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Cha-ching, it's the [Financial Literacy] thread

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Posts

  • khainkhain Registered User regular
    Tax loss harvesting in a robo-advisor account may also mean that you have to commit to that single account to avoid wash sales.

    Marty81firewaterword
  • thatassemblyguythatassemblyguy RESIST. irregularRegistered User regular
    Yeah one of the reasons I went with it is that the base level doesn't charge fees (that is, fees on top of the typical, and relatively low, etf expenses).

    They have an optional premium service but I don't really see the benefit of it since as far as I know it's just additional access to guidance.

    If you wanted to think about it another way, the cash drag, even in the “no fee” tier is the fee. Basically, they’re not investing every dollar, and are probably using the cash balance as some sort of leveraged hand-wavey thing.

    Personally I’ve been skeptical of retail robo-investors so far because they just started within the past few years, and so haven’t been tested in a real market downturn.

    firewaterworda5ehren
  • firewaterwordfirewaterword Satchitananda Pais Vasco to San FranciscoRegistered User regular
    Yeah one of the reasons I went with it is that the base level doesn't charge fees (that is, fees on top of the typical, and relatively low, etf expenses).

    They have an optional premium service but I don't really see the benefit of it since as far as I know it's just additional access to guidance.

    If you wanted to think about it another way, the cash drag, even in the “no fee” tier is the fee. Basically, they’re not investing every dollar, and are probably using the cash balance as some sort of leveraged hand-wavey thing.

    Personally I’ve been skeptical of retail robo-investors so far because they just started within the past few years, and so haven’t been tested in a real market downturn.

    That's a really keen perspective to take, thanks. I don't know if I'd ever have thought of it that way.

    Lokah Samastah Sukhino Bhavantu
  • a5ehrena5ehren AtlantaRegistered User regular
    Yeah, that too. I read up on the Schwab one, and their most aggressive allocation holding 6% cash is pretty nuts.

    firewaterwordthatassemblyguy
  • firewaterwordfirewaterword Satchitananda Pais Vasco to San FranciscoRegistered User regular
    That's about the lowest I could set it, yeah.

    Then again I guess it's added protection against that powerful urge to erase money via OTM weeklies.

    Lokah Samastah Sukhino Bhavantu
    thatassemblyguy
  • PaladinPaladin Registered User regular
    What's this about Michael Burry trashing index funds as the next CDO?

    Marty: The future, it's where you're going?
    Doc: That's right, twenty five years into the future. I've always dreamed on seeing the future, looking beyond my years, seeing the progress of mankind. I'll also be able to see who wins the next twenty-five world series.
  • MugsleyMugsley Registered User regular
    Ehhhhh.

    The bigger issue with CDOs is that their risk levels were straight out lies.

    Also I thought he was getting big into water investments(?)

    Also note how the interview is low-key selling his funds.

    thatassemblyguya5ehrentyrannus
  • a5ehrena5ehren AtlantaRegistered User regular
    Yeah, dude made a good call 12 years ago. Doesn't mean he's a genius that is right about everything.

    tyrannusfirewaterwordDoodmannschuss
  • monikermoniker Registered User regular
    Index funds follow indexes. It probably does give a basically unwarranted free boost to Company 499 but not Company 501 which isn't ideal. But...yeah. If the 500 largest (or depending on the fund all listed public) companies are just shams held together by not looking too close then we're going to hit Mad Max investment strategies pretty quick.

    a5ehrenfirewaterwordShadowhopeMugsleythatassemblyguyCaptain Inertia
  • TimFijiTimFiji Registered User regular
    a5ehren wrote: »
    Yeah, dude made a good call 12 years ago. Doesn't mean he's a genius that is right about everything.

    Yeah if you look at his filings several of his positions (Google, Alibaba, Fedex) are amongst the largest companies in the world, and those are the very companies whose prices he thinks will be most distorted because they're in the biggest index funds. I was pretty surprised he said that since it didn't seem to match his own practices.

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  • PhyphorPhyphor Building Planet Busters Tasting FruitRegistered User regular
    edited September 14
    TimFiji wrote: »
    a5ehren wrote: »
    Yeah, dude made a good call 12 years ago. Doesn't mean he's a genius that is right about everything.

    Yeah if you look at his filings several of his positions (Google, Alibaba, Fedex) are amongst the largest companies in the world, and those are the very companies whose prices he thinks will be most distorted because they're in the biggest index funds. I was pretty surprised he said that since it didn't seem to match his own practices.

