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Stepping back a little, the whole purpose of an asset allocation is to provide the balance of risk and growth that you want. If you never rebalance, your allocation changes based on recent market results, slowly changing your risk profile. Annual rebalancing keeps you balanced where you want to be just fine. Like most things having to do with long term investment, getting more involved makes it less effective.
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May 29, 2021 09:24
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Mu Zeta posted:I always thought rebalancing was more for your psychological benefit so that you don't freak out and sell immediately when there's a recession. If you just do it once a year like a normie it should be fine. I do it once a year around the holidays when the I’ve been around my entire family for 3-4 days.
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May 29, 2021 11:39
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Residency Evil posted:I do it once a year around the holidays when the I’ve been around my entire family for 3-4 days. [tears rolling down cheeks] "I am in CONTROL of something. The money LISTENS to me"
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May 29, 2021 16:50
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In Vanguard, there's no way to schedule an investment of the full balance of the settlement account, is there? I turned off auto reinvest for tax loss harvesting purposes, but the inability to schedule a reinvest from the settlement account is killing my plan to be totally hands-off... edit: On that note actually, any suggestions for something I can subscribe to that will alert me before 4pm when it's a good day to TLH (and not bother me with other things)? I don't really look at any news until the evening. runawayturtles fucked around with this message at 17:30 on May 29, 2021 |
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May 29, 2021 17:18
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I’ve been reading a little about momentum bands where you rebalance if fund x gets +/- 5% etc. Anybody have more info on this? This thread has inspired me to go back to school (grad school) and study Economics. What have you done?
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May 31, 2021 19:31
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Valicious posted:This thread has inspired me to go back to school (grad school) and study Economics. What have you done? The typical role of the modern economist is to breathlessly justify the endless butchery required for the maintenance of the existing economic order. Are you sure you wouldn't rather study more along the lines of finance or accounting? 
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May 31, 2021 20:30
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Sardonik posted:The typical role of the modern economist is to breathlessly justify the endless butchery required for the maintenance of the existing economic order. Are you sure you wouldn't rather study more along the lines of finance or accounting? Finance, but that’s within the School of Economics at one of the schools I’m looking at....for some reason. I’m looking at schools in Japan that have programs in English. It looks like the main degree is in economics, but you can have all your electives be in Finance. Valicious fucked around with this message at 02:03 on Jun 1, 2021 |
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Jun 1, 2021 02:01
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After all this time, I still have one total noob question that I've always wondered: do long-term capital gains apply to bond funds as well? I understand that interest paid is taxed as regular income, but is the sale of shares as well? I've always just assumed that LTCG only applies to equities, but I guess even Bitcoin can qualify for LTCG? If that's the case, then bond index funs just became much more tax efficient than I thought.
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Jun 1, 2021 08:15
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literally this big posted:After all this time, I still have one total noob question that I've always wondered: do long-term capital gains apply to bond funds as well? I understand that interest paid is taxed as regular income, but is the sale of shares as well? I've always just assumed that LTCG only applies to equities, but I guess even Bitcoin can qualify for LTCG? If that's the case, then bond index funs just became much more tax efficient than I thought. Yes, but only the rise/fall in the base fund price. That is generally pretty stable over time compared to equities.
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Jun 1, 2021 14:31
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H110Hawk posted:Yes, but only the rise/fall in the base fund price. That is generally pretty stable over time compared to equities. True, but it is indeed some degree of tax benefit that I never realized bond funds had. It's also a bit more relevant for Muni bonds, as capital gains is the only tax you'd pay on some of those. But I'm young and have no huge need for bonds right now, so I never looked too much into it.
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Jun 1, 2021 22:54
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Note also that if you hold actual bonds (rather than a mutual fund investing in bonds) and hold those bonds to maturity, all of the gains will have been taxed via your bond income payments; the final amount returned to you is just the principal you paid. So there is no capital gains tax at maturity. This does mean that effectively, tax-free munis are totally tax free if held to maturity.
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Jun 3, 2021 18:47
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I’m interested in opening a Vanguard mutual fund as a compliment to my 401K. Anyone have a recommendation or should I just pick one and dive in? I’d like something on the more aggressive side with a minimum buy in of $3,000 or less.
