Any Interest in a Class on Investing?


With the release of the first book on finance and investing, SmallIvy Book of Investing: Book1: Investing to Grow Wealthy, and the upcoming new book, Cash Flow Your Way to Wealth, one thought I’ve had is to start teaching a weekend class/seminar on investing and money management.  While it is great to pick up a book and read about investing and finance, or to read a blog post a few times each week, there is just something about going to a seminar where you really sit down and focus on a topic that really gets you ramped up the learning curve fast.

I’ve also found that there are a lot of bad books on investing if you go to the local bookstore (if you can find one anymore) or go browse through the finance books at Amazon.  You’ll find one book that talks about buying mutual funds, another that talks about flipping real estate, and another that talks about day-trading your way to wealth and happiness in just four hours a day.  Someone could easily get confused with all of the different strategies offered, some that are valid and others that aren’t.

My question to my readers is, therefore, would you have interest in a seminar that teaches you how to invest or other personal finance/money management topics?  I’m thinking of a full-day seminar on a given investing/finance topic.  This would give time to really focus in on a given area, allow you to ask questions, and include a copy of at least one of my books and a set of notes/hand-outs to refresh your memory at home.

Hey – if you like The Small Investor, help keep it going.  Buy a copy of the SmallIvy Book of Investing: Book1: Investing to Grow Wealthy or just click on one of the product links below, then browse and buy something you need from Amazon’s huge collection.  The Small Investor will make a small commission each time you buy a product through one of our links.

Shop Appliances
Find a great new book
Shop DVDs
Buy your Pet Supplies
Tools and Hardware
Best Selling Toys and Games
Patio Lawn and Garden Supplies
Clothing and Accessories
Baby Products
Health and Personal Care

Classes could be on topics such as:

How to select mutual funds

Choosing funds and investing in your 401k

How to select individual stocks and manage a stock portfolio

How to manage a portfolio and generate investment income in retirement

How to manage your cash flow to build wealth (what to do after you’re out-of-debt)

Smart ways to manage your money (so that you can have your cake and eat it too)

Want all the details on using Investing to grow financially Independent?  Try The SmallIvy Book of Investing.  

The other question is the best format for the class.  Given that I’m located in the South East United States, classes could be held in or near cities such as Atlanta, Huntsville, Nashville, Louisville or Ashville.  I could also offer an online class, maybe spread out over a few days/evenings, with lectures/discussions using Go To Meeting or some similar website.

So, here’s where I need your help.  Would you be interested in a class such as this?  If so, what would be the best format (in person or remote)?  If in person, would one of the places listed work for you?  Finally, what would you think would be a reasonable cost for an 8-hour seminar such as this, complete with notes and books (and maybe lunch)?

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The Beauty of the US – Everyone Has an Equal Chance


I was thinking the other day about what it would be like to go out on your own, a few hundred dollars in your pocket, and try to make it in the world.  Thinking about trying to find a place to live, find a job, buy clothes, food, and other necessities.  One thought was that it would be difficult for someone who came from an impoverished background, with both parents on welfare because of medical conditions or lifestyle choices, to get a decent job because such an individual would not be able to get the education needed to move into better paying jobs.  It seemed like they would be at a great disadvantage to someone from an upper-class or middle-class background.

But then it occurred to me – those in the US whose parents are poor have an equal ability to pay for college, even at elite school, as those who come from wealthier backgrounds.  If anything, they are in better shape than the typical middle-class family.  How so?

Hey – if you like The Small Investor, help keep it going.  Buy a copy of SmallIvy Book of Investing: Book1: Investing to Grow Wealthy, buy one of the products shown, or just click on one of the product links and then browse and buy something else you need from Amazon’s huge collection.  The Small Investor will make a small commission each time you buy a product through one of our links.

There is an enormous amount of educational welfare available, coming from both the Federal Government and the schools themselves, that really make the ability to pay for school equal for all, or even to the advantage of those from poor backgrounds.  A student whose parents make $150,000 per year will probably pay something like $25,000 per year to go to Duke University or Harvard.  If that same student’s parents also had a couple of million dollars in the bank, even if they made $80,000 per year instead of $150,000 per year in salary, they would probably pay most of all of the $45,000 per year it costs to attend Duke or Harvard, including room and board.

Someone whose parents make nothing and have nothing saved up would pay nothing to go to those same schools.  They could go to a community college, a state school, or even an elite private university and pay nothing to do so!  Between the reductions or eliminations in tuition that these schools provide to students who show financial need and the grants given out by the federal government, which do not need to be paid back, students from poor backgrounds see little if any cost for going to college.  So there is really no financial reason for a student not being able to leave home and gain the education needed to make very good money in the US even if his/her parents didn’t make more than $10,000 per year their whole lives.

So the first lesson for those reading this article from poor backgrounds:

There is no financial reason that you cannot learn the skills to increase your income.

Now it is totally different for someone whose parents do make decent money, but are not willing to support their children financially for college.  In this case, the schools and the federal government will look at your parent’s wealth and income and expect them to support a portion of your educational costs based on what they could fund if they wanted to, even if they choose not to do so.  This is really unfortunate since there are parents out there who do cut their children off when they leave home even if the schools and the government expect them to provide support.  It is understandable from the school’s prospective, however, since if colleges just took your word for it, virtually everyone would not give any money to their children for college so that they could go for free.  (Boggles the mind to see that people who would never take charity for other things see nothing wrong with having others fund their children’s education when they could do so themselves, but apparently there’s no taboo when it comes to accepting college financial aid.)  So this is a lesson for parents of middle-class or upper-class background:

Your children will likely get little in terms of financial aid, regardless of whether or not you have saved up money for their college education, so start saving early and plan on footing at least part of the bill to keep them from being buried in student loans.

