All these articles are garbage. They can be summed up as such: 1. Start out well off 2. Get a good job and use (1) to launch yourself into a position making multiple 100ks a year 3. Fuck off until (2) gets you where you need to be. I've read rich dad poor dad, and the millionaire next door. While the millionaire next door tackled this problem with data (for example, most millionaires never make more than 80,000 a year in their lives and are prolific savers), these examples in these tabloid-style articles don't help anyone. If anything, they make the problem worse. I wish they'd talk about people who make less than 100k a year. The millionaires in this category are truly prolific, and would serve a good example to people who aren't C-suite executives or sales-types. When it's C-suites and sales-types it feels more like masturbation in public than an actual exercise in educating the would-be working man on how to create wealth. It took me a long time to justify putting a down payment on my house, and I put down 5% as an escape hatch despite being able to afford more. Even though my balance sheet shows an asset, the house is a liability until it is paid off, and as such, I wanted to balance down payment with total PMI additions (its literally only $30ish dollars a month) instead of thinking in "payments" because if I wanted to I could chop down the loan considerably by shelling money into it. I also got lucky and bought at near the bottom of the interest rate nose dive which benefited this plan greatly. I do believe the single most important thing someone can do is own a home and some land anywhere. If you can't - move. Your retirement calculations simplify considerably when you don't have to worry about your rent going up. Your statement on starting life being short one house is a good way to think about it. I like that analogy.
I couldn't agree with this more. In some ways I am a permabear, but what I have also learned is that everyone in the market has to be flushed out at some point. The buy and hold crowd really hasn't taken a hit yet, and there is no rule that says for the next 20 years we can't have sideways actions, or worse, for exactly the things you mention. The boomers might be ready to slowly start cashing out and spending their money, so, as you point out, where will all the new money come from? Not only will they be cashing in their investments, but also their properties. Given the obvious lower income of the current young generation, where will the money come from to take over their houses and investments at these prices? I could be wrong, and usually am, but this smartphone generation will I think have to learn that life isn't as easy at it appears. First the crazy high valuations of tech companies that make no money will implode, and then the rest of the re-pricing will follow.
TWO step formula : 1. don't invest now !!! only invest around end of recession / beginning of bull run 2. trade now!!!
You make one excellent point I omitted. Because of the long run up in equities long term holders have not been feeling pain in a long time. Any astute student of history knows that markets never just go up. It takes just one serious additional financial crisis to catapult all the long term holders back 20 years by halving their portfolios or even worse. Same with properties in overheated markets like Hong Kong or Vancouver or tier 1 cities in China. Tell a Chinese that property prices can crash and they laugh into your face. Some people have either not studied history at all or have lived for a way too short time without undergoing regular market cycles, which admittedly have been quite long in duration in the past 30 or so years. So, my point was that doing the math and actually running a simplified backtest easily proves that buying at market corrections of greater -10% produces superior returns vs investing at fixed time spans.
The biggest gain I never made probably came as a result of being negative about that advice when I was given it 25 years ago. And at the time I was very focused on building a stake to fund my "algo" trading, rather than saving for a home deposit. Wasn't called algo then. Yah, I chose the mechanical bull. I stand by my choice. Agree on move to where you can afford a home. Wife and I found our self in an affordable place. Let us get a home and get on with building life. A thought that comes into mind: trade the positions that life accidentally gives you. Life will eventually give you a position that you almost didn't plan, it will be a good position, or the best one you have, and it will be on the path of life's least resistance.... so fkn work it in your favor. They don't come often. The other one is easier said, and often said: big returns comes from big positions that last a long time and are big winners. I am running a huge open winning position right now, and I don't care one bit. We have had 1 big winner so far, and one big scratch. And the current open winner. In 13+ years. Everything else for us is peanuts in comparison. Luck is a big player.
George Carlin understood this decades ago: watch from minute 7:48: big fucking business interests is which likes little Joe Smoe to keep on buying and keep on investing:
%% Good points. BUT sounds like they still live on a budget, more or less.As that implied= once you have the wise giving,saving, spending habits + investing habits, its still good habits . Good habits are hard to break also...................................................................................................