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Very very low risk tolerance

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  • #16
    Originally posted by Larry Ragman View Post

    Yeah, but everything does that is not a hard asset and the question requested options for someone risk adverse clearly defined in terms of market risk. That means not stocks, though maybe real estate would be ok. Short term allows adjustment for interest rates rising and the first option at least adjusts for inflation. Now I sorta like paying off the mortgage since the return is guaranteed, though I concede keeping the mortgage payments is superficially attractive since it will be repaid with inflated dollars.
    how has the inflation protected investment done in real terms past 1 yr?

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    • #17
      Originally posted by jacoavlu View Post

      how has the inflation protected investment done in real terms past 1 yr?
      3% return reported but I suppose real depends on one’s experienced rate of inflation. You can subtract from your preferred metric.

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      • #18
        Originally posted by Larry Ragman View Post

        3% return reported but I suppose real depends on one’s experienced rate of inflation. You can subtract from your preferred metric.
        It’s not “I suppose”. It’s real. Again that’s the point. 3% nominal is not low risk except in bizarro world where people choose to ignore reality

        there is no low risk. The investor must understand this.

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        • #19
          Originally posted by jacoavlu View Post

          there is no low risk. The investor must understand this.
          Maybe. Perhaps the OP has a situation where it is imperative that principal is preserved. Regardless, I was trying to answer the question asked, not change the paradigm.

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          • #20
            Originally posted by Larry Ragman View Post

            Maybe. Perhaps the OP has a situation where it is imperative that principal is preserved. Regardless, I was trying to answer the question asked, not change the paradigm.
            Perhaps. Perhaps not. Im not changing the paradigm. Risk is not defined. That’s the point.

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            • #21
              Originally posted by jacoavlu View Post

              “safest”

              that’s kinda the point. Some people think a guarantee getting their dollars back at a future date plus some guaranteed fraction of a penny of yield is safe, when it’s not safe at all bc inflation is 15%+
              curious why you keep quoting 15%+ interest rate. Is that your estimate for future?

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              • #22
                Originally posted by jfoxcpacfp View Post
                What is the purpose of the money? Leave to kids? Nursing home protection? The biggest risk of keeping $200k in cash for many years is not that they will lose it all in the stock market (assuming they appropriately invest, which is really quite easy) but that the nursing home costs double or triple by the time they need it. Huge risk of being “risk averse”. Of course, the kids won’t be calculating the inflation erosion and can just spend it to upgrade to 1st class on their next overseas vacation.
                Thank you all for the replies. The money is for retirement.

                I believe there’s a cultural difference in terms of investment for certain groups especially immigrant worker. There are certain immigrant workers that believe the stock market is a “game.” The friend immigrated to US for better opportunities. Built 2 different business and eventually invested into a real estate, which is generating passive income. Never placed any money in stocks.

                I asked about putting money in index fund, but heard stories of his friend losing money in the stock market. His net worth (mostly from real estate) would probably be more than enough for most physicians. Like many from his background, investment in tangible assests like real estate and gold appears safer to them.

                He does not want to invest in real estate anymore and, understands that his money is losing to inflation each year in the bank.

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                • #23
                  Originally posted by East coast View Post

                  curious why you keep quoting 15%+ interest rate
                  inflation

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                  • #24
                    banana stand

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                    • #25
                      Originally posted by chocolatebear11 View Post
                      There are certain immigrant workers that believe the stock market is a “game.”…

                      …I asked about putting money in index fund, but heard stories of his friend losing money in the stock market.
                      Sounds like neither he nor his friend have any understanding of the stock market or how to make money in it.

                      Which is a shame, because a five-year-old can grasp the concept.

                      Earn money. Invest money in broad market index fund. Keep hands off money until retirement.

                      Sounds like his next investment should be a book.

                      Also sounds like he needs to get a grip or will suffer the financial consequences.

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                      • #26
                        Originally posted by bovie View Post

                        Sounds like neither he nor his friend have any understanding of the stock market or how to make money in it.

                        Which is a shame, because a five-year-old can grasp the concept.

                        Earn money. Invest money in broad market index fund. Keep hands off money until retirement.

                        Sounds like his next investment should be a book.

                        Also sounds like he needs to get a grip or will suffer the financial consequences.
                        You’ll be surprised. Not everyone has financial literacy. Most servers and a lot of my technicians aren’t invested. Actually if you take a poll of medical student class, Im sure there’s a large portion that don’t understand the market.

                        anyways, he’s doing well because of his passive income through real estate, so he’s not worried, but it’s just so much wasted opportunity. Just wondering if there was a low risk tolerance investment but I guess there’s not really one.

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                        • #27
                          No kidding, it sounds like offering this 60 year old friend a copy of If, Only Investment Guide You'll Ever Need, Bogle, Bernstein, might be the better use of time and money. Three decades ago would have been better. Tomorrow is good enough. (Also offer those same books to the next generation or two for your friend.)

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                          • #28
                            Some don’t feel they can afford to take chances later in life due to not having any wiggle room although at 60 I’d say this person has time. He took chances, invested sweat equity and made money with RE so good for him. Not everyone feels a need to continue squeezing every penny after amassing millions or agonize over leaving the absolute maximum legacy.

                            It sounds like he would be fine even if he decided to keep stacks of 20s under the mattress so if he’s not interested in learning about the market I would recommend ladder CDs and maxing I-bonds for safe, ultra conservative options.

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                            • #29
                              Originally posted by chocolatebear11 View Post

                              You’ll be surprised. Not everyone has financial literacy. Most servers and a lot of my technicians aren’t invested. Actually if you take a poll of medical student class, Im sure there’s a large portion that don’t understand the market.

                              anyways, he’s doing well because of his passive income through real estate, so he’s not worried, but it’s just so much wasted opportunity. Just wondering if there was a low risk tolerance investment but I guess there’s not really one.
                              100% correct. Everything has a risk. Cash, gold, CD’s, treasuries, real estate, bonds, stocks. As an immigrant, your friend understands risk and returns. Conceptually, your friend will understand the value of diversification. Collectively, diversification is safest. Buy the whole basket, pretty simple just diversify.
                              There is a piece missing.

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                              • #30
                                Originally posted by jacoavlu View Post

                                inflation
                                Right - typo. Curious why have you stated that number multiple times?

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