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poofactory posted:Tax cuts will lead to the US losing its AAA bond rating. http://www.cnbc.com/id/40641123 Good time to invest in commodities if you are a US person. Yes, because commodities are the best way to diversify currency risk  . This shouldn't be in the Long Term Investing and Retirement Savings thread.Edit to clarify, when you say invest in commodities then you are basically either meaning the physical asset or futures. The physical asset has high carrying costs if you own it through a company and if you are talking about physically taking delivery then usually pretty poor bid/ask spreads on it. If you are talking about futures then there is tremendous volatility and risk associated with those investments. I would agree that PART of a useful hedge could be commodity focus equities but that doesn't sound like it's what you are recommending. alreadybeen fucked around with this message at 03:29 on Dec 14, 2010 |
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Dec 14, 2010 03:15
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moflika posted:Uhg, so am I basically poo poo out of luck when it comes to putting money away for retirement if I don't have a Actually, if your income is low enough you will probably qualify for the 0% tax rate on dividends and capital gains even without a retirement account. Visit the IRS website or a tax accountant for details. Note: This is part of the Bush tax cuts which nominally expire at the end of this year. They may or may not be extended for 2011.
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Dec 14, 2010 05:34
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Okay, guys, I need some help because I keep trying to figure out the answer to this, and a million different websites tell me a million different things. This is related to stocks, rather than mutual funds. But I'm just trying to figure out how to tell if a company is in good shape or not when it comes to value investing. There are metrics that make sense to me, such as P/E, operating margin, 52-week high/low, debt-to-equity ratio, and a bunch of other poo poo. But it's hard to take all these individual stats and interpret them to mean that a company is undervalued but with strong fundamentals and stats, or well-run, or whatever. For the long-term, of course. I'm talking like 20-30 years. Rekinom fucked around with this message at 13:49 on Dec 14, 2010 |
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Dec 14, 2010 11:36
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avan posted:Im thinking about moving some money around in my RothIRA. I have a little more than 3500 in cash and I was thinking of spending it on this: Generally speaking, investing into an IRA is responsible investing behavior. At $33.63, you'd be purchasing it at the highest of its 52-week range of $25.56 - $34.60. The dividend yield of 4.2% is the obvious winning point in that its a better return than you would get by leaving it the bank or SmartyPig, however if you need these funds in lieu of an emergency fund you will get taxed out the wazoo. If it were my money I would wait and buy it around $30, given that its trading on the high and economists are predicting the economy will improve in 2011. How old are you? Dividend investing typically denotes an investor with an income investing strategy who is typically older, risk-averse, and wants to subsidize some of his current living expenses through dividends in mature companies. If you are young, you can handle more a bit more risk than an ETF focused on dividends. I like emerging markets but if a fund ain't investing in da CRIB (China, Russia, India, Brazil) then I don't want it. You should consider that companies focused on dividend payouts are not reinvesting those funds back into the company as retained earnings, which affects future earnings (unless the company is already in its mature stage). Such companies are typically safer bets than those which do not pay out dividends, are riskier, and have greater growth potential. If I were in a dividend-oriented mind today, I would be looking at Verizon (VZ) as a possible candidate for short term investing. Although its trading at its absolute high, it's yield is 5.7%. It's a hold for most of the polled analysts on Reuters (with some recommending Buy and none recommending Sell) but what I would be afraid of missing out on is when it launches the iPhone and starts pulling in market share from AT&T.
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Dec 14, 2010 15:27
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Rekinom posted:Okay, guys, I need some help because I keep trying to figure out the answer to this, and a million different websites tell me a million different things. This is related to stocks, rather than mutual funds. But I'm just trying to figure out how to tell if a company is in good shape or not when it comes to value investing. There are other ratios which are good at filling in the missing parts of the story. I like using Reuters for analysis because it compares the company's ratios against the industry, sector, and the S&P 500. To use a recent example, check out Verizon: http://www.reuters.com/finance/stocks/financialHighlights?symbol=VZ Towards the middle-bottom you will see the Financial Strength ratios. These are a good measure of solvency, both immediate and long-term. With Verizon, solvency is not a major concern but with a small-cap start up, solvency is critical. Profitability Ratios are self-explanatory. Efficiency Ratios such as Inventory Turnover tell you if a company is not doing a good job of managing inventory (excess inventory is usually not a good thing as it represents a "sunk" cost of goods that has not been earned back through sales) and Management Effectiveness ratios show you how the three different arms of the company (finance, investing, operating) are being managed. I think the last section is the most telling in terms of current and future expectations of performance. Verizon is pumping a poo poo ton of money into expanding 4G so its Return on Assets/Investments/Equity for the last year is depressed compared to competitors however its 5-year average is greater than its competitors, signaling that it does a good job of managing its three arms of the business. As you can imagine, there are as many exotic ratios as there are numbers analysts can pull out of the financial statements. Research the meaning of each ratio and understand that a high ratio can be both a positive and a negative depending on the analysts point of view, and it helps to be knowledgeable about that specific industry. I'm comfortable commenting on Verizon's ratios because I work in the wireless industry and know more or less where the industry is heading and who is leading the way, but any other industry would require a bit of reading (and posting). Another think you need to consider is how often a company revises its financial statements (also available through Reuters), as this affects ratios. If a firm has a record of revising statements downward, this indicates poor management or window-dressing and as such should be avoided.
