Investing General Discussion

Blazin · Oct 28, 2019

sleevedraw said:
2 cents about investing for income given low bond yields: dividend stocks. DGRO or VIG.

2 more cents about Ramsey: Echoing others, he goes too far. While being out of debt is great, his advice applies more to those who are "debt addicts". He recommends a 15-year mortgage when financially it makes more sense to do a fixed 30y if you're prudent about saving and investing. He does not recommend cashback credit cards even though they can be money-saving tools, etc.

both yield less than the S&P

Blazin · Oct 28, 2019

Khane said:
I agree that 15 year mortgages are better. Maybe 5% of Americans (probably less) are investmest savvy enough to outperform the savings between a 15 and 30 year mortgage. Even if you go with a 30 year mortgage I still find it a good rule of thumb to never buy a house you wouldn't be able to make payments on if you took a 15 year term. Refinancing to a 10 year some years back and then paying off my house last year was the single best financial decision I've ever made.

Certainly agree with 15yr mortgage vs 30, now just add paying cash for cars and you're set. Not borrowing changes peoples behaviors dramatically that is the real benefit. Not min maxing interest earned vs paid.

sleevedraw · Oct 28, 2019

Blazin said:
both yield less than the S&P

They yield less, but if you're looking to invest for income, and want something that is traditionally less volatile than the average total market, they serve a similar purpose to bonds is my point.

Blazin · Oct 28, 2019

sleevedraw said:
They yield less, but if you're looking to invest for income, and want something that is traditionally less volatile than the average total market, they serve a similar purpose to bonds is my point.

No I don't see the point. Yield is income. And they are less than a money market account which has no volatility, why would you see that as a good choice?

OU Ariakas · Oct 28, 2019

To be clear, Dave Ramsey is trying to reach people that live paycheck to paycheck, have a new car payment, and a very expensive cable TV package. He is trying to take those people and get them to radically alter their lives so that they do not have an extra dollar to spend on frivolous things for long enough that they start to resist the lure of credit as an easy way to fancy shit. That is why he has a weird car buying policy and a no credit card policy. The incremental gains made from a car loan or a money back credit card simply tempt people back into larger car payments or larger purchases because MORE CASH BACK, RITE???

None of the things anyone in this thread are saying are wrong at all, they are just aimed at people with more financial discipline.

Khane · Oct 28, 2019

The credit card thing is such a double edged sword. It makes sense for any addict to remove the temptation as a means to freeing themselves from the addiction, but not having a credit card, for people who likely already have bad credit, means they have no way to rebuild said credit. Which is very damaging in American society. That's a problem with our financial system more than anything else but that's how it is.

Blazin · Oct 28, 2019

Khane said:
The credit card thing is such a double edged sword. It makes sense for any addict to remove the temptation as a means to freeing themselves from the addiction, but not having a credit card, for people who likely already have bad credit, means they have no way to rebuild said credit. Which is very damaging in American society. That's a problem with our financial system more than anything else but that's how it is.

No easy answer to that one if the person is too far gone. For gas only is the normal low bar but some people will just take that as an opportunity to spend that additional $150 in their checking that month before the bill arrives. However, once a person truly gets free, credit scores can be fixed and other than it's affect on insurance rates it's power is diminished to a person not borrowing.

OU Ariakas · Oct 28, 2019

Khane said:
The credit card thing is such a double edged sword. It makes sense for any addict to remove the temptation as a means to freeing themselves from the addiction, but not having a credit card, for people who likely already have bad credit, means they have no way to rebuild said credit. Which is very damaging in American society. That's a problem with our financial system more than anything else but that's how it is.

It is my belief that people really struggling financially don't need a credit score for the things that they can control. Spend less than you make, set aside a small emergency fund, start attacking your smallest debt are all things that can be done immediately in most situations. Worry about that and then building credit becomes much easier since you are not consumed by fear that one small setback financially is going to put you on the street.

Khane · Oct 28, 2019

Liberation from debt cannot be understated. It gives you so much more power over your own life. It could be the difference between eeking out a meager existence in a job you hate vs having the freedom to take a calculated risk for your career simply because you are not beholden to the debt looming over your head. This is especially true for any breadwinner with a family.

Khane · Oct 28, 2019

OU Ariakas said:
It is my belief that people really struggling financially don't need a credit score for the things that they can control. Spend less than you make, set aside a small emergency fund, start attacking your smallest debt are all things that can be done immediately in most situations. Worry about that and then building credit becomes much easier since you are not consumed by fear that one small setback financially is going to put you on the street.

Yes, so long as you already have acceptable living conditions and won't need to move any time soon.

sleevedraw · Oct 28, 2019

Blazin said:
No I don't see the point. Yield is income. And they are less than a money market account which has no volatility, why would you see that as a good choice?