There are some ways out get out from under this cloud, including waiting until you are 23 or older to go to college, or getting married right out of high school.  Some of the other criteria for not needing to include your parent’s information on financial aid forms are listed here.  There are also a lot of scholarships out there that can help cover college costs that don’t require showing financial need.  These might be an option if you generally have good grades and have been involved in various activities to show you are well-rounded.

Want all the details on using Investing to grow financially Independent?  Try The SmallIvy Book of Investing.  

Now, there are other factors that keep children from impoverished families from going to college and raising their income.  Many don’t have good grades while they are in grade and high school, which is understandable if they have no one at home pushing them at all, or even have a home life that makes it difficult for them to perform well in school.  But again, there are still ways to make a better life for yourself than a series of dead-end, low-pay jobs.

Community colleges:  If you are able make it into a community college, which again could be free for you if you come from a poor family background, you have another chance to change your destiny.  If you concentrate on your studies and get good grades at a community college, many universities would then accept you into their schools.  If you are fortunate enough to get in, spend at least two hours per week doing homework and studying for your classes for every credit hour you are taking.  For example, someone taking 12 hours should be doing 24 hours of work outside of class, for a total of 36 hours per week.  Also, go to office hours for help if you don’t understand something, and spend time getting to know your professors since you will need them for references when you apply to the university.

Trades:  Jobs in the trades pay a lot of money.  If you can do electrical work, plumbing, carpentry, computer repairs, and other similar jobs, you can make a lot more than you will working in retail or at a fast food job.  Many jobs in these areas are earned through experience with a professional in the industry.  If you are willing to be a good worker, showing up on time, being willing to work hard and get the job done, and are willing to learn all that you can while you are on the job, you can get a job with a trade professional and learn what you need to eventually do work on your own.

A final issue for those from poor backgrounds is that their families may continue to drag them down.  Someone whose parents have serious drug or health issues may feel an obligation to take care of siblings still in the home or their parents after they leave the house.  Realize, however, that you can’t save someone from drowning if you yourself are barely keeping your head above water.  It can be better for you and for them if you work to get yourself on firm financial footing first and then help where possible instead of trying to support siblings and parents by working a low-pay job and giving them what you can.  You might also be preventing them from getting welfare because you cause the income of their household to be too high to qualify for food stamps and housing assistance.

While it is difficult, the best option may be to cut financial ties temporally and concentrate on getting through school and raising your income, and then helping them out.  Encouraging your siblings to do what they can, such as getting a job while still in high school and/or working hard at school to get the grades needed to qualify for college is also better than trying to support a family on a minimum wage salary.  Two, three, or four people can do more than a single person can do alone.  Remember that anyone who has health has substantial wealth, even if they have no money in their bank accounts.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

How to Start Out on Your Own


My son, who is a junior in high school, asked me tonight if I could talk to a friend of his who was a senior and who was going to be leaving his house soon and start out on his own.  His friend didn’t know anything about personal finance and wasn’t sure how to get started.  My son wondered if I could give him some advice on money management and how to get set-up in the adult world.

That got me thinking.  Hopefully most children have some sort of help with the transition.  Maybe their parents help them get into their first apartment and then they start to pay their rent from a job.  Maybe they go off to college, which their parents help finance, and then they get a job before leaving school, or come back home for a month or two while they look for a job after college.

But what if you were a couple of months away from graduating high school, and your parents just said that once you graduate, you were on your own?  You just needed to leave home, maybe graduation night, and do whatever you could?  How would you prepare, and what would you do?

Hey – if you like The Small Investor, help keep it going.  Buy a copy of SmallIvy Book of Investing: Book1: Investing to Grow Wealthy, buy one of the products shown, or just click on one of the product links and then browse and buy something else you need from Amazon’s huge collection.  The Small Investor will make a small commission each time you buy a product through one of our links.

Hopefully you would have a little time.  Let’s say that you had three months to prepare.  Here are the things that I would do:

1.Look at the basics:  Food, shelter, clothing.

To survive, you would need to figure out how you could acquire the basics.  How would you get money for food, shelter, and clothing?  Food for one person would probably be about $200 per month if you planned to eat at home, cook your meals from basic ingredients, and rarely if ever eat out.  Shelter could be somewhere between $200 and $400 per month, depending on where you live, if you did things like rent with a roommate, rent a room in a house, or look for other ways to save money.  You therefore would need to make somewhere in the vicinity of $10,000 – $12,000 per year to pay for the bare necessities for yourself (no children here).

You might be able to get a job that includes shelter (and maybe even food) such as a nanny or live-in housekeeper.  You might also be able to cut your rent by helping your landlord take care of the place by helping with yard care and maintenance.  A little creativity goes a long way when you’re scraping by at the start of life.

