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AreWeDrunkYet posted:Doesn't that depend on the company structure? ARCC, for example, is a BDC that is mostly in debt, and is legally obligated to distribute income. Further, BDCs often put assets in SPVs, secured by the same assets as the debt above. In a lot of ways, it's like buying into a PE fund that tends to target further up the capitalization ladder. Leverage is pretty minimal, ultimately, the returns to the equity holders should be effectively the returns on the debt instruments the BDC invests in. I know that there are differences in calculating risk when investing in the equity of company that functions as a debt fund than simply investing in debt, but shouldn't the company offer diversification from typical equity investments anyway? A BDC isn't any more like fixed income than an REIT is (which is also legally obligated to distribute income and who's source of revenue is bond-like). They both offer diversification benefits, but neither are fixed income. That's my only point. Consider PSP (an ETF that invests in BDC's that lend capital to private companies) and you will find it has a higher correlation to equities than fixed income. That said, i'm not recommending any action other than to not see it as a fixed income substitute. Didn't we have this same conversation regarding REITs like 5 years ago on one of the old megathreads?
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Jan 9, 2010 00:33
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80k posted:A BDC isn't any more like fixed income than an REIT is (which is also legally obligated to distribute income and who's source of revenue is bond-like). They both offer diversification benefits, but neither are fixed income. That's my only point. After more thought, you are obviously right. Should have been glaring in the first place, just wasn't thinking from the right perspective. 80k posted:That said, i'm not recommending any action other than to not see it as a fixed income substitute. Didn't we have this same conversation regarding REITs like 5 years ago on one of the old megathreads? And yeah, despite the nature being different than I was expecting it to be, I'll hold on to it for now for the dividend. I'm curious though, how does it compare to investing in a private equity LP that makes most of its investments in debt instruments (is it even 'private equity' at that point?)? The REIT conversation was someone else.
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Jan 9, 2010 04:29
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AreWeDrunkYet posted:After more thought, you are obviously right. Should have been glaring in the first place, just wasn't thinking from the right perspective. Without knowing more about who ARCC lends to and on what terms, it sounds like something with risk/return in between mezzanine financing and corporate bond CEFs. Even a Bond CEF really does not qualify as fixed income for asset allocation purposes, as leverage and premium/discount structure often results in equity-like volatility and downside risk when compared to the characteristics of the underlying securities. The features and terms of true fixed income (coupons, maturity date, etc) are necessary aspects of the asset class. In constrast, open-ended mutual funds, due to tight regulations and accounting practices and redeemability at NAV, are a reasonable way to gain access to fixed income. ETF's require an arbitrage mechanism to pass the test. BDC's are more like small bank stocks, the structure of which is more of a taxation issue than anything else.
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Jan 9, 2010 05:53
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Okay the last few posts confused me. What are BDCs, SPVs, and PE funds? Google/investopedia are not being particularly helpful.
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Jan 9, 2010 07:08
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80k posted:Cornholio, I am at a loss for words. That could be the worst 401k plan I have ever seen. The expense ratios are criminal. Heh, it's funny you say that. Canadian mutual funds tend to have brutal MERs. At my home bank, TD, every non-index non-Canadian mutual fund at TD has a MER of 2.42% or higher.  By category, the MERs are: Money market: 0.46% - 0.76% ---- Cdn T-bill is 0.46%, Cdn money market is 0.76%.   Bonds: 1.05% - 2.15% ---- Cdn bond is 1.05%, real return is 1.42%, global is 2.15% "Balanced": 1.40% - 2.18% ---- Monthly income is 1.40%, diversified monthly income is 2.18% Cdn Equity: 1.92% - 2.42% ---- Dividend growth is 1.92%, small-cap is 2.42% (Dividend growth has done the best out of the Cdn Equity funds, heh) US Equity: 2.42% ---- Small-cap to large-cap, all 2.42% Global: 2.42% - 2.73% ---- International equity 2.42%, any specific area is 2.68%+ Thankfully, TD also offers its e-funds series, which have MERs of 0.31% to 0.48%. Still worse than Vanguard, but at least there are no trading commissions.  Most of my money was originally with a financial planner that my parents recommended. When I got interested in investing, I looked up where my money was parked and it turned out to be a Cdn small-cap fund with a MER of 2.80%. When I called him, asking him if he really thought an expense ratio that high was a good idea, I found out that he was charging an additional 1% to manage my money.  Paying ~4%/year in fees was not my idea of a good financial plan. I'm glad I bailed.
