|
SweetSassyMolassy posted:That was an interesting read. As I go on, I'll be confidently leaning more towards value. Book-to-Market or BtM (inverse of P/B) is Fama and French's main method and is what determines HmL (High Minus Low) numbers. HmL is the values that are used for regression analysis for factor analysis. If you ever hear people talk about regression in order to determine size and value exposure, they are using historical values of High-BtM minus Low-BtM returns. It is surprisingly robust if you crunch numbers for existing mutual funds with a long enough history. Remember that value has a risk and a behavioral story. The behavioral one is that investors overpay for growth (small growth overpriced due to the lottery effect) and underpay cheap stocks. Skeptics of value stocks say they are cheap for a reason. Proponents of value investing say that cheap stocks, in aggregate, are cheaper than is reasonable. As for your second question, yes, companies move from value to growth. How long it is held depends on the strategy. How often it is rebalanced. DFA and Powershares RAFI, two major providers of size and value funds, are rebalanced annually, although they do have some trading strategies that try to optimize for trading costs and momentum. Not sure what Vanguard does, but they do not specialize in factor investing. Their small and value funds are not as small nor as valuey as what you get from Powershares RAFI based ETF's and, of course, the DFA funds.
|
# ? Feb 4, 2015 00:39 |
|
|
# ? May 18, 2024 03:19 |
|
SweetSassyMolassy posted:That was an interesting read. As I go on, I'll be confidently leaning more towards value. Well it's driven by the underlying CRSP index in the case of Vanguard's various US value stock ETFs. Info on the index: http://www.crsp.com/products/investment-products/crsp-us-large-cap-value-index etalian fucked around with this message at 04:25 on Feb 4, 2015 |
# ? Feb 4, 2015 01:17 |
|
I asked a little while back a question about, "Once it's time to start withdrawing what information is there to help you determine how to go about that?" and didn't get much of a response. So, I've done a bit of looking and started here: http://jlcollinsnh.com/2012/12/07/stocks-part-xiii-withdrawal-rates-how-much-can-i-spend-anyway/ Which led to here: http://www.onefpa.org/journal/Pages/Portfolio%20Success%20Rates%20Where%20to%20Draw%20the%20Line.aspx Which is really kind of interesting. For one thing it really challenges target date funds in that the more bond heavy a portfolio at retirement the harder it was to keep up with inflation. For example the Vanguard Target Retirement 2010 Fund is 60/40 bonds/stocks which from the above article looks like it's going to offer only modest success rates even at a modest 4% plus inflation annual withdrawal where a 25/75 bonds/stocks split would not only have a 100% success rate (success being that your funds have lasted at least 30 years) but that there is a very good possibility that you have an impressive gift to pass your heirs/nest egg to support your next 30 years of retirement/spend lavishly on hookers and blow.
|
# ? Feb 4, 2015 15:21 |
|
To preface this, I really like where I work. The CEO and Owner and both good folks and seem to prioritize the well being of employees over profitability. The compensation is very generous, especially compared to the COL of the area. We used to have a SIMPLE IRA with a 3% match, but that was shut down last year due to having too many employees to qualify for it. This year we didn't have a plan to replace it. Friday evening this email went out:quote:
I don't think the CEO is correct about the nondiscrimination testing, since I believe that only applies to HCEs, and I'm virtually certain that the majority of the company are not HCEs. I've been there 7 years and I'm still barely below the cutoff for 2014. I do believe that HCEs would be limited to 4% because I doubt many people contributed above the match, and not everyone even took advantage of the match, so 2% + 2% = 4%. I can't really speak to the rest of it, because I don't have enough information. It may be that HR is just not ready to take on administering a 401k. We had American Funds with no sales load for our SIMPLE, and overall it wasn't bad as far as retirement accounts go. Is there anything I can feasibly do to encourage the CEO/Owner to look into this again? How do some companies get 401ks with Vanguard funds? We could contribute to my wife's 403b but it has a 3 year (!!) vesting period for the match.
