The Investment Answer

[spotty_dog]

I've been wanting to talk a little more about investing here, and since we don't all have the same background I've been looking for a way to simply explain key points like asset allocation, diversification, risk and return. So as I prepared to do a little research and get things clear enough in my own head to be able to sketch out an explanation of some of them, I picked this little book, The Investment Answer by Daniel Goldie and Gordon Murray, off my shelf. My parents gave it to me last year after hearing about it on...NPR? I guess Murray was a financial guy who got a terminal diagnosis that prompted him to finally write the book he'd always meant to. When I'd gotten it I flipped through it and nodded my head at the sane, low-cost, passive approach advocated. But I didn't read it closely at the time.

Well now I am really reading it and I think it's terrific! In just 66 pages plus appendices the book neatly and carefully outlines how to choose an advisor, how and why to pick an asset allocation, how and why to diversify, how and why to choose passively over actively managed funds, how and why to rebalance. It doesn't assume any previous knowledge.

So yeah, if for example you were reading WCI's book and found the investing chapter too thin, this is the perfect gap-filler. Not intimidating, very accessible, it's laid out very simply and logically.

Ugh, yesterday when I started writing this post, it was a bargain book on Amazon for just $7! Still, today it's $9.99 for the Kindle version or about $7 plus $3 shipping for the paperback, from resellers. Not terrible.

Alternately, the Bogleheads' Guide to Investing gives the same information and much more, in about 5 times as many pages.

Anyway, hope this helps someone! Enjoy!

[SoonerTexan]

Definitely will check it out. I'm never going to be a savvy investor type, but I think knowing the basics beyond what I learned in college is a good thing.

[medpedspouse]

Thanks so much for the info. We have a fin. advisor but I still feel like "I" need to be somewhat in the know.

[spotty_dog]

Definitely will check it out. I'm never going to be a savvy investor type, but I think knowing the basics beyond what I learned in college is a good thing.

I definitely didn't learn investing or really any personal finance in college, so you've got one up on me!

Honestly, I wish I'd known even the first thing before I got my first work retirement account in 2002 or so. The account would have weathered the 2008 mortgage crisis a lot better if I had the slightest inkling (but then, I might have been tempted to tinker instead of ignoring, so maybe not!) At least I'm gratified that I've been able to grow my understanding as we grow our portfolio post-training. We might yet check in with a fee-only advisor at some point, but even if we did I'd continue to control the money. Nobody cares about it like we do after all.

[Vanquisher]

Thank you!

[Vanquisher]

Question: if you had to recommend one book for personal finance for the galactically stupid, what would it be?

Baby steps? I need something super easy with small, kindergarten words. Put 10% of your money here. Sit. Watch grow. Good Heidi.

Seriously, people start talking finance, and I get vertigo. It's all so over my head. I looked at my current college for a personal finance course, the one and only class is taught be a shit prof. I looked at course era. Nada.

Anyway, I'd love a course to keep me accountable to learn this shit. If I can't do that, then a quick and dirty start might be best.

Is this the book I need?

[MAPPLEBUM]

It sounds like it is, though the breadth of Bogleheads was probably what allowed me to wrap my head around all of the terms and concepts. I've been meaning to finish Bogleheads but once it started getting into education funds it was no longer applicable.

BTW this text conversation happened with my CFO brother this week:

Me: hey Russ do you track finances on excel? I'm thinking that needs to be my next step in bring financially savvy.
Russ: yes, I do. That would be a great next step!
Me: can you teach me at thanksgiving?
Russ: LOL
Me: what? Am I basically asking you how to do math?
Russ: LOL

Still not sure why he thought that was so funny. SD can you explain? Was it a stupid question? The only other thing he said after that was "I got your back!"

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[spotty_dog]

I'm going to think seriously about this, Heidi. I know the feeling, I do. Two-three years ago I wanted to run and hide, and scoffed that my husband had this stuff so well in hand that I didn't need to know any of it, but inside I was a little anxious and wanted to keep my head in the sand. I'm a complete over-researcher though, so my path has taken me through a dozen books and hours of poring over message boards and websites. Let me think how to distill the process.

