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I think all the links on previous page missed out on posting the If You Can pdf by William Bernstein. I'm still working through it. I printed it out and gave it to my 16 year old niece. Gonna print a few more copies and push it on a few more family members like I'm a car warranty salesmen. https://www.etf.com/docs/IfYouCan.pdf
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Jan 30, 2021 05:01
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zaurg posted:I think all the links on previous page missed out on posting the If You Can pdf by William Bernstein. I'm still working through it. I printed it out and gave it to my 16 year old niece. Gonna print a few more copies and push it on a few more family members like I'm a car warranty salesmen. This is a legitimate question: how are you back and not banned?
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Jan 30, 2021 06:05
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I turned 36 a few days ago, and I currently make $65k to $70k a year (it's variable). I have no debt. My current investments look like this: Vanguard Roth IRA, maxed out every year starting in 2015 (though I forgot to contribute one year, oops). 100% in VASGX. Fidelity 401k from my employer, funded by 6% of my wages starting in 2011. Employer does a contribution that usually ends up being around 5% of my wages (it's not defined as a match, and I don't know for sure how it's determined). My 401k is broken down like this:
RERGX is the strongest/riskiest international stock fund available on my 401k, but it has a relatively high expense ratio of 0.46%. I'm thinking of switching RERGX to VFWSX, which is a Vanguard international stock fund with lesser performance/risk but with an expense ratio of only 0.08%. It's hard for me to wrap my head around how much of an impact expense ratio has on long term growth. Now here's the kicker: I last made major changes to these accounts in 2015, after finishing paying off my student loans. At that time I designed this portfolio so that it would result in about 15% of my income getting invested each year. But then my income went up, my spending habits didn't go up as fast, and long story short I now have $70k in cash burning a hole in my checking account. Combined with the retirement savings described above, this means I have nearly 3x annual income in savings. This is great, but $70k in cash is really not ideal. I've been justifying this cash accumulation through a combination of laziness and idle thoughts of "maybe I'll use it as a down payment on a condo," but realistically speaking I don't think I'll be buying property within the next few years. I want to move some of this cash (at least $20k, probably more) into a sensible retirement savings vehicle, but I'm not sure of the best way to do it. I've already maxed out my Roth IRA for 2020 and 2021. I'm nowhere close to maxing my 401k - I'd need more than a 25% wage contribution to do this - but I've already learned that I can't just dump excess cash into my 401k up to the limit for 2020. That leaves me with the following options:
Kefit fucked around with this message at 11:38 on Jan 30, 2021 |
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Jan 30, 2021 09:47
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I can address a couple points for you: ER is king. Over decades it's a huge drag. Making that swap from the 0.46% to the 0.08% is a no brainer. A very simplistic thing you can do to compare is this: (1-0.0046)^30 = 0.87 (1-0.0008)^30 = 0.98 Over 30 years that 0.46% will chip away 11% more of your savings compared to the low cost one. And IRA contributions are a shared pot. If you've already maxed out in a Roth you're maxed out period. There aren't separate contribution limits Roth vs trad. Jows fucked around with this message at 12:26 on Jan 30, 2021 |
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Jan 30, 2021 12:17
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Kefit posted:[*]Add a traditional IRA to my Vanguard account and max out my tax benefits for 2020 and 2021. Unfortunately, since I make more than $65k a year, and since I have a 401k, my limits here are fairly small. Going by the calculator here it looks like my tax deductible limit is $3600 for 2020, and probably $4200 for 2021. So maybe just dump $8k into a traditional IRA and call it a day for now?[/list] The IRA contribution limit is for traditional and Roth combined. You don’t get more space by adding another account.
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Jan 30, 2021 12:30
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I personally wouldn't go with VIGIX over VIIIX. The S&P already has a strong exposure to growth since it's the largest companies. Also, growth stocks have been better performing over the last 12 years, but historically growth stocks underperform the market since they are less risky (everyone agrees that they are good companies which is why they are so expensive). Also, the price of growth stocks are so high right now that it's hard to imagine they'll keep going up at the same rate in the next decade.
