What’s a good place to park money for a decent year or so return
Any discussion of investments must include both the risk and the expected returns. You've given a time frame but no risk level. How large of a drop would you be willing to tolerate over your time frame?
Since there seem to be a lot of people new to investing here let me use this as a jumping off point for talking about risk and returns.
Every investment carries an expected return and a volatility risk. (In terms of probability, think mean and standard deviation.) Risk-free investments are ones that have a guaranteed rate of return and zero volatility risk. If there is any volatility risk whatsoever then the returns are not guaranteed, only expected. Generally, to get a higher expected return you must be willing to accept a higher volatility risk. Note that taking on higher volatility risk does not guarantee a higher return! Risk-free investments carry the lowest expected returns. Things like CDs and savings accounts fall into this category.
In order from lowest volatility risk to highest, I would classify investments as follows:
-CDs and other risk-free investments
-Short term bond funds
-Market-wide index funds (As an aside, I recommend buying ETFs instead of mutual funds)
-Sector index funds
-Individual company stocks
-"Extra-market" stuff like Lending Club, cryptocurrencies, etc. (I was pretty surprised to see this stuff show up on page 1 of this thread. I do NOT recommend this stuff.)
I am unable to quantify the risk of longer term bonds at this time. (As interest rates rise bond values fall, and I don't have a specific enough idea of where interest rates are headed.) I am also unable to quantify the risk or the expected return of things like gold and oil.
Anyway, volatility risk is how the financial community talks about risk. It's the risk of how much your investment will fluctuate.
There's another, more important, type of risk, though, and that's the risk that you will not achieve your financial goals (typically retirement). If you are unwilling to accept volatility risk there is virtually no chance you'll have enough money to retire. Risk free investments do not offer a high enough return (they never really have), so paradoxically, if you take on no (volatility) risk you are really taking on the ultimate risk.
What’s a good place to park money for a decent year or so return
Prior to last fall I'd say SPY.
Why? What's changed?
SPY one year ago: 278.19
SPY today: 287.65
That's 3%. It used to manage a solid 10-15% (probably unsustainably) but the market is much more rocky than it had been. The past, what, 5 years? the S&P 500 has been solidly climbing but now a lot of trumpiness is getting into the market. We're a bit too long overdue for a slide.
That said, I still recommend it for 401k usage - it's what I do. I figure S&P's job is to make sure it reliably increases + it usually has the lowest fees since it's not one of the broker's own "custom" fund.
0
Options
HacksawJ. Duggan Esq.Wrestler at LawRegistered Userregular
I mean, there's a reason they call people who play the stock market "speculators".
I sure as fuck don't consider my trades to be anything more than a gamble. Unlike in Vegas, though the stock market game you can make more educated bets.
I mean, there's a reason they call people who play the stock market "speculators".
I sure as fuck don't consider my trades to be anything more than a gamble. Unlike in Vegas, though the stock market game you can make more educated bets.
What’s a good place to park money for a decent year or so return
Prior to last fall I'd say SPY.
Just to discuss SPY, I think a better option is RSP. RSP is evenly weighted across all of the 500 S&P companies. So you own the same amount of google as you do of apple. If you get SPY, then you're weighted heavily toward the heavy hitters like microsoft and apple. And if you want to be heavily weighted toward 3 or 4 specific companies, you might as well just buy stock in them. Otherwise, it's better to be evenly weighted through them all.
0
Options
daveNYCWhy universe hate Waspinator?Registered Userregular
What’s a good place to park money for a decent year or so return
Prior to last fall I'd say SPY.
Why? What's changed?
SPY one year ago: 278.19
SPY today: 287.65
That's 3%. It used to manage a solid 10-15% (probably unsustainably) but the market is much more rocky than it had been. The past, what, 5 years? the S&P 500 has been solidly climbing but now a lot of trumpiness is getting into the market. We're a bit too long overdue for a slide.
That said, I still recommend it for 401k usage - it's what I do. I figure S&P's job is to make sure it reliably increases + it usually has the lowest fees since it's not one of the broker's own "custom" fund.
Er... SPY's are just designed to track the S&P 500 and while they do update the companies that make up the index, they don't do so often enough that you could really argue that they're working to make sure its value increases in a reliable manner.
Shut up, Mr. Burton! You were not brought upon this world to get it!
What’s a good place to park money for a decent year or so return
Prior to last fall I'd say SPY.
Just to discuss SPY, I think a better option is RSP. RSP is evenly weighted across all of the 500 S&P companies. So you own the same amount of google as you do of apple. If you get SPY, then you're weighted heavily toward the heavy hitters like microsoft and apple. And if you want to be heavily weighted toward 3 or 4 specific companies, you might as well just buy stock in them. Otherwise, it's better to be evenly weighted through them all.
