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“Future stock market returns will be lower than the historical average.”
I’ve been hearing this on Bogleheads (and Vanguard Diehards) for decades, usually from a respected industry guru. The only suggestion to deal with it is to save more and prepare to work longer. I was already working and saving as much as I could anyway, so there was nothing actionable in this for me and no rational reason to worry about it. Turns out these dire forecasts are usually wrong anyway.
Pay off your mortgage before you retire. We did that, and then we bought a second home and decided to keep our beach house and use it as a hybrid vacation home / rental property. This made our quite simple financial picture much more complicated. I’m Ok with it now, but as I age we may decide to simplify the picture.
Dont own too much of one stock. We own a lot of BRK.
Dave Ramsey. Back in the day when we had some debt, he would rather you pay off everything before contributing towards retirement accts. Even staying out of the market for a couple years never made sense to me when you can accomplish both tasks at the same time.
Time in the market is key!
Good one, Catherine!
To buy the latest “hot stock”. I always try to remember the adage that whenever we amateurs make a trade, on the other side is likely a much more experienced and knowledgeable institution or professional trader.
You must own bonds because it will prevent you from selling all your stocks in a down market.
Rich Dad, Poor Dad.
budget……..I’m 78 and have never budgeted but have lived a great life within my means and invested enough to secure in my future whatever may come up
Keep a record of your expenses and budget. I always save at least 10% of my income. Usually much more than that, maxing my company’s 457 plan and funding a traditional IRA also (we need the tax break). It doesn’t matter how I choose to spend my money if I see my savings increase each month.
Our family has always used this method (as long as you don’t cover expenses by carrying credit card balances!). if you “Pay Yourself First,” such as by 10%, you can be frugal or self-indulgent with the rest of your spending and you’re near-certain to come out all right.
In my starving-college-student days, as I watched the 10% grow, I often daydreamed during hard times (while waiting for my next payday) about how I could spend money. I remember thinking I could totally empty my savings account and take the money to a steak house and overeat. This was in the 1960s, with limited savings options, and also a slow turn-around time to get my passbook to and from the S&L. So “daydreaming” was all I had time for—and that next paycheck would always have arrived before the account-emptying savings.
Our kids were encouraged/coerced, from earliest ages, to put away 50% of gifts, etc., and each of them reached adulthood with middle-six-digit portfolios.
“Found money” such as this, plus various rebates, means that wife and I still have a “sweep”brokerage account, just for stashing the kinds of monies that are too-small to mean anything individually, but add up. After making a six-digit house-remodel addition just before 2020, we have a sun-room plus master bedroom and master bath, that feels wonderful in rain or shine—and still leaves a six-figure account of remaining “found money,” ready for us to play with—
All without budgeting.
Regards,
(($; -)}™
Taking a lump sum instead of a pension, Tulip bubble Crypto currency, investing in stocks with P/E ratios in the hundreds.
My favorites to ignore are the talking heads who have written a mildly successful financial advice book and/or who claim to have predicted accurately the last great market collapse, boom or (fill in the blank), who now make their living by selling a newsletter, market trading system, or some other sure fire investment advice that will make market winners out of even the worst investors. We see them regularly on talk shows or in financial blogs and posts, touting their expertise to anyone who will listen and buy! Caveat emptor!
Anything about bitcoin. Its hocus pocus.
Lately it’s been 50/30/20 budgeting. I follow “pay yourself first”, so my retirement account gets funded first, then I pay bills, then whatever’s left is available to spend.
50/30/20 is needs/wants/saving. I really dislike savings being in last place.
I ignore the advice to set aside savings equal to two or three years worth of expenses. My pension covers my expenses. If an emergency occurs, I can always borrow on my margin account.
Rebalancing. For the most part we let our winners run.
“Social security benefits will always be there.”
I told my finance students that social security would always be there for people who fail to plan for the future. But successful investors and planners will increasingly see social security means tested out of existence.
As a 30-something, I was shocked to learn that my doctor father qualified for SS. My parents certainly didn’t need it. I assumed that the system was built as a safety net and that those paying into it hoped to never need it. Instead, we have an upside down pyramid: the richest receive the most.
