My family lives in the South, and we’ve been lucky enough to have had good careers, good investments, good educations, and good marriages for a couple of generations now. To my friends from New York City, we may resemble gentrified hillbillies, but we’ve traveled, read, and quietly tried to contribute to the quality of life for everybody that lives in our area, regardless of their social or economic position. Most of our extended family have college degrees and about half have graduate degrees. French gets bounced around when some of my relatives want to discuss delicate subjects around the younger kids, to give you an idea.
In 2007, while I was away at college, we took a major hit financially when the market tanked. My father (by his own admission to me a couple of years ago) was being too aggressive with the portfolio and got burned, as did a lot of investors. I stayed in school, oblivious to the situation, as my education was paid for before I was even born, but my mother quietly went back to work. My parents’ trips to Paris were now long weekends at the lake.
But, other than those things, and maybe a couple of other changes which I can’t even think of right now, nothing much changed for us. This was a real contrast to some of my college classmates who had to get part-time or full-time jobs or take out student loans to get through to graduation. A couple just dropped out, and it really hurt to watch that. It wasn’t just that they were wearing Ralph Lauren and driving the BMW, and they lost the status that goes with that. It was that they lost the chance to get a really good education. That’s life changing, and I don’t know if anyone ever really recovers from it.
Their parents, by all appearances, were affluent, but they had strapped on that affluent lifestyle, as well. And when they tide went out, as the old saying goes, it really showed who really had what.
My family was living in my grandparents’ house, handed down and paid for, in need of a paint job and some serious landscaping, but it was big and old, and I love it. We drove SUVs that my dad had bought new, paid cash for, maintained regularly, and never sold. (We have land, and when it rains, the roads turn to mud in some parts.) I went off to college in the one that had the most mileage on it, and that was just fine with me. I wanted to have people know me for me.
You sweat like a pig during the summer, and it’s cold as a witch in the winter, so we’ve always just done the oxford shirts, 100% whatever sweaters, khakis and cords, with the LL Bean catalogue for shoe and coat choices. It’s not a fashion statement, it’s just that people in our town pick more cotton in what you do than how you look, and everybody pretty much knows who’s got money and who doesn’t. So you’re not fooling anybody.
The point is that not much changed during this time for me or my family. Nobody cried in their beer or acted out. We didn’t have to sell the family farm (literally or figuratively). i’m sure my mother had some choice words for my dad, but nothing compared to what he was telling himself. I think he got back into an index fund (and some other brick-and-mortar investments) and has ridden the wave until about a year ago, and now he’s out. We’re back to where we started, plus “a little more”, he says, which, in Pop-speak, means a lot more.
Now they’re back to clipping coupons off solid, no frills investments. Mom has retired, I’m sure this time for good. I got my education and I’m lucky to have a job I like and a salary that I can live on.
That’s my experience as Old Money, if you want to call us that: you work hard, enjoy whatever rewards come your way, and if you take some lumps as you go, you take them silently and with all the grace you can muster. Either way, nobody needs to know.
- Tripper
I liked the image of the old S.U.V. I did my Master’s degree in the UK and I always recall the day I saw a 50 something dad and his adult son ( I assume), driving up a hill in the middle of the city in an old open door jeep with mud splashed all over it and a bit of rust around the edges. What made it so memorable was that they were both dressed in top hat and tails and were obviously heading to a wedding.
I was also interested in the mention of investing. It’d be interesting to see a post on blue chips vs. index funds some time.
Thank you for sharing, Ikerrin. The SUV/top hat & tails image is a classic!
I’m going to steer clear of investing specifics, but I think Dario, Amy, or some of our other regulars might have thoughts on the subject.
Thanks again… – BGT
Hi Ikerrin. There has been a lot of research done on this topic. There is a book called The Bogleheads Guide to Investing which covers this topic and is also an excellent book for anyone interested in learning about the basics of investing. You might try that.
Thank you, Amy. Much appreciated. – BGT
Also one might try The Intelligent Investor, by Benjamin Graham
Thanks Amy. I definitely get the efficiency of index investing. If I could just say, one thing I find lacking in it is really aesthetics. My great grandfather bought shares in a company and then passed them down through three wills until my risk hating relative sold them during a bump up in the market. I find it really satisfying to buy and hold individual shares and bonds and I hate to spend any money on management fees, but I haven’t really found this investing strategy has gotten as much attention lately now that indexing has become so popular. However, it is the way our ancestors invested.
Hi Ikerrin,
“Bogel, I’m gonna tell you everything you need to know……….”
“Nobody knows nothin’.”
