How the wealthy allocate investment

[Rune]

Nothing noble about being a drug addict.

Nothing noble about lying about your degree either.

Nothing addictive about weed fool.

[Legion Troll]

Govco's require plans to be "sealed", meaning the PE's stamp, or seal, is applied to the drawings. That PE then becomes the "engineer of record" for those plans and is legally responsible for their correctness. He must maintain copies of them and all related material for at least seven years. His liability for them never goes away.

How's that PE?

[Frank Booth]

Ahhh the set it and forget it approach.

You know it is kind of funny. If all people have to do is put their money into SPY and sit on it, why is there even a need for financial advisors? Seems like a pointless career to me

I know we have spiraled into a bit of the "financial adviser" role, and that is the last thing I would want to do for anyone online - there are probably billions of "investment advice" posts online from anonymous strangers, and if someone really did figure it out, they would bottle it, we would drink it and we would all be billionaires. What is incontrovertible, however, is math and some mathematical principles apply here that are really quite simple to grasp.

When I said "don't touch it", I did not mean "set and forget it" - far from it. In layman's terms, I meant "don't withdraw from the ATM" - let the investment compound and do not sell small parts of it to go buy a Harley or Winnebago. You are stunting or destroying the whole elegant curve of exponential growth, and that is what separates a half-assed day trader from someone who might actually have an impressive portfolio over time. Unlike casino gambling, you actually have pretty iron-clad economic growth on your side the longer you stay at the table (provided we don't enter some Islamist-inspired dark ages anytime soon).

I also mentioned "balancing your portfolio". This is where perhaps the savvy and the "trial and error" come in - if you indeed hold 70% of what you invest in equities, not all equities (or more likely, funds with equities) are created equal. Personally, I balance what I have about once a month (barring oddities in financial markets), maybe spending a few hours with the collected thoughts I have and the opinions of others I might value. There is no magic formula, but we all have a different risk profile, understanding of investments, and perhaps sophistication in knowing what the numbers really mean. A shift from Mid-Caps to internationals. Maybe you overweight mining stocks. Maybe you like North American tech. It can be as simple as a reasoned hunch, or it can get into more sophisticated understandings of individual stock risk premiums. As you learn more, you get the math more, and you make smarter decisions in the long term.

Which takes us to the SPY - you can do a lot worse than dumping your money there and saying "peace out". You are essentially betting on the corporate profits of large American companies, and we are good at trimming dead weight at rewarding our shareholders (unless perhaps you are GM). And yes, indexed funds are taking an increasingly larger share of the US investment pie over managed funds - they are often more stable and most importantly, they have low fees. Instead of giving 1% annually to a international growth fund picking esoteric investments, the Vanguard SP500 takes .17% and invests in the most ironclad thing out there - America's biggest companies. As I mentioned earlier, there is a mathematical imperative to invest outside of one single investment, but there is nothing wrong with making this the biggest part of your pie.

Paying somebody to manage for you is stupid - unless you are extremely rich, legitimately have no time to manage or deep interest in your assets, are under IRS investigation, or are trying to hide assets from your soon to be ex wife.

The point is, Mott is a smart man, but he is not a partner at a Hedge Fund, and should not invest like one. Nor, like you said, should he buy into simplistic slogans about the stock market and just trust the hidden hand of Adam Smith. A 70/30 split of equities and fixed income is a great long-term, risk averse investment strategy, and letting that slide on occasion to 65-35 or 75-25 is no biggie. Shit, buy a house on the side if you get the loan, but treat that as a risky field bet - far better to just buy the performance of people who do that for a living through a REIT. Don't pay some dipshit who went to a 6 week class to manage your money - you are giving him a percentage of your portfolio every year to end up buying whatever shitty mutual fund his regional manager has a quota to sell.

[PostmodernProphet]

Ongoing debate about stock vs real estate
Clearly the richer you are the higher percentage is in equities

duh......the more you have the more you are willing to risk.....

[PostmodernProphet]

I don't know anyone making more than $300,000 a year who "made their wealth" from real estate

actually I have several clients who do.......its what happens after that pesky mortgage gets paid off........

[The Dude]

Unless you are old
Why buy bonds

[canceled.2021.2]

actually I have several clients who do.......its what happens after that pesky mortgage gets paid off........

I think people don't understand the different ways to invest in real estate. It isn't just renting out a house. I gave up on that along time ago after I found the most brilliant cash cow that is easy to manage

[The Dude]

I think people don't understand the different ways to invest in real estate. It isn't just renting out a house. I gave up on that along time ago after I found the most brilliant cash cow that is easy to manage

Yeah but you do it for a living

[Frank Booth]

I think people don't understand the different ways to invest in real estate. It isn't just renting out a house. I gave up on that along time ago after I found the most brilliant cash cow that is easy to manage

This discussion is really lacking context. What the wealthy invest in is very different from what middle class people invest in. Some principles are the same, some are not.

What most people understand is that if you are middle class, a bank will lend you a lot more money (several times more) to buy real estate than to buy an equity-based asset. That is not a mark of wealth - that is a mark of someone who almost certainly makes less than $200k a year applying leverage. If you are disproportionately invested in real estate, and especially if that chain of investments started with you borrowing against your own residence, you are not wealthy by most definitions; wealth is almost always signified by investable assets, and your house is not an investable asset. Given this, most people with significant net worth outside their primary residence do not sink that net worth into real estate - it just does not make mathematical sense (but then again, I am sure there is more than one Cleetus out there who made a few million on a leveraged chain of Chester Fried-chicken restaurants, so anomalies will always exist in this nation of 325 million people).

UBS did a survey a few years ago on a large set of people and asked "what do you consider wealthy". For those people with $1-5 MILLION in investable assets (i.e. liquid things that are not your house, car, bass boat or cessna), only 28% considered themselves wealthy. For people with over $5M in investable assets, 60% considered themselves wealthy.