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Jan 30, 2021 13:49
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drainpipe posted:I personally wouldn't go with VIGIX over VIIIX. The S&P already has a strong exposure to growth since it's the largest companies. Also, growth stocks have been better performing over the last 12 years, but historically growth stocks underperform the market since they are less risky (everyone agrees that they are good companies which is why they are so expensive). Also, the price of growth stocks are so high right now that it's hard to imagine they'll keep going up at the same rate in the next decade. Got any thoughts on ESG? https://www.fool.com/investing/stock-market/types-of-stocks/esg-investing/
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Jan 30, 2021 18:23
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Tezzeract posted:Got any thoughts on ESG? https://www.fool.com/investing/stock-market/types-of-stocks/esg-investing/ ESG is an interesting topic. It sounds good, right? Who couldn't get behind responsible governance and things to better the world? But, in practice, ESG funds are basically tilted to be more like tech/growth heavy funds and include companies that employ many fewer people than the companies that get excluded from ESG indexes: https://twitter.com/tracyalloway/status/1263424675394187264?s=20 https://twitter.com/tracyalloway/status/1300248097088352257?s=20 https://twitter.com/VincentDeluard/status/1263492856074825728?s=20 edit: as it happens, tech/growth heavy funds have performed quite well the past decade!
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Jan 30, 2021 19:00
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Tezzeract posted:Got any thoughts on ESG? https://www.fool.com/investing/stock-market/types-of-stocks/esg-investing/ I definitely don't feel qualified to give a good take as I get my information only through listening to podcasts (Rational Reminder Podcast is pretty good), so take what I say with a massive grain of salt. If you only care about maximizing returns, then investing in ESG is probably not the way to do it in the long term. For example, people think that investing in green firms will produce good returns because they should do better in the future. However, if this is a generally agreed upon fact, then green firms are less risky and so this will be baked into a higher price. Thus, you would expect to see lower returns. Of course, it could that people are still waking up to this fact, which is why ESG could outperform in the short term as the higher prices are being baked in. But if you personally derive a benefit from investing in ESG because of your values, and you are willing to accept a lower return because of this emotional dividend, then you should do it. Listen to this if you want to hear people talk about this is more detail: https://www.youtube.com/watch?v=e1niAJWEtdY&t=1367s
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Jan 30, 2021 19:10
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Or ESG funds are just a gimmick like organic for USDA foods. Vanguard's ESG ETF has these 10 largest holdings for their portfolio: Month-end 10 largest holdings (27.70% of total net assets) as of 12/31/2020 1 Apple Inc. 2 Microsoft Corp. 3 Amazon.com Inc. 4 Alphabet Inc. 5 Facebook Inc. 6 Tesla Inc. 7 JPMorgan Chase & Co. 8 Visa Inc. 9 Procter & Gamble Co. 10 UnitedHealth Group Inc. Ah yes, bastions of social responsibility.
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Jan 30, 2021 19:50
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Jows posted:I can address a couple points for you: Thanks, that simple math helps clear up a lot of stuff about expense ratios in my head. I should know better, but it really is so easy to underestimate the power of decades of compounding when it comes to small numbers like this. Jows posted:And IRA contributions are a shared pot. If you've already maxed out in a Roth you're maxed out period. There aren't separate contribution limits Roth vs trad. I guess I'm kind of screwed then when it comes to simple tax advantaged long term investment vehicles for the cash I have sitting my bank account? Would it make sense to open a trad IRA and just not enjoy the tax benefits, so that I can at least get some growth out of this cash? I'll start maxing my 401k, of course, and keep that up as long as feasible.
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Jan 30, 2021 21:42
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Noah posted:Or ESG funds are just a gimmick like organic for USDA foods. That fund is essentially an index fund that excludes some companies, so it’s generally going to be the same top ten as any other US stock index fund.
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Jan 30, 2021 21:57
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Kefit posted:I guess I'm kind of screwed then when it comes to simple tax advantaged long term investment vehicles for the cash I have sitting my bank account? Would it make sense to open a trad IRA and just not enjoy the tax benefits, so that I can at least get some growth out of this cash? You could just put it in a taxable brokerage account. (I would.) I'm not sure what you mean by "open a trad IRA and just not enjoy the tax benefits" - if you contribute to it beyond your annual cap, even with after-tax money, the overcontribution amount will be taxed at 6% every year until you take it back out. It's not a good idea.
