Advice for young whipper-snapper

[Cal]

Hello all!

I've been reading the boards here and really enjoy everyone's posts.

A little about me: About three years ago, I received a big, fat severence package from the company that was laying me off. At that time, I decided that since I was going to me a wage slave for the rest of my life, I was going to take some time off from working and travel while I was still young enough to enjoy it (I was 33 at the time).

I took a year off from work and traveled to Australia and Hawaii. It was a great time and I'm glad I did it. It was the best ER education I could have gotten. It did three things for me: 1.I learned that having "stuff" doesn't give me pleasure (I got rid of almost everything before I went to Australia) 2.I know I will LOVE the PT lifestyle and, the best: 3. I save every possible penny now for retirement as I can't wait to get back to that lifestyle!

There is a little voice in me that sometimes reminds me how much closer I'd be to ER if I'd saved that severence package. : But I honestly believe that I wouldn't have "known" that I could ER (and enjoy the PT lifestyle) if I hadn't done it. No sense crying over spilt milk.

I have gotten my financial house in order. Paid off debt, have emergency fund and contributed maximum amount to 401k (10% is all my plan allows ) and to a Roth-IRA since I returned to my wage slave status two years ago. I am now focused on educating myself about investing.

I have to say, y'all are a little intimidating (and inspiring) with all the knowledge you have about investing. Any suggestions for books to read in order to further my investment knowledge will be greatly appreciated. Right now I'm reading Stock Investing for Dummies (Paul Mladjenovic) and The Intelligent Investor (Ben Graham).

Thanks and looking forward to all your comments!
Carolanne

 

[Hyperborea]

I have to say, y'all are a little intimidating (and inspiring) with all the knowledge you have about investing.  Any suggestions for books to read in order to further my investment knowledge will be greatly appreciated.

Before you make a lot of big investment decisions give a lot of thought to whether you really think that you can beat the overwhelming majority of fund managers who despite the training, the mountains of information, and the hordes of analysts can't beat the index over any appreciable length of time.  Those that do beat it for short time periods are in general not the same ones who beat it in the last time period nor will they be the ones who beat it in the next.

Factor in the huge amounts of time that you can waste on this and it is big net loss.  Spend the time on your own personal activities or perhaps on your career to allow you to make more money and get out sooner.

What should you read?  How about:

A Random Walk Down Wall Street
Burton Malkiel

The Intelligent Asset Allocator
William Bernstein
also see his website - www.efficientfrontier.com

Common Sense on Mutual Funds
John Bogle

Why Smart People Make Big Money Mistakes
Gary Belsky & Thomas Gilovich

Capital Ideas; The Power of Gold; and Against the Gods
Peter Bernstein

Asset Allocation
Roger Gibson

If you want some more technical stuff then you can try here:
http://www.altruistfa.com/readingroomarticles.htm

 

[Reader]

Listen to hyperborea. Also try www.diehards.org and www.coffeehouseinvestor.com for more good advice. You're better off with low-cost, no-load stock and bond index mutual funds.

 

[Cal]

Before you make a lot of big investment decisions give a lot of thought to whether you really think that you can beat the overwhelming majority of fund manager

I have my IRA at Vanguard. The overwhelming majority of my money is kept in Index funds. I would like to buy and hold some individual stocks that would be held long-term outside of my tax sheltered accounts. Not sure if I'll go that route or keep all of my money in index funds.

Regardless of whether I invest in individual stocks, I feel it is important to have a good understanding of the investments where you put your money. I tend to think of myself as someone who can handle high risk allocation (small/mid-cap and international funds) but unless I understand the stocks that the funds are investing in, I won't be comfortable with that aggressive allocation.

Thanks for the reading suggestions. My hold list at the library just got a lot longer.

 

[Nords]

If you're picking stocks...

... try Investopedia.com's tutorials, especially their primer on reading financials. It should pass the time while you're waiting on the library.

 

[Hyperborea]

I would like to buy and hold some individual stocks that would be held long-term outside of my tax sheltered accounts.  Not sure if I'll go that route or keep all of my money in index funds.

Doing this with some tax efficient mutual funds (e.g. Vanguard's Total Stock Market, Capital Appreciation, Tax Managed International, etc.) would be an easy way to go.  Personally, I use some ETFs but I have some special circumstances (temporary US resident).

Regardless of whether I invest in individual stocks, I feel it is important to have a good understanding of the investments where you put your money.

A worthwhile undertaking.  Read the material I suggested and browse Bernstein's site (read his quarterly web newsletter particularly).  That should give you the information you need.  A lot of people who get interested in investing jump immediately to the how do I choose the next hot stock/fund/racehorse without bothering to consider the question of is it possible and likely.

I tend to think of myself as someone who can handle high risk allocation (small/mid-cap and international funds) but unless I understand the stocks that the funds are investing in, I won't be comfortable with that aggressive allocation.

I too have what some might consider an "aggressive" tilt to my asset allocation.  I've allocated my funds internationally close to the weighting that market capitalization puts it.  I have a 50/50 US/ROW (rest of world) while the actual is 40/60 US/ROW and continuing to tilt towards ROW.  I also have a slight value/small tilt to those as well.  All of that can be done with index funds (or ETFs though for most that isn't the best way).

My hold list at the library just got a lot longer.  

Have fun with them.  Some of them are more directly pertinent or easier to read and I listed them in somewhat that order though it's not that important.  Bogle's book while it is useful and has good things to say can be a bit dry.  While waiting you should read Bernstein's quarterly newsletters starting from the first one - they'll give you a lot to start thinking about.

 

[UpandComer]

Hi Cal (my dad's name too!),

Welcome to the ERF! I still consider myself an investment newbie as well so we have that in common.
My advice would be to start of slow, but be dilligent.

I try to do little things like watch the financial news in the morning before work. I also read the WSJ anytime I get the chance. When I first started, my local community college offered a class called "Investing 101". It was great b/c I learned the basics in a non-threatning environement.

There are TONS of good investment/$$ books out there. Even though it's not strictly an investment book - "The Millionaire Next Door" is great.

Good luck!