General Investing and Economics Discussion - No Politics

[CuseJacket]

Going to leave this open-ended and see where it goes.

What's your general investment strategy? I'll set a baseline and assume most are familiar with "retail" investments including 401(k), IRAs, ESPP, etc.

Are you in real estate, notes, hard money lending, other brokerage accounts, etc? What tools and resources are you using to find opportunities and also to educate yourself?

 

[JacketFromUGA]

This little company called Enron.

 

[Deleted member 2897]

I’m almost exclusively in index funds. Saves me a lot of time versus individual stocks, and index funds historically beat a high majority of mutual funds.

 

[LibertyTurns]

What tools and resources are you using to find opportunities and also to educate yourself?

Here’s a couple of good resources:

https://www.ccmmarketmodel.com/short-takes/ GT Grad and phenomenal statistical approach to investing. Chris posts a video every Saturday which is always very educational. If you have the $$, recommend using his services.

https://www.investors.com/ I started using Investors Business Daily based on the recommendation of a fellow service member. Do your homework, follow the rules and you can generate an above average return and then some. This got me off the ground and I rarely failed to double the market return and a partially avoided the crashes.

Schwab has all my %%. They’ve got some good analytical tools I use for research as well.

 

[LibertyTurns]

@CTJacket posted a great site as well. http://epsilontheory.com/

I should have mentioned none of these are “go buy this hot stock” type sites. They’re all educational though & if you've got the time to dedicate to managing your finance, the desire to learn plus the discipline to leave your emotions aside in your decision making they can help you immensely financially.

 

[CuseJacket]

I’m almost exclusively in index funds. Saves me a lot of time versus individual stocks, and index funds historically beat a high majority of mutual funds.

This is pretty much where I'm at right now.

Some I talk to recommend index ETFs rather than index mutual funds. Probably a dumb question, but what difference does it make over the long haul? I think it's nearly splitting hairs on fees i.e., .04% vs. .05% or whatever. I suppose ETFs offer the ability to sell real-time, giving them the edge? I'm fairly ignorant on the merits of ETFs otherwise, if there are any.

Are you also doing index funds beyond your retirement portfolios i.e., general brokerage accounts?

 

[MWBATL]

I do a mix of real estate investing as well as traditional (and at my age, very conservative) stock funds investing.

The real estate investing is something I do entirely on my own on properties and with people I believe I know personally, to minimize risk.

The stock fund investing I allow my brokerage account managers to handle on my behalf. We meet every six months and make sure strategy wise we ar eon the same page. But then my objectives are much more capital preservation than growth at my age, so if the market goes up 10% I expect to go up 5% and if the market goes down 10% I expect to go down 5%. Ergo, these investments are very widely spread.

I make more money on the real estate than the stocks in recent years, but fully expect that to change with market conditions. I assume NO debt in my real estate investing.

 

[Deleted member 2897]

This is pretty much where I'm at right now.

Some I talk to recommend index ETFs rather than index mutual funds. Probably a dumb question, but what difference does it make over the long haul? I think it's nearly splitting hairs on fees i.e., .04% vs. .05% or whatever. I suppose ETFs offer the ability to sell real-time, giving them the edge? I'm fairly ignorant on the merits of ETFs otherwise, if there are any.

Are you also doing index funds beyond your retirement portfolios i.e., general brokerage accounts?

Yes. I dabbled in stocks when I first got out of Tech and quickly realized I couldn’t beat the index funds. Plus, it took a lot of time. But that’s just me. So that’s what I do for everything, retirement or not.

 

[awbuzz]

I’m almost exclusively in index funds. Saves me a lot of time versus individual stocks, and index funds historically beat a high majority of mutual funds.

Went this route a few years back. Rather spend time doing other things than investigating then babysitting anything I wasn't considering as long term (>5 years). Hell the index of teh SP 500 beats 80% of mutual funds over time... and the mutual funds are handled by those that "in the business" to do it better than I could.

Edit to add that I am referring to ETF tracking stocks.

 

[LibertyTurns]

I spend 10-15 hrs a week on my finances, roughly an hour a day and 6-8 hrs on the weekends. My return’s between $150-200/hr. I started out with a stick everything in mutual funds & let it ride system early in my military career when one of my peers took the time to introduce me to costs & IBD. Today there are low cost fund options in abundance that can meet most needs. That being said, if you want to consistently beat the market you can. It just takes a system you’re comfortable with, time & the discipline not to overmanage/ panic.

