Investment discussion

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Re: Investment discussion

Postby NathanLoiselle » Sun Nov 10, 2019 5:16 pm

You should invest in audio equipment. They can go up to eleven.
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Re: Investment discussion

Postby Pedgerow » Sun Nov 10, 2019 10:02 pm

Windy wrote:I stopped investing because I realized there's no point in investing for the future when you're going to be dead in 3 years.


Are you ill or just pessimistic? The impending recession is almost certain to happen within the next three years, and that's always the best time to invest because everything becomes worthless. Then, when it regains its value afterwards, you can clear up. If you have some health crisis, you can leave the shares in your will to a charity or something, and do tremendous good for a bargain price. If your crisis is more emotional, the idea that some filthy freeloading charity is going to cash in on all your wealth if you die will be a great incentive to stay alive and fight the depression.

NathanLoiselle wrote:You should invest in audio equipment. They can go up to eleven.

I bought an ancient Roman amplifier recently. It goes up to 2.
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Re: Investment discussion

Postby cmsellers » Wed Jun 03, 2020 8:52 pm

So, I finally have a job, and set up a Roth IRA a week ago with Schwab.

I plan to not touch the IRA until I absolutely have to (I'm desperately short on money or I hit the age where disbursements are required), and my strategy is therefore intended to maximize expected returns over the long term.

Long, rambling discussion of my IRA strategy and results to date
I want to have an allocation which is about 2/3 foreign ETFs and about 1/3 US small cap value ETFs, the latter mostly being Vanguard, which seems to offer the best diversity:expense ratio, with a few others for hedges. US small cap value ETFs long-term, have higher returns and higher volatility than the stock market as a whole. The foreign ETFs I'm investing in are also economies I expect to do well over the long-term. I'm mostly looking at countries which are A. democracies, even flawed democracies, B. with diversified economies, which are C. not notoriously difficult for doing business in, and D. are not facing serious demographic problems in the medium to long term.

I'm therefore mostly investing in the Pacific Alliance countries (Mexico, Colombia, Peru, and Chile), several Southeast Asian countries (Thailand, Malaysia, Indonesia, and the Philippines), with a disproportionate investment (for its size) in New Zealand as well. A key part of this strategy is that I am trying to create a portfolio dominated by emerging markets while excluding some of the most popular emerging markets, such as China (dictatorship with demographic problems), Brazil and Argentina (notoriously difficult to do business in), Egypt, Turkey, and Vietnam (dictatorships), South Africa (demographic problems), and the petrostates of Nigeria, Saudi Arabia, Qatar, and the UAE.

I also have some non-US developed markets for global balance; developed markets tend to be low-risk, low-return. South Korea and Taiwan are historic exceptions to this, but past performance is no guarantee of future success and I'm gambling (a relatively small amount of my portfolio) that Chile and New Zealand will be the South Korea and Taiwan of the next few decades.

On the first day I put in $1k, and by the time I finished buying as many ETFs as I could afford with my initial investment, I'd lost $11, which sucked, but it was almost entirely driven by the US small-cap value ETFs. I told myself that I knew going in those would be volatile, and the next day Trump drove the stock market down 200 points and I didn't dare look until it became June and I put in another $500 I had to invest (slow and steady is the key).

Now, a week after I started it, my whole portfolio is up $60 from where it started. Of course, given the expected high volatility of my investments, I'm trying to tell myself not to get too attached to those numbers, anymore than I should have gotten distressed by the $11 I "lost" on my first day. Unfortunately, my feelings don't care about the facts. I now see why people so often make bad investment decisions in contravention of the underlying data.


I also have a 401k through my company, with my own contributions being Roth. (By law, company match contributions must be pre-tax.) For now I've mostly set it up to get the company match, and since I'm hoping to buy a house, that and the IRA will be my main priorities this year. But given it would allow me to triple my tax-privileged investments, I fully plan to max both out next year, assuming I'm still employed. Unfortunately, it doesn't offer small-cap-value ETFs and the only emerging market ETFs are weighted towards ones I don't want to invest in, so I'll probably mostly be investing in small cap, value, developed market, and broad US ETFs for the 401k.

