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Paul MaudDib posted:what is the math on when it's better to do FIFO or LIFO on an individual (non-retirement) investment account? Seems like for a long-term investment account FIFO would be better to hit capital gains, and if you're doing short-term trading then LIFO to minimize taxable gains as you trade? Ideally you want to specify which exact shares/lots you want to sell rather than use FIFO or LIFO. That way, you have more control over what shares you buy/sell, which allows you to not only control capital gains, but gives you more flexibility to tax loss harvest. Who's your brokerage?
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Mar 1, 2021 22:10
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There are several (too many!) slice-and-dice methods, and they all show great promise based on past results. Which one will show the greatest return in the future? That sounds like revolving sectors, whereas the three-fund portfolio's advantage is supposed to be in its ease and simplicity. At the same time I say that, I hypocritically have a small slice of my roth in domestic and international REIT indexes. Yes it's a weighting gamble, but hey, Burton Malkiel made an impression on me and I like the low correlation to the overall market, even if they can be volatile. There are compelling cases for equal weightings of all value cap sizes, but I'm also partial to Bogle's reasoning that market indexes weight by size, so if a smaller company does well, it will climb the weighting ladder and be reflected in the index accordingly (I use total market over S&P 500 for this reason, even if performance is nearly identical).
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Mar 1, 2021 22:14
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You guys have any insight on marijuana ETFs?
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Mar 1, 2021 22:23
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obi_ant posted:You guys have any insight on marijuana ETFs? Always buy them two weeks before April 20th.
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Mar 1, 2021 22:28
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Duckman2008 posted:Always buy them two weeks before April 20th. That’s the plan, 420.69 shares.
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Mar 1, 2021 22:29
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I see a lot of speculation that the market is due for a crash around April. How much should I pay attention to these and get out of positions? (Most of my position is high-dividend REITs and a few Vanguard ETFs.)
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Mar 1, 2021 22:53
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QuantumNinja posted:I see a lot of speculation that the market is due for a crash around April. How much should I pay attention to these and get out of positions? (Most of my position is high-dividend REITs and a few Vanguard ETFs.) Don't time the market.
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Mar 1, 2021 22:53
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QuantumNinja posted:I see a lot of speculation that the market is due for a crash around April. How much should I pay attention to these and get out of positions? (Most of my position is high-dividend REITs and a few Vanguard ETFs.) Based on what convincing data and analysis? And, if true, what makes you think you'll know when the bottom is to buy back in? Folks are always predicting doom and gloom. Economists have predicted 100 out of the last 2 recessions. You can't time the market. Will the market eventually go down? Almost certainly. But you won't know when. Maybe next month. Maybe next year. Whole lot of people got burned by the March/April crash and recovery and missed out on an epic bull run.
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Mar 1, 2021 22:58
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[taking off my BogleHat for a second here] REITs are an interesting asset to have anything more than ~5% of your portfolio in. Keep in mind that REITs are usually only about 10-15% residential, while retail, office and industrial are about 35% and hospital/medical is 10-20%. You are counting Businesses paying more in Rent; not so much a wager on housing. While I think housing prices will continue to climb for the next few years, I have absolutely no confidence in malls, hotels, and office parks doing much of anything. Plus, interest rates could start to tick up at some point which will eviscerate REITs As far as "will things crash in April" I have no idea, but trying to dodge a crash has a negative expected value compared to just enduring it.
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Mar 1, 2021 22:59
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I’ve been messing around with the Wells Fargo retirement planning tool, and by default it has me dying at 85. So far I’m ok if they’re right but if I somehow end up going to 95 I’m kinda hosed and running out of money in my 80s, which seems like a bad idea. How do you decide how optimistic to be?
