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Dr. Jackal posted:You are going to be paying a penalty that you would not pay if you left the preferred in the tax-deferred account. If you just roll the 401k to a Trad/Roth IRA, you wont pay any tax. I'm not paying taxes on my gains, I'm paying taxes on the value of whatever I would take out of the retirement account. I did get my shares for free: I get a % of my salary every year in stock regardless of contribution to the 401(k), but I must keep it (mostly) in company stock as part of the rules of profit sharing accounts. Since my company is the one that paid the cost, I can use their cost for valuation purposes rather than fair market value. If I do the tax trick, I'll pay income taxes on the cost basis price as I move the money out of the retirement account and into a regular brokerage account, and then pay a 10% penalty on top of that. If I roll the funds over, they'll loose their cost basis advantage and I'll later pay income tax on whatever the value of the asset is and that will be it. Even if I were in a 40% income tax bracket (which doesn't exist) and paid a 10% penalty on top of that, I'd be paying 50% taxes on $7.82 to get an asset that's worth $67.36. That's an effective tax of 5.8%, which is lower than anything I've ever seen. I've run this back and forth to confirm that I'm right, and everything I've just written is correct. My concern is that I'm missing something/not asking the right question and I'd inadvertently stumble into a hole that would screw things up. Thus: does anyone have personal experience with this kind of deal?
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May 21, 2011 01:58
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Quick question, and if it's been discussed 1,000 times before I apologize but I didn't see anything in the OP. I'm looking to open a Roth IRA that with a lower minimum ($500 or so) as I've just got myself settled into employment. I have an eye toward building it up this year before moving it to a group like Fidelity or Vanguard. Is there a recommended one for smaller accounts? Something like E-Trade, Ameritrade, or Scottrade? I'm wondering if it even matters (a) with such a small amount, and (b) I'm looking to move it as soon as possible. Thoughts? Thanks!
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May 22, 2011 23:11
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Edawg06 posted:Quick question, and if it's been discussed 1,000 times before I apologize but I didn't see anything in the OP. The minimum on Vanguard Target Retirement funds recently shrunk to $1,000, so you might be better served by waiting until you can meet this and skip the transfer fee you would incur moving from another institution.
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May 22, 2011 23:42
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Also, I believe if you set up direct deposit with Vanguard, they wave the minimum fee entirely (not positive about this though).
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May 23, 2011 00:02
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So, since May 2nd VT and VTI (Vanguard's Total World Market ETF and Total US Market ETF) are both trending downward pretty steadily. I know you shouldn't try and time the market but isn't that a pretty strong indicator to go to cash (or bonds or something) for a month or so or until they establish an uptrend?
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May 23, 2011 14:45
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var1ety posted:The minimum on Vanguard Target Retirement funds recently shrunk to $1,000, so you might be better served by waiting until you can meet this and skip the transfer fee you would incur moving from another institution. Thanks for the information! I looked into it a bit more and they do have $1,000 minimums on those target funds. It looks like a great way to get started, and I really like the philosophy of Vanguard. Seems downright measured and practical, which is outlandish and insane in this day and age.
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May 23, 2011 14:55
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Murgos posted:So, since May 2nd VT and VTI (Vanguard's Total World Market ETF and Total US Market ETF) are both trending downward pretty steadily. You just said "I know you shouldn't try to time the market, but should I time the market?" Either you believe that you can't predict short term future returns or you do. Pick a side and stick to it.
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May 23, 2011 17:29
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Murgos posted:So, since May 2nd VT and VTI (Vanguard's Total World Market ETF and Total US Market ETF) are both trending downward pretty steadily. "Steadily" isn't a word that applies to the stock market.
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May 23, 2011 18:37
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This is kind of a general question, but at what size portfolio for a relatively financially secure investor or institution do you begin to consider more risky or sophisticated investments? Thinking largely about option writing strategies, oil & gas partnerships, and PE and hedge fund investments, but those are the only ones I'm familiar with.
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May 23, 2011 21:45
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Its Miller Time posted:This is kind of a general question, but at what size portfolio for a relatively financially secure investor or institution do you begin to consider more risky or sophisticated investments? Thinking largely about option writing strategies, oil & gas partnerships, and PE and hedge fund investments, but those are the only ones I'm familiar with. Never? Also, why do you want to take more risk when you are financially secure, as opposed to trying to preserve it?
