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Amarcarts: A play, in three acts: Act I: The Beginning Amarcarts posted:New to investing here. Act II: I Know More Than You Amarcarts posted:The S&P 500 is not the market. You are making a choice when you pick a fund. Put as a rhetorical question: why are you picking SPY instead of DIA or QQQ? Just because you'd ultimately be happy with any of them over something more active doesn't mean you get to escape the choice of balancing your portfolio (or choosing someone to pay to balance it for you). Act III: Unintentionally Giving Self Good Advice Amarcarts posted:lurk more.
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May 14, 2020 19:43
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) the practical benefits of index funds in comparison to actively managed funds. From a logical standpoint it does not automatically follow that luck is the main driver of those small number of actively managed funds that beat the market.
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KillHour posted:In fact, the assumption that the results are completely random is such a common standard in statistics, it has its own name. https://en.wikipedia.org/wiki/Null_hypothesis
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May 14, 2020 19:44
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Moneyball posted:Amarcarts: A play, in three acts: 
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May 14, 2020 19:46
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I like how the day trading thread is a permanent self-aware losing battle against irrationality, while this thread is consumed by existential angst over 'what is truth?'
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May 14, 2020 19:46
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Moneyball posted:Did Elon Musk tweet about this thread or something? It's value has plummeted. Needs a rebranding.
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May 14, 2020 19:48
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Amarcarts posted:The S&P 500 is not the market. You are making a choice when you pick a fund. Put as a rhetorical question: why are you picking SPY instead of DIA or QQQ? Just because you'd ultimately be happy with any of them over something more active doesn't mean you get to escape the choice of balancing your portfolio (or choosing someone to pay to balance it for you). SPY is 75% of the total market which is a poo poo ton better than 22% DJIA and 27% QQQ.
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May 14, 2020 19:51
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drainpipe posted:SPY is 75% of the total market which is a poo poo ton better than 22% DJIA and 27% QQQ. Put another way, there is an objective measure here - more exposure to the total market is more better than. Hence this thread's love of VTI/VTSAX. quote:Created in 1992, Vanguard Total Stock Market Index Fund is designed to provide investors with exposure to the entire U.S. equity market, including small-, mid-, and large-cap growth and value stocks. The fund’s key attributes are its low costs, broad diversification, and the potential for tax efficiency. Investors looking for a low-cost way to gain broad exposure to the U.S. stock market who are willing to accept the volatility that comes with stock market investing may wish to consider this fund as either a core equity holding or your only domestic stock fund. So, no, it's not an arbitrary decision and you could have literally 0 access to any stock market history to make the objectively correct decision to pick whatever fund is available to you that maximizes your exposure.
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May 14, 2020 19:55
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Amarcarts posted:This whole conversation got started because I was skeptical of actively managed funds. That's why I was asking if there was a tool for dissecting their returns controlling for the the weight and timing of their holdings. I caught a bunch of poo poo, maybe because I happened to mention that I'm new at investing. Finally someone politely answered. Amarcarts posted:No but I think their return rate is high because they are good investors. Xguard86 posted:Dear OP
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May 14, 2020 19:57
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Amarcarts posted:The S&P 500 is not the market. You are making a choice when you pick a fund. Put as a rhetorical question: why are you picking SPY instead of DIA or QQQ? Just because you'd ultimately be happy with any of them over something more active doesn't mean you get to escape the choice of balancing your portfolio (or choosing someone to pay to balance it for you). This thread spends a lot of time helping people with their 401(k)s, and we usually have to recommend which index fund to pick based on fees. For many investors, an S&P500 fund is cheaper in fees than a total market fund. Fortunately, the S&P500, while not perfect, is a pretty good approximation of a total market fund:  It just happens to be less complicated to reference the S&P500 as a proxy for total market, because there is no globally accepted "total market index" - all total market funds must make choices about what to include, so there are small differences, even though the performance of thousands of proportionately-tiny companies means they matter very little in a cap-weighted index. (The only major index that isn't cap weighted is the DJIA, which this thread prefers to ignore for the most part.) quote:This is a bold claim. Are you saying your strategy exists in a vacuum and you can mentally model risk without factoring in historical returns? Why not just put everything in 6-month CDs? Or under the mattress? In a hypothetical alternate world where the active/index long term return situation was reversed, you're saying you wouldn't rebalance your portfolio to gain more exposure to active management? Hypothetically if active investing outperformed passive investing, the thread would favor active