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Thread: An article about "saving early"

  1. #1

    Default An article about "saving early"

    I am not against saving money. But if you put aside the fact that 7% is nowhere to be earned, not without risk, and definitely not for 40 years.

    Consider this :
    Let me give you a real example: Say you have Sarah, who decides at 25 to save $1,000 a month. She does that for 10 years. And then she stops. Then you have Roger, who waits until he's 35, and he saves $1,000 a month for 30 years. They both earn 7 percent on their savings.

    Now, 30 years after she stops contributing Sarah would have $1,262,089.05. But Roger, who would have put away three times as much as Sarah, would only have $1,133,529.44.

    The reason Sarah only saved a third as much as Roger but ended up with more money is because she started earlier.

    http://finance.yahoo.com/news/invest...154751502.html

    Doesn't that mean, if Sarah paid off her house in 10 years, Roger paid 3x for his house after 40 years while Sarah can be wasting $1000 a month for the remaining 30 years? Obviously most people can't earn 7% on their savings, so how can you make this work to your advantage?

    What in this country is a guaranteed fix rate other than CD, bonds, child support, and mortgage?



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  3. #2

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    Quote Originally Posted by Tpoints View Post
    Obviously most people can't earn 7% on their savings
    I think that financial experts usually figure 7% is a good amount of growth to count on as an average over a long period of time for a portfolio that includes mutual funds, but that is still relatively low-risk.
    I知 not a libertarian. I知 not advocating everyone run around with no clothes on and smoke pot.

  4. #3

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    Quote Originally Posted by erowe1 View Post
    I think that financial experts usually figure 7% is a good amount of growth to count on as an average over a long period of time for a portfolio that includes mutual funds, but that is still relatively low-risk.
    is there a 20 or 30 year record to support that?

  5. #4
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    Quote Originally Posted by erowe1 View Post
    I think that financial experts usually figure 7% is a good amount of growth to count on as an average over a long period of time for a portfolio that includes mutual funds, but that is still relatively low-risk.
    This may have been true before the cash helicopters but most people nowadays don't have a safe 7%. If you invest wisely (ie, far far away from the dollar), you can still get that, but it requires extra work/thought.

    Most people's savings (or what's left of it) will get raped in the coming collapse.
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  6. #5

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    Quote Originally Posted by bxm042 View Post
    This may have been true before the cash helicopters but most people nowadays don't have a safe 7%. If you invest wisely (ie, far far away from the dollar), you can still get that, but it requires extra work/thought.

    Most people's savings (or what's left of it) will get raped in the coming collapse.
    exactly!

  7. #6

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    Quote Originally Posted by bxm042 View Post
    This may have been true before the cash helicopters but most people nowadays don't have a safe 7%. If you invest wisely (ie, far far away from the dollar), you can still get that, but it requires extra work/thought.

    Most people's savings (or what's left of it) will get raped in the coming collapse.
    Its called precious metals and you will make well over 7 percent.
    "If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be." - Thomas Jefferson

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  8. #7

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    Quote Originally Posted by Gumba of Liberty View Post
    Its called precious metals and you will make well over 7 percent.
    Not without risk.

  9. #8

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    Quote Originally Posted by Tpoints View Post
    Not without risk.
    The only risk is confiscation or physical theft. The Fed is the lender of last resort. The Feds are the spenders of last resort. It matters not if the public goes into a deep deflationary depression. Helicopter Ben will come to the rescue and the government will spend us into hyperinflation or enact price controls. Regardless, precious metals will protect purchasing power.
    "If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be." - Thomas Jefferson

    "It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people's minds" - Sam Adams

  10. #9

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    Quote Originally Posted by Tpoints View Post
    is there a 20 or 30 year record to support that?
    Yes. Absolutely. I doubt there have been any 20-year periods in the history of any American stock markets that they didn't average better than 7% a year.

    As bxm said, mutual funds may or may not continue to be good investments. But historically, 7% has been a safe estimate for them.
    I知 not a libertarian. I知 not advocating everyone run around with no clothes on and smoke pot.

