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The way I understand it is that if there was significant distortion due to passive investments, active managers would be exploiting that distortion. I've not heard of anybody doing so, and actively managed funds have continued to underperform about as much as they usually do, so it implies that this distortion isn't large enough to exploit in a systematic manner. To put my money where my mouth is, I'm not switching my portfolio to an actively managed fund any time soon.
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Jul 28, 2020 09:35
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Which index? VOO, VTI, BND, VXUS, TLT, VTV, SWAN, QMOM, MTUM, IAUF all track indices. These are indices with completely different asset classes and tilts. And there is a galaxy of indices to choose from. So if one is going to make a claim of a passive investment bubble, one would need to define your terms more precisely than just saying “index”. My guess is that what most people mean when they say “index” is S&P 500. There, there is good reason to worry that past returns can’t predict future performance (because past results have been extremely good over the last decade or so) and we should be be cautious when balancing our asset allocation going forward. Ben has a video about that too. https://youtu.be/RR7e1Y-HJxQ The thing I like about Ben’s videos is that his claims are backed up by research and he cites the papers. You can check his work if you like. If you think there is a passive index bubble, pick a different index and passively invest in that. If you somehow think that all passive index investing is a bubble (what does this even mean) and want to go with active management to dodge that, you need a really compelling story to tell. We have endless studies showing that active managers fail to beat comparable indices after accounting for fees and that basically 0 active managers can consistently outperform the market.
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Jul 28, 2020 11:09
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I have a (maybe stupid) idea that the people who run Berkshire Hathaway will not let their money disappear, therefore investing in the B stock is a pretty safe idea long term. Am I wrong?
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Jul 28, 2020 22:06
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devilmonk posted:I have a (maybe stupid) idea that the people who run Berkshire Hathaway will not let their money disappear, therefore investing in the B stock is a pretty safe idea long term. Am I wrong? Based on what analysis? A gut feeling? Berkshire Hathaway has underperformed the S&P 500 in the past 1, 2, and 5 year periods, and is actually down quite a bit YTD/1YR whereas the S&P is flat/up.
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Jul 28, 2020 23:11
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Guinness posted:Based on what analysis? A gut feeling? Thanks! It was a stupid thought.
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Jul 28, 2020 23:15
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Not that stupid. Berkshire Hathaway is essentially doing active investing, so the first instinct should be "why do these people think they can beat the market?" Well, one reason is that the company has access to things that the retail investor doesn't. Berkshire can just buy 20% of a company it's interested in, it can get IPO shares before they hit the street, it can buy private companies too. And it can literally run an insurance company and charge premiums and make profits from that company. Another reason is the track record of Warren Buffett, although he's super old now and we should all expect him to drop dead any second (and that could instantly affect share price of course). We can compare the performance of the stock to the S&P, but... is it really a good comparison? Remember the basic principle of risk/reward for investing. Additional factors include leverage and diversification. The risk profiles (and leverage and diversification) of BRK.A or BRK.B are different than that of the S&P500, so a straight comparison of returns that ignores all other factors is at best incomplete and at worst very misleading. Here's an article from 2018 I found that discusses this in a bit more detail: https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/2018-08-01/the-secret-to-warren-buffetts-returns quote:Diversification is no new concept in finance. Its basic premise is to spread investment risk and avoid over-exposure to any one asset. Buffett perfected this notion by investing in a range of industries. Ironically, Buffett is famous for his quote, "Diversification is protection against ignorance. It makes little sense if you know what you are doing." Note that the profile of BRK holdings today is not the same as the holdings that Buffet used to make massive amounts of money in decades past. You should not blindly buy BRK.B just because of those past returns. But if you're considering it, you ought to understand the risk profile and use of leverage and exposure to various sectors and all the other details before deciding, and that includes deciding whether moving money from passive index investing to an active non-indexed investment portfolio like the one managed by Berkshire is appropriate for your desired risk, time horizon, goals, etc.
