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Apologies if it's been asked before, but what's the general opinion of the serious investing thread on using leveraged ETFs for long term investment (30ish years)? I understand the risks are higher and the expense ratio is as well, but if the investment thesis is correct is should allow much higher returns.
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Feb 29, 2020 16:04
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I have read this discussion on Bogleheads and I don't fully understand it but the gist is that there is some numbers fuckery that makes leveraged funds terrible over the long term. They are only useful for short term gambling, holding them longterm guarantees a loss.
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Feb 29, 2020 16:09
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Freezer posted:Apologies if it's been asked before, but what's the general opinion of the serious investing thread on using leveraged ETFs for long term investment (30ish years)? If you drop 10% and then gain 10% you’re still down 1%. With a 3X (before the higher expenses and all that) you’d drop 30% then gain 30% which would mean you’re still down 9%. Over the long term that means it takes longer to recover from the hits. And that’s before expenses. Maybe compare 5-, 10-, and 30-year performance of index ETFs with their 3x counterpart and see what time horizon works for you. If I’m being honest I never thought about a 3x long term until now. I’ve only ever felt they’re for calling bottoms/tops and swing trading shenanigans.
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Feb 29, 2020 16:11
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Freezer posted:Apologies if it's been asked before, but what's the general opinion of the serious investing thread on using leveraged ETFs for long term investment (30ish years)? I have been looking into leveraged ETFs for the same reason. The problem is that the funds promise to replicate the movement of their corresponding index on a daily basis, and make no promises on a longer term. The iShares UPRO prospectus explains all this quite well. https://www.proshares.com/funds/upro.html quote:Compounding Risk — The Fund has a single day investment objective, and the Fund’s performance for any other period is the result of its return for each day compounded over the period. This usually will differ in amount, and possibly even direction, from three times (3x) the daily return of the Fund’s Index for the same period, before accounting for fees and expenses. Compounding affects all investments, but has a more significant impact on a leveraged fund. This effect becomes more pronounced as Index volatility and holding periods increase. Fund performance for a period longer than a single day can be estimated given any set of assumptions for the following factors: (a) Index volatility; (b) Index performance; (c) period of time; (d) financing rates associated with leveraged exposure; (e) other Fund expenses; and (f) dividends or interest paid with respect to securities in the Index. And then includes this chart:  What's interesting to me is that a number of the darker shaded areas are doing worse than the 3x but still better than the index. Also a bunch of scenarios where it does less bad than the 3x rate or much better than the 3x rate (the low volatility periods). It's also worth knowing what the volatility for the S&P 500 tends to be. My understanding is that it's very rare for it to go into the 25%-50% range and mostly lives in the 10%-25% range. But I need to learn more. This chart doesn't take into account all the fees and so on though, so there's more of a drag on results than implied by the chart.
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Feb 29, 2020 16:32
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Freezer posted:Apologies if it's been asked before, but what's the general opinion of the serious investing thread on using leveraged ETFs for long term investment (30ish years)? hueristically: whenever you're dealing with leverage, it can always* go both ways. People have forgotten this and paid for it over and over. Yes people have also made fortunes but those who do are usually not the retail investor. * Unless you're too big to fail
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Feb 29, 2020 17:10
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Abongination posted:I’ve been waiting for a market crash to dump a decent chunk of cash into index funds, I feel like a ghoul but this Corona virus crash seems to be the best time to dive in. The ideal day for you to have invested that money was this past Thursday which if you were able to time the market you would have known. Next best day is this coming Monday. Stop trying to time the market.
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Feb 29, 2020 17:16
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Do not time the market, you can’t win. And if you do win, next time you will lose even harder.
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Feb 29, 2020 17:17
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Jesus In A Can posted:37 years old, likely 25-30 years from retirement, working as a university professor, single, no one to screw up my budget but me. This is such a jumble. Try splitting out your income, debts and expenses to make your situation more clear to yourself. Here's what you are saying about your income (I think—it took me two tries to catch everything): Projected income for 2020: $60,700+$2,000*5+$12,000+$450*8 = $86,300.00/year gross income. I couldn't be bothered to try to figure out the other parts. As for retirement investing vs paying down debts: Most debts have a higher interest rate than the expected returns on the stock market. I see you've got one CC debt that's 0% for awhile, so I'd focus on paying down your others as fast as you can and then that one before the 0% interest runs out. One your various payments go away, you'll have a lot more monthly income to save. Why do you think that putting money into the 403b past the match doesn't make sense?
