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The Investment Thread

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Offline  Re: The Investment Thread
Posted: June 17, 2018, 1:14 PM Post
Posts: 173
Thank you Nate for the advice, it is very helpful. I take a contrarian view on markets so feel it's always over sold. It just seems like all the gains from the recession far outpaced the real economy, and that seems like the market is running on fumes. But I guess if you think about everyone in the country investing in 401k's and the world putting money into the US markets it makes some sense. Thank you for the advice on bonds, I always thought they are a safe way to invest if you invest in highly rated bonds. I guess the return is not worth the safety though. We will be using this advice and taking the long view, as we should.

After I get my student loans paid off I plan to invest for the short term and learn the hard way. I'm reading Security Analysis now and plan to set up a for fun portfolio soon and keep trying to learn more about finance and markets. Once I track the fun portfolio I will be able to see some of my shortcomings hopefully. I do have a degree in economics, but it really has made me more of a cynic than believer in markets. I ended up pursuing a graduate degree in engineering and that is what I do for work now, so I don't use the econ in my job other than developing the economics of future projects.

Edit: Would it be a good idea to use Vanguard FA? They charge 0.3% per year. My gf thinks it might be worth doing, the fees are less than the FA she had been talking to originally. We are just a little worried we might not be sophisticated enough for this amount of money and do not want to do anything foolish.


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Offline  Re: The Investment Thread
Posted: June 17, 2018, 2:26 PM Post
Posts: 11109
When it comes to short term investing “for fun” always remember it isn’t a loss until you sell it.

I’m not much of a fan of trying to time the market etc. The average person trying to get creative with their market investments isn’t really a wise idea.


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Offline  Re: The Investment Thread
Posted: June 17, 2018, 2:39 PM Post
Posts: 173
MrTPlush said:
When it comes to short term investing “for fun” always remember it isn’t a loss until you sell it.

I’m not much of a fan of trying to time the market etc. The average person trying to get creative with their market investments isn’t really a wise idea.


"for fun" as in not actual money but a portfolio on yahoo or something, just to track how I do. Once I have disposable income I would actually invest, but use the fake account as a way to see how poor my analysis is before I actually am investing real money.

Good point about it's not a loss until you sell. As far as timing the market, I don't really want to try and time it, it just seems right now you would be buying in high, and if you waited and it dropped your money would be worth more because stocks would be cheaper. But I guess that is the definition of timing the market, and it could just as easily add another 20% and we never see 24,000 on the Dow again.


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Offline  Re: The Investment Thread
Posted: June 17, 2018, 4:52 PM Post
Posts: 173
OK, instead of watching the Brewers today I tried to look into the index funds offered by Vanguard. If anyone is familiar with Vanguard funds please feel free to share your opinion. Just to clarify what I'm trying to do again, my gf has received an inheritance of about a half million and wants to invest to grow it, not looking for short term investment but long term and is fine being invested for 10 or 20 years or more before she would want to touch it. I am attempting to follow nate82's advice on the allocation. The last number is the expense ratio on the fund.

40% 500 Index Admiral Shares (VFIAX) 0.04%
20% Vanguard Small-Cap Value Index Fund Admiral (VSIAX) 0.07%
10% Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX) 0.07%

15% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) 0.11%
5% Vanguard FTSE All-World ex-US Small-Cap Index Fund Investors Shares (VFSVX) 0.25%

5% Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX) 0.07%

5% Vanguard Precious Metals and Mining Fund (VGPMX) 0.36%

Any advice on the allocation and funds is appreciated. If this is not appropriate for Brewerfan let me know and I will end the discussion.


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Offline  Re: The Investment Thread
Posted: June 17, 2018, 5:57 PM Post
Posts: 1715
Location: Madison, WI
No offense my friend, but if you are looking to invest 500k+ then there are two things that you should absolutely not be doing. #1 is asking a bunch of anonymous people on a message board about how to invest. #2 is making investments heavily dependent on low management fees which appears to be what you are doing here. If your girlfriend's family has an financial advisor/investment broker they trust, then I would recommend using that individual's knowledge.

For the record, I do not work in the financial industry.


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Offline  Re: The Investment Thread
Posted: June 17, 2018, 7:05 PM Post
Posts: 173
#1 I tend to think this forum is pretty informed on a range of topics and would take the advice of certain members only if it aligned with my own ideas on the topic. It is anonymous so I really didn't see the harm in getting some input.

#2 I didn't necessarily use only lowest fees as the deciding factor, though it did play a factor. I looked at how the funds were distributed and what holdings they had and these seemed like decent choices to me. But like I said, if anyone has any reasons why they're not I'd love to hear them, again, just looking for input.

