Home Forums Hunting & Shooting Hunter's Campfire The single most powerful factor behind successful investing?

This Warren Buffett rule can work wonders on your portfolio

By Jeremy C. Miller - MarketWatch - Tuesday, April 26, 2016

Ask Warren Buffett for the single most powerful factor behind his investing success, and he’d respond “compound interest” — without skipping a beat.

He’s been preaching this for six decades, and it’s made him a billionaire. And it’s something every investor can copy.

Beginning in 1956, Buffett spent 14 years as partner of Buffett Partners Ltd., the hedge-fund-like entity he ran before dedicating himself fully as Berkshire Hathaway Inc.’s chairman and CEO. This also marked the beginning of his side career as a teacher.

Buffett has always liked writing letters to teach investing principles. Using his typical wit and easy-to-understand style, he started his first lesson on compound interest to the inventors in his partnership by humorously calling into question the soundness of Queen Isabella’s decision to fund Christopher Columbus’s expedition to find a new route to Asia. “Aside from the psychic income associated with discovering the New World,” he wrote in a letter in 1963, “it wasn’t exactly another IBM (a stock that was doing very well at the time).”

As he figured, had the queen opted instead to invest the $30,000 at 4% instead, it would be worth over $7 trillion today. Such is the remarkable power of compound interest, which Einstein called the eighth wonder of the world. Even modest amounts, when allowed to compound at relatively low rates but over long periods of time, add up to really staggering sums.

Buffett was intent on pounding this idea into his partners’ understanding of what matters in investing.

His second story on compound interest takes a look at King Francis’ decision to commission the Mona Lisa in 1516. The math works out to show that Ferdinand’s $20,000 would be worth well over a $1 quadrillion if he’d only manage to invest it at a 6% annual rate instead.

Buffett said he hoped this figures would “close the discussion of art as in our home” (his late wife was a collector and gallery owner for a time).

In yet another humorous letter on compounding, Buffett inspects who got the better deal, Peter Minuit or the Manhattan Indians, who sold their island for $24 In 1626. When he wrote the letter in 1965, Buffett figured the land value of the island was $12.5 billion, which worked out to a 6.12% compounded annual gain. Not bad. However, had the “Tribal Mutual Fund” managed to earn 6.5% instead, their $24 would have been worth $42 billion. If they could have squeaked out yet another half-percentage point a year and get 7%, the value jumps to $205 billion.

This is Buffett’s way of demonstrating the enormous impact from even modestly higher rates of compounding over long periods of time. An extra percentage point a year may not seem like a lot when viewed in isolation, but as you can see from the example, the cumulative impact of a minor change can be enormous.

Acting rationally, consistently, while harnessing the power of compound interest over a very long period of time is what has made Buffett perhaps the most successful investor of all time. Why not harness it for yourself? Start early and think long term.

I started when I was 23 fresh out of college. Absorbed the first couple of annual salary increases dumping the funds into Fidelity. This was in 1985. The above is spot on, of course.

Your personal testimony to the truth of the piece is also powerful. "He who has ears to hear, let him hear."

I was informed of this in my younger days. I knew it, I believed it and yet, I failed to follow it. My retirement looks sparse at best.

You youngsters especially heed this information and put it to use. You would be surprised how little each month, when you start at a younger age, turns into a large amount.

My wife and I will be playing catch up for the rest of our pre-retirement. Not a pretty picture.

Yes, indeed. My wife and I started at $100 a month when I was only making $800 as a young lieutenant. It astounds me to no end to realize that our net worth now starts with the word "multi."

Compounding interest and TIME!

The other secret of Warren Buffett is just as simple. He follows it in all of his major moves.

1.) Sit on a pile of cash.

2.) When a company you like goes on sale (becomes undervalued), buy it!

3.) Count your winnings.

Warren also needs to show me where I can get a guaranteed 6% every year for 400 years. Not even Berkshire Hathaway has that kind of record.

So do you disagree with the power of compounding because of his entertaining and anecdotal example?

The wiseguy would now ask hatari what he plans to be doing in 400 years.

Hey, it's his example! No sense of humor around here some days. Jeez.

