General Investing and Economics Discussion - No Politics

[LibertyTurns]

I have a plethora of mutual fund options in my 401k in which to invest. I don’t know how to pick the best one for me. Sure, I can try research them, but at the end of the day I’m basically stuck looking at historical returns because I don’t know how to weigh the relative importance of any other information I learn. Whether one fund is inherently a better fund or not for my financial goals I cannot say with any confidence. A financial advisor can advise on that because he’s got a career of experience with them.

@bwelbo also made a great point examining costs, but what I’m suggesting is financial advisors have a wide range of experience. How do you tell if the one you have is any good? What makes his advice worth paying for?

For example, if I can return slightly greater than 9% historically slapping my money in an S&P low cost index any advisor of mine better be able to beat that otherwise he’s costing me money listening to him rather than just mindlessly loading my index fund. If I can generate a hair better than 14% with a small number low risk growth stocks, well he best be able to best that as well. Now these are my benchmarks & every individual is different.

Yep. I have pretty basic criteria for my certified financial planners. (1). They enable me to meet my goals. (2). They don't get paid unless they make money for me. (3). They make me a lot of money.

#2 is an absolute. On #3, again I’d ask: are they making you as much money as they should based on how much you’re paying them? The day I fired mine was the day I realized how much he cost compared to what his return was based on what it should have been. If you don’t have the time to do it yourself, it may afford peace of mind.

Its extremely hard for anybody to beat index funds. The management fee is so low, that 0.2% versus 1.0%+ can add up tremendously over time.

For example, if you put $100,000 into 2 different funds that both earned a 6% return over 15 years. The one with the 0.2% management fee would be worth $225,000 after those 15 years versus $196,000 for the other. You can view that as a $29,000 difference in cost...or said another way, the difference in return equaled 29% of the original investment!

I disagree with your lead in statement that you can’t beat an index fund for example. You most certainly can, but it comes some with additional risk you need to manage.

The S&P 500 is comprised of 500 of the largest market cap companies on the NYSE and NASDAQ and index funds try to mimic the composition of those companies in order to provide a high correlation between the performance of those funds and the weighted S&P index itself. How do you beat it? Individually invest more in overperforming stocks & eliminate/reduce exposure to underperforming stocks.

Yes, you can get burned however if you abide by sound investing principles you can cut short losses where the index cannot & you can overweight while the index cannot. If this isn’t what you or your financial advisor is doing, you either need to fire yourself or fire him, but somebody definitely needs to be fired.

 

[bravejason]

@bwelbo also made a great point examining costs, but what I’m suggesting is financial advisors have a wide range of experience. How do you tell if the one you have is any good? What makes his advice worth paying for?

For example, if I can return slightly greater than 9% historically slapping my money in an S&P low cost index any advisor of mine better be able to beat that otherwise he’s costing me money listening to him rather than just mindlessly loading my index fund. If I can generate a hair better than 14% with a small number low risk growth stocks, well he best be able to best that as well. Now these are my benchmarks & every individual is different.

How do you know if your lawyer is any good? How about your mechanic? Your CPA? The guy installing a roof on your house? It’s the same answer for a financial advisor.

There has been a ton of emphasis in this thread on if the financial advisor can help you beat the market. That is one point of view and it seems to be the overriding concern for most of the posters here. If that is the goal, I’d say eschew the advisor and buy what you think is best. Some of you are interested in trading, which is different than investing, and trading may be on too short of a timeframe for an advisor to be useful or cost effective.

For me, the advisor helps with other factors such as understanding how much risk is appropriate, am I the right types of investments, am I in track to retire when I want to, etc. Yes, I could try to do this on my own and some of you probably do so, but I like having an experienced hand at the wheel since I want to minimize the risk of having to remain employed when I’d rather be retired (I know people who are forced to work full time even though they are well past retirement age because they didn’t properly manage retirement planning).

 

[Deleted member 2897]

@bwelbo also made a great point examining costs, but what I’m suggesting is financial advisors have a wide range of experience. How do you tell if the one you have is any good? What makes his advice worth paying for?

For example, if I can return slightly greater than 9% historically slapping my money in an S&P low cost index any advisor of mine better be able to beat that otherwise he’s costing me money listening to him rather than just mindlessly loading my index fund. If I can generate a hair better than 14% with a small number low risk growth stocks, well he best be able to best that as well. Now these are my benchmarks & every individual is different.

#2 is an absolute. On #3, again I’d ask: are they making you as much money as they should based on how much you’re paying them? The day I fired mine was the day I realized how much he cost compared to what his return was based on what it should have been. If you don’t have the time to do it yourself, it may afford peace of mind.

I disagree with your lead in statement that you can’t beat an index fund for example. You most certainly can, but it comes some with additional risk you need to manage.