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Jan 30, 2021 22:44
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smackfu posted:That fund is essentially an index fund that excludes some companies, so it’s generally going to be the same top ten as any other US stock index fund. It also excludes some weird categories as part of that. I was looking last night because I'm just getting started and I don't want my investments to support oil and gas for ethical and financial reasons, but there are a lot of things in the exclusion list that I don't care about at all, or actively don't want excluded, like nuclear power or "producing adult entertainment". It seems like it's just a no-nuance laundry list of anything any kind of person could object to. Like, I care about climate change and the environment but I also think sex work is real work and those people should be protected, not ostracized. So in addition to the above points on their practical effects, these funds don't really serve my principles to begin with and they may not serve yours either. Guess I just have to shrug and semi-guiltily invest in the index like everyone else? 
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Jan 30, 2021 23:13
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raminasi posted:You could just put it in a taxable brokerage account. (I would.) I'm not sure what you mean by "open a trad IRA and just not enjoy the tax benefits" - if you contribute to it beyond your annual cap, even with after-tax money, the overcontribution amount will be taxed at 6% every year until you take it back out. It's not a good idea. Yikes, thanks for the info. I'll read up on IRAs more, but it's clear to me now that anything with the term "IRA" is off the table now that my Roth is maxed. After doing some more research, I think what I'm looking for is a "general savings" account with Vanguard. I think I can put my excess cash into index funds in a general savings account, and the only catch (relative to the IRAs I'm used to) is that I'll have to pay annual taxes on the reinvested dividends earned by the index funds in this account. On the other hand, this account will be relatively liquid, since I can withdraw from it if needed without incurring penalties (obviously capital gains tax will apply). Does that sound right? Kefit fucked around with this message at 00:04 on Jan 31, 2021 |
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Jan 30, 2021 23:57
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Unsinkabear posted:It also excludes some weird categories as part of that. I was looking last night because I'm just getting started and I don't want my investments to support oil and gas for ethical and financial reasons, but there are a lot of things in the exclusion list that I don't care about at all, or actively don't want excluded, like nuclear power or "producing adult entertainment". It seems like it's just a no-nuance laundry list of anything any kind of person could object to. Like, I care about climate change and the environment but I also think sex work is real work and those people should be protected, not ostracized. So in addition to the above points on their practical effects, these funds don't really serve my principles to begin with and they may not serve yours either. I have poo poo in a similar one, and sure, it doesn't have Exxon, but it has Blackrock, so everything just gets backdoored in anyway.
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Jan 31, 2021 00:57
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Kefit posted:Yikes, thanks for the info. I'll read up on IRAs more, but it's clear to me now that anything with the term "IRA" is off the table now that my Roth is maxed.
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Jan 31, 2021 01:06
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Kefit posted:Yikes, thanks for the info. I'll read up on IRAs more, but it's clear to me now that anything with the term "IRA" is off the table now that my Roth is maxed. Yeah, pretty much. You might want to read up on tax-efficient investment allocation.
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Jan 31, 2021 01:07
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I'm doing my IRA allocations for 2020 and am curious about the reasoning behind the international component of a 3-fund portfolio. I ran the Portfolio Analyzer comparing a 2-fund portfolio with US equity + US bonds vs the traditional 3-fund portfolio, and the former comes out well ahead. What is the thinking here? 
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Jan 31, 2021 02:00
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US has had a good run. At some point it won't. If we do a Japan and you're all domestic you're totally hosed. The fact that it's done better recently is actually a decent reason not to invest entirely in US- it's over valued due to the recent high growth. I think the Vanguard white paper predicted the next 10 years of intl coming out ahead by a few percentage points.
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Jan 31, 2021 03:33
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I hope we take some cues from Japan and start retreating from all this loving debt-based poo poo everywhere.
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Jan 31, 2021 03:38
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jokes posted:I hope we take some cues from Japan and start retreating from all this loving debt-based poo poo everywhere. so doubtful.
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Jan 31, 2021 04:04
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runawayturtles posted:I have an old IRA with around $50k in FSKAX that thus far has prevented me from making backdoor Roth contributions. The available investment options in my 401k are not all that great, but I assume it would still be recommended to roll it over just to enable those backdoor contributions every year? Posted this a few pages back, any thoughts?
