How do you advise your family and friends?

A

axeman

Ok... so now I know enough about trading to NEVER
recommend it to family and friends unless they are
prepared for an enormous commitment, which most could
never do.

So my question is... when it comes to investment advice,
what do you tell your family and friends?

S&P500 buy and hold?
CD's? What?

Is there something really simple that the uneducated trader,
aka "long term investor" average joe can do to get
any kind of respectable return over the long run?


peace

axeman
 
Quote from axeman:

Ok... so now I know enough about trading to NEVER
recommend it to family and friends unless they are
prepared for an enormous commitment, which most could
never do.

So my question is... when it comes to investment advice,
what do you tell your family and friends?

S&P500 buy and hold?
CD's? What?

Is there something really simple that the uneducated trader,
aka "long term investor" average joe can do to get
any kind of respectable return over the long run?


peace

axeman
More...
I know exactly what you're saying. Good question.
 
I don't answer or advise on "what is the market going to do." or "where is a good place to put my money these days ?" or "what are you buying these days?" types of questions. I reply that I am a very short term trader and I don't care if the market is going up or down. I only care only that it is moving.

Some friends/family have asked me to trade some money for them, and I will likely do that sometime this year. I will ask them to limit the amount they place with me to about what they would spend on a trip to Vegas.

I do "walk them through" the principals of assett allocation and teach them to use Bill Sharpe's website:

http://www.financialengines.com/

DS
 
I ask them :

1. How long until they need the money?
2. How much volatility they can handle?
3. What other investments they have?

I am not trying to be coy, it is just that generally those things all factor into my recommendation(s). Also, I make it very clear to them that one size does not fit all in the investing world.
 
Ok.... what would you say for the following combinations:

1) 30 years, any amount of volitility
2) 30 years, low volitility
3) 10 years, any amount of volitility
4) 10 years, low volitility

Let's assume they are currently 100% in cash.


peace

axeman



Quote from hardrock375:

I ask them :

1. How long until they need the money?
2. How much volatility they can handle?
3. What other investments they have?

I am not trying to be coy, it is just that generally those things all factor into my recommendation(s). Also, I make it very clear to them that one size does not fit all in the investing world.
More...
 
If they were to ask I would give, possibly, only this piece of advice: "If you were going to invest in a mutual fund, don't. Put that money into an index fund - choose the time you are going to leave the money in in advance and remove the money on schedule." I don't think anyone would ever listen to this advice, and if they did they would probably be beyond needing this advice.
 
This is exactly what I have been telling people.
Mutual funds = worst place to put money

Just buy some SPY every month.

But i'm not even convinced this is such a great idea. :(

You could still end up with ZERO return in 30 years.

peace

axeman


Quote from rlb21079:

If they were to ask I would give, possibly, only this piece of advice: "If you were going to invest in a mutual fund, don't. Put that money into an index fund - choose the time you are going to leave the money in in advance and remove the money on schedule." I don't think anyone would ever listen to this advice, and if they did they would probably be beyond needing this advice.
More...
 
Quote from axeman:

You could still end up with ZERO return in 30 years.

peace

axeman
More...

You could. I'd probably say 0% in 15 years. But then again with inflation you'd need a couple years to make that 0% (effectively negative) positive again. So maybe you're not far off.

Maybe I should really open up and give advice no one would follow - buy a gold index fund and hold it for 10-15 years.
 
Depending on who they are, and if they're looking for a serious answer (not just making chit-chat when they ask "so, what should I do with my money?"), I'll most often direct to a personal friend who is a financial planner, and spend most of my time explaining why it's the best move.
This guy is great. He takes as long as he has to for the client to understand the lifestyle changes that need to be made in order to realize financial goals. (He doesn't just mindlessly recommmend mutual funds, either.)
Otherwise I encourage people to buy a home (if they don't own one), pay it off (if they do), or buy a bigger one ( :)). It's almost a given that they'll be better off doing this than any moronic moves they would make by dabbling in the markets. Plus they'll get the satisfaction that owning a home (or a newer, nicer home) brings. Very difficult for even the biggest schmuk to stuff this one up.
 
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