Bootstrap for First-Time Investing

This is a breakdown of a first-time allocation of your accumulated cash in order to try and preserve and even increase its value in the short and long term.

DISCLAIMER: I’m not an expert!!! This is an attempt to capture my own bootstrap into the world of financial pragmatism and in no way am I suggesting that copying this setup to any extent will necessarily work for you. It is simply what it is and you should invest at your own discretion.

Required Reading

Pick a good reason for caring about your wealth

  • Wanting to buy a house/start a family — or other desires to save aggressively for.
  • Financial independence/early retirement (FIRE) — to enable yourself to choose what to do/work on without money as a factor.
  • General future-proofing — even if you don’t know what you want now, to look back and know that you’ve been at least a little wise and pragmatic when in the future you DO want something clearly.

Bad examples:

  • Wanting to get rich quickly off the stock market.
  • Because other people are making quick money off of stocks/crypto/whatever (valid reason to be interested, but not enough to actually start investing).

Set aside a rainy day fund

For me a month’s expenses ~= rent + bills + food + transportation.

Set aside a play fund

When I started this was about 30% of my remaining available cash. Now, the fraction is quite a bit smaller — because I got a sense of the effort I’d have to put in to make it worthwhile and re-allocated most of it back into my savings fund.

The rest is your savings fund

An example is SWDA, which tracks the MSCI World Index. This is what I personally am holding. Note that this is also traded under the ticker IWDA on some exchanges, but they are the same underlying fund. In fact, I hold IWDA from the Euronet NL Stocks exchange.

Rationale:
The idea is that the world is productive, and the value of companies increases simply due to the generation of wealth. While individual companies might not succeed, the world as a whole should. In times of economic depression/collapse, value of the world economy goes down, however such times are accompanied by real-world situations where an alternate investment strategy wouldn’t necessarily have helped you. In other words, if the world is fucked, you’re probably fucked too anyway, and there are bigger fish to fry.

An extended version of my philosophy can be found here: https://nhnt11.medium.com/notes-on-how-i-think-about-wealth-and-investing-217f0526e05e

How to convert cash to stonks

  1. Deposit your cash via wire transfer.
  2. Buy stonks. Particularly for the savings fund, I’d recommend verifying that you’re buying the actual underlying asset and not just holding a promise (e.g. a contract for difference) from the broker.

Future income and savings contributions

If I need to make a purchase that is “extra” beyond my normal monthly expenses, I use my rainy day fund and replenish it when I get my salary before buying IWDA. So the badly named rainy day fund basically acts as a buffer to accommodate larger and non-recurring expenses.

Tracking your wealth

Beyond the bootstrap

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