Investing

If investing is gambling, be the casino

JesseLeave a comment

One of the biggest oversimplifications commonly made about investing in the stock market and other securities — and one which I believed myself, for a while — is that it’s “just another type of gambling.” This is a common refrain from people who are apprehensive about investing themselves, or who for whatever reason want to discourage other people who are interested in investing. Or, for people who have actual gambling addictions and want to make some sort of false equivalency so they won’t be as harshly judged by others or themselves (gross).

Either way, I think that it glosses over a lot. But we can run with that analogy and use it to show why investing — whether or not you consider it a form of gambling — can be a reliable way to build wealth, with no dumb luck involved.

Continue reading →

Does investing make you bourgeois scum?

JesseLeave a comment

Skip this article if you think capitalism is swell or that “Going Galt” would accomplish anything other than huge embarrassing failure for the Galt-goers.

I came late to the investment game, mostly due to a perception that getting involved in the market was something that only suckers, and (more importantly) rich people who don’t want to work for a living, do. I imagined investing as mainly a way for silver-spoon babies to gain an ownership share of a business upon whose shop floor they will never set foot, and to siphon off unearned profits from the people who actually work there. For those of us who actually do work for a living, I reasoned that investing was a trick to get us to lend money we earned through our labor, to people who haven’t ever earned money through labor of their own, so that they can finance their business without ever getting their hands dirty.

I don’t know what this means but I’m imaging something like “Communist
Andy Dufresne is going to cream all of you stock market war profiteering losers”

In short, I felt like investing was only for bourgeois scum, or for working people who are getting fleeced by bourgeois scum. But I’ve changed my mind.

Continue reading →

Don’t let Acorns eat all of your money

JesseLeave a comment

I recently wrote an article on how new, small-budget investors might underestimate how significant the transaction fees that brokerages charge can be, compared to the value of the securities they own. But there is also a class of investors who might think they are avoiding all of this hassle by using a simple robo-advisor service such as Acorns. You’re not really trading with these services, so you’re not really incurring those fees, right?

Wrong! Because Acorns charges $1 per month just to keep an account open with them, even if you leave all of you money in your account and never switch between the portfolios they offer.

But $1 a month isn’t much, right? It doesn’t seem like it. You can’t even get a can of soda from a vending machine for that much. However, Acorns is geared toward small investments such as “round-ups”; and when you’re dealing with small amounts of money, $1 can put a real ding in your rate of return.

Continue reading →

Stupid new guy investing mistake: letting fees eat your gains.

JesseLeave a comment

At this point I still consider myself a neophyte in the investing game, but I have already learned a lot — sadly, some of it has been by trial and error.

I got into investing by opening a Roth IRA at E*Trade. I knew little or nothing about investing when I did this. I actually had no idea that I had to deliberately invest my own money to make an IRA work. I opened an account, funded it, and let the money sit there; then I checked back months later and was totally confused when my balance was exactly the same. I thought it was like my work 401(k) account where someone took my money and did some Wall Street magic to make it turn into more money. Then it dawned on me I would actually have to trade securities in order for my IRA to yield more than a savings account.

So, I started investing in mutual funds. I think mutual funds are a great way to get started for new investors. For those who don’t know, mutual funds are like a “basket” of stocks/bonds/whatever. At E*Trade (and I presume other brokers) there is a selection available that have no fees to trade, the only catch being you have to hold them for 90 days or something like that, which is fine because the best way to get above-average returns is to buy and hold for the long haul (but that’s a topic for another blog post) instead of trying to constantly trade. You also don’t have to buy shares in whole increments; you can choose a dollar value that you want to invest in the fund. Some mutual funds have minimum amounts you have to invest to buy-in, but E*Trade offers many that don’t. So, the advantage for new investors is that there is literally no minimum amount you need to invest, you can instantly diversify your portfolio (another important topic for another day) by picking a few mutual funds that have a variety of assets in their “basket”, and you can avoid fees that eat into your gains.

Continue reading →