This begs me to ask - does anyone in this thread have over $1M of "stuff", not including their house, that they can sell on short notice, that does not have a lien or mortgage against it? If you answer yes, how much of that "stuff" is real estate? All the OP stated was for most people in this cateogry, that averages under 20%. If your full time job and income is in real estate, you are not an investor, you are a laborer in the real estate industry, and this discussion becomes even less relevant.

[Minister of Truth]

Unless you are old
Why buy bonds

The story I am told about bonds is that diversification is key, and since bonds are low risk-low reward, it's a good idea to include them in your portfolio. At any rate, the Thrift Savings Plan (TSP) that I mentioned earlier is pretty cool in that it has 5 or 6 classifications of funds. I am not contributing monthly to my TSP due to budgeting constraints at the moment (but, as with my IRA, I am doing a Roth-style TSP since it became available a couple of years ago), but I elected to go with G, S, and C Funds (10%, 50%, and 40%). G Funds are government bonds, and all TSP accounts default to this until you go in and manually diversify it yourself. S Funds are tied to the S&P, and supposedly behave exactly as it does. Likewise, the C Funds are tied to the Nasdaq, and supposedly behave exactly as it does.

I can't contribute anymore money to my TSP account after my military retirement, so what I will do is have an investment group roll everything into a new IRA account for me. My current Roth IRA is through Northwestern Mutual. I will have my TSP rolled-over into an account with the Knights of Columbus (my Catholic fraternity) Insurance Program.

[iewitness]

since money is made up from nothing; then wealth is make believe too; and "national debt" is a lie; which makes a slave of you. enjoy it if you got It, while the lie drags on...

[Minister of Truth]

since money is made up from nothing; then wealth is make believe too; and "national debt" is a lie; which makes a slave of you. enjoy it if you got It, while the lie drags on...

Regardless of how tangible one views a system of finance, you still have to play by the rules and constraints of your "system." If they US ever runs into problems with it's national debt, and decides that since it' all "make believe," anyway, that it will simply cancel all of its debt, the standing of the US government with the world would be collapsed, and few nations on Earth would choose to do business with us, anymore.

[canceled.2021.1]

I know we have spiraled into a bit of the "financial adviser" role, and that is the last thing I would want to do for anyone online - there are probably billions of "investment advice" posts online from anonymous strangers, and if someone really did figure it out, they would bottle it, we would drink it and we would all be billionaires. What is incontrovertible, however, is math and some mathematical principles apply here that are really quite simple to grasp.

When I said "don't touch it", I did not mean "set and forget it" - far from it. In layman's terms, I meant "don't withdraw from the ATM" - let the investment compound and do not sell small parts of it to go buy a Harley or Winnebago. You are stunting or destroying the whole elegant curve of exponential growth, and that is what separates a half-assed day trader from someone who might actually have an impressive portfolio over time. Unlike casino gambling, you actually have pretty iron-clad economic growth on your side the longer you stay at the table (provided we don't enter some Islamist-inspired dark ages anytime soon).

I also mentioned "balancing your portfolio". This is where perhaps the savvy and the "trial and error" come in - if you indeed hold 70% of what you invest in equities, not all equities (or more likely, funds with equities) are created equal. Personally, I balance what I have about once a month (barring oddities in financial markets), maybe spending a few hours with the collected thoughts I have and the opinions of others I might value. There is no magic formula, but we all have a different risk profile, understanding of investments, and perhaps sophistication in knowing what the numbers really mean. A shift from Mid-Caps to internationals. Maybe you overweight mining stocks. Maybe you like North American tech. It can be as simple as a reasoned hunch, or it can get into more sophisticated understandings of individual stock risk premiums. As you learn more, you get the math more, and you make smarter decisions in the long term.

Which takes us to the SPY - you can do a lot worse than dumping your money there and saying "peace out". You are essentially betting on the corporate profits of large American companies, and we are good at trimming dead weight at rewarding our shareholders (unless perhaps you are GM). And yes, indexed funds are taking an increasingly larger share of the US investment pie over managed funds - they are often more stable and most importantly, they have low fees. Instead of giving 1% annually to a international growth fund picking esoteric investments, the Vanguard SP500 takes .17% and invests in the most ironclad thing out there - America's biggest companies. As I mentioned earlier, there is a mathematical imperative to invest outside of one single investment, but there is nothing wrong with making this the biggest part of your pie.

Paying somebody to manage for you is stupid - unless you are extremely rich, legitimately have no time to manage or deep interest in your assets, are under IRS investigation, or are trying to hide assets from your soon to be ex wife.

The point is, Mott is a smart man, but he is not a partner at a Hedge Fund, and should not invest like one. Nor, like you said, should he buy into simplistic slogans about the stock market and just trust the hidden hand of Adam Smith. A 70/30 split of equities and fixed income is a great long-term, risk averse investment strategy, and letting that slide on occasion to 65-35 or 75-25 is no biggie. Shit, buy a house on the side if you get the loan, but treat that as a risky field bet - far better to just buy the performance of people who do that for a living through a REIT. Don't pay some dipshit who went to a 6 week class to manage your money - you are giving him a percentage of your portfolio every year to end up buying whatever shitty mutual fund his regional manager has a quota to sell.

Sorry you lost me when you called Mott a smart man

Lolololololololololololol

[USFREEDOM911]

since money is made up from nothing; then wealth is make believe too; and "national debt" is a lie; which makes a slave of you. enjoy it if you got It, while the lie drags on...

I suggest you buy a car with payments, stop making the payments, and then use that argument with the Courts.

[The Dude]

Three diversification is settling for lower returns
Period