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Feb 29, 2020 17:32
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paternity suitor posted:How long have you been waiting? Since late last year, so don’t think I’ve missed out on much and should be able to get a larger slice for the same price hopefully. My missus finally got convinced by some blokes she pays to dump a bunch of money in just under two weeks ago. She’s still in a “cooling off” period apparently so can pull the cash without any fees. Is it worth pulling out what’s she got and immediately reinvesting it at a lower price?
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Mar 1, 2020 00:58
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It is worth getting the hell away from "some blokes". But you can sell it but will have to wait to reinvest so you don't have a wash sale. Sould probably just leave it and figure out what you need to do to get her away from them blokes.
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Mar 1, 2020 01:20
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Hmm we are likely looking at the worst pandemic to hit the world in the last 100 years. Probably not going to miss out on too many gains if you wait a few weeks to see how this starts to shake out in the US, and if infections take off again in China. And no good investment has a loving cooling off period where you get all your money back. I'm curious what it is, but I'm positive you need to GTFO immediately.
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Mar 1, 2020 03:12
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Don't time the market.
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Mar 1, 2020 03:17
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my money's on crypto
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Mar 1, 2020 03:17
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Hello thread, I'm back with an IRA / tax question. So last year I deposited $6k into my Roth IRA in January, but only earned ~$4.7k throughout the year. Vanguard has an option to withdraw the over-contribution and calculate/withdraw any gains on it, but (I think) I would have to pay both the tax and the penalty on both the over-contribution and any earnings, as my Roth IRA is less than 5 years old. What are my options here? I have a few thoughts: 1) Can I write a letter to the IRS essentially asking for a free pass on this one? Unlikely, I know, but I'm just trying to save for retirement, and didn't really mean to do anything wrong. 2) I also remember reading something, somewhere, about rolling-over the over-contribution into next year's (2020's) IRA. Is this a thing, and how might it work? 3) If I have to withdraw and pay penalties, would now be the best time to do it? With markets down at the moment, reduced gains = less $$$ in penalties, right? I need to do this before tax day, in any case. 4) It's really dumb that I'm essentially being punished for trying to save for retirement, especially given that I was fired in retaliation and through no real fault of my own.
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Mar 1, 2020 03:27
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I don't think the IRA has to be funded with money you made that year, only with money that you made and were taxed on at some point in time.
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Mar 1, 2020 03:33
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literally this big posted:Hello thread, I'm back with an IRA / tax question. Kylaer posted:I don't think the IRA has to be funded with money you made that year, only with money that you made and were taxed on at some point in time.
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Mar 1, 2020 03:33
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literally this big posted:Hello thread, I'm back with an IRA / tax question. #2 works... you still have to pay the 6% penalty on the excess for 2019, but as long as you under-contribute by the amount of the excess in 2020, you are fine for 2020 and onwards, without any extra reporting. #3 also works... just remove the excess, pay penalties on the gains (which could be none, if you made no money or lost money), and then recontribute in 2020 and you won't even have to pay the 6% penalty on the excess. #3 seems like the better option. I've had to remove excess contributions with Vanguard and it was a piece of cake with a form.
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Mar 1, 2020 04:25
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Baddog posted:Hmm we are likely looking at the worst pandemic to hit the world in the last 100 years. Probably not going to miss out on too many gains if you wait a few weeks to see how this starts to shake out in the US, and if infections take off again in China. Cheers, will see how things play out next week. The investment firm my fiancé is hiring seemed like snake oil salesmen to me which is why I’ve not done anything with them beyond the initial meeting she forced me to go to. They charged her $3000 to make up a big file of bullshit and swap her super funds around. No idea what this cooling off period poo poo is, will find out more when she gets home and grill her about it.
