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  • Making money

    When I landed in America in 1991 I had $400 in my pocket and two suitcases of stuff. Over last 15 year I did everything I can to build a prosperous life for me and for my family. I made a lot of stupid financial decisions that I regret now. This section is designed to address those issues exactly.

    We all want to leave well and want to leave something to our children. Many of you think that you do not have any money now and there will be a better time to save and invest. Guess what. This time is now.

    My personal phylosophy (borrowed from smart people) is that everyone has to have a child, plant a tree, build a house and write a book. Given American circumstances we get another imperative - we al can and should make a $1,000,000. Interestingly enough, it is not even that difficult.

    Among other people who come to this Forum are Mark Rappoport and Galina Chernova. Both are seasoned financial professionals. You do not have to use them as your financial advisors, but I urge you to look carefully at the ways you are making and saving money. I am sure you are not aware of the half of available financial instruments and incentives.

    Please, ask questions. There is a lot I want to discuss myself.
    Respectfully,
    Boris

    Tiptoeing through the minefield without a minesweeper...

  • #2
    Richard Russell:


    "...For the average investor, you and me, we're not geniuses so we have to have a financial plan. In view of this, I offer below a few items that we must be aware of if we are serious about making money.

    Rule 1: Compounding: One of the most important lessons for living in the modern world is that to survive you've got to have money. But to live (survive) happily, you must have love, health (mental and physical), freedom, intellectual stimulation -- and money. When I taught my kids about money, the first thing I taught them was the use of the "money bible." What's the money bible? Simple, it's a volume of the compounding interest tables.

    Compounding is the royal road to riches. Compounding is the safe road, the sure road, and fortunately, anybody can do it. To compound successfully you need the following: perseverance in order to keep you firmly on the savings path. You need intelligence in order to understand what you are doing and why. And you need a knowledge of the mathematics tables in order to comprehend the amazing rewards that will come to you if you faithfully follow the compounding road. And, of course, you need time, time to allow the power of compounding to work for you. Remember, compounding only works through time.

    But there are two catches in the compounding process. The first is obvious -- compounding may involve sacrifice (you can't spend it and still save it). Second, compounding is boring -- b-o-r-i-n-g. Or I should say it's boring until (after seven or eight years) the money starts to pour in. Then, believe me, compounding becomes very interesting. In fact, it becomes downright fascinating!

    In order to emphasize the power of compounding, I am including this extraordinary study, courtesy of Market Logic, of Ft. Lauderdale, FL 33306. In this study we assume that investor (B) opens an IRA at age 19. For seven consecutive periods he puts $2,000 in his IRA at an average growth rate of 10% (7% interest plus growth). After seven years this fellow makes NO MORE contributions -- he's finished.

    A second investor (A) makes no contributions until age 26 (this is the age when investor B was finished with his contributions). Then A continues faithfully to contribute $2,000 every year until he's 65 (at the same theoretical 10% rate).

    Now study the incredible results. B, who made his contributions earlier and who made only seven contributions, ends up with MORE money than A, who made 40 contributions but at a LATER TIME. The difference in the two is that B had seven more early years of compounding than A. Those seven early years were worth more than all of A's 33 additional contributions.

    This is a study that I suggest you show to your kids. It's a study I've lived by, and I can tell you, "It works." You can work your compounding with muni-bonds, with a good money market fund, with T-bills or say with five-year T-notes.



    Rule 2: DON'T LOSE MONEY: This may sound naive, but believe me it isn't. If you want to be wealthy, you must not lose money, or I should say must not lose BIG money. Absurd rule, silly rule? Maybe, but MOST PEOPLE LOSE MONEY in disastrous investments, gambling, rotten business deals, greed, poor timing. Yes, after almost five decades of investing and talking to investors, I can tell you that most people definitely DO lose money, lose big time -- in the stock market, in options and futures, in real estate, in bad loans, in mindless gambling, and in their own business.

    RULE 3: RICH MAN, POOR MAN: In the investment world the wealthy investor has one major advantage over the little guy, the stock market amateur and the neophyte trader. The advantage that the wealthy investor enjoys is that HE DOESN'T NEED THE MARKETS. I can't begin to tell you what a difference that makes, both in one's mental attitude and in the way one actually handles one's money.