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Jun 3, 2021 19:00
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Heated Gaming Moment posted:I’m interested in opening a Vanguard mutual fund as a compliment to my 401K. Anyone have a recommendation or should I just pick one and dive in? I’d like something on the more aggressive side with a minimum buy in of $3,000 or less. You are maxing your 401k and Roth IRA this year (if you are able to contribute), yes? Vanguard's VTSAX just so happens to have a minimum buy in of $3k https://investor.vanguard.com/mutual-funds/profile/vtsax
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Jun 3, 2021 19:03
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Heated Gaming Moment posted:I’m interested in opening a Vanguard mutual fund as a compliment to my 401K. Anyone have a recommendation or should I just pick one and dive in? I’d like something on the more aggressive side with a minimum buy in of $3,000 or less. The general advice is VTSAX, which is an index fund of the entire US stock market. If you want more diverse but still simple, you can add VTIAX, which is the same deal for international stocks, and VBTLX, which is the same total index but for bonds. There's other stuff you can do but that's the simple method. I've been reading lots over the past month and have some other Vanguard funds too, probably pointless but who knows. My IRA I just all have in a target retirement fund to keep it simple. Grand Fromage fucked around with this message at 19:11 on Jun 3, 2021 |
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Jun 3, 2021 19:06
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So while I was pondering adding a bond fund to my taxable investments, I realized my taxable stock funds were all VFIAX and not VTSAX like I thought. So two questions: 1. Is there a compelling reason for me to leave the funds in VFIAX from an investment point of view? The performance isn't wildly different, but obviously I'm tilted towards large-cap stocks if it's just S&P 500. But VTSAX is also market-weighted which I think means I'm not wildly over-tilted towards large cap. I don't have a strong reason to prefer one over the other, so my gut says I should start moving towards VTSAX just for pure diversification reasons, since both funds have pretty similar performance, the same ER, and only slight differences in dividend yield. 2. Since this is a taxable account, that means that I'd pay capital gains on any profit if I tried to exchange one fund for another, right? I feel like I sort of answered both of my questions here and that I should probably just leave the money in there as-is, and buy shares in VTSAX in future contributions, but I'd appreciate advice/a sanity check.
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Jun 3, 2021 19:25
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Chiasmus posted:You are maxing your 401k and Roth IRA this year (if you are able to contribute), yes? I do not have a Roth, just the 401K. Should I be opening a Roth and then put any mutual fund I want to invest in into that? Grand Fromage posted:The general advice is VTSAX, which is an index fund of the entire US stock market. If you want more diverse but still simple, you can add VTIAX, which is the same deal for international stocks, and VBTLX, which is the same total index but for bonds. Cool. Seems pretty straightforward.
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Jun 3, 2021 19:29
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Heated Gaming Moment posted:I do not have a Roth, just the 401K. Should I be opening a Roth and then put any mutual fund I want to invest in into that? Roth is tax free so you want to do that first. But you can only add $6,000 a year there, so if you have more to invest you have to open a brokerage account which is taxable.
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Jun 3, 2021 19:40
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Why do Fidelity Target Retirement Funds have a higher net expense than their Vanguard equivalents? I have money in Fidelity Target Retirement Funds and looked at the huge difference. How difficult is it to switch to Vanguard (assuming they're basically the same?). There's no penalties for selling off these Target Retirement Funds right?
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Jun 3, 2021 20:25
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My understanding is Vanguard's expenses are always the lowest because it's collectively owned by the investors, so there's nobody taking a big cut off the top. I started with Vanguard so I have no idea about switching.
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Jun 3, 2021 20:30
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Strong Sauce posted:Why do Fidelity Target Retirement Funds have a higher net expense than their Vanguard equivalents? I have money in Fidelity Target Retirement Funds and looked at the huge difference. How difficult is it to switch to Vanguard (assuming they're basically the same?). There's no penalties for selling off these Target Retirement Funds right? Are you sure you’re comparing the Fidelity Investor-class funds?
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Jun 3, 2021 20:30
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raminasi posted:Are you sure you’re comparing the Fidelity Investor-class funds?