Right now I’ve got about 20% of my portfolio in a hybrid of ROTH and Traditional 401k’s. I switched jobs about 3 years ago & moved it all to Schwab so I could individually invest instead of being stuck in crappy work-restricted mutual funds. New job ROTH 401k is all S&P index. The other 80% of my investments are fairly well diversified among the core growth sectors. It does take some time to manage 50 or so different stocks but I manage any activity generally by the month not hour, day or week.

 

[CTJacket]

This is pretty much where I'm at right now.

Some I talk to recommend index ETFs rather than index mutual funds. Probably a dumb question, but what difference does it make over the long haul? I think it's nearly splitting hairs on fees i.e., .04% vs. .05% or whatever. I suppose ETFs offer the ability to sell real-time, giving them the edge? I'm fairly ignorant on the merits of ETFs otherwise, if there are any.

Are you also doing index funds beyond your retirement portfolios i.e., general brokerage accounts?

The one thing is unless you have a Vanguard or Fidelity account, I read somewhere recently (probably WSJ or Financial Times) that some brokerages are charging fees to hold their lower cost mutual funds. So there would be a slight advantage their to hold the ETF depending on the brokerage firm you use and their policy.

I admit, I haven't tried to trade much outside of index funds even though I have an MS in Finance and my CFA. Our firm specializes in real estate and private equity so I'm more versed in those. Plus with more HF trading/black boxes/etc. it is more difficult. I basically follow @bwelbo 's strategy although I pepper in some stocks that I believe in from time to time. Plus the statistics back up that asset allocation and lower fees have a greater impact on your returns for most people unless you're consistently beating the market.

I think a great book on investing is 'A Random Walk Down Wall Street' (), it's updated every few years and includes very good strategies.

 

[CTJacket]

@CTJacket posted a great site as well. http://epsilontheory.com/

I should have mentioned none of these are “go buy this hot stock” type sites. They’re all educational though & if you've got the time to dedicate to managing your finance, the desire to learn plus the discipline to leave your emotions aside in your decision making they can help you immensely financially.

Thanks for the shout-out. The part I bolded is probably the most difficult thing for most people.

 

[LibertyTurns]

Thanks for the shout-out. The part I bolded is probably the most difficult thing for most people.

I had to eat some crappy moves as a novice because what I selected had to be right. There were a few times I doubled down and got a double beating.

I’ll offer this up for the “you can’t beat the market” crowd. The S&P 500 is a capitalization-weighted index of 500 companies listed on the NASDAQ or NYSE. Not every company will overperform and not every sector will overperform. They key is to develop your strategy such that you maximize the stocks in your portfolio that are in the overperforming category and sectors and limit those below the line. Do that and you beat the market.

As an individual investor you have agility that mutual funds, etc do not. That’s a huge advantage. ETFs or Mutual Funds have rules they have to abide by. Many times these depress performance potentials and individually you are not limited by that.

I realized in time I could handle about 50. It requires a fair amount of reading daily, assessing threats and opportunities, etc much like you do running a department at a company or a business.

I stay away from what I don’t know. If I don’t understand the prospects I either pass or wait until I do. When the market has more risk, I reduce riskier positions and when it has less risk I take more chances. That’s about all there is to it.

Again, this is a time consuming activity. It’s definitely not for everyone. Some people fix their own cars, paint their house, etc where others hire out people to do that. Same goes for investing.

 

[Deleted member 2897]

I had to eat some crappy moves as a novice because what I selected had to be right. There were a few times I doubled down and got a double beating.

I’ll offer this up for the “you can’t beat the market” crowd. The S&P 500 is a capitalization-weighted index of 500 companies listed on the NASDAQ or NYSE. Not every company will overperform and not every sector will overperform. They key is to develop your strategy such that you maximize the stocks in your portfolio that are in the overperforming category and sectors and limit those below the line. Do that and you beat the market.

As an individual investor you have agility that mutual funds, etc do not. That’s a huge advantage. ETFs or Mutual Funds have rules they have to abide by. Many times these depress performance potentials and individually you are not limited by that.

I realized in time I could handle about 50. It requires a fair amount of reading daily, assessing threats and opportunities, etc much like you do running a department at a company or a business.

I stay away from what I don’t know. If I don’t understand the prospects I either pass or wait until I do. When the market has more risk, I reduce riskier positions and when it has less risk I take more chances. That’s about all there is to it.

Again, this is a time consuming activity. It’s definitely not for everyone. Some people fix their own cars, paint their house, etc where others hire out people to do that. Same goes for investing.

I second this, with the twist that you can have your cake and eat it too. About once every year or so, I rebalance my mutual funds to make sure that they stay weighted in the sectors that I feel have the most upside. So if small-cap stocks are significantly under valued compared to large-cap stocks for example, I will leave more money in smaller cap Index funds. Or international or what have you. There are tons of index funds and ETFs. Just be careful if you are getting a little bit off the beaten path, sometimes those investment methods may make use of futures and options, which can add a lot of extra risk you may be unaware of on first glance.

