Dear Kids,
What you should do is start developing a philosophy for investing. Mine is that all intermediaries are thieves, that people make more money brokering money flow than investing it and that safety is primary. The history is that stocks, generally, do better than any other investment as the economy has consistently grown. However, there are some debates: U.S. vs. International, Small vs. Large Caps etc..
What is beyond debate is saving, i.e. spending less than you earn, works.
Certainly some investments do better than others but rarely will one adviser or group of advisers consistently do better than others. Long Term Capital Management was run by two Nobel Prize winners and went broke. Twice. This has led to the notion of "diversity" where people invest in everything and pretend it is a philosophy.
Beating anyone to the punch in the market means finding an investment before someone can sell it. That is rare. I know a broker in Chicago who said their firm sold only the products the brokers did not want.
This is the one thing to remember: The single biggest problem with investing is the common--and entirely erroneous--idea that logic, intelligence and common sense can give an investor an advantage. The basic rule of investing is that the market can be stupid and illogical longer than you can remain solvent.
There are some real debates in the market. I think you should invest in mutual funds that have very low costs and those funds should be broad based. Of those, I think the equal weight funds make the most sense--Rydex S&P 500 Equal Weight ETF (RSP) is one-- and the Joel Greenblatt Formula Funds are intriguing, but really expensive.
So do a little reading and see what you think. I like debating this stuff.
The basic problem:
http://steeleydock.blogspot.com/2009/07/upheaval-and-investment.html and the link:
http://www.ritholtz.com/blog/2014/02/the-best-investment-advice-youll-never-get-2/
What is beyond debate is saving, i.e. spending less than you earn, works.
Certainly some investments do better than others but rarely will one adviser or group of advisers consistently do better than others. Long Term Capital Management was run by two Nobel Prize winners and went broke. Twice. This has led to the notion of "diversity" where people invest in everything and pretend it is a philosophy.
Beating anyone to the punch in the market means finding an investment before someone can sell it. That is rare. I know a broker in Chicago who said their firm sold only the products the brokers did not want.
This is the one thing to remember: The single biggest problem with investing is the common--and entirely erroneous--idea that logic, intelligence and common sense can give an investor an advantage. The basic rule of investing is that the market can be stupid and illogical longer than you can remain solvent.
There are some real debates in the market. I think you should invest in mutual funds that have very low costs and those funds should be broad based. Of those, I think the equal weight funds make the most sense--Rydex S&P 500 Equal Weight ETF (RSP) is one-- and the Joel Greenblatt Formula Funds are intriguing, but really expensive.
So do a little reading and see what you think. I like debating this stuff.
The basic problem:
http://steeleydock.blogspot.com/2009/07/upheaval-and-investment.html and the link:
http://www.ritholtz.com/blog/2014/02/the-best-investment-advice-youll-never-get-2/
This is a bit young but worth it:
http://www.getrichslowly.org/blog/2014/07/24/why-you-must-teach-your-children-about-money/
The first investment to make:
Vanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX)
Love, Dad
The first investment to make:
Vanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX)
Love, Dad
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