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Jan 31, 2021 05:11
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How "not great" are you taking about? What's the ER on your S&P 500 fund? You could also do something like convert it to Roth now or spread it out over something like 5 years. The record keeping and tax forms will be a bit complicated while you do partial conversions of the existing + the new backdoor contributions, but may be worth it in the long run. Can't go wrong with Vanguard, IMO.
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Jan 31, 2021 05:20
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spwrozek posted:so doubtful. It’d be nice though. 
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Jan 31, 2021 06:54
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Well, I'm trying to actually invest and not just save this year Wish me luck as I read through this thread and try to understand my employer's pension system
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Jan 31, 2021 09:17
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moana posted:US has had a good run. At some point it won't. If we do a Japan and you're all domestic you're totally hosed. The fact that it's done better recently is actually a decent reason not to invest entirely in US- it's over valued due to the recent high growth. I think the Vanguard white paper predicted the next 10 years of intl coming out ahead by a few percentage points. Counterpoint: The market can remain irrational longer than you can remain alive. If a U.S.-based investor wants to go all-U.S. in their portfolio, I'd say that's not an unreasonable thing to do and will probably result in them having more money in the long run than someone including international equities. All economic predictions are just tea-leaf reading and should be treated as such. I do hold international, about 20%, but I do it as a hedge, and I fully believe that the most likely outcome is that it will result in lower returns over time.
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Jan 31, 2021 17:01
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How do ya'll take an accurate look at your overall retirement/long-term savings portfolio? Like what all should be included in it? I have 401k+RothIRA+Taxable brokerage account+HYSA included. But I don't have emergency fund, checking account balance, or main home included.
zaurg fucked around with this message at 05:46 on Feb 2, 2021 |
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Jan 31, 2021 17:08
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SlapActionJackson posted:How "not great" are you taking about? What's the ER on your S&P 500 fund? It is .52.
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Jan 31, 2021 17:17
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runawayturtles posted:It is .52. Thats fine. Don't let that spread scare you away from the tax advantages elsewhere measured in whole % points.
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Jan 31, 2021 18:02
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 I think this is the 21st century equivalent of getting stock advice from a shoeshine boy.
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Jan 31, 2021 18:45
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acidx posted:
I'm glad that If You Can and other sources recommend some history on market manias and crashes. It really does help to know this has happened before and will probably happen again. Even the term "meme stocks" feels oddly dismissive and shortsighted, as if this was the first time a stock got hyped up.
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Jan 31, 2021 19:54
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pokeyman posted:Even the term "meme stocks" feels oddly dismissive and shortsighted, as if this was the first time a stock got hyped up. I get where you're coming from here, but the shoe shine boys were the meme-equivalent leading up to the great depression, etc so I think it's easy historical precedent for anyone who has their eyes open.
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Jan 31, 2021 20:06
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Motronic posted:I get where you're coming from here, but the shoe shine boys were the meme-equivalent leading up to the great depression, etc so I think it's easy historical precedent for anyone who has their eyes open. Yeah it's dismissive of shoe-shiners too, even if it's the right connection to make.
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Jan 31, 2021 20:35
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Thanks for the insight on ESG. A 'cleantech' sector play sounds like it might be more promising. Has anyone done research on it? I'm trying to go through 'Zero' newsletter below, along with some random articles from Marketwatch. https://www.marketwatch.com/story/c...end-11611928621 https://zeronewsletter.substack.com/
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Jan 31, 2021 21:40
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Tezzeract posted:Thanks for the insight on ESG. A 'cleantech' sector play sounds like it might be more promising. Has anyone done research on it? pmchem posted some good thoughts in the stock picking thread, quoting part of one below. pmchem posted:I had a look into clean energy ETFs this morning, as they had amazing returns in 2020 and particularly skyrocketed since the dems won the GA senate seats. Like many people, I would be happy if we had a clean energy future and think that this sector of the economy will strongly grow in the coming decade. But is clean energy a good investment right now?