  11. #10

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    Quote Originally Posted by Gumba of Liberty View Post
    The only risk is confiscation or physical theft. The Fed is the lender of last resort. The Feds are the spenders of last resort. It matters not if the public goes into a deep deflationary depression. Helicopter Ben will come to the rescue and the government will spend us into hyperinflation or enact price controls. Regardless, precious metals will protect purchasing power.
    No, depreciation is just as much a risk, especially if you're investing year after year and waiting a 30 year time frame.

  12. #11

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    Quote Originally Posted by erowe1 View Post
    Yes. Absolutely. I doubt there have been any 20-year periods in the history of any American stock markets that they didn't average better than 7% a year.

    As bxm said, mutual funds may or may not continue to be good investments. But historically, 7% has been a safe estimate for them.
    Not even from 1989-2009? or 1979-2009?

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    Interest has been destroyed by government policies. The safest method of saving and collecting interest has been a time tested secure method for wealth generation. Now, since interest rates are manipulated, most people are funneled into Wall Street for so called returns which is nothing more than inflation "gains" parading as investment gains.

    Wall St. benefits when interest rates are manipulated to next to nothing: people chase the stock market looking for any reasonable gains at much higher risk.

  14. #13

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    Quote Originally Posted by Tpoints View Post
    No, depreciation is just as much a risk, especially if you're investing year after year and waiting a 30 year time frame.
    I disagree. Precious metals are not an investment. They are real money. Fiat currency and the Stock Market are far riskier in my opinion.
    "If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be." - Thomas Jefferson

    "It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people's minds" - Sam Adams

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    Quote Originally Posted by Gumba of Liberty View Post
    Precious metals are not an investment.
    Right, they're not an investment. They are a store of wealth. Any "investment" properties PM's have are speculative in nature, which is not a good long-term strategy for retirement.

    Gold will do very well for the next few years relative to the dollar. Relative to the dollar being the key word though. Gold speculation will probably do very well over the next few years but not without risk. There is basically zero risk of losing your money from any gold investments... but there is the risk that you won't earn as high as a ROI if you had invested in a non-speculative investment vehicle.
    Last edited by bxm042; 01-10-2013 at 06:18 PM.
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  16. #15

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    Quote Originally Posted by bxm042 View Post
    Right, they're not an investment. They are a store of wealth. Any "investment" properties PM's have are speculative in nature, which is not a good long-term strategy for retirement.
    so is there something that is?

  17. #16

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    Quote Originally Posted by Tpoints View Post
    Not even from 1989-2009? or 1979-2009?
    7%/yr. over 20 years would be a total return of 387%. Over 30 years it would total 761%.

    On Jan. 9, 1979, the Dow closed at 831.43.
    On Jan. 9, 1989, it was 2,199.46.
    On Jan. 9, 2009, it was 8,599.18.

    So from 1979 to 2009 it went up 1034%.
    And from 1989 to 2009 it went up 391%.

    ETA: I have to take back what I said though. The Dow didn't recover from the 1929 crash until 1954. So a period including that would have to be much longer than 30 years to get back up to an annual average of 7%. But even when you do include that period, I'm pretty sure you'd get back to a 7% annual average if you go out to 40 or more years.
    Last edited by erowe1; 01-10-2013 at 06:28 PM.
    I知 not a libertarian. I知 not advocating everyone run around with no clothes on and smoke pot.

  18. #17

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    Quote Originally Posted by erowe1 View Post
    7%/yr. over 20 years would be a total return of 387%. Over 30 years it would total 761%.

    On Jan. 9, 1979, the Dow closed at 831.43.
    On Jan. 9, 1989, it was 2,199.46.
    On Jan. 9, 2009, it was 8,599.18.

    So from 1979 to 2009 it went up 1034%.
    And from 1989 to 2009 it went up 391%.
    What does DJIA have to do with actual investors? Did somebody who invested in "an average stock" or "an average mutual fund" cash out with 3x-10x what he put in?

