Investing

Image by Zach Klein

One of the most annoying types of financial articles and blog posts that I see on a regular basis is the "If you had invested in these stocks 20 years ago, you would have made $14 million by now." I just saw another one by Intuit: Pennies to Millions. These articles are nothing more than shallow linkbait that play on the human tendency to reevaluate our decisions now that we have the benefit of hindsight and manufacture artificial regret.

"If only" scenarios are a waste of time. The fact that you could have made $xx dollars by investing in whatever twenty years ago is meaningless today. If only you had started Microsoft instead of Bill Gates, you could be the richest man in the world today. Thinking this way is just a distraction that will keep you from moving forward.

This whole subject does raise a good point though: this site focuses on what young people can do to prepare themselves for future success, but what if you haven't done everything you could have? Or what if you're no longer that young and you're stressing out about all the chances you missed, and all the opportunities that are no longer available?

My advice is simple: get over it, and fast. Every second you spend thinking about what might have been is even more valuable time wasted. The fact is that you can't go back and change the past, so stop kicking yourself, and just move on. If you're having trouble, here's a few things you might want to consider:

Transform mistakes into a strength

Think of it this way...every mistake you make and every missed opportunity is a chance to learn and grow. You may not have seized a great chance ten years ago, but by recognizing it, and learning from it, you'll be better prepared the next time around.

Remember that you're not alone

There are few successful people who didn't go through periods where they failed, where they missed great chances, where they felt like giving up. Some of the most successful people in the world spent years toiling away with no reward or recognition until they finally broke through. It may be helpful to read some biographies of successful people that you admire; you might be surprised to find out some of the trials they've gone through and mistakes they've made.

Pass on your experience

This one relates back to viewing this as a learning experience. Because you've learned something, don't be afraid to talk to other people that you see making the same mistakes you did, or missing the same opportunities. Perhaps you've got a younger sibling who is graduating from college and getting their first job; talk to them about investing and preparing for their future. Or maybe you know someone who really wants to write a book, but is afraid of failure; encourage them. Whatever the circumstance, if you can see that someone might make one of the same mistakes you've made and learned from, say something. You'll feel better.

Finally, the most important thing you can do is stop stressing and start doing something. As the saying goes:

"The best time to plant a tree is twenty years ago. The second best time is today."

So get out there and do it. Today. Right now. Go.

The last few months have been incredibly busy, but I'm ready to dive in again and get back to Bounteo. I wanted to highlight a few of the great articles I've read recently around the web:

The College Degree is Not Dead - Good post over at Free Money Finance about how the value of a college degree, while declining, is still very high.

Should You Look For A New Job? - Blueprint for Financial Prosperity gives some reasons why you might want to look for a new job, and some reasons why you might not.

Simplicity and being cheap - Philip over at Wise Bread has some great thoughts on simplicity and how living a life without a lot of stuff will help you attain financial freedom.

Now that Bounteo.com is up and running (though we still are working on a design for the site), I want to start things off well, so I'm looking for post ideas and guest bloggers. Please contact me with any ideas you might have for posts and if you're interested in posting a guest post here, please send in any ideas you have. I would love to get some perspectives from other bloggers and authors about how young people can make good choices and make progress towards a life of success.

Bounteo.com is site that explores the pursuit of a life more abundant, particularly as it applies to young adults in their twenties.  However, readers of every age are certainly encouraged to interact and share their opinions and perspectives.  In subsequent posts, I'll explore a bit more about my own definition of success, the topics that I think are relevant to its pursuit, and why I've chosen to focus on young adults.  But first, a short introduction is in order.

My name is Ryan Waggoner, and for some time I've blogged at my personal website about personal finance, including a 12-part series for young adults on how to start investing for the future.  That content will form the genesis of Bounteo, but as we progress, I hope to add content in areas other than personal finance and investing, such as career development, entrepreneurship, time management, personal development and motivation, and other topics related to the pursuit of success in our lives.

Finally, I would like to say that I myself am a young adult (25 years old) and possess little in the way of credentials and professional experience that would qualify me as an authority of many of the topics we'll discuss.  I'm just a guy with a burning curiosity, a passion for learning, and a willingness to see others succeed.  I will do my best to ensure that I provide sources and solid logic and reasoning for the content on this site, but I hope that my readers will do their part to scrutinize my words and conclusions and challenge me where my own reasoning or research has fallen short.  In this way, perhaps we can actually accomplish something in our pursuit of the truth and a life more abundant.

MSN Money had an interesting post awhile ago about an annual survey of millionaires. They classified the millionaires into six categories, according to how they made their money, their risk tolerance, attitudes about wealth, etc.

Satisfied Savers (24% of Total)

• Average age: 60
• Built wealth through hard work, by living below their means and taking moderate risks
• Financially savvy
• Lost relatively little in the bear market
• Know how to make their money work for them
• Enjoy making a difference through charitable efforts

Status Chasers (18% of Total)

• Average age: 55
• Achieved wealth through work and some inheritance
• Want it all but haven't been able to achieve their major goals yet
• Define wealth as a level three times their current net worth
• Pessimistic about their own financial future
• Less financially knowledgeable than their counterparts
• Think of financial situation daily as a source of concern

Altruistic Achievers (17% of Total)

• Average age: 54
• Achieved wealth through work, some inheritance, good investments, owning a business, and living below their means
• Self-made, driven to succeed, work hard, take risks
• Use their wealth to help the less fortunate
• Lack the time, interest and know-how to manage finances; rely on professional management
• Lost the most in the bear market
• Only one-quarter plan to retire completely

Secret Succeeders (17% of Total)

• Average age: 55

My Two Dollars yesterday had an interesting post about Detroit and how property values have fallen hard there, and probably have more room to fall. A few samples:

At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less.