2. Think about work.

To gain the money needed for food, shelter, and clothing, you would need to have a job.  To just cover your basic expenses, you really could make it with a full-time minimum wage job at the start.  While you might start out as a fairly basic job, you should use the first job (and the jobs after that until you land your dream job) to learn skills that will help you get a better job.  If you work in a fast food restaurant, use it to learn things like how a business runs, how to please customers, and how to deal with coworkers.  You should also be looking for whatever training your employer can provide since the more skills you have, the more money you can make.

3.  Save up a baby emergency fund.

You probably won’t be able to gather up a full emergency fund of $9,000-$12,000 with your first job, but at least work hard to save up a baby emergency fund of $1,000 or so.  That money will help with some things like a car repair, a short job loss, or a minor illness.  Ideally you should save this money up before you even leave the house.  If you can’t, save as much as you can from your job (and maybe a second job) to get there as soon as you can.

Want all the details on using Investing to grow financially Independent?  Try The SmallIvy Book of Investing.  

.4.  Figure out college or a trade school.

Even if you don’t have help from parents, you should look at college or training in a trade.  Luckily, if your parents do not make a lot of money, you will probably be able to go to school for free or nearly free through grants and financial aid.  This might involve a work-study program, but there is nothing wrong with working part-time in the school cafeteria in exchange for thousands of dollars in tuition being waved.  If your parents do make a lot of money, but simply cut you off, it will be a bit more difficult since the schools may still expect you to be able to get help with tuition from your parents.  Using community colleges, that cost a lot less, for the first couple of years and then transferring to a university to complete the degree might be a good way to keep costs down.

Also, if you’d rather work with your hands than sit at a keyboard all day, many trades pay as well or better than jobs for those with college degrees.  Electricians and plumbers can do very well, especially if you eventually start your own business, as do technicians, nurses aides, and other jobs that require an apprenticeship or a couple of years at a trade school.

5.  Move your way up the ladder.

College is one way to possibly increase your pay, but it is not the only way.  You make more money when you become more valuable and are able to serve more people.  If you have a special skill, are able to lead people, or are able to manage large projects, you can make more money.  Always be looking for ways to get additional training and experience through your work and other opportunities that present themselves.  Also always be looking for the next opportunity, either within your business or outside.

Realize that volunteer work can give you opportunities to learn new skills  You might not be able to get to lead a large project at work, but you’ll probably be able to organize charitable events such as food drives and can-ups since few people are wiling to step forward to do so.  You can also meet people you might not otherwise.  Some of the best people volunteer, including community leaders and small business owners who could be your net boss.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Become An Owner Instead of a Worker


When we’re young, we trade our health for money.  We work long hours.  We lift heavy things and wear down our tendons. We spend hours typing or doing other repetitive motions that cause carpal tunnel syndrome.  We spend hours on our feet and wear down the disks in our backs and develop heel spurs.

We trade this wonderful gift of youth and health that we’ve been given, the ability to keep pushing it for may hours, to bounce back when we fall down and heal fast when we get cut, for cash by working way too many hours.  We go in before dawn and leave after dark, never getting out to see the sun and the woods and the oceans.  We work hard to go on a vacation, which is then rushed and filled with work thoughts and emails back to the office the whole time.  We buy large, beautiful homes that we spend all of our free time maintaining and cleaning when we aren’t working to pay the mortgage.  We buy things on credit and then spend a quarter to half of our time working to pay interest payments.

Join the discussion and ask your questions.  Visit the SmallIvy FaceBook page and become a friend.

While we’re young we can make extra money by just pushing it a little harder.  We can make that car payment if we work overtime on weekends so we can drive that shiny new car to work and have it sit in the parking lot all day, slowly decaying away.   We can take on that second job and get all of the cable packages and five different web streaming services.  We can keep buying clothes to impress people we don’t like and buying all of the latest gadgets to look good for people we don’t even know.

When we get old, we trade our money for health.  Any money we’ve saved up through those long hours of work goes to treatments, surgeries, and drugs to reduce the pain our weary bodies feel.  We spend money to try to have the ability to walk and run and jump and heal like we did so easily while we were young.  We get surgeries to be able to walk after long hours of carrying heavy loads have destroyed our knees.  We buy prescriptions to lower our blood pressure after years of sitting idle at a desk, eating poorly, and letting our health decay.

Stop.  Stop today.  Stop right this minute and change your life.

Become an owner instead of a worker.  Instead of getting that new car, drive your old one for a few more years and send those car payments you would have made into a stock mutual fund and become an owner in a group of companies.  Buy a smaller house for cash and invest the money you save on interest.  Stop buying things to impress people and just buy what you need so that you can spend time with your family who don’t care what the label on your blouse or jeans says.

Start building a portfolio so that you will be getting dividend payments and capital gains instead of paying interest payments and penalties.  Let others work for you so that you don’t need to work those extra hours.  Expand your lifestyle by waiting a little while to buy things, instead investing the money in mutual funds, then using the distributions from those mutual funds to add to your income.  Direct some of that money back into buy more mutual funds, and your income will expand on its own.

Etekcity 4 Pack WiFi Smart Plug Mini Outlet with Energy Monitoring, Works with Amazon Alexa Echo and Google Assistant, No Hub Required, White

Everybody can become an owner.  You can start a mutual fund account with Schwab for only $1.  You can start investing through Vanguard funds for only $3,000 ($1,000 if you start a retirement account).  Start an account and start sending a little of your paycheck in each month to build your wealth.  Own things.  Build things.  Stop just using all of your effort to generate entropy.  Stop having your money flow into your back account through direct deposit and then back out again to bills through auto pay without your even seeing it.

