
Hello, I am the The Polite Investor, a polite Englishman that has been
living in the US for 10 years.

Although I have always been interested
in personal finance and investing, once my employer enrolled me in
their retirement plan, I thought it was time to
get serious and figure out how the American financial system works to
make sound investment choices. 

I started this site to document my financial
journey and offer my opinions to help others. Perhaps you might learn something from
my experiences and together we can all try to lead better financial
lives.

I believe the key to building wealth is disiplined saving
and investing coupled with a somewhat minimalist lifestyle. You don't
need stuff and you should have a healthy skepticism towards activities
your peers engage in: mortgages, expensive cars, expensive vacations.
You'll find a little bit of my personal philosophy peppered throughout
the site.



I hope you feel welcome here. Take what you find useful and leave the
rest. Pass on what you’ve learned to your friends. May you find the
financial success you deserve.

Want to say hello?  [Email me](mailto:hello@politeinvestor.com).


Antony Holmes

Polite Investor, CEO, CTO, employee #1, whatever

Use a credit card responsibly and essentially you'll get paid to shop.



Some financial bloggers tell people to shun credit cards because you might incur debt. That's absolutely true. If you misuse a credit card it can
hurt you financially. At the same time I love credit cards and use them for every purchase I can. Everyone should use credit cards, providing they
can be responsible with them.

## Advantages

- Rewards. Cards with a reward system will pay to use the card. 2% cash back might not be a lot but it's still free money.
- Purchase protection. Most major credit cards have some form of purchase guarantee and will help you resolve issues with a purchase. A merchant
  might not take much of notice of an individual, but they sure will listen to a behemoth financial company.
- Smooth cash flow issues since you don't have to pay immediately. It's nice to pay off the balance at your convenience (as long as it's in the
  grace period).
- Stops fraud on your bank account. Fraudent charge on your card? Just call your card issuer and get a new card. It's a bit inconvenient, but nothing
  compared to debit card fraud where the money is taken immediately from your bank account and you might be without cash for an extended time until
  your bank resolves the problem.

## Disadvances

- Debt. Friction free purchasing without the need to pay immediately has been shown to cause people to spend more money. This can lead to serious debt
  problems.
- High interest rates if you don't pay off the balance. You should always pay your balance, so this shouldn't be an issue, if you're responsible.
- Rewards and cashback mean the price of goods is higher to compensate for the fees credit card issues charge merchants to pay for the rewards,
  so it's not really free money. That being said, since cards are ubiquitous, you can't really avoid this effect so at least the rewards make it
  all a bit less painful.

## What Credit Cards Should I Get?

It's a good idea to have a few credit cards just in case one of them becomes unusable and it can help improve your credit score a little by showing
you are responsible with multiple cards.

I recommend sticking with a simple, gimmick free cash back card such as the Fidelity Rewards Visa or the Citi Double Cash. Both give you unlimited
2% cash back on all purchases. No rotating spending categories, opaque point systems and spending cut offs to deal with. Simple really.

For more a few more credit card ideas, check out my [credit card](/reviews/credit-cards) reviews.


<div class="conclusions">

- Use a credit card for every purchase.
- Always pay off your balance.
- Earn free stuff.

</div>

_What's your favorite credit card?_

Due credit

The financial press makes a lot of noise reporting on stock market updates, but really very little of it is useful or actionable.



Knowing what the Dow Jones or S&P 500 indices did on a given day is not useful for your long term retirement goals. You should ignore all the noise and pundits and stick to a steady, consistent investment plan.

## What Is "The Market"?

- The stocks of U.S. companies can be found on one of three American stock exchanges: the American Stock Exchange (**AMEX**), the New York Stock Exchange (**NYSE**) and the National Association of Securities Dealers (**NASDAQ**).
- The Dow is always in the news, but only measures 30 stocks, so it's not representative of the overall market.
- The NASDAQ is a leftover from the dot.com bubble when so many people were buying tech stocks traded on the Nasdaq exchange that the media started reporting on the changes as a proxy for how one narrow segment of the market were doing. It's not much use to the average investor. More money is traded on the NYSE each day than on the NASDAQ.
- Sometimes, you hear about the **S&P**, or the **S&P 500**. This index only contains the stocks of 500 hand picked large companies, but at least it has a pretty high correlation with the overall market. You might own a fund that actually tracks this index.

