Thursday, May 16, 2013

Messages From Readers: Professor Feedback

My professor's wife is in a stock picking club. That makes me think that stocks grow in gardens.
Large, expensive gardens.

In an attempt to get validation for my blog, I showed it to a professor. He gave me some great feedback, shared here:

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"Joan, I like your blog! Very cool. Excellent advice to put money away in tax deferred investments as much and early as possible. Mutual funds are better than individual stocks, unless you have some fun in evaluating companies and following the stock. A good way to do that is a stock picking club. My wife has been in one for a long time, with friends from the neighborhood.
My final tip for young folks would be to only borrow money for assets that appreciate (like houses). For assets that depreciate (like cars), try to save up the money first before buying." 

- Professor 

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I want to clarify a couple of things that he mentioned: tax-deffered investments, appreciation, and depreciation (of assets).

What Are Tax-Deferred Investments? 

When you invest in something, it (ideally) earns money over time. That money is not taxed until you officially take the earnings out of the investment (e.g., you sell your stocks). 

Appreciation/Depreciation of Assets

An asset appreciates if it grows in value over time. Like in my professor's example, houses can be sold for a higher price than you originally bought them for. 

An asset depreciates if it declines in value over time. New cars lose value the second you drive them out of the dealership, and the value of used cars declines gradually as well. 

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Photo credit: ...-Wink-... via photopin cc

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