    His argument is that index funds boost low volume stocks without any analysis of whether or not they are a good investment, not that every big company will fail. With the idea that high volume of trades should indicate a more stable price

    The argument boils down to: do you think that existing on an index is sufficient reason to invest in a company, or not

    Phyphor on
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  • TimFijiTimFiji Registered User regular
    Phyphor wrote: »
    TimFiji wrote: »
    a5ehren wrote: »
    Yeah, dude made a good call 12 years ago. Doesn't mean he's a genius that is right about everything.

    Yeah if you look at his filings several of his positions (Google, Alibaba, Fedex) are amongst the largest companies in the world, and those are the very companies whose prices he thinks will be most distorted because they're in the biggest index funds. I was pretty surprised he said that since it didn't seem to match his own practices.

    His argument is that index funds boost low volume stocks without any analysis of whether or not they are a good investment, not that every big company will fail. With the idea that high volume of trades should indicate a more stable price

    The argument boils down to: do you think that existing on an index is sufficient reason to invest in a company, or not

    Yeah I get that, I guess I just mean I don't it's going to be the next bubble that crashes the economy.

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    Mugsley
  • SimpsoniaSimpsonia Registered User regular
    Right, the very funds he complains about are weighted to the point of near de minimis impact due to having much lower market cap than the big boys he's already invested in that take up most of the headroom in the indexes. Any sort of inflationary effect just from being in an index is going to be minimal, if it exists at all. It's certainly not going to crash the economy.

    Beyond that, since most of the volume of these stocks being traded are the indexes themselves rather than traders, the only way to crash their value is if all the indexes de-indexed them at the same time. Since it's not traders cashing out and crashing their value, their value, in the aggregate, is pretty much going to be maintained through any sort of recession.

    BlackDragon480TimFiji
  • emp123emp123 Registered User regular
    I'm looking to open an IRA and I'm starting super late (early 30s). I've heard good things about Vanguard and Fidelity but have no idea which company I should go with. I'm basically just going to deposit the annual maximum and let the robots do their thing (leaning heavy on mutual funds I guess).

    Is there a reason to fret between companies? I have no desire to actively trade so thats not currently relevant to me.

    Though I do have mild concerns about starting this process right before a global recession...

    camo_sig2.png
  • SimpsoniaSimpsonia Registered User regular
    edited October 3
    As I understand it, it mainly depends on whether you will be doing any sort of maintaining any sort of taxable account (more advanced stuff like tax loss harvesting). Fidelity, if I recall correctly, has been super competitive with their expense ratios to the point of being a little lower than Vanguard. Additionally, Vanguard makes ETF trades free, whereas Fidelity charges for most, except some of their own ETFs. Mutual funds are a little cheaper with Vanguard, too. Vanguard also has a much much larger selection of ETFs (1800 vs 92). I will say that Vanguard's interface is pretty early 2000's and doesn't seem like it's going to be improved anytime soon, and customer support isn't great from what I hear.

    So to answer your question, if you're just gonna pick some index fund for a tax-advantaged account, either will work, though you'll get more ETF options with Vanguard, but a crappier interface to do it in. Also, if you care, Vanguard is 100% investor owned, as in Vanguard the corporate entity is solely owned by its own funds, so if you invest in it you own part of Vanguard.

    I'll disclaim this that all of my non-work accounts are with Vanguard are pretty much 100% in the VTSAX ETF.

    Simpsonia on
    emp123
  • emp123emp123 Registered User regular
    I have no idea what tax loss harvesting is, but my main goals are 1) start saving for retirement and 2) make my current AGI as low as possible.

    I'm going to be pretty passive in my maintenance, I just want to put money in the account and let it work for me. Do I get hit with fees if I invest in a fund or ETF and it makes purchases? Or do I only get hit with fees if I move money from fund to fund or rebalance ratios or whatever?

    camo_sig2.png
  • MugsleyMugsley Registered User regular
    If you're just looking for something simple, the Zero Funds at Fidelity work quite well.

    Here's a really good guide to help you get started (and covers Vanguard, Fidelity, and Schwab)

    https://clark.com/personal-finance-credit/how-to-open-roth-ira/#rothiraproviders

    emp123
  • SimpsoniaSimpsonia Registered User regular
    edited October 3
    One thing to note though, if you're trying to lower your AGI, then you'll need to avoid Roth accounts and only invest in either a traditional IRA or your employer 401k (or a 457b if you're a government employee). Roth is post-tax dollars, in exchange for tax-free withdrawals after retirement (so won't lower your AGI). While this sounds good to some, for most people it's better to use a tax-deferred account as most people's income (and thus effective tax rate) in retirement will be lower than it is for them currently.

