Investment knowledge

chap1.begin

Income-Deposit = Expenses
Start saving, raise the goose that lays golden eggs, and increase the savings ratio with each salary increase

Six basic human needs

1. Certainty
2. Uncertainty/change
3. importance
4. Contact/love (interpersonal relationship)
5. growing up
6. Dedication

chap2. See through lies

1. Active funds can beat the market

In fact, most active funds underperform the market, and their performance is quite unstable. Active investment funds are not as stable and reliable as investment index funds

2. Fund fees are very low

In fact, all the fees of many active funds: buying fee, management fee, custody fee, selling fee, plus the annual fee rate exceeds 4%,
while the fee of index funds will be much lower, generally around 1%

3. Our income you see is what you get

This is not the case. It is also related to the timing of your purchase. If you buy at the highest point, you may still lose money.
If you make a fixed investment during the upward channel, the return is definitely not as good as the fund's full increase.

4. I am your economic man, I am here to help you

This is a trust issue. Ponzi schemes and rat warehouses are emerging one after another. The key is to keep your eyes open and identify reliable people and institutions. Don't trust others when it comes to money. The promise of high returns is doubtful.
The simplest is the fixed investment index fund

5. K401 for pension

The author is an American, and he is talking about the situation in the United States, which is equivalent to pension insurance. There are two main risks. Inflation will cause future pensions to be insufficient to live, and government financial deficits may cause social security to be spent early,
and then there will be no money to spend. So plan for yourself

6. Target date fund

Some unreliable funds in the United States mainly use bond ratios to control risks. The closer the retirement date, the higher the bond ratio, which is equivalent to a very simple asset allocation, but the correlation between bonds and stocks is too high to
be effective. The role of risk aversion.

7. I hate annuities, you should hate too

An annuity is equivalent to taking part of the salary out of your salary, and the company will invest for you. The main problem is that the investment fund charges too high

8. High risk is high yield

A really good investment is low-risk and high-yield. Assuming a 50% return in the first year and a 50% loss in the second year, the final return will be a loss of 25%; and if a positive return is 10% each year, the final return will reach 21%. Therefore, long-term stable positive returns
are king.

9. Self-deception lies

Don't set your own limits. Many things are not as difficult as you think. You must dare to think and do.

chap3. Set a small goal

First set a practical goal, and then refine it, so that it is feasible to implement

Five standards of financial freedom

1. Financial security. Deposit income [conservatively calculated at 5%] cover basic life needs
2. Financial vitality. Deposit income cover half of the current additional expenses
3. Financial independence. Deposit income covers all current additional expenses: buying clothes, eating out, entertainment, etc.
4. financial freedom. Can get two or three luxury goods or small dreams: such as buying a luxury house, opening a store, traveling around the world for a few months each year
5. Absolute financial freedom. More extra bold dreams can be realized

Five ways to accelerate wealth accumulation

1. Save more. Reduce expenditure, increase the proportion of wage savings and reduce unnecessary expenses: meals, coffee, etc. Check the recurring expenses and confirm the necessity
2. Make more money. Open source, invest in yourself, and increase your value. Learn, grow, and improve yourself. dare to try
3. Reduce costs and reduce taxes. Reduce the cost of investment, such as the rate of public funds. The tax reduction mainly refers to the situation in the United States, and different states have different tax rates.
4. Get a higher rate of return on investment. Look for opportunities for risk-return asymmetry, such as low-valued white horse blue-chip leading stocks when the bear market crashes. Spread the risk.
5. Change your lifestyle. For example, choose a city with the largest (income-cost of living). Manage health and manage the relationship between husband and wife.

chap4. Asset allocation

Test how deep the river is and don't put both feet in it.
Three tools to reduce risk: selecting securities (selecting investment targets), timing (buying when undervalued in the market), and asset allocation.

Low-yield safety bucket

1. Cash and cash equivalents (monetary funds)
2. Bonds (national bonds, bond index funds)
3. Large deposit certificate
4. Real estate
5. Social security (pension insurance)
6. pension
7. life insurance
8. Structured notes. The author described that it is possible to achieve a guaranteed return and enjoy the return of the stock market. If you check it online, you still need to see the specific instructions. If the guaranteed return is too low, it is better to buy bonds. If there is a risk of loss, it is better to buy an index fund yourself. If the fee is too high, you can directly pass

High-yield risk bucket

1. Equity
2. High-yield bonds (junk bonds)
3. Real estate (residential, apartment, commercial real estate, real estate trust fund)
4. Commodity futures
5. Foreign exchange
6. Collection
7. Structured notes

Bucket of dreams

Save a sum of money to fulfill your small dream, such as a trip to the Maldives; a ski vacation; holiday villas/apartments; luxury cars, etc.
Principles: 1. Only save enough money to implement it, and cannot consume in advance. 2. Cannot use the goose that lays the golden eggs.
How to save money:
1. Suddenly get a large sum of money, such as year-end prizes, lottery winnings, etc., you can put a part in the dream bucket
2. Suddenly make a big profit in the risk bucket, and you can withdraw part of the income to the dream bucket

