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I've currently got all my funds in one index fund that follows the Stockholm SIX30RX. It's got a Morningstar rating of 4/5, and has a risk rating of 6/7. Even with the dip, I'm 10% up on it in little over a year. It's a completely free fund, and it's made up of H&M, Volvo, a couple of big banks, a big nordic electronic company and so on. I've got ~10k in it, and I wonder, is there any reason for me not to just keep plowing money into it? The alternatives here look pretty lovely in comparison. VVV: Thanks, I've seen you all talk about Vangaurd, and it seems like a very good place to put my money. I'll check out what's available. And yeah, going international was my plan. 
MrOnBicycle fucked around with this message at 13:54 on Aug 26, 2015 |
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Aug 26, 2015 13:26
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MrOnBicycle posted:I've currently got all my funds in one index fund that follows the Stockholm SIX30RX. It's got a Morningstar rating of 4/5, and has a risk rating of 6/7. Even with the dip, I'm 10% up on it in little over a year. The Swedish economy is a very small part of the global economy, and you would be well served by diversifying your holdings to gain exposure to the US and other large markets. With the caveat that I'm not a European so I can't speak to how good it is, here is an article about Investing with Vanguard for Europeans from a source I respect.
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Aug 26, 2015 13:49
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Leperflesh posted:Am I giving up substantial returns? Yes, perhaps. Certainly looking back the last 6 years I have. But nobody knows what returns will be like in the future. We can guess based on past performance of the markets, but past performance isn't a guarantee of future returns. My philosophy is that I'm willing to give up a lot of possible future returns that I'd get by being much heavier in stock, for the added safety and security of being hedged against a couple decades of poor stock performance. I can look at my savings rate, make a conservative estimate of my annualized returns, make conservative estimates of my family retirement needs, and see that based on those numbers, I'll be able to retire comfortably. I'd rather be surer that I'll hit that number, than gamble on being a wealthy retiree but risk a serious equity downturn putting me into a situation where I have to work several more years and cut way back on spending in my later years just to make up for the loss. With the caveat that past returns don't indicate future results, I think you're inadvertently assuring that you'll end up working several more years by being overly conservative and heavy in bonds. There's never been decades of poor stock performance.
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Aug 26, 2015 14:55
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Thanks for the responses! I actually don't know how I got VTMSX, I have it all invested in VTSAX (for both of us). The advice is a bit stressful, but I'd like to figure out how to do it so I'll work on implementing it. If I can't, then yeah a target fund sounds like a great idea. I already poked around Vanguard and figured out how to sell shares to buy other shares, so I'll look in the suggested funds, it's not too tricky. Could you explain more how brokerage accounts work? Is it just an extra account where you can invest in the same funds as ETFs etc? We can't afford to do much more because of our current income, but eventually that sounds like a great plan. I have some additional stocks from stuff my grandparents bought a long time ago for us grandkids, as well as a few hundred shares of stock options from a former employer that are unfortunately the lowest they've been for a while so I'm going to wait for that to hopefully change. I could cash those out and move them in to more general ETFs or the above recommendations/target retirement fund eventually as well. Appreciate the advice on timing the market, I'm aware that's not a great thing to do. Just figured it'd be a good time if we could afford it, so we'll see what we can do! mrmcd, I'm already doing the very last part of your advice and I'm trying to help my wife understand that this recent downturn is ok! Over the long-term it'll be just fine (right, RIGHT?!). She's still in the mindset of "my account lost money!" which I was for a long time too, so I get it.
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Aug 26, 2015 16:02
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mrbass21 posted:I've seen it mentioned here that investing your full IRA contribution at once (if you can) is better than buying consistently throughout the year, so justify it to yourself that way. Can someone explain why? Is it just to minimize transaction fees or is it something else?
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Aug 26, 2015 16:29
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Jmcrofts posted:Can someone explain why? Is it just to minimize transaction fees or is it something else? Gains on the contribution amount over a longer period of time. It's pretty marginal, but there's no downside if you have the lump sum in cash on hand.