Please watch the video
https://www.youtube.com/watch?v=zqa-jSuXmYw
The landscape has changed immensely. If you do not want to lose, think twice and invest in your education, not degree. I mean education, since it pays the best dividends. Investors will lose. Do not believe that investors make money. It is nonsense. You have to understand what is money. Once you understand, you are good.
You know nothing about how much “investors” lost after brexit. They will not tell you and media are silent.
And please, keep in mind that redemption suspension is just a phone call away and can be implemented at anytime!!!
And never do what other people do. We certainly do not like what is popular. We do not like crowded space. See, the utility of the glass is in its emptiness.
Thanks omgm. I definitely agree that mutual funds are terrible. I heartily agree that index funds are far far superior to them and to private management. I am only thinking here of an individual buying her or his own funds and holding them forever and collecting dividends.
I mean buying individual shares across various sectors of the economy and across the world.
Hi Ikerrin, why would you do such irresponsible thing? I understand you want to buy someone’s promise that they will pay you more than that you loaned them. So you buy company shares – you lend your money. Now, once you give someone loan, it’s no longer your money, it’s theirs. All you own is risk and promise to be repaid principal plus interest. You are a creditor. The question is: will the company or the government have enough money in the future to fulfill their obligation? Is it their funded or unfunded liability? What makes you to assume that stock or bond prices must go up? Why they should always go up? What will be the purchasing power of the greenback?
But let’s say you will buy. Now, everything has to go through banks. A ton of people knows what and how much you have. Your private wealth is not private all of the sudden. You can use private banking. There however, is a big difference between private banking and Private banker. Two different things you might never heard of. Private bankers I recommend: Bordier & Cie, E. Gutzwiller & Cie, Gonet & Cie SA, Bank Lombard Odier & Co Ltd, Mirabaud & Cie SA, Mourgue d’Algue & Cie, Banque Pictet & Cie SA, Rahn+Bodmer Co., Reichmuth & Co,. You talk to the partner, the owner, not the employee. These are OM boys. Say, you will be politely declined. Different nationality, you have a green light.
You want to internationalize? How about the second passport? Not necessarily for you, but how about for your children or grand children?
Why would you give money to someone and pray for better return?
OM do not risk, they protect over long time.
Perhaps not what you wanted to hear, but I would stay way form the paper and promises and get something tangible.
Omgm, how much in total assets would one need to have their assets managed by one of these Private Bankers?
Hi Zac, I assume you mean one family, not one man or woman. OM have family money, it’s no ones, it belongs to a particular family.
Wrong question. Any number is good. You go to Private banker and tell him something like this: in short term horizon (let’s say 50 years) I want this and this for the people coming after me. In mid term horizon (100 years) I want this and this ….. and in long term horizon (150 +,) I want this and this. Can you manage it with what I put on the desk? After that you will get the answer.
You have to know what do you want family money to do for your family and your people whom you will never meet. Private banker will only help to manage it.
Note: Do not even think of asking them what’s their tier 1 capital. You might want to open the window and take a deep breath.
Do you consider Guarneri del gesu an asset? They can manage it.
Thank you so much for sharing your wisdom omgm!
Hi OMGM, Thanks for the comment. I think whether you buy a Vanguard Index fund or shares in high dividend paying companies across the main sectors of the economy (companies like ATT, P&G, etc), you will always be giving your money and hoping that you get it back in the end. I am very aware of the benefits of index funds and support them as a core holding. However, the thing that concerns me about them is that they have this mystique of “buy and forget”. I think that the way that you keep money through your lifetime and over generations is by having a strong sense of what money is and how it works and then you raise children with that same awareness. I cannot count the number of people I have spoken to who don’t know the difference between a stock and a bond, let alone how to calculate the adjusted cost base of an investment for calculating capital gains at tax time.
By purchasing individual stocks, it forces you to read balance sheets and to understand the key ratios that suggest a healthy or unhealthy company. You have to think about the tax implications and how the stock fits into your investment strategy. You also have more control over year end selling for tax losses or gains. You get the pleasure of receiving dividend checks. You get the satisfaction of feeling like you are an owner and take an interest in the company and how it does over time.
I think when people don’t know how money works and they put all their faith in something, be it index funds today, Lloyds of London investor syndicates in the 90’s, the US property market in the 2000’s, something will always come along to surprise them.
Hi Ikkerin,
“I think that the way that you keep money through your lifetime and over generations is by having a strong sense of what money is and how it works and then you raise children with that same awareness.” Absolutely agree with you. Only gold and silver is money! Anything else is credit.
“I cannot count the number of people I have spoken to who don’t know the difference between a stock and a bond, let alone how to calculate the adjusted cost base of an investment for calculating capital gains at tax time.” There is no difference between a bond and a stock. It’s the same bullshit! Shit is always a shit and pearl is always a pearl. It has always been like this.