The next SmallIvy book, Cash Flow Your Way to Wealth, will be coming out in about a month.  It gives the game plan to go from worker to owner.  Subscribe to this blog to make sure you get your copy when the time comes and don’t miss out.

Click here to view the Cover.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Are Your Parents Likely to Move In? If So, How Should You Prepare?


Don’t look now, but if your parents are in their late fifties or sixties, chances are pretty good that they’ll be moving back home – to your home – in ten to fifteen years.  They’ll still be healthy.  The issue will be that they’ll be out of money since many people in their late fifties and even early sixties have just a fraction of the amount of money needed to make it through a 20-30 year retirement.  Many just have enough to make it five years or less.

There are a couple of things you could do.  You could just ignore the issue and believe it won’t happen.  You could move away and leave no forwarding address, hoping to hide somewhere.  Or you could take on the issue head-on, figuring out if you are likely to need to take your parents in, perhaps help them take steps to delay the inevitable, and make choices now to be ready when the day arrives.  Here are some steps to take:

Have the talk

People say that the two conversations parents and children find most difficult are those about sex and money.  But if your parents are heading into retirement in the next ten or twenty years, now is the time to get a gage on how they are doing.  You may not be able to get them to talk about specific numbers, but maybe you can find out things like 1)Do they have a pension plan at work or a 401k?   2) If they have a 401k, have they been putting away 10% or more right along (if not, suggest they start putting away 15% now) 3)If they have they have a 401k, have they let it build up their whole career or have they pulled money out?  4)Are they planning to stay in their home in retirement or downsize and use the savings for living expenses?  5)Have they talked to a financial planner about their readiness for retirement?

Hopefully, they have a pension plan or they have been regularly contributing to their 401k with no withdrawals.  If they are planning to sell their home and downsize, they may be able to stretch their retirement savings a bit.  If they have gone to a financial planner, hopefully he/she has started to help them realize whether or not they have saved enough.  If from the answers to these questions it does not look like they have done much planning, brace yourself for the worst.  At the very least, see if you can set up a meeting with a financial planner to discuss their status and look at options.

That’s Christmas To MeTime to get your Christmas music

If you do get specific numbers, you can calculate the amount they have total in retirement accounts and other savings/investments (their net worth) to determine how much money they have available to generate income for retirement.  (Do not count their home value in the total unless they plan to sell.)  Once you have their net worth, subtract $400,000 for a couple or $250,000 for a single from the total to account for medical expenses in retirement, then divide by 25.  That is the yearly amount they’ll have available to withdraw each year to fund their retirement and probably make it through without running out-of-money.

For example, if they have $500,000 saved:

Yearly Amount = ($500,000 – $400,000)/25 = $4000/year

In the case above, they would be able to generate about $4,000 per year before starting to deplete their savings.  Add that to maybe $12,000 from Social Security, and they would have about $16,000 per year to spend.  That would not be a good lifestyle for most people and they would need help with bills and expenses.

Nike Mix AAAA Golf Balls, 50 Balls

Set a Target

If you figure out that they need to be saving more, figure out how much they will need to pay for yearly expenses, and then figure out how much they need to save up to reach that target.  Assuming they’ll receive $12,000 per year from Social Security, here’s how much they would need to save up to generate different yearly income levels:

Monthly Income Yearly Income Single Account Value Couple Account Value
$2,500.00 $30,000 $700,000.00 $850,000.00
$3,333.33 $40,000 $950,000.00 $1,100,000.00
$4,166.67 $50,000 $1,200,000.00 $1,350,000.00
$5,000.00 $60,000 $1,450,000.00 $1,600,000.00
$5,833.33 $70,000 $1,700,000.00 $1,850,000.00
$6,666.67 $80,000 $1,950,000.00 $2,100,000.00
$7,500.00 $90,000 $2,200,000.00 $2,350,000.00
$8,333.33 $100,000 $2,450,000.00 $2,600,000.00

Realize that without the expenses of work clothes, maintaining a car for work, and things like professional dues and meals out, the amount needed in retirement will be less than their income while they are working.  If they pay off their home and cars, this will lower the amount needed even more.  They might therefore be able to set their retirement income target at 70% of their current take-home pay or so.  Of course, setting the target high reduces their risk in retirement.

Encourage them to save/invest if needed

If it looks like your parents aren’t ready, you’ll need to help them get into the best position they can.  Have them pull together a budget using the income you expect them to have in retirement if things don’t change.  Perhaps seeing what their life will be like if they head into retirement with $50,000 will cause them to decide to get passionate about saving.

You can then help them develop a savings plan to reach their goal.  If they are five years or less away from retirement, just subtract the amount they have from what they need, then divide by the number of years they have left until retirement to determine how much they need to put away per year.  Divide that number by 12 to determine how much they need to put away each month.

SmallIvy Book of Investing: Book1: Investing to Grow Wealthy

 If they have more than five years until retirement, Multiply their monthly savings rate by the factor from the table below to estimate how much they’ll need to save each month since they’ll be able to invest to enhance their savings.

Years to Retirement Multiply Monthly Amount by
5 0.9
10 0.81
15 0.4
20 0.27

So, for example, if you calculate that they’ll need to raise about $2,000 per month to reach their goal and they have ten years until they will retire, they will actually only need to put away $2,000 x 0.81 = $1620 per month.  This assumes that they invest the money in a diversified set of stock and bond mutual funds or a target date fund appropriate for their retirement date.