A boarded-up bungalow on the city’s west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000.

Now, let me say that I would never live in Detroit. But I've seen that when everyone seems to be saying that it's crazy to own or buy property in an area, it's time to take a hard look at that area because some good values can often be found. Detroit isn't going to disappear tomorrow. It might be a little shaky there, but they'll recover, and when they do, some of those dirt-cheap houses will sell for 10x or 20x what they were bought for. Those investors will invariably be viewed by many as "lucky" but as someone once said:

"Luck is what happens when preparation meets opportunity."
-Seneca

Building wealth over the course of a lifetime is a pursuit that requires focus, dedication, and self-discipline. Living on less than you make and investing the difference is 90% of the battle, and we often think of this path as one of constant restraint, eating ramen noodles and spaghetti and shopping at thrift stores. Pinching every penny is one way to build wealth, but the good news is that once you get some momentum and see your wealth pass a certain point, a class of investments starts to open up that allows you to have fun and increase your wealth at the same time. CNN Money ran an article a few days ago with some ideas about how to live rich and then retire richer. Here's a sample of my favorite suggestions:

• Going global: Buy real estate in exotic locales. Imagine buying a small villa in an up-and-coming tropical paradise (they mention Uruguay) and holding on to it for the next 30 or 40 years. Not only will you have the enjoyment of the property, but you can rent it out to vacationers for some extra income. When you're ready to retire, you can always keep it as a vacation home or sell it, likely for a tidy profit. What could be better?

• Collecting profits: Invest in unknown artists. If you're an art lover, buying works you love from artists who are poised to make it big is a win-win. You'll get the enjoyment of the artwork and possibly make a handsome profit along the way. Granted, it may not be as lucrative as some stocks, but as the article points out, it'll look a lot better on your wall than a stock certificate from Wal-Mart.

I've recently discovered one of the coolest things in personal finance that I've ever seen. It's called the Fidelity Charitable Gift Fund, and it has a lot of implications for maximizing the efficiency of both your charitable giving and your tax strategy.

Private charitable foundations have traditionally been the playground of the mega-wealthy. The cost to establish, maintain, and manage a private foundation is not trivial, making it difficult for all but those with the largest of fortunes. However, in 1991, Fidelity launched their Charitable Gift Fund (CGF), making it possible for millions of people to create a mini-foundation. Here's how it works:

1. Make a contribution to the Gift Fund and set up a Giving Account that you name — such as, The Smith Family Fund — then be eligible to take an immediate tax deduction.
2. Advise how to invest your contributions, giving the assets the potential to grow.
3. Recommend grants from the Giving Account to the charities you support, with the option of being recognized or remaining anonymous.

Essentially, the CGF is one of the largest private foundations in the US. Individuals can open a Giving Account, which is run like a mini-foundation within the CGF. You can provide guidance on how you would like your contributions to be invested and "recommend" charities for them to donate your contributions to. Fidelity reports that the recommendations are followed in 99% of cases, unless the charity doesn't qualify (no political donations, for example).

Some of the advantages of using the CGF are:

1. Contributions can be deducted from your taxes as soon as you add them to your Giving Account, even before you distribute them to the charities and non-profits of your choice.
2. Once you setup a charity or non-profit in your account, giving to that organization is a simple 1-click affair.

Joshua Dorkin over at BiggerPockets.com was kind enough to interview me for his Meet the Investor series. Just wanted to say thanks and I hope the BiggerPockets.com audience enjoys!

I haven't posted as much as I'd like about real estate, but I thought I'd link to a few of my favorite posts about personal finance, investing, and real estate. I'll be adding a lot more of these types of posts in the near future, so check back soon or subscribe to my RSS feed. Thanks!

Can Money Buy Happiness?

My realization on real estate

My thoughts on financial bondage

8 free things to get (and keep) your finances in order

Emergency fund vs. debt paydown

My long-term financial plan

Rich Dad, Poor Dad by Robert T. Kiyosaki

When I was about 19, this book changed my entire outlook on money and finances. Looking back, and reading through the book now, I see a lot that I disagree with, but it sparked my thinking about how to manage money, and what financial freedom truly means. Not a practical book, but definitely a good start if you have no "financial motivation."
The Millionaire Next Door by Thomas J. Stanley

This book, which I read recently, is the result of years of research of America's millionaires: how they live, what they wear, what cars they drive, how they made their money, etc. It was definitely inspiring to me, and also got me thinking about the impact of wealth on future generations, both good and bad.

Cashflow Quadrant by Robert T. Kiyosaki

This book builds on Rich Dad, Poor Dad and goes into detail about how to build multiple streams of income and gradually reduce your reliance on earned income. It contains overviews of the impact on personal finances and income of things like real estate investment, entrepreneurship, and investing in businesses.
The Richest Man in Babylon by George S. Clason

This is a deceptively simple book that contains a series of financial parables that teach the importance of always saving, the power of compound interest, investment, insurance, and other time-tested financial truths. Easy read and a good reminder of some very basic lessons. Again, good to read if you find yourself lacking that "financial motivation."