Edit: for example, I thought oil was extremely undervalued a couple years ago. So I went into an oil ETF. In order to mimic the price of oil, the ETF made use of futures, etc. That introduces a time-based cost. So yes it trended up and down with the price of oil, but over 2 years oil more than doubled, while the ETF returned about 30% less. For an investment vehicle that on the surface has a tiny management cost, that is surely an expensive avenue!

 

[bravejason]

Up until this year, I'd gone the mutual fund route with a financial advisor for Roth IRA's and additional investments. We discussed my financial goals and he recommended a set of mutual funds. I bought the shares in mutual funds of my choosing and paid a sales tax up front and had no other recurring fees or costs.

Last year the fiduciary duty regulations came into effect and the above model became unlawful. I could have grandfathered my accounts, but then I couldn't add additional money to them. So I had to close them and reopen new accounts. Now I'm in a managed account. When the account was opened, I specified my goals and risk tolerance. The account managers then make all the decisions regarding buys and sells consistent with my goals and risk tolerance and I pay an fee every year for this. One benefit I do have now is that rebalancing occurs automatically whereas before I and the financial advisor determined when the account was sufficiently out of balance to merit rebalancing (not that the rebalancing was ever a big deal). I have my doubts that this new managed account will perform better for me. I know for sure that my costs are going up.

That's one half of my investing. The other half is a 401(k). I consult with the financial advisor regarding the funds to invest in while maintaining consistency with the investments I have with the financial advisor. My company has a great 401(k) plan and I have options galore. It's all mutual funds, but there are a ton of options to choose from.

At one point I had a bunch of individual stocks due to an inheritance, though in some of the stock I only held maybe 10 shares. I didn't care to keep track of all the companies so I sold all the stocks and invested the money in the mutual funds I had with the financial advisor.

I know Warren Buffet has said his recommended approach is a low cost index fund. I'm sure Clark Howard has a similar stance. My financial advisor's opinion - and mine too - was that we can do better. An index similar tries to mimic the market, but if the market is crashing, do you really want to be mimicking it? That said, having held these mutual funds a while good while now, I'm not sure that there is that much of a difference. I haven't compared my performance to what it would be if I had been in an index fund the whole time to see what the difference is (Probably something I should do). What I do know is that my portfolio fluctuates like the market does. If the market goes down, my balance doesn't grow. If the market goes up, my balance grows.

The number one thing I have done is kept investing. Even during the Great Recession I never stopped maximizing my 401(k) and Roth IRA contributions and I did not sell any investments even though there was a stretch of time where I would invest X dollars and watch my account balance drop by X+Y dollars.

What the financial advisor really did for me was take the stress out of picking the mutual funds. He had a lot of experience and knew which funds were solid. I would have had to have read online reviews, looked at the past performance, and made an educated guess.

 

[Deleted member 2897]

Up until this year, I'd gone the mutual fund route with a financial advisor for Roth IRA's and additional investments. We discussed my financial goals and he recommended a set of mutual funds. I bought the shares in mutual funds of my choosing and paid a sales tax up front and had no other recurring fees or costs.

Last year the fiduciary duty regulations came into effect and the above model became unlawful. I could have grandfathered my accounts, but then I couldn't add additional money to them. So I had to close them and reopen new accounts. Now I'm in a managed account. When the account was opened, I specified my goals and risk tolerance. The account managers then make all the decisions regarding buys and sells consistent with my goals and risk tolerance and I pay an fee every year for this. One benefit I do have now is that rebalancing occurs automatically whereas before I and the financial advisor determined when the account was sufficiently out of balance to merit rebalancing (not that the rebalancing was ever a big deal). I have my doubts that this new managed account will perform better for me. I know for sure that my costs are going up.

That's one half of my investing. The other half is a 401(k). I consult with the financial advisor regarding the funds to invest in while maintaining consistency with the investments I have with the financial advisor. My company has a great 401(k) plan and I have options galore. It's all mutual funds, but there are a ton of options to choose from.

At one point I had a bunch of individual stocks due to an inheritance, though in some of the stock I only held maybe 10 shares. I didn't care to keep track of all the companies so I sold all the stocks and invested the money in the mutual funds I had with the financial advisor.