Because some people are willing to accept moderate volatility for growth+income instead of low/no volatility for pure income. And % yield is higher for DGRO than it is for SPY. Keep in mind you can buy ~7.5 shares of DGRO for every share of SPY, with higher yield, lower beta, and (over an admittedly short time period), better return.

Blazin · Oct 28, 2019

sleevedraw said:
Because some people are willing to accept moderate volatility for growth+income instead of low/no volatility for pure income. And % yield is higher for DGRO than it is for SPY. Keep in mind you can buy ~7.5 shares of DGRO for every share of SPY, with higher yield, lower beta, and (over an admittedly short time period), better return.

View attachment 228561

I miss understood you. You started out with it as a proxy for bonds now equities. I agree with you that it's an option to be traded in conjunction or in lieu of S&P

Sanrith Descartes · Oct 28, 2019

OU Ariakas said:
I agree with you but only because I don't think either of us are financially illiterate. I think his advice is perfect for whipping those that have no clue into shape and forcing them to basically justify every dollar spent as legitimately working towards financial stability. The beater thing is the advice that I disagree with the most but if you've ever really listened to him talk about it he says that you buy a $2,000 beater and save $200/mo per year and then the next year trade it in and buy a $4,000 car....etc. It is an asinine way to think about car purchases even when you are trying to get people out from under any type of monthly payment.

But Bavarian Motor Works doesnt make "beaters". Some sacrifices are just to painful to make.

Sanrith Descartes · Oct 28, 2019

sleevedraw said:
2 cents about investing for income given low bond yields: dividend stocks. DGRO or VIG.

What about HDV or PFF?

splorge · Oct 28, 2019

Debt used properly is simply a tool for wealth generation. I consider a credit card to be nothing more than a 30 day interest free loan with some perks (miles). If you can borrow money at 2% and invest it and reliably earn 3%, it makes financial sense to do so. Margin does increase risk; and although risk in itself is bad, calculated risks can be good.

My portfolio is always levered to some degree, I would guess total household gearing floats between 5-10%.

sleevedraw · Oct 28, 2019

Sanrith Descartes said:
What about HDV or PFF?

Nothing wrong with those, either. HDV would be one step down on return and volatility and one step up for yield when compared with DGRO. PFF would be three or four steps. That expense ratio on PFF is kind of yikes considering the overall yield+return, though.

Sanrith Descartes · Oct 28, 2019

Debt is like alcohol. Yes there are some folks who can use it responsibly but too many cant.

I was born dirt poor and have worked my way up the socioeconomic ladder. Debt for the poor is an anchor that drags them to drowning. With a certain level of wealth sent can become a tool to increase wealth.

We do an absolute piss poor job educating people about money and debt. The dumber about it they are, the easier it is to abuse them with it. And abuse them we do. Credit cards with 25% interest rates. Adjustable rate mortgages. High interest pay day loans. The list goes on. We have created a society of financially illiterate victims who are trapped in a cycle of debt.

sleevedraw · Oct 28, 2019

Sanrith Descartes said:
Debt is like alcohol. Yes there are some folks who can use it responsibly but too many cant.

I was born dirt poor and have worked my way up the socioeconomic ladder. Debt for the poor is an anchor that drags them to drowning. With a certain level of wealth sent can become a tool to increase wealth.

We do an absolute piss poor job educating people about money and debt. The dumber about it they are, the easier it is to abuse them with it. And abuse them we do. Credit cards with 25% interest rates. Adjustable rate mortgages. High interest pay day loans. The list goes on. We have created a society of financially illiterate victims who are trapped in a cycle of debt.

I'm not a huge fan of compulsory classes in general, but I do think it should be a requirement to pass a personal finance class to graduate from HS.

Sanrith Descartes · Oct 28, 2019

sleevedraw said:
Nothing wrong with those, either. HDV would be one step down on return and volatility and one step up for yield when compared with DGRO. PFF would be three or four steps. That expense ratio on PFF is kind of yikes considering the overall yield+return, though.

Yeah I totally agree on the PFF net fee. The asset class is subtly different than common stock dividend funds and it's up to the individual if it's worth it. Net return is still over 4.5% which in a low bond yield world is something to consider.

Gurgeh · Oct 29, 2019

Sanrith Descartes said:
We have created a society of financially illiterate victims who are trapped in a cycle of debt.

I find it mind boggling the amount of people around me, earning similar amount of money, that have no savings at all. Why the fuck do you buy the 1500€ Iphone on credit ? Or your 20.000€ Safari ? And then complain that you (and your girlfriend) have to live in a shit 200 sq ft appartment that you're renting at 35 ?
If you're middle-class you only ever go into debt for something productive.

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