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Mar 1, 2021 23:00
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How old have your relatives been when they passed? Also how old have your significant other’s family members been when they passed? That can give you a baseline to base things on, adding or subtracting based on lifestyle factors. Sorry if that isn’t super helpful, my current planning is just “more”, which will probably be revised when I’m not just a single dude. crazypeltast52 fucked around with this message at 23:09 on Mar 1, 2021 |
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Mar 1, 2021 23:07
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Guinness posted:Folks are always predicting doom and gloom. Economists have predicted 100 out of the last 2 recessions. This was my general feeling. I just wanted someone else to tell me I'm not insane. Thanks! GoGoGadgetChris posted:REITs are an interesting asset to have anything more than ~5% of your portfolio in. Keep in mind that REITs are usually only about 10-15% residential, while retail, office and industrial are about 35% and hospital/medical is 10-20%. You are counting Businesses paying more in Rent; not so much a wager on housing. My REITs are a relatively small fractions of my portfolio (7%), and are 100% dividend plays. My goal isn't to watch them go up, it's to grab dividends and not lose money. If their value doesn't change, I get what I want; if they start to fall considerably, I will happily sell off my position. They'd have to fall 10% basically overnight and never recover for me to take a loss at this point (which isn't unheard of but... seems unlikely). Thanks for the warning, though. I will keep it in mind. QuantumNinja fucked around with this message at 23:41 on Mar 1, 2021 |
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Mar 1, 2021 23:34
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https://stockcharts.com/freecharts/perf.php?VOO,VTI,VNQ&n=2637&O=011000 That’s total return. REITs make little sense unless you have a particularly strong opinion on their outperformance for whatever reason. They’re also already part of larger index funds. Berkshire Hathaway does not give a dividend so unless you have some specific need for them, which most people do not, you shouldn’t care about dividends either.
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Mar 1, 2021 23:47
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I thought that many REITs have a reputation for being poorly managed. Also, you can end up invested in some weird things like parking lots, storage centers, data centers, etc. because the REIT umbrella is wide. **Adjusts boglehead hat: You are already exposed to REITs through VTI so you have to make a case for overweighting REITs beyond VTI’s 3.4%.
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Mar 2, 2021 00:26
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so i'm thinking of a total portfolio loosely based on the coward's portfolio roughly like the following Large Cap Blend: VTSAX 22.5% International Equity: VTIAX 30% Value Index: VVIAX: 15% Small Cap Blend: VSMAX: 7.5% Small Cap Value: VSIAX: 10.5% REIT Index: VGSLX: 4.5% Short Term Investment Bonds: VFSTX 10% the aim of this over a three fund portfolio is to get more exposure to small cap and value stocks, with a small additional exposure to reits to act as extra diversification. i'm following the general equity: bond ratio that the relevant vanguard target date retirement fund. i increased exposure to international stocks to diversify a bit more, the original allocation seemed overly heavy on domestic stocks. does this seem reasonable as a passive setup? i'd rebalance every 24 months, or if an asset class was more than 10% off of the target, and set up a glide path which keeps the equities in the same ratio to each other, but increases the weight of bond holdings over the next 35 years
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Mar 2, 2021 00:29
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crazypeltast52 posted:How old have your relatives been when they passed? Also how old have your significant other’s family members been when they passed? That can give you a baseline to base things on, adding or subtracting based on lifestyle factors. There’s too much variety in ages to make a good guess, plus lifespans seem to be getting longer so do you account for that? I’d hate to have a decent retirement then end up dying in a miserable hospital for the destitute. I’ve worked in a few of them here in nyc and I would really like to avoid a fate like that.
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Mar 2, 2021 00:33
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Ugh you guys are making me reconsider my 9% Vanguard Total REIT allocation.
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Mar 2, 2021 00:34
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GhostofJohnMuir posted:so i'm thinking of a total portfolio loosely based on the coward's portfolio roughly like the following Again, adding in REITs for diversification purposes is dumb. Look at the portfolio composition of each of those funds and you’ll see that most include the real estate sector. If you want to overweight REITs then go for it. Some do it some don’t. Google “bogleheads reits” if you want to read lengthy discussions on the topic. Otherwise I think your AA is probably too complex and I think overweighting is the same as speculation but I think you’ll probably be fine with that portfolio. Whether you’ll beat the standard 3-fund portfolio or a vanguard target date fund depends on the sectors you overweight.