The S&P 500 is comprised of 500 of the largest market cap companies on the NYSE and NASDAQ and index funds try to mimic the composition of those companies in order to provide a high correlation between the performance of those funds and the weighted S&P index itself. How do you beat it? Individually invest more in overperforming stocks & eliminate/reduce exposure to underperforming stocks.

Yes, you can get burned however if you abide by sound investing principles you can cut short losses where the index cannot & you can overweight while the index cannot. If this isn’t what you or your financial advisor is doing, you either need to fire yourself or fire him, but somebody definitely needs to be fired.

I didn’t mean to imply you can’t beat an index and I didn’t mean to imply I was only looking at the S&P500.

I focus on sectors - my smaller business index fund is the Wilshire5000 MINUS the S&P500. My large cap is the total entire market index (as you implied, the S&P500 is tightly focused actually). And I have an international index. Depending on trends, every few years I’ll shift allocations a bit. For example, when oil hit $25/bbl a few years ago, I actually shifted a decent amount of money into an oil index ETF.

 

[LibertyTurns]

@bwelbo I like discussing investing particularly trying to understand the different psychologies. I would think on a board with people analytically inclined there would be a larger number of people with different technical approaches. Maybe people are too busy and find it easier to pay someone? I enjoy the science behind the various technical approaches and over the years have refined my strategies taking a lot from some sources and avoiding the pitfalls of others. I do find it interesting that many seemingly dismiss lost opportunities and have a high tolerance for scheduled fees as long as their financial performance falls within their expected range. I couldn’t see myself forking over $10-15k+ per year to somebody doing something like managing my finances for me.

 

[Milwaukee]

Digging this thread. Learning quite a bit.

 

[Deleted member 2897]

@bwelbo I like discussing investing particularly trying to understand the different psychologies. I would think on a board with people analytically inclined there would be a larger number of people with different technical approaches. Maybe people are too busy and find it easier to pay someone? I enjoy the science behind the various technical approaches and over the years have refined my strategies taking a lot from some sources and avoiding the pitfalls of others. I do find it interesting that many seemingly dismiss lost opportunities and have a high tolerance for scheduled fees as long as their financial performance falls within their expected range. I couldn’t see myself forking over $10-15k+ per year to somebody doing something like managing my finances for me.

Yea. Investing is like sex - there are many different ways to do right and wrong.

Anyway, to me it comes down to how much time you have, how good you are at it, and how comfortable you are with risk. The answers to that could tell you to daytrade, pay a money manager, invest in index equity funds, or leave money in cash. Or a combination of that. So IMHO the key to “success” is to know who you are, be honest about it, and stay between whatever those guardrails are.

 

[LibertyTurns]

@bravejason Liked your question above and my answer is demonstrated performance. Own a verifiable good track record & you’re hired. Screw up or don’t match advertised expectations, you’re fired. My personal problem with financial advisors, and today the weasel words they use are spreading even into stuff like mechanics, is the BS about not having performance data by which to measure them. This area deals with financial transactions. It’s 100% possible to rate their performance based on performance against the market sectors they’re peddling.

 

[Deleted member 2897]

@bravejason Liked your question above and my answer is demonstrated performance. Own a verifiable good track record & you’re hired. Screw up or don’t match advertised expectations, you’re fired. My personal problem with financial advisors, and today the weasel words they use are spreading even into stuff like mechanics, is the BS about not having performance data by which to measure them. This area deals with financial transactions. It’s 100% possible to rate their performance based on performance against the market sectors they’re peddling.

I once was approached by JD Edwards and they said that (there is nothing to compare them to), because they mix multiple types of funds and change them over time to maximize returns. The problem was that their management fees were like 1.5%-2% yet you’re not allowed to compare them to any benchmark to see if it’s worth it? LOL.

 

[collegeballfan]

From Politico:
"The U.S. trade deficit in goods with China set a new record during President Donald Trump’s second year in office, despite his efforts to rein in what the administration views as Beijing's trade transgressions. The trade gap rose to $419.2 billion in 2018, from the previous record of $375.5 billion in 2017, a Commerce Department report released Wednesday showed. "

 

[Deleted member 2897]

From Politico:
"The U.S. trade deficit in goods with China set a new record during President Donald Trump’s second year in office, despite his efforts to rein in what the administration views as Beijing's trade transgressions. The trade gap rose to $419.2 billion in 2018, from the previous record of $375.5 billion in 2017, a Commerce Department report released Wednesday showed. "

Most of the tariffs with China didn’t take effect until late in the year. I’m somehow not surprised Politico would fail to provide an accurate context. And once again in contrary to what all the “experts” predicted, trade did not slow. And we picked up $25B in tariffs which is pure profit. Not bad for just a few months work.