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Dec 14, 2010 15:50
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Orgasmo posted:Very informative thank you for this. Do you think Verizon will continue to increase? It's at its 52 week highs. Will it see its 2007 highs again in the somewhat immediate future? Somewhat related...has the Verizon iPhone 4 been confirmed for release? All I seem to find are rumors.
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Dec 14, 2010 16:10
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VZ has horrific returns, a debt/equity of 140% and a payout ratio which is sky high and probably unsustainable. Granted they are not as bad as some other major industry companies, but still. They have a lot of room for growth, but now you are speculating rather than investing long term. If you are looking for long term dividend investing I would suggest XOM, JNJ, PG and ED. They are all stable companies with little volatility and nice dividends. Just time your entry, things are a bit inflated right now. Cheesemaster200 fucked around with this message at 16:34 on Dec 14, 2010 |
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Dec 14, 2010 16:20
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|Ziggy| posted:Very informative thank you for this. I do think VZ will continue to gain value but how far it will go is not my place to call. As Cheesemaster pointed, that's just speculation and that discussion would be better served in the Stock Picking thread. The reasonable assumption is that stock price would go up slightly when the iPhone is announced, and if they start pulling considerable subscribers from the competition then it would rise again with respect to future expectations of earnings based on those new subscribers + 2 years which is the length of the typical contract. How many subscribers they will pull is a number I don't know but I'm sure there are analysts out there that have already studied this scenario to death. There is a school of thought in financial analysis that believes that prior history is already incorporated into today's stock price. In other words, where a company was one year ago is no indication of future growth/loss and should not be factored into decisions. I think that looking back is helpful if you wanted to evaluate how a decision to buy earlier would have affected you versus buying today. Verizon is not a company I would shy away from. They are #2 in total subscribers, I'd say are very likely (80%) to offer the iPhone within the next 6 months, have a smart, early, comprehensive 4G rollout, embraced LTE as their 4G vehicle, have the best rated customer service (retaining your good customers is more profitable than gaining new customers), embraced Android (the fastest growing handheld O/S), have a global presence with Vodafone, are poised to be all over Pay-By-Phone and have a well established landline and circuit business in Verizon Business. They are also hurting from the loss of possible subscribers to AT&T because of the iPhone. One of the reasons they didn't get it first was because they were greedy and wanted to control the distribution chain, whereas Apple wanted the iPhone only available through their stores. Verizon also has to do a much better job of creating comprehensive business solutions for companies so that they manage not only the wireless, but the network and phone systems as well. Sprint has tried to do this through WiMax and CNS (Converged Network Solutions) but Verizon has always seemed to me to be more competent. edit: I don't own Verizon stock and if you don't diversify your holdings amongst 40 different researched stocks amongst varying industries only after properly investing the maximum into 401k/Roth IRAs then you are an asshat. Suave Fedora fucked around with this message at 19:48 on Dec 14, 2010 |
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Dec 14, 2010 19:45
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Rekinom posted:Okay, guys, I need some help because I keep trying to figure out the answer to this, and a million different websites tell me a million different things. This is related to stocks, rather than mutual funds. But I'm just trying to figure out how to tell if a company is in good shape or not when it comes to value investing. It is obviously not easy, otherwise a few screens would uncover the best companies to invest in. There is no universal metric. EV/EBITDA is one of the most common metrics used in the context of LBO's and Private Equity activity, as it is capital-structure neutral. However it is only useful in comparing businesses with similar CapEx. Along those lines, you can adjust for Capex to gain a clearer picture, as well as analyze interest coverage or Debt/Equity. However, this method is less useful when evaluating financials. On the other hand, deep value investors tend to focus more on free cash flow, some of whom have an absolute revulsion to EBITDA (Buffett and Munger and maybe to a lesser extent Seth Klarman). However, FCF analysis is labor intensive if you want to arrive at anything useful. Historical simplified Cash Flow from Operations minus Capex tells you little, though it tends to err on the side of conservatism so it may help you pick out the more obvious values. ROIC (often used is NOPAT / invested capital (assets less excess cash and non-interest-bearing current liabilities)) can be used to assess the business's efficient use of capital. This is often paired with earnings yield measurements to look for the best underpriced companies. If you read Security Analysis, you will see that a major part of value investing is understanding the entire corporate structure, so it is not all about good stockpicking. I'm quite certain that at the bottom of the market in March '09, a true Benjamin Graham follower would have found the best risk and return to come higher up the corporate food chain than common stocks. From March '09 until now, equities have performed spectacularly, but outcome cannot be confused with strategy. The best strategy for high returns and high margin of safety would have delved heavily into the credit markets, even if the outcome underperformed an equity-heavy portfolio. I would not get into individual security selection until you can understand that and have confidence in analyzing the entire corporate structure. 80k fucked around with this message at 23:12 on Dec 14, 2010 |
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Dec 14, 2010 20:31
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 bond funds!!I cut my losses (on gains) on my non-retirement account which I had in Fidelity bond funds today. loving things have a volatility of a stock fund and pay dividends off the NAV anyway. If I wanted to deal with that kind of liquidity I would have put it in something with higher potential returns. Probably going to put the money into some individual 3y or 5y notes in the near future. I figure that even if the treasury market tanks more over the next year (probable) I can still sit on fairly nice interest payment until maturity. Won't max out my yields in that case, but my strategy is to sit on a steady income of dividends/interest payments with the money.
