Stock Market/Investing/Fin Planning Catch-All

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CFordUNC said:


Here comes the TRUMP RECESSION
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but the good news is a Trump recession, just like before, will bring down the price of eggs and gasoline. And just like before, the minor downside could be a return to 6.7% unemployment... which is a small tradeoff if you can buy eggs for $2/dozen :sneaky:
 
A warning and advice to those touting the success and "no brainer" approach of low cost S&P 500 index funds.

An excellent strategy for the past few years, even longer. That is because it is impossible for a well diversified excellent fund manager with stocks across all sectors, to outperform the S&P when 80%+ of returns have been driven by the largest companies all in the tech sector.

When a recession or major pullback hits, the index will get crushed for the very same reason. A well managed diversified portfolio will hold up MUCH better. And long term returns are made as much by beating on the downside as the upside. That is why the best managed funds typically outperform the index over a 10 year period by as much as 2%+ per year, net of all fees.

I share this not to start a debate. But you might want to consider switching to an "equal weight" index or etf
 
Kraftyheel89 said:
A warning and advice to those touting the success and "no brainer" approach of low cost S&P 500 index funds.

An excellent strategy for the past few years, even longer. That is because it is impossible for a well diversified excellent fund manager with stocks across all sectors, to outperform the S&P when 80%+ of returns have been driven by the largest companies all in the tech sector.

When a recession or major pullback hits, the index will get crushed for the very same reason. A well managed diversified portfolio will hold up MUCH better. And long term returns are made as much by beating on the downside as the upside. That is why the best managed funds typically outperform the index over a 10 year period by as much as 2%+ per year, net of all fees.

I share this not to start a debate. But you might want to consider switching to an "equal weight" index or etf
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Does this mean that as an investor in my early 30's, with 100% of my investment portfolio invested in total market indices, I should be considering a shift toward a more conservative investment philosophy? I've always figured I have a very high risk tolerance and such a long horizon of time until I *need* my investment portfolio, that I'd be fine with just riding it out in a 100% total market allocation come hell or high water for the next few decades.
 
CFordUNC said:
Does this mean that as an investor in my early 30's, with 100% of my investment portfolio invested in total market indices, I should be considering a shift toward a more conservative investment philosophy? I've always figured I have a very high risk tolerance and such a long horizon of time until I *need* my investment portfolio, that I'd be fine with just riding it out in a 100% total market allocation come hell or high water for the next few decades.
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Don't you work in finance? If so, why are you asking Krafty? Not that he's a dunce, but it seems odd for you to be asking this question.

100% in total market indices is already pretty conservative. You don't want bonds. If you want to downshift into lower beta stocks, I mean, sure -- but then you're making sectoral bets and it's unlikely that you would outperform the market that way.

When you say total market, do you mean total US stock market? Worldwide stock? Total US market? If you don't have any money in other economies, that would be my recommendation. I've done very well by investing in India and/or Brazil ETFs. I currently have an India one.
 
superrific said:
Don't you work in finance? If so, why are you asking Krafty? Not that he's a dunce, but it seems odd for you to be asking this question.

100% in total market indices is already pretty conservative. You don't want bonds. If you want to downshift into lower beta stocks, I mean, sure -- but then you're making sectoral bets and it's unlikely that you would outperform the market that way.

When you say total market, do you mean total US stock market? Worldwide stock? Total US market? If you don't have any money in other economies, that would be my recommendation. I've done very well by investing in India and/or Brazil ETFs. I currently have an India one.
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Ha, totally fair questions. I just like getting different perspectives from different folks. Ultimately I know that investing and personal finance is a single-player game and that each person's needs, desires, strategies, and risk tolerance is unique to them. I just like hearing what other folks think, especially in this community since I have so much admiration for all of the different expertises and experiences that folks here on this board have!

When I said total market, I did mean total U.S. market. I haven't personally invested in international stocks or indices as it (IMO)m hasn't really been necessary over the last 10-12 years of this extraordinary bull run. But I'm definitely open to considering it moving forward, especially since the U.S. seems hellbent on ceding our economic and global leadership roles. I also haven't invested in any bonds or bond indices, because I do feel that I have a strong stomach for risk and volatility, and I figure that I can handle that much more easily in my 20's, 30's and 40's than I will be able to do in my 50's and 60's.
 
Kraftyheel89 said:
A warning and advice to those touting the success and "no brainer" approach of low cost S&P 500 index funds.

An excellent strategy for the past few years, even longer. That is because it is impossible for a well diversified excellent fund manager with stocks across all sectors, to outperform the S&P when 80%+ of returns have been driven by the largest companies all in the tech sector.

When a recession or major pullback hits, the index will get crushed for the very same reason. A well managed diversified portfolio will hold up MUCH better. And long term returns are made as much by beating on the downside as the upside. That is why the best managed funds typically outperform the index over a 10 year period by as much as 2%+ per year, net of all fees.

I share this not to start a debate. But you might want to consider switching to an "equal weight" index or etf
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Thank you so much, i'm your audience. I've been tempted to start moving a little to cash or something a little less risky but this is an idea and i'll be acting on tomorrow. PS, this guarantees a 10% loss on the SPY and VTI overnite ;-) then of course a giant gain in particular sectors not long after I make my move.
 
CFordUNC said:
Ha, totally fair questions. I just like getting different perspectives from different folks. Ultimately I know that investing and personal finance is a single-player game and that each person's needs, desires, strategies, and risk tolerance is unique to them. I just like hearing what other folks think, especially in this community since I have so much admiration for all of the different expertises and experiences that folks here on this board have!