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Aug 26, 2015 16:35
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Jmcrofts posted:Can someone explain why? Is it just to minimize transaction fees or is it something else? It's because the market always trends upward. Of course there are upswings and downswings, but the upswings are more frequent and more sustained than the downswings. Any dollar you invest has an expected positive return over time, so you are best served by getting it in the market earlier rather than later. Here's the core bit from a larger jlcollinsnh post on the subject: quote:1. By dollar cost averaging you are betting that the market will drop, saving yourself some pain. For any given year the odds of this happening are only ~23%.
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Aug 26, 2015 16:36
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Iron Lung posted:mrmcd, I'm already doing the very last part of your advice and I'm trying to help my wife understand that this recent downturn is ok! Over the long-term it'll be just fine (right, RIGHT?!). She's still in the mindset of "my account lost money!" which I was for a long time too, so I get it. If it makes her feel better, my Vanguard account I opened in 2009 when I left my last job to rollover my 401k after getting eviscerated in the financial crisis. Because of my income level I haven't been able to contribute new money to that account at all. Of my initial 21k rollover (after losing maybe 8-10k), I've made 16k in returns just on that 21k rollover, a return of 11.8%, even after these big losses in the past few months. If that rate of return keeps up until I'm 60 years old-- when I can start withdrawing without penalty-- that account alone will be worth $885k without saving another single dollar. In other words, keep doing what you're doing and don't worry about money you can't touch for another 32 years. edit: Taxable brokage account are pretty much what you describe. You put in money and then use that money to buy or sell stocks, bonds, etfs, mutual funds, etc. The main advantage is that the selection of things you can invest in is much larger, and you can liquidate your assets and withdraw the cash at any time. The downside is that any gains from your investments don't receive favorable tax treatment. Dividends and investments you've held for a year or more are taxed at 15-20% when you sell them, and those for less than a year are taxed at your normal income rate. If you lose money, you can offset those losses for tax purposes, but you can't deduct more than $3k for your income per year if you lose a ton of money on investments. Transaction fees as a percentage will also be higher depending on what broker you use, how often you trade, and how much money you have. Because of these tax and transaction costs reasons, that's why everyone in this thread talks about maximizing your tax advantaged constributions to an IRA/401k account first. If you have money left over after that, and you have a comfortable emergency fund, and you are sure you won't want to spend that money on anything in the next 5-10 years, then go ahead and open a taxable brokerage account and invest it in vanguard ETFs or some other low cost broad market funds. If you have money left over after THAT and want to gamble from your desk during your lunch break, head over to the gambling thread and start stock picking. mrmcd fucked around with this message at 17:03 on Aug 26, 2015 |
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Aug 26, 2015 16:38
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Dead Pressed posted:Radbot yet again proving to be the worst loving poster on the forum. Tell me more about how bad we have it as millennials with a loving bike and a goddamned leaf that you're leasing. I love people whose mind explode when "this person has empathy for others" and "this person is financially successful for his age" converge. Keep posting, DP - your obsession and constant poo poo-and-run posting turns me on. Remember that time when you just stopped responding after I pointed out I never said the bullshit you were spouting? That was cool. (USER WAS PUT ON PROBATION FOR THIS POST)
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Aug 26, 2015 16:54
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"Things: Are they the way they used to be?" was my favorite derail of all time and I'm sad to see it go. Congrats to all for overcoming the adversity of your generation / capitalizing on the advantages of your generation. Let's all agree that poor people should just buy more money and get back to arguing 90/10 or 100/0.
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Aug 26, 2015 16:57
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Things Change. Some Say This Is Good, Others Say This Is Bad. Let's go to Radbot for a scorching hot taek.
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Aug 26, 2015 17:20
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Also, speaking of taxable accounts, I have a question. I have my 401k setup to take just about the highest contributions I can make, I have 12+ months of living expenses in cash, and I'm putting extra income into a low cost funds and a few other things on my taxable brokerage account. I still have a biggish, 5 figure chunk of money left over that I may or may not want to use in < 5 years that's only earning about 90 bps right now in my checking account. Would something like BND or VCIT be a good place to park it? Everyone keeps talking about how they are expecting bond prices to melt down any day now, but honestly if a catastrophic year in bonds is say, -5%, then that's a level of risk I'm comfortable with.