|
# ? Feb 7, 2015 19:37 |
|
How big is the company?
|
# ? Feb 7, 2015 19:53 |
|
They can be completely exempt from non-discrimination testing by making it a safe harbor plan, and automatically contributing 3% of everyone's salary to the plan no matter what. It sounds like they already match anyway, so I don't know why that's an issue. Also, Fidelity would happy enough to set up a plan that basically passes on all fees to the employees by making the fund expense ratios artificially higher. They will even let you add Vanguard funds to the plan if you want, and then inflate the expense ratio enough to cover the other costs of the fund. I am unclear what exactly they could possibly be whining about with regards to the fees, to be honest. I did some research for my small firm. 8 participants, about $2,000,000 in total assets, and the total cost Fidelity would have charged us a year would have been about $5,000 (plus the expense ratios of whatever people invested in). Honestly, that letter seems so far removed from reality that I would assume they are just lying to you. On the off chance that they aren't, direct them to Fidelity I guess. https://www.fidelity.com/retirement-ira/small-business/401k-plans Edit to add: After rereading what you quoted, I would guess that they tried to set up a fancy plan where upper management got a much higher level of benefits than the peons. Just from the tone of the letter, talking about non discrimination testing and lawsuits and REGULATION RUINING EVERYTHING, they probably tried to make a plan that disproportionately benefited themselves and got frustrated with all of the laws in place that try and prevent that from happening, so they got pissed and scrapped it. Edit 2: I looked at my actual notes from my conversation with Fidelity, and the maximum cost for us was $6800. I think they said something like $100 extra per employee, so a 125 person company would presumably cost a maximum of about $17500 per year with them, which could be passed on either partially or fully to the fund participants via expense ratio. That cost included all the actuarial BS that has to be done, IRS filings, etc. Droo fucked around with this message at 21:14 on Feb 7, 2015 |
# ? Feb 7, 2015 19:55 |
|
Henrik Zetterberg posted:How big is the company? About 125 people.
|
# ? Feb 7, 2015 20:55 |
|
Droo posted:They can be completely exempt from non-discrimination testing by making it a safe harbor plan, and automatically contributing 3% of everyone's salary to the plan no matter what. It sounds like they already match anyway, so I don't know why that's an issue. Safe Harbor side steps a lot of the regulatory issues and related costs, as Droo said. If they're serious about setting up a plan, they can do exactly what Droo suggested basically. A 10bp management fee is very fair, I didn't know fidelity was that cheap. I think my company charges 12bp to do 401k management for companies, I'm sure that scale slides based on AUM though (assets under management).
|
# ? Feb 7, 2015 20:57 |
|
Yeah, the actual fee structure with Fidelity was more complicated. Basically, you can pick whatever funds you want. If some of the employees are invested in higher fee mutual funds, they will rebate something like 20bp towards the expenses of the fund. If there is still a shortfall after that, then the company can either foot the bill directly or artificially inflate the expense ratios of all funds to cover the shortfall. So the best case scenario is if you have a lot of stupid coworkers that invest in high fee funds, and cover pretty much all of the plan expenses for everyone else involved.
|
# ? Feb 7, 2015 21:11 |
|
Droo posted:They can be completely exempt from non-discrimination testing by making it a safe harbor plan, and automatically contributing 3% of everyone's salary to the plan no matter what. It sounds like they already match anyway, so I don't know why that's an issue. This is definitely valuable info. I feel like they've made up their minds, and I'm worried this is going to affect our ability to attract and retain employees. This is a company where those 125ish employees are all exempt, salaried, professionals that do work requiring a BS or a masters. Lots of statistical analysis and research. How common is it for a company like that, of that size, to have no retirement plan at all?
