why not simple sell a market when goes up and buy it othewise?
I'm Too Risk-Averse for Index Investing
71–80 of 286 posts
Re: I'm Too Risk-Averse for Index Investing
#72Makes you wonder why the 89% of fund managers that fail to beat the market don't just pick "value" stocks.
You're a true Boglehead like myself. That was my exact thought reading the article. Seems the crux of the problem is ... how can you pick value stocks? I'm not Warren Buffett who can spend my entire career weighing a companies value.
Re: I'm Too Risk-Averse for Index Investing
#73Earlier quoted context omitted.
Makes a huge difference when considering the tax implications.
Many retirement funds are in a tax shelter either way, though.
Problem is, the US-based euro or emerging market fund will have withholding taxes applied to it, unless it’s a retirement-specific fund.
You just won’t see the tax withholdings on your statement because it shows up on theirs.
Re: I'm Too Risk-Averse for Index Investing
#74There's something really insidious about tying 401ks and other retirement accounts to the stock market. People including myself end up with a large portion of our assets essentially gambled on the future success of US corporations. It gives some false legitimacy to this idea that our media is constantly pushing, that if the stock market is going well then regular Americans are doing well.
It was super annoying when I returned to the UK with my dual UK/US wife and we couldn't invest in the same passive funds (or rather, we could, but at punitive tax rates) because US seems to like their citizens wherever they live in the world to invest in the US. Nice bit of protectionism you got there. Fair enough for the Maniforts/Bidens of the world wheeling and dealing on a global stage. Less fair for those of wit…
> It was super annoying when I returned to the UK with my dual UK/US wife and we couldn't invest in the same passive funds (or rather, we could, but at punitive tax rates) because US seems to like their citizens wherever they live in the world to invest in the US.
I guess you're talking about PFIC. Are you also a US citizen? If not, iirc your wife is allowed to gift you 164K USD a year, which you can then use to invest however you see fit.
If you somehow still have access to a US broker, as far as I'm aware you're allowed to purchase and own US ETFs through them. PFIC only applies to non-US domiciled funds.
Re: I'm Too Risk-Averse for Index Investing
#75Earlier quoted context omitted.
100%. European markets are known to pay out more dividends whereas the US market is known to prioritize stock price growth. Return-wise that makes no theoretical difference.
Don't know why you're being downvoted; everything you've stated is true. I would just add that one should probably account for taxes. When taxes are involved: buybacks >> dividends.
Depends on the country. Some countries incentivize long-term ownership by taxing dividends at a lower rate than other capital gains. And in some countries, mutual funds don't pay taxes for (domestic) dividends.
Re: I'm Too Risk-Averse for Index Investing
#76Michael Burry has two main points against index funds: 1) large-scale passive investing has deteriorated the price discovery mechanism for index funds and 2) there's a liquidity risk because trillions of dollars are linked to stocks in index funds that only have hundreds of millions of trade volume. So if there's a cascading failure, as smarter money realizes the price is wrong and begins to exit, there will be no bu…
Does he have advice for what passive investors should do instead?
Also, we're not $Billion USD investors like Burry.
Re: I'm Too Risk-Averse for Index Investing
#77When I've read Graham's book or learned about value investing, I always hit a wall where I realize I'm just not willing to put in the vast amount of time it takes to research companies, scour financials and do a proper job of it. I've already got a career, I don't need a second.
Plus I'm not sure how much value I contribute to the world by spending all day picking the stocks that will make me the richest.
Re: I'm Too Risk-Averse for Index Investing
#78One can buy alternative indexes that prioritize value factors. Vanguard, Schwab, and other large brokerages offer these products. See, for example, VTV which uses a multi-factor weighting scheme to try to find stocks that are “cheap” or FNDX which weights based on debt-adjusted free cashflows.
I think the title should say “too risk-averse for market-cap weighted index investing”
Re: I'm Too Risk-Averse for Index Investing
#79Michael Burry has two main points against index funds: 1) large-scale passive investing has deteriorated the price discovery mechanism for index funds and 2) there's a liquidity risk because trillions of dollars are linked to stocks in index funds that only have hundreds of millions of trade volume. So if there's a cascading failure, as smarter money realizes the price is wrong and begins to exit, there will be no bu…
1. Price discovery happens at the edges. You only need a few folks out there making trades for it to happen. Further, if prices do become out of whack with reality, hot shots (or people who perceive themselves as hot shots) will go in to take advantage of the spread.
* https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox
2. The last few episodes of market drama have shown few outflows out of index funds, and probably general net inflows. The folks using them are generally doing a set-and-forget strategy and won't be looking at headlines too much. Certainly less than the average gamified Robinhood account.
Re: I'm Too Risk-Averse for Index Investing
#80Earlier quoted context omitted.
Don't know why you're being downvoted; everything you've stated is true. I would just add that one should probably account for taxes. When taxes are involved: buybacks >> dividends.
If you hold your stocks in a tax exempt account then you don’t really care about this though. Pension funds, ISAs in the UK, etc etc; most countries have something similar. The vast majority of individual savers will not exceed the limits placed on these accounts.
In Canada, it’s difficult/expensive to buy euro stocks or euro funds directly, so you end up buying a Canadian-domiciled or US-domiciled euro fund.
I wouldn’t be surprised if US retirement savers have the same issue.
While dividends from the etf are tax-free in a retirement savings, the dividends from the euro company are first paid to the etf, and the euro company still does tax withholding. From their point of view, they’re not paying out to a retirement fund.