Why you own etfs. Mutual funds not tax efficient

A little segue into the psychology of “savers and spenders”…….
 

rg123, I think it goes beyond just your “savers and spenders” b&w categories. I think it’s more of a spectrum because there are extremes at either end.

The psychology of money is fascinatingly complex.

There are savers who are quietly careful with their money because they need to be. That makes good sense.

And there are savers who are sensible savers because they are planners and that makes sense to me, too.

But then there are other types of “savers” whose personalities go beyond need or just that “rainy day” routine.

Sometimes certain types of “savers” go overboard because they are control freaks and that trait carries over into other parts of their lives, too. That is just their nature. Control freaks are toxic to relationships.

Then we have the “savers” who make a game out of being just plain cheap — you know, like those who conceal-carry their individual packets of Crystal Light into TV restaurants and then order water — and if they are really tacky, they order water with lemon. (I don’t care if somebody needs to order just water with their restaurant meal, but to whip out those little make-your-own packets is ill-mannered, to say the least.)

If I may, I will add my interpretation of your statement that you have more money saved than you will ever spend………

I am not going to go all judgey on you and say you are bragging……..

I think what you mean could be the same thing as what a very wise woman (who taught me some things I know about money) told me when she was a few years into a comfortable, no money worries, retirement………

She said, “Ya know, by the time you can buy anything you want, you don’t want it anymore.”

Boomer

This thread is about inflation. My only point was that, if you have no assets saved, the only effect inflation has on you is the day to day cost of the things you buy. But, if you have savings, and the available interest rate on savings is lower than the inflation rate, your saved money is affected as well as your daily expenses. In the past, the interest rate was much higher on savings, so you were not affected as much by inflation.

A sassin’ back and history remembered……
 

Uh oh, I guess that was to try to put me in my place. But. But. But. Thinking outside the box and coloring outside the lines and reading between the lines is where my place has always been. So I like to take a little side trip with topics now and then. You know — on topic, but expanded. (sigh)

About what you are saying about the Fed stacking the deck against us regular people who are planners — I agree. We planners have every right to be pizzed off. I think the last time I bought 5% CDs was in 2005. (I did catch a briefly open window at 2% a few years ago, but that window slammed shut fast.)

I feel like the 1980s made the Fed fear inflation to the point of paranoia. In 1979 we bought a nice brick 3/2 ranch for somewhere in the $65,000 range with a 20% downpayment and a locked in mortgage rate of 10% — that we were thrilled to get. Not long after that, rates got even worse.

And then, CD rates went to crazytown. I was basically still a kid at the time but I knew enough to put my daughter’s tuition money in 17% CDs — and I think those rates got even higher. Young though I was, I knew those CD rates were out of whack, but I also knew to grab them while I could. (Volker-time)

The Fed has been screwing around with us for a long time. Fearing inflation led to too-cheap money and now we are in the throes of needing those bushel baskets of money to buy houses that are really not worth even near the price.

But banking and builder and real estate lobbyists are a lot more powerful than us little people.

Besides all that, savers have been forced into staying in the stock market to get any return at all. We can keep our moat of cash around stocks, but have to face no returns on that safety.

If CD rates go up to even 5 or 6% — and I don’t think they will — older, more risk-averse investors will pull money out of this really old bull market because they might have made enough on those stocks to just relax a little and break up with their advisors. Remember a lot of older investors still have pensions. Younger people will not even know what a pension is. Corporations have lobbyists. Pensions are costly to corporations. And don’t get me started on healthcare costs — older boomers did not have to deal much with those through most of our careers and we did not have student loans out the wazoo. Tuition costs were manageable. (And, btw, re. advisors — ever noticed the rise of financial advisors in the past 30 years? Especially this century, more and more? Everybody and their dog is getting into that field now. That group probably has their lobbyists, too.)

Who knows what the Fed will do now. In my Ohio home city, houses are still selling faster than ever before. It takes guerilla tactics to get one. And younger people are having a really hard time getting starter houses because of downsizing boomers and nimble flippers with cash.

Lots to think about these days. And lots of reasons to recognize that older boomers often had things easier financially, in spite of that rough inflation ride that got us 40 years ago for a while. Now, powerful money has its fingers in everything.

But, now, I must be off. :)

Boomer

Not trying to put anyone in their place. Just doing the math. I like math. My original retirement plan years ago was to sell all stocks and live off the interest from CDs. But, now I am 40 percent invested in stocks because CD rates are too low.

I am seriously curious about something…..if you do not mind my asking…….

Do you have any thoughts on where you think CD rates might go?

I would love to see something from CDs, but I do not have my hopes up.

Boomer

Some Reading.

Will CD Rates Rise in 2022? Here's What Experts Are Saying.

In my opinion, interest rates, including CDs, will remain very low for a long period of time. The goal is to stimulate the economy and encourage borrowing, at the expense of people who are frugal and just want to preserve their savings. But, I have still done extremely well by being frugal and avoiding all debt, including mortgage debt. To me, the worst advice you can give to a young person is that they need to "establish credit". My advice is to pay cash for everything and never go into debt.

Thinking prime will go to 3-4% but suspect banks will stay at around 2%.

Bingo.

Keep CD's "out of your retirement portfolio".
Quotes are used because I don't mean 100% out.

Look back, since 1960, what was the average recovery time from a dip in the S&P 500?
~ two years.
So put a couple years of annual expenditures in CD's, Money Markets, ST Bonds, etc., and INVEST THE REST.

History does not promise Tomorrow, but 60 years, or 40 years, or 20 years give me a lot of comfort. :MOJE_whot::MOJE_whot:

I don't know about anyone else, but i love paying long term capital gains. . because I am paying a reduced rate from income, and capital gains means that I am getting wealthier, unlike having capital losses which makes me much poorer, and less able to afford nice things.

some people just like to whine about success

To some extent it is an emotional thing. When we did our taxes and were accumulating 1099's had no idea our capital gain distributions would be as high as they were.

Electric lithium golf cart is my main vehicle rather than filling up $80 of gas a week in a premium gas car.
Don't but grocery items that are now twice the price.
Buy chicken and pork in bulk at Costco
Travel less
Not watching regular TV anymore and all the lousy commercials

sure, but its negative for success, which if you examine it on an emotional level, is counter productive, and keeps you down and is a subconscious block to successful investing.

Simply stated: the difference in mentality of wealth maximization vs tax/expense minimization. wholly opposite mentalities, and you get what you subconsciously want.

to be successful in investing, you have to celebrate success, not demean it. . . its all in the psychology to keep going forward. .

My guiding statement came from T Boone Pickins, who had a $20M gain, and thought about selling, but waited to sell when the investment became eligible for long term capital gains. When that time came, the profit was gone. Taxes should seldom enter the gain selling decision. Taxes are a by product of success. . .

likewise, if you want to not pay taxes on gains, which is a tax minimization strategy, you need to pay more attention to statements, and then sell losers to offset gains prior to year end. . .

I have more examples, but I am still on my fixed income, my salary