matjone

I agree, the board is a great value. Not to say that the OP's ideas were bad ones. I'll jump in with an unsolicited suggestion of my own. I don't know if this is even possible, but it would be nice to have the whole prior conversation show up in a private message. I have a poor memory and sometimes I forget the details of the previous messages

jay21, someone posted some industry primers on these a while back. you should be able to find them. if not let me know and I'll send them to you

It is a tough call. I asked the same thing a while back and got a lot of different answers so you could revisit that thread if you wanted some different perspectives. It depends on the rate you are paying vs. what you think you can get, but it also depends on how much cash flow you get from your job/business and how secure that is, how much wealth you have, how old you are, your personality, all kinds of things. Here's a crazy idea... take the cash and invest it in tax liens at rates of 18% or more. That way if the economy stays good they likely redeem and you are way above your hurdle, but if we go into a depression and the investment goes bad and you lose your job and you can't pay your note, you get another house.

I wonder what Tweedy was holding prior to the crash? Did they have a lot of cash?

I ran across this a few months ago http://www.beyondproxy.com/detecting-accounting-fraud-asia/ if you understand it maybe you can explain it to me.

I don't think you necessarily have to be able to remember those things, but it is nice to have that ability in investing because it saves time. If you can see a quote and immediately remember figures from the statements without looking them up that is an advantage. I've noticed Graham, Buffett, Klarman and some others seem to be able to recall things really well. Buffett is impressive when people ask him things in interviews, sometimes going decades back and quoting statistics about companies he bought. Graham was the one who really amazed me with his memory - I've seen transcripts of lectures where students asked him about a random company and he immediately started rattling off statistics and facts about the company, and a lot of times they were companies that I imagine he had never invested in. I've looked into those memory enhancing techniques, to see if I could improve my memory and maybe develop even a sliver of that kind of ability, but the techniques never made much sense to me. I've also noticed some investors don't get the credit they should because they are less polished writers or speakers. I've seen some blogs and shareholder letters that aren't that good at selling their ideas, and it's only when you look up their performance that you say, "wow, I really need to pay attention to this person."

I don't know, Buffett has said that one of their advantages is that people want to sell to them because they get to keep their autonomy.

Don't buy the books if you can keep from it. I've found I can get most stuff through interlibrary loan. If you do buy something try to buy it at a price where you can sell it back and at least break even. I wouldn't pay for any services or subscriptions or screeners either. I think 1000 bucks would be fine to get started with as long as you can find a broker that will let you get started with that much. Even if you don't feel totally comfortable, I think it could be a good idea to start sooner rather than later. Until you have real money on the line you won't understand the emotional part of it, and this 1000 bucks is pretty insignificant when you compare it to your future earning power. So I say just read until you find something that looks like a good bet and go all in or maybe make a couple 500 dollar bets. It might be a good idea to coat tail on your first ideas. It might also be a good idea to pick a smaller company that's easy to understand, rather than a complicated large cap with a 200 page 10-k. Oddballstocks blog is great and so is otcadventures.

I saw something the other day about stock prices from Templeton. He said, "Stock price fluctuations are proportional to the square root of the price." If that's true then you should be able to make more money on fluctuations in the lower priced stocks, which I think are more likely to be smaller companies. I always hear the objection that with small caps you are likely to have to hold longer for price to reach fair value. Has this been shown to be true anywhere? Hopefully I'm not coming across as argumentative. I'm not saying there is no study on this, just that I haven't seen it.

SwedishValue - are you seeing a of good bargains over there?

Isn't there a pretty good chance that you are going to miss out on more money due to trading restrictions than you'll save in taxes? Think of how much poorer you'd be if you'd been investing under these rules before.

I agree there is a lot to be desired in index investing. What she should do is read Bogle, Buffett, Graham and Murray Stahl and then make her own decision. If she had access to Sanjeev or Sonkin or somebody that would be different. She'll probably be able to save 1% or so on the expense ratio buying the index instead of the managed funds. Betting that someone will outperform by more than 1% when they are running 15 B or whatever just doesn't seem worth the risk. Especially when you are betting their money instead of your own.

Thanks for the replies. I told her to pick a low cost fund that is either mostly or completely in equities. May have been a mistake. There are a lot of good reasons to not talk about money, especially with your friends. But I think if I refused to tell her anything I'd feel bad, and I'd be worried she might have her money invested in some high expense, poorly performing fund.

