Enlarge your pension size or your own financial adviser
Microsoft founder Bill Gates became a shareholder in the network of amusement parks Six Flags. According to JP Morgan analyst, the purchase of Six Flags shares by the founder of Microsoft is a normal investment procedure. According to information received from Gates' personal representative, the head of Microsoft regularly invests various companies by selling stocks of other firms ... August 2002
We all work and deduct part of our earnings into pension programs. What happens next with pension money in official pension programs and what are the prospects for pension programs for 20-30 years ahead ... we, perhaps, will not discuss. And the problem is not in a particular country, the problems are global in all countries with a pension system:
- The population is getting older,getting fatter and growing stupid, pensioners are getting more and more percentage, and you can compensate for the increase in pension expenses in the current economic conditions ... by increasing deductions and taxes from those who work? And a decrease in real pensions due to inflation?
“Official licensed pension fund managers around the world do their jobs so well that in 2008 ... it suddenly became clear to everyone how much. To decide whether it makes sense to depend on the work of these guys in suits, you can read Michael Lewis on the accompanying topic - “The big game for a slide ” and “ From the first world to the third . Read easily and quickly.
')
But it is not all that bad, There is a way out of this situation. At this point, according to the classics of the genre, I have to offer you a wonder product that will immediately solve the problem of retirement insuranceand excess weight . But I will not do this. I will simply describe the various available ways to solve the problem of retirement and long-term investments. Through the efforts of unknown heroes of nameless programmers in the network, it is already possible to find a lot of free utility calculators that allow you to do a lot of things that financial consultants used to do for a fee.
Those who think about their future find the simplest ways to behave in such a situation - bank deposits (in Russia) and the purchase of real estate (all over the world). A more complicated and interesting point is that in recent years such tools of long-term diversified investments have become available to any private investor with at least $ 500 (not to be confused with speculation, fast earnings,earnings on the Internet, to make money in online casinos, traders, online -betting petting , etc.), which previously were available only to large investor pools. I mean the emergence of a huge number of so-called ETF - Exchange Traded Fund , the diversity of which, in my opinion, made the whole industry of investment mediators not particularly necessary.
Let's start the discussion with deposits. This is the easiest and most accessible tool. The small caveat is that, on average, in the long run, deposit rates lose out on inflation . Below is the first chart in Google that clearly shows the inflation rates and average interest on deposits year after year for the Russian Federation:
Not always, not so much, but on average, deposit rates lose inflation. Inflation over the past 10 years in our country (Russia, Ukraine, Kazakhstan) was on average about 7-10% , which means a drop in purchasing power 10 times every two and a half times. And how often do we have higher deposit rates? Usually (worldwide), the rate loses inflation by at least one and a half to two percent. But even these 1-2 percent a year, before the retirement, are able to eat a lot from our savings, and not at all provide us with a good pension. It is also necessary to take into account that the highest rates are observed in not the most reliable banks, and reliability is important for our savings. Yes, I speak for you - it is important for us - I know your opinion.
According to a poll by the Public Opinion Foundation in March 2013
71% of respondents said that when choosing investments, safety of funds, money back guarantees with or without a small profit are in the first place. The key priority is not multiplication, but safety. According to the authors of the study, this leads to very short investment horizons. And there is a natural inattention to, for example, what real income shows real estate in the long term period of 20-30 years of commercials (and not only during periods of a boom), inattention to the long-term effect of inflation.
57% of respondents use bank deposits to achieve long-term goals. At the same time, people do not notice that interest rates on deposits can only protect themselves from most of the inflation, nothing more.
The logical risk for low risk is low income, so there is nothing surprising. Risk and profitability are inextricably linked. Also, in the long run, inflation cannot be beaten up by other low-risk instruments - accumulative life insurance, bonds, savings certificates and ... pension funds.
Further, the gurus of financial markets inevitably make the transition to instruments with high returns - to stocks. And they immediately advise you to buy shares in mutual funds, open a brokerage account, undergo trading training,sell the soul to the devil, go with an ax to the old woman .
In the long run, stock market indices of various countries (especially those that do not lose the war on their territory) actually outpace inflation and generate income sufficient for the pension portfolio:
However, the price for several percent above inflation is monstrous volatility (volatility) in the short run, which is measured in tens of percent. And these fluctuations are directed very down. Those. profitability is balanced by risk. Moreover, the closer to retirement, the more irrelevant such fluctuations in the pension portfolio, and the weaker the heart. I would not really like to get a 50% drawdown along with the stock exchange index a year before retirement.
There are 2 ways to avoid a heart attack in this situation.
The first is to spend 7 days a week, like Buffet, on exploring investment opportunities, or, like Soros, to devote 7 days a week to exploring speculative opportunities. A small caveat is that the labor costs here will be huge, but success is not very guaranteed. For various reasons, described, for example, by Taleb and Kaneman in their books, very few people try to repeat the successes of Buffett and Soros. Let's say we all have in our head evolutionary conditioned bug features that make us prone:
- fall into euphoria, panic, tilt, gambling in the stock market;
- incorrectly assess risks.