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Mar 2, 2021 00:44
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Snowy posted:There’s too much variety in ages to make a good guess, plus lifespans seem to be getting longer so do you account for that? What you actually do is aim for a reasonable number like say age 85, but then you run monte carlo simulations of money performance for various ages before and after that, which tells you whether you can probably coast longer or not. What you should be able to do while you play with numbers is get some kind of percentage likelihood that you'll run out of money on x, y, or z dates. But then this just tells the story now. In five years or something, do it again, and so on. As you approach retirement, do it annually. Plan to adjust your rate of savings (during work) or rate of drawdown (during retirement) as needed to stay comfy with the number. A few things more to keep in mind: there's a big risk during the very first couple of years of retirement, due to something called sequence-of-returns risk. Basically, several terrible market years during the moment when you have the most money saved (all your earning years over, few of your drawdawn years happened) has the largest effect on your portfolio compared to any other sequence of years in your life. E.g. say you retire with 1M, and there's a three-year drawdown of the market right when you start taking out money, resulting in three years later you only have $800k. That's just chopped 20% out of your retirement, and you may not live long enough to make much of it back, since you're also spending it. Secondarily; health care costs tend to rise dramatically in your final years, so unless we somehow get universal free health care in the US before you're in your final years, you should not assume that your drawdown rate will be flat and even from the day you retire till the day you die. All of this stuff is kind of super important to think about when you're in your 50s and 60s, but if you're still in your 40s or younger it's probably a waste of your time. A 1% higher or lower average rate of return over the next 20 or 30 years will have such an outsized effect that you should be aiming to "overshoot" your retirement needs by at least a couple percent anyway. Or, if you're saving as much as you possibly can, then you have no more agency and shouldn't worry about it regardless. Leperflesh fucked around with this message at 01:29 on Mar 2, 2021 |
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Mar 2, 2021 01:20
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Leperflesh posted:All of this stuff is kind of super important to think about when you're in your 50s and 60s, but if you're still in your 40s or younger it's probably a waste of your time. I just hit 50 so I really appreciate the informative post! I’ve blindly put money into a 401k for a long time but was otherwise fairly financially irresponsible. I’ve been making up for it in the last few years so I should be fine but I still have a lot to learn. I’m just lucky I worked with a guy who told me to always put 15% into the 401k. I mostly listened to him through a lot of freelance jobs and that might have made retirement a possibility if get serious about goals.
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Mar 2, 2021 01:29
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Yeah 15% is a decent rule of thumb, but it also assumes you've been doing it since your mid 20s or something. There's a lot of factors. Some people like to totally disregard social security (which is silly), some folks are likely to have an inheritance (boomers are dying with a lot of money over the next 10-20 years), some folks intend to move to a lower cost of living retirement, some have houses that represent an outsized proportion net worth, etc. etc. Also I edited my post to link to probably a more user-friendly monte carlo simulator, https://www.ifa.com/calculators/retirement-income/ but really google for them and try several because each one does some different things and it's good to not get tunnel view on what just one of them says.
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Mar 2, 2021 01:33
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Leperflesh posted:Yeah 15% is a decent rule of thumb, but it also assumes you've been doing it since your mid 20s or something. I started in my late 20s, so not too bad, although I had some slow years. I think I can up my contributions now though, I’ve cut my expenses lately so I’m considering going up to 20-25% unless I learn of something smarter. Thanks again, that’s exactly the kind of info I was looking for, glad to have a clearer idea of what to research.
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Mar 2, 2021 01:38
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hobbez posted:Considering target date retirement funds and I’m just wondering if it’s better to “overshoot” or “undershoot” on my target date. I’m a lucky individual and could foresee a scenario where I can possibly retire before 60, which might be appealing, but I can also envision a scenario where I choose to keep working well into my 60s. The question being, given an indeterminate desired age of retirement at age 30, do I target my portfolio to mature by 60, 65, or like 70? It basically depends on your risk tolerance. What happens is that as you approach the retirement date, the fund progressively rebalances to hold more bonds and debt instruments versus equities. What does that mean? If your appetite for risk is very low, an earlier date will include more bonds sooner and reduce risk. If your appetite for risk is relatively high, pushing a later date will keep you in a higher percentage of equities for longer, potentially giving you higher returns. There's two ways to look at working later by choice: 1) You should push equities because hey it's house money, you'll still be making income until later in life, so you need to cover fewer retirement years with your savings. Tolerate a bit more risk in exchange for likely high returns. 2) You should push bonds because you don't need the money, you'll still be making income until later in life, so you need to cover fewer retirement years with your savings. You don't need additional money in retirement, so don't take on additional risk. I personally go for #1 because hey, if we're in a situation where equities are tanking for decades, poo poo has gotten pretty hosed. I don't think we can tolerate a Japan style lost decade or two without poo poo going sideways, so my bet is that if my equities crater, the entire structure of society will crater and I won't at least be worse off than anyone. There is also a lot of FIRE analysis about all-equities portfolios that is somewhat interesting, but the above is fairly conventional wisdom and will serve you well enough if you don't want to get deep in to the literature.
