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[Ether_Snake]

I don't have access to a TSX (or S&P) fund in what the bank offers for the company I work for. I am invested at 40% Canadian small cap (average return of 15% a year over the past decade, 0.6% management fee), 30% obligations (which bring 6%+ on average over the past 10 years, management fee of 0.2%), and 30% in Canadian equities (average return of 11% over the past decade, 0.35% management fee). So I'm all invested in Canada. The funds for US or so called "balanced" (world-wide, which still is at 69% Canadian-invested) are all worst than the three I picked, so I don't have much of an alternative. Of course if the Canadian economy tanks, and it will in the near future, I don't have much choice. But over the long term I think I'm fine. Plus like I said, all other funds suck.

At least my employer matches my contributions at 40%.

 

[James Sawyer Ford]

I don't have access to a TSX (or S&P) fund in what the bank offers for the company I work for. I am invested at 40% Canadian small cap (average return of 15% a year over the past decade, 0.6% management fee), 30% obligations (which bring 6%+ on average over the past 10 years, management fee of 0.2%), and 30% in Canadian equities (average return of 11% over the past decade, 0.35% management fee). So I'm all invested in Canada. The funds for US or so called "balanced" (world-wide, which still is at 69% Canadian-invested) are all worst than the three I picked, so I don't have much of an alternative. Of course if the Canadian economy tanks, and it will in the near future, I don't have much choice. But over the long term I think I'm fine. Plus like I said, all other funds suck.

At least my employer matches my contributions at 40%.

You don't have any broadly diversified funds available in your portfolio? Why do the US funds "suck?"

That's a little shocking, honestly I would not be comfortable with that much geographic risk, especially with much of the Canadian economy tied to commodities.

Also a 40% match sounds too good to be true. I haven't heard of anything like that.

 

[Chris R]

Finally got around to opening a Roth IRA today. Starting really late (26), but I think I'll be ok. Just never really had the money to invest before

 

[Piecake]

I don't have access to a TSX fund in what the bank offers for the company I work for. I am invested at 40% Canadian small cap (average return of 15% a year over the past decade, 0.6% management fee), 30% obligations (which bring 6%+ on average over the past 10 years, management fee of 0.2%), and 30% in Canadian equities (average return of 11% over the past decade, 0.35% management fee). So I'm all invested in Canada. The funds for US or so called "balanced" (world-wide, which still is at 69% Canadian-invested) are all worst than the three I picked, so I don't have much of an alternative. Of course if the Canadian economy tanks, and it will in the near future, I don't have much choice. But over the long term I think I'm fine. Plus like I said, all other funds suck.

At least my employer matches my contributions at 40%.

Well, one thing that I would be worried about is that 60% of Canada's economy is in financials and Energy and the top 10 companies are 40% of the economy

That is not very diversified at all. That's a tough choice if the other funds suck. I would probably go with the lower expense ratio ones myself, and try to convince HR to actually do their job and get some World/US low cost index funds in there

Those expense ratios don't seem too bad though

What the heck is an obligation anyways?

Finally got around to opening a Roth IRA today. Starting really late (26), but I think I'll be ok. Just never really had the money to invest before

That really isnt late at all considering that only 40% own an IRA and only 15% actually make yearly contributions.

The American people are seriously fucked when retirement comes

 

[Ether_Snake]

You don't have any broadly diversified funds available in your portfolio? Why do the US funds "suck?"

That's a little shocking, honestly I would not be comfortable with that much geographic risk, especially with much of the Canadian economy tied to commodities.

Also a 40% match sounds too good to be true. I haven't heard of anything like that.

The US funds suck because their returns have been lower. They aren't terrible, I could make it 15% US 15% Canadian equity, but US and Canada pretty much goes hand in hand, except we should normally do better. I can't imagine a scenario where the US economy would do great while the energy and minerals tank. One thing that can happen to Canada is a housing collapse.

And yes my company matches at 40%, but I forget what the yearly cap is at, after which the company contributions end.

Well, one thing that I would be worried about is that 60% of Canada's economy is in financials and Energy and the top 10 companies are 40% of the economy

That is not very diversified at all. That's a tough choice if the other funds suck. I would probably go with the lower expense ratio ones myself, and try to convince HR to actually do their job and get some World/US low cost index funds in there

Those expense ratios don't seem too bad though

What the heck is an obligation anyways?