When I said total market, I did mean total U.S. market. I haven't personally invested in international stocks or indices as it (IMO)m hasn't really been necessary over the last 10-12 years of this extraordinary bull run. But I'm definitely open to considering it moving forward, especially since the U.S. seems hellbent on ceding our economic and global leadership roles. I also haven't invested in any bonds or bond indices, because I do feel that I have a strong stomach for risk and volatility, and I figure that I can handle that much more easily in my 20's, 30's and 40's than I will be able to do in my 50's and 60's.
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I'd start with reallocating money into international equities. Avoid international fixed income. I did great with a developing world bond fund in the 2000s, but now is not the right time for that (not sure the fund even exists any more). There are total global stock market ETFs, but you can also add country-specific ones.

I have money in India for a few reasons -- one of which is that it seems to me a possible winner in the new new world order. But the truth is that investing is just much harder now than it used to be.
 
CFordUNC said:
Does this mean that as an investor in my early 30's, with 100% of my investment portfolio invested in total market indices, I should be considering a shift toward a more conservative investment philosophy? I've always figured I have a very high risk tolerance and such a long horizon of time until I *need* my investment portfolio, that I'd be fine with just riding it out in a 100% total market allocation come hell or high water for the next few decades.
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Not at all CFord. You should never try to time the market. You should set what you are comfortable with and leave it that way. And in your 30's 100% in stocks is just fine so long as you can stomach the ups and downs and not do what MOST investors do (the exact opposite of what they should do.)

Most investors get even more aggressive after big runs, and more conservative after big drops.

The best example of why market timing does not work is 2020. In addition to the tragic loss of lives, it was a major recession. Over 10 million jobs lost and countless small biz bankruptcies, an anemic economy. The market was down over 37% first half of year. Yet the S&P finished with double digit gains before a single Vax was administered, and a very deep recession.

As for Super's comments, I spent the first 15 years of my career and got fairly high up in Corp. Finance with a couple of Fortune 50 Companies. I was in financial reporting and analysis. I could do all sorts of fundamental analysis, and whiz through other company Financials with ratio analysis. But I didn't know crap about personal financial planning and investing.

Now, I give investing workshops to CPAs a few times a year, and in turn go to a few of their tax workshops (just to learn, I can not advise on that and don't wish to) though I do help clients with great tax moves.

Also, Super is completely wrong about being conservative in an index. Take the S&P 500, the largest index holding by far. It is 100% in stocks. If that is primarily what you are in, along with maybe an international or global index, the QQQ, small/midcap index, sector indeces, etc, you are still 100% in stocks. That is fine for your age. Yet NOBODY who manages money would consider that conservative. Stock diversification, yes, conservative? NO.

And finally a point about an equal weighted S&P index that I made earlier. Yes in a regular S&P 500 Index or ETF, you do in fact own all 500 companies. But the bulk is in the top 10 to 20 holdings, because their market caps are so much higher, and right now trading at astronomical multiples and have been for years.
 
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superrific said:
I'd start with reallocating money into international equities. Avoid international fixed income. I did great with a developing world bond fund in the 2000s, but now is not the right time for that (not sure the fund even exists any more). There are total global stock market ETFs, but you can also add country-specific ones.

I have money in India for a few reasons -- one of which is that it seems to me a possible winner in the new new world order. But the truth is that investing is just much harder now than it used to be.
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You may be right especially if you want to jump into European defense stocks :sneaky:

but at this point I think going cash and keeping your powder dry for the remainder of the year is the way to go if you want to sleep well at night...
 
heelinhell said:
You may be right especially if you want to jump into European defense stocks :sneaky:

but at this point I think going cash and keeping your powder dry for the remainder of the year is the way to go if you want to sleep well at night...
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Powder dry isn't a good strategy in an inflationary environment.
 
And yet another error by Super. Global is not the same as International. International is 100% outside the U.S. (ex-USA.) Global means just that. The U.S. is on the Globe also. Global can still be anywhere from 50-80% domestic companies.
 
Kraftyheel89 said:
Also, Super is completely wrong about being conservative in an index. Take the S&P 500, the largest index holding by far. It is 100% in stocks. If that is primarily what you are in, along with maybe an international or global index, the QQQ, small/midcap index, sector indeces, etc, you are still 100% in stocks. That is fine for your age. Yet NOBODY who manages money would consider that conservative. Stock diversification, yes, conservative? NO.
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Hey now. I said a total market index, not an S&P index. Plus, "conservative" is a relative term. That wouldn't be conservative for a 55 year old, but let's look at the sorts of things early 30 somethings like to do:

1. Invest in a local brewery or brew pub;
2. Crypto
3. Individual stocks;
4. Fuck around with options, etc;

I was also suggesting to get into non-dollar assets as a way of diversifying country risk, which is pretty conservative in this environment (though not uniformly over the years).
 
Kraftyheel89 said:
And yet another error by Super. Global is not the same as International. International is 100% outside the U.S. (ex-USA.) Global means just that. The U.S. is on the Globe also. Global can still be anywhere from 50-80% domestic companies.
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When did I say that global = international? To be honest, I don't keep track of the exact nomenclature. The more important point is to move assets outside the U.S. This is tricky, because sometimes problems in America create a global panic, and investors react by fleeing to quality, and historically quality has meant America . . . it's why predicting the damage from a US bond default is hard.

I would make sure to have some money in China and Japan for hedging purposes. I'd much rather be diversified between the US and China than between stocks and bonds.
 
superrific said:
Powder dry isn't a good strategy in an inflationary environment.
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It is if you put your cash in money markets paying over 4% now and with inflation those rates will increase. You can also consider investing in free floating bank loan stocks/mutual funds which are yielding around 8% and tend to do well in an inflationary environment.

Unless you are an investor who is under 50 years old, the "powder dry" strategy is a pretty good one if you want to sleep well at night for the next 4 years;)
 
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