It is well known that expecting a 6% return every year is a pipe dream. Compounding interest is wonderful. Albert Einstein said “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

That's why you should start saving young. I funded a Roth IRA for my kids before they started school. 60 years of compounding interest for them.

For the record, I am heavily invested in BRK-B. It has served me well over the past 20 years. Might want to lighten up and have a look at what Warren is doing.

It kinda cuts both ways, my friend. Your objection to the example was equally inane. But let's just shrug and move on.

Bingo

Kind of hard to get them numbers when they are paying .002-.003 at most banks.

I do have funds that we went to after the banks made the decision to not pay for saving money with them.

It's an either or prospect. Everybody (myself included) wants to borrow money for auto loans, home mortgages, etc. at low rates; but, nobody wants their savings to earn so little interest. It will come around again where money will be loaned again in double digit rates and then, we will make higher rates on our savings.

Compound interest and TIME. If you are already 65 years old, you are too late.

kwg

What interest? 0.03% compound that. You have to do your own due diligence. Just like Winchesters there are no rules.

The only frizzin' thing you need to know:
Buy low…………Sell high.

Works for me.

Something bought "right" is 1/2 sold.

Yep. In fact, we are in the throes of updating our trust to set up appropriate "charities" to receive a chunk as we do not want to leave it all to the boys. We are thinking scholarship funds, college endowments and the like.

I think he also said something along the lines of when there is blood in the street (people dumping stock) buy, and when your barber is giving you stock tips - sell.

The single most powerful factor behind successful investing?
----------------

Timing and luck.

The single most powerful part of investing is the INVESTING part.

Saving is NOT investing. You can't get a guaranteed 6% anywhere, but you can get an AVERAGE return of over 10% if you invest in the stock market. That's a 100 year track record.

$100 per month starting at age 20, invest it in the stock market, and by retirement age, you'll be a millionaire.

As I mentioned, Dutch: I did and I am. (It still blows my ever-loving mind to try to grasp that.)

But if you are in your 20s, let it be a lesson to you: you CAN do it.

Compound interest is a very elementary, and practical way to make money, at least in theory. Like hatari said, no way to average 6-7% interest every year.

I don't recall any of the wealthiest of the wealthy that made their fortunes in the stock market anyway. They made it by inheriting it, in business, etc, not Wall St.

I wasn't in the army but I can easily say my net worth is easily multi-hundreds, not many can make the same claim. Saving can't be emphasized enough...

That is a fact.

I bet you have a $ 1 million in stories?

Inheriting is the best...

DF

I heard an interesting thought at a talk about investing.

Question #1 How much can you lose when you invest?

Answer: 100% Obviously you can lose it all but no more than 100%

Question #2 How much can you gain by investing?

Answer: Potentially many THOUSANDS of %.

That thought helped me get going quite a few years ago.

The OP was not about being the wealthy of the wealthiest or even wealthy rather being able to retire financially sound, to be able to live at least as well as one did while working. Few will be able to do that unfortunately.

Often...simple, boring and consistent allotments is a recipe that works out to be the needed method. Understanding and learning fees associated with certain funds, and picking those funds based on long term value, is a strategy.

Ameriprise, TSP life cycle, various tangibles and a little real estate here.

Why do people refuse to accept the fact that the average return in the US stock market over the last 100 years is more than 10%. Over the last 50 years it is more than 10%.

10% is more than 6%. That difference, after applying compound interest, is the difference between retiring comfortably and retiring stinking rich.....

Single most powerful factor? Consistency. Think tortoise and the hare. Think compounding interest over time. But it is the very rare person that can do this on their own. Get an advisor you like and not one who is "fee based" seller, but one who profits from your earnings.
Be nimble and diverse. Investments aren't something you buy or invest in and forget. There will be a time to re-balance, which means sell and move to something else. Some mutual fund managers re-balance within an individual fund. Your advisor's job is to be up on new market features that benefit you.
Your goals will change as you grow older. In general, the older you get the more conservative your investments should become.
But consistency is the key.