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Jun 3, 2021 20:51
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Fidelity Freedom Funds are not passive-index funds. Avoid them as you would any actively managed fund, unless you're actually trying to find an actively managed fund. In which case, the .75 ER is still pretty crap, so still avoid.
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Jun 3, 2021 21:00
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Leperflesh posted:Fidelity Freedom Funds are not passive-index funds. Avoid them as you would any actively managed fund, unless you're actually trying to find an actively managed fund. In which case, the .75 ER is still pretty crap, so still avoid. I already have money in their Freedom Fund... Is there any penalty with selling it off?
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Jun 3, 2021 21:17
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Strong Sauce posted:I already have money in their Freedom Fund... Is there any penalty with selling it off? If it's in a tax-advantaged space, no.
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Jun 3, 2021 21:20
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Sorry guys I am sure this is a real dumb question. But I'm just becoming financially stable and independent I we the past few years and finally in a spot to start thinking about more investing. My question is pretty straight forward and I'm looking for someone to poke holes in it. Okay so I just refi'd my house. Bout it for 617k and I live in a bananas market and have turned down cash offers without it being for sale for 950k. The refi was the max federal on a 30 year fixed...548k at 3.375%. It automatically came with a 75k HELOC. I understand that if i drew that all down... theoretically for the length of the loan...all I would have to do is pay the interest each month which comes out to 211 monthly to have all 75k out. Repayable when the loan ends or house is sold or refi or whatever. Now...say I find some etf no load fund at fidelity or something that gets say 4.5% yield that pays monthly dividends. Market volatility aside...what's to say I can't or certainly should not draw it out...dump it all into the fidelity fund. Transfer enough out each month to cover the bank interest on the 75k and pocket the 1% + difference? (Around 844 a month)? Edit...or really if I can get any amount about the mortgage rate? If it ever went south I can put a stop loss and just give the original 75k back to the mortgage lender? (Trad bank) Basic Poster fucked around with this message at 21:24 on Jun 3, 2021 |
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Jun 3, 2021 21:22
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Guinness posted:If it's in a tax-advantaged space, no. It's in a Trad IRA. So if I sell off my shares but leave it in the IRA.. I don't incur taxes on any profits from selling it right?
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Jun 3, 2021 21:23
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Strong Sauce posted:It's in a Trad IRA. So if I sell off my shares but leave it in the IRA.. I don't incur taxes on any profits from selling it right? Correct, as long as you don't take the money out of the account it will not be a taxable event.
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Jun 3, 2021 21:27
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Basic Poster posted:Market volatility aside Those words are doing some real heavy lifting here. Also, dont forget you're probably paying 15% taxes on that 4.5%, so you're looking at closer to a 3.825% return, meaning your margin has shrunk considerably. Also your math seems to be jacked up. 3.375% of $75,000 is $234 monthly, 4.5% is $281 (assuming simple interest yadda yadda, not exact numbers). Not sure how you got $800. With taxes you're looking at more like $239, so you'd net more like $4 a month. Now you can go even deeper with taxes and stuff but I dont think it makes sense.
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Jun 3, 2021 21:35
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One weird trick to make money, loan officers hate it!
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Jun 3, 2021 21:56
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I think in general, trying to get cute with your long-term goals is great until it goes wrong. Except great usually more like "slightly positive" and wrong is "well poo poo now I have to work until I'm 75".
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Jun 3, 2021 22:04
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Basic Poster posted:Sorry guys I am sure this is a real dumb question. But I'm just becoming financially stable and independent I we the past few years and finally in a spot to start thinking about more investing. My question is pretty straight forward and I'm looking for someone to poke holes in it. To add to what others said, if you actually wanted to withdraw cash from your home equity to invest, the better way to do it is a cash-out refinance, not an HELOC. However, the fees on a refi likely exceed any "guaranteed" return you'd get on the investment, after taxes etc. Being automatically approved for an HELOC as part of your new loan doesn't mean much, given you have that equity if your credit is decent any bank would approve you for one. You've not told us what the full terms of that loan are, so it's hard for anyone to really assess, but at the very least you ought to compare it to what other HELOC offers are available from other banks. Lastly, you should not assume that your house's current value is a floor, and you should keep in mind that if you sell it, you will pay likely between 6 and 10 percent of its sale value in fees and costs. What would you do if next year you owe $540k, plus a $75k loan, and both the market and the housing market drop to the point where your house's sale value is less than $675k... and you need to move? You could find yourself in a position of having to liquidate your investments at a loss, and still bringing cash to the table to afford to sell. Money is cheap right now and the market's return over the last 12 months is absurd enough that it's gotta be tempting to get your home equity working for you; but you need to be careful about analyzing the risks and leaving yourself sufficient margin to deal with an uncertain future.