I consider market weighting a feature, not a bug. But I'm a Boglehead, so my general idea is that the best path for meeting a retirement goal is try to match the overall market return for as cheap as possible.
It is extremely difficult for professionals to beat the market long-term (even moreso after fees), and I only have so much time for this.
Another one to keep in mind is VTSAX (and what I have most of my retirement accounts in). Rather than just tracking the S&P 500, it tracks the entire market as a whole. As such, it gives you some more exposure to small and mid-cap companies that you wouldn't get in a 500 index.
What’s a good place to park money for a decent year or so return
Prior to last fall I'd say SPY.
Why? What's changed?
SPY one year ago: 278.19
SPY today: 287.65
That's 3%. It used to manage a solid 10-15% (probably unsustainably) but the market is much more rocky than it had been. The past, what, 5 years? the S&P 500 has been solidly climbing but now a lot of trumpiness is getting into the market. We're a bit too long overdue for a slide.
That said, I still recommend it for 401k usage - it's what I do. I figure S&P's job is to make sure it reliably increases + it usually has the lowest fees since it's not one of the broker's own "custom" fund.
Er... SPY's are just designed to track the S&P 500 and while they do update the companies that make up the index, they don't do so often enough that you could really argue that they're working to make sure its value increases in a reliable manner.
I was just using it as an example of an S&P tracking ETF. Since it fluctuates very evenly with the actual index, I often include it in my stock trackers just to have a feeling for the way the day is moving.
0
Options
thatassemblyguyJanitor of Technical Debt.Registered Userregular
Looked at my portfolio, and saw that I have one huge stinker in there.
Whelp, time to bite the bullet and tax harvest some of those losses.
Anyone have any experience with eREITs like Fundrise? Seems kind of like Lending Club, only you fund real estate projects instead of loans. I've always wanted to get real estate exposure but am shy about buying an actual rental property myself since I'm not even that handy around my own house.
I guess I'd be interested in anyone's experience with traditional REITs too since I've never put money in those either.
Smurph on
0
Options
KakodaimonosCode fondlerHelping the 1% get richerRegistered Userregular
edited June 2019
It's possibly a way to diversify.
I'd make sure you have a handle on the rating levels of the REITs. The handful of projects I looked at have high debt/asset ratios so I'm curious just how much they'd pay out after debt servicing.
The other issue is REITs are pass-through tax entities. You'll get a 1099-DIV on the income and need to pay taxes on that every year.
Kakodaimonos on
0
Options
zepherinRussian warship, go fuck yourselfRegistered Userregular
So I'm thinking of hedging more heavily on my 401k. Right now things are very highly priced, and I feel in my bones a bubble burst, or a dip in the next year or so. Should I realocate my stocks, or simply change future buy in allocations to lower risk?
So I'm thinking of hedging more heavily on my 401k. Right now things are very highly priced, and I feel in my bones a bubble burst, or a dip in the next year or so. Should I realocate my stocks, or simply change future buy in allocations to lower risk?
Don't try to time the market based on the market conditions, it rarely works out. There were doomsayers saying the same thing for the last 4 years, that the market couldn't continue. If people had timed the market based on feelings back then, they'd have lost on on years of growth, which would offset the eventual fall when the next economic cycle does hit. The reality is trying to time the market is pure luck. Time in the market trumps all. Plus, if you jump out now, how will you know when to jump back in. You could either miss out on growth when it starts back up, or lose more if it hasn't hit the bottom yet.
That being said, hedging your allocations based on your personal circumstances is absolutely a good idea. If you're only 5-10 years out from retirement, then you might not be able to ride out a full economic cycle, and hedging a portion into safer instruments like bonds could be a good idea. There's a few schools of thought on percentage allocations at age ranges, though I don't know them off the top of my head, as I've got 25-30 years left, so I'm just riding all stocks and no bonds right now for maximum growth.
So I'm thinking of hedging more heavily on my 401k. Right now things are very highly priced, and I feel in my bones a bubble burst, or a dip in the next year or so. Should I realocate my stocks, or simply change future buy in allocations to lower risk?
Don't try to time the market based on the market conditions, it rarely works out. There were doomsayers saying the same thing for the last 4 years, that the market couldn't continue. If people had timed the market based on feelings back then, they'd have lost on on years of growth, which would offset the eventual fall when the next economic cycle does hit. The reality is trying to time the market is pure luck. Time in the market trumps all. Plus, if you jump out now, how will you know when to jump back in. You could either miss out on growth when it starts back up, or lose more if it hasn't hit the bottom yet.
