Hey all, just wanted to say as a new INSIDERS Member, this place is awesome!
I have been posting a bit in the normal forum, but wanted to really disclose some more private things here in the INSIDERS Forum in hopes of getting some solid advice for the group regarding investments and money systems from MJ.
After reading MJ's book, the one biggest thing that I took away was about building a money system. Honestly had no idea you could get paid monthly dividends from mutual funds.
A bit of background on myself.
I have been working my a$$ off ever since I dropped out of college and in 3 short years, I have built a business that brings in a steady six figures of profit a month and I can run it all by myself. It is in the online advertising space. I have been saving all my money and I am at the point where I have hit my number. The issue is that I just have the money sitting in my bank account. Crazy to do it at this age, so I am very grateful, but this money needs to do better than the .25% interest I am getting (Less than $1K a month and taxed at the highest rate).
MJ put together a great blog post here that I have read countless times:
How to Never Work Another Day in Your Life, The Money-System Portfolio
He also mentioned in the normal forum for a user to "Start a thread in the INSIDERS forum, Ill disclose some things there insofar as my "investment" philosophy."
https://www.thefastlaneforum.com/in...-cash-sitting-investment-account-what-do.html
I didn't see any thread created, so I figured I would do it.
Just to preface what my current situation is; I am still living at home with my parents, so my living expenses are low. I operate the business out of my room and help pay for most of the bills around the house. I know it seems ridiculous, but things are working and have been working, so there is no need to blow money on any office space. Personally I hate spending money on unnecessary things. Even though I have a good amount of money in my bank account, my largest purchase for myself was a $2K laptop.
Being that my parents together only make around $50K a year, I grew up around tight spending and have maintained that since growing my wealth. This also makes it hard when searching for advice though. We don't have any wealthy friends or people that I can ask for advice when it comes to things like investing. Most everything I learn is self taught and I am really glad I discovered MJ's book and this forum. It is just tough to trust people when their goal is to sell you the investment or policy that makes them the highest commission.
Investment wise, my accountant set me up with a financial adviser who setup the general things. I have a 401K that I max out every year, an annuity and 2 life insurance policies. All earning yearly returns, but money I cannot touch for another 35 years or so... I have no debt either. I basically just get killed on federal and state taxes.
My biggest goal for starting my business and working so hard was that one day, I wanted to buy myself a nice home. After looking at the real estate market in my current area all this year, there is nothing worth buying. I have no problem waiting until the right house pops on the market. I also wanted to buy my house cash, but doing that would prevent me from having a large money system. In the mean time, I think it would be smart to have the money appreciating instead of losing value to inflation.
Here are the issues that I am faced with that have me putting off starting a money system and what I need help with. Hopefully some users here are faced with the same questions and please forgive my lack on financial knowledge.
1) End of year fund distributions and not wanting to buy at the wrong time
Ex. https://www.thefastlaneforum.com/investing-trading/3289-buyer-beware-buying-funds-year-end.html
In this helpful post, MJ talks about how buying a fund near the end of the year can screw you on unnecessary capital gains.
My question is, being mid November, is it a good time to be wanting to start a money system? I noticed that since the election, the price of stocks has gone down, but the price of bond funds has gone up. Interest rates should be pegged down for the next year or two due to the quantitative easing, so the bond funds should do well, but I am anticipating an exit if the economy boosts around 2014-15. Also, how/where do you find the date when a fund will pay capital gains? I see on Morningstar and Marketwatch they have dividend dates, but nothing showing capital gain distributions.
Come 2013, the long term capital gain rate might jump. Has this changed the strategy of investing in some funds?
2) Duration/Liquidity of Investment and Fees
The way my business is setup, I don't pay quarterly taxes. I simply wait until the end of the year, calculate my tax expense with my accountant and pay 90% of the state (CA) and federal taxes by January 5th, 2013. This means that come January 5th, 2013, I need to have over $1M in my corporate account to pay for my taxes. Should I keep this money unallocated in savings to cover the tax bill, or try and invest it along with my other money, but liquidate/pull the money need for taxes out near the end of December?