That Wall Street model is what costs Americans Billion$. They have always told their clients that you look at the long haul, not short term. They (Wall Street) will also tell you that over time with the market fluctuations, your principle will double on the average of seven years. Another lie, if it was true, I would have over 3X the money in my 401 that I have now.

It is a fact, that if I did, with someone else's money, what Wall Street did with mine, I would be in prison...

GUNS.

I bought a near mint Python from an Army Reserve buddy in the mid '70's for $185. He was in a bind, needed cash.

Those guns are moving in the $3,500 range today.

Put that up against the stock market, gold, silver, etc..

Not even close...

DF

Shrap, don't know what to say, but you're doing it wrong. I've only been investing for about 20 years, most all of it in Vanguard's total stock market index funds. Right at 9% lifetime return.

Lately, playing a little with international funds and energy funds (buy low). We'll see how smart I really am in about 5-7 years...

I haven't been doing it wrong, D A Davidson is doing it wrong. If you think I am happy and want to prove you wrong, you are mistaken. According to their formula, you should have 4 times what you had 14 years ago.

If you do, their formula sure works better for you than for me. I am stuck with investing through the employer with a firm that has lots of agents that sit on the ground floor so when they jump out the window in a down market, they won't get hurt...

There are dozens of dividend reinvestment plans that charge no fees.

The reason more people don't do what Buffet recommends, and what RockyRaab (and me) apparently did, is that it involves sacrificing X today for Y tomorrow, where Y is much larger than X. "I'd rather go out drinking with the boys tonight than study for my course" or "I'd rather buy another TV than more savings." Eat the goose now instead of getting golden eggs later.

More recently, though, the Obamunists have really screwed this up by deliberately and artificially keeping interest rates so low. The CEO of Black Rock has estimated that it now takes three times as much savings and investment to have a secure retirement as it did just a few years ago.

The advantage of low interest fates , from the Obamunists' position, is that the Feds have to pay far fewer billions on Treasury Bill interest, and, secondly, they effectively take more wealth out of the hands of the people. where does it go? To the government. And nobody even knows they're doing it.

If "investment advisers" , old school" fiduciaries", maybe excepted, knew a friggin' thing about investing…they would not be selling their services.

or trying to sell you an annuity.

Buy low……..sell high.

most "investors " get it backwards.

I sold a bit of equities before '08…..but what I kept…I kept.

I think there is a relationship between Bernie voters and the huge amount of people , living on SS.

Low interest, inflation and monetary devaluation in general is a stealth tax that we all pay. It's the govt. hedging it's position at the expense of ours and promising us more of the same. And, we seem to keep buying more and more of what they're "selling".

I think the political revolt we're seeing with Bernie and The Donald reflects the distrust and disgust the electorate has for the govt. "system" as currently operating.

It ain't about us, but it may be...

DF

Sorry, man, that sucks....... My main Vanguard fund has an expense ratio of 0.05% per year........ I know I doubled the last five years, I'll have to look and see what I did at the 10 and 15 year mark. I tend to not look at it --- the market doesn't effect my choices. Last Fall was the first time I actually moved money out of the index fund to a sector fund.

Managed funds, target date funds, loaded funds.....all increase the costs of investing. Very, very, very few manage to beat the index funds in the long term. It has been done, but it's a rare thing.

That was my underlying point. Assets build wealth, not the stock market. You may hit a few years worth of up an up market if you're lucky.

I know loads of folks with huge $$$$. None of them made it playing the market.

I bought this book in April 2015 and converted my 401(K) and both IRAs to it. I have been very pleased with the results, especially how they handled the Aug 2015 correction. Things are really beginning to pick up steam now. Thurman has an office here in OKC, and I am going to stop by and talk to him about becoming our advisor. My wife is a little antsy about everything if I were to kick the bucket.






The All-Weather Retirement Portfolio: Your post-retirement investment guide to a worry-free income for life Paperback – March 23, 2015
by Randy L. Thurman

You can have it all--not just more income to spend in your retirement years, but also the peace of mind that comes from knowing that, no matter what happens in the outside world, you've done all you can do to have a worry-free income for life.