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Jul 28, 2020 23:34
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^^super interesting. Thanks 🙏
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Jul 29, 2020 01:13
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Entropy238 posted:Sure: OK are you sure this is what you want? This is approximately what is called a segregated fund in Canada, and usually a variable annuity in the US, though some exact details are for sure different. There are very specific and narrow conditions that you'd need to hit for me to recommend this product. They typically involve avoiding probate (in Canada,) or being extremely risk averse. Advisors love selling these things they get a nice commission from it. It sounds like its great they handle the tax issue for you, but they still pay it, they don't just get around it. From what I can tell you will be paying a lot for that service. The management fee is 0.90%. The actual total fee will be higher after taxes (and sometimes operating expenses, I don't see a mention of that anywhere it may not be an Ireland thing). The underlying mutual fund is has a total fee of 0.18% (https://americas.vanguard.com/institutional/mvc/detail/mf/overview?portId=9930&assetCode=EQUITY#%23overview). Right off the bat, the guarantees embedded in the unit link product are costing you 0.72%. EDIT: to be fair, you wouldn't be able to get this exact mutual fund at that price, due to the min. investment, but there is definitely something comparable at a similar or lower price (e.g. just ETFs then pay accountant is probably cheaper). Additionally, the key features indicate there may be additional premiums/fees that apply to your account (it wouldn't let me copy/paste, check page 3). Not just the early withdrawal fee, but the life insurance levy, cash account fee, and fund switch fee stand out to me as potential problems. Jenkl fucked around with this message at 01:39 on Jul 29, 2020 |
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Jul 29, 2020 01:33
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Leperflesh posted:Berkshire Hathaway chat I posted a link to a super informative twitter thread on BRK valuation in the stock trading thread. See discussion here: pmchem posted:I posted a while ago in thread wondering if BRK was undervalued. This guy on twitter just did a huge writeup on it, saying, yes it is, by perhaps around 40%. Good analysis inside.
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Jul 29, 2020 01:38
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pmchem posted:I posted a link to a super informative twitter thread on BRK valuation in the stock trading thread. See discussion here: It'll be tempting if the shares drop in price after Buffett dies.
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Jul 29, 2020 03:29
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Agreed it's an interesting read. There's one or two quibbles I'd have in there - in particular the editorializing that "concentration creates wealth" while using a huge stake in Apple as the key example and otherwise discussing a highly diversified company - most of the analysis of BRK seems spot on to me and I'd agree with the thesis that BRK is currently undervalued by the market. I'm not going to stake a significant percentage of my portfolio on the bet that the market will eventually agree with OP or me and bid up BRK's shares, or that its future investment decisions will maintain and grow that theoretical value. I just don't do that kind of investing.
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Jul 29, 2020 04:42
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FWIW I agree with you. I don't own any BRK right now. But I'm eyeballing it as a reopening play for later in the year.
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Jul 29, 2020 14:17
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Jenkl posted:It sounds like its great they handle the tax issue for you, but they still pay it, they don't just get around it. From what I can tell you will be paying a lot for that service. I've checked with them the 0.9% AMC is the only fee for the product. Jenkl posted:The underlying mutual fund is has a total fee of 0.18% (https://americas.vanguard.com/institutional/mvc/detail/mf/overview?portId=9930&assetCode=EQUITY#%23overview). Unfortunately this is the cheapest vanguard retail investment product you'll get on the Irish market. Most other AMCs for similar products start around 1% to 1.25% by comparison. At some stage, once the size of my investment grows, I definitely agree with you that it makes sense to start looking at an accountant because they'll charge flat rather than proportionate rates. Based on the research I've done, this only starts making sense once you're looking at investing around the 100K mark. Jenkl posted:Additionally, the key features indicate there may be additional premiums/fees that apply to your account (it wouldn't let me copy/paste, check page 3). Not just the early withdrawal fee, but the life insurance levy, cash account fee, and fund switch fee stand out to me as potential problems. The life assurance levy is a 1% levy on all allocations to an investment - apparently you can negotiate with the companies for them to pay this. Cash account fee is only necessary if you go through their self-directed brokerage option. Agree fund switch fee could be a problem further down the line. It's definitely not an ideal solution but in the circumstances it's probably the best after-tax investment I can make if I don't want to become a landlord.
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Jul 29, 2020 14:22
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Is there a way for me to retroactively change 2020's Roth 401k and 403b contributions to Traditional? If the second round of stimulus passes with $1200 per kid, this could end up being a pretty big stimulus check that I would miss out on due to both partners in the household choosing Roth over traditional.
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Jul 29, 2020 15:35
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Twerk from Home posted:Is there a way for me to retroactively change 2020's Roth 401k and 403b contributions to Traditional? If the second round of stimulus passes with $1200 per kid, this could end up being a pretty big stimulus check that I would miss out on due to both partners in the household choosing Roth over traditional. I don't know if/how to do that but on the last stimulus one of my employees was in the phase out for him but still got the full amount for each kid. Not sure that is helpful but you may still get the kid portion. But also who knows what the actual law will say.
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Jul 29, 2020 15:51
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Twerk from Home posted:Is there a way for me to retroactively change 2020's Roth 401k and 403b contributions to Traditional? If the second round of stimulus passes with $1200 per kid, this could end up being a pretty big stimulus check that I would miss out on due to both partners in the household choosing Roth over traditional. I don't know but you should talk to your plan administrator. Also wait for the actual law to come out. Right now the senate version is mostly a defense appropriations bill.