These bugs can be circumvented, you can generally learn a lot. This is not much more difficult than quitting smoking. Everyone can easily. We will agree that we, too, can, but we simply do not have time to do this professionally now.
Therefore, we will be interested in the second method - the so-called Asset Allocation. In Russian, it is commonly called the Asset Allocation, Passive Investment.
Even a non-investing investor will be able to surpass the achievements of most investment professionals if he periodically invests in index funds. This is paradoxical, but when “stupid money” recognizes its limitations, they stop being stupid - Warren Buffet.
On the website of the Federal Securities Commission of the United States (SEC) posted such an introduction to the essence of the method, such as a translation , I will quote:
Even if you are new to investments, you probably already understand some of the most important principles of effective investment. Just from his life experience, unrelated to the stock market. For example, you have often seen that street vendors sell things that seem incompatible with each other - like rain umbrellas and sunglasses. This may seem illogical to many. When do customers take both at the same time? Obviously, never - and this is the whole point of the actions of sellers. Merchants understand that when it rains, it’s easy to sell umbrellas, but it’s hard to sell sunglasses. Clearly, in sunny weather the opposite is true. “With the help of product line diversification”, i.e. offering both products - a street vendor can reduce the risk of losing profits on any given day ...
And then the Federal Commission proposes to attend to the investor with a portfolio of stocks, bonds and money market instruments (I know, it sounds incomprehensible, but you can start with a translated course of Schiller's lectures ). Until you forget, on the Vanguard website, you can play online with the simplest portfolio of these 3 parts with annual rebalancing (annual restoration of a given asset allocation):
- in the upper right part of the diagram there is a display mode switch, and below there are sliders for changing shares. Practical utility is not enough, but for clarity, it is very useful. I mean the visibility of changes in the smoothness and stability of portfolio growth depending on the distribution of asset classes.
Another online calculator for the distribution of savings (it also takes into account the age of the future retiree) from Iowa is available here .
The simplest portfolio indicated by the Federal Securities Commission of the USA consisting of stocks / bonds / money is in fact not suitable for everyone and not always. He is good for illustration. We ourselves can make a portfolio safer. If we have at least a few hundred dollars, thanks to a large selection of ETFs (index fund units) we can make a portfolio of asset classes, which will allow us to smooth out financial market fluctuations, reduce the risk and size of losses, but at the same time keep the profitability above inflation. And to spend on all this very little time.
In fact, the ETF is a new type of securities that serves as a certificate for a share portfolio. This allows each investor to own a piece of any index, i.e. very diversified. Previously, the size of such a piece was relatively large and expensive, and therefore inaccessible to most investors.
If you do not chase for super-profits, you can significantly reduce the risks and complexity of our investment activities. You can't get rich like that at a breakneck pace, but for the retirement portfolio, that's it.
Continued here .
PS If I gave a link to where it doesn’t mean that you need to trust there and enter into commercial relations. On the contrary, the meaning of my posts is that "not the gods burn pots". It is easy to avoid unnecessary intermediaries and costs. Much can be understood and easy to do yourself. And to tell friends who have not yet had time to attend to the work of the pension system, long-term statistics, and are confident that "real estate can only become more expensive."
We all work and deduct part of our earnings into pension programs. What happens next with pension money in official pension programs and what are the prospects for pension programs for 20-30 years ahead ... we, perhaps, will not discuss. And the problem is not in a particular country, the problems are global in all countries with a pension system:
- The population is getting older,
“Official licensed pension fund managers around the world do their jobs so well that in 2008 ... it suddenly became clear to everyone how much. To decide whether it makes sense to depend on the work of these guys in suits, you can read Michael Lewis on the accompanying topic - “The big game for a slide ” and “ From the first world to the third . Read easily and quickly.
')
But it is not all that bad, There is a way out of this situation. At this point, according to the classics of the genre, I have to offer you a wonder product that will immediately solve the problem of retirement insurance
Those who think about their future find the simplest ways to behave in such a situation - bank deposits (in Russia) and the purchase of real estate (all over the world). A more complicated and interesting point is that in recent years such tools of long-term diversified investments have become available to any private investor with at least $ 500 (not to be confused with speculation, fast earnings,
Let's start the discussion with deposits. This is the easiest and most accessible tool. The small caveat is that, on average, in the long run, deposit rates lose out on inflation . Below is the first chart in Google that clearly shows the inflation rates and average interest on deposits year after year for the Russian Federation:
Not always, not so much, but on average, deposit rates lose inflation. Inflation over the past 10 years in our country (Russia, Ukraine, Kazakhstan) was on average about 7-10% , which means a drop in purchasing power 10 times every two and a half times. And how often do we have higher deposit rates? Usually (worldwide), the rate loses inflation by at least one and a half to two percent. But even these 1-2 percent a year, before the retirement, are able to eat a lot from our savings, and not at all provide us with a good pension. It is also necessary to take into account that the highest rates are observed in not the most reliable banks, and reliability is important for our savings. Yes, I speak for you - it is important for us - I know your opinion.