Note that they will only need to save 27% as much if they start 20 years early – their investments will make up the rest.  If they are only five years away, they’ll need to raise about 90% of the difference through hard work and saving.  There is good reason to start saving early.  It may be too late for your parents, but you still have a chance.

NEOSAN Womens Thick Ribbed Knit Winter Infinity Circle Loop Scarf Twist Khaki

Encourage them to work longer

If they don’t have enough saved up and it is clear that they will not be able to do so before their expected retirement date, encourage them to think about working longer.  Not only will this allow them to pile up more money, but it will also reduce the number of years they’ll be drawing an income from their savings, reducing the amount they will need to have.  As long as they are healthy and don’t have enough saved up to live comfortably, they should continue to work, even if it is only part-time near the end.

New to investing? Want to learn how to use investing to supercharge your road to financial freedom?  Get the book: SmallIvy Book of Investing: Book1: Investing to Grow Wealthy

Have a question?  Please leave it in a comment.  Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Get Ready Millenials – Mom and Dad are Coming Home, to your Home


Hey millennials, glad that those in your generation, who came home after college and stayed another ten years, are finally getting their own place.  Sure, Mom and Dad are footing the down-payment, but at least you’re finally starting to venture out on your own like your parents probably did when they were 18 or maybe 21.  I’m sure that plenty of you also moved out and got a modest apartment when you graduated college or high school like your parents did – it is unfair to stereotype an entire generation – but there are more millennials living at home at age 28 than there were in any of the past generations, at least since about 1950.  There are also a lot of 30-somethings who still have their parents paying their phone bills or helping with other expenses, even when they are adult children living mainly on their own.

Many of us in GenX were worried about this development of delayed maturity.  The hashtag, #adulting, is truly assinine.  Note that Jack Daniels started his brewery at age 14, so it is possible to become self-sufficient and even do some pretty remarkable things way before you turn 25.  We wondered what would happen when your parent’s generation started to retire and people were needed to do all of the important jobs that they had done.  I’m sure your grandparents were also worried about who was going to pay for their Social Security if no one was working.  Also, what would happen if your generation never grew up and moved out before your parents retired or died and were no longer able to take care of you.  Solar Charger, 8000mAh 3-Port USB and 21LED Light Solar Power Bank Portable Battery Cellphone Charger, Solar Panel for Emergency Outdoor Camping Hiking for IOS and Android cellphones (Black)

But this morning I realized that we were worrying about the wrong people.  I’m sure that while 35 is the new 20, eventually those student loans will be paid off and you’ll be working your way up the corporate ladder.  I know that many of you are just waiting for your parent’s and grandparent’s generation to retire and get out-of-the-way so that you can advance.  I’ve also got to believe things like having kids will make you want to get your own space and a refrigerator on which to hang artworks from your elementary schoolers.

The real issue is your parent’s generation.  They don’t have anywhere near enough money to continue to live on their own all the way through a 30 or 40-year retirement that the are expecting to have.  To generate a $50,000 per-year income, which is probably about what it would take for them to continue to live in their home and continue to live about how they are now, they will need to save up about $1M by the time they retire.  Really they should have about $2M since there are also medical bills and a lot of retirees want to do some traveling when they retire.  The trouble is that the average person approaching retirement has about $135,000 saved up.  And that is the average, which includes some people who have several million saved tipping the scales.  There are a lot of people who have $50,000, or $20,000, or $2,000 saved beyond their home.

SmallIvy Book of Investing: Book1: Investing to Grow Wealthy

In the past, many in their situation would have had the option of selling their home and moving somewhere cheaper.  If they were to move to a small apartment in a safe but unspectacular neighborhood, and not a condo on the beach or in a high-rise in downtown, that would help them get maybe a decade or more before they ran out of money. The issue is that a lot of them still don’t own their home.  They refinanced their mortgage and took out money to put you through college, or upgrade the kitchen, or pay off your student loans or credit card bills.  Many people bought bigger homes in their late forties or fifties and started all over again with a 30-year mortgage.  That means their home won’t be paid off until they’re 80, and they’ll only have maybe 20-30% equity when they hit retirement age since you pay mostly interest at the beginning of a loan.

So what happened with your parent’s generation that didn’t with your grandparent’s?  The issue is that your grandparents had a pension plan where their employer put money away for them and paid them less in salary.  Because they had a lower salary, they had smaller homes, took fewer vacations and cheaper vacations, and cook at home most meals.  Your grandmother is probably a much better cook than your mom, and that is because she has had 30 years of practice.  She didn’t do take-out unless it was a casserole she took to a church potluck.  Your grandparents also probably didn’t have two cars, the expense of two sets of work clothes, the daily lattes, and the cost of childcare.   They also had college tuition costs of about $3,000 per year in today’s dollars since they could not afford any more than that so universities kept frills to the minimum and didn’t ask for high tuitions.   In exchange for this more meager living, they had a pension plan waiting for them at retirement.