“By purchasing individual stocks, it forces you to read balance sheets and to understand the key ratios that suggest a healthy or unhealthy company. You have to think about the tax implications and how the stock fits into your investment strategy. You also have more control over year end selling for tax losses or gains. You get the pleasure of receiving dividend checks. You get the satisfaction of feeling like you are an owner and take an interest in the company and how it does over time.” Although English is not my first language, I think you wanted to write something like: You get the pleasure of holding some gold American eagle coins. You for sure get the satisfaction of feeling that you are the owner of true money and tangible, 100% liquid asset. You also have more control, because you pay no tax.
And therefore you can come and “wander around Europe fallowing in the steps of Julius Ceaser’s “Conquest of the Gauls”, or just living in Venice and reading “War and Peace” for 2 months.” You can also go to Florence and walk the same chambers the Medici walked. They for sure knew something about money. Perhaps, instead of reading companies’ balance sheets you should observe sheets of libro segreto.
“I think when people don’t know how money works and they put all their…………….” I agree, people for sure do not know what are money and how money work and what money do.
Money do not yield! Why should they? Money store value, your sweat and smell, your time away from your the most valuable asset – your children and your family. OM is about family, not money. Although, Money is important.
Now, click the link, please
http://stmedia.startribune.com/documents/1prince010716.pdf
go to: Schedule B, Schedule D – item 5.
I wish 67th generation after you would have at least one.
Now you know what is money?
I guess Prince read the constitution, I think you should as well.
For centuries, the alchemists tried to turn stones into money. You think they succeeded? New experimenters try to turn paper into money, you think they will succeed?
Hi OMGM,
Thanks for the detailed responses to my post. I appreciate the close reading. I may need to agree to disagree with you about gold. I’ve been very aware of the value of gold over my lifetime and have even invested in it occasionally. It has risen and fallen by wide amounts through that time, falling to $300 and rising to well over $1000. Plus it doesn’t pay a dividend. I definitely agree that it has a place in a portfolio, but I would be hesitant to give it a central role. Thanks for the link to Prince’s will. That was quite interesting.
If you are aware of gold’s value you should already know that gold is money and it plays pivotal role in international money. Maybe you invested in paper gold, which is not gold. How can you invest in gold? You just buy it and hold it in your hand, put it in your pocket, or teach your children, grandchildren that in the case of emergency, the money is with them. If they don’t spend it, well teach them to pass it down the line. Gold doesn’t pay dividend. Neither a dollar, euro, pound or RMB on a bank account. If you want dividend you have to withstand risk. With gold there is no risk. Troy oz of gold was troy oz in 1815 and it will be in 2234. Look one more time at the gold price chart. Now, turn your computer screen upside down and what you see? You see how currencies depreciate against gold. Same with silver. “The price of gold is going up” – translation: I need more currency to buy a toz – honest, hard money, tangible asset. That means the purchasing power of that particular currency is going down. A gold coin is a gold coin in America, Austria, India …….. however a greenback might not be accepted. It happened to Americans in Italy.
Take a look what just happened to the pound. It’s plunging. What is it plunging against?: against gold.
I’m not encouraging anyone to give gold a central role. OM survived because they have gold (money), fine arts and land. Remaining ten percent is for speculation on the market, if you want. The primary reason why ON are still here is because the have knowledge and thorough education. It’s not easy to distract their attention. They are stubborn in their way. If they happen to find a fork with word Odiot on the neck, they don’t run to the nearest pawnshop and get some paper for it. They run to the pawnshop and look if they can find more Odiot.
Some very interesting comments and views on this thread. I do buy individual stocks from time to time, and have even engaged in some “plays” with help from family who live and work in finance down in the city. However, a good portion of our money is in Vanguard funds because of the low fees and transparency, but not just index funds. With a little money that runs deep and is tucked away in trusts, access is sometimes limited. And by today’s wealth standards our “nut” is not that much; we are not even in the top 2 percent in terms of net worth any longer. But what is comforting is when you realize that your ancestors did not work for centuries back across the pond and left you with a set of values and viewpoints that are worth more than money, and perhaps as well, a thin skeletal frame from not working. But today we work doing meaningful things. We do not ruminate over finances, nor to we covet new, trendy material things. As I have said before, this little book really resonated with me. My son read it in one sitting and said: “This validates how we live.”
Thank you for sharing your story of inspiration. I will keep your lessons in mind.
Oh, just another thought regarding investment information discussed in this thread:
My dear husband has always told me, “Don’t give money to “money managers” who are not wealthy themselves.”
Thank you, Ms. Hutchinson. That is excellent advice. Their own net worth and their list of clients are telling. – BGT