|
# ? Feb 7, 2015 21:29 |
|
SiGmA_X posted:This is exactly what it read like to me, too. I looked at Safe Harbor, and the closest equivalent option would be the 100% match up to 3% and then 50% match up to 5%. That would be more generous than our current 100% up to 3%, and I really don't know how much that extra cost would amount to.
|
# ? Feb 7, 2015 21:35 |
|
AbsenceVsThinAir posted:This is definitely valuable info. I feel like they've made up their minds, and I'm worried this is going to affect our ability to attract and retain employees. This is a company where those 125ish employees are all exempt, salaried, professionals that do work requiring a BS or a masters. Lots of statistical analysis and research. How common is it for a company like that, of that size, to have no retirement plan at all? Rare unless it's an immature startup. Anyone with a STEM background should be able to find an employer with benefits if the worker is willing to relocate.
|
# ? Feb 7, 2015 23:53 |
|
Another option if you don't like the overall Target Retirement fund concept of gradually reducing stock exposure over time, are the Lifestrategy Funds. The most aggressive one does a 3 fund type strategy with a 80-20 stock and bond split.
|
# ? Feb 7, 2015 23:57 |
|
AbsenceVsThinAir posted:To preface this, I really like where I work. The CEO and Owner and both good folks and seem to prioritize the well being of employees over profitability. The compensation is very generous, especially compared to the COL of the area. We used to have a SIMPLE IRA with a 3% match, but that was shut down last year due to having too many employees to qualify for it. This year we didn't have a plan to replace it. Friday evening this email went out: Also, this is the classic case for why discrimination testing was put in place.
|
# ? Feb 8, 2015 15:00 |
|
I Have what I imagine to be a fairly straight forward question, but don't know the first or any of the steps I need to take to make it work to my advantage. I recently received a letter in the mail about an IRA I had with my previous employer that I honestly completely forgot about, since the paperwork was filled out when I was 19 and I don't think I saw documents on it once until this year, which has been nine years. Now it is a paltry sum, roughly $2,500 and I want to make it work to my advantage, but I have no idea if I can do anything with it because it seems as though nothing has happened to the account in 3 years other than the meager $3.00 in annual interest it is earning and the annual $15.00 fee. I currently work for a employer who does not offer any 401k options, and would like to get a retirement account set up. Since I plan on staying with the company for some time. Can I move this money out of the IRA into something that will actually earn me money? I also don't understand why in an IRA this money is just sitting stagnant, is the sum to small to see a return? Maybe I am uninformed as to how IRAs actually work. It was a happy surprise to find out about this sum, but I would like to take the right approach on how to effectively start planning for retirement and am looking for some advice.
|
# ? Feb 8, 2015 17:21 |
|
Dik Hz posted:I agree with the other posters. They could set up a simple untested 401k by using a safe harbor plan. Also, discrimination testing only applies to company matches and contributions. Not employee contributions. Our sector is small enough that we are in the Top 75 companies by revenue, so I'm researching comparable ones to see if they do or don't offer a 401k/retirement plan. I think showing that we would be at a substantial disadvantage in hiring given our disparity in benefits would be a persuasive argument. I know our CEO cares a lot about how our company stacks up vs. others, and seeing much smaller companies offer 401ks would neutralize a lot of the arguments put forward.
|
# ? Feb 8, 2015 17:23 |
|
FallenSystm posted:$2,500 Is it a traditional IRA (vs. Roth)? Easy answer: roll it over into a traditional IRA at Vanguard, and put it in the 2055 Target Retirement Fund. You can do it online and all the info you need should be in that letter. It's not earning money right now because it's in a money market fund, probably. See the OP for some suggesting reading about portfolio allocation - once you make some decisions there you can change your fund selection to something else. If you want to, that is - and there's no hurry on that. Since you don't have a 401k option you should definitely at least max out an IRA every year, probably a Roth IRA. If you want the money to grow you need to use some riskier stock/bond funds within the IRA. The Target Retirement ones are a good starting place if you don't know from poo poo.
