I think we're going solar

Of course, it is, that's why I would consider installing solar panels only if it is totally independent of those two factors, that is off-grid, self-sufficient tiny house to live in. In a meantime as long as I am connected to the grid, I get a guaranteed 15% saving on my electricity bill with the community solar which requires no installation, no loans, no fees, no maintenance.

 

Saving and investing, both are important in wealth-building practice. My regret is that I did not participate in either of those practices early enough. Then again, I consider the joy of life is something totally separate from being wealthy. After our needs for the basic necessities of food, clothes, and shelter are met, any additional money is mostly spent on our egos. I would much rather be poor and happy than rich and unhappy. Rich and happy... maybe better? I don't know. In fact, I really don't care to know.

As the proverb goes:

He who knows he has enough is rich. — Lao Tzu

 

Just to clarify, I am not suggesting that putting money in the savings account is the way to go. If the objective is to make money, then by all means, put that money into better performing (yet more risker) investment account. I certainly do that.

What I am saying is that spending money I already have to make more money or worse borrowing money to spend it to expect to get a return later is not the same thing as saving money.

 

I do! First account I ever opened, walked in, signed some papers, walked out with a passbook and 5½% interest; those rates didn't start to drop until 1986. Not exactly sprinting ahead of inflation, by any means, but a comfortable couple points ahead.

Nowadays your vanilla savings account rates are about one hundredth what they were then, and also pretty nearly one hundredth the rate of inflation, and you've got scarcely any options for staying ahead of inflation, or even just keeping pace with it, that don't put principal at risk.

I think that's true of mine too. But choose a slightly wider window—the past 15 years, say—and there's a giant flushing sound, followed by a long slow scrabble back. I'm glad I wasn't thinking of retiring in 2008.

Maybe one useful lesson of a pandemic year is there are no choices to make that aren't gambles. So there are just reward/risk calculations for all of them, no easy way to just bin them into "safe"/"not safe" buckets.

 

There is real value in being able to sleep comfortably at night.

I would just remind market neophytes that this 10 year look back period, up to even 12.5 years, is "special". Extending that look-back calculation to 20-22 years, makes it look much less eye-popping, more pedestrian. But still very much positive.

Investing is a long game, sometimes the markets mostly tread water for even a decade. Fortunately, mom carefully managed a very unfortunate event and initiated her children's investment accounts while they were still in primary school, giving them a good start they could easily continue building upon. That was 50+ years and 8 recessions ago.

 

Come to think of it, the saving account I recently opened to get the refinancing loan on my PP has an interest rate of 6.17% APY, higher than the current rate of inflation 4.4% depending on which number to use. Yeah, it's only for the balance up to $1,000, but still... a great deal. BTW, this is the first credit union I have ever joined which was mentioned by someone here and I contacted them to become a member. Took a bit of back and force telephone conversations, but overall almost seamless online financing option. I ended up refinancing my PP which was financed at a dealer for 3.99% APR with my intention to pay it off in a much shorter term than the contract. Instead, a new refinanced loan from DCU is at APR 1.24%. I decided not to pay it off and keep the proceeds of the last PP sales in the investment account which is currently earning ~26% returns.

As measured by the CPI, the annual rate of inflation from October 2020 to October 2021 was 6.2 percent. As measured by the PCE deflator, the annual rate of inflation from September 2020 to September 2021 (the most recent available data) was 4.4 percent.
What does current inflation tell us about the future?​

Primary Savings | DCU

 

That's a phenomenal savings-account rate, more than ten times the best savings rates known to bankrate.com for this month (which is itself ten times what my local credit union is offering).

I suspect the only way they make it work is through that clever upside-down structure, where that is only the rate on the first $1,000, and it's 0.25% on all the rest. Granted, even 0.25% is five times what my local CU can do.