A friend is setting up her 401k and asked me a question about what she should do with it. I think she's in her mid twenties. I am tempted to tell her put it all in a total world stock index and leave it alone for 30 years. There are a lot of reasons to not answer these questions. I'm not certified, they could lose money and blame me, etc. On the other hand, these people really have no idea what they are doing, and if they go it alone they might end up doing some really dumb things like buying high expense, underperforming funds, investing too much in fixed income and getting killed by inflation, and so on. I think that technically the best answer is to tell them to talk to a financial planner, but it kind of sounds like a brush off, like I'm refusing to help them, and I feel like an ass saying it. The other problem with that response is that I know these people and there is about zero chance of them going to the trouble of seeking out a financial planner or doing any research on investments. So what would you tell her?

I agree. I don't like the fund structure that much. What I'd want is to have Sanjeev managing my money as close as possible to how he invests his own in his personal account. If you have confidence in someone, it makes sense to me to free him up and let him work without worrying about liquidity and redemptions.

I found the article on the australian tax. http://www.sovereignman.com/finance/the-next-domino-australia-doubles-tax-on-retirement-savings-11618/ The way things really seem to work, whatever doesn't get you voted out is fair game. If most people have less than x in the bank, and the gov needs money, you just take some money from everyone with more than x. There aren't that many of them, what are they going to do about it?

I think you are onto something. Sanjeev saw an opportunity to put up some seed capital

That's all true, racemize. I guess I have a trust issue with the government. I think the world has decided that when people are hurting, those who have saved have responsibility to bail out those who haven't. So I can see a day when they come after these accounts. It has already been proposed and I have heard that other governments have double dipped into people's retirement accounts (I think it was in Australia. If anyone has stories like this I'd like to hear them). If it was 100% certainty that the roth would not be touched it would be less complicated. Eric brings up another good point about divorce. I honestly didn't know that they were treated differently. I kind of figured all assets were split up 50/50 (or maybe more like 70/30 according to some I've talked to) in a divorce.

This has been debated on here before, but I am curious to know where people stand. I think for most people the spreadsheets tell them to pick the roth and get the tax savings later. That is always what I believed, so I always made roth contributions foregone the tax deduction. But after thinking it over for a while I think I've changed my mind. The main reason is that I don't really trust our government to keep their promises, and lately I am leaning more towards guaranteed money now, vs. promised money later. If you'd like to share your rationale behind your choice, that would be great, as that is what I am really looking for. Making the wrong decision on this could make you a lot poorer in the end, so I think it's smart to consider other opinions. Also, each individual has different circumstances, so what is right for one may not be for another. Also I am not sure if people from other countries have a similar choice, but if so I'd like to hear your thoughts on the subject as well. TIA

I'd stress test by imagining a great depression scenario where the market tanks and doesn't recover for decades, earnings go in the toilet, and unemployment is rampant.

The Tweedy Browne paper had some stuff like that. Also, you can run your own backtests on portfolio123, but you have to pay for it. I've seen some papers on this stuff. I think Oppenheimer did one on net nets. I think you could find several more if you go to a library with access to JSTOR.

Somehow I missed this discussion I like hearing from ragnar, oddball and the other micro cap investors cause these are the guys I am trying to follow and steal/learn from these days. I like oddball's comment about missing things in analysis. After reading analysts reports for a company I worked for I've come to the conclusion that either none of them have sufficient knowledge to understand what is going on, or if they do they are keeping it to themselves. I work for a company that in the past has dominated their niche and earned high returns on capital. Recently a private company launched a division that is shaping up to be a serious competitor. I've never seen this fact mentioned in any analyst report. I'm not sure why that is but I imagine they aren't aware because it's not listed as a competitor on morningstar, bloomberg etc. When they do visits they let the management walk them around and show them the facility and talk to them. Probably what they should do is find out what bar the vendors, employees, customers, etc. are hanging out in and get people drunk so they start talking. BTW, Nate, did you say you now only have 20 positions? I know in the past you held 50 or so. Have you gotten more concentrated? Or have you just gone to cash?

Agreed. Until Kraven is pinned, this thread is not over! Let's rumble!

Stitch in time saves nine definitely applies. Walk around once every few months and do an inspection. Look around for major problems, or minor ones that may become major such as peeling paint, leaky roofs, plumbing leaks, foundation cracks or settling, gas leaks, etc. You want the thing to stay plumb and dry. Problems occur when you have structural problems or water getting in where it shouldn't and you don't take care of it promptly. There are a lot of common sense things. Too many to list them all here. Find out where to shut off your water. Put in smoke and co2 detectors and put it on your calendar to check them. Try to get on friendly terms with the neighbors so that they'll help you when you need it. If anyone tells you that ripping something out and putting in a newer and better version will make you money, be skeptical. Don't hire a contractor off craigslist. Get one that's highly rated on BBB, that's been around a long time, that is recommended by someone you know. Also, make sure to not buy during the biggest housing bubble in history.

I think Kraven must be celebrating Festivus. This is the traditional airing of grievances. Next come the feats of strength.