|
# ? Feb 8, 2015 17:32 |
|
Is there any savings account better then UFBdirect for a deposit >25k? It seems they offer 1.25% on 25k. However their withdrawal process seems sort of nebulous, and doesn't disclose their fees, which I don't love. Is there a better choice?
|
# ? Feb 8, 2015 18:41 |
|
slap me silly posted:Since you don't have a 401k option you should definitely at least max out an IRA every year, probably a Roth IRA. If you want the money to grow you need to use some riskier stock/bond funds within the IRA. The Target Retirement ones are a good starting place if you don't know from poo poo. The minimum balance for a Target Retirement fund is $1000, so $2500 is more than adequate to start the account at Vanguard.
|
# ? Feb 8, 2015 18:46 |
|
lord1234 posted:Is there any savings account better then UFBdirect for a deposit >25k? It seems they offer 1.25% on 25k. However their withdrawal process seems sort of nebulous, and doesn't disclose their fees, which I don't love. Is there a better choice? Sure they do: https://www.ufbdirect.com/customer-support/disclosures It looks pretty standard. I never heard of UPFDirect or Bofl myself but that doesn't mean much.
|
# ? Feb 8, 2015 18:52 |
|
Trying to figure out if we should: a) convert our Traditional IRAs to Roths and make a backdoor contribution b) simply stop contributing to an IRA c) make a non deductible contribution to the traditional IRA. Employer does not allowed Traditional IRA rollovers into the 401k. Married, California 2014 AGI: $210,000 Person A Roth IRA: $128k Trad IRA: $17k Roth 401k: $72k Trad 401k: $9k Person B Roth IRA: $47k Trad IRA: $48k Roth 401k: $0k Trad 401k: $75k What are your thoughts on a, b or c? Or some option D I am missing?
|
# ? Feb 9, 2015 01:40 |
|
Why are you worried about it? Why not just let the two sit in separate accounts? Unless you're paying outrageous fees, I wouldn't worry about it... Certainly wouldn't pay the tax you guys would be liable for in a backdoor conversion.
|
# ? Feb 9, 2015 02:19 |
|
app posted:Or some option D I am missing? Are you allowed to make after-tax (not Roth) contributions to your 401k?
|
# ? Feb 9, 2015 02:26 |
|
Dead Pressed posted:Why are you worried about it? Why not just let the two sit in separate accounts? We are not worried about anything, just trying to figure out what, if anything, we should do now that we can no longer contribute to our Roths... What do you mean by let them sit in separate accounts? My understand is it doesn't matter if you have one or a hundred accounts, the rules for contributions, conversations, etc, are all the same? Gisnep posted:Do you qualify for an HSA? 1) Yes we do, and its maxed to the federal limit. 2) I am not sure, if I CAN contribute post tax non-Roth to my 401k why would I do that when I can still contribute post tax Roth to my 401k since there is no income limit?
|
# ? Feb 9, 2015 04:00 |
|
I'm looking to open a Vanguard account and transfer a large portion of my emergency fund into a Roth IRA (I only have a 401k right now). I'm mainly doing this to help me mentally ignore the money, and I understand that I can access the money I put into the account without penalties at any time (obviously there will be a period of time to process a transaction to my bank if needed, but I assume within a week which I'm comfortable with). Since this is still going to be an emergency fund, does Vanguard have funds that would be good for this? I'm not looking to make money this way, but if any options are above my measly 0.05% or whatever my current savings account is, then great. My biggest concern is my checking account not having instant access to my savings account. I plan to also start funding the Roth IRA this year towards retirement (I'd do $5,500 for 2014, and $2,500 for 2015 into the emergency fund, and fill out the remaining $3,000 into a fund for retirement. I'm currently putting 20% into my 401k including a 4% match).