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Dec 14, 2010 22:26
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I'm still in the process of reading up this up and not close to making any decisions, but I was wondering: Is there generally a minimum that one should be willing to put in when buying shares in a company? Buying a few shares from a few companies seems like it may be a waste of time, but I can't really tell why. Since retirement options are out for me at the moment, I was thinking about finding a few companies in different sectors of the economy and buying a few shares from each. Vanguard ETFs seem like a good option, but I'd like to have a general idea of what I want and what to look out for, so that I can avoid obviously bad advice. You tend to get better service when you at least have a small idea of what you're talking about :/ I just want to know if dealing in a really small number of shares is a waste of time. Sure, there's risk, but I'm looking to park a couple of thousand somewhere long-term. I don't want to have to worry too much about day to day, split second decisions. This obviously will change as my knowledge-level and income both increase. I should probably educate myself on tax matters before taking this kind of step, but you've got to start somewhere. Speaking of which, could I trust someone from a place like H and R Block to make sure I don't miss anything come tax time if I keep my investments simple, or should I move up in the world and find a better tax person? They can be pretty $$$$... moflika fucked around with this message at 22:51 on Dec 14, 2010 |
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Dec 14, 2010 22:49
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moflika posted:I should probably educate myself on tax matters before taking this kind of step, but you've got to start somewhere. Speaking of which, could I trust someone from a place like H and R Block to make sure I don't miss anything come tax time if I keep my investments simple, or should I move up in the world and find a better tax person? They can be pretty $$$$... I worked for a similar company and I wouldn't trust H&R Block or the company I worked for. I had to take training to do it, sure, but basically all I did was enter it into a program and it told me what you'd get. Those companies can get expensive too. For example a basic return with 1 W-2 would cost a bit over $100 to do, but additional things increase this number pretty quickly and soon enough your return is $300. That really sucks when you get to the end and realize you owe money. Not only to the government but now the tax company if you file with them or pay their consulting fee. If all you have is a W-2 you should file yourself. There are programs like TurboTax that could be helpful if it's a little more complicated. I still use a pen and paper to fill everything out, but you can do it online at the IRS website I believe. Most tax things aren't as complicated as you would think, but we have a big tax megathread here you could ask questions in. edit - Tax Megathread |Ziggy| fucked around with this message at 23:02 on Dec 14, 2010 |
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Dec 14, 2010 23:00
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Cheesemaster200 posted:
Mark your treasury bonds to market everyday and you are dealing with no less volatility than the NAV of an equivalent bond fund. If you like to keep your head in the sand in regards to market value, then go for a ladder of CD's instead of a bond fund. I do have issue with Fidelity's overall management of bond funds though, so getting out of their bond funds is not a bad idea anyway.
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Dec 14, 2010 23:20
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moflika posted:I should probably educate myself on tax matters before taking this kind of step, but you've got to start somewhere. Speaking of which, could I trust someone from a place like H and R Block to make sure I don't miss anything come tax time if I keep my investments simple, or should I move up in the world and find a better tax person? They can be pretty $$$$... If you are under a certain income level (irs.gov will know), you can use turbotax or H&R block online's tax filing things for free. Well, it's free to file your federal, and $29.95 for state, but it's still a good idea. I am totally ignorant of most things and have real trouble with math, but TurboTax at least makes it really clear where things should go. There're nice question mark buttons next to every field. The Tax Megathread people are also amazing.
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Dec 14, 2010 23:23
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80k posted:On the other hand, deep value investors tend to focus more on free cash flow, some of whom have an absolute revulsion to EBITDA (Buffett and Munger and maybe to a lesser extent Seth Klarman). However, FCF analysis is labor intensive if you want to arrive at anything useful. Historical simplified Cash Flow from Operations minus Capex tells you little, though it tends to err on the side of conservatism so it may help you pick out the more obvious values. I have generally found that reported earnings plus depreciation and amortization minus capital expenditures is a reasonable proxy for free cash flow, although most of the thing I've purchased have a working capital that is small relative to fixed capital (changes in working capital are usually the difference between reported earnings plus depreciation and amortization and cash flow from operations). However, I have also noticed that many companies have current capital investments that fall below historical averages, which is one concern, but the bigger concern is what proportion of capital expenditures goes to maintaining the current earnings power and what proportion goes to expansionary plans. But assuming that all capital investments are necessary to sustain current earnings is the conservative approach, and if you can find good "obvious" investments there's probably no reason to look for more subtle ones. But it's impossible to know what's going to happen over the next 20-30 years. Value investing works because the future very often resembles the recent past, but you do need to keep updating your views. Join us at the stock picking thread. Do not be afraid.