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May 23, 2011 21:48
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My line of thinking was that if you're financially secure with steady incomes/profits you're more capable of taking on risk and the possibility of principal loss compared to someone with erratic finances who might need to depend on his principal to meet some obligations. So if you had $1 million, an extremely long time horizon, and little chance of needing to depend on the money, you'd invest in a regular diversified stock/fund/ETF whatever portfolio? What about $5, 10, 50, 100? Stuff like this:quote:Accredited investor is a term defined by various securities laws that delineates investors permitted to invest in certain types of higher risk investments including seed money, limited partnerships, hedge funds, and angel investor networks http://en.wikipedia.org/wiki/Accredited_investor Where does one begin researching these opportunities? Its Miller Time fucked around with this message at 02:00 on May 24, 2011 |
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May 24, 2011 01:54
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quote:So if you had $1 million, an extremely long time horizon, and little chance of needing to depend on the money, you'd invest in a regular diversified stock/fund/ETF whatever portfolio?
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May 24, 2011 01:57
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Its Miller Time posted:So if you had $1 million, an extremely long time horizon, and little chance of needing to depend on the money, you'd invest in a regular diversified stock/fund/ETF whatever portfolio? gently caress yeah I would. And at that level I'm getting the super low expense ratio versions of them. The only thing I could maybe consider doing differently would be to get an advisor that gets me access to DFA funds, but that would be a big maybe.
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May 24, 2011 03:13
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On a personal note, all my money is in dfa funds. Didn't realize this was a Good Thing. Back to my main question, what if the amount was higher? Say 5, 10, or 20 million? Are there any online resources dedicated to this area of the market? Public prospectuses from major funds and the like?
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May 24, 2011 04:19
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Its Miller Time posted:On a personal note, all my money is in dfa funds. Didn't realize this was a Good Thing. Back to my main question, what if the amount was higher? Say 5, 10, or 20 million? Are there any online resources dedicated to this area of the market? Public prospectuses from major funds and the like? At 5 million dollars I could have a withdrawal rate of at least 100,000 a year invested in moderately safe funds without hurting the principal much if at all. Why get greedy? The game shouldn't be as much as possible, but enough as safe as possible. Hedge funds are ripoffs, IPOs are giant gambles, I just don't see it.
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May 24, 2011 11:28
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Its Miller Time posted:This is kind of a general question, but at what size portfolio for a relatively financially secure investor or institution do you begin to consider more risky or sophisticated investments? Thinking largely about option writing strategies, oil & gas partnerships, and PE and hedge fund investments, but those are the only ones I'm familiar with. Not sure if this answers your question, but when I was working at one of the major wealth management firms in the US, the lowest minimums I saw for managed alt investments in personal accounts were $500,000. The norm was more like $1-2 million. clarifying edit; those were the minimums for each of the alternative funds, not the account minimums. If you value having even a hint of intelligent diversification, your total holdings would need to be substantially higher.
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May 24, 2011 15:26
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This may be a dumb question, but I'm new to all of this so bear with me. Basically I'm wondering if there's a huge difference in which financial institution I choose when opening a Roth IRA. It seems like Vanguard is the preferred option in this thread, but I already have an investment account with TradeKing and was thinking of opening an IRA with them as well. Is there a significant difference in using Vanguard or another institution? Is it difficult to transfer my account if I open an IRA with TradeKing and decide I want to change? Thanks.
