/ which will hold allocated gold/silver on your behalf in foreign vaults (and at very reasonable fees), but I'm from the school of thought that believes "if you can't hold your physical gold, then you don't own gold" i.e. in times of economic stress, will you have access to your metals? COMEX is a joke and GLD is for traders.

While cash will be eroded by the twin terrors of inflation and negative real interest rates, I could live with losing a guaranteed 2-3% (in real terms) per year, if I know that equity markets will definitely correct by 40%+ at some point in the near future. Remember that cash will allow you to move quickly as the market changes.
 
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Thanks for the input. I have to do some research before I decide if having the metal within physical reach is a must for me.

Part of the reason why I went into Bitcoin and crypto to begin with was because I wanted an investment disconnected from the other bubbles, but have come to understand that the fundamental store of value trait of it is likely years away from comming into fruition. The price action seem to correlate way to much with the equity markets and speculator emotions, for it to work as a hedge. So for now I only like crypto for its upside potential.
 

McGrrr

Facetious
is a Contributor Alumnus
is it starting, oh great Oracle, McGrrr?
Equities have erased 3 months of gains, but it remains to be seen if this is the start of something more substantial. The market has seemed impervious to bad news in recent years, recovering almost immediately after each dip. There are many factors contributing to this, namely excess liquidity i.e. an oversupply of capital being pumped into too few quality assets (money managers have to put idle cash somewhere). Another cause is the continuing rise of passive investing through ETFs that buy everything, to capture secular and aggregated trends.

Essentially, investors have more money than ever (due to QE) and they're dumbing down their investment decisions (to avoid fund management fees) in addition to taking on more risk to capture ever diminishing yields. A whole generation of financiers have also matured through a period of historically low interest rates, and a market that's never been adequately corrected in its relentless upward trajectory. They've never known anything different; this simply can't end well.
 
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This thread has been a really interesting read for me. I will fully admit that despite being almost 30 I have very little knowledge of investments, the stock market, etc., partially because I never wanted to have any knowledge of it (and still don't) since it seems like such a huge gamble with your assets. Any advice for someone who simply wants to stick money into their RRSP (retirement fund for you non-Canadians) and let it sit there until they're done working?
 

McGrrr

Facetious
is a Contributor Alumnus
Do you have any concrete evidence or specific facts for this dude? If you work at like goldman, morgan stanley or any banking institution I'd be inclined to agree with you...
I'm an associate at the second or third (depending on how you measure it) largest global investment bank. I don't feel the need to name my employer, but it's obvious which institutions make the shortlist.

If you're interested in these things, I'd strongly recommend https://www.realvision.com/ and other resources relating to its founders Raoul Pal and Grant Williams. They're the best at creating insightful, unbiased content that's accessible for non-finance people.
 

McGrrr

Facetious
is a Contributor Alumnus
Any advice for someone who simply wants to stick money into their RRSP (retirement fund for you non-Canadians) and let it sit there until they're done working?
If I had a good answer for this, it wouldn't be free, and I'd certainly be a lot wealthier. Anybody offering financial advice that promises long term secure returns in the current economic environment is either a genius or a fraud, and they're a fraud until genius is proven. All I know is that the smartest people in the room are nervous, and they're taking money off the table. I'd be hesitant to offer anything beyond the "hold cash" suggestion that I've already espoused in this thread.
 
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If I had a good answer for this, it wouldn't be free, and I'd certainly be a lot wealthier. Anybody offering financial advice that promises long term secure returns in the current economic environment is either a genius or a fraud, and they're a fraud until genius is proven.
Hahaha, can't say I blame your response! But yes, I presume that individual research is usually the best thing since I like to imagine I'm intelligent enough to see the benefits and drawbacks.

MGrrr said:
All I know is that the smartest people in the room are nervous, and they're taking money off the table. I'd be hesitant to offer anything beyond the "hold cash" suggestion that I've already espoused in this thread.
I think that, thankfully, I already had that mindset going for me as I move into my career. Why would anyone invest in the stock market, ever? The promise of making free money?
 