Will –
It certainly is charitable of you to determine that your parents did not need Social Security.
I know I am appreciative when the Democrats (leftists) pre-determine that I have no need of the first amendment, or the second either. I feel so much better when I don’t have to make those difficult decisions on my own.
Any economic predictions to two figures or more are bumpf as far as I’m concerned. I see a lot of headlines similar to this “Expert X predicts the market will be up 18.26% this year! Really? Why not 18.27%??? All nonsense.
“Buy indices no matter what’s in them or how they are priced”.
Buying Crypto’s!
We keep far too much of our investable money in cash, due to my husband’s distrust of the stock market. Combination of minuscule interest rates, missing out on the recent bull market, and now inflation rearing its ugly head really brings home why all these years we should not have ignored the popular financial advice to mostly invest our too-large rainy day fund.
I feel badly for you. We have so many choices, so many theories, so much graft, it is hard to know what to do in the moment. Only time will tell, and in your case, he guessed wrong.
Judging by the number of articles, the most popular financial advice consists of predicting the markets. Took me a long time to wise up, but now I know there are two kinds of market analysts:
I have no saving goal.
I just spend small then save and invest the rest. Most people should have goals and habits because it’s so hard to keep them without some structure. For me, I get a thrill out of saving, so it’s kind of like my ‘fun money’. Which does not sound so fun, I’m sure.
Saving 10% of my salary is never something I have thought about. I can’t even tell you what my saving rate is.
Too right, Mr Z. Living below your means sloughs-off a ton of other conundrums: saving rates, budgeting and so on. What stays on the table, however, is tax planning.
Right now I am ignoring the popular financial advice that borrowing for college is worth it because college provides a double-digit return on your investment.
This is just one more instance of popular financial advice on when to borrow money and how much debt load is okay, including car loans and home loans.
Old fashioned idea, but at this point in my life, if I can’t pay in full, I won’t buy it. Amazing how my interest in purchasing things fades away when I think of real money going out of my pocket to get it.
Honestly, I had a friend from college laugh and say, “Haven’t you heard of leverage?” as he described his hobby farm, which I wondered how he could afford. He may have been correct, and he may be multiples richer than me at this point, but that is not how I roll.
You sound young, but wise! I am not encouraging my grandkids to automatically go to college. I am encouraging them to find their passion and fulfill it. That may involve getting a medical degree, in which case, money well-spent. Or it may involve running a specialty restaurant and no degree=money well-saved!
At this time I steer clear of the flavors of the month – NFTs and crypto. The other one is to buy gold as a hedge against Armageddon. I never understood that one.
It depends on how much gold, right? I want enough to trade for food or security when that time comes. I keep a little gold for those reasons, not as some kind of “investment”. Armageddon may come; being able to buy some time could get you through it.
If you need Gold to survive, we are all in very BIG trouble. I am sticking to the Dow, S&P and Nasdaq EFT’s. I am with Buffett, the S&P should get you through any stock market ups and downs.
I hate the click bait headlines like, “Six stocks you need to buy now!” Why would I think some journalist trying to get readers with a seductive headline would know how to beat the market? I don’t.
Many personal finance writers love to tell you to get the biggest mortgage you can afford and never pay it off. Yes, it is the cheapest debt you can buy but I still say phooey. Ignore that advice when you’re able.
I ignore all the pitches to invest in the latest, greatest, hottest “thing”. Even if it were a good investment, if “everybody” is already buying it, it’s too late!
Yes, but perhaps a corollary is that if everybody is saying it’s too late it probably isn’t.
I’m long past advice doing me much good, but I did follow the save early, save regularly and stop trying to beat the averages. Today popular advice seems to be around retirement withdrawal rates and how much one needs in funds to retire. With the wide range of advice given in both, I’m guessing ignoring the experts and using some basic math on each individual situation is best.
Right. What matters is what is YOUR needed withdrawal rate, unless one is trying to time the last dollar to one’s death day.