    The wealthy investor doesn't need the markets, because he already has all the income he needs. He has money coming in via bonds, T-bills, money market funds, stocks and real estate. In other words, the wealthy investor never feels pressured to "make money" in the market.

    The wealthy investor tends to be an expert on values. When bonds are cheap and bond yields are irresistibly high, he buys bonds. When stocks are on the bargain table and stock yields are attractive, he buys stocks. When real estate is a great value, he buys real estate. When great art or fine jewelry or gold is on the "give away" table, he buys art or diamonds or gold. In other words, the wealthy investor puts his money where the great values are.

    And if no outstanding values are available, the wealthy investors waits. He can afford to wait. He has money coming in daily, weekly, monthly. The wealthy investor knows what he is looking for, and he doesn't mind waiting months or even years for his next investment (they call that patience).

    But what about the little guy? This fellow always feels pressured to "make money." And in return he's always pressuring the market to "do something" for him. But sadly, the market isn't interested. When the little guy isn't buying stocks offering 1% or 2% yields, he's off to Las Vegas or Atlantic City trying to beat the house at roulette. Or he's spending 20 bucks a week on lottery tickets, or he's "investing" in some crackpot scheme that his neighbor told him about (in strictest confidence, of course).

    And because the little guy is trying to force the market to do something for him, he's a guaranteed loser. The little guy doesn't understand values so he constantly overpays. He doesn't comprehend the power of compounding, and he doesn't understand money. He's never heard the adage, "He who understands interest -- earns it. He who doesn't understand interest -- pays it." The little guy is the typical American, and he's deeply in debt.

    The little guy is in hock up to his ears. As a result, he's always sweating -- sweating to make payments on his house, his refrigerator, his car or his lawn mower. He's impatient, and he feels perpetually put upon. He tells himself that he has to make money -- fast. And he dreams of those "big, juicy mega-bucks." In the end, the little guy wastes his money in the market, or he loses his money gambling, or he dribbles it away on senseless schemes. In short, this "money-nerd" spends his life dashing up the financial down-escalator.

    But here's the ironic part of it. If, from the beginning, the little guy had adopted a strict policy of never spending more than he made, if he had taken his extra savings and compounded it in intelligent, income-producing securities, then in due time he'd have money coming in daily, weekly, monthly, just like the rich man. The little guy would have become a financial winner, instead of a pathetic loser.

    RULE 4: VALUES: The only time the average investor should stray outside the basic compounding system is when a given market offers outstanding value. I judge an investment to be a great value when it offers (a) safety; (b) an attractive return; and (c) a good chance of appreciating in price. At all other times, the compounding route is safer and probably a lot more profitable, at least in the long run. "..

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    • #3
      Тема очень интересная и важная, до конца ещё не многими участниками сего почтенного форума осознанная (ибо им многим пока не до этого), но когда критический процент новоиспечённых Американских врачей завершит интересны и увлекательны процесс обучения и начнёт практиковать - встанит вопрос как сохранить и приумножить всё нажитое непосильным тудом (2 портсигара отечественных, 2 кинокамеры заграничных и далее по списку). Борис заинтриговал но механизмы обогащения не раскрыл и про финансовые ошибки, коих нужно избегать, не поведал.

      Из статьи, приведённой финансовым профессионалом, я так понимаю что нужно копить деньги, вкладыватся в фонды под жирный процент (и чем раньше тем лучше), не тупить и не транжирить. Вы меня конечно простите, дурака финансового, но всё это на мой взгляд не инвестмент. Что делать с теми стремительно обесценивающимися зелёными бумажками и всячески сдерживаемой инфляцией и как быть если эти механизмы рухнут? Как можно полагатся на бонды если правителство само в долгах как в шелках? Про стаки я вообще неловко говорить - они банкротят бумажных миллионеров уже не первый год. Не боязно ли доверятся финансовым фондам, когда абсолютно не известно на что они тратят ваши денги и как честно делят заработанные между собой любимыми и вами кто им эти деньги доверяет?

      Вопросов много. Может финансовые специалисты что то посоветуют кроме того что не разумно спускать своё состояне в Казино?

      В частностности интересует как законным образом врачу можно снизить налоговое бремя.
      Что вы думаете об инвестиции в золото и другие ценные металлы.
      Как обстоят дела с вложением в недвижимость.
      Last edited by doctor_sword; 04-29-2008, 04:29 PM.