In terms of my broader financial strategy, I plan to buy a house, and until I have about half enough saved to retire on, that and my emergency fund are going to be basically the only "safe" investments, while I pursue of not only primarily equity, but ideally, as much equity as possible following my high-volatility, high expected long-term returns strategy. Once I get about halfway to retirement, I will switch my investments primarily to bonds, with the goal of having a portfolio that's about 50% equity. Then, when and if I retire, I'll draw down the bonds first, engaging in "bond tenting."
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Re: Investment discussion

Postby NathanLoiselle » Wed Jun 03, 2020 11:16 pm

I had an IRA once. It blew up in my face.
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Re: Investment discussion

Postby iMURDAu » Sat Jun 06, 2020 11:46 pm

We could've bought massive amounts of masks, toilet paper and hand sanitizer as recently as February and made a killing.
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Re: Investment discussion

Postby jbobsully11 » Mon Jun 08, 2020 2:13 am

iMURDAu wrote:We could've bought massive amounts of masks, toilet paper and hand sanitizer as recently as February and made a killing.

I was thinking of investing in 3M or some other company that makes PPE, but their stock costs more than I put in my Roth IRA in a month.

I figured I should probably have some idea of how balanced my account is, so I checked with an online retirement allocation calculator, and supposedly I should have something like 6% in cash (instead of <0.4% like I currently have). I also have more in bond funds than I should, but *shrug*.
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Re: Investment discussion

Postby cmsellers » Mon Jun 08, 2020 3:07 am

I believe that some brokerages allow you to buy fractional stocks, but I don't think it makes sense to buy PPE companies at this point: the 'rona is already baked into the price.

I don't understand the reasoning behind keeping IRA/401k assets as cash. I know a lot of target retirement funds keep part of their assets as cash, but I assumed it was to meet unexpected expenses. It's good to have cash on hand, for emergencies, but why on earth would you want to keep a depreciating asset in a tax-privileged account?

I should mention to y'all that I've become a big fan of Ben Felix, whose YouTube channel talks about investment decisions based largely on academic literature and/or math. A lot of what he talks about—especially with relation to which accounts to use for which investments for tax purposes—is Canada specific, but there's plenty that's useful in terms of broad principles.

My big takeaways are:

1. Without a source of insider knowledge, you can't reliably beat the market by timing the market or picking stocks.
2. You can reliably beat the market by taking on additional sources of risk in the short-term which have expected long-term returns commensurate with their risk.
3. Diversify your compensated risk factors.
4. Avoid idiosyncratic (uncompensated) risk (investing in individual stocks, investing in REITs) altogether.
5. Pretty much every investment except stock ETFs and bond ETFs is either unproven, or proven to have worse returns when you adjust for risk and cost than stock and bond ETFs. You can capture all the premiums on various sorts of risk, in any mix you choose, through stock and bond ETFs.
6. Dividend-based ETFs are just a less efficient, less-diversified, more expensive, more taxable way to capture the value premium.
7. Taxes can make the difference a lot of the time, which is the only reason I own any individual stock in my employer (via my 401k): owning your employer's stock in a 401k gets special tax treatment, though I haven't looked into exactly what it is.

Any rate, I bring this up because I've never heard Ben Felix suggest putting cash in tax-privileged accounts either.

Also, good news: it turns out that my 401k offers a BrokerageLink account on pretty good terms. It only allows the trading of ETFs, but I then ETFs are all I trade. It also allows only three brands of ETFs: Fidelity and iShares for free, Vanguard with a $5 per transaction fee. Since most of my ETFs in the IRA are Vanguard and iShares, and since Fidelity ETFs are just basically rebranded Vanguard ETFs, this should work pretty decently for me, as long as I only trade actual Vanguard ETFs at least $1k at a time.
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Re: Investment discussion

Postby JamishT » Wed Jun 10, 2020 8:58 am

I pay rent using the Cash App, and last year it developed the ability to trade fractional stocks. At the end of December someone sent me $75 on the app, so I decided to have a little fun and see what I could do. Then, in the middle of the COVID-19 stuff in March, I invested another $25 because I figured prices were at their lowest at that point. I currently have (rounded up or down):

Aurora Cannabis: $20 in, -$7 return, Very disappointing investment (at one point it was at a -90% return), but I guess I am a little too late to the Weed Train. I'll dump it if it ever breaks even for me.

Juniper Networks: $15 in, $.30 return. Very slow growth, but I got a tiny dividend from them, which was nice. I picked them because they seem to be involved with corporate/industrial level technology may end up dumping them at the end of the year. Or I'll just hang on to it forever.

Square: $20 in, $8 return. Being that it is the company behind the app I'm using, I figured I should bet on it as well. It's past the price it was before the COVID crash, and I think that I'll keep it in my minuscule portfolio for a while.

Shopify: $20 in $16 back. I picked it because I know that it is the company behind a lot of online shopping, which in December I thought was a good idea. Since COVID it's turned out to be an excellent idea.

