HERE IS WHAT I LEARNED SO FAR. I'M NOT A FINANCIAL ADVISOR.
RESEARCH THE THINGS I SAY.
One important bit is how the guy working in investments keep his money in ETF.
I was lucky enough to work in the Silicon Valley 10 years ago and have colleagues that knew about ETF and explained them to me. It took me still 8 more years to understand fully what they are and open an investment account and buy one.
ETF are quite well-known in the US but scarcely known in Europe, at least in my social circles.
Most of the people I know in Europe doesn't know about ETF and only invest in it's mortgage of the house where s/he lives.
They only know about Real Estate and as soon as you speak about ETF they think you are preaching some get-reach-money-scheme and they ask you stuff like:"Ah so I should buy a lot of gold OR bitcoin?"...mmm...NO...do not buy a lot of gold and crypto...buy ETF which are diversified group of stocks to have a diversified investment.
FEW TIPS FOR WHO DOESN'T KNOW WHAT ETF ARE:
1) research passive investing with ETF
2) DO NOT TRY TO BEAT THE MARKET: The chances you are the smartest person on the planet and have incredible financial ideas that no-one else had are practically 0 and even financial geniuses get it worse than just buying a little bit of everything after a couple of years.
3) BUT Warren Buffet did it! Warren Buffet is not just an investor. He's a business man, he got down in trenches many times to save up companies. He created value as war-time temporary CEO.
4) do not invest with Robinhood/Etoro, get a investment bank that has been around 10-30 years but not a dinousaur. https://www.interactivebrokers.co.uk/ is available in many countries.
5) Start by buying only one ETF of a very generic market index with the lowest fees. For example MSCI World.
6) Do not buy ETF of niche sectors because they are just not diversified and you might as well just buy stocks and gamble.
7) Do not try to time the market. Just keep the ETF and instead of wasting time buying/selling stocks spend time working as an employee or startup founder.
8) People that tell you that they make money daily-investing should be taken as serious as professional poker player (to be clear both daily-investing and poker playing are NOT profession but just pure gambling and luck. The Casino always wins in the long run. Find something you love that creates value and do that.).
Just to point out it's index trackers you're recommending. The "ETF" part is just a method of purchasing an index tracker. There are other ways. ETFs are also available that invest in all kinds of garbage and are not necessarily index trackers.
My take on this as someone who lived in the UK the last 10 years or so: the main reason why ETF are less known are: less disposable income in the middle class/upper middle class(compared to the USA), it was much harder to buy stocks > 10 years ago imho
Yes, frankly though the acronym doesn't mean much and doesn't explain much of what it does. It became sort of the facto name for a stock that contains a tiny piece of many stocks. Instead of buying 1 stock of Apple you buy one stock of an ETF that contains many stocks.
For example this is the ETF I currently buy given by Italian investment account:
iShares Core MSCI World UCITS ETF USD (Acc) - SWDA - AFF
Acc=Accumulating
large and mid-cap
Benchmark MSCI World NR USD (NR= Net Return)
ISIN IE00B4L5Y983
1,585 companies from 23 Developed Markets (DM) countries
TOP 10 CONSTITUENTS
APPLE 4.44%
MICROSOFT 3.28%
AMAZON 2.69%
FACEBOOK 1.22%
TESLA 1.16%
ALPHABET C 1.08%
ALPHABET A 1.08%
JOHNSON & JOHNSON 0.85%
JPMORGAN CHASE & CO 0.77%
VISA A 0.64%
ETF aren't rocket science. They are not super easy either, maybe 2-4 weeks of research. It's quite probably they will literally DOUBLE your savings when you will retired. And you will be able to retire when you say so not when the governments tells you that you can.
There are 2 types of pensions funds essentially.
1) The ones that do not save money.
You pay pensions taxes now that just go to pay the people retired today.
Believe it or not the vast majority of governments pension funds are like this.
In Italy it's like this. You IRPEF money doesn't go in an investment, it pays the retirees of today. Now just wait and see what we'll happen with life expectancy increasing and population reduction.
2) The ones that buy things for you. And guess what they buy: usually 3 bonds and 2 ETFs.
And they will take 1-2% for that.
And you might think: "oh but 1-2% I can give awayt if I do not have to care about anything".
In practice though ETFs return 5-8% per year when kept for decades and the earnings are averaged. So the pension fund takes 1-2% from 5-8% which is 20-30%. On top of that there is compounding interest. When you will have retired it's likely you will have given away half of your savings to the company managing the pension fund/retiring plan.
There are many pension funds out there with varying degrees of performance. Just like with your health, in matters of personal finance you have to be an active participant and your own agent. Even if that means picking around for the best pension fund for you.