I get your point and this can be my last post on the subject, I guess I just didn't see the harm in getting some input. Any time I read some of these off topic threads there are a lot of good insights I would not have thought about. And I will take your advice into consideration as well, as I think this may be too big of an undertaking for us and would be better served by a professional. There is not much trust with who her family is currently using so pretty sure she is looking elsewhere, and may use the Vanguard services.

I wouldn't just bring this subject up on any message board and expect any worthwhile discussion, but I feel this isn't your normal message board with respect to the quality of posters.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 12:00 PM Post
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You didn't do anything wrong (at least to my knowledge) in posting this. I do think JosephC was just saying, that's a big chunk of money, and she probably is better off talking with someone. My advice however, is there are a lot of sharks that will want that money to invest, and may not offer great advice. So I think it's always good to meet with multiple people, or have someone you trust, take a look at what is recommended, to make sure it's legit. I think the average investor can do a decent job, just by doing proper generic allocations, looking at fund ratings and expenses. Because this will be in a taxable account (I assume), I think this is where an advisor could really help. Help manage the investments with regards to taxes. Again, this is where you have to be careful, because some insurance or investment people may try to get you to invest in something long term like an annuity or life insurance, and it may not be the best move. Always ask an advisor why they are advising an investment and what their take is. I think people on here generally try to help and look out for each other on here.

So what is her long term plan for this money? What if something happens and she needs it sooner than 10 years or more? Would she use part of it for a big purchase, ie. downpayment on a house? All things you have to think about. A lot of times we have great intentions, but you'd hate to have a situation where you invest it all in mutual funds, the market tanks and it's only worth half, and you are forced to take it out and lock in a big loss.

edit: I just went back and skimmed earlier posts that I hadn't read. You also want to make sure you are diversifying by cap size and growth vs value stocks. So within domestic and international ratio, you want to make sure you are touching on all those areas. Usually in a fund analysis, it will have a dot in a tic tac toe looking grid, on where the fund lands. Large, mid, or small cap and also a growth or value fund. Ideally you have a foot in each area. Large cap funds tend to be the safest equity investments, so most people have a much higher percentage there. You can do more research on this to see what is appropriate for your goals (risk/reward).


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 2:35 PM Post
Posts: 173
The tax considerations are a good point, we have thought about it a little, as far as reinvesting any dividends and not taking any income from it. Where that will be an issue is when she finally looks to cash out. She will be in school again in about a year so may try to take dividends then for living purposes and deal with those taxes, but it would be her only income. These are things I need to look into though. I have an uncle who has his own tax business, I will talk to him about what types of investments would align with a tax strategy. She plans to use this money to invest for the long term, no plans to pull it out and should not have to for any specific reason. She's more interested in leaving the money in the market and letting it grow. Personally I'm not sure if she should be expecting the same returns as we've seen the last 30 years but everyone she talks to says get it invested ASAP.

I think the biggest thing is to take our time and do some in depth research on some funds and talk to more people. I have a friend's wife and my brother-in-law's uncle who are FAs and I would trust, but they are both located out of the area and she doesn't know either so would rather not use them. But I should still reach out and get some advice. Her family's FA was steering her toward a fund which took a 2% fee off the top, and I think other fees would have been applicable as well, and if she wanted to get out of that fund and into another it would be another 2%, so figured he's not really looking out for her.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 2:48 PM Post
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Just because a fund is front loaded (pay to get in), does not mean it's bad advice. So don't think the person is a bad advisor. Advisors have to get paid for what they do. They get it one way or another, and they should. The problem is when they lead someone to an investment that doesn't make any sense, just for a higher commission. I was in the FA industry for a few years out of college, so I know just enough about the industry to get an idea what an advisor is going for. You could always ask that advisor if there is a possibility to buy the same funds in a managed account, where you just pay an annual fee (maybe around 1%) and not have to pay a front load fee. This is an ideal type of an account for someone who would be pretty active with your investments, because you wouldn't get charged for buying and selling. A front loaded fund makes more sense if you were to invest, and probably just let it sit for years (not be too active in trading). Remember, inside a mutual fund, the fund managers are buying and selling stocks to meet the objective of the fund, so you don't really need to buy and sell funds themselves, too often. Typically only if they underperform their peers for a couple years in a row and if their rating goes down.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 3:01 PM Post
Posts: 173
OK, he knows the family well and their investments are just held, so he probably was looking out for her knowing that is their strategy. It just seemed like 2% was excessive when you could be in a Vanguard account and the fees can be as low as .05% per year. I told her to make sure he would act as her fiduciary and put it in writing and he did not have a problem with that. He had also made a mistake which cost them money and tried to push them into something which was not beneficial to them, but they realized it wasn't to their benefit and did not allow it.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 3:02 PM Post
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I'll second the tax aspect considerations. Keep in mind that if you're investing in mutual funds, the managers of those funds are buying and selling stocks within the funds, likely creating capital gains (on which you get the privilege of paying taxes). I invested on my own for years, but then also received an inheritance that was more than what I had previously invested. At that point, I turned to a professional to manage all my investments. There's value in having someone coordinate all your investments - as you likely have (or will have) several different buckets. In my case, I have the inherited account, a rollover IRA from previous jobs, and my current job 401k. My guy makes sure my overall picture is the mix of investment vehicles, risk profiles, and taxable income generation (or tax loss harvesting) fits with what I'm comfortable doing.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 3:06 PM Post
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I see no problem trying to time the market. If I get a check for half a million today, no way would I put that into the market. Maybe I would lose out, but I'm just very confident there will be a correction within the next few years.