I know Warren Buffet has said his recommended approach is a low cost index fund. I'm sure Clark Howard has a similar stance. My financial advisor's opinion - and mine too - was that we can do better. An index similar tries to mimic the market, but if the market is crashing, do you really want to be mimicking it? That said, having held these mutual funds a while good while now, I'm not sure that there is that much of a difference. I haven't compared my performance to what it would be if I had been in an index fund the whole time to see what the difference is (Probably something I should do). What I do know is that my portfolio fluctuates like the market does. If the market goes down, my balance doesn't grow. If the market goes up, my balance grows.

The number one thing I have done is kept investing. Even during the Great Recession I never stopped maximizing my 401(k) and Roth IRA contributions and I did not sell any investments even though there was a stretch of time where I would invest X dollars and watch my account balance drop by X+Y dollars.

What the financial advisor really did for me was take the stress out of picking the mutual funds. He had a lot of experience and knew which funds were solid. I would have had to have read online reviews, looked at the past performance, and made an educated guess.

You bring up some good points like dollar cost averaging. Also, when the market is fully priced and at the end of the longest business cycle ever, my own personal opinion is you shouldn’t have any money in the market you wouldn’t need for 5 years. One reason I feel that way is for financial safety, but the other is to make money. We will have another painful recession. It might be in 1 year or it might be in 3. When that comes I plan on plowing everything I can into the market. Times like 2009 and 2001 were amazing buying opportunities.

 

[LibertyTurns]

Sorry this is broken into parts but work has been getting in the way.

Approx 30% of my holdings within each account where I’ve got individual securities I hold a limited number of what I’ll call my gold stocks. These are securities that have an extremely long term proven track record of appreciation/ dividend increases. You can probably guess what they are, but these are my buy and hold stocks and only in certain circumstances, ie May 2008 when the market started crossing over have I cashed these out and waited to regain larger positions after the crash.

I don’t ascribe to the “trying to catch a falling knife” strategy and as I stated earlier it took a couple of acute experiences trying to do so to teach me that valuable lesson. Most times it pays to be in the market but when the market’s rolling over I seek safe haven. This doesn’t happen often, but when it does you have to be very smart or very lucky to fend off equity deterioration. I’m not that guy.

 

[CuseJacket]

A lot of interesting thoughts that are reminding me of other questions.

1) For anyone investing for the short-term... what's your strategy? In other words, do you have killer dividend-producing equities? Or are folks primarily in this for the long haul? Curious if anyone's trying to quit their job

2) For those who attempt to proactively triangulate around risk, what are your thoughts on the market right now? Nearing the top or are the fundamentals strong enough to continue the bull run?

3) Unsurprisingly the convo is shifting primarily toward equities. Anyone in real estate, private equity, something else or attempt those in the past? I'm actively looking at real estate, both buy and hold rentals as well as private commercial deals. While I've learned the basic concepts and math (NOI, Cap Rate, cash on cash, depreciation, etc.), for whatever reason to me that market seams crazy all over again, but admittedly I am entirely less familiar with the macro picture. Again tied to risk.

 

[LibertyTurns]

@CuseJacket

1) I like my job but I also want to retire before I can’t do a lot of the things I’ve always wanted to do. I’ve got a number I’m aiming at & when I hit it then I’ll be planning my departure date.

2) In the CCM short takes link it provides numerous solid analytical videos discussing current market conditions compared to past cycles. This bull run is likely just starting but as you’ll hear repeatedly in the videos don’t fall in love with your feelings as obviously things can change. Right now we’re in a small post-correction consolidation & I expect the market to head north for a good while as long as anti-capitalist forces don't derail our economy. The market data will guide you if you can maintain your discipline. IBD has a different type analysis as it looks at distribution days. Again, another education resource that’s not emotional but analytical which is why I like it.

Note there’s a market correction about every year and a half and it takes the market on average about 4 months to recover. The lack of volatility leading up to the correction this year was an anomaly.

3) I don’t have the time for real estate. My full time beach house and hopefully in the near future a Georgia Tech football condo so I can stop having to get hotel rooms plus a few more years out a lake house is the extent of my real estate desires.

 

[bravejason]

A lot of interesting thoughts that are reminding me of other questions.

1) For anyone investing for the short-term... what's your strategy? In other words, do you have killer dividend-producing equities? Or are folks primarily in this for the long haul? Curious if anyone's trying to quit their job

It's all long term for me. To me, "short term investing" is fancy way of saying "I'm trying to time the market." Which brings me to a another point. There is investing and then there is playing the market. Investing is putting money in something and letting that something generate value or income for you. Playing the market is taking advantage of short term stock price volatility (day trading being the ultimate example). Investing is concerned with the long term future of a company. Playing the market is concerned with the near term stock performance (up or down) and the company's long term future is irrelevant. You can make money either way, but recognize that the strategies appropriate for one are not necessarily appropriate for the other.