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Jan 9, 2010 08:40
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Something similar happened to me. On the advice of my parents' church friend who was moonlighting as a New York Life representative, I started an IRA with 100% in the large-cap fund MCSCX. The rep charged a fee up front, plus the fund had 2% ER and 5% back-end load. I was really pissed when I found out how lovely it was and how expensive it was going to be to get out. Worse, that happened right around the time of the tech bubble crash, and the fund managers were chasing returns so it suffered badly relative to the market. Nowadays I'm starting to learn what the gently caress. I'm hopefully learning in time - my parents got kind of hosed because they were doing the same thing but were much closer to retiring.
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Jan 9, 2010 09:01
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DuckConference posted:Okay the last few posts confused me. What are BDCs, SPVs, and PE funds? Google/investopedia are not being particularly helpful. Luckily, they are not important to know about for the retail investor. PE is private equity, BDC is a business development company, and SPV is a special purpose vehicle.
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Jan 9, 2010 17:03
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it's amazing how many people get preyed on by lovely brokers at church. I've heard MLM is also pretty rampant at some of the churches my family and friends go to.
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Jan 9, 2010 17:07
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My brother has 4 shares of Pepsi that he got as a Christmas gift 10 years ago. How would he go about selling those?
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Jan 9, 2010 20:52
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Does he have the actual certificates in-hand? Or are the shares held by a broker or something?
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Jan 11, 2010 09:08
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He's got the actual certificates in hand.
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Jan 11, 2010 14:40
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I believe it is easy as this: find an online stock broker that you want to do business with in the future. Open an account. Send in stock shares and they will show up on your account. And then sell the shares.
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Jan 11, 2010 18:34
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Thanks 80k, I'll let him know. I was hoping it wouldn't be too difficult.
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Jan 12, 2010 02:10
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I'd really appreciate some advice on my 401k. I'm 24 and I max out my contributions. These are my options. Click here for the full 1198x571 image.  Click here for the full 1198x650 image. This is my current allocation. Oakmark Equity & Income II 25% Lord Abbett Small-Cap Value Fund 25% Pioneer High Yield A 25% JP Morgan Mid Cap Value Fund A 25% I will have $5,000 to fund a Roth before April. Can I still contribute that for 2009 if I don't currently have a Roth open?
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Jan 12, 2010 23:34
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A good investment plan is not just about a 401k allocation. It is impossible to give advice without knowing if you have or intend to contribute to a Roth (edit: just noticed you plan to contribute to a Roth), or if you have taxable accounts. Knowing what your company match is can also help know how much to contribute to your 401k plan. For instance, I have 100% of my 401k allocated to guaranteed income. This is because I hate all the other choices, and so i invest in other asset classes (stocks, bonds, TIPS) in my Roth and Rollover IRA's and taxable account to maintain a balanced portfolio. But if the 401k plan was all I had, then of course I would make compromises and try to assemble a not-too-lovely collection of funds.
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Jan 12, 2010 23:56
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theitguys posted:I will have $5,000 to fund a Roth before April. Can I still contribute that for 2009 if I don't currently have a Roth open? Yes, it is not an issue. You have until April 15th.
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Jan 13, 2010 00:09
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Is it possible to file for my 2009 taxes in February, as soon as I get my W-2s and 1099s back, and then use my tax refund to fund a Roth IRA that would 'count' for 2009? Or is this a chicken-and-egg problem where I really have to fund it before I file? Second, is that April deadline for 2009 IRA funding, actually "April, or whenever you file your 2009 taxes, whichever comes first"?
