Invest With Investors You Respect And Trust: I’m Following USAA’s Lead

US Military - Fallen Soldier MemorialWhen the Japanese bombed Pearl Harbor, my grandfather was there to serve as a Captain in the Army. During the Vietnam War, my father also served in the Army and was sent overseas to be a stockade prison guard in nearby Thailand. Then there’s me. A man who did not carry the family tradition of serving one’s country. I felt unworthy.

I wanted to join the US Foreign Service to help America in a more diplomatic way, but I felt too stupid to pass the Foreign Service Exam, so I did not try. One of the duties my father had while serving at the State Department in Washington D.C. was to be an oral exam examiner. He shared with me stories of the difficulties in making it through.

I’ve discussed a lot about having money guilt in the past, and I think part of my guilt comes from not being able to serve our country as my father and grandfather have done. A part of me is driven to make up for my lack of contribution by helping people with their personal finances. Money is a means to a better life, and I hope to make some sort of difference.

It’s an atrocity that there are homeless veterans in America. The government needs to do more to make sure that every single veteran finds a job when they come home. The private sector has to take the lead as well. If there are veterans out there who would like to share their story or become a writer for Financial Samurai, shoot me an e-mail.

Should I Contribute To My 401K Or Invest In An After-Tax Brokerage Account?

foragingThe great thing about a 401k is that you are contributing with pre-tax money. The higher the tax bracket you are in, the more tax savings you will have. If you can start withdrawing from your 401k when you’re in a lower income tax bracket, then you’ve successfully conducted some tax engineering to boost your wealth.

The problem with the 401k is the 10% early withdrawal penalty before age 59.5. If the government gets desperate, they can raise the early withdrawal penalty percentage or increase the age limit. I ascribe a 75% chance one of these two things will occur over the next 30 years.

It’s easy to understand why saving for retirement is difficult. The value proposition is that you put your money away in an institution like Fidelity, which operates under the confines of the omnipotent government, who punishes you if you err from their rules, all for the chance that your money will grow decades down the road.

With no assurances from your money manager or the government that your money will be there in retirement, spending money now on instant gratification makes perfect sense. Give me the latest iPhone vs. the potential to have $25,000 more in retirement! Therein lies the dilemma of the 401k contributor who can’t max out his or her account every year, and who therefore doesn’t have excessive after tax savings for liquidity and other purchases.

What Is Venture Debt? An Investment With Higher Yields And A Lower Risk Profile

Venture Debt vs. Venture Capital Returns

Venture Debt vs. Venture Capital Returns

One of my favorite investment strategies is the barbell strategy where I invest in lower risk companies or indices to hit singles and doubles while concurrently investing in more speculative companies to hit potential home runs. I’ve structured my after-tax investments to be more low-risk through structured notes, and my pre-tax investments in my rollover IRA, SEP IRA, and Solo 401k to be more high risk. Given my pre-tax investments can’t be touched until 59.5 without penalty, I find it easier to take more risks with such funds.

My investments are solely a mixture of equity and fixed income to keep things as simple and straightforward as possible. My main goal is to come up with an appropriate asset allocation for my age and risk-tolerance, and let the investments perform as they may. Spending energy trying to beat the S&P 500 is a fool’s game. I’d much rather be traveling, playing tennis, building my online business, or writing with my spare time.

I’ve recently invested into a new investment vehicle I’m very excited about. It’s called venture debt. For those of you who are accredited investors who like the barbell investment strategy as well, I think you will appreciate learning about venture debt in this article.

Better Investing: Figuring Out How Much More To Dollar Cost Average

Confused on when to investDollar cost averaging is the act of consistently investing in a particularly security over a set interval of time. Most like to invest every two weeks or every month since that’s when most get paychecks. For example, let’s say you’ve got $2,000 left a month after you contribute to your 401k and pay your basic living expenses. You invest $1,000 every single month into the S&P 500 ETF, SPY, regardless of whether it’s reaching record highs or going into the crapper. That’s dollar cost averaging.

The great thing about dollar cost averaging is that you don’t have to think too much. All you have to do is not forget to invest, and eventually your financial nut will grow so large you’ll achieve make it rain status. Growing your wealth is all about practicing good financial habits that last over the long run. Sticking with a system of saving and investing will do way more than trying to uncover than unicorn stock for most.

At some point in your life you will either have a financial windfall (year-end bonus, inheritance, gift). There might also be violent corrections in the stock market as you’ll see in a chart below. Given the stock market trajectory over the long-term is up and to the right, you should come up with a framework on how to best take advantage of opportunities in a methodical way.

Here’s how I think about how much to dollar cost average. It’s kind of an oxymoron to “figure out” how much to dollar cost average, but hear me out. Hopefully my framework will help you better deploy your cash. 

Are Your Short-Term Actions Ruining Your Long-Term Wealth?

Long Term Gain

Long Dhosas Taste Better

I must be the biggest donkey on Earth because I just spent an egregious amount on a handyman to fix some things. I’ve had a funky bathroom window that would not close properly for years in my main San Francisco rental. I tried to fix it, but couldn’t. My tenants never complained over the years, so I let it be. The window is in a small bathroom without a vent, so having the window slightly cracked open helps relieve moisture.

Then one fine summer day my tenant’s neighbor below decided to start grilling on their little deck. Smoke would waft into the bathroom and through the rest of the apartment. So when my tenant texted me to fix the window, I said “no problem” and found a handyman on Craigslist immediately. He is actually a licensed contractor on Craigslist with “no job too big or too small.” In retrospect, I used a sledge hammer to push in a thumbtack.

He stopped over to visit my tenant directly and gave an estimate for $225. I told my tenant to tell the handyman everything else she’d like fixing while he was there besides the window. She mentioned a broken dimmer switch, and a faucet cap that needed replacing. Perfect. Fixing three things in one visit every year or two isn’t that bad.

Although $225 sounded steep at the time, I agreed to the estimate because I figured he would take at least an hour to do all the work, buy the parts, and commute back and forth for two visits. I was also happy to not have to physically go out there and meet the handyman for either visit. I asked the handyman whether I could get a discount if the work took less than a couple hours, and he said it was flat fee. Fine.

I told my tenant to tell me how long he took to fix everything so I could see whether I was getting my money’s worth. She texted back, “Maybe 15 minutes, no more.”

Damn! What a moron I am!