I don't trust any advisors, not sure I would even it was a family member. If they were so good at the job, they would have been able to retire long ago with 10s of millions of dollars. They can't beat the S&P on a regular basis any more than you can. Are there really good ones out there, and ones that have my best interest in mind? Probably, but impossible to know.

As mentioned earlier, tax considerations is something you should always keep in mind. Sock away as much as you possibly can in 401k and IRAs. Even annuities are worth looing into, which the financial planning world hates. (As a contrarian, that tells me it's worth looking into.)

First thing you should do though, buy a few thousand tickets to every Cubs game at MP the rest of they year and hand them out only to Brewer fans.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 3:27 PM Post
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You aren’t timing the market by saying “there will be a correction in the next few years”. That’s the easy part...the problem is try to get in at or near the bottom.

What if it takes another few years and the market soars until then? Any correction probably won’t get it low enough to be where it is now. Makes you better off just getting in now, growing, taking the correction hit, and then still be ahead.

You could also wait it out for a correction watching the market keep rising and wait for the correction. When you think it is back on the rise you buy in...but wait, it was only halfway down. Then you lose all the market gain and still take on some of the correction.

If one could time the market to any realistic accuracy everyone would do it and people would be swimming in money. The fact is it isn’t. If you are looking at a 20+ year investment it’s smartest to just get the money into the market.

Only timing of the market I would recommend is in the event of a big market crash or recession. If you are lucky enough to be in a good financial state at a time like that it could be a wise idea to start putting lots of money into the market. Then again that just being at the right place at the right time...not really timing anything. Timing the market is really just sitting around hoping it sees a correction sooner rather than later and hoping you put (or take out) in your money at the right time.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 3:42 PM Post
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MrTPlush said:
You aren’t timing the market by saying “there will be a correction in the next few years”. That’s the easy part...the problem is try to get in at or near the bottom.

What if it takes another few years and the market soars until then? Any correction probably won’t get it low enough to be where it is now. Makes you better off just getting in now, growing, taking the correction hit, and then still be ahead.


No question, it is impossible to know the top or the bottom. For that matter, how long it will take to get to the bottom, back to the top, etc.

But I'm personally gambling that the market will not soar even higher in the next few years. Even if it does, at some point I see it going way down again. I wouldn't wait for the bottom, since we have no idea what it is. Just buy chunks on the way down once we get to correction territory.

I just don't believe in dollar cost averaging for stocks. There is always some luck, some educated guessing involved, but I believe we've had a big bad bull market, and I'm not buying equities until we have a correction. Yea, that means I have to wait, maybe for a while, but that's ok.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 4:11 PM Post
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FVBrewerFan said:
I don't trust any advisors, not sure I would even it was a family member. If they were so good at the job, they would have been able to retire long ago with 10s of millions of dollars. They can't beat the S&P on a regular basis any more than you can. Are there really good ones out there, and ones that have my best interest in mind? Probably, but impossible to know.