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Jul 29, 2020 16:09
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Twerk from Home posted:Is there a way for me to retroactively change 2020's Roth 401k and 403b contributions to Traditional? If the second round of stimulus passes with $1200 per kid, this could end up being a pretty big stimulus check that I would miss out on due to both partners in the household choosing Roth over traditional. Aren't the income limitations based on your 2019 returns though? At least based on what I understood, the previous round was based on your 2019 returns if done at the point of distribution, or 2018 if you hadn't.
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Jul 29, 2020 18:59
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drive me nuts to school posted:Aren't the income limitations based on your 2019 returns though? At least based on what I understood, the previous round was based on your 2019 returns if done at the point of distribution, or 2018 if you hadn't. It's all based on the 2020 tax year, so if you don't get it now, you'll get it when you file 2020.
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Jul 29, 2020 19:12
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Am I right in saying that because annual management charges and interest rates are both multiplicative in nature you can simplify long-term growth projections by multiplying them together? e.g. €10000 is invested, with a 7% interest rate and a 1% AMC is charged: €10000 * 1.07 * 0.99, becomes €10000 * 1.0593 = €10593 e: assuming you're willing to hit the repeat button on the calculator a lot Entropy238 fucked around with this message at 19:59 on Jul 30, 2020 |
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Jul 30, 2020 19:44
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Yup, pretty much. Notice that it turns your 7% growth into 5.93%. That is a greater than 15% hit to your growth, which is huge.
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Jul 30, 2020 20:56
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drainpipe posted:Yup, pretty much. Notice that it turns your 7% growth into 5.93%. That is a greater than 15% hit to your growth, which is huge. Thanks for confirming - that is indeed quite poo poo.
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Jul 30, 2020 21:23
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My employer has told me that we are still getting our 401k true ups from last year, and it should be in August!
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Aug 1, 2020 06:06
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What's the goon view on how index equity portfolios should be weighted? I've got access to the following three options: - Standard Life Vanguard Global Stock Index (0.9% AMC). Tracks the MCSI World Index. : mid and large caps in all developed countries. - Standard Life Vanguard US 500 Stock Index (0.9% AMC). Tracks the S&P 500. Only large cap. - Standard Life Vanguard Emerging Market Stock Index (1.05% AMC). Tracks MCSI Emerging Markets Index. Mid and Large Cap. I was thinking I'd go 60/40 on the Global and US 500. Is there anything to be said for putting money into emerging markets? From what I gather investment in multinational developed world companies seems to capture a lot of emerging market growth. e: This Vanguard paper seems to indicate that there's not a whole lot in it but going global might ensure a smoother ride. Entropy238 fucked around with this message at 12:46 on Aug 1, 2020 |
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Aug 1, 2020 12:17
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Entropy238 posted:What's the goon view on how index equity portfolios should be weighted? I've got access to the following three options: The default is market weight, then people tend to fiddle until they're satisfied. Yours is overweight US large cap (which is also included in MSCI World), is that intentional and do you have a reason? Adding Emerging to World doubles the number of holdings, so that'll lower volatility. But World is already decently diversified. Entirely up to you, especially when the expense ratios are so similar. A better way to lower volatility would be to allocate some to fixed income. It probably doesn't matter much in the end. For simplicity I'd just dump everything into the Global Stock Index. One and done. (Also these index names are real dumb. Good job MSCI.)
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Aug 1, 2020 13:54
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those ERs are brutal
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Aug 1, 2020 14:23
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pokeyman posted:The default is market weight, then people tend to fiddle until they're satisfied. Yours is overweight US large cap (which is also included in MSCI World), is that intentional and do you have a reason? My thinking was along the lines of: in the US number always goes up. pokeyman posted:Adding Emerging to World doubles the number of holdings, so that'll lower volatility. But World is already decently diversified. Think I'll leave off the Emerging Markets. The higher AMC is going to bite into any potential gains pretty hard anyway. pokeyman posted:It probably doesn't matter much in the end. For simplicity I'd just dump everything into the Global Stock Index. One and done. I think this is what I'll do for simplicity sake. As you point out, the Global one is 66% US and I'll also end up getting more mid-cap exposure so  KYOON GRIFFEY JR posted:those ERs are brutal They are. You can see some of my previous posts in here outlining the investing situation where I'm from. It's not great and these are the best of a bad market. I don't want to become a landlord so don't have much choice in the matter. Entropy238 fucked around with this message at 14:47 on Aug 1, 2020 |
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Aug 1, 2020 14:45
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My long term has been in Edward D Jones. I didn't know what to do so just did whatever my father advised. So I have the Roth IRA, contibuted close to the max for the past 3 years. I heard that Edward D Jones is kind of bullshit though and that I need to find a better way. I have a 401k from an old company that I'm not with anymore, I didn't even know I had one until recently.