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May 24, 2011 16:55
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Ever see the show American Greed? While there are ma and pa investers who get taken for a few hundred K there are a huge number of 'sophisticated' investers who get taken for $5m-$10m in ponzi schemes because they are chasing 10-15% 'guaranteed' returns thinking they are smart and beating the market. Find me someone who lost their whole retirement investing in the S&P over a 20+ year horizon. Bland index funds may not be exciting, but they also aren't usually the target of ponzi schemes either. If you really do have $5m+, with a long horizon before you need it, find yourself something LOW risk. 3.5% is 175,000 a year in income, or ~10m in 20 years. No matter what the realistic inflation levels, you will have a hard time spending $350k a year in 2030. Hoopajoo, The only difference is in the fees. People like the Vanguard because it has low fees and has no transaction/trade fees on the vanguard funds which are prized in the Long Term Investing thread strategy of passive/index investing for their low expense ratios. You need to figure out how much of a fee TradeKing charges you per trade and how much it charges you to withdraw to know at what point you are better off elsewhere. Edit: TradeKing is for ...surprise... frequency/options trading. If you are using it for a mutual fund you are paying ~$15/trade and still paying $5 for an ETF. Vanguard is free on their mutual funds and basically free on their ETF's too. The TradeKing will charge you $50 to liquidate your account, so that's something to consider as well. KennyG fucked around with this message at 17:21 on May 24, 2011 |
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May 24, 2011 17:14
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Its Miller Time posted:On a personal note, all my money is in dfa funds. Didn't realize this was a Good Thing. Back to my main question, what if the amount was higher? Say 5, 10, or 20 million? Are there any online resources dedicated to this area of the market? Public prospectuses from major funds and the like? It's easy to expect that wealthy investors have access to better investment vehicles, but it's also important to remember that it is also more gratifying to rip off wealthy people. Mostly, someone with a large portfolio just has the word SUCKER written in bigger letters on their shirt. "Exotic" investments almost always means lower liquidity and transparency, and high fees. And this provides even more dilemmas to the wealthy investor than the small fry. With hedge funds, you have the same issue as with active mutual funds in that you have to first weed out the skilled from the lucky. And even with the good managers, you will find that the 2/20 fee structure hurdle is a tough one to overcome. Hedge funds are designed to share just enough of the excess returns with the investors so that they remain invested while pocketing the rest in the form of fees. When you find the rare quality hedge funds, you will find that they are not looking for new investors. Seriously, the good funds do not need nor want your money. The world of private equity (mainly LBO, venture capital, and mezzanine financing) may be slightly more lucrative but still have poor characteristics for investors: mainly liquidity and transparency again, but also high dispersion in returns (lottery-like characteristic). You also gain little diversification accessing PE, when combined with a traditional portfolio. LBO behaves similarly to leveraged investing (consider a leveraged portfolio of small value stocks), but then add the high fee structure (2/20 similar to hedge funds). So most of the excess returns is explained by risk (is this so surprising?), which makes PE investing a very inefficient way to access risk when viewed in the context of your entire portfolio. There may be evidence of strong persistence in manager outperformance, but you will find these "best" funds to be also closed to outside investors. Again, they do not need nor want your money. See a common theme going on here? There is very little I would do differently with 10-million vs a 1-million-or-less portfolio. I'd buy individual munis, I'd probably lock in more long-term TIPS as I'd be interested in preserving a guaranteed real rate of return over a longer duration if I had a large enough portfolio. I'd probably set aside a huge amount for collectables like rare musical instruments or art. If you are going to go exotic, might as well enjoy it.
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May 24, 2011 21:43
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BigAlienHoopajoo posted:This may be a dumb question, but I'm new to all of this so bear with me. Do you like Tradeking? If so, the fees are not bad and you can do an ETF portfolio there at $5/trade. But Vanguard allows free trading on Vanguard ETF's and of course free mutual fund trading. So you will save money at Vanguard if your goal is to set up a low cost passive portfolio.
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May 24, 2011 22:02
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KennyG posted:No matter what the realistic inflation levels, you will have a hard time spending $350k a year in 2030. It's entirely beside the point, but... personally, I doubt I'd have a "hard time" spending $350k a month, right here in 2011. Hell, I could start off with the top twenty or thirty supercars and spend $10M+ in a month. Nevermind houses, private islands, etc. I'm just saying. e. I always thought it'd be cool to own my own private luxury submarine...
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May 24, 2011 22:58
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80k posted:It's easy to expect that wealthy investors have access to better investment vehicles, but it's also important to remember that it is also more gratifying to rip off wealthy people. Mostly, someone with a large portfolio just has the word SUCKER written in bigger letters on their shirt. "Exotic" investments almost always means lower liquidity and transparency, and high fees. And this provides even more dilemmas to the wealthy investor than the small fry. Very interesting, I appreciate your response, and love the idea of collectibles as an investment and hobby combination. Would you ever consider individual personal or commercial real estate acquisitions? Does the income and appreciation ever beat out similar bond investments?
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May 24, 2011 23:33
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Its Miller Time posted:Very interesting, I appreciate your response, and love the idea of collectibles as an investment and hobby combination. Sure, RE can be good investments and add diversification. However, I doubt I would go through the trouble of RE ownership other than my own home(s) and maybe REIT exposure.
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May 24, 2011 23:45
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If you had the option, would you purchase new real estate with 100% cash or take out a mortgage for a large portion and use rents to pay it off? My finance mind tells me leverage=good but fiddling around in Excel I can't show it.