    I'm guessing your on some sort of income based student loan plan, thus the desire to lower AGI as much as possible?

    Simpsonia on
  • Marty81Marty81 Registered User regular
    emp123 wrote: »
    I have no idea what tax loss harvesting is, but my main goals are 1) start saving for retirement and 2) make my current AGI as low as possible.

    I'm going to be pretty passive in my maintenance, I just want to put money in the account and let it work for me. Do I get hit with fees if I invest in a fund or ETF and it makes purchases? Or do I only get hit with fees if I move money from fund to fund or rebalance ratios or whatever?

    In an IRA? Only the bolded.

    In a taxable account, mutual funds can generate capital gains taxes.

  • emp123emp123 Registered User regular
    Simpsonia wrote: »
    One thing to note though, if you're trying to lower your AGI, then you'll need to avoid Roth accounts and only invest in either a traditional IRA or your employer 401k (or a 457b if you're a government employee). Roth is post-tax dollars, in exchange for tax-free withdrawals after retirement (so won't lower your AGI). While this sounds good to some, for most people it's better to use a tax-deferred account as most people's income (and thus effective tax rate) in retirement will be lower than it is for them currently.

    I'm guessing your on some sort of income based student loan plan, thus the desire to lower AGI as much as possible?

    I think a Roth account would have been good when I couldn't afford to invest in my retirement, but as it stands today my income is high enough where I'll definitely be paying lower taxes at retirement.

    And yeah, the lower AGI is all about minimizing my student loan payments. I'm going to be making payments on them for the next 20 years, and then entering into a repayment plan with the IRS for my 2039 tax bill so I'd rather maximize the amount I can save/invest now so I'm okay when I retire (in 2060).

    God that's depressing.

    camo_sig2.png
  • SimpsoniaSimpsonia Registered User regular
    edited October 3
    emp123 wrote: »
    Simpsonia wrote: »
    One thing to note though, if you're trying to lower your AGI, then you'll need to avoid Roth accounts and only invest in either a traditional IRA or your employer 401k (or a 457b if you're a government employee). Roth is post-tax dollars, in exchange for tax-free withdrawals after retirement (so won't lower your AGI). While this sounds good to some, for most people it's better to use a tax-deferred account as most people's income (and thus effective tax rate) in retirement will be lower than it is for them currently.

    I'm guessing your on some sort of income based student loan plan, thus the desire to lower AGI as much as possible?

    I think a Roth account would have been good when I couldn't afford to invest in my retirement, but as it stands today my income is high enough where I'll definitely be paying lower taxes at retirement.

    And yeah, the lower AGI is all about minimizing my student loan payments. I'm going to be making payments on them for the next 20 years, and then entering into a repayment plan with the IRS for my 2039 tax bill so I'd rather maximize the amount I can save/invest now so I'm okay when I retire (in 2060).

    God that's depressing.

    I'm in the exact same boat, but a little worse since I'm on the older IBR rather than PAYE (25 yrs vs 20). I've also started putting aside about $2k a year in a taxable account whenever I can to have an account I can liquidate to help with that massive tax bill that will hit me in 2035. Btw, don't ever let them switch you to a different payment plan type (ie REPAYE or anything else) even if the terms lower your monthly. It will capitalize all of your unpaid interest and make things drastically worse. Feel free to PM if you have any other student loan questions, I've done all the research possible, and have build excels mapping out my loan payments for 25 years to figure out my options. The biggest finding? I should have asked my wife if we could be common law rather than legally married. Would have saved us a BUNCH of money.

    Simpsonia on
  • CauldCauld Registered User regular
    Getting married seems like a pretty bad long term financial decision when compared to just being a couple for the same amount of time.

  • Jebus314Jebus314 Registered User regular
    Cauld wrote: »
    Getting married seems like a pretty bad long term financial decision when compared to just being a couple for the same amount of time.

    Only if you make a lot of money. Or if you break up eventually.

    "The world is a mess, and I just need to rule it" - Dr Horrible
  • emp123emp123 Registered User regular
    edited October 4
    Simpsonia wrote: »
    emp123 wrote: »
    Simpsonia wrote: »
    One thing to note though, if you're trying to lower your AGI, then you'll need to avoid Roth accounts and only invest in either a traditional IRA or your employer 401k (or a 457b if you're a government employee). Roth is post-tax dollars, in exchange for tax-free withdrawals after retirement (so won't lower your AGI). While this sounds good to some, for most people it's better to use a tax-deferred account as most people's income (and thus effective tax rate) in retirement will be lower than it is for them currently.

