yesthattom | I'm an investor... again

Anything at all I can do to talk you out of this? I know whereof I speak. And I can talk with you about how much you need to retire and how to get that much, starting where you are now, etc etc etc etc. Or I can refer you to places I consider reliable. Not This Book.

Just remember: past performance is no guarantee of future results. past performance is no guarantee of future results. past performance is no guarantee of future results. past performance is no guarantee of future results. past performance is no guarantee of future results.

You could try pointing out this (http://www.amazon.com/Little-Book-Value-Investing/dp/0470055898/ref=bxgy_cc_text_a/103-9166154-0877434) or this (http://www.amazon.com/Little-Book-Common-Sense-Investing/dp/0470102101/sr=1-1/qid=1170202341/ref=pd_bbs_1/103-9166154-0877434?ie=UTF8&s=books) little book. Of course, the Green one still makes you bother having to learn about business and P/E ratios and SEC filings and blahblahblah. Which is great and all if you want to do that.

Personally, I'd rather just pull a Ronco (http://www.google.com/search?hl=en&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&hs=Zv2&q=just+set+it%2C+and+forget+it&btnG=Search) and put a few no-load, low expense mutual funds (or indices, or etfs. Whatev) in my 401k/403b/ira/tax-avoidance plan of choice. Interestingly, this is also what Mr. Tobias suggests (http://www.amazon.com/Only-Investment-Guide-Youll-Ever/dp/0156029634/sr=1-1/qid=1170203204/ref=pd_bbs_sr_1/103-9166154-0877434?ie=UTF8&s=books) for most of us.

Yeah. Plus, depending on your state, you might have access to relatively high-dividend-yield tax-free bond funds that can be quite gratifying and a good portfolio balancer. I'm guessing New Jersey has some nice CEFs in that category. I'd have to look. Heck, you can get 5% out of ING CDs at this point. Some nice Vanguard or Fidelity mutuals, perhaps TRRBX, which is designed for people retiring at that approximate time.

The whole "Magic Formula" thing makes me nearly as nervous as the too-good-to-be-true promised returns.

In general, 10% will double your money in 7 years, and 7% will double your money in 10 years. See? 10% == 7 years double, 7% == 10 years double. Planning on a better return than that is unlikely to win you better. Indexing into the S&P will do you just fine. Tom is correct, however, that he needs about a million roonies if not more when he retires in 17 years. There are calculators that will figure out how much to save each month at what return to get whatever you think you need, depending on how long you expect to live.

I don't do value investing (too much like religion) so take that for what it's worth. Again, past performance is no guarantee of future results. past performance is no guarantee of future results. past performance is no guarantee of future results. past performance is no guarantee of future results.

I don't do value investing (too much like religion)

Pray elaborate...

Look. Value investing is a perfectly valid strategy. I just don't enjoy it. But by all means, read the book Tom recommends, and go to http://www.fool.com/index.htm where you can pick and choose your preferred style: value, dividend, mutual funds, smallcap, etc. and there are discussion groups. There are also discussion groups at http://morningstar.com and at http://marketwatch.com and at http://thestreet.com and at http://finance.yahoo.com and at http://finance.google.com/finance and at your own broker's site.

Personally, I'm the old traditional your-age=bond-percentage, 20% real estate, 14% international, and the rest mostly indexed funds. I confess to a passion for CEFs in states where they're available, and I note that New Jersey has 13: BNJ (from http://www.etfconnect.com/select/FindAFund.aspx) though trading at a premium, is one example, though its state tax status is a little unclear and I don't know New Jersey.

Hmmm.. That mix sounds extremely risk averse - in fact, it looks to me like your only real chance for significant inflation-adjusted upside is the international portion. What rate of return are you trying to achieve?

It jumps around between 10 and 20%, which is fine with me. And the risk aversion level sort of depends on how old I am, doesn't it? Which is the traditional point.

Yes... except for the part about median lifespans having increased rather dramatically over the last forty years, and median working lives having started to stretch over the last decade.

Point taken. Having highjacked Tom's journal already, what's your mix?

A decade ago, 20% cash (working capital) and 80% stocks, almost entirely in various parts of the tech sector. After I used that to fund my startup, which sadly drained the entire portfolio, I've been very slowly building back in the last two years, let's see, call it 35% growth fund, 65% individual stocks. But then, I'm a young pup with no significant liabilities; that's a significantly riskier mix than I'd recommend to anyone who wasn't very well insulated against having their portfolio crash.

