[allovernow]

I live well enough within my means that I don't have to bother with any kind of accounting. On a typical tech salary living in a relatively cheap COL area, I bought a house about half of the price I could afford. I exclusively purchase used vehicles (partly because I am am enthusiast and enjoy working on them, but even a 10 year old low mileage modern vehicle is pretty reliable and cheap to maintain), and I don't shop for the fun of shopping.

The result is a guaranteed growing savings which I periodically invest in various assets while trivially maintaining a buffer for emergencies.

The trick is to live modestly even if you have money. Also, stocks are basically equivalent to savings, since with modern tech liquidating funds and transferring them to your bank in an emergency can take as little as minutes.

There's so much uncertainty in money management that you're probably IMO wasting your time micromanaging. Pick a couple decent assets, or even an index fund, diversify with a little bit of gold or alternative market hedges, and leave the funds alone. There's no reason to overthink money management if you plan everything with a healthy buffer - but that requires self control. Less stress this way though.

[jmeyer2k]

Investing in an index fund consistently gives returns of about 5-10% a year. This turns out to be a LOT of money in the long run (1.1 ^ 30 = 20x).

Trying to time the market is a bad idea. Picking individual stocks is a bad idea.

This is assuming your main goal is returns on your investment. Picking individual stocks or even 30 stocks is basically gambling.

Really recommend reading "A Random Walk Down Wall Street": https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/03933...

[tempsy]

I'm so tired of these types of comments on HN that say investing in individual stocks is like gambling. It's such a tired piece of advice. Don't invest more than say, 5%, in an individual company, but choosing a selection of high quality companies that you believe in is not in any way like going to the roulette table.

[jmeyer2k]

It depends on the time-frame you plan to invest. If it's a short time frame, investing in individual stocks can be OK.

There's just so many variables that go into the price that something that causes the stock to go up/down 20% can be completely unforeseen.

A broad market index won't have these weird fluctuations. Almost every single market strategy underperforms broad market indices in the long run.

Even hedge funds that outperform the S&P in one period perform average in the next period. In other words, past performance of funds has no impact on future performance. On average hedge funds picking individual stocks consistently underperform compared to broad market indices.

[tempsy]

The issue I have with your statement is not that you're guaranteed in any way to beat the market, but saying that investing in individual stocks is gambling. It just isn't true.

Again, if you have no more than 5% of your portfolio in an individual stock then a 20% drawdown on that one stock is not going to significantly hurt you.

People should feel free to decide for themselves if they want to spend the time to actively invest vs throwing everything into an ETF and no one should be shaming them into thinking it's akin to going to a roulette table in Vegas.

As someone in tech, I've done quite well investing in high quality tech companies like Apple, Netflix, Amazon, and Nvidia over the years. I keep my 401K in a broad index fund but enjoy actively investing a part of my wealth.

[jldugger]

> As someone in tech, I've done quite well investing in high quality tech companies like Apple, Netflix, Amazon, and Nvidia over the years.

I feel like I have a number of coworkers who make investments like this, that haven't really been burnt on this because of the bull market. And because they know tech better than most, that's what they focus on, and it becomes a huge sector risk, even though no more than 5 percent is invested in any particular symbol. If five years from now we learn that someone in big tech has been cooking the books (https://en.wikipedia.org/wiki/MCI_Inc.#Accounting_scandals) that could lead to a sector wide dip for a variety of reasons, far worse than a 5 percent drop.

What it comes down to for individual investors is that diversification is at odds with well researched investing. You just don't have the time to pour over 100 quarterly 10-Qs, build sales forecasts, or predict next year's return on the 10y treasury bond. It can be a fascinating hobby, and while I have a small trading account with the IEM, all my real money goes into VOO/AGG.

[tempsy]

I don’t take investing so seriously like pouring over financial statements outside of skimming through earnings reports. I don’t live everyday worrying Tim Cook is committing massive accounting fraud. I invest in companies I understand, use/like, and reasonably trust, and it’s worked out well for me. There may come a time the whole market crashes again, but my gains are far above the index fund over the last 10 years, and if I need to derisk I will make that decision at a later time.

Again, I just thinking screaming “anything except index funds is stupid gambling and irresponsible” is untrue. I also think those who become truly wealthy in life necessarily have to do things that the average person is unwilling to do, like invest understanding there’s a risk involved.

[monksy]

> it's a short time frame, investing in individual stocks can be OK.

And then your gains are cut by transaction costs, opportunity costs and short term gains.

[hackbinary]

It depends on which index. The Dow Jones is an exceeding poor index and a good actively managed fund will out perform it easily.