    I'm guessing your on some sort of income based student loan plan, thus the desire to lower AGI as much as possible?

    I think a Roth account would have been good when I couldn't afford to invest in my retirement, but as it stands today my income is high enough where I'll definitely be paying lower taxes at retirement.

    And yeah, the lower AGI is all about minimizing my student loan payments. I'm going to be making payments on them for the next 20 years, and then entering into a repayment plan with the IRS for my 2039 tax bill so I'd rather maximize the amount I can save/invest now so I'm okay when I retire (in 2060).

    God that's depressing.

    I'm in the exact same boat, but a little worse since I'm on the older IBR rather than PAYE (25 yrs vs 20). I've also started putting aside about $2k a year in a taxable account whenever I can to have an account I can liquidate to help with that massive tax bill that will hit me in 2035. Btw, don't ever let them switch you to a different payment plan type (ie REPAYE or anything else) even if the terms lower your monthly. It will capitalize all of your unpaid interest and make things drastically worse. Feel free to PM if you have any other student loan questions, I've done all the research possible, and have build excels mapping out my loan payments for 25 years to figure out my options. The biggest finding? I should have asked my wife if we could be common law rather than legally married. Would have saved us a BUNCH of money.

    Yeah I'm on the old IBR too, I'm just 5 years in. I dont think theres any option for me but paying more a month and fuck that; I dont have a problem paying back my total loan amount even with a fair interest rate tacked on, but 7% is practically usury. It doesnt help that I just barely missed being eligible for the 10% 20 year plans which would free up enough money so I could get beyond this stupid stage where I make enough to squirrel money away, but not enough to do anything with it.


    EDIT: When I'm setting up my IRA how aggressive should I be? I figure I have another 40 years of work life left, retire 70-75, die around 85-90 depending on what science cooks up. 80/20 stocks bonds to start?

    emp123 on
    camo_sig2.png
  • MugsleyMugsley Registered User regular
    It depends on your risk tolerance and how much you expect to need after you stop working. If you're just starting out, you need as much money in the market as possible.

    I'd personally be at 5% bonds (or less).

    You can also check the allocation in a 2060 Life Cycle fund to see what they use (or just buy that fund)

    Quida5ehrenfirewaterword
  • QuidQuid I don't... what... hnnng Registered User regular
    There's really no need for bonds starting out. You want to put in as much as possible as early as possible and not worry about market fluctuations while you're contributing.

    SimpsoniaVishNubfirewaterwordElvenshaeShadowhope
  • monikermoniker Registered User regular
    Quid wrote: »
    There's really no need for bonds starting out. You want to put in as much as possible as early as possible and not worry about market fluctuations while you're contributing.

    Yeah, so long as you don't lose your job, Recessions are technically good for your investments since you can get more shares per dollar and aren't withdrawing anything before the market rebounds anyway. They're just absolutely terrible for all the people who do lose their job, are just starting out, &c.

    a5ehrenCauldQuidTuminBurnageElvenshaeShadowhope
  • SimpsoniaSimpsonia Registered User regular
    Yeah, with another 25-30 years of your working life ahead of you, you should be as aggressive as possible right now with your portfolio to maximize your gains early on so compounding interest works its magic.

    Even those target retirement funds are pretty conservative, holding a definite number of bonds (as high as 10% even for target date 2060 retirement funds). So I just bypass all of that and go all in on the total stock market index (VTSAX). I only started saving for retirement late in life, in my early-30s, so I want/need to maximize my gains out of the next recession/recovery before I start diversifying a portion into bonds. The total stock market index is essentially owning little pieces of the entirety of the market so you mirror the market as a whole. In theory it should allow you to maximize your gains over a simpler S&P500 index, since those only contain large cap companies. Sometimes large companies can stagnate, while small and mid-cap companies can thrive, and vice versa so you are diversifying that way without having to to much work. I know some people also try to include some international indexes (such as VGTSX the Vanguard total international stock index) to diversify outside of the US markets.

    Quid
  • emp123emp123 Registered User regular
    Yeah Vanguard suggested 90/10 which seems a bit aggressive assuming we're headed full steam ahead into another recession.

    I'm inclined to max the account now, do the same thing in January, and then turn it on after the downturn...if I only knew when that would be.

    camo_sig2.png
  • RedTideRedTide Registered User regular
    emp123 wrote: »
    Yeah Vanguard suggested 90/10 which seems a bit aggressive assuming we're headed full steam ahead into another recession.