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Jan 31, 2021 21:52
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yeah I post a lot about ETFs in the other thread. I'll make one post here just to see what you all think and see if you all have fun reading it. Yes I know, Target Date Funds, 3-Fund Portfolio, VT, VTSAX, VOO, and so on. I get it. Nevertheless, enjoy --- I think that smaller ETFs fly under the radar all too often. Here are 10 ETFs with less than a billion dollars under management, but that I think are interesting and possibly useful for a variety of reasons: 1. THNQ: ROBO Global Artificial Intelligence ETF, https://roboglobaletfs.com/thnq . The process-based management of THNQ's holdings targets heavy exposure to companies developing or leading in execution with artificial intelligence and machine learning. My only issue with it is that for some reason they don't include Facebook in its holdings (and FB is famous with PyTorch and related work). Competitors in this thematic space include AIQ and IRBO. A newer ETF, THNQ has performed very, very well since inception, easily beating many other growth ETFs. Certainly a theme to watch for the coming decade. 2. SFY: SoFi Select 500 ETF, https://www.sofi.com/invest/etfs/sfy/ . This ETF is... highly intriguing. It has a 0.0% expense ratio, yes, free, waived until at least end of June 2021 (at which point it might go up to 0.19%). They're waiving the fee to draw in AUM. Its performance over the past trading year is +20%, so it beats the S&P 500 (easily). What they do is take the top 500 US stocks by market cap, then weight them according to a set of equations based on net income and sales growth as per the methodology. Not market-cap weighted, which is very unusual and thus nice to have as a tool in your toolkit. The ETF ends up with more weighted overlap with the S&P 500 than other large-cap growth ETFs such as VUG, IWZ, JKE, etc., because the "value" companies are still in there -- they're just not weighted as highly as they are in SPY or VOO. The usual suspects are still in the top 10: AAPL, AMZN, MSFT, TSLA, GOOGL, FB. SQ comes in at #15, which I think is very nice, and SQ is missing from an S&P 500 ETF. Methodology here: https://www.solactive.com/wp-content/uploads/2019/03/Solactive-SoFi-US-500-Growth-Index-Guideline.pdf 3. DSTL: Distillate U.S. Fundamental Stability & Value ETF, https://distillatefunds.com/dstl . Its methodology is in the prospectus, https://distillatefunds.com/dstl/prospectus . Essentially, they try to combine "quality" and "value" factor investing. The fund's weighted overlap with SPY is only 20% according to etfrc.com. So it's not simply the S&P. It's also not the first ETF to use free cash flow as a factor (see also: COWZ, TTAC, neither of which I really like). Its ER is only 0.39%, which is reasonably low for small-ish specialty ETFs. But how does it perform? Well, since inception over 2 years ago it has kept pace with or outperformed the S&P 500 and iShares' US quality and value factor ETFs every step of the way. Gotta admit, I'm kinda impressed. Their top holdings right now are: JNJ, UNH, INTC, WMT, GOOGL, HD, PG, CSCO, AMGN, and AVGO. Surprisingly, compared to SPY, they're most underweight in financials. I would've thought they scored well on those cash flow metrics but maybe the banks score poorly on their debt metric and they don't compensate for banks having a different business model than, say, JNJ. Really neat non-market-cap weighted ETF! 4. SDG: iShares MSCI Global Impact ETF, https://www.ishares.com/us/products/283378/ishares-msci-global-impact-etf-fund . This fund tracks an index that seeks to "Obtain exposure to global stocks aiming to advance themes related to the United Nation’s Sustainable Development Goals, such as education or climate change." ARK Investing may also be launching an ETF with this theme in the future (see: https://www.youtube.com/watch?v=kfhgbZBWgBE&t=30m53s ). Methodology here: https://www.msci.com/msci-acwi-sustainable-impact-index . It's nice to have a fund you can feel good about investing in. It has also easily outperformed the S&P 500 over the past year! 5. FRDM: Freedom 100 Emerging Markets ETF, https://freedometfs.com/frdm/ . It's a very new emerging markets ETF that is not market-cap weighted and filters countries based on human and economic freedom scores. Top holdings include TSMC, Samsung, and CD Projekt Red. Very unusual and a neat tool to have in your emerging markets investing toolbox! 6. EMXC: iShares MSCI Emerging Markets ex China ETF, https://www.ishares.com/us/products/288504/ishares-msci-emerging-markets-ex-china-etf-fund . Also an ex-China emerging markets fund, but otherwise it follows a broad MSCI mark-cap weighted index. Very top-heavy in Korea, Taiwan, India, and Brazil. It's another tool to stay in emerging markets but de-risk China exposure if you decide that's prudent. 