investing, except that in that hypothetical world, it'd be impossible to advise people to "just pick active funds and then do nothing but make regular deposits for 30 years" because active funds and passive funds are not interchangeable. That's the whole point. Active funds are active, they change their components based on human decisions rather than simply copying the content of an index that is, itself, simply following a very uncomplicated metric (the S&P500 is the 500 largest publicly-traded US companies, period, nobody gets to "decide" to include or not include a company other than on that specific basis." So the hyypothetical you're posing is fundamentally invalid. Passive investing works specifically because index funds are passive too. We invest in the total market, or in a reasonable approximation of the total market, passively, and can do so because passively-managed index funds exist. Also, to address the rest of your question: CDs and mattresses have different risk profiles than stocks. We do, in this thread, discuss the approrpiratness of different investment classes, particularly on the basis of their risk profiles. For many investors, CDs are a better choice than stocks: this has to do mostly with time frame and risk tolerance. If you'd like to engage with us on that basis, you'll find many willing and polite posters who are into that sort of thing, myself included. quote:What I'm saying is that everyone here knows that past performance does not guarantee future results, but you definitely can't prove that past performance does not inform current decisions, and it's an insanely complex discussion if you want to talk about how past performance should inform current decisions. They are completely different categories of statements. No. We can prove that past performance of human decisions about stocks does not inform current decisions, because we are not making "current decisions" in this context. This is the principle that you are continuing to obstinately not understand or accept. When we buy the total stock market or a reasonable proxy of it, we are not stock picking, we are investment-class picking. It's not the same thing. This is the long-term investing and retirement thread. We are not interested in short periods in which a stock-picker might temporarily outperform the market, even if that is theoretically (or provably) possible. For that, seek the stock-picking thread. Here, we are interested in helping people set themselves up for retirement, by making long-term investments. Over the long-term (20+ years), even the pros cannot seem to beat the market. We do not accept the premise that maybe you are special and can. If you disagree, I suggest you seek a lucrative career as a hedge fund manager. If you can actually do what you think you can do, you can make millions. Good luck. Leperflesh fucked around with this message at 20:00 on May 14, 2020 |
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May 14, 2020 19:57
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KillHour posted:Put another way, there is an objective measure here - more exposure to the total market is more better than. But none of those include privately held companies which are definitely part of the economy and the "total market" if you really think about it. 
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May 14, 2020 20:00
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totalnewbie posted:But none of those include privately held companies which are definitely part of the economy and the "total market" if you really think about it. Don't worry my friend, your pal GoGoGadgetChris will tell you when a good company is about to IPO
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May 14, 2020 20:00
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totalnewbie posted:But none of those include privately held companies which are definitely part of the economy and the "total market" if you really think about it. There are sites that let you buy "stock" in privately held companies, in case you're a sadomasochist and want to do that for some reason.
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May 14, 2020 20:04
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totalnewbie posted:But none of those include privately held companies which are definitely part of the economy and the "total market" if you really think about it. The word "market" is meant, in this context, to include only that portion of the markets to which ordinary investors have access. Only private capital can access privately-held companies, so they are not part of the "market" we are talking about. They absolutely are part of the economy, and you should correctly conclude that average investors are not investing in "the total economy." In fact, we are also mostly ignoring the international segment when discussing benchmarks here; but for me at least, that's intentional. We have had something to say int he past about the value and need for the international component in the three-fund portfolio, and we again run into issues with agreeing on what is actually the benchmark for international, whether it should or shouldn't include or weight emerging markets, etc.; and, germaine to the point at hand, choosing whether or not or how to include an international component is "picking winners" in a way that is fraught. I personally prefer to offload that task also to Vanguard's passive indexing; VGTSX/VXUS (and its other classmates) tracks the FTSE Global All Cap ex US Index, a passive index that in turn tracks mature and emerging markets worldwide ex-US, with weighting between countries that follows a particular formula, and this is a rabbit hole we can go down if we like but I'm reasonably satisfied in the "total" and "passive" assertions of this passive total-market index fund. How much to hold in proportion to the US-based segment of the portfolio? An interesting choice, but one which - I'd argue - again should not be made on a basis of solely or primarily looking at recent returns, for the same reasons already elucidated in the last few pages.
