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hosed up and posted in the wrong stickied thread. This isn't really a long term investing question.
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Mar 19, 2015 20:35
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turevidar posted:Today I found out that my retirement account provides in service rollovers and after tax contributions. I live in a US state without income tax, so I could do the mega backdoor Roth trick without feeling too much pain.
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Mar 20, 2015 19:57
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I'm just starting the 4th chapter in Four Pillars but this book was obviously written before the '08 crash. My understanding is that Berstein thinks instead of the historically constant 7% return of the stock market, in the future we can only expect ~5%, based on the DDM and Gordon's Theory. He also seems to posit that bonds will return about the same as the stock index, and that small cap stocks will yield better returns than large cap. Am I misreading the first three chapters? If this is what the book is arguing, why are so many people invested so heavily in stocks? Wouldn't a more balanced portfolio, perhaps 60/40 stock/bond, be more in line with the book's philosophy? Has Bernstein ever amended the points he makes in Four Pillars in the wake of the recent financial crisis? khysanth fucked around with this message at 22:07 on Mar 20, 2015 |
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Mar 20, 2015 22:04
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The most current edition has a post-script from 2010 or 2011. It's about 10 pages that just say "everything I wrote is still true". Earlier in 2015, Bernstein wrote that he now expects 2% real returns for the next 20 years. No way to know who's right until we're looking back on 30 years!
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Mar 20, 2015 22:12
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I know that after reading that book I went 70/30 and considered that very aggressive.
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Mar 20, 2015 22:28
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Yeesh, that's a pretty grim outlook. Welp, 2% is better than nothing. I'm planning on starting 90/10 at 25 (now) and shifting by 2% every year.
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Mar 21, 2015 01:26
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Keep in mind that a 2% REAL return is much different than a 2% NOMINAL return. For example, the NOMINAL annulized return of the S&P 500 (including reinvested dividends) from 1964 to 2014 was something like 9.9% The REAL return over the same period was more like 5.6% (I'm not 100% sure of the veracity of these numbers, but I used the following website to generate them: http://dqydj.net/sp-500-return-calculator/ )
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Mar 21, 2015 04:06
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etalian posted:Check the type of funds available first, other good thing about having your own Roth account is you can shop between brokerages. My company's 401k doesn't offer Vanguard but has Spartans (0.07%) so I am putting my money spread on the Spartan fund(s). The idea was to contribute into 401k while balancing out the index fund from the Roth so that I could use the Roth for funds that aren't offers by the 401k (or do the "I think this one is a winner" thing). Apparently Roth 401k can be rolled over into a Roth IRA?
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Mar 21, 2015 10:02
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Dr. Jackal posted:Apparently Roth 401k can be rolled over into a Roth IRA? Absolutely
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Mar 21, 2015 16:26
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Dr. Jackal posted:My company's 401k doesn't offer Vanguard but has Spartans (0.07%) so I am putting my money spread on the Spartan fund(s). Spartan funds are really good as well. Also the IRS pretty much provided all the tax clarification this year on the roth 401k concept.
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Mar 21, 2015 20:08
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I'm a planning on starting a taxable brokerage with Schwab and I'm a bit confused about cost-basis for mutual funds. The First in First out default seems to be how I expected it to work, but will I be better off with one of the other options? Schwab has an option called the Tax Lot Optimizer which looks like a better choice since it takes into account costs and short term vs long term capital gains. I'm planning to invest in Schwab Index funds if that makes any difference.
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Mar 22, 2015 00:50
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THF13 posted:I'm a planning on starting a taxable brokerage with Schwab and I'm a bit confused about cost-basis for mutual funds. The First in First out default seems to be how I expected it to work, but will I be better off with one of the other options? Schwab has an option called the Tax Lot Optimizer which looks like a better choice since it takes into account costs and short term vs long term capital gains. Using tax lots, also known as specific identification of shares, will give you the most flexibility over when you pay taxes compared to FIFO or average cost.
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Mar 22, 2015 01:00
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warderenator posted:Using tax lots, also known as specific identification of shares, will give you the most flexibility over when you pay taxes compared to FIFO or average cost. Secondly do I need to keep track of anything manually to do this? I saw that the IRS requires brokerages to report cost basis as of 2012. I was planning on automatically reinvesting dividends but I might not if it makes it overly complicated.