  19. #18

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    Quote Originally Posted by Tpoints View Post
    What does DJIA have to do with actual investors? Did somebody who invested in "an average stock" or "an average mutual fund" cash out with 3x-10x what he put in?
    Of course. Some worse than average and some better. But the more diversified your stock portfolio is and the longer you have it, the more closely it will match the average. If you wanted to emulate the Dow as closely as possible, then you could invest in funds that did that.
    Last edited by erowe1; 01-10-2013 at 06:32 PM.
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    Quote Originally Posted by Tpoints View Post
    so is there something that is?
    Rental property is very much like gold, in that it retains its value, but its also an income generator. Good long term investment. There's mixed opinions on whether or not it will do well in the short term. Rental-REIT's would be a good part of your portfolio.

    Other than that, you can do mutual funds in overseas non-Euro non-Japan markets... Singapore perhaps? Shrug. I don't have just a whole lot of money to throw around right now so I haven't done much research, but I know there are semi-decent opportunities overseas that are insulated from the dollar (and the euro.. and the yen.. lol)
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
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    double post
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
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  22. #21
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    You could also invest in gold mines. Another income generator that will retain its value.
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

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    Quote Originally Posted by erowe1 View Post
    7%/yr. over 20 years would be a total return of 387%. Over 30 years it would total 761%.

    On Jan. 9, 1979, the Dow closed at 831.43.
    On Jan. 9, 1989, it was 2,199.46.
    On Jan. 9, 2009, it was 8,599.18.

    So from 1979 to 2009 it went up 1034%.
    And from 1989 to 2009 it went up 391%.

    ETA: I have to take back what I said though. The Dow didn't recover from the 1929 crash until 1954. So a period including that would have to be much longer than 30 years to get back up to an annual average of 7%. But even when you do include that period, I'm pretty sure you'd get back to a 7% annual average if you go out to 40 or more years.
    Include dividends and the S&P 500 had a compound annual growth rate of:

    11.52% between 1979 and 2009
    9.26% between 1989 and 2009

    3.67% between 1929 and 1949
    8.56% between 1929 and 1959

    http://www.moneychimp.com/features/market_cagr.htm

  24. #23

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    The problem with gold as an investment...is that people think it can't be overpriced.

    As a gold buyer, how do I know if it is overpriced or not? I can't trust others because if the don't realize gold is overpriced, then it is just the blind leading the blind.

    Sure gold has intrinsic value, but it can also have additional speculative value that makes it overpriced. So say the real value of gold is 200 dollars an ounce. Plus 800 dollars an ounce for speculative demand. How do I the purchaser know what portion of the price is real and what is just markup?

    So say the real value of gold is 200...but the "market"/casino value of gold fluctuates from 400 to 800. Did gold really become "that much more valuable"? Or did it just go from being overpriced to very overpriced? If the latter, the obvious danger is that the price of gold could suddenly and without warning drop catastrophically. Such unnormal deviations in the price would be possible because the price itself is not normal.

    Another way to think about the gold question is this. In order for a commodity to be used as currency, it must be set aside from consumption. Therefore demand = commodity demand + circulation demand. Higher demand = higher prices. But because the price of the commodity is higher (after it has been declared a currency) this means the commodity becomes overpriced and partly fiat. The seigniorage from this fiat/commodity money would come from the sellers/miners of the original commodity.

    Long story short...I am convinced that commodity currency is illusory and a very dangerous one that I hope a lot of Ron Paul fans don't get snookered into wasting their savings on.

    If you want to save...pay off your debts, cut expenses and invest conservatively in companies with low debt ratios. Refinancing family member debt is actually not a bad idea because part of it can be tax exempt and family are most likely to repay. Don't play these casino games with "commodity money", avoid financial parasites like planners/mutual funds and flashy name brand companies sectors. Everybody invests in stupid stuff like the airlines, car companies, etc..because that is what they say. When in reality it can be some obscure bolt company that makes a ton of money.