That being said, hedging your allocations based on your personal circumstances is absolutely a good idea. If you're only 5-10 years out from retirement, then you might not be able to ride out a full economic cycle, and hedging a portion into safer instruments like bonds could be a good idea. There's a few schools of thought on percentage allocations at age ranges, though I don't know them off the top of my head, as I've got 25-30 years left, so I'm just riding all stocks and no bonds right now for maximum growth.
Fair enough. I changed my allocations a bit but didn't re-balance my account. I feel like putting 10 percent into bonds and upping my international vanguard fund is reasonable. The rest is Aggressive growth.
Anyone have any experience with eREITs like Fundrise? Seems kind of like Lending Club, only you fund real estate projects instead of loans. I've always wanted to get real estate exposure but am shy about buying an actual rental property myself since I'm not even that handy around my own house.
I guess I'd be interested in anyone's experience with traditional REITs too since I've never put money in those either.
Why would you not buy an REIT ETF or mutual fund? You get much broader exposure both across area and type of real estate. It's also a little weird to me that big apartment complexes are using it for funding. I'd personally be wary because it seems like it would either mean the company behind them thinks they can get a better rate or it's riskier than typical fundraising would prefer both which isn't good for an investor. I'd also look at what the terms are for the investment. GroundFloor which looks similar had weird terms that caused me to go nope.
As far as typical REIT, I invested in Vanguards, VNQ, for several years and felt like it had very similar performance to the US total market at a higher premium so much so that I've dropped it now to simplify things.
So I'm thinking of hedging more heavily on my 401k. Right now things are very highly priced, and I feel in my bones a bubble burst, or a dip in the next year or so. Should I realocate my stocks, or simply change future buy in allocations to lower risk?
Don't try to time the market based on the market conditions, it rarely works out. There were doomsayers saying the same thing for the last 4 years, that the market couldn't continue. If people had timed the market based on feelings back then, they'd have lost on on years of growth, which would offset the eventual fall when the next economic cycle does hit. The reality is trying to time the market is pure luck. Time in the market trumps all. Plus, if you jump out now, how will you know when to jump back in. You could either miss out on growth when it starts back up, or lose more if it hasn't hit the bottom yet.
That being said, hedging your allocations based on your personal circumstances is absolutely a good idea. If you're only 5-10 years out from retirement, then you might not be able to ride out a full economic cycle, and hedging a portion into safer instruments like bonds could be a good idea. There's a few schools of thought on percentage allocations at age ranges, though I don't know them off the top of my head, as I've got 25-30 years left, so I'm just riding all stocks and no bonds right now for maximum growth.
Fair enough. I changed my allocations a bit but didn't re-balance my account. I feel like putting 10 percent into bonds and upping my international vanguard fund is reasonable. The rest is Aggressive growth.
How far away from retirement are you? Assuming you're in your 30s, there's no reason to not go fully aggressive. Yeah there'll be downturns, but as mentioned above time in market trumps all.
I'm lazy though when it comes to my 401k, I just dump it all into a vanguard target retirement fund. I've got a couple other accounts where I play around with stuff more, but even there I still put a large majority of my money into ETFs.
Posts
Prior to last fall I'd say SPY.
Any discussion of investments must include both the risk and the expected returns. You've given a time frame but no risk level. How large of a drop would you be willing to tolerate over your time frame?
Since there seem to be a lot of people new to investing here let me use this as a jumping off point for talking about risk and returns.
Every investment carries an expected return and a volatility risk. (In terms of probability, think mean and standard deviation.) Risk-free investments are ones that have a guaranteed rate of return and zero volatility risk. If there is any volatility risk whatsoever then the returns are not guaranteed, only expected. Generally, to get a higher expected return you must be willing to accept a higher volatility risk. Note that taking on higher volatility risk does not guarantee a higher return! Risk-free investments carry the lowest expected returns. Things like CDs and savings accounts fall into this category.
In order from lowest volatility risk to highest, I would classify investments as follows:
-CDs and other risk-free investments
-Short term bond funds
-Market-wide index funds (As an aside, I recommend buying ETFs instead of mutual funds)
-Sector index funds
-Individual company stocks
-"Extra-market" stuff like Lending Club, cryptocurrencies, etc. (I was pretty surprised to see this stuff show up on page 1 of this thread. I do NOT recommend this stuff.)
I am unable to quantify the risk of longer term bonds at this time. (As interest rates rise bond values fall, and I don't have a specific enough idea of where interest rates are headed.) I am also unable to quantify the risk or the expected return of things like gold and oil.
Anyway, volatility risk is how the financial community talks about risk. It's the risk of how much your investment will fluctuate.