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Dec 14, 2010 23:28
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moflika posted:...Is there generally a minimum that one should be willing to put in when buying shares in a company?... To answer your questions: * There is no minimum, but ideally one should invest an amount that makes the commission cost worthwhile. For example, if you buy one share of a company at $10 the commission might be $9.99. But if you buy 100 shares the commission would still be $9.99. So you reduce your overall cost with the larger purchase. You have to check the commission schedules of the brokerage you work with (either online or through a bank). To keep things simple for managing my cost basis (i.e the current cost of your positions) I like to buy stocks at a minimum of 100 shares, or round to the nearest 100 for larger blocks. But there is nothing wrong with buying odd lots of shares (like 13, 37, 145, etc.). * Vanguard ETFs: You could buy one of Vanguard's ETF funds, either S&P 500 or other broad index. That's a fairly safe starting investment for equities, and gives you the advantage of almost no company risk. For example, you have less risk buying 100 shares of Vanguards VTI ETF compared to 100 shares of British Petroleum (BP). The VTI ETF less impacted than BP to certain offshore drilling risks, such as having a drilling rig explode and create a massive oil spill (which caused BP's stock price to drop over 50%). The ETFs usually pay out a quarterly dividend as well. Once you learn more about investing from your ETF purchase you can look into later purchasing individual company securities, hopefully when you understand the risks better. * Tax time: Any of the free tax software packages should give you enough info to manage the taxes yourself. If you don't sell the ETF position then all you will have to pay taxes on are any dividend distributions. Just get one of the packages and test out the tax preparation steps with dividends from a hypothetical stock or ETF position to see how the taxes are determined.
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Dec 15, 2010 05:12
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Sweet, thanks for the answers! Now I just have to find a way to process all the information I've been gathering these past days...
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Dec 15, 2010 08:56
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poofactory posted:Tax cuts will lead to the US losing its AAA bond rating. http://www.cnbc.com/id/40641123 Good time to invest in commodities if you are a US person. Nice to see that the senate minority can be so myopic that they may actually cause the depression that we're skirting the edge of. It's disingenuous of that article to blame the "Obama Tax Package" when the lovely part of it is the minority compromise. Of course, it's asinine of Moody's to think that that tax package will severely affect the US's ability to collect taxes and pay it's debts.
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Dec 15, 2010 16:41
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Murgos posted:Nice to see that the senate minority can be so myopic that they may actually cause the depression that we're skirting the edge of. It's disingenuous of that article to blame the "Obama Tax Package" when the lovely part of it is the minority compromise. poofactory is the living embodiment of Confirmation Bias. A CNBC article about Moody's concern regarding US's AAA rating = US will default, commodities will surge, my portfolio is the only way to go. Good luck with this one. Those with real life experience with investing and know their market history should be familiar with this one.
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Dec 15, 2010 20:11
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Orgasmo posted:words Also in reference to VZW. They may have a load of debt right now (I was talking to one of the managers at a VZW store and he gave me a statistic (Weather its bullshit or not I know not) that they spent over a billion dollars in 2009 erecting new towers and improving their entire infrastructure. But they do have something that AT&T and Sprint (Don't get me started on sprint - the phone company that makes the most money but is bleeding more customers every day than Gallons of oil were spilled in the gulf) They have extremely loyal customers. Everyone who I know that has Verizon (Me Included) raves about their service and network. I am the person who ACTUALLY has more bars in more places. And when they get the iPhone (reuters said early Q1 2011) There will be a huge flock of AT&T customers that switch. So I would buy Verizon. But not for a few weeks at least its too high right now.
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Dec 15, 2010 20:45
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moflika posted:Sweet, thanks for the answers! Now I just have to find a way to process all the information I've been gathering these past days... I started managing my own retirement fund back in June. I went with Vanguard for my broker for many reasons stated in this thread. While doing my own research I found some things that I have pasted in an document that I use to maintain my records. I will share these with you, but I don't have the original sources Select low-cost funds Consider carefully the added costs of advice Do not overrate past fund performance Use past performance to determine consistency and risk Beware of stars (as in, star mutual fund managers) Beware of asset size Don’t own too many funds Buy your fund portfolio – and hold it "The idea of Value Investing is to buy stocks whose price is lower than their true value and then to hold those stocks until their price returns to the true value earning a return on the investment." Keep total expenses under 1% for an actively managed fund, 0.3% for an index fund. "Finally, rebalance, by selling your winners and buying more of the losers. Most people can’t bring themselves to do this, even though it improves returns over the long run. "
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Dec 15, 2010 21:42
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Is E*trade a smart way to invest in a 401k if your work doesnt offer any 401k options? I'd like to be able to just chip in $100-$150 a month in various funds. I dont have enough money right now to dump $1-2K in every fund that I would want to invest in. This would just be a secondary investment for me as my job does include a pretty sweet pension plan!
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Dec 16, 2010 00:21
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BleakLewis posted:Is E*trade a smart way to invest in a 401k if your work doesnt offer any 401k options? I'd like to be able to just chip in $100-$150 a month in various funds. I dont have enough money right now to dump $1-2K in every fund that I would want to invest in. This would just be a secondary investment for me as my job does include a pretty sweet pension plan! I use it for my wife's Roth account and it works pretty well for me. I'd also go for a Roth over a traditional 401k if your not getting any matching, but you'll have to weight the benefits for yourself.