> Not sure where you are but you can often check where your money is invested and change funds
I did and I found out they just buy 3 bonds and 2 ETFs.
Very standard stuff. You can learn enough about bonds and ETFs to buy them yourselves and literally save HALF of your savings at retirement time.
This is typical in Spain too. If you have any kind of investiment you're mostly some kind of evil libertarian. It's basically what people is being told by the local press, so...
I'm moving to Valencia this summer! I'll use the Beckam Law and take a mortage.
If you are available I would love to ask you some financial questions about Spain! Please write me if you have time: g i o r g i o z a m p a r e l l i AT gmail DOT com (without spaces :)
I don't want to give you financial advice neither receive it.
If you have bought a house or done a mortgage I just wanted to know how is the process in Spain!
I just invest in ETFs & Stocks, and a bit of playing in Etoro, and I have money in a roboadvisor, so I can't help you in that. Again, in Spain, the best place for asking for financial help, aside from professional, is the Rankia.com forum.
> HERE IS WHAT I LEARNED SO FAR. I'M NOT A FINANCIAL ADVISOR. RESEARCH THE THINGS I SAY.
Most of personal finance can fit on a very small piece of paper. While the advice is slightly US-centric, I think it's fairly universal (it works for us Canadians):
The original index card, pictured above, has:[9]
1. Max your 401(k) or equivalent employee contribution.
2. Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20xx funds.
3. Never buy or sell an individual security. The person on the other side of the table knows more than you do about this stuff.
4. Save 20% of your money.
5. Pay your credit card balance in full every month.
6. Maximize tax-advantaged savings vehicles like Roth, SEP and 529 accounts.
7. Pay attention to fees. Avoid actively managed funds.
8. Make financial advisors commit to the fiduciary standard.
9. Promote social insurance programs to help people when things go wrong.
For Canadians: 401(k) ~ RRSP, (Roth) IRA ~ TFSA, 529 account ~ RESP.
The 20% seems high, (retired) actuary Fred Vettese recently came out with a good book, The Rule of 30:
> Easy: Save an amount equal to 30% of gross income, minus the amount you are paying towards a mortgage or rent, minus extraordinary short-term expenses like daycare costs.
> The rule aims to strike a better balance between competing financial priorities. It also makes it easier to decide how much to set aside each year, and is more realistic and achievable than saving a flat percentage of pay, especially during the expensive childcare years.
> This is all about consumption smoothing – not depriving oneself of a standard of living during the years of juggling competing financial goals. It backloads the high savings rate to later years when childcare expenses are long gone and the mortgage or rent payments make up a much smaller percentage of your gross income.
Also, there is some 'rule of thumb' floating around that says who need 70% of your pre-retirement income. This is inaccurate as Vettese and others show:
One important bit is how the guy working in investments keep his money in ETF. I was lucky enough to work in the Silicon Valley 10 years ago and have colleagues that knew about ETF and explained them to me. It took me still 8 more years to understand fully what they are and open an investment account and buy one. ETF are quite well-known in the US but scarcely known in Europe, at least in my social circles.
Most of the people I know in Europe doesn't know about ETF and only invest in it's mortgage of the house where s/he lives. They only know about Real Estate and as soon as you speak about ETF they think you are preaching some get-reach-money-scheme and they ask you stuff like:"Ah so I should buy a lot of gold OR bitcoin?"...mmm...NO...do not buy a lot of gold and crypto...buy ETF which are diversified group of stocks to have a diversified investment.
FEW TIPS FOR WHO DOESN'T KNOW WHAT ETF ARE:
1) research passive investing with ETF
2) DO NOT TRY TO BEAT THE MARKET: The chances you are the smartest person on the planet and have incredible financial ideas that no-one else had are practically 0 and even financial geniuses get it worse than just buying a little bit of everything after a couple of years.
3) BUT Warren Buffet did it! Warren Buffet is not just an investor. He's a business man, he got down in trenches many times to save up companies. He created value as war-time temporary CEO.
4) do not invest with Robinhood/Etoro, get a investment bank that has been around 10-30 years but not a dinousaur. https://www.interactivebrokers.co.uk/ is available in many countries.
5) Start by buying only one ETF of a very generic market index with the lowest fees. For example MSCI World.
6) Do not buy ETF of niche sectors because they are just not diversified and you might as well just buy stocks and gamble.
7) Do not try to time the market. Just keep the ETF and instead of wasting time buying/selling stocks spend time working as an employee or startup founder.
8) People that tell you that they make money daily-investing should be taken as serious as professional poker player (to be clear both daily-investing and poker playing are NOT profession but just pure gambling and luck. The Casino always wins in the long run. Find something you love that creates value and do that.).