There's another, more important, type of risk, though, and that's the risk that you will not achieve your financial goals (typically retirement). If you are unwilling to accept volatility risk there is virtually no chance you'll have enough money to retire. Risk free investments do not offer a high enough return (they never really have), so paradoxically, if you take on no (volatility) risk you are really taking on the ultimate risk.
Why? What's changed?
SPY one year ago: 278.19
SPY today: 287.65
That's 3%. It used to manage a solid 10-15% (probably unsustainably) but the market is much more rocky than it had been. The past, what, 5 years? the S&P 500 has been solidly climbing but now a lot of trumpiness is getting into the market. We're a bit too long overdue for a slide.
That said, I still recommend it for 401k usage - it's what I do. I figure S&P's job is to make sure it reliably increases + it usually has the lowest fees since it's not one of the broker's own "custom" fund.
I mean, there's a reason they call people who play the stock market "speculators".
I sure as fuck don't consider my trades to be anything more than a gamble. Unlike in Vegas, though the stock market game you can make more educated bets.
Without getting kicked out, anyways.
3DS: 0473-8507-2652
Switch: SW-5185-4991-5118
PSN: AbEntropy
Just to discuss SPY, I think a better option is RSP. RSP is evenly weighted across all of the 500 S&P companies. So you own the same amount of google as you do of apple. If you get SPY, then you're weighted heavily toward the heavy hitters like microsoft and apple. And if you want to be heavily weighted toward 3 or 4 specific companies, you might as well just buy stock in them. Otherwise, it's better to be evenly weighted through them all.
Er... SPY's are just designed to track the S&P 500 and while they do update the companies that make up the index, they don't do so often enough that you could really argue that they're working to make sure its value increases in a reliable manner.
FXIAX is even cheaper (0.015%) than that if you're looking at mutual funds instead of ETFs.
If you're just starting out, FZROX (Fidelity's "total US market" fund) is 0.0% and a decent place to start from.
I consider market weighting a feature, not a bug. But I'm a Boglehead, so my general idea is that the best path for meeting a retirement goal is try to match the overall market return for as cheap as possible.
It is extremely difficult for professionals to beat the market long-term (even moreso after fees), and I only have so much time for this.
I was just using it as an example of an S&P tracking ETF. Since it fluctuates very evenly with the actual index, I often include it in my stock trackers just to have a feeling for the way the day is moving.
Whelp, time to bite the bullet and tax harvest some of those losses.
I guess I'd be interested in anyone's experience with traditional REITs too since I've never put money in those either.
I'd make sure you have a handle on the rating levels of the REITs. The handful of projects I looked at have high debt/asset ratios so I'm curious just how much they'd pay out after debt servicing.
The other issue is REITs are pass-through tax entities. You'll get a 1099-DIV on the income and need to pay taxes on that every year.
Don't try to time the market based on the market conditions, it rarely works out. There were doomsayers saying the same thing for the last 4 years, that the market couldn't continue. If people had timed the market based on feelings back then, they'd have lost on on years of growth, which would offset the eventual fall when the next economic cycle does hit. The reality is trying to time the market is pure luck. Time in the market trumps all. Plus, if you jump out now, how will you know when to jump back in. You could either miss out on growth when it starts back up, or lose more if it hasn't hit the bottom yet.
That being said, hedging your allocations based on your personal circumstances is absolutely a good idea. If you're only 5-10 years out from retirement, then you might not be able to ride out a full economic cycle, and hedging a portion into safer instruments like bonds could be a good idea. There's a few schools of thought on percentage allocations at age ranges, though I don't know them off the top of my head, as I've got 25-30 years left, so I'm just riding all stocks and no bonds right now for maximum growth.
https://www.bogleheads.org/wiki/Main_Page is a great resource.
Why would you not buy an REIT ETF or mutual fund? You get much broader exposure both across area and type of real estate. It's also a little weird to me that big apartment complexes are using it for funding. I'd personally be wary because it seems like it would either mean the company behind them thinks they can get a better rate or it's riskier than typical fundraising would prefer both which isn't good for an investor. I'd also look at what the terms are for the investment. GroundFloor which looks similar had weird terms that caused me to go nope.
As far as typical REIT, I invested in Vanguards, VNQ, for several years and felt like it had very similar performance to the US total market at a higher premium so much so that I've dropped it now to simplify things.
How far away from retirement are you? Assuming you're in your 30s, there's no reason to not go fully aggressive. Yeah there'll be downturns, but as mentioned above time in market trumps all.
I'm lazy though when it comes to my 401k, I just dump it all into a vanguard target retirement fund. I've got a couple other accounts where I play around with stuff more, but even there I still put a large majority of my money into ETFs.