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Dec 16, 2010 00:31
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imabmf posted:Advice Just pasted it in my notes file and will keep it in mind when it comes time to pill the trigger. Thanks! moflika fucked around with this message at 04:55 on Dec 16, 2010 |
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Dec 16, 2010 03:41
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imabmf posted:Select low-cost funds Believe at least that piece is from Jack Bogle (Vanguard founder)
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Dec 16, 2010 03:58
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avan posted:I'm only 20, but I make quite a bit of money and I was taught the magic of compounding early. (teehee) I love stocks with good dividends (I own micky d's and JnJ) So I went ahead and bought both the IDV and the Vanguard Emerging Markets ETF. They both appeared pretty solid I went for it. Also I just want to state that if you are a good investor you always re-invest dividends, if you don't you are dumb and could be making as much as 50% more money on your original investment over a period of less than 5 years. Maybe I should start a "Young peoples guide to retiring early" thread or something along those lines. It's good that someone got through to you on how to save early. I hope to teach my son the same. I have to disagree with you on reinvesting dividends. Just because it doesn't fit your personal strategy doesn't make it a sign of poor investing. Like I mentioned earlier, someone who doesn't reinvest dividends is probably living off those dividends, which is typical for older, likely retired investors. They prefer mature, less risky companies that don't have to reinvest that money to remain competitive. Making a dividend payment means you (the corporation) are giving away money that could have been used to reinvest back into the corporation. This is otherwise known as Retained Earnings and is listed on corporations' financial documents. Investopedia posted:Retained Earnings is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under Shareholders' Equity on the balance sheet. If a non-mature company is making nice dividends, I as a long term investor have to ask myself if they are shooting themselves in the foot by not reinvesting those dividends back into the company, either to gain market share, increase R&D, whatever. Dividends don't appear out of thin air, it's cash that could have been used to strengthen the corporation. If I wanted to be critical of Verizon, I'd ask why are they paying out dividends when they could be reinvesting that money to really kick the poo poo out of AT&T? The best thing you can do with that information that VZW manager gave you is wipe your rear end with it. At best, it gives you something to research independently. It's true that they are spending gobs of money on upgrading their network, but to what, 4G or to expand/improve existing 3G? LTE or EVDO-A? Urban, suburban, and rural areas? He was performing marketing's job without even knowing it. I don't doubt they are headed in the right direction; Verizon seems competent next to Sprint and AT&T's corporate decision-making. But you have to take what a company rep tells you with a grain of salt; the truth is in the financial documents and independent analysis. Loyal customers are absolutely vital. You can have the most efficient operations but without customers, the business is toast. Retaining your best customers is a whole field of its own (marketing management) that companies are warming up to because it makes a lot of dollars and sense to enact programs that keep your best customers, make OK customer pay more, and that disincentivize bad customers. It's very much like how Las Vegas works, where high rollers get the best comps.
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Dec 16, 2010 19:08
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Anubis posted:I use it for my wife's Roth account and it works pretty well for me. I'd also go for a Roth over a traditional 401k if your not getting any matching, but you'll have to weight the benefits for yourself. A couple more questions since you've used E*trade before and I'm a complete newbie to this sort of investing. I'm looking at multiple Vanguard mutual funds that I want to invest in. I see both a initial investment price and a share price listed on E*trade's site when I look up funds. For example VFSTX has a share price of $10.75 and an initial investment price of I believe $3k. I can just buy individual shares right? I'm just not considered a voting shareholder or something along those lines correct? Another question is there a way in E*trade to automatically distribute money added to my IRA into multiple funds. Like if I put in $100 it could automatically put %40 in one fund and %30 in another, etc.?
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Dec 17, 2010 01:01
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BleakLewis posted:A couple more questions since you've used E*trade before and I'm a complete newbie to this sort of investing. I'm looking at multiple Vanguard mutual funds that I want to invest in. I see both a initial investment price and a share price listed on E*trade's site when I look up funds. For example VFSTX has a share price of $10.75 and an initial investment price of I believe $3k. I can just buy individual shares right? I'm just not considered a voting shareholder or something along those lines correct?
