Ask HN: Where do you all invest your money?
I'm 25 years old. I just started my job and want to learn about financial options for investing and the basics of finance. Just want to know how to you all invest your money or comment any resources to go through to get started.
37 comments
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This is where Bitcoin excels. You don't need storage rooms or containers for bitcoin. Invest in bitcoin and when the monetary system collapses, you will be rich. People will be lining up to buy bitcoins from you.
Except there hasn't been a single historical example pointing to people doing this after the collapse (partial or otherwise) of civilization.
After the fall of Rome, people used the currency (both bullion and as a measure of value) for a few decades after. If the US dollar collapses, you've got a litany of more pressing issues than "how can I pay for goods" and history shows that you'll probably just end up relying on social credit with people in your immediate community.
tl;dr invest in being a social-able person first, then learn how to grow your own food instead
Regarding the storage room comparison, storage rooms and money are orthogonal to one another. The closer comparison would be banks as that is where digital money is stored and physical currency is extracted. Digital fiat US currency and digital wallets will be equally useless to us in a grid or monetary down incident. Additionally bitcoin is an unregistered speculative investment and the numbers in crypto are less real than the fiat numbers in banks as it depends on organizations with no oversight. There is no insurance for such investments and this will matter more if and when we get just beyond a monetary collapse. To get money out of the ledgers requires exchanges which are basically banks with far less regulations and they are equally subject to a monetary collapse and do not insure investments with exception to the traditional banks that got involved in virtual currencies. Even if the internet were still viable I have no way to verify that an exchange isn't a bucket shop like FTX. The only value I could envision in bitcoin and their ilk is if I needed to do wash trading which is illegal. I've had enough battles with the IRS without virtual speculative unregistered unregulated investments being a part of the picture. I will be staying very far and away from such things. I could go on for hours why I would never use virtual speculative unregistered unregulated investments but that really belongs in a blog write-up and will just irritate the agency that created it who shall not be named.
20% debt liquid mutual funds
10% gold(jewellery)
10% treasury bonds
10% bank deposits
Learning resources: Reddit, newsletters from finance firms, books, and friends.
A random walk down wall street
Are you a stock or a bond
Your money or your life
Starting off, you can guarantee a minimum of 2% return on your money in the absolute safest investments. All of your money should go to those, something like a money market account or a high yield savings account, just to prepare for investment. Basically don't keep most of your money in a checking account that gives you next to no interest.
Secondly, the biggest drain on any investment is going to be taxes. You should learn about how you are taxed, how roth and traditional iras work in terms of taxation, how capital gains tax works, as well as all taxation related to real estate (it still remains a pretty advantageous investment in terms of taxes but most people don't understand the concept of APR). Generally, you should be able to be comfortable computing the taxes manually on any sort of transaction, whether its your salary or investment - if you can do that, you are well read on it.
Outside of these constant things, economy fluctuates quite a bit, and future is impossible to predict, so there is no "right" investment. For example, this happened to a friend of mine - got job during the end of the pandemic in 2022, started getting salary, invested all of it into safe index funds. 2023 happens, all index funds take a dive, he gets laid off, and has to pull out funds at a loss to cover expenses between jobs. He would have made out better had he kept everything in a savings account.
So there isn't a right investment choice to make just out of the market, everything depends on your situation, your risk tolerance, your backup plan availability, e.t.c. For example, if you are ok with living super cheaply and you have no big financial responsibilities, you can take on a lot more risk which can pay of bigger. Meanwhile, someone with kids who need money for college cannot. So figure what those are for you, and then its pretty easy to run what if models for any sort of scenario, whether its buying a house, to playing the stock market.
Also, equally important, you get one life to live. You are young, you have energy. When you are old, you will have more responsibilities, less energy, and your genetics could cause you to start having more health issues. Do all the stuff that you want to do in life now, even if it costs money that you feel like you should be saving, and you will be 100% glad that you did it. It is much easier to settle down into a "boring" life later in life where you hold down a job and accumulate savings over time then it is to experience regret of never doing the things when you had the opportunity.
Interesting, I draw exactly opposite conclusion from "you have one life". For me, it's best to make as much money when you're young, have energy and can take the abuse. In your 40ties you should be either retired already or have a large chunk of money saved which will allow you to take a relatively chill job (maybe part time?) and coast to retirement.
The alternative - doing crazy things when you're young and only starting to get serious about your career when you're older - will mean you will have to work hard in your fourties and later, which sucks, as you won't have the energy, curiosity and naive optimism of a young person any more.
I just got back last week from Thailand. Last year, I went to an island in the Caribbean. I'm 27. I've no idea if I'll make it to 40 years; I'm not going to wait to live my life. I can imagine being 40 and wishing I went to Thailand when I was 27 though.
(I'm still working incredibly hard btw.)
