The Gaming Den

Absolutely, it's quite possible to try to succeed and fail.

But, not even trying to succeed is to pretty much guarantee failure.

It's not that complicated, but people get so emotional and have been trained to respond so strangely. It's almost as though they've been trained to respond with rage rather than try.

I mean, someone asks "what should I invest in?". I respond with "try the best investment possible over the last 10 years," and immediately the response is hatred, anger, and a branding that I'm some sort of nut.

Granted, there have been some intelligent responses, eg, "but it's at the high right now", and all I can respond to that is "not when you consider inflation, and that the policies and activities creating that high are still in place, with no indication of any change any time soon." I don't have a crystal ball, but I'm not talking about an investment for all time, I'm talking the next year or so, with plenty of option for re-evaluation.

"Buy and hold forever" is a bogus concept supported by bogus charts like that DJ chart.

Obviously, you need to make your own decisions, but I humbly ask you to look around and think about it for a while.

Doom wrote:Abso-

Dicks. Eat them.

Count Arioch the 28th wrote:

Doom wrote:Abso-

Dicks. Eat them.

To be fair, he is backpedalling from his initial stupidity as hard as he can.

Yeah, it's really stupid to say lots of people smoke and are overweight, and it's quite clear that the billion+ yearly lottery ticket sales in many states is just one guy, Bill Gates, travelling from state to state. There's no reason at all to think the money comes from elsewhere.

But, idiotic misreadings aside, back to the point: right now, putting money in a savings account is a bad idea. Randomly buying stocks is a bad idea. Trusting your employer or goverment not to screw you is a bad idea. Precious metals worked very well for the last 10 years, but might well be a bad idea in the future (opinions vary, here).

Does anyone have any concrete suggestions for helping the one guy (note for the idiots: not talking about the entire population of India here) asking for advice?

The deal with the cheap lottery tickets, is that for the poor your spending a dollar (or dollars) and you are buying hope. You'd have to be spending around 50 dollars a week on tickets to make a noticeable, the vast majority of lottery players don't spend that much, all though I grant a minority does.

On to investing: right now we are in a depression/recession, we look to the past for insight as to how to proceed. Problem is there are probably 4-5 previous recessions worth looking at, all have different and often conflicting lessons. Any large returns for the next few years are going to require a disproportionate amount of risk because of the added market instability. It's so bad that some smaller banks are failing. I don't think there is any one great answer, there may be some good ones, but it depends on the amount of capital you can risk and how much you're willing to risk it.

With regards to precious metals, the real trick is trying to divine what an ounce of gold is actually worth. You can try gauging inflation over the last century, since the US had a gold-backed dollar. The thing is you can't use dollars, and the most common commodities like food, clothing, real estate, cars and energy use different amounts of labour and resources then back in the day making a direct comparison difficult. You can try to take advantage of the historical gold to silver price ratio, but that won't tell you if gold will go up or silver down.

Hey, $50 a week adds up (and is alot of money for many people). Imagine if someone had, instead of lottery tickets, bought a single ounce of silver every week over the course of the last 10 years (and that's well under $50 a week, more like under $15 for most of the last decade). That's worth $15,000 now, a very noticeable amount of money to me, at least.

I agree with you completely about the disproportionate amount of risk right now, which is why I urge very conservative investing. It's more imporant to preserve capital in this situation than try to strike it rich. I'm not so sure about "smaller banks" being the only victims, I seem to recall some big banks having some serious financial issues, too.

What's an ounce of gold worth? An ounce of gold. A dollar, on the other hand, doesn't seem to translate quite as easily. In this scenario, supply and demand seems to offer insight--many countries, including China, seem to currently have a great demand for gold (silver, too, of course). Not coincidentally, there's one country that's vastly increasing the supply of dollars.

The historical ratio favors silver, but I'm really not a fan of such technical anaysis. I think the greatly reduced stocks of silver and high demand will be a better influence on the current price than what the ratio has been between 0AD and 1800 AD. Of course, both pointing in the same direction makes it tough to argue.

Doom wrote:Hey, $50 a week adds up (and is alot of money for many people). Imagine if someone had, instead of lottery tickets, bought a single ounce of silver every week over the course of the last 10 years (and that's well under $50 a week, more like under $15 for most of the last decade). That's worth $15,000 now, a very noticeable amount of money to me, at least.