|
# ? Feb 9, 2015 04:06 |
|
app posted:2) I am not sure, if I CAN contribute post tax non-Roth to my 401k why would I do that when I can still contribute post tax Roth to my 401k since there is no income limit? http://whitecoatinvestor.com/the-mega-backdoor-roth-ira/
|
# ? Feb 9, 2015 04:21 |
|
It's been done to death but stocks/bonds are sort of bad idea for emergency savings. Your best bet is savings accounts (1% for the current low rate environment) or I-bills(1.48% yield). If you want to sock away money with a lower investment window, then vanguard life strategy funds are a good fire and forget option. They pay around a 2% SEC yield.
|
# ? Feb 9, 2015 04:21 |
|
What if I currently have a 12 month emergency fund? Would it make sense to put half of that into the life strategy fund, with the intent of never having to touch it, but could if poo poo hit the fan really bad? I have 12 months now because I was unemployed for 8 months when the recession first hit. While I collected unemployment that whole time, it still shook me up as I barely had any savings at the time. I was thinking this could be an avenue to still have a large emergency fund, without being on the extreme end of conservative. Perhaps I'm being dumb and I should just keep 9 - 12 months in a savings account if I'm really that worried about it.
|
# ? Feb 9, 2015 04:49 |
|
etalian is being incoherent again. The life strategy funds are stock and bond funds, therefore not a suitable vehicle for emergency savings or short term savings. Having 9-12 months worth in cash in a savings account is perfectly fine if it's what makes you comfortable. And if its purpose is to make you comfortable, don't put it anywhere it could shrink, like stock or bond mutual funds. If you want a slightly higher return without risking principal, you could look into a CD ladder, or I-bonds (there is no such thing as an I-bill). Just make sure you understand the withdrawal rules first.
|
# ? Feb 9, 2015 05:00 |
|
Dustoph posted:What if I currently have a 12 month emergency fund? Would it make sense to put half of that into the life strategy fund, with the intent of never having to touch it, but could if poo poo hit the fan really bad? I have 12 months now because I was unemployed for 8 months when the recession first hit. While I collected unemployment that whole time, it still shook me up as I barely had any savings at the time. I was thinking this could be an avenue to still have a large emergency fund, without being on the extreme end of conservative. Perhaps I'm being dumb and I should just keep 9 - 12 months in a savings account if I'm really that worried about it. Well I use a similar strategy right now, I have a long investment window account with a higher stock tilt and also a shorter window account with a more conservative 40 percent allocation. For emergency/rainy day funds savings account is the best bet, even though other people like the I-bill option. Also makes sense to make sure you are maxing out all your retirement funding first before looking to build a taxable slush fund account. etalian fucked around with this message at 05:15 on Feb 9, 2015 |
# ? Feb 9, 2015 05:06 |
|
Alright. I think I'll look into opening a separate savings account, as that will solve the out of sight issue. Any recommendations for high yield savings?
|
# ? Feb 9, 2015 05:35 |
|
Dustoph posted:Alright. I think I'll look into opening a separate savings account, as that will solve the out of sight issue. Any recommendations for high yield savings? I use discover bank. other options: http://www.nerdwallet.com/blog/banking/nerdwallets-top-high-yield-online-savings-accounts/ CDs are also much less attractive in today's low interest environment since they don't offer a much better yield than 1% high yielding savings accounts. etalian fucked around with this message at 05:56 on Feb 9, 2015 |
# ? Feb 9, 2015 05:51 |
|
etalian posted:CDs and savings accounts are extremely attractive (relative to bonds) in today's low interest environment since institutional investors have no access to them and thus no way to bid down the rates. Fixed your post. Also, 5 year CDs with a cancel option go as high as 2.25% currently: https://www.gecapitalbank.com/savings-products/high-yield-cds.html As a consumer oriented product there will always be lovely rip-off offerings with a line in the water. You should shop around and compare best price to best price for each product before making generalizations.