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Mar 22, 2015 02:55
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THF13 posted:OK, this wasn't an option to select as the default which makes sense because it would require manually specifying the specific lots each time. Will it matter at all what the default is? I was wrong earlier when I said the default for Schwab was First in First Out, for mutual funds it is actually using Average Cost as the default choice. I think brokerages will now keep track of the price and quantity for each time you buy something, so when you sell you pick exactly which shares you are selling. This is what Vanguard does now, and last time I sold some stuff it showed me a list of different groups of shares and their cost basis so I don't have to keep track of anything. I think every brokerage will do this now but I'm not 100% sure.
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Mar 22, 2015 03:26
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Schwab should keep track of everything, but it can become a mess if you switch brokerages. You don't mention why or which mutual funds you want to buy, but if you have a choice ETFs are more tax efficient. Edit: just to further clarify, the brokerage will report the cost basis to the IRS using the method you specify when you sell.
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Mar 22, 2015 08:23
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I was just going to do a very simple 3 fund portfolio using Schwab Total Stock Market Index/Schwab International Index Fund/Schwab Total Bond Market Fund. Schwab has a lot of excellent ETFs but I don't think they would work well with my plan to only invest $100/month.
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Mar 22, 2015 17:45
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GoGoGadgetChris posted:The most current edition has a post-script from 2010 or 2011. It's about 10 pages that just say "everything I wrote is still true". Bernstein is a smart guy and does good work in getting people to buy into passive investing. His crystal ball is no better than anyone else's though.
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Mar 23, 2015 17:47
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Posting to say I have officially liquidated all of my high-risk individual stocks and have deposited both $5,500 maximums for 2014 and 2015 into a Roth IRA. No employer 401k match currently but I will start working on that and my future 2016 Roth IRA contribution. Thanks for all of the great info in the OP + everyone who takes time to answer questions ITT. Edit: Another quick question: Why does http://www.bankrate.com/calculators/retirement/roth-traditional-ira-calculator.aspx have me as potentially saving $10-$30k more using a Traditional IRA rather than Roth IRA? ($5,500 contribution each year for ~36 years) I've left the 25% current tax, 15% retirement tax settings that it lists. I thought Roth IRA won't get taxed at all even if I'm using it as income for when I retire? Why would traditional ever give me a benefit if I'm paying tax on earnings+contributions later vs. paying tax only on contributions now? Blinky2099 fucked around with this message at 20:07 on Mar 23, 2015 |
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Mar 23, 2015 18:48
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Blinky2099 posted:Posting to say I have officially liquidated all of my high-risk individual stocks and have deposited both $5,500 maximums for 2014 and 2015 into a Roth IRA. No employer 401k match currently but I will start working on that and my future 2016 Roth IRA contribution. Roth is tax now and no tax later, traditional is no tax now, tax later. If you assume that your marginal tax rate is lower in retirement as this calculator does and hold all variables equal, a traditional will save you taxes.
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Mar 23, 2015 22:54
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So - For people who have a little extra money after maxing out their Roth IRA. What do we do to use the rest of the money wisely? Let's say I have an extra 50k sitting in a savings account at a dumb low low interest rate that I want to start using for investing. I don't want to do anything fancy, just a relatively stable investment vehicle. I love Vanguard so far (because you all told me to) - but should I invest more with Vanguard as an ETF or something and just get on board with them still? Would like to be able to withdraw the money/interest at any time if necessary.
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Mar 24, 2015 03:56
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THF13 posted:OK, this wasn't an option to select as the default which makes sense because it would require manually specifying the specific lots each time. Will it matter at all what the default is? I was wrong earlier when I said the default for Schwab was First in First Out, for mutual funds it is actually using Average Cost as the default choice. Almost any security you buy today (and any you may have bought from 2011 until now depending on the type and when it was phased in) will be tracked by Schwab and reported to the IRS on a 1099. You don't have to do any work tracking it. You just tell Schwab the accounting method you want to use and they'll do it. Also if you want to select a specific lot later when you sell you can do that. You just have to tell them before the trade settles. Searching Schwab's website I found this for you: http://www.schwab.com/public/workplace/nn/articles/Calculate-the-Cost-Before-You-Sell quote:You should also make sure your financial institution is using the accounting method of your choice. Even though FIFO (first in, first out) is the IRS default method for both individual securities and mutual funds, most institutions (including Schwab) will report individual securities using the FIFO default method and report mutual funds using the average cost single-category method. Also this might be useful (the cost basis section): http://www.schwab.com/public/schwab/client_home/client_faqs Zero One fucked around with this message at 04:39 on Mar 24, 2015 |
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Mar 24, 2015 04:33
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Captain Apollo posted:So - For people who have a little extra money after maxing out their Roth IRA. What do we do to use the rest of the money wisely? Let's say I have an extra 50k sitting in a savings account at a dumb low low interest rate that I want to start using for investing. I don't want to do anything fancy, just a relatively stable investment vehicle.