    I'm inclined to max the account now, do the same thing in January, and then turn it on after the downturn...if I only knew when that would be.

    Eh, unless you're 55 go full steam ahead.

    You'll be buying on the way down as well as on the way up and those assets will still outpace safer investments even if it takes awhile to get back to break even.

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  • a5ehrena5ehren AtlantaRegistered User regular
    Don't try to time the market, you will lose.

    monikerQuidPolaritieOrcaJebus314firewaterwordElvenshaethatassemblyguyRMS OceanicStabbity StyleFoolOnTheHillQuantumTurkShadowhope
  • monikermoniker Registered User regular
    emp123 wrote: »
    Yeah Vanguard suggested 90/10 which seems a bit aggressive assuming we're headed full steam ahead into another recession.

    I'm inclined to max the account now, do the same thing in January, and then turn it on after the downturn...if I only knew when that would be.

    Don't try to time the market. People who are smarter than you, with more resources at their disposal, and who literally do that as their job rather than only checking it when they have downtime get it wrong.

    Also, remember, any dip in share value is solely a "paper" loss, until you actually sell your share. The only value that really matters is the one you spent to buy and the one you received to sell. Every bump on the rollercoaster in between doesn't mean shit.

    a5ehrenQuidRedTideElvenshaeBlackDragon480Stabbity StyleFoolOnTheHillShadowhope
  • a5ehrena5ehren AtlantaRegistered User regular
    https://engaging-data.com/market-timing-game/

    Go ahead, give it a shot!

    (you will lose)

  • BurnageBurnage irregular Registered User regular
    a5ehren wrote: »
    https://engaging-data.com/market-timing-game/

    Go ahead, give it a shot!

    (you will lose)
    Congratulations, you outperformed the market by $685

    pVjTzGN.jpg?1

    MugsleyKnight_JragghenOrcaMarty81Elvenshaethatassemblyguyemp123tynicRMS OceanicBlackDragon480a5ehrenDaenrisStabbity StyleFoolOnTheHillHefflingTynnanShadowhope
  • MugsleyMugsley Registered User regular
    emp123 wrote: »
    Yeah Vanguard suggested 90/10 which seems a bit aggressive assuming we're headed full steam ahead into another recession.

    I'm inclined to max the account now, do the same thing in January, and then turn it on after the downturn...if I only knew when that would be.

    If you're comfortable with your job stability, any recession is actually a sale on stocks for you. Since you're dollar cost averaging into the market when it's low, you'll have more shares that will increase value when the market rebounds.

    Here are my returns from the Great Recession:
    2007 - ~5%
    2008 - -25% (that's negative)
    2009 - 21%
    2010 - 14%
    2011 - -1%
    2012 - 12%
    2013 - 24%

    I'll stop there. Yes, I had to eat one double-digit loss, but all my dollar cost averaging allowed me to ride the double-digit gains in 4 of the next 5 years. Granted, losing 1/4 of your 401k value is a hard pill to swallow, but I have more than recovered the losses.

    Shadowhope
  • firewaterwordfirewaterword Satchitananda Pais Vasco to San FranciscoRegistered User regular
    You should follow all this sensible advice for sure!

    Or yolo your savings on out of the money weekly SPY calls and buy a yacht!

    Yay investing!

    Lokah Samastah Sukhino Bhavantu
    DoodmannElvenshaethatassemblyguy
  • DoodmannDoodmann Registered User regular
    You should follow all this sensible advice for sure!

    Or yolo your savings on out of the money weekly SPY calls and buy a yacht!

    Yay investing!

    psh, SPY calls. Ride that JNUG rollercoaster.

    Whippy wrote: »
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  • KakodaimonosKakodaimonos Registered User regular
    Doodmann wrote: »
    You should follow all this sensible advice for sure!

    Or yolo your savings on out of the money weekly SPY calls and buy a yacht!

    Yay investing!

    psh, SPY calls. Ride that JNUG rollercoaster.

    Nah, sell out of the money SPX puts on margin. It works great till it doesn't.

    DoodmannfirewaterwordMugsley
  • DoodmannDoodmann Registered User regular
    Short bunk international shipping penny stocks.

    Whippy wrote: »
    nope nope nope nope abort abort talk about anime
    Torchlight | Steam | ART
  • monikermoniker Registered User regular
    If you put it all on red you have a ~48% chance of doubling your money.

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