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oldguy
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ok so i was just kind of reading a bunch i was thinking of buying bonds im not sure i get the total idea of it..


You are only 23, you should avoid bonds. To build wealth, you need appreciating assets, things that apprecaite much faster than inflation. Eg, if inflation is 3% and you buy a 3% bond, you would build zero wealth. You need 11%/yr assets to build wealth. The two appreciating assets are equities and real estate. Later, when you are about age 55, start moving your wealth into wealth preservation stuff - bonds, CDs.
Post Wed Jan 25, 2012 11:46 pm
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budpln
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So equities and real estate is that in stocks? lol i wish there was a chat room on here so i could talk to you directly old guy lol...
Post Thu Jan 26, 2012 1:07 am
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oldguy
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'Equities' is stocks, real estate is houses. The simplest way to own stocks is to use a no-load company, Vanguard or Fidelity, and buy shares in their SP500 Index Fund. The SP500 index is an index of the 500 largest corporations in the US, it represents about 80% of the capital in the US, all major companies are there - GM, GE, Boeing, Deere, Exxon, Walmart, etc. So it is extremely diversified, if one of those 500 companies goes broke, it barely affects you, the other 499 carry it. It is the purest way to own "The US Market".
Post Thu Jan 26, 2012 2:23 am
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budpln
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So it is like a mutual fund but it giant companies and very safe...i like it what kind of percents can I expect from it power year? Or is that to unpredictable?
Post Thu Jan 26, 2012 4:08 am
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coaster
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quote:
Originally posted by budpln
can i lose money with bonds? and is the interest a garuntee?

yes and yes.

~Tim~
Post Thu Jan 26, 2012 7:06 am
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Offshore-Wealth.com
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quote:
Originally posted by coaster
quote:
Originally posted by budpln
can i lose money with bonds? and is the interest a garuntee?

yes and yes.


Curious, interest guarantee? Only if whoever is backing the bond does not go bankrupt, and in this economy, nothing is guaranteed 100%.

Success to all,

EXPLODE ANY BUSINESS WITH FREE-ADPLOTTER.com
Post Thu Jan 26, 2012 1:30 pm
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oldguy
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So it is like a mutual fund but it giant companies and very safe...i like it what kind of percents can I expect from it power year? Or is that to unpredictable?


Yes, it's a mutual fund containing those 500 stocks. I wouldn't call it "very safe" - and "very safe" is not what you need. Again - risk and return are directly proprtional, no free lunch. If you want to build wealth, you must learn 'risk", learn to analyze it, mitigate it, manage it.

The historic return per year is 11%. It is completely unpredictable for one year - it is typically between 50% 'up' and 30% down. After about 10 years your 'ups' and 'downs' start to cancel each other and your portfolio return starts to comverge on 11%/yr - but it coulld still be in the 2%/yr to 20%/yr range. After 30 yrs it normally converges to 11%/yr within a few points.

http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
Post Thu Jan 26, 2012 1:44 pm
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budpln
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sounds good to me so that would b a long term investment.. would you suggest going into more than just the s&p 500? this stuff is fun to learn about but there is just so much to learn and i deff want to get a strategy together where im risking to hopefully gain and also want to be able to put money somewhere it will grow even if only at a slow rate. maybe just kind of split it up and if rates get better even do some bonds. does that sound doable and smart? i kind of want some action as well as stability and i feel if i try these tree things i will have that.
Post Thu Jan 26, 2012 2:20 pm
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oldguy
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quote:
would you suggest going into more than just the s&p 500? this stuff is fun to learn about but there is just so much to learn


No - the successes of the past invested incrementally (monthly) and steadily (never selling) into the SP500 Index for 30 or more years. Those patient steady investors did better than 85% of the professional money managers - and they did way better than investors who tried to switch from stocks to bonds and back when the economy switched between bad/good.

Fun to learn, yes. The market is extremely complex, 1000s of books have been written - Elliot Waves, Fibonnaci Ratios, Stoicastics, candle stick formations, channeling, fundamental analysis, standard deviations, Gausian distributions, market derivatives, call options, put options, straddles, etc.

The irony is that, while the market is extremely complex in theory - it is relatively simple when the theory is reduced to practice.

quote:
maybe just kind of split it up and if rates get better even do some bonds. does that sound doable and smart?


No - that kinfd of thinking will hold you back.
Post Thu Jan 26, 2012 4:02 pm
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budpln
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so your saying invest as much as possible into the sp500 and ride it out.. getting avg 11% in return for the money i put in and it works itself out to be as profitable as playing the stock market..
Post Thu Jan 26, 2012 4:43 pm
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coaster
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quote:
Originally posted by Offshore-Wealth.com
Curious, interest guarantee?

Yes, in the sense that a bond is a contract between two parties, the interest rate is guaranteed to not change, it is part of the contract (in a "normal" bond), and I think that was the sense in which the question was asked: can the interest rate on a bond be depended on to continue at the same rate at which the bond was purchased, and the answer to that is "yes".

Nothing is 100%. Don't be so picky. Mad

~Tim~
Post Thu Jan 26, 2012 5:22 pm
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oldguy
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quote:
so your saying invest as much as possible into the sp500 and ride it out.. getting avg 11% in return for the money i put in and it works itself out to be as profitable as playing the stock market..


Maybe not as much as possible - but whatever it takes to make your goal. Eg, $5000/yr at 11%/yr for 30 yrs equals $1,105,000. And $10,000/yr equals $2,210,000 - and so on.

For most people, this method turns out to be way MORE profitable than playing the stock market. The brokerage industry ran a 23 year study during a period when the index averaged 14%/yr. The clients that ignored the market & simply invested incrementally got the 14%. The clients that traded out of the market during bad times and bought back in after the market recovered got about 2.5%/yr during that same 13%/yr period - ie, they snatched defeat out of the jaws of victory.
Post Thu Jan 26, 2012 5:47 pm
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budpln
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By those numbers if I put 5grand a year in and I'll be a millionaire when im 53 I like the sound of that...
Post Thu Jan 26, 2012 5:52 pm
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budpln
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$5000/yr at 11%/yr for 30 yrs equals $1,105,000. And $10,000/yr equals $2,210,000


can you show me the math please?
Post Thu Jan 26, 2012 8:25 pm
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oldguy
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By those numbers if I put 5grand a year in and I'll be a millionaire when im 53 I like the sound of that...


Yup, that 's the way it works - I retired 14 yrs ago, I'm proof.

And if you quit adding $5000/yr at age 53 but left the $1.1M in the same fund, it would be $3.1M at age 63. And so on.

I use Excel - coluumn A & B are self explanatory, just do a "fill down" to 30 yrs. Column C
Put $5000 in first box.
Put C1*1.11 in second box.
Put (B3+C2)*1.11 in the third box and "fill down" to 30.

0 $5,000 $5,000
1 $5,000 $5,550
2 $5,000 $11,711
3 $5,000 $18,549
4 $5,000 $26,139
5 $5,000 $34,564
and so on.
Post Fri Jan 27, 2012 12:23 am
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