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Dec 17, 2010 06:31
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I've been hearing a lot of talk about bonds lately. Let me see if I understood this correctly: Bond interest rates don't have much more room to go down, so the value will go down as the interests rate (in the near future) will start to rise? So, if I'm understanding this correctly, the only move at this point for someone who doesn't have bonds would be betting on short term bonds and hoping that the interest rates continue to drop for at least a year? I'm looking for long-term investments, but it sounds like that is not a good move now when it comes to bonds? imabmf posted:Don’t own too many funds I'm kind of afraid to look into anything other than index funds/EFTs, since it seems like I won't get hit has hard and I don't have to watch movements as closely as I would with stocks. How much is too much? I want to get my feet wet, so I was going to spread a little bit over a bunch of different type of EFTs, like: - Dom: Vanguard S&P 500 ETF (VOO) - EU: Vanguard European ETF (VGK) - Asia: Vanguard Pacific ETF (VPL) - Emerg: Vanguard Emerging Markets ETF (VWO) - REIT: Vanguard REIT ETF (VNQ) Depending on if I get in on bonds right now: Vanguard Total Bond Market ETF (BND) and Vanguard Short-Term Corporate Bond ETF (VCSH) or just (BND) If this looks insane, should I just start with just (VOO) and (BND) and go from there? Way more is going to go into Dom and Bonds than the rest, but I'm not sure if you have to wait for the right moment like stocks, since these are basically index funds and dip into a bunch of companies. I'm basically starting from square one. Forgive the misuse of terms... -------------------------- -------------------------- Finally, precious metals: If I wanted to invest in silver, are there any disadvantages to choosing an ETF/Stock that exposes you to silver prices (not production) over buying actual coins? I move a lot, and the idea of moving (and losing) coins just seems annoying :/ Sorry for making GBS threads up this thread. I don't have anyone to talk to about this and I need to make sure to clear stuff up as I go along so I don't pile up a bunch of bad information  I can't bring myself to trust bank advisers quite yet. I wouldn't really be able to tell if the advice given was complete garbage. moflika fucked around with this message at 12:49 on Dec 17, 2010 |
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Dec 17, 2010 12:41
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moflika posted:I've been hearing a lot of talk about bonds lately. Let me see if I understood this correctly: No one knows what bond rates will do in the future. The only thing we do know is that bonds have a low expected return going forward due to low yields. Buying short term bonds is not a bet on continuing interest rate drops. Short term bonds is simply a way to get some incremental yield above savings accounts and money markets without taking too much risk. It is that simple. Long Term investing includes the use of bonds not because of their returns but because of their stability relative to stocks. moflika posted:I'm kind of afraid to look into anything other than index funds/EFTs, since it seems like I won't get hit has hard and I don't have to watch movements as closely as I would with stocks. How much is too much? I want to get my feet wet, so I was going to spread a little bit over a bunch of different type of EFTs, like: There is no need to complicate the international components with separate pacific and europe funds unless you have a reason to do so. Start with: VGTSX - Entire International market (including emerging markets), capitalization weighted and includes large/mid/small cap stocks. (or more accurately... will include large/mid/small caps as it is in the process of a benchmark change). OR: (if you want to split up developed and emerging markets) VEA - Developed International Market (europe and asia) VWO - Emerging International Market OR: (if you want to split up large and small cap) VEU - Entire International Large Cap universe (including emerging markets) VSS - Entire International Small Cap universe (including emerging markets) Any one of the above combos will cover your international stocks and depends if you want to overweight emerging or small caps. VGTSX can be all you need. An ETF version is coming out in a few months if you prefer ETF's. FOR DOMESTIC: - Forget VOO and get VTI (Total Stock Market) as VTI is more diversified, has a tiny bit less turnover, less licensing costs, and less issue with front-running. S&P500 is not bad but VTI is a better domestic market index for investors. FOR BONDS: BND or BSV or VCSH are all fine but I prefer a combination of BSV and VIPSX (inflation protected securities) for my bond portfolio. moflika posted:Finally, precious metals: liquidity is an issue. I have some silver bars that I bought at under $10/oz and I would totally sell them if i were not too lazy. Plus, silver is cheap-ish (maybe not now) and so takes up a lot of room. Buying coins has a pretty high transaction cost, expect to lose over 5% of the spot price everytime you buy or sell. moflika posted:I can't bring myself to trust bank advisers quite yet. I wouldn't really be able to tell if the advice given was complete garbage. yet? the bank is the worst place to get investment advice.
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Dec 17, 2010 18:38
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80k posted:Start with: Great post! I just want to point out one little detail--because I've actually made this mistake before.  Be very careful not to transpose VGTsX (total international index) and VGStX (star fund). Thankfully I caught the mistake before finalizing the transaction, but for a second there I was really confused.
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Dec 17, 2010 19:54
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The fund recommendations make perfect sense when diversification is taken into account. I usually tend to avoid things that are "all in one", but it looks like I might need to change that. Sadly, I can't yet hang with the 3,000 minimum of funds like VGTSX and VIPSX, Luckily, there are plenty of other options. 80k posted:yet? the bank is the worst place to get investment advice. Ha, true enough. I guess you don't even really need to call in anymore to open an account. That's really the only reason I call these days.