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Mar 1, 2020 04:35
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Whole life insurance is a terrible idea for 99% of people right? I'm sitting on another smaller forum and people are advocating for taking out a whole life policy and 'being your own bank'. I feel like I'm taking crazy pills
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Mar 1, 2020 05:23
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Shats Basoon posted:Whole life insurance is a terrible idea for 99% of people right? I'm sitting on another smaller forum and people are advocating for taking out a whole life policy and 'being your own bank'. I feel like I'm taking crazy pills Whole life insurance is good for only two groups of people: - Wealthy people who are looking for an estate tax shelter, but aren't loaded enough to participate in Panama Papers style tax frauds - Insurance salespeople who get fat commissions from cash value policies like whole life or universal life "Being your own bank" probably refers to the way you can take out loans against a whole life policy. Just like a 401(k) loan, this is almost always a bad idea.
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Mar 1, 2020 05:46
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Abongination posted:Since late last year, so don’t think I’ve missed out on much and should be able to get a larger slice for the same price hopefully. Abongination posted:Cheers, will see how things play out next week. This screams of a waste of money. Swapping super funds is literally a couple of pages of paperwork. It sounds like they’re trying to sell you active fund management, which is full of high fees. You don’t need that. Withdraw the money from it immediately and do not talk to them ever again. You don’t need to pay for investment guidance, when there is a wealth of freely available information. Theres a number of Aussies in here (myself included), who can provide specific advice to the Australian market if you’re concerned with this thread being too US-biased.
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Mar 1, 2020 05:50
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Space Gopher posted:
Yea that was the hook. The specific strategy was to pay the premium 3-5 years then take out a "tax free" loan if you need cash flow
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Mar 1, 2020 06:03
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Shats Basoon posted:Whole life insurance is a terrible idea for 99% of people right? I'm sitting on another smaller forum and people are advocating for taking out a whole life policy and 'being your own bank'. I feel like I'm taking crazy pills My parents are trying to do this to support us kids after they're dead. They've also lost thousands upon thousands of dollars on the stock market trying to time it and following some dipshit "professor"'s newsletter. Take that as you will. There is no One Weird Trick to saving for retirement.
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Mar 1, 2020 06:07
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Shats Basoon posted:Whole life insurance is a terrible idea for 99% of people right? I'm sitting on another smaller forum and people are advocating for taking out a whole life policy and 'being your own bank'. I feel like I'm taking crazy pills At best I've heard whole is not as good term. At worst I've heard it's an outright scam. I have no idea who would be recommending whole.
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Mar 1, 2020 07:59
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Shats Basoon posted:Whole life insurance is a terrible idea for 99% of people right? I'm sitting on another smaller forum and people are advocating for taking out a whole life policy and 'being your own bank'. I feel like I'm taking crazy pills
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Mar 1, 2020 09:15
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Re: excess contributions to a Roth: pub 590-a and (obscurely) the instructions to form 8606 lay out some options. “Obscurely” because there’s nothing that obviously points you there, and because form 8606 may or may not be where you report the correction.
Gazpacho fucked around with this message at 09:52 on Mar 1, 2020 |
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Mar 1, 2020 09:46
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I think my wife may have over-contributed (in a strategic sense) to her 401k last year. It looks like she is eligible for the Foreign Earned Income Exclusion this year, haven't fully run the numbers yet but her salary is low enough that it should completely zero out her income tax liability. Which negates the primary benefit of the traditional 401K (still some value in having the money in there I assume, as it's protected from bankruptcy etc). I assume in this situation the ideal solution is to contribute to traditional 401K up to her employer's match, and then max the Roth 401k?
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Mar 1, 2020 12:54
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literally this big posted:Hello thread, I'm back with an IRA / tax question. Since you contributed in January, you can apply some of that deposit to 2018. Call Vanguard and tell them to apply $1300 to 2018. Assuming you have the earned income level and didn't max 2018.