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Aug 26, 2015 18:01
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Barry posted:With the caveat that past returns don't indicate future results, I think you're inadvertently assuring that you'll end up working several more years by being overly conservative and heavy in bonds. There's never been decades of poor stock performance. That caveat is kind of the elephant in the room, though. I don't believe that just because it hasn't happened, it won't or can't happen. And actually, it totally has happened: the period from 1965 to 1985 was nearly flat, after adjusting for inflation. That's twenty years of lovely performance. Bonds did better during that same period. If it can happen for 20 years, I'm not at all confident it can't happen for 25... and since I'm retiring in 25 years, the period I care about the most, for stocks, is the next 15 years. By the time I'm 10 years out from retirement, I can't be heavily weighted stocks any more. I do appreciate what you're saying, though: there's a good chance I'm giving up substantial returns by being "conservative" (frankly, "your age in bonds" used to be considered middle of the road... the idea it's overly conservative seems to me to be a fairly new one) but that is the inherent nature of investment risk. I'm willing to give up, say, $100k in retirement money, to be much more certain of not giving up (say) $200k in retirement money.
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Aug 26, 2015 18:22
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mrmcd posted:Also, speaking of taxable accounts, I have a question. BND is only yielding about 1.7% or something, so I would just put it (and the 12 month fund) into a 1% online savings account instead right now. I use Barclay's.
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Aug 26, 2015 18:22
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KYOON GRIFFEY JR posted:Things Change. Some Say This Is Good, Others Say This Is Bad. Let's go to Radbot for a scorching hot taek. Data's a bitch, ain't it?
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Aug 26, 2015 18:39
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Jmcrofts posted:Can someone explain why? Is it just to minimize transaction fees or is it something else? The thing they're talking about is whether it's better to max out up front if you can. Unless you are being ripped off with transaction fees, and you shouldn't be, you should put money in as soon as you get it. They are not saying you should save cash over the year and invest all at once. Don't do that.
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Aug 26, 2015 18:52
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Leperflesh posted:That caveat is kind of the elephant in the room, though. I don't believe that just because it hasn't happened, it won't or can't happen. What bonds are you referring to when you say they performed better over the 20 year period between 1965 and 1985? Both bonds and stocks performed poorly in real terms during that period due to high inflation. If you think about it on a fundamental level it doesn't make sense for bonds to outperform equities for a long period of time. Debt is a senior claim on cash flows compared to equity, and as such it is lower risk, and therefore investors demand higher returns from equity in order to compensate for the extra risk. Bonds aren't a hedge against long periods of poor stock performance, they protect against equity volatility and performance in the short term. In periods of long term low stock returns (whether from inflation eroding real returns or a low equity risk premium) you would still expect lower bond returns as they would be affected by the same factors.
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Aug 26, 2015 18:53
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mrmcd posted:Basically you want to do what mrbass21 said. You don't need to open new accounts to reallocate the funds in your IRA, you just log in and do an exchange (what everyone here calls rebalancing) until you're in the allocations you want. Also 100% VTMSX is probably not what you want to do. Not only is that only small cap stocks (you want a good chunk in large cap blended or S&P 500 index funds), but it's managed to minimize taxable income which doesn't apply to an IRA. VSMAX would be a better sub for VTMSX. Doesn't Vanguard have funds which basically mix all of this together? I think I'm starting to understand this a little better, each fund can caters to a specific need, so for example, if I wanted to purchase a fund that invested in nothing but US socks I would look into something like VFIAX or VTSAX. I'm assuming they have something I can look at for purely international funds? Is there an easy way to see or sort out the mixes on Vanguard? Edit: https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list
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Aug 26, 2015 18:59
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VTSAX is not a "large cap fund", it is the entire US Stock Market. It's about 80% large cap, 20% small/midcap. I recommend it over separate large/mid/small funds.