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Dec 17, 2010 21:04
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I've got a question about some scenarios with regards to property. My wife and I have a property that is currently tenanted, it covers it's own rear end and it's got ~17 years left on the term. We've recently been discussing the options for the future of this. Our initial idea was to move back into that place once I had finished my degree (as I am studying in a different city), touch it up and flog it off, try to recover the capital. Then we decided after discovering how much different making additional mortgage repayments could make to the overall loan, and thought maybe pouring all our money into the mortgage and try to pay off that bitch within maybe 10 years. When we talked to our property manager she told us that idea was "bad" because we could just let the tenants pay the mortgage, don't worry about the length of it because we're still young and put our money into another place to rent out and increase our portfolio, and repeat. The final idea being that at retirement you will have a bunch of houses becoming freehold and rental will be your source of income That idea does make sense, the problem being that in today's market the mortgage repayments for any given house are more than the rental one would receive so subsidising it out of our own pocket is necessary. Perhaps moving into said place and spending a few years pouring cash into the mortgage until the repayments can be low enough to be covered by rent, then renting and moving on would work. But then I had another idea. If I combine the idea about paying off the first loan as fast as possible then the rent from that place is going to "us" not the bank, but if we then bought another place and put tenants in it, we could pour the money from the first place into the second place, making that loan pay off much quicker, and allowing the higher payments to be covered by the first house not us. If then that mortgage gets paid off and by then we have another place we could then have the rental of 3 places paying off the mortgage of just one. From my position this seems like a less overall efficient use of cash (as we are putting more money total into the properties and not just letting the tenants pay evetything) but everything could become freehold much faster, allowing the use of the money and maybe tying up all the loose ends at an earlier point in our lives.. Possibly offsetting the extra use of our cash in the first place. I have no idea how to run the numbers to compare This is kind of a theoretical post. I'm in NZ so likely our taxes and repayment penalties etc are different, so for now I'm talking about the situation as if those things simply don't exist. And forgive me if I use the wrong terminology etc, this is certainly not my forte, but something I am interested in learning more about. echinopsis fucked around with this message at 08:30 on Dec 18, 2010 |
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Dec 18, 2010 08:26
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echinopsis posted:I've got a question about some scenarios with regards to property. You've got a great situation there. Keep in mind your property manager has an incentive for you to increase the amount of property rentals(the assumption being that you'll use her for the new rentals as well). The question you should ask yourself is how much margin of safety do you have and want? How long can you stay afloat with unoccupied rentals? I'm very conservative so I'd like to keep a 6 month cushion but that's me. If you start to own two properties, the cushion changes obviously.
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Dec 18, 2010 19:18
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What is your rate on the mortgage. I would probably not pay down the note early for a few reasons. 1) Don't get confused that because a property is paid for it is magically more profitable. You can look at it and say 'oh building A costs me $xxxx/month and I make $yyyy/month' but really that isn't the right way to look at it. However, you have a couple separate things going on right now. a) you income stream from the property b) you loan payment on the property. It is important to note these are not tied together. 2) Consider the opportunity cost of paying down the mortgage early, any dollar you pay towards it is a dollar that isn't doing something else for you. You basically can put the dollar towards the building you own or save it and invest it in the markets. Consider the flexibility you are buying yourself by saving the money. If you save $50,000 and then decide it really would be the most beneficial to pay down the property, then you can go ahead and do that. However say you put it all into paying off the property and then decide you want to use those funds for something that will return more, now you can't because its stuck in equity (assuming you don't get crazy with a HEL or a HELOC). 3)You seem to be in a good position financially. I don't think a second building would necessarily be a bad idea since you seem to be very pragmatic about it. However, I would probably NOT go about it in the way she is recommending. Instead save additional money by not paying down the mortgage. If you are saving up this additional cash plus your income you should hopefully be able to save a decent sum at a pretty quick rate. As you are saving your large pile of cash always keep an eye on the market, checking listings, maybe even let a realtor know you are casually looking for what might be a good investment property. You have the luxury to just low-ball or big on a foreclosure or whatever. If it doesn't pan out, no big deal just look for the next one. If/when you do move to buy a second investment property, you will look much more appealing to a bank with $xxx,xxx in cash than someone with a second building that is paid off. Basically what I am saying is especially in this market liquidity and cash are king. Not paying down the mortgage now lets you amass a lot more and still lets you either pay it down later, buy another property, or invest it elsewhere.
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Dec 18, 2010 19:47
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lostleaf posted:You've got a great situation there.  quote:Keep in mind your property manager has an incentive for you to increase the amount of property rentals(the assumption being that you'll use her for the new rentals as well). quote:The question you should ask yourself is how much margin of safety do you have and want? How long can you stay afloat with unoccupied rentals? I'm very conservative so I'd like to keep a 6 month cushion but that's me. If you start to own two properties, the cushion changes obviously. Very good point thanks.. alreadybeen posted:What is your rate on the mortgage. quote:1) Don't get confused that because a property is paid for it is magically more profitable. You can look at it and say 'oh building A costs me $xxxx/month and I make $yyyy/month' but really that isn't the right way to look at it. However, you have a couple separate things going on right now. a) you income stream from the property b) you loan payment on the property. It is important to note these are not tied together. This is an interesting point I haven't considered specifically before, I don't get the ramifications completely though.. quote:2) Consider the opportunity cost of paying down the mortgage early, any dollar you pay towards it is a dollar that isn't doing something else for you. You basically can put the dollar towards the building you own or save it and invest it in the markets. Consider the flexibility you are buying yourself by saving the money. If you save $50,000 and then decide it really would be the most beneficial to