I would want to avoid getting hit with unnecessary taxes and redemption fees. I can see some funds will charge no fees if you hold for more than 30 days, but then what is the earned money - short term capital gains on the sale and dividend income for a month?
3) Taxes
I live in California, so I have the strategic option to invest in CA Municipal Bond funds. This saves me on both the Federal and State taxes and there are funds that pay monthly dividends. Would you prefer these to the federal bonds, or use a combo of both - with more being in CA for the tax advantage?
Since I am in the highest federal tax bracket and California bracket, the savings are great, but what else should I add to my portfolio to diversify whilst not getting killed on federal and state taxes?
In the Money System example MJ wrote about, he has funds in the following sectors: Government Bond, Australia/Asian, Municipal, International Emerging Bond, REIT, Cash/Currency, Utility, Preferred Stock
Is it recommended to diversify like this?
I found they have these things called Lazy Portfolios:
Aronson Family Taxable - Lazy Portfolios - MarketWatch.com
Interesting and relatively safe, but low dividends and unfavored tax positioning. I am not trying to be greedy and want insane yields, but being able to yield 5% a year after tax would be more than enough for me.
4) Investment/Brokerage Diversification
What is your opinion on brokerage diversification? Should I have everything setup through one or a few companies? In doing my research, I have seen that some brokerages don't reinvest dividends back into funds (I think it is called Cash Sweeps). Many of the big funds have their own systems: Fidelity, T. Rowe Price, Vanguard, etc. and you could save money by going direct.
Tips - Are there any big pieces of advice that novices should know before jumping into starting a Money System?
Things like buying a fund near the end of the year when capital gains hit.
Anything around fees, discounts/premiums, NAV prices, closed-ended funds vs open-end funds, etc.
In MJ's blog post about Money Systems, there was a lot of good info, but I wasn't sure what he meant by: Writing covered calls on any dividend equity position and naked puts on down-drafts.
MJ, It would also be helpful to know your current holdings if you don't mind sharing that.
Thanks for all the help and introducing me to the world of Money Systems. I apologize for the long post and for being so needy with all the questions, but I am just trying to figure out the best way to get things going. It is really tough to find honest financial advice out there.
I have been posting a bit in the normal forum, but wanted to really disclose some more private things here in the INSIDERS Forum in hopes of getting some solid advice for the group regarding investments and money systems from MJ.
After reading MJ's book, the one biggest thing that I took away was about building a money system. Honestly had no idea you could get paid monthly dividends from mutual funds.
A bit of background on myself.
I have been working my a$$ off ever since I dropped out of college and in 3 short years, I have built a business that brings in a steady six figures of profit a month and I can run it all by myself. It is in the online advertising space. I have been saving all my money and I am at the point where I have hit my number. The issue is that I just have the money sitting in my bank account. Crazy to do it at this age, so I am very grateful, but this money needs to do better than the .25% interest I am getting (Less than $1K a month and taxed at the highest rate).
MJ put together a great blog post here that I have read countless times:
How to Never Work Another Day in Your Life, The Money-System Portfolio
He also mentioned in the normal forum for a user to "Start a thread in the INSIDERS forum, Ill disclose some things there insofar as my "investment" philosophy."
https://www.thefastlaneforum.com/in...-cash-sitting-investment-account-what-do.html
I didn't see any thread created, so I figured I would do it.
Just to preface what my current situation is; I am still living at home with my parents, so my living expenses are low. I operate the business out of my room and help pay for most of the bills around the house. I know it seems ridiculous, but things are working and have been working, so there is no need to blow money on any office space. Personally I hate spending money on unnecessary things. Even though I have a good amount of money in my bank account, my largest purchase for myself was a $2K laptop.
Being that my parents together only make around $50K a year, I grew up around tight spending and have maintained that since growing my wealth. This also makes it hard when searching for advice though. We don't have any wealthy friends or people that I can ask for advice when it comes to things like investing. Most everything I learn is self taught and I am really glad I discovered MJ's book and this forum. It is just tough to trust people when their goal is to sell you the investment or policy that makes them the highest commission.