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Jan 13, 2010 00:28
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I believe you could go ahead and declare your Roth contribution before you file. But I don't know if it actually makes a difference in any real tax matter as it doesn't impact your taxable income.
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Jan 13, 2010 00:49
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Leperflesh posted:Is it possible to file for my 2009 taxes in February, as soon as I get my W-2s and 1099s back, and then use my tax refund to fund a Roth IRA that would 'count' for 2009? Or is this a chicken-and-egg problem where I really have to fund it before I file? Maybe you missed the part of the 1040 instructions where it actually states you can have your refund directly deposited into a Roth IRA for the same tax year as the return (as long as you can verify that the refund will be deposited by the deadline of the return). See page 73 of the 1040 instructions linked here.
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Jan 13, 2010 01:43
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flowinprose posted:Maybe you missed the part of the 1040 instructions where it actually states you can have your refund directly deposited into a Roth IRA for the same tax year as the return (as long as you can verify that the refund will be deposited by the deadline of the return). Oh nice! Yeah I hadn't looked at the 1040 this year yet (I bought a house and will file for the new homebuyer tax credit... and, my wife became a small business this year, so I'm debating whether to get a tax adviser for the first time in my life to avoid making any costly mistakes).
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Jan 13, 2010 02:14
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The advise in here is drat awesome! I have another question about IRA's. I have 5k that I plan on investing in an IRA. I was hoping to put it into a traditional IRA before April 15 for the 2009 tax year. I was thinking traditional because I have a job with a pension and in 2010 I will be over the income limit for a traditional IRA. This will be the only year I can invest in a traditional. This can be deducted from this years tax then, right? Seems to be a better deal for now than a Roth, which I can do next year. I want to put the 5k into the Vanguard Target Retirement 2045 Fund (VTIVX)and just let it sit until then. I know wouldn't be able to contribute further without a tax hit. I plan on maxing a Roth IRA afterward for the remaining tax years (hopefully). A good plan? Is there a tax law im forgetting that will pound my arse?
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Jan 13, 2010 11:26
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80k posted:A good investment plan is not just about a 401k allocation. It is impossible to give advice without knowing if you have or intend to contribute to a Roth (edit: just noticed you plan to contribute to a Roth), or if you have taxable accounts. Knowing what your company match is can also help know how much to contribute to your 401k plan. For instance, I have 100% of my 401k allocated to guaranteed income. This is because I hate all the other choices, and so i invest in other asset classes (stocks, bonds, TIPS) in my Roth and Rollover IRA's and taxable account to maintain a balanced portfolio. But if the 401k plan was all I had, then of course I would make compromises and try to assemble a not-too-lovely collection of funds. I don't have any other form of investment at the moment. I will have a Roth by April. My company was matching up to 6% but canceled it when things got tight. I currently contribute 25% of my pay which is enough to put me above the limit by the end of the year. I like the 401k because I have trouble saving money. I'm 24 and still don't have my life planned very well. I just picked the four funds that had the highest ten year returns. Is there better criteria I should be considering? The expense ratios are rather high for all of the funds, but seeing Cornholio's options made me realize it could be worse.
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Jan 13, 2010 14:00
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theitguys posted:I'm 24 and still don't have my life planned very well. I just picked the four funds that had the highest ten year returns. Is there better criteria I should be considering? The expense ratios are rather high for all of the funds, but seeing Cornholio's options made me realize it could be worse. Have you considered putting it all into a date-targeted fund and calling it a day?