 

[LibertyTurns]

@collegeballfan There’s been some good aspects of the recent trade policy but time will tell whether or not the needle moves. I suspect what has been done so far is too flaccid and we really should have had a more aggressive posture, but you can’t effectively argue the general approach has been misguided. You don’t change 3 decades of bad policy in a couple of years. It may take 4-6 more years of positive policy decisions to reverse the tide unfortunately.

 

[collegeballfan]

Most of the tariffs with China didn’t take effect until late in the year. I’m somehow not surprised Politico would fail to provide an accurate context. And once again in contrary to what all the “experts” predicted, trade did not slow. And we picked up $25B in tariffs which is pure profit. Not bad for just a few months work.

I entered this as a point of information, not making a comment for or against. As an investor this is a important piece of info.

As Politico points out a lot of this is importers simply raising inventory levels to moderate the effect of a possible increase in tariffs. There is also the tax cut that left many consumers with a few extra dollars to buy consumer goods (mostly imports).

I'm sure none of the US importers that paid the $25 billion (your number bwelbo, but I do not dispute) in tariffs are celebrating even if Treasury is. And the consumers who are paying at the retail level may not be aware that they are doing so. But, this is another sign of a vibrant US economy, even if it not a political pat on the back.

 

[LibertyTurns]

Until the masses figure out that taxes are not mythical and somehow moronic incompetent government bureaucrats are going to outsmart a bunch of elite corporate lawyers hired by smart and savvy business owners or others who have become otherwise wealthy thru their hard work, then taxes which get imposed upon the middle and lower middle classes as pass thrus in the form of higher prices, fees, etc will continue. Face it. For generations people have tried to tax the rich and the poor get the horn. All these people are doing is making more poor people suffer than they otherwise would have if their fancy new tax the rich scheme was never concocted in the first place.

 

[awbuzz]

People for get that companies "don't pay taxes", the consumer does through higher prices. Where do they think the tax money comes from? Printed up in the backroom?

 

[Deleted member 2897]

People for get that companies "don't pay taxes", the consumer does through higher prices. Where do they think the tax money comes from? Printed up in the backroom?

Right. And in the meantime with the highest corporate tax rate in the world, the equation of home versus abroad was pretty easy. The unemployment rate is 3.8%. What - 3 million+ net new jobs since the corporate tax cut? Not a 1 to 1 relationship, but pretty amazing 10 years since a recession.

 

[LibertyTurns]

People for get that companies "don't pay taxes", the consumer does through higher prices. Where do they think the tax money comes from? Printed up in the backroom?

They think the rich guy is just going to open his wallet and fork it over. Hey Mr Liberal Dude, if they were going to do that wouldn’t they (a) first give it to the people working for them or (b) give it to the charity of their choice?

 

[LibertyTurns]

Talked to my financial advisors today and they don't see much way around the crash that the market is going to go through given the artificial sugar high it was on. Similar problem is starting to happen in the housing market. Everywhere you look there are bubbles forming. This was inevitable and was predicted last year after the huge tax cut for the rich went into place. All that money resulted in, among other things, companies engaging in stock buy backs. When the tariffs hit and some business sectors had tangible pain, the high value that was on paper in the markets was exposed. Now the problem is going to be where to park your money. Those who go liquid will lock in their losses. Those who stay in the markets are going to have a rough ride which, hopefully, will last less than six years if the Fed can get the pain over with quickly.

Just curious what are you financial advisors telling you now?

Time will tell but the data said get out of securities in Oct, if you were a risk taker get back in late December (smart move in my mind was a partial allocation) and if more conservative you would have waited until the 2nd week of Jan. Right now it’s flashing damn near full on bull. It’s early and obviously it could change, but a high percentage of your net worth should be back in at this point. if you didn’t do the above, you likely missed on about a 20-25% favorable swing.

 

[LibertyTurns]

Another great video this week. It’s rare when free information/advice is helpful.

https://www.ccmmarketmodel.com/shor...l-makes-powerful-statement-about-stock-market

 

[Peacone36]

anyone else enjoying recent gains in the marijuana market?

I am in three different stocks there NEPT, ACB, TGODF.

I am novice to say the least, does anyone have any thoughts on those companies?

 

[smathis30]

anyone else enjoying recent gains in the marijuana market?

I am in three different stocks there NEPT, ACB, TGODF.

I am novice to say the least, does anyone have any thoughts on those companies?

I have been riding Canopy Growth since last October (CGC) right before they got a billion dollar investment from Constellation brands. Buying puts was the easiest money ive ever made right before legalization in Canada. Its taken since October, but they have finally recovered from that scare. Should grow until November or so when more marijuana bills get put on ballets. Legal marijuana is good for business but bad for companies that grow medical.