That's what I wrote. You'd have to be spending around 50 dollars a week on lottery tickets to make not buying them a significant difference. My thinking was that with 50 dollars a week ($2600 a year) that's two semesters part time at a college, I think education is a better investment than silver.

I agree with you completely about the disproportionate amount of risk right now, which is why I urge very conservative investing. It's more imporant to preserve capital in this situation than try to strike it rich. I'm not so sure about "smaller banks" being the only victims, I seem to recall some big banks having some serious financial issues, too.

The difference between small and big banks is that the big banks may be considered too big to fail, the little ones will get swallowed up.

What's an ounce of gold worth? An ounce of gold. A dollar, on the other hand, doesn't seem to translate quite as easily. In this scenario, supply and demand seems to offer insight--many countries, including China, seem to currently have a great demand for gold (silver, too, of course). Not coincidentally, there's one country that's vastly increasing the supply of dollars.

If an ounce of gold was worth only an ounce of gold then gold would be useless to everyone who didn't like jewelry. Gold has to be convertible to other things to have value, so how much value does it have? While I'm less sure about China, in India status seems very important, a lot of that gold isn't being minted into coins for storage but into jewelry for the misses.

Actually calculating what an ounce of gold can get you and how it changes over time is an undertaking, but it's an important one. If an ounce of gold can produce significantly more value than it has historically than that's an indicator that its over valued. The price trend will continue going up until it doesn't, knowing where that point is what we'd like to know.

The historical ratio favors silver, but I'm really not a fan of such technical anaysis. I think the greatly reduced stocks of silver and high demand will be a better influence on the current price than what the ratio has been between 0AD and 1800 AD. Of course, both pointing in the same direction makes it tough to argue.

Same deal, if we don't know if the increase in silver price is substantiated and the we don't know if it's a good investment.

I cannot imagine that paying taxes on your income is wise.

mean_liar wrote:I cannot imagine that paying taxes on your income is wise.

I strongly recommend you do so, the penalties for failure to pay are rather severe.

Or have I misunderstood what you might be saying here?

410k is pretax. Unless your rate-of-return on your investment is such that you can beat out the 25%+ reduction out-of-the-gate, 401k still remains the best investment.

mean_liar wrote:410k is pretax. Unless your rate-of-return on your investment is such that you can beat out the 25%+ reduction out-of-the-gate, 401k still remains the best investment.

+1, that is actually an excellent point.

Only if you forget that you'll be taxed later (paying any extra tax on the extra profits). The effect of getting to invest pre-tax money depends on your rate of return, although if you're very careful, live long enough, and get lucky it can make a decent difference.

Think about it: if you're getting 0%, being taxed now or later makes no difference (except, of course, that you don't have access to your money now, which might be an issue if you need to take out a loan).

Toss in how actually getting the money out of the account can be something of a pipe dream (again, ask Enron employees how that works), and actually having control of your finances isn't such a bad thing, really.

I save in addition to the 'monkey money' of my empoyer retirement account, because people getting screwed at the end when try to retire, is quite common.

Doom wrote:Only if you forget that you'll be taxed later (paying any extra tax on the extra profits). The effect of getting to invest pre-tax money depends on your rate of return, although if you're very careful, live long enough, and get lucky it can make a decent difference.

It's probably going to be a 10% difference in tax rates if you're married (or a qualified widower) in your retirement, at current rates; its not negligible.

One thing that might help with saving.

If your company matches 401k contributions, it might be a good idea to invest into it. When times were better I had a very conservative 401k heavy on bonds that my employer matched 100$ of to 5% of my income. I considered that a fairly wise move in the end. I actually still have one of the 401k's (and I suppose I could cash it if at dire need, but it would literally have to be worse than being homeless it would seem, as cashing it when it looked as if I was going to lose my apartment didn't seem like a good call. I'd lose nearly a grand for early withdrawal plus I'm still young, I can take a lot more abuse than I could when I get older.)

mean_liar wrote:I cannot imagine that paying taxes on your income is wise.

You are grossly mistaken. If you can afford them, Roth IRAs are the best investment there has ever been ever.

Neeeek wrote:

mean_liar wrote:I cannot imagine that paying taxes on your income is wise.

You are grossly mistaken. If you can afford them, Roth IRAs are the best investment there has ever been ever.

