blah blah finances blah blah

[rmd]

so, i've been pondering my finances lately.

as usual, i'm thinking that i should be saving more money. then again, i suspect that if i could retire this moment i'd still be thinking "man, i should be saving more money. what if..."

i'm thinking about talking to some kind of financial planning type, but haven't done anything about it yet.


[Poll #743154]

if you're local to me and have a financial planner you like, feel free to share the name. i have an irrational aversion to most "hey, talk to our financial planners" offers from amex et al since i pessimistically assume they're going to act in a way that maximizes their happiness in terms of "meeting boiler room quotas" and less to maximize my happiness in terms of "making me a lot of money".



thanks!

Comments

[rmd.livejournal.com]

You do not need a financial planner.

see, that's what my DIY-ethic inner self wants to think. but on the other hand, i'm kind of dumb (uneducated, lacking clue) about money beyond what's in my pocket and what's in my bank account. during the 90's i made some in the market and lost some in the market. *shrug*

it's nervous-making terrain full of handwaving use of jargon that i do not parse and concepts that i'm only passingly familiar with in this context.

so, i ask the lazyweb. :-)

[wotw]

I promise you; in this case your DIY-ethic inner self is right. Not
because there's anything particularly virtuous about doing it yourself
but because in this case there's practically no "it" to do. Put your
money in mutual funds and leave it there. Period.

I had dinner once with Fisher Black, who would surely have won the
Nobel Prize in economics if he'd lived long enough. At the time he
was working on Wall Street, devising financial instruments and earning
several million dollars a year. Here is what he told me:

"Guys like me should be taxed out of existence. All I do is devise
complicated financial strategies for people who would be better off
with bank CDs and Vanguard mutual funds."

I've posted a chart for you at www.homeport.org/~wotw/interest.xls .
It assumes you invest $100 a month; if you invest $1000 a month, multiply
all the numbers by 10. Et cetera. The interest rate is on the left;
the number of years till retirement is on the top. If you invest at 3%
for 30 years, you'll have $58,384. If you invest at 10% for 40 years,
you'll have $643,176. If you invest at 12% for 50 years, you'll have
$4,024,272.

The morals (and the only morals you need to know) are that the rewards
to risk-tolerance (which allows you to earn a higher interest rate) and
to patience are huge. A slightly higher interest rate or a slightly
longer time horizon translates into enormous numbers of dollars. I wish
someone had told me this when I was young.

The other thing you'll want to know is that the stock market historically
earns about 8% plus inflation. So if you put everything in the stock
market, you should use the 8% line, but read those numbers as inflation-
adjusted; i.e. after 40 years you'll have $352,987 in today's
dollars, which could be quite a bit more in 2046 dollars. If anything,
8% is a low estimate for stock market returns.

Remember this too: When you look at the change in the value of the stock
market over the past twenty years, you are not seeing anything like
the full rate of growth of a stock market investment, because your
investment earns dividends, which don't show up in the growth of the
Dow Jones average.

Now: If you want that 8% (in expectation of course; there's some risk of
disaster, though I judge that risk to be quite small), put everything in
the stock market (and don't don't don't try to pick winners; just use
mutual funds; someday if we're standing in front of a blackboard I can
explain why); if you want more safety, split between mutual funds and CD's;
if you can tolerate more risk, you can essentially earn 12 or 15 or 20
percent by investing in the stock market with borrowed money. (That's a
MUCH MUCH better way to earn high returns than investing in individual
risky stocks. Again, I can show you why on a blackboard someday.

Finally: No financial planner in the world can tell you anything that is
not either a) contained in the above few paragraphs or b) irrelevant or
c) wrong. Truly.

[r-ness.livejournal.com]

"Guys like me should be taxed out of existence. All I do is devise
complicated financial strategies for people who would be better off
with bank CDs and Vanguard mutual funds."

Vanguard and TIAA-CREF are my friends. Gotta love the expense ratios.

[hotpoint.livejournal.com]

I have a few books I could lend you which expand on both the terminology and the DIY investing process wotw is describing. Whether you talk with a financial planner or not, you can get a better idea of what the jargon actually means and what's out there for you.