pay down the property, then you can go ahead and do that. However say you put it all into paying off the property and then decide you want to use those funds for something that will return more, now you can't because its stuck in equity (assuming you don't get crazy with a HEL or a HELOC). quote:3)You seem to be in a good position financially. I don't think a second building would necessarily be a bad idea since you seem to be very pragmatic about it. However, I would probably NOT go about it in the way she is recommending. quote:Instead save additional money by not paying down the mortgage. If you are saving up this additional cash plus your income you should hopefully be able to save a decent sum at a pretty quick rate. As you are saving your large pile of cash always keep an eye on the market, checking listings, maybe even let a realtor know you are casually looking for what might be a good investment property. You have the luxury to just low-ball or big on a foreclosure or whatever. If it doesn't pan out, no big deal just look for the next one. If/when you do move to buy a second investment property, you will look much more appealing to a bank with $xxx,xxx in cash than someone with a second building that is paid off. I don't think the problem is getting the loan itself (although I am open minded), and this is somewhat what our property manager thinks. Is there a fundamental difference between what you've suggested compared to buying now, living and paying off to get repayments down to rental income levels (this is important) other than appeal or lack thereof to the banks? quote:Basically what I am saying is especially in this market liquidity and cash are king. Not paying down the mortgage now lets you amass a lot more and still lets you either pay it down later, buy another property, or invest it elsewhere. I guess my point of view is that paying mortgage off sooner saves orders of magnitudes more in interest later on, and the sooner that income comes to me the sooner I can use it as leverage to do other things, and I'm trying to figure out the better overall approach. Maybe I'm not looking at the risks enough though, and trusting that things will pan out too much.. Thanks for the information guys, I really appreciate it. Everywhere I go I get a different impression and me and my wife talk about it and realise we know very little, yet are in a fortunate position. We've been very lucky at narrowly evading another property purchase that could have cost a shitload but didn't, simply because we were too keen and didn't think but ended up very lucky too.. I really want to know, and more importantly understand all my options and the theories involved. Cheers
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Dec 18, 2010 23:41
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I'd just like to confirm that I'm thinking about this correctly. Right now I'm focused on paying down debt, but soon I'll be able to max my contributions to an RRSP and the Tax Free Savings Account in Canada. I want them to each perform well, separately. To do that I will hold a balanced portfolio in each. I'm thinking that I will also want to hold different portfolios in each, but I don't know. I've only slightly scratched the surface of what I'll actually invest in, just by skimming the mutual funds that my bank offers on its website. I'm also thinking about trying to max my RRSP this year instead of paying down debt. The idea being that I'll use my larger tax return to make a lump payment towards the debt. I'm not sure if that offers any real benefits, I'm just kind of impatient to start working on my future instead of paying for my past.
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Dec 24, 2010 03:58
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Well I finally decided to pull my money out of my managed investment account, and venture forth on my own after reading the Four Pillars. I'm still a little rusty when it comes to taxable vs non-taxable (ie IRA, etc..). Basically, I'm contributing from every paycheck 7% to my TSP, along with the employer match of 5%. I had this in the G Fund eventually, but I recently moved it over to one of their yearly goal funds. There's about $12k in my TSP. I have another 140k which is what I pulled out of my managed investments account, and I'm ready to go long term with it. The question is, after reading four pillars, is there something specifically I should be aware of considering I'll have to have a taxable account? I could see where changing my allocations and/or re balancing could hurt in this scenario, so is there anyone with experience dealing with a taxable account as far as the long term? I'm only 25, so I'm willing to go risky with it 80/20, seeing as I don't really want to touch the money till I'm much older. I do have another 40k set aside in a money market account for emergencies/future house down payment/etc... so I don't need a lot of the 140k to be part of liquid assets.
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Dec 24, 2010 04:41
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Hungry Hippo posted:Well I finally decided to pull my money out of my managed investment account, and venture forth on my own after reading the Four Pillars. I'm still a little rusty when it comes to taxable vs non-taxable (ie IRA, etc..). Basically, I'm contributing from every paycheck 7% to my TSP, along with the employer match of 5%. I had this in the G Fund eventually, but I recently moved it over to one of their yearly goal funds. There's about $12k in my TSP. put your 20% bonds in tax sheltered space, fill remaining tax sheltered space with less tax efficient stock funds (active funds if you plan to use them, or small cap stocks). Put only broad market index funds or ETF's in taxable (like Total Stock Market and Total International Stock index). Rebalance less frequently and try rebalancing with new money (add to underperforming asset classes). Set larger bands for rebalancing (don't rebalance until allocation is off by over 5%). Tax Loss harvest when you have an opportunity. about 70% of my money is in a taxable account. I experience minimal tax drag on my returns with the above strategy.
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Dec 24, 2010 05:00
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80k posted:put your 20% bonds in tax sheltered space, fill remaining tax sheltered space with less tax efficient stock funds (active funds if you plan to use them, or small cap stocks). Put only broad market index funds or ETF's in taxable (like Total Stock Market and Total International Stock index). I would add to this with a couple of ideas: 1) Potentially hold some municipal bonds in your taxable accounts. 2) If you're going to buy a house anyway, why not use that $180k (or maybe save up a little more if you're not buying right away) and just buy a house straight up. Then you avoid loan origination fees, etc, saving you a few extra %. You were saying you don't want to touch the money until later anyway, right, so the loss of liquidity from purchasing the house wouldn't mean that much to you. 3) Be sure to balance your portfolio as a whole between your taxable and non-taxable accounts. This means you'll have to pull your money back out of the L20X0 you used in TSP since you'll need to individualize your TSP holdings based on what you hold in your taxable accounts. As 80k suggested above, broad-based index funds in the taxable, most bonds in the tax sheltered. The G-fund is really your friend here, too. Its essentially a risk-free (think money market) fund that has the interest rate of a 10-year T-bill. This is a vehicle not found in any other place, so take advantage of it.
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Dec 24, 2010 05:21
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