Your parents instead got higher salaries with the expectation that they would then save up for their own retirement.  This was actually a better deal since the returns on pension plan investments aren’t as great as returns one can get investing for oneself since the pension plan manager needs to be conservative (and get lower returns) all of the time to ensure there is enough money to keep the payments for current retirees flowing, but an individual can be aggressive during the first 30 years and then shift to a more conservative mix near the end.  The trouble is that your parents used the extra salary to buy bigger houses, take more lavish vacations, pay high college tuition costs and living costs for their college students, and eat every meal out.  Retirement was always something that they would worry about later when they didn’t have this need or that crisis to take care of.

Oster TSSTTRWF4S 4-Slice Toaster

With $130,000 in savings, living in a standard home even without a mortgage, they’ll probably be able to eek out 5-7 years before they’ll run out of money.  This is assuming that they don’t have any major medical expenses, don’t travel the world, and that the stock market cooperates to a good extent.  A bear market, a mortgage payment, or a big medical bill could cause them to run out much sooner.  And what will happen then?

The most likely thing is for them to give you a call.  At that point you’ll be over at their place, having a big yard sale to sell off all of the stuff they’ve collected over the years (some of it will end up at your house), then they’ll be moving into that home office, guest bedroom, or workout studio you’ve made at your home.  Maybe you’ll still be living at your parents home, so you’ll just take over the mortgage payments and the grocery bills.BarksBar Original Pet Seat Cover for Cars – Black, WaterProof & Hammock Convertible (Standard, Black)

It will be nice to have them around to help out with watching the kids, assuming they’re interested in that.  But the house will suddenly feel a lot smaller, and there will be the inevitable power struggles and in-law struggles that come with multi-generation households.  Meals out will become a lot more expensive, as will vacation since you’ll be getting extra hotel rooms and tickets.  This is not a terrible arrangement, with many advantages such as your children getting to really know their grandparents, the ability to share some of the household chores (assuming your parents don’t decide it is your turn to take care of everything), and an easy transition when they become old enough to need a lot more help with things.  It is actually very common in Asian countries, especially in areas where housing prices are astronomical, and was the standard in the US for many families when most people were farmers.

Still, you had better start thinking in terms of how you will handle having a full household, both in managing expenses and living arrangements.  In the next post, I’ll go into some steps to take to get ready, starting with having a frank conversation with your parents about their finances.

New to investing? Want to learn how to use investing to supercharge your road to financial freedom?  Get the book: SmallIvy Book of Investing: Book1: Investing to Grow Wealthy

Have a question?  Please leave it in a comment.  Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The Small Investor Book Club Reviews Bogleheads’ Guide to Investing – Asset Allocation


For our second book club book,  I asked Small Investor readers to read The Bogleheads’ Guide to Investing.  This was really a great book.  If you have not done so already, pick up a copy from Amazon using the link below – you’ll be glad you did.  For many people, the information within this book would be all they really needed to know to invest successfully.  It also has some great information about insurance and a little on money management.   I’ve made several posts about sections of this book since there is so much great information.
 

The Bogleheads’ Guide to Investing

Today I would like to cover chapter eight, which is on Asset Allocation.  In addition to investing early and regularly and being aware of taxes and fees, asset allocation is key to maximizing your total investment returns.  There are two main reasons for asset allocation:  1) ensuring that you are invested in the areas of the market that are doing well at any given time and 2) reducing the level of fluctuations in your overall portfolio by buying assets that zig when the others zag, and thereby reducing the risk of a significant loss.

Asset Allocation for Improved Returns

If you have ever looked through your mutual fund statement, you may have noticed that some of your funds have performed much better than others during a given 1, 3, or 10-year period.  You may think to yourself, “I wish I had invested it all in that small-cap fund that made 20%, instead of havign some money in that large-cap fund that only made 8% over the last year.  In a worst-case scenario, you might decide to sell the shares of the large-cap fund and put it all into the small-cap.  Do this and you’ll be making 5% returns while the markets are making 12% returns.

The thing to realize is that you’ll never be able to predict which sectors of the markets are going to do well over any given period.  Efficient market theory says that all information that is known is already priced into the markets, so it is just as likely that the large-caps will do better than the small-caps over the next period as it is that the converse will occur.  By buying into both segments of the market, you’ll be sure to have some of your money in what is doing well next time.  While your whole portfolio will not be making as good a return as the best performing mutual fund in the mix, you’ll do better over time than you would if you were trying to jump from fund to fund and pick the one that will do well next.  The times that you pick the fund that makes 1% or declines while another one goes up 10% will more than offset any times you are lucky enough to actually pick the fund that makes 18% instead of 12%.

By moving into a fund that has done well, you are also buying shares that have already appreciated, meaning you are buying high.  While there is no reason that they cannot go higher for a period of time, which is why you should also not sell everything just because shares have gone up, on average shares that have been beaten down will do better than those that have shot up.  If anything, you’d do better buying the fund that did poorly since you’d be buying low instead of high.  Unfortunately, many people find the fund that has done the best during the last year and buy shares of that one, holding while it treads water or even declines, then sell just when they should be buying it because they are then trying to chase the next fund that did well.  It is better to invest in everything, then rebalance periodically to sell some of the shares in the funds that have done well and buy more of the shares in funds that have done less well.


The Hunger Games Box Set: Foil Edition

Asset Allocation Reduces Risk

A second reason to spread your money around is that it decreases the level of fluctuations in your overall portfolio, which means it reduces the amount of risk you are taking.  This risk includes not only the risk of losing money, but also the risk of not getting as good a return on your money as you should.  Different assets will do different things at any given time.  During the early 2000’s, you would want to be in stocks since they were increasing rapidly.  In 2008, you would want to be in bonds since they increased a little, plus paid interest, while a portfolio of all stocks declined by 40%.