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Mar 24, 2015 05:53
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Captain Apollo posted:So - For people who have a little extra money after maxing out their Roth IRA. What do we do to use the rest of the money wisely? Let's say I have an extra 50k sitting in a savings account at a dumb low low interest rate that I want to start using for investing. I don't want to do anything fancy, just a relatively stable investment vehicle. It depends on when you think you're going to want the money, and what you're going to use it for. For something you will probably need in the next few years you could either keep it in cash or use short term bonds for a little better return with more risk. You will pay income taxes on the interest, just like you would with a bank account. If you probably won't need the money, you can lump the money in with your retirement savings. The most tax efficient thing to do is to put it all into broad stock market index funds. Then you can adjust your holdings in your IRA and 401k, by moving more money into bonds for example, so that your overall risk level is where you want it. Foreign stocks are a little more tax efficient than US stocks in a taxable account because you can take the foreign tax credit. The risk with this strategy is that if you need the money during a bear market, it won't all be there. When I was saving for a down payment for a house I kept it all in a taxable account with about 80% short term bonds and 20% stocks. Also make sure to keep a decent amount of cash in the bank just in case. ETF vs index mutual fund is mostly a matter of preference; personally I like funds. If you open a taxable account at Vanguard you can buy funds or ETFs.
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Mar 24, 2015 06:00
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warderenator posted:ETF vs index mutual fund is mostly a matter of preference; personally I like funds. If you open a taxable account at Vanguard you can buy funds or ETFs. I don't think this is entirely true when considering being able to withdraw your money at short notice. Some Mutual Funds have penalties for withdrawing within 60 days of deposit (I've seen as high as 2% here). ETF's you can buy and sell at will as long as you thought ahead and got an ETF that trades with any frequency.
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Mar 24, 2015 12:34
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warderenator posted:It depends on when you think you're going to want the money, and what you're going to use it for. I think this is solid advice, but wanted to ask if there's a reasonable concern with putting your higher return investments into the taxable account vs the tax advantaged ones?
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Mar 24, 2015 16:58
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MJBuddy posted:I think this is solid advice, but wanted to ask if there's a reasonable concern with putting your higher return investments into the taxable account vs the tax advantaged ones? You only end up paying 15% (hopefully) long-term capital gains taxes on the stock funds, whereas the bond dividends will all be taxed at your full marginal tax rate if you hold them in taxable accounts. This is a good resource for the strategy of allocation between taxable and tax-advantaged accounts: http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement
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Mar 24, 2015 17:01
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flowinprose posted:You only end up paying 15% (hopefully) long-term capital gains taxes on the stock funds, whereas the bond dividends will all be taxed at your full marginal tax rate if you hold them in taxable accounts. Got it. I'm fairly far away from this being a direct concern unless I decide to invest my home savings in a taxable account, but good to know. e: Though that article made me consider that at our household income we might be better off increasing our 401k contribution than paying down student loan debt due to the sudden 10% marginal tax and a long list of tax deductions you lose as your AGI exists in that range. MJBuddy fucked around with this message at 17:56 on Mar 24, 2015 |
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Mar 24, 2015 17:10
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Zero One posted:Almost any security you buy today (and any you may have bought from 2011 until now depending on the type and when it was phased in) will be tracked by Schwab and reported to the IRS on a 1099. You don't have to do any work tracking it. You just tell Schwab the accounting method you want to use and they'll do it. Thanks, I appreciate the help. Wanted to be sure about everything before investing any money, rather than trying to deal with it afterwards.