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Aug 26, 2015 19:02
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obi_ant posted:Doesn't Vanguard have funds which basically mix all of this together? It's the target 2050/2055 fund mentioned in the post you quoted.
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Aug 26, 2015 19:03
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Desuwa posted:The thing they're talking about is whether it's better to max out up front if you can. Unless you are being ripped off with transaction fees, and you shouldn't be, you should put money in as soon as you get it. Thanks, makes sense.
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Aug 26, 2015 19:39
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mike- posted:What bonds are you referring to when you say they performed better over the 20 year period between 1965 and 1985? Both bonds and stocks performed poorly in real terms during that period due to high inflation. Hmm. It's been surprisingly difficult for me to find true side-by-side comparison of "bonds" to the S&P for the period. Here's some individual charts: S&P500:  30-year T-bond:  10-year T-note yield:  I don't think believe these charts are inflation-adjusted. 10-year notes went from ~42 in 1965 to ~110 in 1985. Isn't that better than basically flat S&P500? (Actually, and it's worth mentioning, stocks began a sustained recovery in 1983, so picking 1985 is a little misleading: stocks were literally flat for 18 years, not quite 20). Here's a chart produced by "Pioneer Fund" - we can ignore their advertising for their own fund (which, lol, appears to have made all its outperformance before 1950 and then never again since then) and just look at the performance of the three bond tracks vs. S&P500 for 1965-85. It looks to me like corporate and government bonds are at least as steep, if not steeper, than the S&P. Particularly from ~1965 to ~1978.  I could easily be missing something important here, of course. But remember, I'm not advocating 100% bonds, I'm suggesting that "your age in bonds" isn't an unreasonable position to take, if you're somewhat risk-averse, and if you think there's some chance that stocks could have a two-decade period of poor performance.
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Aug 26, 2015 20:58
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http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html You can download the excel sheet and calculate growth of an investment for any time period. Please don't try to compare returns by eyeballing how steep graphs are, especially when they are on a different scale and even more especially when they don't actually show what you are trying to compare. I'm not against your idea of having a conservative asset allocation, I'm just saying that the logic you presented for why you were doing it doesn't actually make sense.
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Aug 26, 2015 21:44
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mike- posted:http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html Using that chart: From 1965 to 1985, an investment in the S&P500 went from $2991 to $15,517. Using 1985 dollars, that's $10,216 becoming $15,517, for a 20-year return of 50%. In the same period, a $179 investment in T-bills went to $727.Using 1985 dollars, that's $611 becoming $727, for a 20-year return of 19%. Same period, $274 in T bonds went to $950. In 1985 dollars, that's 936 becoming 950, for a 20-year return of just ~1.5%. But. Most of those stock gains were made between 1983 and 1985. In 1982, using 1982 dollars, $9,163 in the S&P500 had become $9,105, for a total loss of a little over half of one percent; meanwhile, again in 1982 dollars, T-bills went from $548 to $569, for a gain of 3.8%. So in that 17-year period, the T-bills outperformed the S&P500 in real dollars. And T-bills represent a benchmark bond return: I would very much like to see what a rough equivalent of a passively-managed bond index fund, like VBMFX, would have returned between 1965 and 1982. I do think I understand what you're saying: historically, bond returns are way, way lower than stock returns. But I don't think I'm wildly wrong in saying that, for a pretty seriously extended period of time, "bonds outperformed stocks," broadly speaking. I'm still having trouble finding a good way of measuring overall bond market performance vs. stock performance for the period, though, and if I'm wrong, that'll be interesting.
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Aug 26, 2015 22:27
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No need to make it a black and white stocks-or-bonds. Given a specific time period and a specific purchasing pattern, you can always find what the optimum portfolio would have been. The optimum bond allocation was certainly higher for some time periods than for others. The question is, how do you make that information help you?