Unless you are already rich and have capital to hand away to corporations to gamble what is the point. You're just giving away your money on the presumption there will be more in the long run and not paying tax on it now will somehow make you money later (IRA). Stock market is fool's game if you aren't in a position like the OP. The ONLY way to play would be very long term and even that money will ultimately not add up to much if you aren't re-investing heavily and adding from your income. Employer matching is the only reason I would ever contribute to an IRA.

Unless you already have your house, business, finances, family, etc., in order and cool 100 G's + put away (that you don't need) you should not be wasting your extra income on equities unless you have a great employer incentive and are able to get the money when you need it. What the OP doesn't reveal is in reality you already have to be extraordinarily wealthy to be able to make any real return that isn't over a very long time. I get the premise I finished my finance degree almost 3 yrs ago but let's be real here. What use is a 20% growth if it isn't realized.

Let's face the reality of this. The middle class is fucked. You will NOT become rich or wealthy as a middle class person with middle class income playing the stock market, in any way shape or form. OP probably makes much more than middle class figures and actually makes enough income to grow his portfolio consistently. Most people can't do that. This is what I would recommend for most that aren't in the finance world but want wealth.

What you youngsters need to do (I'm 26 which is like 60 on smogon) and this is of course following the premise of the thread, to one day 'retire' from working full-time and somehow live off of the money you're made, is accept that in order to retire one day you must become WEALTHY. Not rich, but wealthy, as in generational wealth. You must accept that the middle class and everyone in it is screwed, therefore you must escape the middle class.

-- Work your ass off. Make every meeting, appointment, follow up every phone call. You aren't doing shit with your time anyway, don't act like you need to schedule way future appointments with people. Don't get into shit debt like expensive cars or hurry into a mortgage.

-- Find ways to make MORE income. Instead of thinking 'oh if I just don't drink starbucks every day i'll save xx every year', think to yourself, how do I do more, how do I employ the 24 hours of my day instead of the 8-12 I spend at work. How do I add streams of income, how do I make more money from the same job I have now, how do I monetize all time of the day. Realize that your passion and your cash cow will rarely ever be the same thing and that is ok. You need to be in industries that pay well if you actually want to make serious money. It's not for everyone. Learn how to sell shit and you will never be without work for long. Also don't get into shit debt like expensive cars, credit cards, hurry into a mortgage, etc.

-- Invest your money into a business, or a vehicle that produces CASH FLOW. This is vital. If you're 20 something and only have 20k to your name, you better face the reality that you're barely above BROKE. If you are broke... Invest your time and energy into 1.) self improvement/growth/skill building, 2.) working and saving up cash like a squirrel saves nuts and eventually 3.) into a business or investment that's going to produce cash flow. As a young person you can afford to take much more risk.

-- Realize that we live in the 21st century. You cannot simply work and save your way into retirement like past generations could. We have the internet. Commerce flows 24 hours a day but we only 'work' to make money 8-12 hours. Think how you can use the internet and real businesses and cash producing assets that can work for you while you aren't working. I don't want to make 10-25% on something I have zero influence over (stock market), I want 200% and control/influence.


Once you have your first 100-500K depending on where you live you can leverage debt to take some risk and start your business or to invest in REAL assets and be in control of million $+ assets/businesses. You must never stop producing income but this is a way you will grow and develop real wealth that will secure your and your family's future. OP is of course qualified to be in stocks and I don't mean to discourage what he does. I respect OP and always enjoy learning from him but for most people I feel like they're just lazy and are hoping it doesn't all get washed out due to a crisis. The truth is you can be in control and you can weather extremely dire times by taking on the risk and control of your own income and not leaving your future to the mercy of massive banks.
 

Tera Melos

Banned deucer.
A Navy friend of mine asked me what my retirement plans are. We're both in our Early twenties. I thought it was such a weird question until I really thought about it. Still kind of pondering what my retirement plans are.
 

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