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Things important, and unimportant
Summary
This article discusses important and unimportant aspects of investing. It highlights the importance of investing for the long-term and staying the course, as well as using low-cost index funds and having a guideline for when you are financially independent. It also explains why actively managed funds with high fees can be dangerous and why you don't need an investment advisor to purchase index funds. Finally, it discusses the importance of having a high savings rate and how to use credit cards without carrying a balance.
Q&As
What is the 4% Rule for financial independence?
The 4% Rule for financial independence is a guideline that states that you need 25x the annual amount you spend/4% of your assets to be financially independent.
What is Sequence of Return Risk?
Sequence of Return Risk is the risk of running out of money before the end of 30 years if you set your 4% withdrawal rate and adjust it for inflation each year, and put it on auto-pilot and forget it.
What are the benefits of investing in broad-based, low-cost stock index funds?
The benefits of investing in broad-based, low-cost stock index funds are that they outperform active management and have very low expenses.
How can savings rate be used to reach financial independence?
Savings rate can be used to reach financial independence by increasing the rate of savings, which will speed up the process of reaching FI.
What is the difference between actively managed funds and index funds?
The difference between actively managed funds and index funds is that actively managed funds are more expensive and have higher fees, while index funds are low-cost and have lower fees.
AI Comments
👍 This article provides a thorough and comprehensive overview of the important and unimportant aspects of investing for financial independence. It is well-written and offers helpful advice for those looking for guidance on the matter.
👎 This article does a poor job of explaining the more complex aspects of investing for financial independence. It is sometimes difficult to follow and does not provide enough detail on some of the more important topics.
AI Discussion
Me: It's about the things that are important and unimportant when it comes to investing for the long-term. It talks about staying the course, focusing on low-cost index funds, and having a guideline for when you have enough money to become financially independent. It also talks about having a savings rate and becoming financially independent.
Friend: That's interesting. It's great to see all the different aspects of investing it discusses. What do you think are the implications of the article?
Me: I think the article highlights the importance of having a long-term outlook when it comes to investing, as well as the importance of low-cost index funds. It also highlights the importance of having a savings rate and becoming financially independent. Finally, the article emphasizes the importance of understanding the risks associated with investing, as well as the need to stay informed and make informed decisions. Overall, I think the article provides a great overview of the important aspects of investing for the long-term.
Action items
- Research the 4% Rule and the Trinity Study to understand the risks and rewards of investing.
- Calculate your savings rate and set a goal to increase it.
- Compare different investment companies and their fees to find the best option for your portfolio.
Technical terms
- VTSAX
- Vanguard Total Stock Market Index Fund.
- The 4% Rule
- A rule of thumb for determining how much money you need to save in order to be financially independent.
- Sequence of Return Risk
- The risk that a portfolio will suffer losses due to the order in which returns are received.
- VFIAX
- Vanguard’s S&P 500 index fund.
- ETF
- Exchange traded fund.
- VTI
- ETF version of VTSAX.
- VOO
- ETF version of VFIAX.
- Expense Ratios (ER)
- Fees funds/ETFs charge their shareholders and are a direct drag on returns as investors.
- Active Management
- A type of investing that involves making decisions about which stocks to buy and sell.
- FI
- Financial independence.