jldugger/gist:8c9bf7f7721730dd90121055b39c559d

## gistfile1.txt
Reading List
------------
Random Walk on Wall St., *Burton Gordon Malkiel*
Financial Markets, *Robert Shiller* http://oyc.yale.edu/economics/econ-252-11


Investing Priorities
--------------------

Invest as much as you can in the highest priority, then apply the balance to
the next highest, until all money is allocated.

1. Pay off your credit cards
2. Employer Match
3. Emergency Fund (4-6 mo expenses)
4. Roth IRA
5. Remaining 401k contribution limit
6. Taxable Brokerage Account

Passive Investing Strategy
--------------------------
The S&P 500 averages 7 percent (Adjusted for inflation). Few active funds beat it consistently, but still charge
investors 1 percent of assets. The chief goal of a passive investing strategy is to match the S&P 500 while minimizing
costs (called an **expense ratio**). I've seen expense ratios for funds seeking to replicate the performance of the
S&P500 as low as 0.07 percent.

Diversification is a magical tool that lets you build a higher performing portfolio for the same risk. The S&P 500 is a
pool of 500 stocks, and mutual funds allow you to cheaply invest in all of them. Mathematically, the less correlated
your asset returns are, the more you can reduce risk (or improve returns without changing risk). 500 stocks is a lot,
but there's still a lot of return correlated between all of them. Different assets exist with less correlation.
For example, bonds are contracts loaning money to governments or companies. These assets are not well correlated with
stocks, so you can add them to your portfolio to reduce your risk. The AGG index benchmarks bonds, and there are low
cost index funds that track it.

The simplest portfolio I recommend is 70 percent SP500, 30 percent AGG across all your holdings. There's other assets,
but starting simple and learning over time is a decent strategy. It is assumed here that stocks are riskier than
bonds, so you can adjust up or down based on risk tolerance. Lifecycle Funds are special mutual funds that adjust risk
down as you age, but they are sometimes higher expense for that privilege, and as your porfolio grows, that expense
is bigger and bigger for what is essentially the same amount of work (but with bigger numbers).

Rebalancing
-----------

Put a recurring annual appointment on your calendar for a week before your birthday to rebalance
your portfolio. On this day, you will check if your portfolio is more than a few percent away from your target.
If it is, this is usually a sign that your portfolio is doing well. You should sell your winners (assets above target)
and buy more of the losers (assets below target). Thus you are selling high and buying low automatically, at a time
scale you can manage.

Retirement planning
-------------------
There's many reasons to save, but retirement is the biggest. For graduating seniors, retirement is a long way away.
The principal rule of thumb to know up front is the *4 percent rule.* Stocks make about 7 percent annually, but
the variance is plus or minus 14 percent. To minimize the risk of running out of funds, plan on living on an amount
equal to 4 percent of assets. Thus, if you have a $1m portfolio, you should only spend $40k from it annually.

Tracking & Documentation
------------------------

Many places purport to help you track your retirement savings. If you only have one acct, any broker will do. Most
will offer to help track your other assets. Mint does as well. I don't like sharing passwords and instead track
everything with GNUCash. Pick whatever works best for you.

But you should also have paper documentation. A cheap portable file organizer costs like ten bucks. Get one and some
hanging file folders. For every bank account you have, label a folder to put your paper statements and documentation
in. Organize the files by Transaction Accounts, Retirement Account, Liability (debts), Legal (taxes, insurance, non
debtcontracts). Color code them if you can. Organize papers within each folder by date, most recent towards the front.
When relevant mail comes in, read it, do any work you need, and file at the front of the relevant folder. As your
financial life grows in complexity, add new folders. After a while you might want to scan older documents and shred
them.
	Reading List
	------------
	Random Walk on Wall St., Burton Gordon Malkiel
	Financial Markets, Robert Shiller http://oyc.yale.edu/economics/econ-252-11


	Investing Priorities
	--------------------

	Invest as much as you can in the highest priority, then apply the balance to
	the next highest, until all money is allocated.

	1. Pay off your credit cards
	2. Employer Match
	3. Emergency Fund (4-6 mo expenses)
	4. Roth IRA
	5. Remaining 401k contribution limit
	6. Taxable Brokerage Account

	Passive Investing Strategy
	--------------------------
	The S&P 500 averages 7 percent (Adjusted for inflation). Few active funds beat it consistently, but still charge
	investors 1 percent of assets. The chief goal of a passive investing strategy is to match the S&P 500 while minimizing
	costs (called an expense ratio). I've seen expense ratios for funds seeking to replicate the performance of the
	S&P500 as low as 0.07 percent.

	Diversification is a magical tool that lets you build a higher performing portfolio for the same risk. The S&P 500 is a
	pool of 500 stocks, and mutual funds allow you to cheaply invest in all of them. Mathematically, the less correlated
	your asset returns are, the more you can reduce risk (or improve returns without changing risk). 500 stocks is a lot,
	but there's still a lot of return correlated between all of them. Different assets exist with less correlation.
	For example, bonds are contracts loaning money to governments or companies. These assets are not well correlated with
	stocks, so you can add them to your portfolio to reduce your risk. The AGG index benchmarks bonds, and there are low
	cost index funds that track it.

	The simplest portfolio I recommend is 70 percent SP500, 30 percent AGG across all your holdings. There's other assets,
	but starting simple and learning over time is a decent strategy. It is assumed here that stocks are riskier than
	bonds, so you can adjust up or down based on risk tolerance. Lifecycle Funds are special mutual funds that adjust risk
	down as you age, but they are sometimes higher expense for that privilege, and as your porfolio grows, that expense
	is bigger and bigger for what is essentially the same amount of work (but with bigger numbers).

	Rebalancing
	-----------

	Put a recurring annual appointment on your calendar for a week before your birthday to rebalance
	your portfolio. On this day, you will check if your portfolio is more than a few percent away from your target.
	If it is, this is usually a sign that your portfolio is doing well. You should sell your winners (assets above target)
	and buy more of the losers (assets below target). Thus you are selling high and buying low automatically, at a time
	scale you can manage.

	Retirement planning
	-------------------
	There's many reasons to save, but retirement is the biggest. For graduating seniors, retirement is a long way away.
	The principal rule of thumb to know up front is the 4 percent rule. Stocks make about 7 percent annually, but
	the variance is plus or minus 14 percent. To minimize the risk of running out of funds, plan on living on an amount
	equal to 4 percent of assets. Thus, if you have a $1m portfolio, you should only spend $40k from it annually.

	Tracking & Documentation
	------------------------

	Many places purport to help you track your retirement savings. If you only have one acct, any broker will do. Most
	will offer to help track your other assets. Mint does as well. I don't like sharing passwords and instead track
	everything with GNUCash. Pick whatever works best for you.

	But you should also have paper documentation. A cheap portable file organizer costs like ten bucks. Get one and some
	hanging file folders. For every bank account you have, label a folder to put your paper statements and documentation
	in. Organize the files by Transaction Accounts, Retirement Account, Liability (debts), Legal (taxes, insurance, non
	debtcontracts). Color code them if you can. Organize papers within each folder by date, most recent towards the front.
	When relevant mail comes in, read it, do any work you need, and file at the front of the relevant folder. As your
	financial life grows in complexity, add new folders. After a while you might want to scan older documents and shred
	them.