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Jan 13, 2010 17:13
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theitguys posted:I don't have any other form of investment at the moment. I will have a Roth by April. My company was matching up to 6% but canceled it when things got tight. I currently contribute 25% of my pay which is enough to put me above the limit by the end of the year. I like the 401k because I have trouble saving money. Well, it depends on your risk tolerance, in terms of what is appropriate for you. The biggest thing that stands out in your portfolio is Pioneer High Yield (TAHYX). I think your 401k administrator did a disservice to the company by offering this fund, as it is misleading putting this in the bond category. The 2008 return was negative 37% and the 2009 return was positive 62%. This fund (despite being a bond fund) has had greater volatility than equities. It is a completely inappropriate investment as a "bond" role in a portfolio. Graham and Dodd's Security Analysis has an excellent chapter describing how misleading the labels of stock, preferred stock, and bonds can be, and that investments need to be evaluated according to expected behavior. So I would drop the Pioneer High Yield. The other bond funds are too expensive. The Guaranteed Income Fund may be your best choice for bonds. For equities, the BlackRock Equity Index is a good choice for domestic stocks. You could also use American Funds Growth Fund of America. All of your international and small cap options are poor. I would use Vanguard for your Roth. You can do $5K for 2009 and $5K in 2010. So prioritize filling those up this year, since you get no match on your 401k. At Vanguard, get a healthy chunk of VFWIX (All World Ex US Fund) and maybe a small amount of Vanguard Small Value index if you want some small caps. What percentage of each depends on your risk tolerance. 3 categories: - Domestic stocks (use BlackRock Equity Index, American Funds Growth Fund of America, and maybe round it out with some Vanguard Small Value in your Roth). - International stocks (use just VFWIX in Roth) - Bonds (use Guaranteed Income Fund in your 401k) A sample portfolio may be something like 40%/35%/25% for the 3 categories above (the 40% domestic is divided among the 3 funds in that category). That's a start... you'll have to take it from here, do the math and see what you can do based on the existing 401k balance and pending roth contributions. 80k fucked around with this message at 17:33 on Jan 13, 2010 |
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Jan 13, 2010 17:31
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Is there any place to get long term history on the PE ratios of various indices? I checked the websites of the indices, I checked some basic stock quote sites and just did searches but didn't have any luck. I can find charts for the S&P 500 as part of articles but that's it. I found someone else asking the same question on another site and the only response was to use the PE info for an ETF using the index, but I tried that and couldn't find anything for ETFs either. I feel like I must be missing something simple here because checking PEs is a fairly common thing for stocks.
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Jan 13, 2010 20:38
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EchoBase posted:Is there any place to get long term history on the PE ratios of various indices? I checked the websites of the indices, I checked some basic stock quote sites and just did searches but didn't have any luck. I can find charts for the S&P 500 as part of articles but that's it. I found someone else asking the same question on another site and the only response was to use the PE info for an ETF using the index, but I tried that and couldn't find anything for ETFs either. I feel like I must be missing something simple here because checking PEs is a fairly common thing for stocks. Best sources for P/E (or P/E variations like P/E10) for S&P500 that I have seen have been compiled by Robert Shiller. His book Irrational Exuberance has charts. A quick google search for "Shiller P/E chart" found this: http://www.multpl.com/ Not sure about other indices though.
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Jan 13, 2010 20:53
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80k posted:Well, it depends on your risk tolerance, in terms of what is appropriate for you. Thanks. I actually had half my balance in the Guaranteed Income fund in 2008. I'll definitely be able to max out the Roth for '09 and '10. My company should reinstate the contribution matching this year since the industry is picking back up.
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Jan 13, 2010 23:48
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At the end of 2007, a certain individual on this forum challenged me with a bunch of managed funds that he expected to continue to outperform its category. Let's examine how they handled one of the worst years in stock market history (2008) and one of the best (2009). NMTAX (Columbia Marsico 21st Century A shares): M* puts this in the Large Growth category. So let's compare NMATX with VIGRX (Vanguard Growth Index) code:code:CGMFX (CGM Focus): M* puts this in the Large Growth category (although it should really be in the WTF category). So let's compare CGMFX with VIGRX (Vanguard Growth Index) code:Moral: Past performance is no guarantee of future performance. This is not intended to rub anything in anyone's face. Duke is a nice guy and it was a civil challenge. But this just goes to show that it is not easy to pick winning managed funds. Only easy when looking in the rear view mirror. 80k fucked around with this message at 22:32 on Jan 14, 2010 |
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Jan 14, 2010 18:32
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I found something interesting offered by my defined contribution pension plan provider: a series of those target retirement date funds (where all your allocations are taken care of by the fund) that you see from most mutual fund providers, but these have a guarantee on the value at the end-date. If you're holding the fund at the end-date, you sell out for the peak value of the fund over its history. I imagine that this will just make the managers extremely conservative as they want the end date to be the peak so they don't take a loss, but still, it's an interesting idea. The fund is insured somehow, that's how they guarantee the payout. The MERs are ~0.99% too, I was expecting a huge MER to cover the insurance costs...but it's not that bad (relatively speaking).