Was planning on doing that back in the day when I had a decent job.

Unfortunately, I still had some stupidity to get out of my system, and I drank pretty much what I made back in the day. Lesson learned, and I will be much better for it when things start turning around. (The night I drank a liter and a half of Jager pretty much cured me of my alcoholism. Could have been much worse, I cured myself at the age of 27 instead of 50)

Isn't there a thing that says you don't have to pay taxes on investments like that if you're over a certain age? So if you don't touch your retirement fund until you retire, then aren't you in the clear?

No, that just means there's no penalty. When you withdraw from a pre-tax 401k you treat your withdrawal as ordinary income.

Roth IRAs are decent but their contribution limits are too low to effectively retire (solely) on them. There's advantages in that they're a more flexible investment vehicle than a 401k, but considering the marginal tax rate for your income band, I don't see how they're better than a 401k.

mean_liar wrote:I cannot imagine that paying taxes on your income is wise.

ROTH IRA. Basically you pay your taxes now so that all proceeds from that (including the interest) is tax free when you withdraw. Not good for a retirement account where your retirement tax bracket is significantly lower than your current bracket, but a major plus if it is not, especially since it can be transferrable (thus a great way to avoid inheritance tax).

You can also roll over traditional IRAs to ROTH, paying the tax in a lump sum and never have to worry about it again.

Generally speaking, this is a level of accounting that you need to run the numbers through because some times the magic works and some times it does not.

tzor wrote:You can also roll over traditional IRAs to ROTH, paying the tax in a lump sum and never have to worry about it again.

I'm in the process of doing this right now.

I think the only real (and it is very good) advantage of a Roth IRA is that you can pull money out of it without penalty. Otherwise, a 401k beats its performance pretty handily assuming interest at 9%.

mean_liar wrote:I think the only real (and it is very good) advantage of a Roth IRA is that you can pull money out of it without penalty. Otherwise, a 401k beats its performance pretty handily assuming interest at 9%.

That's quite an assumption, considering that the average investor got only 4.48%, before the crisis.

-Username17

If you are a US citizen or resident making between 9k-28k a year, you fucking want an IRA or 401k/403b, the trick is finding a bank or broker that will let you open one with a deposit that is only 2x to 10x your annual federal income tax liability. You need to be in that sweet spot where you earn enough to have federal tax liability, but not so much that the credit starts to phase out.

Just in case you folks aren't reading it right, for those Single, income under 16,750, HoH under 25,125, or MFJ 33,500 it means you get half of what you put into such an account as a tax credit. Effectively, that means you have the choice of putting twice what you owe Uncle Sam into an account rather than actually paying Uncle Sam. That's effectively an immediate 50% return on investment. (or 20% or 10% for people with slightly higher incomes). The limit is that it's a non-refundable credit, so that return is only valid up to the amount of your federal income tax liability.


The downside is that taking money out of such an account without an exception code is eating bank penalties and also taking a 10% tax hit, and then also treating the withdrawal as regular income (usually at least another 10% in taxes) so don't take it back out until you hit retirement age, buy a home, become disabled, or have some sort of rollover or other tax dodge set up.

FrankTrollman wrote:

mean_liar wrote:I think the only real (and it is very good) advantage of a Roth IRA is that you can pull money out of it without penalty. Otherwise, a 401k beats its performance pretty handily assuming interest at 9%.

That's quite an assumption, considering that the average investor got only 4.48%, before the crisis.

-Username17

Ah. Yes.

the link wrote:Reality, however, is quite different from this scenario – and it’s not the fault of the fund companies. In this year’s Quantitative Analysis of Investor Behavior, DALBAR illustrates how investors are often their own worst enemies. By examining actual fund inflows and outflows during the 20-year period ended December 31, 2007, the analysis finds that investors often buy and sell at the worst possible times – and achieve commensurate returns.

If your sample includes people constantly shooting themselves in the foot, then yes, 401k's suck. If someone's investment strategy is "buy high, sell low" then they don't need a Roth or a 401k, they need to get educated. A pension plan might work for these people, or maybe instead they'll blow all that pension money on magic beans and I'll link to an article decrying how pensioners are all broke-ass for some reason (magic beanz).

I have not been getting 4%, not even close, and that's accounting for the crisis.

So basically, be very careful, live long enough, get lucky.