 

That depends strongly on your timeframe.
For me, I had a 35+ year timeline.
In order to lower my power bill to $0 (on an annual basis), I prepaid for 10 years of electricity at the current price.
Because I paid that up front, I have no price increases.
Once I account for the rebates, by cost dropped to about 8.5 cents/kWh.
Because I entered into a contract with the utility to pay me for the solar I produce (weather I use it or not) for 10 years, that drops my cost to about 4 cents/kWh.
Net metering lowers the cost to about 1.5 cents/Kwh.

Even if Net metering disappeared, I am way ahead and am saving money.

It also lowers my monthly outflow of cash, should I suffer a financial hardship in the future. I kind of look at it as insurance.
Insurance doesn't save you money, until it does

Solar saves me money as long as I live 10 years (5 now). If I loose that bet, I won't care

 

I am glad that you had financial resources to back up your bet and it is working for you. I am not saying you can't make net positive cash flow (profit if you want to call it). It sure can in some cases. But that is a long wait for me and a very risky proposition that I am not willing to take especially when the volatile political climate surrounding utility companies in our region makes it very difficult for a long-term commitment to the investment.

But that is not the point of my contention. My point is, investing or making a bet for future net cash flow is not the same thing as "saving". Yes, you end up with more money in your pocket either way, and investing may let you have more money than otherwise. But you have to first spend the money to make money. However, a penny saved is a penny earned. If I have a penny that I don't spend and save, that is actually more than a penny earned. There is no risk, no waiting, and no betting. I would much rather contribute to the community solar while purely saving 15% of my utility bill guaranteed, which cost me nothing upfront. no fees, no commitment. And when I retire and am ready to downsize our current home. I am willing to spend my saving to build a 100% off-grid tiny house. If my rough calculation works out, the cost of building such a house would be not so much more than the cost of installing solar panels on our current home.

 

This is somewhat reassuring as I am 21 and just started my fund last year. Also modeling after the s&p 500. What scares me is how it is historically high. is that growth sustainable?

 

Over the long long long term, it generally seems that you can count on stocks as roughly a seven percent per year investment. Less risky things, less than that; more risky things (like running your own business) more than that.

When they run way higher than that for some period, it's fun, and then there will be something not fun, and then a recovery, and eventually you'll look back and see an annualized average around seven percent.

Don't get too carried away by the fun parts, and don't get too demoralized by the not-fun parts. A consistent seven percent is nothing to sneeze at. It amounts (very closely) to doubling your money every decade. If you started your fund at 20 with a thousand dollars, when you're 80 that'll be around $64,000 if you never added another penny to it.

We have the luxury in the US of a nice long look-back period to observe those averages, unclouded by wildcards like political overthrow. So the usual prospectus mantra, "past performance is no guarantee of future results," takes on an extra poignancy under present circumstances.

 

Thanks @ChapmanF and @jerrymildred !

Yes I started my fund one month before that big dip haha... but I am investing for the long run so Im not worried abt it.

Sounds good

Nice work!

Right now just roth ira, but when I start full-time upon graduation in May I will have a 401k and also max out the employer match. I think the dollar-cost averaging should be taken into account then with the consistent contributions.

 

My newly-working-age niece had pulled together money to start her own investment account, and with some trepidation, finally pushed the start button on the very day that turned out to be the bottom of that dip. As seen only in hindsight, absolutely perfect timing. But as her mother told her, she will never ever get that lucky again. So keep up the dollar cost averaging.

Having already left the paycheck world, we didn't have uninvested cash sitting around waiting for an investment opportunity. But I did make some significant Roth conversions that same week, so didn't completely miss out.

While you are more than twice as 'old' as I was when mom started my investment accounts (really looking ahead only to college, but she didn't mention it much and most of us kids found enough summer earnings and scholarships to not touch those resources), you are still younger than when I entered the 'real-job' labor force and could start adding my own contributions. My subsequent contributions far exceeded the seed money she put in, but having the seeds already planted provided a major motivational boost.

 

^ That….

 

Investing is a fascinating subject and one I enjoy a great deal. Below is a graphic of Asset classes and how they performed each year. It is easy to see there isn't a rhyme or reason - maybe a good example of why diversification and rebalancing is so important in investing over the long term.