When diversifying for stability, you want to pick assets that are as uncorrelated as possible, which means buying stocks, bonds, and real estate.  Stocks should also include companies of all sizes in both US and foreign markets, since sometimes the US is where to be and other times other countries do better.  Owning both a total US stock fund and a total foreign stock fund will cover all of the bases.  Bonds should be both US and foreign as well, and also have different maturity dates, ranging from short-term, which are safer but have lower returns, and long-term, which pay a better interest rate but fluctuate in price more.  You can get exposure to both of these markets with a total bond market fund.  Real estate should include your home, along with either rental properties or Real-Estate Investment Trusts (REITs) if you don’t want to be a landlord.  You could also throw things such as art or collectibles into the mix, but that really takes some knowledge (and some space), so that is better left as a hobby if that is what you like to do than as an asset allocation plan.

 

The Boglehead’s provide suggested asset allocations for people of different ages and risk tolerances at the end of Chapter 8.  They even provide suggestions of combinations of Vanguard funds that you could use, doing all of the work for you.  If you haven’t done so already, be sure to buy a copy of The Bogleheads’ Guide to Investing.  Please also share your thoughts with the group when you’re done reading.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The Small Investor Book Club Reviews Bogleheads’ Guide to Investing – Professional Money Managers


Do you need a professional money manager?  Chapter sixteen of The Bogleheads’ Guide to Investing does a great job covering this question.  A couple of months ago I asked folks to read The Bogleheads’ Guide to Investing with me so that we could discuss it.  This was really a good book, deserving of many posts.  Today I wanted to talk about the discussion of professional money management provided in the book.
 

The Bogleheads’ Guide to Investing

The first thing the book covers is all of the different designations that you can use without any sort of financial training or education.  These included things like Accredited Financial Counselor, Chartered Asset Manager, and Certified Financial Planner.  (I’ll confess that this gave me hope, since I am entirely self-taught through experience, so I’m happy that I could hang out my shingle as a “Wealth Management Specialist,” and help people set up an investing plan without needing to do a lot of coursework.)  Apparently, the only certifications that mean anything are Chartered Financial Advisor and Certified Financial Planner.  The chapter then goes on to describe the types of money managers, along with how to select someone who generally is there to help you as opposed to someone who will just try to sell you the financial products offered by the firm.

One of the other things that you pick up from the book, however, which you will also pick up from this blog, is that it is really easy to learn to invest, particularly in index mutual funds as recommended by the Bogleheads.  Basically, it is a just a matter of developing an asset allocation strategy, investing regularly, and then rebalancing once or twice a year.  Since financial advisors will charge you a fee to manage your money for you, which gets added to the mutual fund fees, having someone invest your money for you also goes against another Boglehead principle of keeping your expenses low.  Let’s look at each of these activities, through the eyes of the Bogleheads.

Asset Allocation

Asset allocation, as described in Chapter 8, is determining what percentage of your money to put into equities (stocks), and bonds.  It also includes deciding how much to put within the subcategories of stocks and bonds, such as large or small stocks, domestic or international bonds, and so on.  Basically, when investing for retirement, the younger you are and the more tolerant you are of risk, the greater the percentage of your asset you want in stocks, and your stock investments should be evenly spread between small and large stocks.  Between US and international, the Bogleheads say you should have about 80% in US stocks and 20% in international stocks.  They then give sample portfolios.  For example, a young investor using Vanguard funds could have a portfolio consisting of 80% in Total Stock Market Index Fund and 20% in the Total Bond Market Fund.  An investor late in retirement might have 20% in the Total Stock Market Index, 40% in The Short-Term Total Bond Market, and 40% in Inflation-Protected Securities.  Simple.

Investing Regularly

  Chapter two talks about the importance of investing regularly.  This chapter shows what happen with compounding when you start really early, versus starting later.  If you have never seen the effect, I advise you to check out Chapter two for yourself.  Hopefully, you’re 20 and not 45 when you do so that you can start investing early.

Rebalancing

 Rebalancing is the act of periodically shifting money among your funds to keep your investments consistent with your asset allocation plan.  This can easily be done in most mutual fund accounts.  Many accounts have automatic tools for doing this.  The only issue is that if you are not investing within an IRA or other tax-advantaged accounts, you may need to pay some taxes after rebalancing.  If this is the case, you may wish instead to direct new investments to funds that have done poorly, such that you are underinvested in these funds, rather than selling portions of winning funds and shifting to losing funds.

If you haven’t done so already, be sure to buy a copy of The Bogleheads’ Guide to Investing and share your thoughts.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The Small Investor Book Club Reviews Bogleheads’ Guide to Investing


 A couple of months ago I started The Small Investor Book Club, where we would read a book together and offer our thoughts in a later post.  For our second book I asked folks to read The Bogleheads’ Guide to Investing.  I’ve always been a big fan of Jeffery Bogle, founder of Vanguard funds, and this was a great book expressing his philosophy.
 

The Bogleheads’ Guide to Investing

 

Really, there were a lot of great ideas in this book and I would recommend anyone who wants to get involved in investing give it a read.  In fact, there were so many great ideas that I’ll spend a few posts going over the high points.