## What Should I follow?

The most common indices that measures the whole stock market are the **Wilshire 5000** and the **Russell 3000**, which measure the movement of thousands of stocks. Follow these; blockbuster total market funds such as Vanguard's do so it pays to keep an eye on what your money is actually being invested in. The Wilshire 5000 contains stocks from all three of the exchanges.

## You Don't Need To Care What The Market Did Today

No serious investor cares about one day's stock market movements. If you're investing for 5, 10, 20, or 30 years, a single day doesn't matter. If the markets went up, great: do nothing. If the markets went down, oh well: still do nothing. You should be looking at the performance over a week, month or year before drawing conclusions on where the market is heading.

<div class="conclusions">

Financial news is of very little value and will mostly just cause you stress and anxiety. What a relief, Tune it out, follow your investment plan and simply **do nothing**.

</div>

_How often do you check your investments and the financial news? Do you keep to your plan?_

Everybody's doing something, we'll do nothing.

Market Noise Or: How I learned to stop worrying and love doing nothing

How much do you need to save each year in the accumulation stage of your life?



The simple answer is **as much as you can**, but to look at the issue from a more academic and theoretical perspective, Wade Pfau wrote a [paper](https://www.financialplanningassociation.org/sites/default/files/2020-05/4%20Safe%20Savings%20Rates%20A%20New%20Approach%20to%20Retirement%20Planning%20over%20the%20Life%20Cycle_0.pdf) that nails it down about as well as one can.

## Show me the money

For the TLDR version, Table 1 from the paper summarizes what you need to know. I have reformatted this and presented it here so its easier to read (especially on a phone screen).

### Replacement Rate = 50% of Final Salary

<table>
<thead>
  <tr>
    <th></th>
    <th>20 years</th>
    <th>30 years</th>
    <th>40 years</th>
  </tr>
</thead>
<tbody>
  <tr>
    <td style="font-weight: bold" colspan="4">40/60 Asset Allocation</td>
  </tr>
  <tr>
    <td>20 years</td>
    <td>31.98</td>
    <td>39.5</td>
    <td>47.02</td>
  </tr>
  <tr>
    <td>30 years</td>
    <td>15.64</td>
    <td>19.33</td>
    <td>22.19</td>
  </tr>
  <tr>
    <td>40 years</td>
    <td>10.26</td>
    <td>12.42</td>
    <td>13.84</td>
  </tr>
  <tr>
    <td style="font-weight: bold" colspan="4">60/40 Asset Allocation</td>
  </tr>
  <tr>
    <td>20 years</td>
    <td>30.94</td>
    <td>35.91</td>
    <td>38.92</td>
  </tr>
  <tr>
    <td>30 years</td>
    <td>13.88</td>
    <td>16.62</td>
    <td>18.63</td>
  </tr>
  <tr>
    <td>40 years</td>
    <td>7.57</td>
    <td>8.77</td>
    <td>9.22</td>
  </tr>
  <tr>
    <td style="font-weight: bold" colspan="4">80/20 Asset Allocation</td>
  </tr>
  <tr>
    <td>20 years</td>
    <td>30.52</td>
    <td>34.45</td>
    <td>35.94</td>
  </tr>
  <tr>
    <td>30 years</td>
    <td>12.85</td>
    <td>15.14</td>
    <td>16.54</td>
  </tr>
  <tr>
    <td>40 years</td>
    <td>6.26</td>
    <td>7.39</td>
    <td>8.06</td>
  </tr>
</tbody>
</table>