In this book you'll find:
- 9 steps to build a portfolio that will survive the Perfect Financial Storm, so you can stop worrying about the economy, the latest financial catastrophe, or what the market did today

- 2 questions you must answer before you invest another dime

- Why investing after you retire is radically different from investing while you're still working

- The life expectancy of 6 key types of investments--and what you can do to make them last as long as you do

- The 10 essential questions you must ask a financial advisor--before you hire one

- The exact amount of money you can withdraw without worry or guilt, knowing you've applied the best available research to ensure you'll never run out of money.

http://www.amazon.com/All-Weather-R...rds=The+All-Weather+Retirement+Portfolio

The way to certainly get what the market produces is to be in index funds.

Since we are talking about what Warren thinks.

http://www.marketwatch.com/story/warren-buffett-to-heirs-put-my-estate-in-index-funds-2014-03-13

The exercise is not about being mega wealthy

Though first we need to define wealthy

I used to think havin a million meant you were set for life and a million in 76 when I entered the work force for real would have pretty well had you there

A million today?

Hardly a lot of security in that number from my perspective.

2 million? Better, probably comfortable, but not wealthy

Rocky & Ed have given us examples of real world investing not touting to be the smartest guys in the room but disciplined and how systematic investing has allowed them to be very comfortable if indeed not above average comfortable in their results and subsequent lifestyles for when they no longer wanted to be part of the workforce


It's salt in the wound to most of us this age because if we haven't done the same its too late for us to match their results

I've not made much money in the market. I've avoided some big losses but I've avoided even bigger gains

I'm a control freak, and not very trusting of huge institutions be it wall st. Big banks or religious institutions

I've invested in our own businesses and re and we've been fortunate with the returns on both


But I believe even if it's too late for many of us to follow Ed & Rocky's plan, there's a valuable lesson to be gained from observing their real world results

We've got a dab of money & plan on setting up Roth IRAs in no to low load mutual funds for our kids

If the world goes to hades it won't matter if that money is lost, but if the world continues to roll on I expect commerce to play a role in the world

Owning shares of good companies will probably still play a vital role in most people's ability to retire in comfort if not wealth

I am limited in what i can say on these kind of posts for various reasons but i agree with buffett. The worst action usually is no action.
However, i remember a meeting i had to sit in on some years ago when a reprentative of a very well known mutual fund company was doint their spiel.
they had pretty charts, everything, and showed what 10k invested in say 1932 would have done up to the present day if put into three of their funds. I am sure it was all quite true.
I didn't win any favors with my remark, when did the funds even gain back to their original investment amount? Answer was sometime in the 40's. And my remark, okay well what if i was 70 in 1932 and did that i wouldn't be whole until well after i was worm foot. They were kind of quiet.
There is a lot of simplicity in many ways in approaching investing, and more than one right way. Luck has something to do with it. But the absolute best way to not gain anything is to do nothing.

Ron, your point is absolutely valid. The stock market typically makes it's gains in very short, intense spurts, and there are long, long stretches in between where it does nothing. If you have a 10 year horizon, the stock market is very risky. 15 years? Much less risky. 20 years? I'm all in.

On the other hand, even 20 years is no guarantee. The Japanese stock market was at 35,000 in the late 80's. Now it's at 17,000 something. If you have all your money in the Japanese stock market even if you were 50 in 1990, you are SCREWED.

So, diversification is needed. We can still do that with index funds, like international funds, we can do that with real estate. Not a big fan of commodities, metals and such. Some people like collectables, but I would limit my exposure there. Pretty fickle in most cases.

Ron, what you witnessed is what I call DECEIT BY SELECTIVE REPORTING.

I would have asked that rep how many funds they started that were no longer in existence because they had been selectively flushed, so only rosy ones could be advertised.

Late in life I learned THE WAY from a generous, kind and brilliant man.

PAY YOURSELF FIRST.

Set aside--never to be spent--1 dime from every dollar you receive from any source . At first the $ can go into a coffee can; then perhaps a savings account; then a stock account; then real estate, a business, etc, for example. This 10% never gets spent--only invested--an investment against which you can collateralize a loan, if you wish.