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Jan 14, 2010 18:53
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EchoBase posted:I found something interesting offered by my defined contribution pension plan provider: a series of those target retirement date funds (where all your allocations are taken care of by the fund) that you see from most mutual fund providers, but these have a guarantee on the value at the end-date. If you're holding the fund at the end-date, you sell out for the peak value of the fund over its history. I imagine that this will just make the managers extremely conservative as they want the end date to be the peak so they don't take a loss, but still, it's an interesting idea. The fund is insured somehow, that's how they guarantee the payout. The MERs are ~0.99% too, I was expecting a huge MER to cover the insurance costs...but it's not that bad (relatively speaking). If you don't understand how it works and why it's better for you, don't put your money in it. Don't leave it up to an advisor/salesman to do the understanding for you. I'm not sure I really understand myself what you've described. It sounds like something between a Principal Protected Note (PPN) and whole life insurance, which is a red flag because neither of those financial products are particularly good for most people. big shtick energy fucked around with this message at 20:20 on Jan 14, 2010 |
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Jan 14, 2010 20:18
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I'm not buying it, I just saw it and thought I'd post it. You're basically paying someone to be hyper conservative with your money from what I can tell.
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Jan 14, 2010 20:47
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80k posted:At the end of 2007, a certain individual challenged me with a bunch of managed funds that he expected to continue to outperform its category... Have you read the research by Fama and French "Luck versus Skill in the Cross Section of Mutual Fund Returns"? The paper basically confirms what you challenged your friend on.
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Jan 14, 2010 21:06
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bhaltair posted:Have you read the research by Fama and French "Luck versus Skill in the Cross Section of Mutual Fund Returns"? The paper basically confirms what you challenged your friend on. Yea, Fama and French's research was the basis of the argument.
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Jan 14, 2010 21:41
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Alright, I've been trying my hardest to come up with a good way to manage this myself, but I'm hitting a wall an could use some advice on my retirement. I'm 26 and have a long time horizon, and have 0 intention of touching any of the money in any of these except for retirement (ie not raiding the Roth for a home purchase). I apologize in advance for this being (very) long - it's got too many quirks to keep it short. My retirement comes in 3 pieces: 1. Roth IRA I've got a Vanguard Roth IRA w/ ~$5700 in it, all in their 2045 target retirement fund (VTIVX). I started it last year and maxed it, and will be contributing ~420/month, maxing it out over the year. It's all in VTIVX because I wanted some diversification and could only choose 1 fund because of the 3000 minimum that Vanguard has. Hopefully this restriction is going to stop mattering at the end of this or next month, so I'm open to splitting/moving the money once I've got enough to do so. 2. 401(k) My 401(k) with my company will be "waking up" when I next get paid. I get no match. I've got $40 in it at the moment, but will be throwing $400/month at it every month now, so I need to start getting serious about where the funds go. The fund is managed by JPMorgan, and is made up of 7 funds: A. JPM Prime Money Market, which trades under JINXX. Expense Ratio is 0.27% B. JPMorgan Stable Value Fund. Expense Ratio 0.16% C. US Bond Index Fund. Expense Ratio 0.10% D. Large Cap Equity Index Fund. Expense Ratio 0.04% E. World Equity Index Fund. Expense Ratio 0.12% F. Small Cap Equity Index Fund. Expense Ratio is 0.11% G. My company's stock. No expense Ratio. You'll note that only 2 of the funds trade on the NYSE - the rest are private funds that aren't publicly traded, making them a pain in the rear end to track. They index what the title would suggest, but beyond that it's a bit of a mystery as to what specifically is contained within each account. My current mix of funds is 20% Bond Fund, 25% Large Cap, 30% World Equity, and 25% Small cap, and I'm setup to contribute in those ratios as well. 3. Profit Sharing Trust Instead of matching the 401(k), my company has a profit sharing plan setup. This fund is separate from the 401(k), but is managed through JPMorgan as well. Every year they'll give me a % of my salary in preferred and regular company stock. The specific % is based on