Investment wise, my accountant set me up with a financial adviser who setup the general things. I have a 401K that I max out every year, an annuity and 2 life insurance policies. All earning yearly returns, but money I cannot touch for another 35 years or so... I have no debt either. I basically just get killed on federal and state taxes.
My biggest goal for starting my business and working so hard was that one day, I wanted to buy myself a nice home. After looking at the real estate market in my current area all this year, there is nothing worth buying. I have no problem waiting until the right house pops on the market. I also wanted to buy my house cash, but doing that would prevent me from having a large money system. In the mean time, I think it would be smart to have the money appreciating instead of losing value to inflation.
Here are the issues that I am faced with that have me putting off starting a money system and what I need help with. Hopefully some users here are faced with the same questions and please forgive my lack on financial knowledge.
1) End of year fund distributions and not wanting to buy at the wrong time
Ex. https://www.thefastlaneforum.com/investing-trading/3289-buyer-beware-buying-funds-year-end.html
In this helpful post, MJ talks about how buying a fund near the end of the year can screw you on unnecessary capital gains.
My question is, being mid November, is it a good time to be wanting to start a money system? I noticed that since the election, the price of stocks has gone down, but the price of bond funds has gone up. Interest rates should be pegged down for the next year or two due to the quantitative easing, so the bond funds should do well, but I am anticipating an exit if the economy boosts around 2014-15. Also, how/where do you find the date when a fund will pay capital gains? I see on Morningstar and Marketwatch they have dividend dates, but nothing showing capital gain distributions.
Come 2013, the long term capital gain rate might jump. Has this changed the strategy of investing in some funds?
2) Duration/Liquidity of Investment and Fees
The way my business is setup, I don't pay quarterly taxes. I simply wait until the end of the year, calculate my tax expense with my accountant and pay 90% of the state (CA) and federal taxes by January 5th, 2013. This means that come January 5th, 2013, I need to have over $1M in my corporate account to pay for my taxes. Should I keep this money unallocated in savings to cover the tax bill, or try and invest it along with my other money, but liquidate/pull the money need for taxes out near the end of December?
I would want to avoid getting hit with unnecessary taxes and redemption fees. I can see some funds will charge no fees if you hold for more than 30 days, but then what is the earned money - short term capital gains on the sale and dividend income for a month?
3) Taxes
I live in California, so I have the strategic option to invest in CA Municipal Bond funds. This saves me on both the Federal and State taxes and there are funds that pay monthly dividends. Would you prefer these to the federal bonds, or use a combo of both - with more being in CA for the tax advantage?
Since I am in the highest federal tax bracket and California bracket, the savings are great, but what else should I add to my portfolio to diversify whilst not getting killed on federal and state taxes?
In the Money System example MJ wrote about, he has funds in the following sectors: Government Bond, Australia/Asian, Municipal, International Emerging Bond, REIT, Cash/Currency, Utility, Preferred Stock
Is it recommended to diversify like this?
I found they have these things called Lazy Portfolios:
Aronson Family Taxable - Lazy Portfolios - MarketWatch.com
Interesting and relatively safe, but low dividends and unfavored tax positioning. I am not trying to be greedy and want insane yields, but being able to yield 5% a year after tax would be more than enough for me.
4) Investment/Brokerage Diversification
What is your opinion on brokerage diversification? Should I have everything setup through one or a few companies? In doing my research, I have seen that some brokerages don't reinvest dividends back into funds (I think it is called Cash Sweeps). Many of the big funds have their own systems: Fidelity, T. Rowe Price, Vanguard, etc. and you could save money by going direct.
Tips - Are there any big pieces of advice that novices should know before jumping into starting a Money System?
Things like buying a fund near the end of the year when capital gains hit.
Anything around fees, discounts/premiums, NAV prices, closed-ended funds vs open-end funds, etc.
In MJ's blog post about Money Systems, there was a lot of good info, but I wasn't sure what he meant by: Writing covered calls on any dividend equity position and naked puts on down-drafts.
MJ, It would also be helpful to know your current holdings if you don't mind sharing that.
Thanks for all the help and introducing me to the world of Money Systems. I apologize for the long post and for being so needy with all the questions, but I am just trying to figure out the best way to get things going. It is really tough to find honest financial advice out there.
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