by The Investor
on April 24, 2010
My view on the current valuation of different asset classes, followed by this week’s money links.
Last week I mentioned I’ve been selling down equities since late March. I hope I was clear this was an asset allocation decision, not a call on valuation.
Over 90% of my net worth was in shares, after I went ‘all in’ with my last reserves in March 2009.
That was the buy of the century, but 13 months on I don’t want to push my luck, given that I may want to buy a house in the next five years.
I still remain more than 75% invested in shares. By most measures, this is too high. But I still see equities (including REITs) as reasonable value and most other assets as expensive.
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by Guest Author
on April 23, 2010
If you want to retire early, then as this final article by Jacob from Early Retirement Extreme warns, you’ll need to do things differently.
Having introduced extreme early retirement and outlined some ways of living frugally, Jacob now concludes by suggesting you rip up the rulebook.
I saved around 75 per cent of my income in order to retire early. Sometimes more, sometimes less.
My budget is slightly over $500 a month. Almost half of that is rent, but I could decrease that by moving out of California. You could make that kind of money with a part-time job as a burger flipper or a greeter, if you wanted to have more time to do interesting stuff right away without saving to retire early.
In terms of the recession, I did lose some dividend income, but I quit my career right at the market low in March 2009. It does not concern me.
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by The Investor
on April 22, 2010
The humble interest only mortgage has become a byword for financial recklessness. In the eyes of many, such mortgages are the UK equivalent of sub-prime loans in the US.
But I disagree:
- Sub-prime mortgages saw US banks scanning the worst localities for the worst customers. Just to make sure things ended badly, the resultant loans were sliced and diced into mortgage-backed securities and sold with an often fanciful credit rating. Cue the credit crisis.
- An interest only mortgage is simply a financial product with the potential to be misused.
Comparing a sub-prime mortgage to an interest only mortgage is like comparing crack cocaine with aspirin. Both can kill you, but with an aspirin – or an interest only mortgage – you’ll be fine provided you read the label and follow the instructions.
I don’t have a mortgage, but if and when I buy a home I’ll probably go interest only. In this article I’ll explain why.
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by The Investor
on April 21, 2010
A long time ago Jeremy Clarkson had a TV show alongside his 53 cars and a death wish. And in one episode he discussed pensions.
Watch the video below for proof, and note that Clarkson’s pension plan involves:
- Spending 10% more than you earn
- Eating and smoking enough to die before you’re old
- Blowing anything left over on an E-Type Jag!
It’s pretty funny stuff, but obviously Clarkson was speaking as a bigshot media personality who now earns well over £1 million a year. (Not to mention someone who probably will die of one of those things!)
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