By paying yourself first, less than you might give to a disinterested waitress, you unfailingly become wealthy. It cannot fail. Even if some of your investments do poorly, others will take up the heavy lifting. You will never miss the dime you first removed from each dollar--it will still be there, working for you. You will quickly learn how to live on the 90 cents/dollar of income. And you will accumulate wealth and enjoy freedom you can now only imagine.

Thank me later.

No one's a bigger advocate than me on buying and holding firearms.

But you are correct that the numbers are not even close.
Your $185 invested in the S&P index in 1975 would provide more than enough to purchase 3 of those Pythons today (if you could find them, and before Uncle Sam taxed the crap out of your capital gain).

Oh, to be young again.

I'll thank you now on behalf of any young guys reading this.

it's indeed the first principle of financial freedom.


Richest Man in Babylon


got the book when I was 21-23 years old or so. Made a huge difference.

Sorry Bob, terrible advice. ;-{>8

Hey don't be telling Bob about luck


Bob knows luck



why if it were raining whores, Bob would get hit with a ????

A dick?

2l2q--thanks and you're welcome.

You'd think this would be easy to teach our young. But too many would rather get free chit from .gov.

I'm in the invest in ch!t you know something about camp. If you bought $1000 of nasdaq in 2000, you would $1000 today, with inflation about $600. I average 7%-10% annual returns buying, fixing, renting real estate depending on the market. Buy low sell high and manage your own rentals in between. It's a PITA and a lot of work, but I make my own decisions that control my outcome. wallstreet is a rigged game, and not in our favor.

Stormin, I don't disagree about investing in what you know.

Wallstreet is, however not a rigged game. If you buy an index fund, you will get what the market produces. Over time, it grows.


I must add, what is rigged is managed funds, picking stocks, and timing the market.

Sure are a lot of good posts here. I never did good in the market. I did good for a while 30 yrs ago , put it in Tech stocks in 2000 and lost what I gained. At 9.5% interest on my house , I thought , heck, pay the house . It's a9.5% guarantee. Now that my house wis payed for 7 yrs now. I am investing in the market. My biggest mistake was a bank talked me into loaded funds. ( FKUSX) in 9/2011. Bad move . Next , my wife that worked at a bank is where we went. More loaded Franklin funds. He at least steered us straight with half decent fund, but still loaded. Next, a referal from some friends. An investor in town, and more loaded funds, non traded reits and more loaded mutual funds loaded with oil in June 2014. ( guess how well that fund is doing) . I decided to go on my own with Fidelity . I was down 25K when I left the investment firm in Oct. 2015 . AS of last week I am dead even. Today 2-3 K ahead. I have y own portfolio I did mostly on my own. I am slowly going into index , ETF or stocks cause I learned very fast how expensive high load / expense ratios kill returns. Here is my portfolio. Is it normal or is it all wacked out?
My son is smarter than I . He has about 3K in a roth and barely 19 yrs , 1/2 BP, 1/2 FKDNX.

Here is my portfolio.

AGNC - Mortgage reit. 11% up about 10% or so . Bought 6 months ago. 13% div.

BP OIL 13% up 10% since bought 6 months ago 7.7% div.

ETGLX MID CAP growth 3% down 2% or so

fbiox BIOTECH 4.4% down 20% in since bought 1 yr ago

fbsox IT 3% up 3% in 6 months

FKINX OIL? BONDS 15.4% down 5% ( bought 2 yrs ago. OIL 5.4% div.

FMEIX madcap blend 1.2% even

focpx TECH growth 6.3% up 10%

FREL realestate (ETF) 1.4% up

fresh realestate 1.4% up

fsphx 1.4% down 10%

JAWWX world stocks 2.9% - 3% ?

PRBLX large cap blend. 19% May go into index fund + 10% in 4 months

NON traded reit American Capital realty 4%

GNL equity reit. 10% dead even , bought 2 yrs ago. 7.1% div.

I bought 10 shares of Berkshire Hathaway in 1966 after buying 5 of their (then new) permanent press shirts!. I paid about $22/share and in 6 months they went to $29 (a 30+% gain in 6 months!), so I sold them. Today, Berkshire Hathaway sells for $224,00/share!

Today, I only invest in index funds.