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      • #4
        Could you tell me what is the difference between IRS funds and 401k?:-o

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        • #5
          очень интересная тема. Вот меня интересует, где сейчас инвестиции этих инвесторов А и В?

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          • #6
            Финасовый кризис показал реальную ценность советов разнообразных financial advisors.И не только advisors.Подавляющее большинство руководящего эшелона корпоративной Америки(самых высокооплачиваемых в мире CEO's) также продемонстрировали свою потрясающую некомпетентность.Чего стОит пример руководства трех автомобильных гигантов.Чего стОит пример руководства всей банковской ситемы США и Wall Street.A также "гениального инвестора" Bernard Madoff http://en.wikipedia.org/wiki/Bernard_L._Madoff ,сумевшего построить финансовую пирамиду в 50 миллиардов долларов.В которую,кроме индивидуальных инвесторов, оказались вовлеченными также и"высокопрофессиональные" финансовые брокеры,эдвайзоды и прочие.Т.е. те,кому инвесторы в США привыкли доверять.
            На сегодняшний день,доверие к людям,представляющим инвестиционную индустрию в США,потеряно.
            Это не значит,что инвестировать деньги не надо.Если они есть,то инвестировать их,безусловно,надо.Держать их просто в банке бессмысленно.
            В разгар кризиса инвестиционные опции очень ограничены.Ни один эдвайзор ни в состоянии предугадать,какие инвестиции принесут желаемую прибыль,а какие-нет.Падение на Wall Street,на международных финансовых рынках и real estate рынках еще не достигло дна.
            И когда это дно будет достигнуто,и как долго рынок и экономика будут падать, не может предсказать ни один финансовый эдвайзор на свете.

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            • #7
              Originally posted by Igor Bulatov View Post
              Финасовый кризис показал реальную ценность советов разнообразных financial advisors.
              I agree with you 100%! It seems that in present situation the best investment is to buy guns! I kid you not! In any financial turmoil guns and ammo appreciated more than friggin' stocks and bonds! Over 50% during the past year! My 401K dropped 40% because I was increadibly stupid to leave moneys there before crash has began. At least I am better off than all "financial advisers"...
              Fun times, yeah!
              Last edited by dimasin; 02-02-2009, 07:05 AM.
              "From error to error one discovers the entire truth."
              Sigmund Freud

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              • #8
                I agree that everyone who invests money anywhere has to understand all possible risks involved(including force majeure circumstances) No advisor on earth is a 100% guarantee against money loss.
                When market reaches its bottom it could be a good time to buy: anything from stocks to real estate

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                • #9
                  Originally posted by Dan View Post
                  I agree that everyone who invests money anywhere has to understand all possible risks involved(including force majeure circumstances) No advisor on earth is a 100% guarantee against money loss.
                  When market reaches its bottom it could be a good time to buy: anything from stocks to real estate
                  Well, it is not easy to figure it out. Actually nobody knows when it will take place. Dan if you know, send me PM

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                  • #10
                    apparently, nobody knows it for sure(except for the guys who are responsible for artificially creating crisis in certain countries) - I think there has to be some kind of gut feeling+ analysis(done by your advisors or yourself) and once again one has to realize all the consequences since it is a gambling
                    Last edited by Dan; 02-10-2009, 03:20 PM.

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                    • #11
                      Here is a great quote from Jubak's article on MSN:

                      "All of us are mad as hell, and many of us are saying it will be a cold day in hell before we trust Wall Street or buy stocks or corporate bonds again."

                      I completely agree.
                      "From error to error one discovers the entire truth."
                      Sigmund Freud

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                      • #12
                        Originally posted by dimasin View Post
                        Here is a great quote from Jubak's article on MSN:

                        "All of us are mad as hell, and many of us are saying it will be a cold day in hell before we trust Wall Street or buy stocks or corporate bonds again."

                        I completely agree.
                        I have also heard a joke/truth? that a monkey could be as successful in picking stocks/bonds etc. as a professional broker)))

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                        • #13
                          Originally posted by Dan View Post
                          I have also heard a joke/truth? that a monkey could be as successful in picking stocks/bonds etc. as a professional broker)))
                          That joke is about me. I historically choosen funds that fluctuated in line with Dow. I guess we're all in deep hole, no matter what somebody says! At least I am not shifting now.
                          "From error to error one discovers the entire truth."
                          Sigmund Freud

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