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Aug 26, 2015 23:25
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mrmcd posted:If it makes her feel better, my Vanguard account I opened in 2009 when I left my last job to rollover my 401k after getting eviscerated in the financial crisis. Because of my income level I haven't been able to contribute new money to that account at all. Of my initial 21k rollover (after losing maybe 8-10k), I've made 16k in returns just on that 21k rollover, a return of 11.8%, even after these big losses in the past few months. If that rate of return keeps up until I'm 60 years old-- when I can start withdrawing without penalty-- that account alone will be worth $885k without saving another single dollar. Thanks. This helps a lot!
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Aug 27, 2015 01:41
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I'm curious if we have any retired goons, or soon-to-be-retired goons, who follow the principles of this thread?
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Aug 27, 2015 02:17
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pig slut lisa posted:The Swedish economy is a very small part of the global economy, and you would be well served by diversifying your holdings to gain exposure to the US and other large markets. Yeah for the love of god avoid home bias when investing. People from small countries market cap-wise like Sweden or Canada put way too much of their money into local stock choices. To keep it simple just invest in the All World FTSE fund. etalian fucked around with this message at 02:23 on Aug 27, 2015 |
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Aug 27, 2015 02:19
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GoGoGadgetChris posted:I'm curious if we have any retired goons, or soon-to-be-retired goons, who follow the principles of this thread?
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Aug 27, 2015 03:26
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GoGoGadgetChris posted:I'm curious if we have any retired goons, or soon-to-be-retired goons, who follow the principles of this thread? Check out the Bogleheads forum if you want to see lots of older than Gen-X people post about retirement. Most of what is gospel here as far as investment advice originated there (it's literally the Vanguard fan club). There are a couple posters there in their 90s!
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Aug 27, 2015 05:10
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GoGoGadgetChris posted:I'm curious if we have any retired goons, or soon-to-be-retired goons, who follow the principles of this thread?
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Aug 27, 2015 05:45
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slap me silly posted:No need to make it a black and white stocks-or-bonds. Given a specific time period and a specific purchasing pattern, you can always find what the optimum portfolio would have been. The optimum bond allocation was certainly higher for some time periods than for others. The question is, how do you make that information help you? Well yeah. Conversation got started talking about 90% stocks vs. 100% stocks, and I mentioned I'm 60/40 and explained why. mike- (quite rightfully) questioned not my allocation, per se, but my reasoning. Resorting to charts and calculations was mostly an examination of the idea that bonds had never outperformed stock for "decades" which, actually, is true; 17-18 years looks to have been the longest stint, at least in the US. I'm still not 100% convinced that my allocation is correct, or that I fully understand bonds. I do think that many people, especially young people, are actually much less risk-tolerant than they believe themselves to be. And one of the most critical things to understand about chasing a risk premium is that the risk goes both ways... risk sometimes returns greater rewards, but we're relying on the efficient market hypothesis to always return a reward commensurate with risk. And the EMH is, uh, problematic. Sometimes risk winds up bringing losses. That's why we call it "risk."