The bigger issue with your view is that in your case, your retirement will be essentially chilling, doing nothing. This is a big problem. It may seem appealing, but if you don't feel a purpose, even if you know you are doing nothing wrong, its going to accelerate your decline. Your younger self has a lot more neuroplasticity, which means you can do things like develop hobbies, try things, build relationships, quite a bit easier. This will carry on into your later years, where in retirement you will continue to do pursue those hobbies or relationships.
I would recommend to first break down your financial situation. Write down the amount of income and the amount of costs. Be as accurate as possible. If you have nothing left, there is not much to do. If you have something left, great.
Then you should ask yourself, if it is required to have some insurances... your job and your health are mission critical for all your investments, maybe it is good to insure them.
After this I would target monthly savings of at least 10% of your current income before taxes - if there is more left, even better.
Personally, I use a 3 pot strategy.
pot 1 is your current account - should be at least 1xincome
pot 2 is your call money account - should be at least 4xincome (more conservative 5x)
pot 3 is your passive ETF / indexing fonds with global diversification
Example:
- You have earnings of $2000 per month.
- Think over having a occupational disability insurance for 1800$ (good ones should be about $40-$70 a month - the earlier you get one, the cheaper they are)
- After you paid for everything (rent, car, living, etc.), let's say you have $500 left
- 10% would be $200, so you have $300 for fun, or save more if you like
- As long as pot 1 is below 2000$, put it there
- If pot 1 is >2000$, start transferring to pot 2
- If pot 2 is >8000$, start pot 3 (indexing)
Most important is, that you should adjust your investments once a year to your current situation. This way you have enough money for small disasters, like the car broke, you move to another appartment or even lose your job.
Passive indexing mostly means, that you should not touch any invested money after it is invested, even if the markets go down rapidly. Your target is to invest for 15 or more years.
If you have saved enough that you are asking yourself if this is still the right strategy, you can vary your investment to gold, real estate or other things, but I personally don't. ETFs are portable, stable and pretty easy to sell.
I instead started investing "socially responsible", but this may be risky and is not mathematically proven... additionally, it is not even fully "socially responsible", so this is not a recommendation :-)
Links that may help:
https://gerd-kommer.de/indexing-101/
https://www.justetf.com/
So: wads of cash (joke)*, commodities like copper, silver, gold, oil, houses, etc that appreciate and do not depreciate. A depreciating asset like a car is NOT an investment.
If you control that physical thing yourself, it is yours. Otherwise it isn't yours.
You can invest in the stock market, but the idea there is to obtain an ongoing return. Investing in stock market prices (aka 'trading') is merely glorified gambling.
If you are looking at numbers in a computer, such as stock prices, crypto, forex trading, etc. be aware that those numbers can be changed at the whim of some other person or company or government and you have no comeback at all.
If you can't physically control something like (say) diamonds in a Bank's safety deposit box, you don't own it, they do. And they can take that away from you whenever they feel like doing so.
* There's an old joke that you should keep your money safe under the bed and not in one of those risky Banks. Like all jokes, there's a good measure of truth in that. Read up on the Cyprus 'bail-in' back in 2013 when depositors' money was confiscated.
Commodities for long term investment is way more speculative than a global index investment across stocks, realestate etc.
Real estate makes sense mostly for tax reasons and leverage.
When I was a freshly graduated 22-year-old entering grad school, I didn't know the first thing about finance, but this book taught me all of the fundamentals.
You'll learn about how to pay off debt, how credit scores work, how to use credit cards, how to invest for retirement, how to save for large expenses like weddings and homes, etc.
By the end of the book, you'll have learned how to automate your finances so you do the right things by default.
1. max out your 401k
2. invest in experiences, especially the ones you can do in your 20-30s and won’t be able to do later, eg physical activities.
also note that your earnings will grow in the next years, so you can also spend or risk a bit more right now.
Not rich though. If I were to get say a lottery win or startup exit type thing I wouldn’t necessarily buy real estate. Indexes are much easier (no tenants or building maintenance!)
Bogleheads Wiki: Getting Started
https://www.bogleheads.org/wiki/Getting_started
This wiki is one of the best resources in USA for simple, straightforward, no-nonsense personal finance strategy which has been battle-tested over multiple decades.
Also, there is a very insightful and concise personal finance course at Stanford:
CS007 Personal Finance for Engineers
https://cs007.blog/
The course notes/slides are very recently updated (Oct 2023)
Yes but important to realize, economy has grown steadily over the past 2 decades. This is not a guarantee.
Seriously: nobody picks up shares in unlisted companies, the ones that have the largest (potential) upside, via crowdfunding sites or by buying shares from employees? I’m not enough of an expert, so I will refrain from saying one should allocate x % in this type of investing, but I’m surprised that nobody is even talking about it.
50% into Index Funds.
40% into Real Estate (or Real Estate Funds)
10% into Bitcoin (Bitcoin ONLY, not crypto).