Quote :

"If you really think that at age 25 you should be avoiding high risk/reward vehicles for low risk/reward vehicles you are also an idiot."

You're right, except unless you are extremely rich and have a low risk tolerance due to personal averseness to risk.

1/25/2007 6:30:59 PM

Quote :

"I'm a software engineer. Why do you ask?"

1/25/2007 10:30:39 PM

If you're properly diversified there really isnt much risk in a stock portfolio that you won't be touching for 40+ years.

People act like bonds & mutual funds don't have risk. Guess they've never heard of inflation risk?

You people would have gotten drilled in the 70's.


I don't care if people never learn the value of investing. The 0% personal savings rate in America is what makes my individual return higher.

If it wasnt for those pesky foreign and corporate investors we'd all be making a shitload of money.

[Edited on January 26, 2007 at 4:37 PM. Reason : a]

1/26/2007 4:37:24 PM

just curious.

anyway.

- assume I have $1500/month to spend on either paying off debt or investing.

- let's say I have $25,000 in debt at 14.9% (credit cards) and I make minimum payments ($1000/month). It would take me something like 2.5 years to pay it all off. at the same time, let's say I take the remaining $500/month and put it into a mutual fund that made 10% annually. at the end of the 2.5 years, I would have $17,500 and no credit card debt. Good deal.

- now let's say I took all $1500/month and put it into paying off the credit card and didn't invest any. it would take about 1.5 years to pay it off. if I invested the $1500/month for the next year, (at the end of the 2.5 year period initally given to pay off the credit card), I would end up with $20,500. Better deal.

- now let's not even invest that $1500/month for that year [after you are done paying off your debt in the second scenario]. let's instead take that $1500/month and put it into a cigar box under the bed. at the end of that year, I would end up with $19,500.

is my logic flawed, or is $20,500 (or $19,500) > $17,500?

[Edited on January 29, 2007 at 8:38 PM. Reason : editing in bold per next post]

1/29/2007 8:32:03 PM

The third scenario doesn't mention your debt.

[Edited on January 29, 2007 at 8:36 PM. Reason : Regardless, I don't see the point of your post.]

1/29/2007 8:34:25 PM

oh wow....seriously?

the point is that if you get rid of your debt FIRST, you can do whatever you want with it (read, MAKE MONEY) later

1/29/2007 8:40:01 PM

1 sec

[Edited on January 29, 2007 at 8:40 PM. Reason : ]

1/29/2007 8:40:18 PM

Quote :

"let's say I have $25,000 in debt at 14.9% (credit cards)"

Hah. We were comparing student loans, car loans, and to an extent mortgages and now you bring up credit cards out of the blue? Of course if you have a loan where you are paying a double digit interest rate it doesn't make sense.

I'll humor your scenario. Even with a loan at a double digit interest rate if you took the $500 and put it in a 401K with matching you would come out ahead. I'll be happy to do the math for you if you'd like.

1/29/2007 8:45:23 PM

If you owe money at 15% interest rate and your portfolio increases at a 10% rate then you would be better off paying down the debt first.


For the exact same reason you would be stupid to pay down a 5% debt when you could make 10% in your portfolio.


Plus you can deduct the interest you pay on a house. This isnt true on credit card interest (**in most cases, im sure someone could provide a business expense scenario)

1/29/2007 10:40:40 PM

Quote :

"For the exact same reason you would be stupid to pay down a 5% debt when you could make 10% in your portfolio."

I generally agree with the notion of paying down debt regardless of its interest rate, except for primary mortgages.

Your example is just too simple. The stock market isn't an ATM. You don't just go to the market and put your card in and get 10% back next year.

The market rewards people for risking their money, plain and simple. Yes, it is true that long bets are often right. But that's not written into law anywhere. How well your money does, is a function of timing and worldwide factors noone can accurately predict. All we know is that, historically, the market does well in any given twenty-year period.

Investing in the market without a healthy respect for it is utterly, 100%, asinine and foolish. That includes Miss Cleo up there, talking about how well a diversified portfolio will do in 40 years. Does he realize how much totally unpredictable and crazy stuff happens in 40 years? Do we live on the same planet?

Investing in yourself -- well, unless you're a fool -- is almost always a safe bet. Unlike the market's returns, your debt obligation is written down on paper. Your creditors have more rights to your money than you have to your own investments.

Of course the usual cabal will harp on me for being an anti-market Luddite. I have plenty of investments in the market. But I don't expect it to be a cash register. Paying off debt is an instant, guaranteed return that lowers my basic cost of living, no matter what my circumstances in life. If North Korea goes nuclear tomorrow and the markets tank for the next ten years, at least I still have a car.

1/30/2007 4:25:09 AM

OKay i just want to point out that over 40 years there is very little unpredictability.


And over one year there is a lot of unpredictability.



You wrote an awful lot of words that were based on an incorrect assumption.

1/30/2007 7:49:17 PM

Quote :

"I generally agree with the notion of paying down debt regardless of its interest rate, except for primary mortgages."

What's so special about mortgages?

1/30/2007 7:55:58 PM

Quote :

"OKay i just want to point out that over 40 years there is very little unpredictability."

Smoker4:

Quote :

"All we know is that, historically, the market does well in any given twenty-year period."

Are you capable of comprehending the meaning of the word "historically?"

There is no guarantee that the market will go up in any period of time, at any rate of predictability.

Any belief otherwise is 100% irrational, stupid, asinine, foolish, and dangerous. If you think the market is anything but a long bet on historical odds, you are missing some screws.

Quote :

"What's so special about mortgages?"

They're fucking big? Do you know many people who can pony up six figures in liquid cash in short amounts of time to pay them down?

I totally advocate paying more than the principal, but it's usually not practical to just pay it off outright. And cash is king, after all (that's the whole point of paying off debt).

[Edited on January 31, 2007 at 12:07 AM. Reason : foo]

1/31/2007 12:07:00 AM

Quote :

"They're fucking big? Do you know many people who can pony up six figures in liquid cash in short amounts of time to pay them down?"

So like, if I buy a really expensive car, or run up huge credit card debts...then I can treat them like legitimate debt?

1/31/2007 8:09:52 AM

Apparenlty so...

Be careful out there today guys. Historically gravity has kept us from flying around, but I have a bad feeling that today it might stop working...

1/31/2007 8:22:52 AM

Cause you know the market has never gone down, not once, and not ever over any period of time ever.

1/31/2007 8:52:05 AM

The market has gone down before. What a foolish statement to make.

Quote :

"cash is king"

I'm still laughing at that one.

1/31/2007 8:57:10 AM

Dude you are totally backtracking on me smoker.

You said this

Quote :

" That includes Miss Cleo up there, talking about how well a diversified portfolio will do in 40 years. Does he realize how much totally unpredictable and crazy stuff happens in 40 years? "

That is an illogical assumption.

Over a 40 year period there is very little unpredictabitlity compared to a short term period.



All of you are a little ridiculous. You need to put into perspective just how stable our economy is right now. People talk about the 2001 "recession" as if people were starving or something. Do you realize that we actually had nominal growth in 2001?

I mean jesus. You cant act like the sky is falling just because the market had a SLIGHT correction after nearly a decade of substantial growth.


I can tell you right now that if you put your money into a well diversified portfolio and take it out 40 years from now you will almost certainly be looking at 9% growth within +/- 1%.


Who gives a fuck if it goes down a couple times along the way? Money makes money. Period.


I dont care if you suck at handling your money, it just leaves me with more advantageous opportunities.

1/31/2007 6:12:55 PM