    Lastly, don't constantly put money into the stock market. Wait for sales (market crashes)...and you can get huge 20% off discounts or more. Just wait and stockpile cash...the crashes ALWAYS happen...then swoop when the media is bemoaning how awful things are.

  25. #24

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    Quote Originally Posted by Gumba of Liberty View Post
    Its called precious metals and you will make well over 7 percent.
    No, this is bad advice.


    Look at what happened to gold in the early 80's.


    If you want good solid investment advice Google for Harry Browne (or search RPF) and listen to his radio show for free. Also check out the videos on www.PaulWinkler.net for a good investment scheme that is simple, stable, and barring a complete collapse will allow for steady growth.
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    Well , everything is a crap shoot , with property , comes property tax , uncontrolled in most places if there is a structure on it, they can raise the asessment if they need more revenue for more big govt services , pensions etc.With stocks , in the end , it is just paper , value of a company , what if they no longer have value ?Farmland , very difficult to turn a profit due to high costs of fuel , seed , fertilizer and taxes, without even mentioning equipment .What do you do ? Hedge your bets , buy some land , seeds , livestock ,weapons, ammo , copper, silver, gold , stocks , bonds, have water, food ..... see how it plays out.

  27. #26

    Default Why a Horrible Decade in Stocks Could Yield Positive Returns.

    One of the thigns that we need to remember is that most young people do not start out with large estates. Therefore, when they invest, they are putting a couple thousand to work each year. So if the stock market were to crash when you start investing, your returns are only going to be really bad for your first couple thousand in investments. The next couple years will probably work out really well for you. Most people I have seen online, who started saving right before the dot com crash did really good over the last 10 years.

    Basically what I am saying is that if you don't have a large estate, you should wish for a crash now so that your future investments will be made at good low pe levels.

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    Quote Originally Posted by Gumba of Liberty View Post
    The only risk is confiscation or physical theft. The Fed is the lender of last resort. The Feds are the spenders of last resort. It matters not if the public goes into a deep deflationary depression. Helicopter Ben will come to the rescue and the government will spend us into hyperinflation or enact price controls. Regardless, precious metals will protect purchasing power.
    Metals move up and down. Let's say you bought $10,000 worth of gold in 1980. Not counting transactions costs you would have about $3500 by 2002. ($800 an ounce down to around $265 an ounce). Rather than gaining seven percent a year guaranteed you would have lost 65% of your money. Nothing goes up forever.

    But the point was to show the advantages of compounding- the longer you have for something to compound it return, the higher the amount of money you will have at the end of the time period. Seven percent was a randomly chosen example.
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  29. #28

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    Obviously the people saying you can never lose on gold weren't around in the early 80's. A lot of people lost big time and only would of broke even a couple of years ago. In fact counting inflation they still wouldn't have broken even, 33 years later.
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    Adjusted for inflation, the peak back then would be about $2500 today. After that peak, it pretty much declined (nominally- not just adjusting for inflation) for the following 20 years. If one has only followed gold for say the last five or ten years, they have not seen this. In it's recent history, it peaked in August 2011 and has been slowly working its way back down again.


    http://www.kitco.com/charts/livegold.html
    Last edited by Zippyjuan; 01-11-2013 at 06:13 PM.
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  31. #30

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    Quote Originally Posted by Zippyjuan View Post
    Metals move up and down. Let's say you bought $10,000 worth of gold in 1980. Not counting transactions costs you would have about $3500 by 2002. ($800 an ounce down to around $265 an ounce). Rather than gaining seven percent a year guaranteed you would have lost 65% of your money. Nothing goes up forever.

    But the point was to show the advantages of compounding- the longer you have for something to compound it return, the higher the amount of money you will have at the end of the time period. Seven percent was a randomly chosen example.
    Pfft, yeah, if you ONLY bought at the height of the bubble and sold at its lowpoint, sure.

    And if you bought the S&P at its height you'd be barely even today, and that's counting it with dividends and not even accounting for inflation (which was something like 25%+ over the decade according to "official" gov numbers).

    So what?
    Last edited by matt0611; 01-11-2013 at 06:52 PM.

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