Zoom: $25 in, $22 back. I started hearing about Zoom on NPR and Marketplace a lot, so I figured I would make my total investment a nice round number. Here's to hoping they don't have some kinda massive scandal!
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Re: Investment discussion

Postby cmsellers » Wed Jun 10, 2020 11:08 pm

You're taking on a lot of idiosyncratic risk here, Jamish, but at the amounts you're playing with, it would take you almost a century and a half to become a millionaire, adjusted for inflation (I did the math, it's 137 years) through normal stock market returns, so you might as well gamble with it.

That said, keep in mind that while holding onto a stock pot is usually a good idea, holding onto the pot stocks probably isn't. Your decision to hold on only if you get back your initial investment is an example of the sunk costs fallacy, and you're also ignoring the opportunity costs of investing them in a better asset. But again, small amounts of money, so if you enjoy the gamble, that fun is probably worth the couple bucks you could be making.

OTOH, I would expect pot stocks to rise if Biden wins the presidency, and rise dramatically if Democrats win the Senate, so if that looks likely to be the case a week before election day, buying then and holding until Biden announces his AG or the Democrats announce their marijuana policy might not be a bad idea.
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Re: Investment discussion

Postby jbobsully11 » Thu Jun 11, 2020 12:23 am

I’m shifting toward more index funds. For marijuana, I’m invested in TOKE. I also have money in the junk bond fund JNK.

I have >$1,100 in my account now, so I’m debating investing in a target-date fund (Vanguard seems to be good with those), but it would mean dropping most of my other stocks (the Vanguard funds have a $1k minimum), and I know that as soon as I do, they’ll shoot up. I... may not be good at handling logical fallacies.
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Crimson847 wrote:In other words, transgender-friendly privacy laws don't molest people, people molest people.

(Presumably, the only way to stop a bad guy with a transgender-friendly privacy law is a good guy with a transgender-friendly privacy law, and thus transgender-friendly privacy law rights need to be enshrined in the Constitution as well)
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Re: Investment discussion

Postby JamishT » Thu Jun 11, 2020 3:01 am

Yeah, I'm basically just gambling for fun, but I hadn't thought of the sunk cost fallacy in regards to the pot stock. I'm a little stubborn though, so I'll probably just hold on to it anyway, especially with that Biden point.
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Re: Investment discussion

Postby cmsellers » Thu Jun 11, 2020 6:32 am

My IRA is almost back down to the initial amount I invested, and given the high volatility of the stock market, will probably drop below that amount before it rises again. I've set up $500 to auto-deposit every month, and have resolved not to look again until I do that. I do not have enough money that setting firm allocations and rebalancing makes sense, so I'm currently sort of winging it with rough allocations that "feel right" to me. I'm under-allocated to US small-cap value and international value stocks, so most of my next two allocations will go towards those, which will reduce individual country allocations such that everything now at 5% will be 4%.

I have, however, have a few new bits of information.

1. I've begun my project to determine which emerging markets make sense to invest in. As a first pass, I simply looked at ten indices which look at factors I expect might determine economic growth. (Keeping in mind that I only looked at whether countries matched the factors I'd expect to make a difference, I still haven't run the data on whether those factors do actually make a difference and to which degree.) Most of my intuitions about which countries would do well in those factors were correct, however South Africa (which I'd dismissed) actually does really well on most of them, and I'm going to aim for a roughly 3-4% allocation to South Africa in my next round of ETF purchases.

2. This same initial pass suggested that the most-promising markets which don't currently have single country ETFs include Panama, Costa Rica, Uruguay, Morocco, Tunisia, Oman, Ghana, Namibia, Tanzania, Mauritius, and Madagascar. These are all considered "frontier markets," so I looked into what's available for frontier market ETFs, and it's ... not much. There's a Vanguard bond ETF, and an iShares Frontier Markets ETF which has heavy exposure mostly markets I do not consider promising, but it's performed well on average (with some pretty high volatility), and is at a low point right now, plus it has some exposure to Oman and Morocco, so I'll probably allocate 1-1.5% of my portfolio to that ETF.

3. I had a conversation today with a fellow who has made and lost multiple fortunes in tech. I was talking about 3D printing, and how the 'rona has demonstrated a lot of new potential uses for it. He mentioned that he also expects it to do well, which is why he's invested (among other things) in a 3D printer ETF. It's so far performed rather poorly, and investing in sector ETFs is generally a bad idea, but in this case, I think it's worth investing maybe 1-1.5% of my portfolio in, because I've seen what I can do, and in researching other disruptive technologies with an eye to having perhaps 5-10% of my portfolio eventually dedicated to disruptive technology ETFs.