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Mar 1, 2020 14:04
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https://apple.news/AU6u1fbs2SXScHAoYyLMjPw “The total debt burden for Americans over age 70 increased 543% from 1999 through 2019, to $1.1 trillion, according to data from the Federal Reserve Bank of New York. Similarly, those in their 60s saw debt, such as mortgages and auto loans, balloon by 471% to $2.14 trillion. While other age groups also saw their total liabilities increase over that period, the percentage increase experienced by seniors was most pronounced. Seniors have been "disproportionately harmed" by a deterioration in the country's "modest social safety net," forcing older Americans to take on debt to make ends meet, according to a 2018 academic study on bankruptcy among seniors.” Good job cutting the social safety net And my favorite: “However, having debt in retirement isn't always bad, and some near-retirees or retirees shouldn't feel they have to rush to pay off those liabilities, according to financial advisors. In fact, doing so may not be the best financial choice. "Ideally, people would go into retirement with all their debt in the rear-view mirror," said certified financial planner Glenn Downing, founder and principal at CameronDowning, a financial advice firm based in Miami. "But sometimes it doesn't work out that way." Cash flow is key for individuals assessing whether it's OK for them to retire with certain debt, Downing said. “That means reviewing if your retirement income — monthly payments from investments and Social Security, for example — could cover debt payments and still afford you a comfortable lifestyle. It's often not harmful to hold certain types of debt, such as mortgages, auto loans and student loans, in retirement since they typically come with relatively low interest rates, said William Goodson, a CFP and financial advisor at Financial Synergies Wealth Advisors in Tyler, Texas. Monthly bills are also more predictable from month to month, especially with a fixed-rate loan, than other types of debt.”
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Mar 1, 2020 15:02
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Tyro posted:I assume in this situation the ideal solution is to contribute to traditional 401K up to her employer's match, and then max the Roth 401k? You should be able to go all Roth 401k. The match would just get deposited as traditional. Check with HR though.
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Mar 1, 2020 15:20
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spwrozek posted:You should be able to go all Roth 401k. The match would just get deposited as traditional. Check with HR though. Hell yeah. Thanks.
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Mar 1, 2020 15:47
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Abongination posted:Since late last year, so don’t think I’ve missed out on much and should be able to get a larger slice for the same price hopefully. So consider that it took an unpredictable event like this for you to reach a break even point in price. That's not considering the lost dividends, which surely beat out whatever interest rate your cash returned, and it's not considering that your gains would be taxed lower due to being long term at his point. That said, you're still on the sidelines considering whether to enter, and that is really the fatal flaw of timing the market. There's never going to be a point that's an obvious bottom, so you'll keep waiting, and then at some point in retrospect you'll see the bottom has passed, and you'll wait two more years for another. Rinse and repeat
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Mar 1, 2020 16:44
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Duckman2008 posted:“The total debt burden for Americans over age 70 increased 543% from 1999 through 2019, to $1.1 trillion, according to data from the Federal Reserve Bank of New York.
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Mar 1, 2020 18:15
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It says total debt burden so that's almost certainly a raw number, not adjusted for the significant demographic shift that has occurred over those same years. So yeah, it's fearmongering, targeted at the media's favorite consumers of fearmongering.
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Mar 1, 2020 18:24
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Question around short term losses and medium-term brokerage account allocation. I have not yet done my backdoor Roth for 2020 (was holding excess cash for some house renovations which are now finished). Options I'm looking at: 1a) Move $6k cash from my Schwab taxable (had been holding for house reno stuff) over to Fidelity (where I'd do the BD Roth... I'm familiar with the process there and like Fidelity in general). 1b) Take the excess cash (minus the $6k) I've been holding liquid at Schwab and buy more SCHB I guess. 2a) Take all my liquid cash at Schwab and buy more SCHB in my taxable. 2b) At Fidelity, sell off $6k worth of FZROX (all at minimal short-term losses, like $250 total) and then do the BD Roth with those funds. Saves some transfer nonsense. Is there anything I should be aware of around the short-term losses? I like that option #2 leaves more money overall at Schwab, helps me balance out a bit more across the two. Not that I imagine either of those two giants failing, but I sleep better at night knowing I have options in case something wacky happens to one of them.
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Mar 1, 2020 18:47
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CubicalSucrose posted:FZROX Do you think they knew what they were doing when they named that?
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Mar 1, 2020 19:28
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Pollyanna posted:Do you think they knew what they were doing when they named that? Yes.
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Mar 1, 2020 19:33
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https://www.youtube.com/watch?v=kkNtEcLyMUs This is what putting money into an index fund feels like.
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Mar 1, 2020 19:41
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Well this is a hell of time to need to roll a 403b over. I'm probably going to roll over a Fidelity 401k from the job before this too so it's all in one place and they have weight. I'm gonna roll a 403 and 401 into a Vanguard Trad IRA. Might put everything in bonds for a couple months to see how things shake out. Decent plan? Should I consider a different vendor? I would qualify for admiral funds.
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Mar 1, 2020 21:10
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Don't time the market Don't time the market Don't time the market
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Mar 1, 2020 21:38
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