Oh, and I would describe every one of the individual issues as being a 'distress purchase' - pick up an otherwise solid company when they've just stumbled and their stock has plummeted because speculators have all bailed out.

Have you read the book?

This isn't my retirement strategy.

I was having trouble imagining that it was -- I always figured you for the type of person who invested in employer-sponsored 401(k) plans. You just linked this investment effort with the word "retirement" in your post, which made it sound that way.

Ah. I feel better now. Go to town! Value investing has its obvious pluses (see the author of the book, Buffet, etc). Good luck! I was worried that you were risking all your savings.

Something tells me that if you have the discipline to save up $30K of "risk money" (that which you can afford to lose), that using any sane investment strategy will pay off.

The challenge, of course, is developing the discipline to save up that first $30K of risk money. :-)

Good luck, Tom.

I didn't hear anything about "risk money" but if that's what it is, hey, go to town! I save up money for my retirement, but I don't spare any to throw around on schemes. I keep it all for when I turn 65, given a reasonable rate of return, given that I need at least a million to get by at that point. So there's left over to invest in anything other than mutual funds, bond funds, and my one lovely stock (GOOG). Oh, and my savings bonds.

Unless you plan on living in a cardboard box and eating rocks, I can't imagine retiring at 65 with only a million dollars being enough. (Think: inflation, etc.) I'm figuring I'll need somewhere between $4M and $5M in order to retire.

Of course, this is why many folks can't afford to retire these days ...

Oh yes. I realized long ago that a million was far from enough.

BUT, I live in a rent controlled apartment, and I don't own a car, nor do I have any children. My biggest expense is the gym, at this point. So indeed, retirement may well work out for a mere million. I even eat cheap, healthy, cooperatively sold, food. Saving money is making money. But if you can't do that, try not to lose it.

In the meanwhile, our dear Tom will have wiled away his 30K.

You're dissing value investing but you own Google stock?! Dude, make up your mind already!

Google fails every reasonable test of value investing there is. My choice there had zero to do with any kind of value metric (in fact, it should fail according to Tom's recommended book). It's a total market play, nothing to do with value, which may or may not catch up.

That... would be a neat trick. You need to get six doublings to accomplish that, which means a prolonged rate of return of more than 24%.

That is not a small number.

Have you read the book?

No, I haven't.
Is that relevant?

Oh, also, it occurs to me that I misspoke - to accomplish the financial goal you propose, with a one-time $15k investment, would require an after tax return of more than 24% annually, sustained for 17 years in a row. So, annual returns of 30%, assuming no significant transaction costs. Which is still a really big number. That's not just beating the market, that's beating the market by a lot, all the time.

(A point of clarification: I am a strong advocate of individual equity ownership; in my experience, there is a high correlation between avoiding the stock market and maintaining a slowly falling level of purchasing power and relative wealth. However, expecting to be done because you buy in once is extremely optimistic, given how short your time horizon is)

Yes, it's relevant to me.

The estimates are that the system loses money 1 year our of 4, but makes it up in the longer term. It's basically a fast way to find mispriced stocks, and the prose is just a joy to read.

The estimates are that the system loses money 1 year our of 4

IE, about as frequently as the market as a whole does...

but makes it up in the longer term

Right - do you see why getting returns above 30% on an ongoing basis is a challenge?
Remember, if I have a dollar, and I buy something with it that has variable value, and that value falls by 10%, I need for it to then gain 11% to recover it's original value. If it falls by 20%, I need for it to go back up by 25% just to get back where I started.

Again, my complaint is not with owning stocks, nor is it with Value Investing as a basic strategy. My complaint is that 'I can put $30k in now and get a megabuck back really soon' is broken.

"According to his simulations, you can turn $15k into a million in 17 years."

Do his simulations also show that you can turn $15k into $0 in 17 years? The joys of the market, there is no sure thing.

Read the book.

Yes, actually.

The simulations are based on stock data, trying various 17-year periods thoughout the last 75 years. Yes, the market is different now, but not that different. It does lose money, about 1 year out of every 4. However, it holds to the usual good values of long-term holds, value investing. It just makes finding the value stocks easier and puts it into a ,onthly or quarterly routine that helps reduce the stress.

I'm an investor... again

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