My wife and I started saving for retirement when we were 53 years old and worked until we were 71 and 70. We managed to invest 1/3 of our income and amassed a retirement nest egg of low-mid 7 figures when we retired. We do not touch this, instead we live on social security and my employer annuity. The "retirement" nest egg just keeps growing.

The secret was to live within our means, not buy new cars every few years (our are now 16 years old) and save. We were fortunate to have 2 decent incomes so we could save, but with sacrifice, anyone can do it.

Good job!

Timing, luck AND investing in index funds. 80% of mutual fund active fund managers fail to beat the S&P 500 index for more than 3 years.

The US stock market has average 10.1% growth since 1929 - BUT, 1929 was the start of the Great Depression whereby many large cap funds (railroads, steel, etc.) were busted to mid-cap stocks. Since then they grew to their previous standing.

Also, the 10.1% growth rate assumes that the investor did not withdraw dividends (i.e., spend them) but re-invested them.

"They (Wall Street) will also tell you that over time with the market fluctuations, your principle will double on the average of seven years."

Using the "Rule of 72", investments will double in 7.2 years, assuming a 10% growth rate. This assumes that investments are in S&P 500 index funds (which have achieved the 10.1% growth rate) and not in bank savings accounts. Index funds are often ridiculed as for losers, but they do work. Many active investors and their advisors, tout superior growth of selected stocks, but who can predict which stocks will grow? I bought Berkshire Hathaway in 1966 at $22/share and sold it 6 months later at $29/share fearing tat it had made it's run. Boy, was I wrong!!!

I'm impressed. I save 16% (not counting the crapload of money I re-invest in the business). 33% is awesome.

It's interesting that, in the article (index funds) , linked to, Buffet did not have one fund manager that he would entrust his estate to, including his advice for his kids.

When I consider that, along with many other factors, my opinion comes to be that WB is pretty much a crony capitalist and his holdings are diverse enough that the information he is privy to (alluded to in the article) makes his decisions virtual (legal) insider trading. IMO, he would not be going along with øbama's taxation happy talk if he was not getting significant benefits in return. He's not a Republican or Democrat, but a VERY pragmatic investor.

Note, he has always lived well below his means. ;-{>8

Time and a little luck. You'll get some picks wrong, but it only takes a handful of picks to be right and you'll do very well if you go very long. I don't like mutual funds, index funds, etc. I pick stocks and ride them either into the ground or to wealth. Tough to do though if you are a fearful person.

Dutch, we were fortunate to have good incomes. We lived on 1/3, paid 1/3 in taxes and saved the final 1/3. We lived pretty good, but didn't squander money (OK, I did buy some decent guns). But, unlike many, we drove older cars, didn't have a beach condo, rarely ate out, packed our lunches for work ,didn't take annual lavish vacations, etc.

It paid off and the money saved will provide well for any emergency in retirement. BTW, we both still work in retirement - the wife does consulting (earned $40 last year) and I work at a golf course (small wage but free golf!). Neither of us know what we'd do if we didn't work; the money isn't important, but the activity is.

I agree with you to a point. Assets do build wealth, but at some point in time you'll need a place to stick money where it can grow as your assets bring you surplus cash. A guy only has so much time on his hands, and the stock market is handy for stashing money away for long periods and forgetting about.

A good steady income that grows with spending under control, and an aggressive investing plan is a good recipe for long term wealth and some happy children when you kick the bucket.

Guns btw, in the scheme of things, aren't a very good investment. You might get lucky on the occasional gun, but you'd have to move a pile of guns on a regular basis to make any real money.

Kinda like doubling down on a bet when you've already lost a lot of money. Just like in golf, pay the safe shots; risky shots often lead to a ball in the rough or water.

Consider that, as already referenced, 80% of professional fund managers do not beat the market averages (index). And, to beat a no load index fund they need to far exceed the market average, to cover their salaries, advertising, broker's fees and possible generated taxable events. What appears to be fearful for some, is really just good stewardship.

Further, consider the time, your precious life, that it takes, researching all of this, when it could be spent with family or acquiring valuable memories. IT AIN'T WORTH IT, TO ME.