### Replacement Rate = 70% of Final Salary

<table>
<thead>
  <tr>
    <th></th>
    <th>20 years</th>
    <th>30 years</th>
    <th>40 years</th>
  </tr>
</thead>
<tbody>
  <tr>
    <td style="font-weight: bold" colspan="4">40/60 Asset Allocation</td>
  </tr>
  <tr>
    <td>20 years</td>
    <td>44.78</td>
    <td>55.3</td>
    <td>65.82</td>
  </tr>
  <tr>
    <td>30 years</td>
    <td>21.9</td>
    <td>27.07</td>
    <td>31.06</td>
  </tr>
  <tr>
    <td>40 years</td>
    <td>14.36</td>
    <td>17.38</td>
    <td>19.38</td>
  </tr>
  <tr>
    <td style="font-weight: bold" colspan="4">60/40 Asset Allocation</td>
  </tr>
  <tr>
    <td>20 years</td>
    <td>43.31</td>
    <td>50.28</td>
    <td>54.49</td>
  </tr>
  <tr>
    <td>30 years</td>
    <td>19.43</td>
    <td>23.27</td>
    <td>26.08</td>
  </tr>
  <tr>
    <td>40 years</td>
    <td>10.6</td>
    <td>12.27</td>
    <td>12.91</td>
  </tr>
  <tr>
    <td style="font-weight: bold" colspan="4">80/20 Asset Allocation</td>
  </tr>
  <tr>
    <td>20 years</td>
    <td>42.73</td>
    <td>48.24</td>
    <td>50.31</td>
  </tr>
  <tr>
    <td>30 years</td>
    <td>17.99</td>
    <td>21.2</td>
    <td>23.16</td>
  </tr>
  <tr>
    <td>40 years</td>
    <td>8.76</td>
    <td>10.35</td>
    <td>11.28</td>
  </tr>
</tbody>
</table>

The tables show you how you'll need to save per year and for how long to have a % of your final salary for a given number of retirement years. Let's look at two extremes to get an idea of what the table is saying.

First, if you only work and save for 20 years, then want to live in retirement for 40 years on 70% of your final salary, and you're only willing to use a portfolio that is 40% stocks, then you need to save 66% of your income each year. On the other hand, if you're willing to work for 40 years, have a retirement of 20 years, live off 50% of your final salary, and use an 80/20 portfolio, then you only need to save 6.3% of your salary.

So your savings rate needs to be between 6% and 66%. That's quite a range. Let's be a little more specific. With some reasonable assumptions of working for 30 years, having 30 years of retirement, and living off 50% of your final salary (remember you don't have to pay as much in taxes or save for retirement and you'll likely get something from social security) and using a standard 60/40 portfolio the table suggest you need a savings rate of 17% of your gross (before tax) income. So if you take nothing else from this article, aim to save a minimum of 17% (let's round that to 20%) of your salary per year. You can do it.

<div class="conclusions">

- A savings rate of 10% probably isn't enough, 20% and you're doing well, 30% and you can probably retire early. If you want to retire really early (before 50), you're going to have to bump that up even further. Even with only living off 50% of your salary and investing aggressively, you'll still need to save over 1/3 of your income during your working years.
- As for me, I aim for 50%, so 50 cents of every dollar I earn, I save. I **save till it hurts**. Why not come and join me in the 50 Cent Club?

</div>

_Think this is too much? Unrealistic? What percentage of your income are you saving?_

The 50 cent club

Small changes can lead to big outcomes with a little bit of disipline.



You might have heard a rubbish, but frequently repeated, expression along the lines of **Save $5 on a coffee a day, retire a multi-millionaire** popularized by financial gurus like Suzie Orman and Dave Ramsey.

Sometimes called the **latte factor**, because everything requires a name and and a brand nowadays, no matter how mediocre, it's the idea that cutting out the small purchases (like lattes), and investing that money over time, will give you a big retirement nest egg.

Whilst the idea is not althogether unreasonable, it's a little disingenuous, and misleading. If you save $5/day for 250 days a year, every year and compound that over 35 years at an average 6% return, you get **$140,000**, which is A LOT of money, but it isn’t a million.

## Can we take away anything useful from this though?

We sure can. The kernel of truth is that one small change might not make that much difference, but one change can lead to others and many small changes can add up over time to something big, really big. Something much bigger than a small potato: a really big potato or even a cauliflower.

<div class="mx-auto py-8">
<img src="https://ik.imagekit.io/u0tzjkv2q/posts/cauliflower.webp?tr=w-800" class="rounded-lg">
<small>Imagine this as your delicious retirement.</small>
</div>

Ultimately, financial freedom and building a retirement nest egg requires disipline for which no amount of buzzwords and phrases can help you. It requires a particular outlook and way of thinking. Skipping the coffee is symbolic. You have to want to meet your financial goals strongly enough that you're willing to make sacrifices and optimize parts of your lifestyle to trade short term gratification for long term success. So the next time you’re standing in line at Dunkin', think about it. Are you willing to do whatever it takes to become financially independent?

