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Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

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Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#81

Post by losvedir »

I think direct indexing with TLH is a useful tool particularly when you are looking to diversity out of a large existing holding (say a bunch of RSUs or something from a public company you've worked at for a while). The direct indexing piece is nice because you can build "around" your existing holding, which you can't do with, say, VOO. And the TLH is nice because you have a lot of capital gains in your position to offset.

This is something you can do with, e.g. Fidelity's FidFolios, but those are paid for via an AUM fee.

Can you do the same here? That is choose an index, but seed it with some amount of shares that you already hold?

Another potential annoyance is filling out your tax return. Can you talk a bit about how that would work, with all the trades throughout the year you'll be doing?

I'd also love any more info you can provide on how exactly you do TLH. A factor model linear optimization problem is interesting! When I talked to my Fidelity advisor she pitched it as the pair-wise solution you mentioned, and gave an example of "sell Pepsi to buy Coke". But while the drinks are interchangeable, I'm not convinced the companies are! So I'm still a little hesitant on the idea of TLH at all.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#82

Post by jjmaxwell4 »

shred45 wrote: post #38
jjmaxwell4 wrote: post #27

Earlier quoted context omitted.

We use fractional shares. But otherwise you are correct, our minimums are set to allow you to buy at least $5 of each member of the US 500. We do not charge trade commissions. There are some SEC fees charged for trading across most major brokerages. The national best bid offer (NBBO) means you will get executed at the current best price for a given security across all exchanges.

Thanks, regarding transaction fees, I was referring to slippage (should have said transaction cost). This depends a lot on your customers rebalancing settings, but it would be good to be able to compare that directly to VOO.

Yeah it's an interesting point. Due to the redemption mechanism of ETFs, my understanding is that an ETF's bid-ask spread is basically the weighted average of the bid ask spread of it's underlying holdings. Which to answer your questions means that buying the individual stocks within an ETF would result in approximately the same slippage as buying the ETF itself.

"Bid/ask spreads of the underlying securities directly impact the costs to market makers to trade ETFs" from this .pdf: https://www.ssga.com/library-content/pdfs/etf/au/spdr-au-etf...

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#83

Post by LocalPCGuy »

tschwimmer wrote: post #26

I like the idea behind this business and like the value that you are providing. I'm a target customer because I'm sensitive to investment fees and have done lots of comparison shopping over my investing lifetime. Unfortunately, I won't use your product. While you do appear to be cheaper than Vanguard for a comparable product, I don't think the risk of switching is worth it. The primary risk I'd be worried about is yo…

Same sentiment here - I feel like this is the largest challenge for people that would otherwise be ideal candidates. I wasn't even willing to move off one of the largest brokerages for the semi-recent Robinhood 3% "transfer deal" just because even there I felt like it was too much risk (granted, that was for a retirement account).

For someone that has quite a bit of my portfolio in very low cost index funds, something like $40k does seem like a relatively low "fee" for avoiding risk, especially considering it's spread over many years.

That said, I do like the idea, and hopefully there are enough folks willing to tolerate the risk to provide a viable alternative to the big status quo brokerages.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#84

Post by chii »

gruez wrote: post #36
ddulaney wrote: post #24

Earlier quoted context omitted.

For 1 — dude, please back off the “[the rules] are a farce”. Citadel and friends pay to trade with you because they think you’re dumb and they can make money off you. They’re giving you or your broker a better deal because they think they’re smarter than you. That’s all it is. They’d rather trade with you than with the median person on the market. Because they think you’re dumb. You’re welcome to be insulted by that.…

>Citadel and friends pay to trade with you because they think you’re dumb and they can make money off you. They’re giving you or your broker a better deal because they think they’re smarter than you. That’s all it is. More to the point, just because they're smarter than you, doesn't mean you're taking a loss by trading with them. The public markets are shark tanks, and it's better for both sides to avoid it. Market m…

> because they know the typical retail trader isn't a shark.

so why don't the sharks use robinhood, which then they can do their shark thing there, but at a better price than before?

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#87

Post by semiquaver »

taway789aaa6 wrote: post #65
ramon156 wrote: post #50

Earlier quoted context omitted.

Sorry if this sounds uninformed, but what is the alternative? Even the bank and pensions gamble with your money, its how they move. I wish it wasn't the case either

The alternative is to not fall for the "its basically free!" schtick. If its free, then you're the product. If its $1/month, then you're still probably the product. In the case of my investments, I do not want the firm that I invest with -- to whom I trust my assets -- to turn around and lend out my assets to other organizations that have no obligation to me to act in my best interest. Share lending is almost always…

  > separate out banks and gamblers.
Banks are inherently in the business of gambling. Since time immemorial the defining characteristic of a bank is to convert short-term liabilities (deposits) to long-term assets (loans). To lend is to gamble that your borrower will pay you back. A bank that takes no risk cannot cover its expenses and will cease to exist.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#88

Post by gruez »

taway789aaa6 wrote: post #41
jjmaxwell4 wrote: post #12

Earlier quoted context omitted.

We charge $1/month. Longer term, we think there are additional revenue streams we can enable that are similar to existing broker-dealers like Robinhood, Fidelity and Schwab. That means things like cash float, margin lending, stock lending and payment for order flow. Currently we are not a broker-dealer.

Ah yes, the old "we'll buy stocks for you and then turn around and lend them out to short sellers that actively want you to lose money. Promise we care about you!" I do not trust any institution that makes money off of lending MY shares out to predatory short-sellers who's sole purpose is to decrease the value of MY shares.

>I do not trust any institution that makes money off of lending MY shares out to predatory short-sellers who's sole purpose is to decrease the value of MY shares.

1. You realize that short sellers have to buy the stock back, which basically has the opposite effect? Unless you're planning to dump the stock in a few months, this isn't worth worrying about.

2. You know what's worse than short sellers driving down the price of your stocks? Corporate malfeasance going undetected and blowing up (eg. Enron), causing you to lose everything. Short sellers might get a lot of flak by profiting off people's losses, but they provide a useful service by exposing misconduct and putting a wet towel on irrational exuberance.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#89

Post by windexh8er »

Invictus0 wrote: post #71
hn_throwaway_99 wrote: post #22

Earlier quoted context omitted.

I appreciate the sentiment, and I agree, but this really matters. There have been so many stories of fintechs collapsing recently, where people were really just trying to make an extra few percentage points of yield, and then people lost all of their savings. I also like to root for the little guy, but the trust barrier will be the largest hurdle I think that this company needs to overcome, and so it's fair to discus…

Please recall this is the website that discusses startups. It is absolutely not fair to use "you are not a big company" as a point of criticism

Every possible angle is "fair" when it's your money. To look the other way because it's being discussed on HN is madness. For folks that aren't aware of the fintech failures the point being reiterated makes a statement and if the OP / founder doesn't address the issues in the thread then it doesn't seem like I should have a ton of faith in their service.

Re: Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

#90

Post by shmatt »

hn_throwaway_99 wrote: post #16

I saw the "Your Money is Secure" section, but after things like the Synapse fiasco, I would like to get confirmation from you. It says my money would be SIPC insured, which means if anything goes missing (obviously not through loss of equity value, but through missing funds or a ledger bug), I get my money back, up to the SIPC limit, right? I just want to ensure this isn't the same situation with fintechs that say yo…

This would explain only $10M in AUM within 3 months. Id guess just the commenters on this thread hold 10x that in etfs and funds

If a big bank launched this it would have $1B in AUM within less than an hour

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