This book is SO short which is what I love. It's literally meant to read in one sitting. However, it might be a little dense because of this. So let me compare it to some other stuff and get back to you!

Coursera has a course that was pretty good when I started it maybe a year ago. It was through UC Irvine. Not all of it was relevant to our situations though which is why I petered out. There's one up now and slated to start in August but I'm not so sure about it.

[spotty_dog]

Still not sure why he thought that was so funny. SD can you explain? Was it a stupid question? The only other thing he said after that was "I got your back!"

Huh. Yeah, no idea! But what kind of tracking are you planning? Like all your inputs and outputs, a la Mint?

[Vanquisher]

Ooh, I found the August one. Personal and Family Financial Planning. Looks Perfect for me. It's a bunch of work to do your finances. Just what I need. 5-7 hours a week for 8 weeks, and I'll actually have some planning started.

[MAPPLEBUM]

Huh. Yeah, no idea! But what kind of tracking are you planning? Like all your inputs and outputs, a la Mint?

Well that was part of my question. I've seen you and others talking about tracking on Excel but I've not had much luck figuring out how to use the program, let alone what to track and which spreadsheet to use. And let's not even get into the math, that might be what he was laughing about. Who knows. I figure you're tracking losses/gains but like I said. Hardly even know how to use Excel. He's the one who walked me through fundamental steps of saving/investing, and has talked me through my conclusions from reading. So I'm hoping he'll just walk me through how and what to track on Excel. (and maybe teach me the math. Haha! When I was a kid during a long car ride he pounded prime numbers into my head. Wouldn't let up until I had them memorized) Until then I think I'm just going to start with a simple spreadsheet that organizes my funds and what money I put where.

May have asked this before, but do you budget? And keep track of how much you're spending on everyday expenses? I found Mint to be more frustrating than helpful. At this point I just keep a simple ledger in a notebook that shows how I pay for what at the end of each month. I'm paying for just about everything manually until I'm confident I have a grip on things. Since we use one CC for almost all purchases it's nice to be able to flip through and see which were more and less expensive months, and which months I have more or less money in my account. About every 6 months I go through and track how much we spent on gas, food, restaurants, etc. and compare. About a year ago we set up our Roth IRAs. Since January I've started contributing to a 403(b), have started a Fellowship interview fund, and contributed to my bow fund. But at this point if I were to start another fund I'd need to have a tighter grip on our finances. Anyway, all of this is to say as I've been getting control of things it seems the next step is to start one of those elusive Excel spreadsheets!

[spotty_dog]

Ooh, I found the August one. Personal and Family Financial Planning. Looks Perfect for me. It's a bunch of work to do your finances. Just what I need. 5-7 hours a week for 8 weeks, and I'll actually have some planning started.

Sweet, I'm glad that will work out for you! Love Coursera for giving some structure and feedback to the learning process.

BTW, for *just* the investing bit, I am looking more closely at The Investment Answer through the filter of "don't want to be intimidated" and I *do* think that this is the book. It aims you at consulting a professional but intends to leave you with enough understanding to know what is being recommended and to keep control over your own transactions.

[spotty_dog]

Well that was part of my question. I've seen you and others talking about tracking on Excel but I've not had much luck figuring out how to use the program, let alone what to track and which spreadsheet to use. And let's not even get into the math, that might be what he was laughing about. Who knows. I figure you're tracking losses/gains but like I said. Hardly even know how to use Excel. He's the one who walked me through fundamental steps of saving/investing, and has talked me through my conclusions from reading. So I'm hoping he'll just walk me through how and what to track on Excel. (and maybe teach me the math. Haha! When I was a kid during a long car ride he pounded prime numbers into my head. Wouldn't let up until I had them memorized) Until then I think I'm just going to start with a simple spreadsheet that organizes my funds and what money I put where.