If you won't listen to me, and why should you, listen to Warren Buffet. ;-{>8

Index funds have been very popular, and for a reason.. We just pulled out of a big crash and have been on a run for awhile. Hit another bear market for several years or longer and you won't hear people singing Index praises too loudly.

You have to take on some risk at some point in time.

The last 15 years in the market have actually been pretty "meh" compared to historical rates, but then again, so has inflation.

The stock market moves in spurts, both up and down. If you want to try your luck, you can try and time the spurts, and you can very easily outperform the market. Or lose money handsomely.

Miss one good upswing in your lifetime, and it will cut your lifetime returns as much as 50% (considering compound interest).

THAT is why index funds are popular. They are always in the market.

Bespoke scatterguns…..

order 1 a year.

Don't forget to adjust those long term earnings against the dollar index. The dollar index makes the long term return 6%-7% . Right now stocks vs earnings don't look cheap. buy low sell high. I started my retirement investing in the 90's, got pounded in 2000 and then again in 2008 so my perspective may be different than some of you. I've done ok, but my RTI has been way better buying crappy houses and making them into decent houses. It's a lot more work, but less risk. I'm hoping to have enough rentals to replace my income in the my early 50's.

The single most important act is like the saying making the 1st step Open that account and then make regular deposits to it. EdM and Rocky are right on. If your employer offers matching it is always wise to take advantage of that too unless they only offer the company stock and thenit might or might not be worthwhile. As to Investment advice the best I know is figure your investment profile by subtracting your age from 90 and putting that amount into equities and the rest in Fixed investments ( bonds). For example if you are 30 years old you should have about 60% equities and 40% bonds. If you are 60 then have 30% in equities and 70% in bonds. For the small investor you only need three funds a Stock index fund that follows the s&p , A bond index fund, and a money market fund where you can hold a small amount of cash if you wish. These funds should carry a low expense fee and will do as well as all of the managed funds etc. You should realign your portfolio every birthday.
The one thing I find I have issues with the financial planning industry is they are big on telling you to save save save and build up your portfolio. ( the bigger your portfolio the more they make in fees as a rule) They are lousy at helping you plan to spend your money when you retire. Their aim is to maintain your portfolio balance ( their income base) and they are full of dire warning about running out of money etc. to scare you. The issue is do you wish to leave a pot of cash in your estate or do you figure the kids are grown you raised them and educated them so they need to fend for themselves. If its the former you need a lot more money. If its the latter you can do on a lot less. One thing I will point out as an example of how they sort of mislead you is when they say to a 60 -66 year old if you can just work another 4-5 years you'll have so much more $$. The part they don't say is that's about 20%-25% of the time you have left and it most likely the best 20% you have.If you have been saving that probably isn't good advice if you have not you may not have a choice. Think about that. The final piece of financial advice Ill give is even if it means living in a smaller house plan on having it paid for by age 55-60. The American concept of your home as an investment is bad advice. You need a comfortable warm dry place to raise your family and that's what a home is. If you want to invest in real estate thats fine but buy a duplex , apartment etc that produces income. Don't be house poor all your life thinking it will pay off big as an investment.

I agree with this.

I married a smart girl, and worked my ass off, I don't owe anyone or need any money, that being said, I've seen dumbass gamblers that thought they were smart blow a lifetime of hard work and savings planning.

Truly sad to see the fallout from that level of stupid.

I'm with you gunner500. Years of hard work, spending way less than I made, and blessing from the Man upstairs allowed me to be 100% debt free, personal and business, at age 41. It ain't rocket science.

Oh yeah, never ever let someone else manage your money. The cash that I do keep is in several accounts at a local FCU.

One thing I've seen a lot of over the decades is people who worked their ass off at a job they didn't like so they could do the things they wanted in retirement. Instead I chose a job I liked, and did most of the things I dreamed about in life as part of my job, so they were business expenses, or even paid for by somebody else.

Started saving and investing money a little later than some here, because I was plowing considerable money into the business early on. But am sitting OK now, especially since the part of the business requiring the least work continues to grow, in the past few years providing more income than our other investments (including the ones with compound interest). Since my wife also works for herself, this allowed us to live in a part of the country with a low cost of living, so we've been debt-free for years.