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Mar 2, 2021 03:08
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Based on feedback from this thread I set up my 401k allocation as 10% bonds/90% stocks. The stocks were split into 80% SP500, 5% Mid cap, and 15% small cap. Unfortunately, I longer have small cap stocks available in my investment options through my work 401k. I now have international options, which weren't available before, but no small cap. How do I go about balancing my 401k allocation without this option?
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Mar 2, 2021 03:14
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Feeding off of what KYOON just said, I go for #2 because I see my risk tolerance like this: A) I am extremely averse to having to retire with nowhere near enough money B) I am mildly averse to having less 'fun money' in retirement So for me, the cost of having a more conservative allocation is a cap on the upside of my rate of return, but the advantage is a lower likelihood that I have to cope with a serious loss in the next 20 years. To put it another way, "risk" for me isn't a straight slope. I can hit my retirement goals with, say, 5% or 6% above inflation return rate, I don't need to chase higher returns, and that means I don't have to accept as much risk of falling significantly short. But, as a trade-off, I understand that holding a large portion in bonds in my mid-40s means I'm possibly giving up a higher average return rate that might have let me retire with a couple hundred thousand more. I think about risk a lot. I believe most people don't really understand risk well.
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Mar 2, 2021 03:20
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KYOON GRIFFEY JR posted:(words) Leperflesh posted:Feeding off of what KYOON just said, I go for #2 because I see my risk tolerance like this: viewing bonds as low risk is extraordinarily "risky" to generalize in the current environment. it's quite possible -- maybe even probable -- that, buying bonds right now, you will have negative total return over the remainder of 2021. here's a chart of the total return of vanguard's total bond index and a 20+year bond ETF over the past 6 trading months: https://stockcharts.com/freecharts/perf.php?BND,TLT&n=126&O=011000 hint: they're both negative. hell, any T-bond other than a 30-year right now has negative real yield: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldYear&year=2021 I realize bonds are generally viewed as more conservative than stocks and that this discussion is for a long-term horizon, but, just going with conventional wisdom of "bonds aren't risky" is REALLY not a great idea sometimes, like say in an inflationary environment after long bond yields plummeted to near zero. there are portfolio asset possibilities other than "bonds" and "stocks", and many different flavors of bond, stock, and "other" funds.
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Mar 2, 2021 04:29
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Of course there's quite a bit more complexity, but if the OP doesn't understand how date variability in a target date fund works, I don't think that launching in to a full explanation of inverted yield curves is necessarily the correct response, do you? This is in a retirement fund and so therefore I also don't think that a 6 month time horizon is all that meaningful to the OP either.
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Mar 2, 2021 04:38
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The only people who I’ve ever seen recommend investing in REITs over broad market investment have been people who either rework in real estate or think long-term investment should be way more complex for some reason. It’s really, really hard to invest in something that isn’t already reflected by a VTI-like, except for like buying a treasury bond directly. I challenged my friend to come up with some economic activity that isn’t at least partially covered by the stock market and neither of us had a good one. Maybe cocaine? Strippers? But then again, you can invest in banks.
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Mar 2, 2021 06:41
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The major index funds also include REIT exposure. VTI is about 3.5% REITs. VXUS is about 4%. Keep that in mind to not over-expose yourself.
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Mar 2, 2021 06:55
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jokes posted:Maybe cocaine? Strippers? But then again, you can invest in banks. The ETFs for those sectors should have funny names. Like COKE or BLOW or something.
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Mar 2, 2021 13:42
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jokes posted:The only people who I’ve ever seen recommend investing in REITs over broad market investment have been people who either rework in real estate or think long-term investment should be way more complex for some reason. You’re close, but you need to diversify your drug portfolio. So cocaine yes, but you want a broad mix of uppers, downers and hallucinogens to make sure you are covered for when sales of one goes up and another goes down.
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Mar 2, 2021 13:48
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laxbro posted:Again, adding in REITs for diversification purposes is dumb. Look at the portfolio composition of each of those funds and you’ll see that most include the real estate sector. I’m skeptical of the REITs too, but I think adding small cap value is a smart thing to do. It’s certainly not necessary, but you might do it for the same reason you add international exposure because size and value are additional risk factors identified by academic literature you can diversify into. Small caps are such a small portion of total market funds you aren’t getting much exposure to this factors. So adding more makes your portfolio more diverse.