May have asked this before, but do you budget? And keep track of how much you're spending on everyday expenses? I found Mint to be more frustrating than helpful. At this point I just keep a simple ledger in a notebook that shows how I pay for what at the end of each month. I'm paying for just about everything manually until I'm confident I have a grip on things. Since we use one CC for almost all purchases it's nice to be able to flip through and see which were more and less expensive months, and which months I have more or less money in my account. About every 6 months I go through and track how much we spent on gas, food, restaurants, etc. and compare. About a year ago we set up our Roth IRAs. Since January I've started contributing to a 403(b), have started a Fellowship interview fund, and contributed to my bow fund. But at this point if I were to start another fund I'd need to have a tighter grip on our finances. Anyway, all of this is to say as I've been getting control of things it seems the next step is to start one of those elusive Excel spreadsheets!

Ah, gotcha!

I have to confess I'm pretty crummy at budgeting. During residency when things were tight I used a complicated Excel setup to keep us living within our means -- my goal was actually to save $500 per month but I didn't manage that. :\ Fortunately DH had a second income that I didn't touch, so we still had plenty of saving going on (I was putting in the most effort during the time we were expecting a second baby, about to move across the country, and had already bought a house so we were paying mortgage on top of rent!)

After residency our strategy is to pay ourselves first (put a certain amount into savings) then spend as little as we can of the rest. We put all expenses on the credit card and a few times per year I download 3 months of transactions into Excel. I break that out into categories to see what our average spending is like in certain areas and where we might need to make changes.

As for investments, I do have a spreadsheet for those. I am coordinating 7 accounts across 3 financial institutions and trying to keep them all in balance with each other. We don't have anything automated so every month when our retirement contribution gets submitted, I need go in and figure out where to allocate that money. I update it every 2-3 weeks or when I need to make a trade. It's kind of tedious to get everything off the websites and punch it in by hand but it gets the job done.

I see what you mean about having lots of savings funds to juggle! I didn't like Mint either but I really like the *idea* of it. I wonder if something like YNAB would do what you're looking for?

[Thirteen]

YNAB is great! I was just about to suggest that.
DH subscribes to the podcasts, I believe.


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[houseelf]

Just added this to my library hold list. By the way, budgeting via mint helped me kill my book buying habits! When you have a graph visually depicting what you spent at B & N in a year, you can't help but be motivated.

I agree with the need for "just right" level of financial information. I'm educated, but sometimes I get onto those forums and I'm like WTF are you talking about? I've read Bogleheads, Suze Orman, Jean Chasky (sp?), and a few others. Some, like Dave Ramsey, are too simple and do not lay out a specific plan. (Quite frankly, while 95% of Dave's message is applicable to anyone, he really isn't great for physicians because of some of the tax ramifications/investment issues he fails to neglect. He told one dual physician couple to get out from under their massive debt first and not fund their partially matched 401k. !!! This both wasted free money AND did nothing to minimize their extensive tax burden. I wanted to call in and tell them to take the match and look into moonlighting to help tackle that debt, even if it was just once a quarter or reviewing records from home. I felt like he was taking a Debt Free hammer across the board when better advice would have applied).

But I digress. Honestly, Heidi et. al., just chip away at it. This stuff has come slowly to me. I get the basics, "always hold something back when funds come in", but I swear some of this stuff is dressed up to make it more complicated so the average person feels they need expensive help. I turned everything over to a fee only planner last year. It was scary and a PITA to do. My husband was adamently against me going it alone. This was our compromise.

Honestly, reading this stuff is scary. I just read Rich Dad Poor Dad author and his take is that hyperinflation is inevitable with the quantitative easing (fancy terms for printing more money). Hell if THAT is the case, don't pay your debt because it won't be as hard to pay tomorrow. (I truly don't believe this but one could come to this conclusion).

I would love to just hire spotty dog and be done with it, but one thing I've learned is that ultimately we have to be in charge. It sucks, but there it is.