According to a poll by the Public Opinion Foundation in March 2013
71% of respondents said that when choosing investments, safety of funds, money back guarantees with or without a small profit are in the first place. The key priority is not multiplication, but safety. According to the authors of the study, this leads to very short investment horizons. And there is a natural inattention to, for example, what real income shows real estate in the long term period of 20-30 years of commercials (and not only during periods of a boom), inattention to the long-term effect of inflation.
57% of respondents use bank deposits to achieve long-term goals. At the same time, people do not notice that interest rates on deposits can only protect themselves from most of the inflation, nothing more.
The logical risk for low risk is low income, so there is nothing surprising. Risk and profitability are inextricably linked. Also, in the long run, inflation cannot be beaten up by other low-risk instruments - accumulative life insurance, bonds, savings certificates and ... pension funds.
Further, the gurus of financial markets inevitably make the transition to instruments with high returns - to stocks. And they immediately advise you to buy shares in mutual funds, open a brokerage account, undergo trading training,
In the long run, stock market indices of various countries (especially those that do not lose the war on their territory) actually outpace inflation and generate income sufficient for the pension portfolio:
However, the price for several percent above inflation is monstrous volatility (volatility) in the short run, which is measured in tens of percent. And these fluctuations are directed very down. Those. profitability is balanced by risk. Moreover, the closer to retirement, the more irrelevant such fluctuations in the pension portfolio, and the weaker the heart. I would not really like to get a 50% drawdown along with the stock exchange index a year before retirement.
There are 2 ways to avoid a heart attack in this situation.
The first is to spend 7 days a week, like Buffet, on exploring investment opportunities, or, like Soros, to devote 7 days a week to exploring speculative opportunities. A small caveat is that the labor costs here will be huge, but success is not very guaranteed. For various reasons, described, for example, by Taleb and Kaneman in their books, very few people try to repeat the successes of Buffett and Soros. Let's say we all have in our head evolutionary conditioned bug features that make us prone:
- fall into euphoria, panic, tilt, gambling in the stock market;
- incorrectly assess risks.
These bugs can be circumvented, you can generally learn a lot. This is not much more difficult than quitting smoking. Everyone can easily. We will agree that we, too, can, but we simply do not have time to do this professionally now.
Therefore, we will be interested in the second method - the so-called Asset Allocation. In Russian, it is commonly called the Asset Allocation, Passive Investment.
Even a non-investing investor will be able to surpass the achievements of most investment professionals if he periodically invests in index funds. This is paradoxical, but when “stupid money” recognizes its limitations, they stop being stupid - Warren Buffet.
On the website of the Federal Securities Commission of the United States (SEC) posted such an introduction to the essence of the method, such as a translation , I will quote:
Even if you are new to investments, you probably already understand some of the most important principles of effective investment. Just from his life experience, unrelated to the stock market. For example, you have often seen that street vendors sell things that seem incompatible with each other - like rain umbrellas and sunglasses. This may seem illogical to many. When do customers take both at the same time? Obviously, never - and this is the whole point of the actions of sellers. Merchants understand that when it rains, it’s easy to sell umbrellas, but it’s hard to sell sunglasses. Clearly, in sunny weather the opposite is true. “With the help of product line diversification”, i.e. offering both products - a street vendor can reduce the risk of losing profits on any given day ...
And then the Federal Commission proposes to attend to the investor with a portfolio of stocks, bonds and money market instruments (I know, it sounds incomprehensible, but you can start with a translated course of Schiller's lectures ). Until you forget, on the Vanguard website, you can play online with the simplest portfolio of these 3 parts with annual rebalancing (annual restoration of a given asset allocation):
- in the upper right part of the diagram there is a display mode switch, and below there are sliders for changing shares. Practical utility is not enough, but for clarity, it is very useful. I mean the visibility of changes in the smoothness and stability of portfolio growth depending on the distribution of asset classes.
Another online calculator for the distribution of savings (it also takes into account the age of the future retiree) from Iowa is available here .
The simplest portfolio indicated by the Federal Securities Commission of the USA consisting of stocks / bonds / money is in fact not suitable for everyone and not always. He is good for illustration. We ourselves can make a portfolio safer. If we have at least a few hundred dollars, thanks to a large selection of ETFs (index fund units) we can make a portfolio of asset classes, which will allow us to smooth out financial market fluctuations, reduce the risk and size of losses, but at the same time keep the profitability above inflation. And to spend on all this very little time.
In fact, the ETF is a new type of securities that serves as a certificate for a share portfolio. This allows each investor to own a piece of any index, i.e. very diversified. Previously, the size of such a piece was relatively large and expensive, and therefore inaccessible to most investors.
If you do not chase for super-profits, you can significantly reduce the risks and complexity of our investment activities. You can't get rich like that at a breakneck pace, but for the retirement portfolio, that's it.
Continued here .
PS If I gave a link to where it doesn’t mean that you need to trust there and enter into commercial relations. On the contrary, the meaning of my posts is that "not the gods burn pots". It is easy to avoid unnecessary intermediaries and costs. Much can be understood and easy to do yourself. And to tell friends who have not yet had time to attend to the work of the pension system, long-term statistics, and are confident that "real estate can only become more expensive."
Source: https://habr.com/ru/post/232041/
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