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May 25, 2011 02:29
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quote:The only difference is in the fees. People like the Vanguard because it has low fees and has no transaction/trade fees on the vanguard funds which are prized in the Long Term Investing thread strategy of passive/index investing for their low expense ratios. You need to figure out how much of a fee TradeKing charges you per trade and how much it charges you to withdraw to know at what point you are better off elsewhere. quote:Do you like Tradeking? If so, the fees are not bad and you can do an ETF portfolio there at $5/trade. But Vanguard allows free trading on Vanguard ETF's and of course free mutual fund trading. So you will save money at Vanguard if your goal is to set up a low cost passive portfolio. Thanks guys  , makes sense. Looks like I'm going with Vanguard.
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May 25, 2011 12:59
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Its Miller Time posted:If you had the option, would you purchase new real estate with 100% cash or take out a mortgage for a large portion and use rents to pay it off? My finance mind tells me leverage=good but fiddling around in Excel I can't show it. Whether your rents pay off the mortgage is not the issue as money is fungible. If you have the option to pay off a home and you choose not to, you are not using rents to pay off the mortgage... you are using cashflow generated from your assets and income to pay for it, among which is rents from the property. It matters more what your other assets are. If I could pay off a home with money I would otherwise invest in low yielding low-risk assets (that were yielding less than my mortgage rate net of tax considerations), and I still had a large emergency slush fund, then paying it off is a financially attractive option. If it is otherwise invested in assets with higher expected return, then it is a question of risk preferences.
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May 25, 2011 17:53
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Its Miller Time posted:If you had the option, would you purchase new real estate with 100% cash or take out a mortgage for a large portion and use rents to pay it off? My finance mind tells me leverage=good but fiddling around in Excel I can't show it. Exactly what 80K said, and to just add a little bit more: It depends entirely on the Rent-Price ratio. Residential is currently 15-17 nationally, areas may varry significantly, and commercial can be about half of that. Commercial buildings tend to be more expensive per sq/ft and have higher overhead. Leveraging will provide more profits, but it also provides significantly more risk. A small dip in revenue (rent prices) will leave you with either no tenant or requiring you to cover the shortfall. If you can't cover the shortfall, you're screwed. This is the reason that Donald Trump has filed for bankruptcy 3 times.
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May 25, 2011 18:00
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KennyG posted:Leveraging will provide more profits, but it also provides significantly more risk. A small dip in revenue (rent prices) will leave you with either no tenant or requiring you to cover the shortfall. If you can't cover the shortfall, you're screwed. This is the reason that Donald Trump has filed for bankruptcy 3 times. It is also the reason the world economy came crashing to its knees and almost went over a cliff in '08. How anyone can say leverage=good anymore is beyond me.
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May 25, 2011 18:22
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80k posted:It is also the reason the world economy came crashing to its knees and almost went over a cliff in '08. How anyone can say leverage=good anymore is beyond me. bbbbut the banks and my finance textbook said so!
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May 25, 2011 23:04
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Long-term, is there a risk to investing primarily in ETFs from a single company, e.g. Vanguard? My concern, in the wake of 2008, is a Bernie Madoff-style scenario where they're basically just pocketing the money, or failing to disclose <x, y, and z> or literally just taking my money and spending it on Herman Miller chairs and Château d'Yquem bottle service in the club. If 2008 taught us anything, it's that the spectrum of financial fraud is broad! If the answer is yes (be concerned), does that mean you diversify ETF purchases across companies, too? E.g. If you hold VDE, do you also buy IYE? This seems like a recipe for a very ridiculous portfolio. If the answer is no (it's no big deal!), what makes you trust a company like Vanguard or iShares?
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May 26, 2011 16:34
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Metonymy posted:Long-term, is there a risk to investing primarily in ETFs from a single company, e.g. Vanguard? First of all, Vanguard does not have custody of your assets... JPMorgan does. So it'd make more sense to diversify between custodians (which you would if you got iShares since they use IBT as custodian and not JPMorgan). There are only a small handful of custodians that handle the vast majority of fund assets. They serve as independent custodians and assets are held in a separate trust from the company's assets. There is also fidelity bond insurance that protects from internal fraud, as well as independent auditors. Additionally, SIPC guarantees the brokerage (for your ETF's) is holding everything your statements show it is holding. The layers of scrutiny and regulation makes mutual funds and ETF's extremely safe from fraud and you should have no qualms with using exclusively Vanguard ETF's. 80k fucked around with this message at 17:11 on May 26, 2011 |
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May 26, 2011 17:05
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80k posted:It is also the reason the world economy came crashing to its knees and almost went over a cliff in '08. How anyone can say leverage=good anymore is beyond me. You're probably referring specifically to derivatives leveraging, and companies like Long Term Capital Management running their business levered over 25:1. But the use of leverage at its core plays a very important and fundamental role in the economy. Any time you take out a loan to buy inventory or a piece of machinery you are using leverage to do it. Hell, any time you take out a loan to buy anything you're using leverage. Blaming the use of leverage as the reason for the economic crisis isn't correct. It contributed to it, but to say that leverage can't be good or useful simply isn't true.