7. IMTM: iShares MSCI Intl Momentum Factor ETF, https://www.ishares.com/us/products/271538/ishares-msci-international-developed-momentum-factor-etf . One of th few ways to get exposure to trending stocks in developed non-US markets. Really heavy on tech and luxury. If you're bored of holding EFA or VEA and want greater returns from non-US developed markets, check this out, it may be something you like. 8. SWAN: AMPLIFY BLACKSWAN GROWTH & TREASURY CORE ETF, https://amplifyetfs.com/swan.html . Treasuries plus SPY LEAP options. Its performance in 2020 was great -- saved you during the crash, and gets you most of the S&P 500 upside during "normal" times. Kind of a barbell strategy; an interesting conservative ETF. 9. NTSX: WisdomTree 90/60 U.S. Balanced Fund, https://www.wisdomtree.com/etfs/asset-allocation/ntsx . Another fund that deals with both US large caps and treasuries. But in this case, it uses treasury futures as leveraged exposure to get 90% equities, 60% treasuries total exposure. Quite a clever package and designed for long-term holding with reduced volatility, while hopefully outperforming a 60/40 balanced fund. 10. IGBH: iShares Interest Rate Hedged Long-Term Corporate Bond ETF, https://www.ishares.com/us/products/275397/ishares-interest-rate-hedged-10-year-credit-bond-etf . This is an interest-rate hedged long-term corporate bond ETF. You see, when treasury yields rise, as is expected the next year or two, corporate bond yields also rise. But that means the price of the bonds goes down -- bad for bond ETF values. Hedging the rates allows you to still collect distributions and have lower volatility than equities, but avoid the interest-rate risk. A whole lot of money has flowed into this and its sister ETF, LQDH, in the past 6 months because of historically low treasury yields. ok, here's a bonus #11: 11. PPA: Invesco Aerospace & Defense ETF, https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&ticker=PPA . This is a broad defense industry ETF, and may have some deep value right now as the industry has lagged for the past year. But the world is still a dangerous place and if war breaks out these companies will benefit; a good ETF to have watchlisted. US and allied defense spending keeps chugging along. Also, many of these companies may be in Cathie Wood's ARKX. ITA is an alternative but lacks $HON. Disclaimer: this is not financial advice and I currently have no position in any of those ETFs at time of posting, but that may change at any point in the future.
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Jan 31, 2021 23:17
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runawayturtles posted:It is .52. Yeah, that's kinda lousy. But unless you expect to be in a higher tax bracket at retirement than now, I think the 401k roll-in is still the way to go.
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Jan 31, 2021 23:47
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pmchem posted:
Thanks for posting about this one. This one is what I'm looking for - going to start with it tomorrow!
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Feb 1, 2021 04:24
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moana posted:US has had a good run. At some point it won't. If we do a Japan and you're all domestic you're totally hosed. The fact that it's done better recently is actually a decent reason not to invest entirely in US- it's over valued due to the recent high growth. I think the Vanguard white paper predicted the next 10 years of intl coming out ahead by a few percentage points. Question about this: 1: I think Bogle himself said that he felt getting American companies provided enough intl exposure since the whole economy is global. I assume this is not something others agree with? 2: Is it sufficient to just get into a World index product, or do you need to get into specifically ex-US products? For instance, my Target Date retirement fund (VFIFX) has "Vanguard Total Stock Market Index Fund Investor Shares" as its biggest component and "Vanguard Total International Stock Index Fund Investor Shares" as its second biggest. (Sorry, can't find the ticker for those shares.) 3: Not to sound lovely, as I also think stonks are overpriced right now, but in what way is an attitude like this different from market timing? We're timing over ten years instead of 2 days. Is this better thought of as simply a fundamental, and this is just "buying right" to not buy only US stuff?
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Feb 1, 2021 11:35
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