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May 14, 2020 20:06
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Amarcarts posted:Quote a claim I've made that would require a source Hoodwinker posted:I would need more supporting evidence that there's a miscommunication before diverging from the default stance that you're actually the one who's been hostile from the start and everybody else was responding to that. Hoodwinker posted:Dude just go read the OP and the books recommended in there and get back to us. Nobody really gives a poo poo if you gently caress up your nest egg, we're just trying to help you not do that. Loan Dusty Road fucked around with this message at 20:26 on May 14, 2020 |
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May 14, 2020 20:13
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Amarcarts posted:So if everything is technically a strategy, and if you truly claim to be agnostic about the future, you have to concede the possibility that one strategy could theoretically outperform another over a fixed time frame. I have no doubt that you can easily demonstrate, (with data on historical returns It does when you factor in the inconsistency of the actively managed funds. Funds that were in the top 10% of highest performers in one 5 year period can end up in the bottom 10% over the next 5 year period. The Lindner Growth fund outperformed the market for 11 straight years, then over the next 18 years, underperformed by 8% annually. The 44 Wall Street fund was the top performing mutual fund of the 1970's, and the worst performing mutual fund of the 1980's. If luck wasn't the primary driver, then more funds would outperform the index consistently, and index investing wouldn't have become as popular as it is.
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May 14, 2020 20:24
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One of the several factors that seems to screw over active funds: the more money your fund has under management, the more your moves are constrained. A move that substantially changes performance of the fund has to involve increasingly large positions (a $1M purchase of a stock for a fund with $1B in assets "matters" a hundred times more than a $1M purchase of a stock for a fund with $100B in assets); but, the larger a position being taken, the more the act of taking that position moves the market. E.g., if I make a stock purchase on one day consisting of 1/10th of 1% of total daily volume, my purchase hardly moves the needle. But if a fund manager wants to take advantage of some opportunity in the market that their super good stock pickin' skillz has revealed, either it's so small of a position relative to fund size that it being a winning pick is basically irrelevant, or, it's so large of a position that just starting to buy into it forces the price to rise to a point where it's no longer a winning position! And yet, investors reward small, outperforming funds by piling into them, possibly ruining the skill effect of their managers. Those funds wind up stuck with large blue chip positions and small positions in whatever else they wanted, which is how market-cap-weighted index funds already work, but with an added expense drag, and possibly a lot of pressure to make decisions/active moves to justify fees, leading to underperformance. This explains why some small fund managers started locking their funds to new investors. Which, interesting, but as a normal not-rich person, the fact you are locked out of funds that have good recent-historical performance but are now closed to new investors, further erodes your opportunity to try to beat the market with active investing. Of course, it is also the case that even with that practice of locking to new investors, many or most of these funds still go on to underperform. It remains the case that human decision-making about picking stocks seems to be not just "the same as random picking luck" but "significantly worse than random".
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May 14, 2020 20:33
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Leperflesh posted:Fortunately, the S&P500, while not perfect, is a pretty good approximation of a total market fund: i thought past performance was no guarantee of future performance check mate   
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May 14, 2020 20:59
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KYOON GRIFFEY JR posted:i thought past performance was no guarantee of future performance check mate oh drat welp I guess I'm owned brb, I just found out 99% of winning lottery tickets pay out, gonna go get some winning lottery tickets
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May 14, 2020 21:25
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gently caress all of that. I'm signing up for a newsletter the smart way. If that newsletter is anything other than a weekly image of Bezos direct to my inbox, it's overselling itself.
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May 14, 2020 22:01
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Sundae posted:gently caress all of that. I'm signing up for a newsletter the smart way.
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May 14, 2020 22:02
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This is the best thread ever lmao
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May 14, 2020 22:53
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Why might the turnover rate for FDEWX as shown in Fidelity's fund browser thing be way different from the same fund's turnover rate as shown everywhere else, like (for example) Yahoo or Morningstar?
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May 14, 2020 23:17
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Fidelity's tooltip says their turnover (74% in this case) is calculated as follows:quote:Turnover Rate quote:Sales or Revenues ÷ Total Assets I would guess that either these don't mean the exact same thing, or Yahoo doesn't directly have access (via the scripts that build their pages at least) to the underlying funds' purchases/sales the way Fidelity would. Remember that target funds like this are funds-of-funds so getting at the purchases list might be more difficult. Turnover isn't really a useful metric for an index fund in any case. For active funds, turnover is useful to understand "how many decisions are the fund managers making", with a higher number indicating more churn as the managers move in and out of positions. But index funds are moving in and out of positions only in an automated way, in order to maintain holdings substantially identical to the underlying index. I believe turnover may also be driven partially by volume of participant activity; that is, when new investors are buying in to the index fund, the fund is obligated to buy shares proportionately to add in that money while not screwing up their ratios of ownership, and similarly, when investors pull their money out/sell, the fund is obligated to sell across the entire portfolio. During economic crises, if investors are cramming money into safe harbors (like index funds) or yanking money out of investments (like to pay rent), that would tend to drive up Turnover more too.