4. Turns out the brokerage account available through my 401k, I'm limited to 50% of my investments invested in it. This is unfortunate, but I had thought I couldn't get *any* of the ETFs I wanted in my 401k, so I still come out ahead. I've upped my contribution such that my company match now constitutes about one third of the money I'll be saving for retirement this year, and if I fully fund my 401k next year as I hope, that will drop to one fifth. I had initially planned on not holding any bonds for about five years, then beginning to bond tent. However given that the company match is pre-tax and my own contributions are Roth, I've decided that I will dedicate about half of it this year to bonds, with a target of having 1/6 of my assets in bonds for the next few years, all in company match funds.
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Re: Investment discussion

Postby Pedgerow » Mon Jul 06, 2020 1:16 am

I need your help, millionaires! I keep putting off investing my money, even though I've been saying for years that when the economy next collapses, I will score myself a sweet tracker fund where every single share is like half the price it should be, and make a vast mountain of dolla dolla billz y'all when everything reverts to normal. I have no interest in picking my own shares or anything like that; I just want the surplus to the surplus of my savings to go into the stock market. Let's say I'm looking to invest about £5000, presumably in the FTSE 100 because that's the country I live in and I don't feel adventurous enough to try anything else.

Now then: most of these basic tracker funds have a minimum monthly contribution. So I can't just hand over five grand and walk away till I have five more grand; I'm going to need to keep topping it up. Would you, the mighty experts, invest the full wodge right now and top it up by a measly pittance each month, or would you invest, say, half of it, and add a fair amount more each month? I don't have infinite millions, but would £5000 plus £50 a month after that be a better idea than £2000 now and £200 a month after that? I can afford either one (at present, barring catastrophe), but if I don't get my ass in gear quickly, everyone's going to get their jobs back and then I won't be richer than everyone else any more. So what would you do?
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Re: Investment discussion

Postby cmsellers » Mon Jul 06, 2020 2:30 am

When I'm trying to google about UK index funds, I'm mostly finding stuff about how to invest in US index funds with UK exposure. So I can't tell you what specific funds to invest in, or how it works in the UK.

What I can tell you is that in the US and Canada, you have two kinds of tracker fund (or as we call them: index fund): mutual funds and exchange-traded funds, or ETFs.

Some mutual funds will have the restrictions you describe, but I've only ever heard of them from actively managed funds: I don't think it's common in passively-managed mutual funds.

ETFs are just like stocks: you set up a brokerage account, buy them like stocks, and then you presumably hold them long-term. In the US, most index funds are ETFs, to the point that people will often claim ETFs are actively managed and mutual funds passively-managed, which isn't true. I'm invested in one mutual fund, in part of my 401k, where my options are limited, and a couple dozen ETFs.

I'll also note that it looks like, based on a quick google, brokerages in the UK all seem to charge a per-trade commission, but it can be as low as three pounds, which isn't too bad if you're going to buy in bulk and hold. RobinHood will be coming to the UK this year, which would give you a commission-free option and likely drive other brokerages to offer it too, but time in the market will probably beat a few pounds out of thousands.

I'd also suggest you consider diversifying to hold a substantial chunk of your investment in foreign ETFs. However it's a tradeoff, you're diversifying your risk, but also subjecting yourself to foreign taxation.

Plus, if it's an option, you might consider both diversifying your risk and increasing your expected long-term returns with a small-cap value fund. Failing that, if small cap and value funds are an option, buying both is worth considering. I can't tell you how much is recommended to buy, because it depends on your risk tolerance.

Also, while the British Private Pension Scheme doesn't offer a post-tax option like Canada and the US do, investing pre-tax money will still save you money, so it's probably worth looking into setting up one of those if you don't plan on touching the money for awhile, assuming it lets you pick your investments.
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Re: Investment discussion

Postby jbobsully11 » Tue Aug 04, 2020 3:05 am

I'm happy to report that as of a few days ago (the end of last month), my retirement account was up >7.7% from the month before, and (assuming I'm doing it right) almost 9.5% above all the money I've put into it since opening the account last November. So, naturally, I had to suspend my monthly contributions again because I'll likely need extra money for some major bills that may come up soon, but still.
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Crimson847 wrote:In other words, transgender-friendly privacy laws don't molest people, people molest people.

(Presumably, the only way to stop a bad guy with a transgender-friendly privacy law is a good guy with a transgender-friendly privacy law, and thus transgender-friendly privacy law rights need to be enshrined in the Constitution as well)
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