> Instead of a regular stock broker, I highly recommend Vanguard. Go with Vanguard whenever you can.
This is good advice. YMMV but my retirement fund with Vanguard has been yielding ~10% annually (VWELX).
Hard-won lessons about money and investing
141–150 of 264 posts
Re: Hard-won lessons about money and investing
#142I've been considering moving from holding Vanguard ETFs (one of their Total Retirement funds) over to Betterment or Wealthfront to take advantage of their automated tax loss harvesting. Does anyone have any thoughts about whether automated tax loss harvesting is worth the 0.15-0.25% fees that the robo-advisers charge?
I made a comment elsewhere in this thread, but will reiterate it here: tax loss harvesting only shifts the tax burden to the future. If you put in $100k today (post tax dollars), and tax loss harvesting is able to fully "realize" that $100k, you'll have to pay tax on that $100k when you go to sell it (because the basis will be down to $0). Yes, you get the potential gain on the difference in your net worth; consider…
I'll take any interest free loan that I can get, offsetting today's gains to lower my tax bill means more money to invest.
I agree that in many situations tax loss harvesting isn't helpful and even in the best case it's not amazing but if over the long term it can be worth the 50 basis points that the robo-advisors claim then it might be worth paying 15-25 basis points for it.
Hearing about Schwab's entry into the market makes me think that I should at least hold off to see what changes an established broker makes on the robo-advisor market.
Re: Hard-won lessons about money and investing
#143Earlier quoted context omitted.
the trouble with index funds is you participate fully in any crash/dogs eg index funds had to hold enron to the bitter end. some of my active funds saw the problems with the banks and got out before the crash now no index fund is ever likely to make up the difference - the active fund is now always ahead of the index
> the active fund is now always ahead of the index but the question is how do you select the active fund which will consistently beat the market in the future.
look for ones that have been around for 100 plus years and with 30-40 years of increasing dividend payments
Re: Hard-won lessons about money and investing
#144https://www.bogleheads.org/wiki/Getting_started Short version: Open a Vanguard account and invest >=15% of your salary in the appropriate target date fund for the year you want to retire. P.S. Where possible, become a millionaire in Google's IPO.
Bogleheads is a great resource, but I expect most HN readers can handle managing their asset allocation manually (using a simple "three-fund portfolio" or similar), which allows you to save a bit on expenses compared to a target date fund, as well as take more advantage of tax management techniques like municipal bonds and tax loss harvesting.
This is very true. But for people who know nothing about investing and just want to get started, the simplest non-harmful advice I always give is "Vanguard Target Date Fund". That way, at least they are not doing anything wrong that will serious hurt their returns. Later on, when they have more experience or more money, they might want to switch to some other allocation.
Re: Hard-won lessons about money and investing
#145Earlier quoted context omitted.
Well, except for how difficult that is. Living on only 35% of after tax income requires you either A) live extremely cheaply or B) make tons of cash. Roughly speaking, in California, this requires living off of 20% of pre-tax income. As an example, to live off $35k/year in SF as a single person (which would be considered modest in tech circles), you'd need to earn $175k/year. With a family, this gets more unrealistic…
Perhaps that means SF might not be a great place to work in spite of 6 figure salaries.
Work remotely. Get paid a SF salary; live in back-of-beyond, Arkansas. Retire at 30.
Re: Hard-won lessons about money and investing
#146Regarding most of these lessons, in 2004, Google brought in experts on personal investing to educate employees heading into its initial public offering: http://www.modernluxury.com/san-francisco/story/the-best-inv... TL;DR: Put your money into some broad-based, low-cost index funds.
ah so why do the Rothschilds put a good chunk of family money in an active fund aka RIT Capital partners.
index funds are fine for some one with only a couple of grand spare - with the sort of money that comes from a good ipo you need to be a bit more sophisticated than that.
Re: Hard-won lessons about money and investing
#147For most people, the easiest way to become financially independent is to save aggressively. That aside, I have always invested in a small number of individual stocks, with minimal management or effort, and only moving positions between companies slowly over time. Basically, I make bets on long-term trends that I view as technologically inevitable. I don't invest in sexy companies (though some become sexy later), I in…
Based on what you've written, it doesn't appear that you've measured the performance of whatever method you're using against an appropriately risk-adjusted benchmark. For example, beating the S&P 500 over a certain time period is okay but if you're doing it with a bunch of small- or mid-cap tech stocks, it's quite possible you're not being compensated adequately for the risk you're taking. For instance, if you're inv…
I only invest in large caps, ones everyone knows, based on two criteria:
1) They are are fairly or somewhat undervalued given the conventional market view and metrics.
2) They are likely to be significant beneficiaries of large-scale technological trends that the market is oblivious to and has not priced into the stock.
Then I wait a few years for the trend to become more obvious and for the market to adjust the stock price accordingly for the new upside. My portfolio is essentially a ladder of different technology trends that take 3-4 years to mature. Occasionally one does not pan out but, while I may not make much money, I never lose much money because "good large-cap tech stock".
The only "small caps" I invest in are tech startups. But that is a different portfolio than what I am talking about here.
Since I spend my days thinking about trends in technology anyway, this whole exercise takes little additional effort. I might add or remove something from that list of stocks once a year. When I save money from my paycheck, I semi-randomly put it in a stock on that list so no thinking required.
Yes, I could do some kind of sophisticated portfolio analysis but that would defeat the goal of spending as little time on it as possible. I only check against the S&P 500 as a sanity check. My lifetime annualized return (decades) is about +2 over the S&P 500 but the last five years has been more like +4, so I can't complain. The annual return relative to the S&P 500 has actually been surprisingly steady over time, so no undue volatility.
Re: Hard-won lessons about money and investing
#148> Think about working for equity vs. salary It's really common for people to drastically overestimate the value of startup equity, or to just not understand the basic mechanics of it at all. In my experience people look at the face value of their options and are pretty clueless about how taxes (or even their strike price!) affect what they might actually wind up with.
I had a friend of a friend quote me the value of his "options package" once (was high six figures), and only after drilling down I discovered this was the amount of ISOs multiplied by his strike price, i.e. a price that he would have to pay up to exercise it.
I once had a VP of Engineering quote me the "value" of my options using that calculation. I declined the offer. Ironically, it was a Lisp startup, and Lispers "know the value of everything and the cost of nothing."
Re: Hard-won lessons about money and investing
#149Earlier quoted context omitted.
One of the nice things about Vanguard is that the fee structure is much less than 1-3% for many of their funds. I invest with them in some of their index funds and pay no more than 0.4% in fees; usually much less than that.
Vanguard is owned by their funds, so incentives are aligned with the shareholders of the funds. They are very different than most fund companies.
That's a bit of a gimmick. Management still pays themselves from the % of invested funds, not fund performance. Same issue as with a nonprofit -- the corporate profit structure is only one source of moral hazard.
Re: Hard-won lessons about money and investing
#150How many people are actually living entirely off passive income from interest, dividends, and capital gains? I feel that goal—which requires millions of dollars in investable financial assets—is only realistic for a tiny percentage of the population.
You could live quite well off only a £million or so in the UK so 2 mill in the USA will give you a nice life style - baring any catastrophic health issues