The Dow does not take into account market cap or float, and when a security comes off of it at $5 a share and a new one goes in at $105 per share, then the index jumps $100 in value.

The S&P is better, but managed funds are usually better.

[jmeyer2k]

90% of managed funds have underperformed the S&P over the last 10 years and studies have shown the funds previous performance has little to no impact on future performance.

https://www.cnbc.com/2019/03/15/active-fund-managers-trail-t...

[turc1656]

While it's true the Dow doesn't take into account market cap because it is a price weighted index, it is not true that removing a $5 security and adding a $105 one jumps the index $100 in value.

Every index has a divisor, which acts to preserve the return. The general calculation for an index level is Level=MCAP/Divisor. With the Dow, the MCAP is simply the sum of the prices instead of the sum of all MCAPS for the individual securities. When you drop one security and add another, the divisor is calculated such that it offsets the change in MCAP. In this way, when the index opens the next day it opens at the exact same level as the previous close and then the real time feeds kick in and update based on the gap up/down of each security in the Dow. The same basic logic applies to all top level indices. The calc changes for gross/net returns, currency variants, hedge calcs, etc. But the same principal applies that there must be a way to preserve the day over day return so that adding and removing securities doesn't throw off the actual index levels and returns.

Your 401k and other investment accounts that report performance do the same thing behind the scenes - particularly 401k. With a 401k you are consistently adding money to your investment pool and placing small trades to obtain more shares of a pool of securities. This influx of money doesn't artificially inflate your personal return for the year because the way the calculation is done is very similar under the hood to how an index is calculated.

[solarkraft]

Interesting that you claim that, since I usually only hear the contrary (actively managed funds don't perform better and the fees are too high).

Does anyone have specific data on this? Does anyone

[turc1656]

I work in this industry. We have detailed reports on damn near everything, including private hedge funds and how they perform. 80-85% of any active management or financial advisory services have not beat low cost index investing over the long haul. The top 15% or so can and do, but the vast majority of the active investments players (that 80% or so) don't make enough to beat passive investment once their fees are taken into account and an appropriate passive benchmark is used. Meaning, if they are actively investing for their client using only US securities and products, we use a major US benchmark to compare against. If they are global, Asia-Pac, Dev/emg, etc. we use one of those to compare against so we are looking at apples to apples. A lot of times they will simply invest in a high growth emerging market and tell their clients that they are beating the S&P 500. Yeah, of course you are. But you aren't beating the relevant emerging markets growth products.

[tunesmith]

What are those top 15%? Is it the same 15% each year? :) Does it include big players that anyone can sign up for like Fisher or Fidelity?

[hef19898]

Yeah, that's what we do as well. After the first couple of years in my first job, during which I spent a little bit more on stuff I couldn't afford before (sport equipment and such) but within my means, we stopped spending at a level below what our combined salaries would allow. It's a nice feeling to have enough buffer for a couple of months. And the opportunity to opt for a lower salary without any financial risk. Generally sound advice to live below ones means. And stay there.

EDIT: One thing that helped a lot in doing so was to treat any bonuses, whether that is stock, years end bonuses or any variable salary elements, as just that. A bonus. Don't plan with it as part of your salary, put it aside. And only use it for stuff, like, a house. Or true emergencies.

Also, have a separate bank account at different bank. Put every month, even a small sum is enough, on that account. Every month. Every year. And never look at that account, ever. Until the world is to end and you need cash. Until that point, don't even think about that account, never ever. Forget it is there.

[kevmojay]

I agree with your conclusion but for me personally, I am afraid of spending even though I have money to spend. And when I do spend the money, it gives me a lot of anxiety.

I started keeping track of my budget so I can comfortably spend without the stress.

[hello_moto]

I feel like you need a goal or you need some sort of framework to make yourself feel safe.

Say here's just an example (DO NOT QUOTE THIS): Most people don't know how much money they should have for retirement. The FIRE movement suggest Expense * 25 = Your Nest so you can take 4% annually. People don't have to follow the FIRE lifestyle but the calculation itself could give some deadline/goals to keep yourself "sane" because Mathematically it looks "sound" (better than NOBODY KNOWS!).

[allovernow]

Nothing wrong with being extra responsible!

[keehun]

Do you do any sort of financial planning for retirement? What you've got going for yourselves seems like it's working for you, but curious to know hat would happen if the "tech salary" were to stop.

[spurdoman77]

You forgot bitcoin. Lots of bitcoin on the side. That way you can retire in peace.

[Gabriel_Martin]

this is terrible advice. They should put it all on red.

[hef19898]

What an amateur advice. Every sophisticated roulette player know you don't do that.

You put it all on Pair.