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Mar 2, 2021 14:51
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Baxate posted:I’m skeptical of the REITs too, but I think adding small cap value is a smart thing to do. It’s certainly not necessary, but you might do it for the same reason you add international exposure because size and value are additional risk factors identified by academic literature you can diversify into. Small caps are such a small portion of total market funds you aren’t getting much exposure to this factors. So adding more makes your portfolio more diverse. Another important point to add on the subject of tilting towards different dimensions of risk that comes up a lot is the incorrect position that "I'm already invested in the total market, and thus am exposed to small/value etc" - this unfortunately doesn't line up with the academic literature, because the market portfolio can only give you market returns (All the various factors "cancel out" each other in the market portfolio, to put it in a crude manner) If you want exposure, you'll have to tilt away from the market. Is tilting worth it? A bunch of nerds show that you should probably expect a slightly higher risk-adjusted return, as well as potentially see some benefits in smoothing of returns through risk diversification, but now you're babysitting a more complex portfolio and subjecting yourself to tracking error (Though small HAS been a total rocket ship for the past few weeks... Just waiting on you, value!)
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Mar 2, 2021 15:02
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pmchem posted:viewing bonds as low risk is extraordinarily "risky" to generalize in the current environment. it's quite possible -- maybe even probable -- that, buying bonds right now, you will have negative total return over the remainder of 2021. uh huh https://stockcharts.com/freecharts/perf.php?BND,TLT&n=126&O=011000  so I agree anyone who is heavy in bonds and planning to sell their bond portfolio in the next six months
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Mar 2, 2021 18:16
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runawayturtles posted:So my IRA transfers are just about finished, and it would be great if I could get some feedback/recommendations on how to allocate my 401k/Roth IRA going forward. Generally aiming for a standard three fund portfolio (target retirement around 2050), and currently about 70% of my retirement funds are in the 401k (with the investment options in the image below) and 30% in the Roth IRA (at Vanguard). This got buried in tax posts, any thoughts?
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Mar 2, 2021 19:06
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runawayturtles posted:This got buried in tax posts, any thoughts? A) those are some fairly crappy options in terms of ER (although we've seen worse) and you should communicate to your plan administrator that not having a low-cost index fund option is doing a big disservice to the employees. 0.52% ER is about 0.48% higher than it should be if you had a 401(k) that offered Vanguard or Fidelity index funds B) Suggest just using the S&P500 index in this account, and use your IRA to complete your asset allocation with international & bonds, assuming those two categories add up to 30% or less of your intended asset allocation
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Mar 2, 2021 19:28
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Leperflesh posted:uh huh over the very long term, bonds and stocks both have positive expected value, yes. but we all tend to agree that stocks have risk, yes? I'm simply saying that the risk involving the total return bonds should not be ignored. they have risk too, just like stocks. that risk can be higher than people realize.
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Mar 2, 2021 23:25
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Leperflesh posted:A) those are some fairly crappy options in terms of ER (although we've seen worse) and you should communicate to your plan administrator that not having a low-cost index fund option is doing a big disservice to the employees. 0.52% ER is about 0.48% higher than it should be if you had a 401(k) that offered Vanguard or Fidelity index funds Yeah it's pretty garbage, not sure if anything can be improved because we're a very small company that uses some bigger umbrella org to handle benefits and HR. But I'll ask, it can't hurt. I was gonna base it off of Vanguard's target retirement 2050 fund, so that's why I thought maybe 10% bonds and 30% international would be good, but I could do 10%/20% instead (although I suppose the 401k will continue to grow from contributions much faster than the IRA, unfortunately). Is it not too top-heavy to go 70% S&P500, or is it just not worth the slight ER increase to include mid and small cap?
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Mar 2, 2021 23:25
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p.s. there are also many ways to hedge the interest-rate risk of bonds. see here for some discussion of ladders, for example: https://investor.vanguard.com/investing/online-trading/bond-strategies or here for a hedged total bond ETF: https://www.wisdomtree.com/etfs/fixed-income/agzd
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Mar 2, 2021 23:28
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Random quick Q: I have a Roth 401k at work that my contributions go in. My company's ESOP shares and the company match are traditional contributions. So when I end up leaving this job and want to roll this over into my IRA accounts (I have Trad and Roth), will they separate that out into a trad rollover and a roth rollover?
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Mar 2, 2021 23:43
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