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Aug 3, 2020 15:00
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excellent bird guy posted:My long term has been in Edward D Jones. I didn't know what to do so just did whatever my father advised. So I have the Roth IRA, contibuted close to the max for the past 3 years. Go to Vanguard's website, sign up, put like $20 in there or whatever to get the ball rolling, then call and ask for help rolling over everything. 
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Aug 3, 2020 15:52
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My work is about to start offering a Roth 401k. Currently I max out my Roth ira each year and contribute 10% to my regular 401k. While saving for a house down-payment I don't want to up my percentage, is a Roth 401k worth using in addition to what I'm already investing in?
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Aug 3, 2020 20:17
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Spikes32 posted:My work is about to start offering a Roth 401k. Currently I max out my Roth ira each year and contribute 10% to my regular 401k. While saving for a house down-payment I don't want to up my percentage, is a Roth 401k worth using in addition to what I'm already investing in? If you want Roth you would actually have to lower your % contribution to achieve the same paycheck in the end and maintain your savings rate. I don't know what your time horizon is for having enough to buy a house, but I would just leave it alone unless you've always been wanting to do Roth treatment for your 401k.
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Aug 3, 2020 21:10
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Oh I understand that I would have to split the 10% up between 401k and Roth 401k. What I'm trying to figure out is if I should do this since I'm already contributing to a Roth ira.
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Aug 3, 2020 22:05
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Spikes32 posted:Oh I understand that I would have to split the 10% up between 401k and Roth 401k. What I'm trying to figure out is if I should do this since I'm already contributing to a Roth ira. Depends on what your retirement savings plan and expected income/assets are over the course of your career and in retirement. For example, if you're a high earner now and you think your taxes will be lower in retirement, traditional makes more sense. That's a really hard question to answer, though, and is more like reading tea leaves. There's also an argument for diversifying the tax treatment of your assets so that you have more flexibility in your drawdown strategy in retirement. Our federal tax rates at historic lows right now, and national debt at historic high, so it's reasonable to assume that taxes will go up in the future but who the hell knows. FWIW, I max out my 401k as a traditional, and max out a (backdoor) Roth IRA.
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Aug 3, 2020 22:16
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Biggest thing IMO is that you should be doing both (pretax and post tax) to hedge against changes in tax policy. Guinness' reasons are sound but it's very hard to predict future tax policies, therefore you should prepare for both the possibility that you will be paying more in taxes later, and also the possibility that you will be paying less. You are already doing this. I do not think there is a compelling reason for you to contribute to a Roth 401(k).
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Aug 3, 2020 23:11
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Thanks folks! My instinct was that I wouldn't need to bother but hadn't ever heard of a Roth 401k so wanted to check. I'm not making enough money to need a backdoor Roth ira, though I know they exist.
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Aug 4, 2020 00:40
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Guinness posted:FWIW, I max out my 401k as a traditional, and max out a (backdoor) Roth IRA. This is also what I do because as you said who the hell knows what the future holds.
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Aug 4, 2020 02:08
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Guinness posted:FWIW, I max out my 401k as a traditional, and max out a (backdoor) Roth IRA. I also do this. Even if we assume the government will need more revenue than the current tax system provides in the future, it's always possible they may turn to a VAT or some other method of raising additional revenue. (IIRC, most every other country has a national VAT in addition to income tax.)
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Aug 4, 2020 03:32
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Comedy post, gold is looking like it's gonna crack over $2000 an ounce sometime this week, up 5 years ago from just barely missing going below $1000/oz It's been going up at a steady rate since last year, but in the last two weeks it's really been on a tear Hadlock fucked around with this message at 12:13 on Aug 4, 2020 |
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Aug 4, 2020 12:11
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My Marcus savings account is down to 0.8% APY. Thanks COVID.
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Aug 4, 2020 22:13
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Hadlock posted:Comedy post, gold is looking like it's gonna crack over $2000 an ounce sometime this week, up 5 years ago from just barely missing going below $1000/oz The comedy post is that there's goldbugs still buying physical gold coins right now, even at these prices, and paying transaction costs to do it.
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Aug 4, 2020 22:20
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I have a 401k through my employer, managed by Empower (I'm 31, have had it for 8 years). Currently contributing 6%, with a 6% match. Based on my understanding, it's invested 100% in "LifePath Index 2055 Account A." I've never hosed with it or changed anything, ever. Should I be loving with it? Or just leaving it all alone? I'm dumb and don't know anything.
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Aug 4, 2020 22:33
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