how long I've worked for the company, and the %'s are high enough that I'll have a significant chunk of stock as soon as it kicks in. The fund has a vestment period, meaning that won't have full control of it until 2014/2015. Even once I'm totally vested there are restrictions on selling the stock. I *think* I can sell the stock and buy into the Money Market fund, stable value fund, or bond fund, but I'm not positive about this. Either way, the stock is given out annually, and I'll get a hold of (roughly) $3800 of it sometime in September. I don't have any yet. Given all this, I'm wondering what the best way to manage my retirement is. I've been thinking that I'd just manage the pieces separately, but I know that I should keep my retirement balanced across the various accounts rather than trying to make each one a perfect allocation itself. However, with that much money tied up in a single stock I'm a little confused as to how to allocate things in general. This is doubly the case since my company is a fortune 500 company (and a big one at that), so it's among the 10 largest holdings of the large cap fund, making it even more of a snaggle. TL/DR: My retirement is a clusterfuck and I need help figuring out how to manage it all. So questions: Is there a good way to tie this all together and keep it straight? If not, how do my present allocations look and what would you recommend doing once I start getting stock directly? Finally, for the Roth, what would people recommend doing once I start getting enough money to buy into additional funds? Christ that was long. Thanks for making it through the wall of text.
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Jan 15, 2010 03:10
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80k, I would probably take that bet with you on FAIRX, that fund just seems unstoppable.
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Jan 15, 2010 03:20
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abagofcheetos posted:80k, I would probably take that bet with you on FAIRX, that fund just seems unstoppable. People said the same thing about Ken Heebner's CGM Focus Fund, before it crashed and burned last year.
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Jan 15, 2010 04:05
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abagofcheetos posted:80k, I would probably take that bet with you on FAIRX, that fund just seems unstoppable. Honestly, i never wanted to take any bets. It's mostly meaningless over the short term. I only bring it up because a forum regular seemed pretty sure he could pick winning funds ahead of time and specifically cited those funds at the end of 2007. Here we are 2 years later. FAIRX is a fine fund. I am not against active funds. I also think Graham and Dodd's Security Analysis is one of the greatest books ever written on investing and would have no qualms with an active fund that employs that method of investing. FAIRX is one of them, as are Longleaf, First Eagle, and IVA. A good chunk in those types of funds, despite the higher ER, is not so bad an idea.
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Jan 15, 2010 04:43
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Ravarek posted:People said the same thing about Ken Heebner's CGM Focus Fund, before it crashed and burned last year. Besides, even though CGMFX underperformed the last two years it still ended the decade providing over 200% greater returns than VIGRX (and there was a time when it was near 500%).
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Jan 15, 2010 17:22
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abagofcheetos posted:Besides, even though CGMFX underperformed the last two years it still ended the decade providing over 200% greater returns than VIGRX (and there was a time when it was near 500%). There is no doubting CGMFX's past performance. The point is that there was a lot of talk about it at the end of 2007 (so 2008 and 2009 performance is relevant). One of the posters was all "this is the type of fund that people should invest in, and Cramer agrees with me". And Mulletstation piles into it beginning of 2008 (cuz Heebner knows his poo poo... called the subprime yo!). Chasing performance is typical investor behavior, and is a poor strategy.
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Jan 15, 2010 17:41
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abagofcheetos posted:This is true, but when you look at the strategy of Focus you know what you are in for, and that it will be feast or famine depending on Heebner's bets. Fairholme, like 80k stated, follows a methodology that is a little more grounded and based more on fundamentals. Also... one thing to watch out for, regarding FAIRX, is asset base. It is not the same fund as it was earlier in the decade. Probably still a very good fund but asset bloat could become a problem.
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Jan 15, 2010 17:56
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