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April 17, 2013


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Our parents really do not discuss their finances or investments with us and I think it's a real shame. There is wisdom to be learned from, but I think it may come down to a generational aspect of wanting to be secretive about money issues.

Good article.

Money was a giant secret when I was growing up. My parents told me nothing. I did not even know that there was such a thing as property tax. My property tax bill is stuck to my fridge and the utility bills and pay stubs are scattered on the kitchen table and my sons read them when they are eating breakfast.

When they were younger they sat in bank appointments with me while I moved money in to registered retirement accounts. When I was much younger my mother made me sit in the chairs at the bank so that I could not see what was happening at the teller window.

I think the majority of kids do learn how to handle money from their parents, unfortunately. This article (both the ability to give good advice and the ability to provide motivation-crushing support/inheritance) seems to speak to a tiny population, but maybe that's just what I see around me. But given that population is probably visiting this site, good advice to those.

My experience - knowledge, wisdom and guidance often fell on deaf ears. But the kids did tell me I got a lot smarter after they moved out.

After I retired I offered to manage my three children's money for them and it worked out well because during the wonderful bubble ride we had from 1993 to March 2000 we were all in the same investments and did very well, increasing our portfolios tenfold. I continued in the stock market until late 2007 when I shifted 100% us all into bonds and CDs (yielding on average 5% tax deferred or tax exempt.

Consequently the two oldest girls are multi-millionaires, and the youngest boy is approaching $1M.

The only downside to our children's lives have been that unlike our experience growing up in England during the WWII years and in a far different society than we find today in the USA they have led very different lives. Unlike my wife and I who will have been married 57 years this July, our children have each had divorces. The eldest has had 2, the next one has had 1, and the youngest has his first divorce becoming final today.

In my opinion there has been a huge breakdown in societal values in recent years. We now live in a very different society where the introduction of smart phones and social media products, along with their many benefits have also contributed to an increase in criminal acts of all kinds. It seems that hardly a day goes by without another horrific act somewhere in the country and my wife and I feel fortunate that at 78 and 80 we stay close to home these days. The latest sordid crime near us took place in a very affluent area. The parents were away and their 16 year old daughter invited her friends from one of the very best high schools in Silicon Valley over for a party. There was lots of alcohol in the house and it ended with their daughter getting completely stoned on alcohol & gatorade and passing out, then taken into a room by some boys and brutally raped, with crude remarks written on her naked body. Pictures of her went viral on the social media causing such anguish and shame to the victim that she later hung herself. The attempted hanging sent her into a coma and 9 days later she was taken off life support. So much for progress, I'll take the social standards of my youth where pre-marital sex was taboo over what goes on under the name of having fun today.

@Old Limey,

Increasing your portfolio tenfold in 7 years is a 39% annualized rate of return. And then you perfectly timed the 2008 crash by exiting the market just before it? Wow, you should go manage a hedge fund and rake in billions with that kind of track record.

Too bad you didn't plow your bonds back into stocks in 2008 and perfectly time the upswing as well.

I try to pass my wisdom onto my children. A lot of times, I feel it goes unheard because I rarely see the application of said wisdom. Oftentimes, it greatly saddens me. I believe eventually they will come to value it. My children are still young enough--21, 18 & 15.

I agree with many of the readers who observe that their advice falls on deaf ears. Sometimes it takes awhile for young adults to admit that their parents are still right most of the time, while other times, they are putting up a front of independence but still carry your wisdom in their back pocket. At the end of the day, I have crafted a balance between my views and my parent's wisdom, so they don't always agree with the decisions I make, but they are usually the rights one for me. Worst comes to worst, as parents, you will always know you were there for your children. Whether they take your advice and put it to good use, that's up to them as adults.

@Old Limey - seriously, despite my finance degree and working in the industry, will you manage my money? haha, unfortunately I was a kid during the dot-com bubble, but with results like that, I will happily campaign to get you assets to manage! =) Then again, that would go against my philosophy of being "self-made".

Tom & Bryan
It's important with one's investments that you know when you have reached the appropriate time in your life, the state of your finances, and your ability to handle stress, to move into the slow lane and invest much more conservatively.

When the bubble burst I got completely out in 4 trading days but my portfolio still dropped from $3,369,058 to $3,021,835 between 3/9/2000 and 3/15/2000. The funds I owned followed the Nasdaq 100 closely. This index peaked at 4,704 on 3/27/2000 and as of yesterday was at 2,938 a long, long way from its all time high. My portfolio however is 216% higher than its peak on 3/9/2000 and by moving into low volatility investments and timing junk bond funds for a few years after getting out when I did has paid of financially as well as eliminating most of the stress involved in managing a large amount of money. Today my stress level is close to zero which is much more important to me than trying to time the stockmarket in an attempt to increase my returns It is also important to me that I have not had a losing year since I retired in September 1992, something that few investors are able to say.

"Like my parents, I want to be self-made."

If your parents gave you the cultural capital to get into a top university (and supported you financially through it?), you're not self-made. There's absolutely nothing wrong with being lucky enough to have parents who could support you, but it's important to be clear about the advantages you've already enjoyed in life.

Sarah, then by virtue, no one can be self-made. If someone (parents, foster parents, an orphanage) fed or sheltered you, or sent you to kindergarten, you aren't self-made.
There are children who are blessed with everything in the world and still make nothing of themselves. I do appreciate the advantages I've had, but my goal is not to live up to expectations, but to exceed them. By a lot!
There are varying degrees of "self-made", but how I make money and the business I am in has nothing to do with my parents. I did not inherit any money and was not loaned any to start. I have had no mentors or corporate sponsors show me the way. And lastly, through all the failures and setbacks (and there have been many), despite the constant chatter that I should just get back into finance, I've never given up on my dreams.
Maybe I won't be self-made in your eyes or by anyone's definition, but it's as self-made as I can get in my shoes.

@Old Limey,

There were other dips in years prior to 2000 (a quick google finance search shows Jul 98, Sept 98, Jul 99, Jan 2000) that looked like the dip in March 2000 where you pulled 100% of your money out. How did you know at the time that the other dips were temporary but the March 2000 dip was the beginning of a crash?

I worry that other people reading these posts will think what you did is easy. It is absolutely not, and most people will lose money by market timing. Even Warren Buffet does not average a 39% annualized return.

It wasn't until October 1998 that the Nasdaq 100 started to really take off and that was when I started to load up on the best performing, actively managed, aggressive growth funds. From then on the dips that I experienced weren't anywhere near serious enough to get me to start moving out. It wasn't until the chart of my total investments surged 506% just between 10/29/1999 and 3/9/2000 that I had my finger on the trigger ready to bail out and that's just what I did on the first really bad day by selling my largest holding. Then on each of the next 3 trading days I sold more and more until I was completely out.
This was a time when the technical charts go out the window and the fear of losing more and more money overrides everything else.

As Alan Greenspan later said, "The market was experiencing irrational exuberance" and there was a rush to get on board and then a rush for the exits as soon as it started down. I was probably in the first group to jump ship.

There hasn't been such a climactic spike in the Nasdaq 100 or other indexes since then. I have lectured on the technical analysis of the market and this brief period defied normal technical analysis because pure greed took over first soon to be followed by pure panic. One fund I owned for a while you may be interested to read about was Garret Van Wagoner's Emerging Growth fund. It was one of the best performers during that brief period returning 291% in 1999 but then rolled down into oblivion before it collapsed and went out of business.

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