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Vanguard Is Growing Faster Than Everybody Else Combined

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Re: Vanguard Is Growing Faster Than Everybody Else Combined

#281

Post by zeroer »

hesdeadjim wrote: post #275
zeroer wrote: post #249

Earlier quoted context omitted.

Take a look at this chart of the SP500 over time: http://www.macrotrends.net/2324/sp-500-historical-chart-data (Make sure to turn off inflation-adjusted) I think you'll see that in the last 90 years, even the worst market crashes don't take the index down to a level lower than what it was 15 years prior. To put it another way, pick any time in the past 90 years, the S&P 500 is always higher 15 years later than that d…

I suppose there is no harm then in milking the tax loss harvesting for as long as it is profitable and then reevaluating performance in ten or fifteen years to see if it makes sense to switch to a lower cost provider like Vanguard. Like I said though, I have seen very significant returns from my loss harvesting. Even without a yearly source of capital gains, it definitely does not hurt to collect the losses and use t…

There is a harm. In 15 years, if you decide you don't like Wealthfront, in order to move, you will have to sell all your assets and incur the capital gains.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#282

Post by grzm »

zeroer wrote: post #281
hesdeadjim wrote: post #275

Earlier quoted context omitted.

I suppose there is no harm then in milking the tax loss harvesting for as long as it is profitable and then reevaluating performance in ten or fifteen years to see if it makes sense to switch to a lower cost provider like Vanguard. Like I said though, I have seen very significant returns from my loss harvesting. Even without a yearly source of capital gains, it definitely does not hurt to collect the losses and use t…

There is a harm. In 15 years, if you decide you don't like Wealthfront, in order to move, you will have to sell all your assets and incur the capital gains.

This is true any time you move brokerages, is it not? If, at some time in the future, you chose to move from Vanguard to Wealthfront to take advantage of tax loss harvesting, you'd pay capital gains tax as well.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#283

Post by jpetso »

hvis wrote: post #205
bdonlan wrote: post #81

Earlier quoted context omitted.

Index funds buy or sell blindly, at whatever the prevailing best price is. Naturally, if there were only index funds in the market, the price would vary randomly. That being said, consider what would happen if stock prices did start to vary randomly - if you had actual research suggesting the price was too high or too low, you could trade accordingly. This would net you a profit, and also help push the price in the o…

But the "correct" price is the one the investors are willing to buy at, right? Imagine that 99.98% of all investors are index funds, and there is a company BigCo that is at some point is at the top of the market. So pretty much every index fund invests in it. Then suppose BigCo makes some move that would traditionally be a mistake. Like it has some scandal, the sales drop off, etc. Say it even has a bad quarter. How…

Even if it doesn't drop off, you can make money by investing into businesses who give you better long-term growth and (related) dividends than the one that everyone else is buying through index funds which you know isn't doing well.

This would require a long-term view similar to how Berkshire Hathaway is acquiring businesses. If active investors' short-term price speculation were reduced in favor of long-term bets, that might be a good thing for businesses and the economy overall.

And of course, if this situation actually becomes commonplace, chances are the market for index funds is going to self-correct since a well-performing stock needs either solid dividends or above-average growth. A market with 100% indexing can not give you above-average growth, and dividends depend on actual business performance.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#284

Post by sigstoat »

jalopy wrote: post #220
bluGill wrote: post #211

Earlier quoted context omitted.

Actually Vanguard claims they care more: active investors will get out if things go bad - they might even make decisions that are good short term bad long term. Vanguard is in for the long term so they care more. One of the things Vanguard can do is ensure good management is in place.

But then that would be active management. This is something Vanguard expressly does not do.

That's not what active management is. "We believe that our active engagement demonstrates that passive investors don’t need to be passive owners."

https://about.vanguard.com/vanguard-proxy-voting/

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#285

Post by lr4444lr »

malchow wrote: post #197
lr4444lr wrote: post #154

Earlier quoted context omitted.

If you're a Vanguard customer (buying the flagship fund classes, I presume), you're expressing faith in CAPM[0] and EMH[1] on a significant level. Some active investors will probably in the long term scoop up some extra gains, but the question still remains: which of them, over what time horizon, and is that a risk you want to take? Vanguard gives you lots of no-commission funds with 1 day liquidity even in the mutua…

Say more. Why do I believe in the Capital Asset Pricing Model and Efficient Markets (both proven wrong) if I invest in Vanguard's cheap S&P 500 ETF? I invest in their S&P 500 ETF because it's the cheapest way to get diversified exposure to the 500 largest American companies, and I believe that the 500 largest American companies will be more valuable in the future as a combination of valuation, scale, and cash flows t…

I think the other commenters hit on the important points and anticipated my distinctions. Note that I said "on a significant level". That did not imply blind or absolute faith. There are other investment options to match your bullish outlook if you think CAPM and EMH are wrong to the approximation that suits your involvement, knowledge, and risk profile, but you chose an index ETF. Why?

