Well let’s see CAR…Let’s see how a kid’s attitude if they took your advice literally….
1. Don’t ever buy a house as an investment.
2. Don’t invest in the stock market/bond market, because it’s all gambling.
3. Don’t go to college, or if you do go, don’t major in anything technical, because we’ll all be replaced by robots or outsourced.
4. Don’t speculate and take risks on opportunity
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I can’t speak for CAR but on your points, I’d counter with these thoughts speaking for myself.
1. It’s one thing to buy a home. And also another thing to buy investments properties if you can comfortably afford them. Nothing wrong with either as long as you can COMFORTABLY manage the payments under a worst case scenario situation.
Worst case scenarios including possibly losing your stable job, someone in your immediate family having a medical problem, being in a prolonged bad economy where rentals can be affected on investment properties, etc.
Personally I’ve always believed in real estate as a LONG TERM investment and excellent for cash flow. In fact, it’s how I built up much of my net worth via cash flow from paid off real estate.
I think the thing you just have to be careful is “biting off more than you can chew”. I’ve met several people here in San Diego that bit off more than they could “chew” and either lost home(s) because they just leveraged too much.
One of my wife’s friend always says things like, “oh I remember when I was rich and had a big house, and had a maid, and had a Mercedes SUV, etc. etc.”. Her and her husband were obviously leveraged to the hilt. They not only lost their home here in San Diego but they also lost a home they bought/leveraged in Las Vegas. I always feel like telling her that she was never “rich”. It was all false….
2. I’m not sure I read anywhere where someone was saying it’s foolish to invest in the stock market. But it’s one thing to “invest” and another thing to “trade”. It’s two totally different things that are best not confused. Timed/planned/steady investments over a long period of time in a diversified portfolio is one thing but day trading is another.
And I’m not even saying that there is anything wrong with “trading”. My only point is that trading on margin can be treacherous with too much leverage. Also, it’s one thing to be investing in a diversified portfolio that isn’t too risky but there are lots of guys out there that are chasing a small basket of volatile stocks. That isn’t “investing” either.
Also, investing and even some leverage might make sense but I see lots of day traders with their 4 X buying power and their margin accounts that really get killed with sudden swings in the market and margin calls. What they are doing is NOT “investing”.
Also, it DOES make sense to protect your positions through responsible use of call and put options. However, lots of people just basically gamble with options. Again, I’d say you have to separate the two.
Also, it’s one thing to invest with YOUR money but quite another when you’re “investing” with leveraged money. For example, I recently met a guy that was telling me that he was taking these 0% credit card balance transfer check offers and depositing it into his investment/margin account! He said that he had very high credit limits and was paying 3% to deposit it into his account and then he was using this money and trading/investing.
Because money market and CD’s are paying almost nothing, he had invested all his cash in the stock market but that wasn’t even enough so he said he took $100,000+ in these credit card balance transfer offers. Sure, things might be rolling ok for him now in an up market. But in a down market you can get crushed easily.
Man, I told him how that is dangerous and I’d advise against it. But guys like this just think that this is “found money” and idiot proof. I just shook my head listening to that guy. He thought he was the smartest guy doing this… I don’t consider this “investing”. The truly scary thing to me is after that story I wondered how many people out there are doing things like this? I’d have to imagine if there are guys like this out there, then there are guys taking HELOC’s doing the same type of thing!
3. I’m in the camp that still says you most likely will need to have a college degree in a good major from a respectable University to get a good high paying job these days. Sure there are exceptions to the rule but I don’t see this changing in the near future.
Back when I graduated, it was still possible to have an almost “worthless” degree like Religion, History, Communications, Art and still get a decent job. But more and more that is not the case.
I still say that a college degree if you’re going into a field that isn’t totally worthless in today’s job market is still almost a necessity. And I do find the cost of a college degree is insane these days. But I still say it’s almost a necessity. I’m one of those students who graduated with six figure student loan debts (I totally put myself through college).
The truth is I could have NEVER gotten where I did in life if I didn’t spend all that money on a college degree. I wouldn’t have gotten the job I got or made the income that I made.
4. Personally I think it DOES make sense to speculate and especially take a risk on opportunity IF it’s within reason and IF you have a very good plan. It’s one thing to just gamble but it’s another to carefully put together a solid business plan or life plan based on that speculation opportunity.
As we discussed above, calculated risk/speculation is different than blind risk/speculation.
From my experience,some of the most successful and wealthy people I’ve met are people that DID take advantage of calculated risk/opportunities. But most of them put together very solid business plans. Everything was very well thought out. And even with those opportunities they either self-financed the opportunity or they got loans from family/friends. Not like using their credit cards like I hear some people do.
I think in life you do need to take advantage of various opportunities when they become available.
I truly believe that in most cases to be able to retire earlier in life you needed to have most of these things:
– Worked VERY hard in life.
– Been intelligent and made good investment decisions
– Either made a limited amount of financial mistakes or they quickly learned from those mistakes and didn’t repeat it
– Had some luck on their side
– Had good timing on their side be it in a particular investment, working for an employer that still offered great pension plans, or other element of “good timing”.
– Capitalized on a good opportunity where they took calculated risks
– Was careful with leverage ratios and never put themselves in a situation where they could “lose it all” with any particular investment
– Fairly well diversified
There are many others but I think most people have at least had these elements as a recipe for a possible earlier retirement in life. Obviously I didn’t list those that inherited money, had trust funds or won the lottery. That’s just good luck!