|
# ? Feb 9, 2015 06:23 |
|
Read through the OP, I have a pretty basic question about getting started with investing. I have a 401k with employer matching that I already max out, and for a while have just sent everything extra into a savings account. Fast forward a year or two, and I'd like to begin investing that "extra money" now that I have a comfortable savings baseline. I live in a big city and looking into things like wealth management etc seems daunting - I don't even see a way to accurately compare fees among long term investment funds without digging through a bunch of websites and hoping the information is accurate. Some of my friends have stocks managed through smaller companies. I guess this is basically the "I got a guy who manages that stuff" approach. Is there a significant difference between that approach and just sticking with an index/mutual fund managed by a larger place? I know "diversification" is important but I'm not sure if this means I should go to one place to manage different types of investments or not.... Basically I've thought to myself for the last year "I should really learn more about investing" but the reality is that I don't have much personal time to dig into it with any great effort, which means I'd much rather spend find a reliable place to manage it for me and then just check in with them every month or so, limiting my (probably dumb) micromanaging to a minimum. Is there a particular institution who's known for being good in that regard? Should I bother looking at smaller wealth management places nearby me or should I just stick with the big guys like Meryll Lynch, Vanguard, etc?
|
# ? Feb 9, 2015 06:45 |
|
Dustoph posted:Alright. I think I'll look into opening a separate savings account, as that will solve the out of sight issue. Any recommendations for high yield savings? Check for any local credit union. They may be offering much higher rate than the national average. My two checking accounts have 3% and 1.75% respectively.
|
# ? Feb 9, 2015 06:47 |
|
TheresNoThyme posted:Should I bother looking at smaller wealth management places nearby me or should I just stick with the big guys like Meryll Lynch, Vanguard, etc? wealth management and financial advisor can be pricey with 1-2% of the total account being the most common fee. For new investors I like Vanguards LifeStrategy Funds since they are fairly low expense ratio and provide a easy way to do stock-bond split in a single fund. The beauty of index investing is it provides a simple way to invest while avoiding lots of traps in the finance industry like dishonest brokers or financial advisors. Index investing also avoids the old stock picking trap by just tracking the performance of the overall index instead of agonizing over individual stocks In terms of cost the main things to worry about in picking a stock or bond investment are: -Expense ratio, very important basically yearly cost for the investment, for 100,000 invested a 1% ER would cost you $1000 per year -Fund load (mutual fund), a additional fee tagged on to mutual fund purchases in addition the commission. You want to look for no load mutual funds etalian fucked around with this message at 07:16 on Feb 9, 2015 |
# ? Feb 9, 2015 07:10 |
|
TheresNoThyme posted:Is there a significant difference between that approach and just sticking with an index/mutual fund managed by a larger place? The difference is basically that giving extra money to someone to actively manage your money is worse. You will be making that guy's Lexus payment and he will, on average, give you anywhere from slightly worse to a lot worse performance than an index fund (because of the massive fee drag if nothing else).
|
# ? Feb 9, 2015 14:38 |
|
Simple stupid strategies like a Life Strategy Growth fund have a annualized return of 6% which is pretty much the best a regular investor can do over a long investment window.
|
# ? Feb 9, 2015 17:31 |
|
Is there a "global market index fund" out there, one that tracks every economy in the world? Or would my best bet, if I want to diversify across the entire globe, be to buy into index funds based on those areas' respective shares of the global economy?
|
# ? Feb 9, 2015 18:31 |
|
|
# ? May 18, 2024 03:19 |
|
TheresNoThyme posted:Basically I've thought to myself for the last year "I should really learn more about investing" but the reality is that I don't have much personal time to dig into it with any great effort, which means I'd much rather spend find a reliable place to manage it for me and then just check in with them every month or so, limiting my (probably dumb) micromanaging to a minimum. And hey, here's a no-cost option for you: tell us your age and what you're investing the money for (house, retirement, what?) and we'll tell you exactly what to do for free. Please don't waste your money on "a money guy."
|
# ? Feb 9, 2015 18:31 |