Don't ever intend to fully retire, unless absolutely forced to. One of my mentors kept working until he died at 91, because he liked to, but like him I will slow down. And as I do, will sell off some of the business investments made over the years, including many guns. Dunno when that will happen, but am already enjoying a sort of semi-retirement, since I've already done most of the travel dreamed about when younger, so am spending far more time with family and friends closer to home.

Agreed, started to fully retire 13 years ago at 40, but, you know what they say about an idle mind.

I'll be slightly busy doing something till they pat my face with a spade.

You were wise enough, early on, to set your priorities, make a life plan and work the plan.

I think that's neat, wish more had that discipline and foresight.

It's not really work if you enjoy what you're doing. So many are slaves to something/someone.

DF

I doubt I'll ever fully retire either.

Mule Deer, you are very fortunate in that you could make a living doing what you love. I'm sure you know that. I tried to make a living playing baseball, and it didn't work out but that is fine. Ever heard that saying, "the quickest way to ruin your hobby is to make it your job"? That's the way baseball bacame for me. Unless my kid, neighbor, etc was playing I could care less about watching a baseball game.

My hobby is my job, and I love it. I'm sure they'll find me slumped over in the wheelhouse when I'm an old man.

I'm a huge fan of debt free. Huge. I don't see the point in investing if you are paying interest on anything other than a house. You can live so cheap if you are debt free that you don't need a huge retirement and saving money is really easy.

I'm with you there.

Most of my "growth" and "bottom line" is real estate related. It's tangible and local; I can "kick the tires" with hands on involvement.

You gotta do what's in your comfort zone, what you are at peace with. Everyone is different, one size doesn't fit all.

And at the end, we all end up with about the same sized real estate plot...

The only lasting thing is relationships, first with our Maker then others in our lives. I've yet to see a Brinks trucks in a funeral procession.

And how we live our lives depends on how many come to pay last respects, how many come to "make sure"...

DF

^^^^^^

This


I became solvent at 37....retired for 11 years and traveled/hunted/fished while I was young enough to physically do it. Ran out of money at 48 And went back to work. But as Calvin said, debt free you really don't need that much.
I live modestly, and by many standards I don't have much...but most importantly amongst what I don't have is debt.....
Retired again at 62, bucket list full, so again, that requires very little.


I wanted to put myself in a situation years ago where if everything went to schitt, I could work part time at McDonalds and still live the way I live.

One other point, unlike others I didn't work and live someplace I hated waiting for retirement...I picked where I wanted to live THEN got a job.....

you find very few people talking about that, and what dollar devaluation has done to measured investment returns.

you are one of the very few, live within your means, and realize what you want. I have dealt with various people through the years from the very wealthy(dinner at the petroleum club a few times if that means anything to anyone) to those with not so much. Money provides the grease, but i can honestly say some of the happiest people i deal with are those that are on the other end of the spectrum, or were once. And have reasonable expectations.

Reasonable expectations are the key. Frankly I wish I didn't have as much as I do...I would like to have 50% less schitt and a house half the size that I have, and lower maintenance.
But, tune into TLC in a few years...I expect them to do an episode of " Hoarders" dedicated to my wife....

Great advice. I credit Dave Ramsey with teaching me this salient point about 14 years ago.

My own experience, learning about investing over the past five years, has cost me thousands of dollars in "stupid tax" (as Dave Ramsey calls it.

Once me and the little wifey became debt-free following Ramsey's 7 Baby Steps program, I finally discovered an investment philosophy that worked for me. I credit two books for my current strategy, though I have read dozens of books on investing over the years as part of my personal education on the subject.

I set up my retirement accounts (401(k) and both mine and my wife's ROTH IRAs) with the "All Weather Retirement Portfolio" and set up my joint brokerage accounts with "The 3% Signal" portfolio.

Both of these strategies fit my own personal risk/reward mind set at this stage of my life (63 years old and still working.)

I could not recommend more a careful reading of these two books before one invests another penny in a portfolio in which you have no plan or confidence. Hope doesn't work out in the stock market . . . I know from experience.