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Mar 24, 2015 20:32
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What do you guys think about drip feeding vs. lump sum? I have £15k in an ISA waiting to invest and I'm on the verge of buying my first shares in a fund (LifeStrategy 80%), but I'm a little nervous about just going all in especially as things are sitting at a high right now. I know it won't make a huge difference, just interested in the opinion of the thread on drip feeding as I've recently read some interesting bits in favour of just going for lump sum purchases. What's holding me back is that iWeb will charge me £5 for every trade, so even splitting that £15k into a few big chunks would cost me a bit. El Grillo fucked around with this message at 15:47 on Mar 25, 2015 |
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Mar 25, 2015 15:32
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El Grillo posted:What do you guys think about drip feeding vs. lump sum? I have £15k in an ISA waiting to invest and I'm on the verge of buying my first shares in a fund (LifeStrategy 80%), but I'm a little nervous about just going all in especially as things are sitting at a high right now. I know it won't make a huge difference, just interested in the opinion of the thread on drip feeding as I've recently read some interesting bits in favour of just going for lump sum purchases. Don't worry about trying to time the market ("things are sitting at a high right now"). Every time this question comes up the result appears to me to be that if you can do a lump sum, you probably should.
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Mar 25, 2015 15:58
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The math works out such that dollar-cost averaging has no effect over longer time periods. Studies of historical returns have reached the same conclusion. In the long run, investing $1 every day of the year has the same risk/return stats as investing $365 on July 1 (or June 22nd or whatever the exponential midpoint works out to). Doing it all on Jan 1 is slightly better (6 months more returns) but the differences are small enough that you should just do whatever makes you feel better.
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Mar 25, 2015 16:03
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Invest it all today. https://pressroom.vanguard.com/content/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf
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Mar 25, 2015 16:11
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Thanks for the advice folks. P.S.: Ouch stamp duty
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Mar 25, 2015 16:55
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We're trying to get a company 401k going at work, though we are still really small headcount wise, Vanguard looks to deal with even startups though so hopefully that works out. I have been explaining how they have the lowest fees and are awesome, but some other thing my boss found is offering Transamerica, they are even crappier than Fidelity I'm assuming?
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Mar 25, 2015 21:54
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sadus posted:We're trying to get a company 401k going at work, though we are still really small headcount wise, Vanguard looks to deal with even startups though so hopefully that works out. I have been explaining how they have the lowest fees and are awesome, but some other thing my boss found is offering Transamerica, they are even crappier than Fidelity I'm assuming? The Spartan funds from Fidelity are as good (maybe a hundreth of a percent more expensive than Vanguard), but Fidelity's target funds are expensive, ~0.8% I think. Choose Vanguard, then Fidelity with Spartan funds or brokeragelink, the rest is very likely to be crap.
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Mar 25, 2015 22:27
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sadus posted:We're trying to get a company 401k going at work, though we are still really small headcount wise, Vanguard looks to deal with even startups though so hopefully that works out. I have been explaining how they have the lowest fees and are awesome, but some other thing my boss found is offering Transamerica, they are even crappier than Fidelity I'm assuming? My wife's crappy former employer used them. Expense ratios ranged from 0.58% to 1.5%, and there were additional quarterly fees. So yeah, they suck.
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Mar 25, 2015 23:07
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MickeyFinn posted:The Spartan funds from Fidelity are as good (maybe a hundreth of a percent more expensive than Vanguard), but Fidelity's target funds are expensive, ~0.8% I think. Choose Vanguard, then Fidelity with Spartan funds or brokeragelink, the rest is very likely to be crap. Fidelity does have low cost target retirement date funds but you won't find them unless you are specifically looking for them. They're called Fidelity Freedom Index funds and are basically the same price as Vanguards.
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Mar 25, 2015 23:41
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Yeah all my Fidelity target retirement funds are like 1.2% plus some management fee. Of course this is the default fund. No thanks.
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Mar 25, 2015 23:49
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El Grillo posted:especially as things are sitting at a high right now. I wish I could remember the exact figure, but the market is often and regularly at all time highs, because of course it is. That's the nature of our monetary system and global economy. The price of almost everything is almost always increasing. The value of the market has nothing to do with how it relates to the price of the market in the past. The market being lower in price than past markets doesn't mean the market is a good value either. The value of the market has everything to do with how much the companies which make up the market are earning, and how much those earnings will increase in the future.
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Mar 26, 2015 01:00
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This is a tangential point to the above: the value of the stock market is worth what someone will pay you for it. Crashes don't happen because the world's companies suddenly become profitless. They crash because no one is buying. Likewise, markets can raise in the absence of increasing profits if demand for stock is increasing. I got a pet theory that the current sustained market ballooning is (in part) supported by increased retirement savings by baby boomers. Not really here nor there; it's always a good time to invest for 10+ years from now!
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Mar 26, 2015 05:38
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