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May 26, 2011 17:23
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Don Homhoos posted:You're probably referring specifically to derivatives leveraging, and companies like Long Term Capital Management running their business levered over 25:1. But the use of leverage at its core plays a very important and fundamental role in the economy. Any time you take out a loan to buy inventory or a piece of machinery you are using leverage to do it. Hell, any time you take out a loan to buy anything you're using leverage. Blaming the use of leverage as the reason for the economic crisis isn't correct. It contributed to it, but to say that leverage can't be good or useful simply isn't true. I know what leverage means. I was responding to the previous poster that said "leverage=good" as a basic rule. Leverage does not equal good. That does not mean that Leverage equals bad.
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May 26, 2011 17:27
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80k posted:First of all, Vanguard does not have custody of your assets... JPMorgan does. So it'd make more sense to diversify between custodians (which you would if you got iShares since they use IBT as custodian and not JPMorgan). There are only a small handful of custodians that handle the vast majority of fund assets. They serve as independent custodians and assets are held in a separate trust from the company's assets. There is also fidelity bond insurance that protects from internal fraud, as well as independent auditors. Additionally, SIPC guarantees the brokerage (for your ETF's) is holding everything your statements show it is holding. The layers of scrutiny and regulation makes mutual funds and ETF's extremely safe from fraud and you should have no qualms with using exclusively Vanguard ETF's. This was very informative; thank you very much!
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May 26, 2011 17:33
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80k posted:I know what leverage means. I was responding to the previous poster that said "leverage=good" as a basic rule. Leverage does not equal good. That does not mean that Leverage equals bad. I guess I misinterpreted your post then, sorry. When you said "How anyone can say leverage=good anymore is beyond me" I read it as implying that it was bad. Its probably because there are a lot of people out there that I have encountered who do ignorantly believe that leverage is always bad. I understand what you meant now that I realize the way you meant to say it - that a tool is neither inherently good or bad, it just depends on how it is used.
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May 26, 2011 17:41
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All I was saying was that my fundamental understanding of the use of leverage tells me you can increase returns in an investment project by financing a portion with debt and reducing the equity you have to put in. The excessive leverage that led to the crisis was Bad, but that doesn't mean we should stop borrowing.
Its Miller Time fucked around with this message at 21:21 on May 26, 2011 |
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May 26, 2011 21:19
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You are absolutely correct, but it is critical to understand that increasing leverage pretty much always means also increasing risk. It is that factor (a failure to properly assess risk) that caused the financial crisis. Investment banks and their insurers - and, for that matter, real estate buyers, mortgage brokers, wall street pundits, regulators, and politicians - all failed to either recognize, or failed to acknowledge to their stakeholders, the enormous risks they were taking. Namely, that if real estate prices ever began to fall, they would be hosed. So feel free to use leverage where appropriate, as long as you are clear-eyed about the risk involved and have made a sober assessment of how much risk you can tolerate.
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May 26, 2011 22:01
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Leperflesh posted:You are absolutely correct, but it is critical to understand that increasing leverage pretty much always means also increasing risk. Except for insurance. And hedges.
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May 27, 2011 05:16
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Bozart posted:Except for insurance. And hedges. With which you decrease profit and gains.
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May 27, 2011 17:19
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So I'm not sure if this is the best place for this, but I'm trying to think of the pros and cons of a particular situation. My wife and I have a house in a recently severely earthquake damaged city. Our house is mostly fine, and it's rented at the moment and not really costing us anything. There's about 70k equity in it. Now, we live in a different city and we're thinking of buying some land and putting some kind of house on it (see this thread for laffs) So if we use the equity from the first house, we can likely do our plan, but we will be tight and borrowing up to our limit. We could sell the first house and then we won't be so restricted. From my perspective, it seems like not selling the first house is a better idea investment wise, but selling it seems like the more secure option. Also, with the earthquake, it means that sooner or later as a lot of the new houses get built with the insurance money pouring in, the average age of a house in that city is going to increase, making our house seem less appealing. Or so I think anyway...
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May 28, 2011 00:45
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