David Swenson Portfolio

U.S. domestic stocks (Wilson 5000 Global Market Index) 20%
International Stocks (MSCI Country Index) 20%
Emerging Market Stocks (MSCI Emerging Market Country Index) 10%
Real Estate Trust (FTSE Real Estate Investment Trust Index) 20%
United States Long Term Treasury bonds (Barclays Treasury Bond Index) 15%
Inflation Protected Treasury Bonds (Barclays Long-Term Credit Index) 15%

John Borg preliminary configuration

Age Safety Bucket
100-Age Risk Bucket

Timing

1. The bear market with the market crash is a good time to buy undervalued quality assets
2. Diversified investment in different asset types, diversified investment in different markets, diversified to different times (index fund fixed investment)
3. To rebalance , check assets once every six months or a year to see if the proportions of various assets maintain the original proportions, and sell some of the assets with the increased proportion to buy the assets with a reduced proportion. Or it is execution that is extremely hot in the stock market.
4. Share an optimization strategy for fixed investment: adjust the fixed investment amount according to the rise and fall. For example, the initial fixed investment of 1000, and the increase of 1% one month later, the fixed investment amount is (1-1%) 1000=990, or (1-1%) ( 1-1%)*1000,
   if it drops by 1% after one month, the fixed investment (1+1%)*1000 = 1010

chap5. Lifetime Income Plan

24/7 investment strategy

Traditional asset allocation is to allocate the portfolio in proportion to the amount, but in fact it should be allocated according to the ratio of risk to return. For example, 50% bonds and 50% stocks, what is the risk ratio: 5% to 95%.
Investment Four Seasons: According to changes in economic growth rate and inflation rate, it can be divided into 4 quadrants. In this way, 4 economic environments can be obtained, which can correspond to 4 types of assets.

Suggested configuration scheme:

• 30% stock
• 15% medium-term government bonds (7-10 years)
• 40% long-term government bonds (20-25 years)
• 7.5% gold
• 7.5% of commodities
  are rebalanced at least once a year

Never lose money

If you lose 50%, you need 100% gain to make it back. Loss will seriously reduce investment returns.

pension

If you are in your old age, when you are not working, you hope to generate stable cash flow every year through investment. The previous method has problems. If the market is turbulent and stocks and bonds fall sharply, taking out a portion of the money to be spent at this time will cause
permanent losses to assets . At this time, we need an investment that can stably generate cash flow and never lose money.
The financial product recommended by the author is annuity:

• Variable annuities: Most of them are public funds covered by insurance, no capital protection, double fees, insurance companies collect once, fund companies collect once. The author strongly criticizes
• Immediate annuity: pay a large sum of money to the insurance company, and you can receive a fixed income every year, and you can start to receive it immediately (within 1 year) until the end of life.
• Deferred annuity: Give the money to the insurance company in one lump sum or in installments over several years, starting at a certain age (50, 60), and receiving it every year. According to the income, it can be divided into 3 types: fixed annuity, index annuity, and mixed annuity. (This is the situation in the United States. China does not know if there are so many options)
• Fixed annuity: Provide a specific and guaranteed rate of return (such as 3% or 4%), and a fixed rate of return can be obtained every year for a certain period of time.
• Fixed index annuity: to obtain index returns, while ensuring the safety of principal.

QA:
Q1. What should I do if I die young?
A1: The heir can receive the balance of the annuity.
Q2. What should I do if I use the money in a hurry?
A2: How many fixed index funds are allowed to withdraw 10%-15%. A handling fee is required to surrender the insurance. The closer the time, the higher the cost.

Advantages of life insurance

1. Income tax exemption
2. Tax exemption
3. No funding limit
4. Can be left to the heir

Living trust

Assets can avoid court certification after death. You can add an incapacity clause to allow someone to act as a successor trustee to handle bills and other matters.

chap6. Master’s experience

The basic principle:

1. Don't lose money
2. Take small risks and make big money
3. Forecast and dispersion
4. Never stop

Carl Icahn

1968-2013 compound annualized rate of return 31%. Find high-quality but poorly managed companies, conduct mergers and acquisitions, and then optimize management, improve efficiency, and increase corporate performance.

David Swenson

The 27-year annualized rate of return is 13.9%. Manage endowments from 1 billion to 23.9 billion. Wrote "Unconventional Success"
three tools to increase revenue:

1. Asset allocation (most important)
2. Market timing
3. Securities selection
   Buying index funds will increase transaction costs while diversifying.
   70% equity + 30% fixed income

John Borg

Created an index fund company-Pioneer Company, with a management scale of US$2.86 trillion.
The fees of public funds are too high, and the performance level is also unstable. There is a contradiction between whether a public fund company wants to make money for shareholders or for customers.
Investment principles:

1. Your asset allocation should be consistent with your risk tolerance and your goals
2. Diversify investment and invest with index funds
3. Don't trade. Always hold
4. The ratio of bond funds is as old as age. This is a rough benchmark

Warren Buffett

What Buffett wants to say is in the letter to shareholders. Investment index funds, always held.
Buffett’s Trust Asset Allocation: 10% Treasury Bond + 90% Standard 500 Index Fund

Paul Tudor Jones