## Want to live like the Polite Investor?

He doesn't drink tea, coffee or alcohol so the latte factor is built into his lifestyle and as well as saving he has fresh breath and a limited need for teeth whitener, but he fully appreciates that this isn't for everyone.

Small potatoes

What is cryptocurrency and should you buy it?

Tales from the Crypto

Fees, you can't avoid 'em, but knowing whether they're bogus can save you a lot of money long term.



You can't completely avoid investment fees, but using a low cost brokerage will allow you to minimize them. The table summarizes common fees you might see attached to a fund. Understand what they are an when to avoid them.

<table>
<thead>
<tr>
    <th>Fee</th>
    <th>When you pay it</th>
</thead>
<tbody>
<tr class="text-red-500">
    <td>Front load</td>
    <td>Cost to buy into a fund or ETF.</td>
</tr>
<tr class="text-red-500">
    <td>Back load</td>
    <td>Cost to sell your investment.</td>
</tr>
<tr>
    <td>Expense ratio (ER)</td>
    <td>Cost of owning a fund, paid yearly normally as a percentage of the value of the investment.</td>
</tr>
<tr>
    <td>12B-1</td>
    <td>An annual marketing or distribution fee. Never worth paying for</td>
</tr>
</tbody>
</table>

Fees are insidious. Often marketed as small % built into the cost of owning a fund/ETF, a seemingly small increase can cause a dramic drop in the value of your investments overtime because they effectively reduce your return each year and this loss compounds over time.

For example, with a starting balance of **$10,000**, and investing **$1,000** a month for **40** years, an expense ratio of **1%** could end up costing you more than **$700,000**.

Don't believe me? I built an [interactive fee calculator](/calculators/fees) that lets you play around and see how much fees can affect your performance. Even with a modest portfolio you can lose hundreds of thousands of dollars over your life time if you don't pay attention.

[Dave Ramsey](https://www.ramseysolutions.com/retirement/why-dave-prefers-up-front-fees) seems to think front load fees are a good idea. I disagree. High loads = high expense ratios in a lot of cases. Pick any major well regarded stock
fund/ETF from a major brokerage such as Vanguard or Fidelity and you'll see they are almost always no load and have a low ER to boot. Load fees are a red flag for bad management and should be avoided at all costs. They are just a waste of your money.

In the early days of the mutual fund business, the 12b-1 fee was introducted because it was believed that by marketing a mutual fund, its assets would increase and management could lower expenses through economies of scale. Mutual fund assets from companies such as Vanguard that do not actively market themselves still grew rapidly taking in trillions of dollars without any help. You might be asking what the point of this fee is then and you'd be right. Critics seriously question the justification for using and today it's mainly used to pay commissions to salespeople for selling a fund's shares. Another waste of your money.

## So what does a low cost fund look like?

Glad you asked. Here a few funds to give you an idea of what high qualit low cost funds look like. BTW you consider having these in your portfolio if you don't already.

<table>
<thead>
<tr>
    <th>Fund</th>
    <th>Symbol</th>
    <th>Load</th>
    <th>Expense Ratio</th>
</thead>
<tbody>
<tr>
    <td>Vanguard Total Stock Market Index Fund ETF</td>
    <td>VTI</td>
    <td>$0</td>
    <td>0.03%</td>
</tr>
<tr>
    <td>Fidelity Total Market Index Fund</td>
    <td>FSKAX</td>
    <td>$0</td>
    <td>0.01%</td>
</tr>
<tr>
    <td>Schwab Total Stock Market Index Fund</td>
    <td>SWTSX</td>
    <td>$0</td>
    <td>0.03%</td>
</tr>
</tbody>
</table>

<div class="conclusions">

- Load fees are charged by subpar companies for overpriced funds. All the good investments you'll ever need can bought for $0 at a reputable brokerage.
- You can't escape the expense ratio (it does cost a company to run a fund), but you can minimize it so it's practically non-existant.
- Try my [interactive fee calculator](/calculators/fees).

</div>

_What's your favorite credit card? How much do you think you save per year?_

Due credit

Market Noise Or: How I learned to stop worrying and love doing nothing

The 50 cent club

Small potatoes

Tales from the Crypto

Fees! Fees! Millions of fees!