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May 15, 2020 00:13
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Thanks, that’s super helpful! I stumbled across this number while trying to figure out what to do with the long-term money in my taxable brokerage account. Target date funds appeal to my extreme laziness but I’ve been reading that high-turnover funds are bad fits for taxable accounts because they generate a lot of taxable events.
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May 15, 2020 01:33
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Can anyone suggest to me a free portfolio tracker? I have a few accounts across 2-3 different institutions that I would like to see in one simple place. Something in the lines of just adding a fund name, along with the dollar amount I have in there and it giving me a breakdown of what I currently own.
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May 15, 2020 15:45
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Personal capital can do that. Maybe overkill if you want something really simple.
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May 15, 2020 15:51
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obi_ant posted:Can anyone suggest to me a free portfolio tracker? I have a few accounts across 2-3 different institutions that I would like to see in one simple place. Something in the lines of just adding a fund name, along with the dollar amount I have in there and it giving me a breakdown of what I currently own. code:
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May 15, 2020 15:53
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Had no idea google could do that, thanks for the tip!
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May 15, 2020 16:10
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obi_ant posted:Can anyone suggest to me a free portfolio tracker? I have a few accounts across 2-3 different institutions that I would like to see in one simple place. Something in the lines of just adding a fund name, along with the dollar amount I have in there and it giving me a breakdown of what I currently own. The google sheets noted above will work. I will plug Personal Capital (for as long as they are not purchased by Chase) as I like that it also gives you your breakdown of what sector your funds are in.
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May 15, 2020 16:16
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In honor of the new thread title, some quotes from Boethius: "No man is rich who shakes and groans, convinced that he needs more." "Verily this is the very crown of my misfortunes, that men's opinions for the most part look not to real merit, but to the event; and only recognize foresight where Fortune has crowned the issue with her approval."
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May 15, 2020 19:54
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raminasi posted:Thanks, that’s super helpful! I stumbled across this number while trying to figure out what to do with the long-term money in my taxable brokerage account. Target date funds appeal to my extreme laziness but I’ve been reading that high-turnover funds are bad fits for taxable accounts because they generate a lot of taxable events. That is correct. It is not a huge deal, but target retirement funds are a little less tax efficient. Treat your tax-advantaged retirement accounts and your brokerage money as a single portfolio, and put the less tax-efficient allocation in the retirement accounts if you can. This might not be possible depending on relative account balances vs. your intended asset allocation. Here's a brief introduction. https://www.investopedia.com/articles/stocks/11/intro-tax-efficient-investing.asp Just remember that having the right asset allocation is probably more important than saving a couple hundred bucks a year on taxes; but you can read up on the options and maybe have a good allocation while also saving a bit.
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May 16, 2020 05:19
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moana posted:In honor of the new thread title, some quotes from Boethius: I was surprisingly happy about the changes.
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May 16, 2020 08:26
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Moneyball posted:Amarcarts: A play, in three acts:  Man, I both predicting the drama, and I then got distracted with work and missed it in real time.
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May 16, 2020 12:51
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YOU CAN’T TIME THE DRAMA
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May 16, 2020 13:00
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Slow news day huh
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May 16, 2020 13:10
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So if I have a Thrift Savings Plan, and I put all my contributions into the roth part, I still get the employee match, but it goes into the non-roth portion? Census Bureau worker here.
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May 16, 2020 16:43
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thechosenone posted:So if I have a Thrift Savings Plan, and I put all my contributions into the roth part, I still get the employee match, but it goes into the non-roth portion? Census Bureau worker here.
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May 16, 2020 17:12
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thechosenone posted:So if I have a Thrift Savings Plan, and I put all my contributions into the roth part, I still get the employee match, but it goes into the non-roth portion? Census Bureau worker here. I have never seen a match go in Roth. Most likely has to do with who pays the tax.
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May 16, 2020 17:39
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spwrozek posted:I have never seen a match go in Roth. Most likely has to do with who pays the tax. It's fine if it doesn't, so long as I get it. Got everything in C-fund since I'm not planning on cashing out for ~30 years. Figure either everything collapses and there wouldn't have been any difference, or I come out pretty well.
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May 16, 2020 17:47
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thechosenone posted:So if I have a Thrift Savings Plan, and I put all my contributions into the roth part, I still get the employee match, but it goes into the non-roth portion? Census Bureau worker here. The match is pre-tax so it can’t go in a Roth otherwise you would have a higher tax liability for the year. I suppose you could convert it manually and pay taxes on it now?
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May 16, 2020 17:49
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