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Jun 3, 2021 22:13
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Thanks everyone! I knew it was a lovely idea...just didn't know why! Very helpful stuff.
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Jun 3, 2021 22:26
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what's the difference between VTSAX and VTI? i'm sitting on money for a down payment on a house that i hope to buy in 3-5 years. would either of these be good to put it into while i wait and save more?
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Jun 3, 2021 22:53
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err posted:what's the difference between VTSAX and VTI? Are you willing to push out your buying timeline potentially another 5 years? If not, you don't have an investible timeframe.
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Jun 3, 2021 23:10
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err posted:what's the difference between VTSAX and VTI? VTI is an ETF, VTSAX is a part of their admiralty shares thing that generally have lower fees and poo poo and it’s also a mutual fund. They are seeking to do the same thing.
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Jun 3, 2021 23:25
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VTI is literally VTSAX, traded as an ETF. They're the exact same investment, but VTSAX's price is quoted as the net asset value at close daily, while VTI is allowed to float on the market so can deviate from NAV a little teeny bit. If you are purchasing in a taxable account, the ETF may be more tax efficient because of how the fund's dividends are handled; the ETF would allow a short-term trader to get in or out of the fund more quickly; and many people investing using various brokerage apps can't buy mutual funds but can buy ETFs in-app. But the long-term performance of the two is identical. e. they're not "seeking to do the same thing" so much as they're the same pile of investments with two different ways of owning part of the pile. e2. but also yeah don't put your down payment into something that can easily drop 25%+ right when you were gonna go buy, unless you're OK with maybe that happening and needing to wait months or even years (or even never) for it to recover. If you don't want to be in all cash, consider a CD ladder or maybe government bonds. Leperflesh fucked around with this message at 23:41 on Jun 3, 2021 |
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Jun 3, 2021 23:38
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Thanks for the responses. I guess just keep it out of the stock market if I intend to use it soonish? It doesn't seem like there is many good options for some type of savings account to avoid inflation?
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Jun 4, 2021 00:10
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High-yield savings accounts exist with certain mostly-online banks that should let you more or less keep pace with inflation. Here's Nerdwallet's list: https://www.nerdwallet.com/best/banking/high-yield-online-savings-accounts Just keep in mind all these rates are variable so there's no guarantee. These have recently been up above 1%, but they've all fallen precipitously in the last few months. You could also buy inflation-proof government bonds (U.S. Treasury Inflation-Protected Securities, or 'TIPS'). You can get a broader basket of inflation-proof securities with a TIPS-based fund, although then you're paying an ER; but for example, Schwab US TIPS ETF's (SCHP) ER is just .05 so that's not a huge deal. 1-year return on SCHP (trailing, and this includes recovery from June 2020, so keep that in mind) was 7.06%, so that's better than a high-yield savings account would have gotten you. Leperflesh fucked around with this message at 00:28 on Jun 4, 2021 |
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Jun 4, 2021 00:25
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There are inflation protected investments like VIPSX. You don't get much of a return off it, but at minimum your principal increases enough to keep pace with inflation so you lose no real value. I don't know if there's a time period you have to keep money in there, but that may be viable for what you're looking to do.
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Jun 4, 2021 00:28
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When the cash-out refi rates are lower than your current rates then the only reason to HELOC is to extract money to make a down payment on a new house and then immediately pay it off when you sell your current home (what I'm doing right now). E.g. only for extremely short term things
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Jun 4, 2021 00:32
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