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#286

Post by snotrockets »

q-base wrote: post #101

Think I may need to dig deeper into this. But a few questions that one of you may be able to answer. Seems like you won't get super large returns but on the other hand you won't risk super large losses either. But sounds like instead of having cash on a bank account, earning no interest, it may be worth putting them into EFT's? Or have I totally misunderstood? Is it only possible to tie your money up for longer perio…

There is a risk, but it is averaged over hundreds of equities instead of just a few, as with directly buying shares (unless you can afford to spread a lot; if you do, you can afford a wealth manager).

If just a few equities are decreasing in value, it'll balance out. But if they all loose, like on October 19th, 1987, when the S&P 500 lost 20.47%, you'd be much poorer.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#287

Post by The3rdMan »

KKKKkkkk1 wrote: post #181
kolbe wrote: post #162

Earlier quoted context omitted.

> the less active money there is around, the less accurate our concept of a correct value can be The problem is deeper than that. Active shareholders actually give a shit about corporate governance. Collectively, they put honorable and competent people on the board of directors, and make sensible decisions when other issues are put to shareholder votes. Vanguard and other indexing funds could barely care. Their incen…

Talking about honorable and competent people on the board of directors. I recently realized that Apple's board of directors includes Al Gore. He's certainly a honorable man, but what does he know about making and selling iPhones? Why is he on Apple's board of directors?

Al Gore is an "honorable man"?! He is nothing more than a charlatan, dictating to us peons how we should live our lives and reduce our "carbon footprint", while jet-setting around the world in private planes. The man has emitted more carbon dioxide than I can ever hope to do within twenty lifetimes. Politicians are rarely the sort of people you want to proclaim as “honorable”, as by the very nature of their business, they typically sell themselves out like a cheap whores.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#288

Post by snotrockets »

StavrosK wrote: post #134
peferron wrote: post #109

Earlier quoted context omitted.

Can you request an ITIN?

I don't know what that is, I'm afraid. Is it something Vanguard would provide? If it's a US government thing, I don't live in the US, I would just like to invest in index funds (so anything that resembles Vanguard is fine with me).

AFAIK there are non-trivial tax liabilities and reporting requirements in the US for non US persons investing in the US. Just to be on the safe side, I wouldn't directly invest in another country without consulting a tax professional first.

If you want to invest in a US index, you can probably find a ETF traded in your country of residence that tracks a US index. It'd cost a bit more than Vanguard's, but would cost you much less in hassle, effort, and regulatory requirements (which would be handled by whoever manages the fund).

You should ask your broker or bank about that before rushing to try and buy Vanguard's ETF directly from the US.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#289

Post by pembrook »

headmelted wrote: post #125

As a Vanguard customer, I can understand why people are so enthusiastic about their products, and have known for a while that passive investment, and Vanguard in particular, was growing while active management was on the decline. At no point did I think the difference in inflows was anywhere close to 8.5x. And it does worry me. I'm familiar with the contention that even having some active players in the market will a…

The flows to Vanguard are largely driven by retail investors and I think you are grossly overestimating the pricing value that "active" retail investors provide.

Retail investors don't act as a rational pricing mechanism. 99% of them don't discount future cash flows, examine balance sheets, or evaluate growth prospects. In fact they statistically buy high and sell low which only serves to make boom and bust cycles more severe. They are the greater fools in the Greater Fool Theory.

Turning "dumb" retail money into passive index fund flows can only serve to make markets more efficient and stable. That said, if I had to guess the massive flows to index funds will come to a grinding halt as soon as the next market correction.

While indexing has historically been the best strategy over the long run, the low interest rate environment has made it appear to be the best strategy even in the short term. This is not normal and is due to the high correlation still lingering after the effects of QE. Once interest rates rise enough to make alternatives more appealing this will balance itself out since investors chase returns.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#290

Post by acchow »

zeroer wrote: post #143
acchow wrote: post #129

Earlier quoted context omitted.

False - this is not how tax loss harvesting works. Even if you are in the black every year, you can still benefit from it.

That is exactly how tax loss harvesting works. Here's a quote from Betterment: "What is Tax Loss Harvesting? Tax loss harvesting is the practice of selling a security that has experienced a loss." https://www.betterment.com/tax-loss-harvesting/

No, you are not understanding how it works. Your portfolio can be in the black every single year, but you can still use TLH to improve your returns every single year by harvesting losses in individual securities.

See: http://www.investopedia.com/articles/taxes/08/tax-loss-harve...

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