For those who don’t know, Jeffery Bogle was the founder of Vanguard funds and a strong believer in index funds.  Index funds are mutual funds that try to buy stocks to track certain segments of the market, rather than trying to pick stocks and beat the market.  A central idea in The Bogleheads’ Guide is that you cannot beat the market (or at least it is so unlikely that it is effectively impossible), so you would be better off just buying index funds and trying to match the markets.

The  The Bogleheads’ Guide to Investing is not written by Bogle (except for the foreword), but instead by a group of Boiggleheads – people who follow the Bogle philosophy to investing and regularly share ideas on the Boglehead forum, an online chat area.  You can find a link to this forum on the sidebar of this blog.  Central ideas that they present are:

  1.  Start early and Invest regularly.
  2. Keep costs low, and index funds are a good way to do that.
  3. Figure out how much you’ll allocate to different segments of the market (bonds, stocks, international, etc…).
  4. Stick to your plan through good markets and bad.
  5. Ignore the noise from the commentators, on-air analysts, and other “investing porn.”
  6. Periodically rebalance your accounts to match your plan, and adjust your plan as you age.

Looking at the first point, they show the effects of compounding.  Starting with a quote from Meg Green, a certified financial planner in Florida, “Adding time to investing is like adding fertilizer to a garden: It makes everything grow,” they go on to show why you should start investing early and the effect of compounding on your returns.  One example is a Vanguard investor who invested regularly since the mid-1970’s and amassed a portfolio worth over $1.25M, but never made an income of more than $25,000 per year!  (kind of shoots holes in the idea that you need to make a big income to become wealthy.)

They then provide a table showing how much you would need to save by a certain age to amass $1M by the time you were 65, assuming you earn 8% annualized per year.  At age 15, you only need $21 thousand.  At age 45, you would need $214 thousand.  At age 55, it is $463 thousand.

One neat thing about such a table is that you can use it to determine where you should be at different ages.  For example, I think that to retire comfortably today, you really need about $2M.  Looking at the table, which is the amount needed to have $1M at retirement age, you can just double the amounts to know how much you’ll need to have at a given age to have $2M at retirement.  So if you’re 45 and don’t have about $450 thousand or more in assets invested in things that go up in value, not including your home, you need to get to work.  If you’re just starting out today, you’ll need about $4M when you’re ready to retire due to inflation, so hopefully you’ll have about $900 thousand invested by the time you’re 45.  You would also know that you’re on the right track if you amass a couple hundred thousand dollars by the time you’re 30, but that would be difficult for most people, between having a lower-income, needing to buy a house, and paying off student loans.

The rest of the chapter talks about ways that you can save and find extra income for investing when you’re young and don’t make a lot.  (Really, it is unfortunate that we make the least amount of money when it is the most important time to invest.)   The SmallIvy Book of Investing (see sidebar or The SmallIvy Books page from the link above) goes into this topic in much greater detail if you want still more ideas.

We’ll go through some of these other points in future posts.  If you haven’t done so already, be sure to buy a copy of The Bogleheads’ Guide to Investing and share your thoughts.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The Small Investor Book Club Reviews Bogleheads’ Guide to Investing


 Last month I started The Small Investor Book Club, where we would read a book together and offer our thoughts in a later post.  Hopefully a few readers out there joined me in reading our first book, The Compound Effect.  I know that I got a lot out of the book and hope that others did as well.  You can read my review of the book here and add your own comments.
For our second book I’d like us to read The Bogleheads’ Guide to Investing.  I’ve always been a big fan of Jeffery Bogle, founder of Vanguard funds.
 

The Bogleheads’ Guide to Investing

The description for the book is as follows:

The irreverent guide to investing, Boglehead style

“The Boglehead’s Guide to Investing is a DIY handbook that espouses the sage investment wisdom of John C. Bogle. This witty and wonderful book offers contrarian advice that provides the first step on the road to investment success, illustrating how relying on typical “common sense” promoted by Wall Street is destined to leave you poorer. This updated edition includes new information on backdoor Roth IRAs and ETFs as mainstream buy and hold investments, estate taxes and gifting, plus changes to the laws regarding Traditional and Roth IRAs, and 401k and 403b retirement plans. With warnings and principles both precisely accurate and grandly counterintuitive, the Boglehead authors show how beating the market is a zero-sum game.

Investing can be simple, but it’s certainly not simplistic. Over the course of twenty years, the followers of John C. Bogle have evolved from a loose association of investors to a major force with the largest and most active non-commercial financial forum on the Internet. The Boglehead’s Guide to Investing brings that communication to you with comprehensive guidance to the investment prowess on display at Bogleheads.org. You’ll learn how to craft your own investment strategy using the Bogle-proven methods that have worked for thousands of investors, and how to:

  • Choose a sound financial lifestyle and diversify your portfolio
  • Start early, invest regularly, and know what you’re buying
  • Preserve your buying power, keeping costs and taxes low
  • Throw out the “good” advice promoted by Wall Street that leads to investment failure

Financial markets are essentially closed systems in which one’s gain garners another’s loss. Investors looking for a roadmap to successfully navigating these choppy waters long-term will find expert guidance, sound advice, and a little irreverent humor in The Boglehead’s Guide to Investing.”

Please buy a copy of The Bogleheads’ Guide to Investingand read it during the month of July and August.  In early August we’ll get back together and share our thoughts.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.