A majority of FA aren't trying to beat the street every day like traders. They are offering a service. Trying to help their clients understand and invest wisely and properly plan for the future. A lot of people don't have the time or the ability to understand how to invest properly, so that's why the service is needed. I don't think too many advisors are saying they will make you rich, but that they will come up with plan to help meet your goals. I think if you can find a good and fair financial advisor, that goes above and beyond, and truly understands what they are doing, you hold on to them and pay for their service. Unfortunately the best ones typically only deal with big money. The other unfortunate part is there are a lot of FAs that aren't worth paying. Like a good accountant and mechanic, they can be great to have.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 6:31 PM Post
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The dividends could be taxed at 0% depending on your tax bracket.
https://www.corporatemonkeycpa.com/2018 ... -jobs-act/

Another option other than an FA could be a CPA if you want to go that route. Finding a good FA is hard as there are so many of them I suggest getting to know one and feeling them out if they are going to be a good fit. If you want to start looking on your own I would suggest asking an accountant as you should be asking them a few things about taxes also. You could be paying 0% on your dividends.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 7:20 PM Post
Posts: 173
I appreciate all of the info everyone has provided. We are going to continue to research our options and not rush into anything, possibly seeking professional help if we feel this is just too much for us to handle. I know a lot of people say get into the market as soon as possible, but I think we'd be better served to go in with confidence in our choices than just invest to get in.

And thank you Nate again for providing extremely useful info, once she starts school paying no taxes on dividends should be a great way to cover expenses.


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Offline  Re: The Investment Thread
Posted: June 18, 2018, 9:45 PM Post
Posts: 1855
ilikewisco said:
Thank you Nate for the advice, it is very helpful. I take a contrarian view on markets so feel it's always over sold. It just seems like all the gains from the recession far outpaced the real economy, and that seems like the market is running on fumes. But I guess if you think about everyone in the country investing in 401k's and the world putting money into the US markets it makes some sense. Thank you for the advice on bonds, I always thought they are a safe way to invest if you invest in highly rated bonds. I guess the return is not worth the safety though. We will be using this advice and taking the long view, as we should.

After I get my student loans paid off I plan to invest for the short term and learn the hard way. I'm reading Security Analysis now and plan to set up a for fun portfolio soon and keep trying to learn more about finance and markets. Once I track the fun portfolio I will be able to see some of my shortcomings hopefully. I do have a degree in economics, but it really has made me more of a cynic than believer in markets. I ended up pursuing a graduate degree in engineering and that is what I do for work now, so I don't use the econ in my job other than developing the economics of future projects.

Edit: Would it be a good idea to use Vanguard FA? They charge 0.3% per year. My gf thinks it might be worth doing, the fees are less than the FA she had been talking to originally. We are just a little worried we might not be sophisticated enough for this amount of money and do not want to do anything foolish.


From another view (I tend to be more bullish)...the market has been digesting a massive run from election night 2016 until late 2017/early 2018 as the economy catches up so to speak.

Image

Wages are increasing, employment is increasing, and many of these jobs are better paying (and full time vs the part time job market of the prior many years due to the healthcare bill incentivizing employers to do it).

If your GF wants to own some stocks I would start out looking at simple things like AT&T (T) and Apple that are paying a fat dividend and see how it goes from there before venturing off into riskier things. I own the ETF SCHD (US big cap dividend) and AT&T in my IRA at the moment.

I would definitely keep at least part of it with a professional, but do whatever you feel most comfortable with.


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Offline  Re: The Investment Thread
Posted: June 19, 2018, 8:55 AM Post
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ilikewisco said:
I appreciate all of the info everyone has provided. We are going to continue to research our options and not rush into anything, possibly seeking professional help if we feel this is just too much for us to handle. I know a lot of people say get into the market as soon as possible, but I think we'd be better served to go in with confidence in our choices than just invest to get in.

And thank you Nate again for providing extremely useful info, once she starts school paying no taxes on dividends should be a great way to cover expenses.


Over time small cap stocks out gain large caps. And if you are looking at a 15 - 20 year timeline then you have wiggle room with risk (obviously risk is personal though). So you could potentially put a large percentage in a small cap index fund. But if that is too risky by your standards then I'd probably just put almost all of it in a large cap index fund and let compounding interest work its magic.

If you are are worried about inflation you can diversify and use part of it to invest in some real estate.

"Dustin Pedroia doesn't have the strength or bat speed to hit major-league pitching consistently, and he has no power......He probably has a future as a backup infielder if he can stop rolling over to third base and shortstop." Keith Law, 2006


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Offline  Re: The Investment Thread
Posted: June 19, 2018, 10:59 AM Post
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homer said:

Over time small cap stocks out gain large caps. And if you are looking at a 15 - 20 year timeline then you have wiggle room with risk (obviously risk is personal though). So you could potentially put a large percentage in a small cap index fund. But if that is too risky by your standards then I'd probably just put almost all of it in a large cap index fund and let compounding interest work its magic.

If you are are worried about inflation you can diversify and use part of it to invest in some real estate.


Instead of actual real estate not sure if you are suggesting that but an REIT also works.

There are other tax implications for REIT and other real estate investments. Should really talk to a tax accountant first before talking to a FA IMHO.


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