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Aug 27, 2015 06:08
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Leperflesh posted:Well yeah. Conversation got started talking about 90% stocks vs. 100% stocks, and I mentioned I'm 60/40 and explained why. mike- (quite rightfully) questioned not my allocation, per se, but my reasoning. Resorting to charts and calculations was mostly an examination of the idea that bonds had never outperformed stock for "decades" which, actually, is true; 17-18 years looks to have been the longest stint, at least in the US. Actually, 1981 to 2011 is a thirty year period where 20-year treasuries beat stocks in the US. But treasury yields were extremely high back then, and are anemic now. And I agree with you. Stocks have a risk premium over bonds, yes, but there is always a chance stocks underperform bonds, even over the long term, otherwise there would be no risk. And of course many countries have had worse stretches (the US is the third best performing country over the past century). On the flip side, looking globally, long bonds have had some even worse stretches over the past century: - Five countries (Germany, France, Belgium, Italy, Japan) have had around 30-45 year stretches where stocks didn't even keep up with inflation. On the other hand, a larger handful (Ireland, Spain, Australia, Netherlands, Sweden) have all had 60 year stretches where long bonds didn't keep up with inflation. So that can offer a slightly different perspective of risk over the long run. Also, a good reason to diversify globally. 80k fucked around with this message at 06:37 on Aug 27, 2015 |
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Aug 27, 2015 06:27
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Leperflesh posted:Using that chart: If you pick a peak to start and a dip to end, your returns will look like poo poo. Just like if you compare your portfolio now to your portfolio in 2009, you'll look like a financial savant. I'm not accusing you of cherry-picking, since I know you're smart enough to avoid that trap, but just picking one point instead of dollar-cost averaging can lead to non-representative results when compared to how middle-class people saving for retirement actually invest. Who knows, you can't predict the future, though. I'm 100% equities right now. Actually 100% small cap because it was the only decent index fund in my 401(k). We just got Spartan funds from Fidelity, though, so I'm going to rebalance as soon as I can. I have to wait out the 90-days short-term trading window, though. I'm also very much an EMH guy, so I have a different outlook, I know. Dik Hz fucked around with this message at 11:46 on Aug 27, 2015 |
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Aug 27, 2015 11:43
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There's some survivorship bias in using the US stock market as the measuring stick for stock performance too.
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Aug 27, 2015 14:51
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Dik Hz posted:Now go back and dollar-cost average buying your allocation every 2 weeks for 20 years. You don't really even have to be that extreme. Once a year is enough to show how those variations can change the total return by surprising amounts. If you just buy in 2000 then by 2009 your IRR will be negative, if you buy a little all the time your IRR will be positive in 2009. Because, the price fluctuates and any one point of time is not a good indicator. But yeah, that's why two of the pillars of saving for retirement are regular contributions and regular re-balancing. Since, on average the stock market goes up every year, year over year, it forces you to buy the dips (also the peaks but those are more rare). e: ^^^^ I don't think survivorship bias is the right way to look at the survival of a stock market since stock markets don't (or at least haven't) failed due to internal pressures. I think I recall that every stock market failure has been due to external events (usually war or revolution). Murgos fucked around with this message at 14:56 on Aug 27, 2015 |
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Aug 27, 2015 14:53
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Dik Hz posted:I'm 100% equities right now. Actually 100% small cap because it was the only decent index fund in my 401(k). This is a lot easier to do when you have like 0x-2x your salary invested, compared to people who have 10x+ invested.
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Aug 27, 2015 14:56
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Deep 13 posted:Check out the Bogleheads forum if you want to see lots of older than Gen-X people post about retirement. Most of what is gospel here as far as investment advice originated there (it's literally the Vanguard fan club). There are a couple posters there in their 90s! That blew me away that Taylor Larimore is in his 90s, holy poo poo.
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Aug 27, 2015 16:12
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Murgos posted:e: ^^^^ I don't think survivorship bias is the right way to look at the survival of a stock market since stock markets don't (or at least haven't) failed due to internal pressures. I think I recall that every stock market failure has been due to external events (usually war or revolution). Why does it matter how a stock market dies? The point is that they can, and we are using as our benchmark one that hasn't, mostly because it hasn't. I don't think stock markets just randomly die; there's always a historical political/economic/social context. But that's hardly a reason, by itself, to dismiss the idea of survivorship bias. Dik Hz posted:Now go back and dollar-cost average buying your allocation every 2 weeks for 20 years. Sure. The crux of the conversation basically boils down to: if you have a time horizon of maybe 20 more years in which you could reasonably be overweight equities, should you? And my point: probably yes, most of the time equities outperform stocks, but there's reasons besides "reducing volatility" to take a substantial position in bonds. There have been times in the past when the market has favored bonds, and therefore it's reasonable to assume that it could do so again. That makes bonds a potential hedge, not just a volatility damper. How many years from your planned retirement date are you, if you don't mind my asking?
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Aug 27, 2015 16:37
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In a scenario where US equity markets are permanently shuttered there's a pretty good chance it doesn't really matter whether you were 90/10 or 50/50 bonds v stocks 20 years prior.
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Aug 27, 2015 17:32
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