Obligations (french name) = bonds/fixed returns. 71% of it being government bonds (apparently all Canadian). http://www.desjardinslifeinsurance....lutions/Documents/rates-return/funds_0248.pdf

This is the crappy global fund: http://www.desjardinslifeinsurance....lutions/Documents/rates-return/funds_0287.pdf

The American funds:
http://www.desjardinslifeinsurance....lutions/Documents/rates-return/funds_0281.pdf
http://www.desjardinslifeinsurance....lutions/Documents/rates-return/funds_0221.pdf

I guess the last one isn't BAD, the expense fees are low too. Maybe I can split my Canadian investment half and half with that. Or else outright make that one the equity fund and remove the Canadian one, keeping small cap and bonds Canadian. That would be 40 Can small cap equity, 30 Can bonds, 30 equity US. The GE fund really blows though, I'm not touching that.

 

[Piecake]

The US funds suck because their returns have been lower. They aren't terrible, I could make it 15% US 15% Canadian equity, but US and Canada pretty much goes hand in hand, except we should normally do better. I can't imagine a scenario where the US economy would do great while the energy and minerals tank. One thing that can happen to Canada is a housing collapse.

And yes my company matches at 40%, but I forget what the yearly cap is at, after which the company contributions end.



Obligations (french name) = bonds/fixed returns. 71% of it being government bonds (apparently all Canadian). http://www.desjardinslifeinsurance....lutions/Documents/rates-return/funds_0248.pdf

If the expense ratios are similar or lower I would honestly dump it all into the US. It is MUCH MUCH MUCH more diversified and has a greater international presence as well.

You simply cannot judge future returns based on past results. Therefore you always go with lower expenses and greater diversity to lower your risk.

 

[James Sawyer Ford]

The US funds suck because their returns have been lower. They aren't terrible, I could make it 15% US 15% Canadian equity, but US and Canada pretty much goes hand in hand, except we should normally do better. I can't imagine a scenario where the US economy would do great while the energy and minerals tank. One thing that can happen to Canada is a housing collapse.
.

Pretty terrible logic. The rear view mirror doesn't tell you were you're going; it only tells you where you've been. I can very much imagine a scenario where the US economy does great and the Canadian market does terribly - commodities (energy and minerals) take a beating, other sectors in the economy do better as a result of lowered commodity prices to which you have very little exposure.

"Past returns for US equities for the prior decade hasn't matched my 15% annual return for Canadian stocks, therefore US stocks suck"

The Canadian market has done well due to the explosion in oil & gas prices over the prior decade.

Will that persist? Or will the oil market stagnate and do terribly for the next decade? Nobody knows. That's why it's prudent to diversify. O&G is boom or bust, and very cyclical.

This is why we diversify:

 

[Ether_Snake]

Hmm you made me rethink it. Looking at it, there are opportunities to diversify and get decent expense ratios and returns that weren't too bad.

Here is what I would chose now:

Canadian Bonds, 0.2% E/R: http://www.desjardinsassurancevie.c...ement/Documents/taux-rendement/fonds_0248.pdf
Canadian Equities, 0.2% E/R: http://www.desjardinsassurancevie.c...ement/Documents/taux-rendement/fonds_0253.pdf
Canadian Small cap, 0.6% E/R http://www.desjardinsassurancevie.c...ement/Documents/taux-rendement/fonds_0239.pdf
World-wide excluding North America (top five countries are UK, Japan, Germany, Australia, France), 0.25% E/R: http://www.desjardinsassurancevie.c...ement/Documents/taux-rendement/fonds_0260.pdf
US Equities, 0.18% E/R: http://www.desjardinslifeinsurance....lutions/Documents/rates-return/funds_0221.pdf

I could split it this way:
40% US
35% Canadian (20% equities/40% bonds/40% small cap equities)
25% World-wide excluding US.

 

[Piecake]

Hmm you made me rethink it. Looking at it, there are opportunities to diversify and get decent expense ratios and returns that weren't too bad.

Here is what I would chose now:

Canadian Bonds, 0.2% E/R: http://www.desjardinsassurancevie.c...ement/Documents/taux-rendement/fonds_0248.pdf
Canadian Equities, 0.2% E/R: http://www.desjardinsassurancevie.c...ement/Documents/taux-rendement/fonds_0253.pdf
Canadian Small cap, 0.6% E/R http://www.desjardinsassurancevie.c...ement/Documents/taux-rendement/fonds_0239.pdf
World-wide excluding North America (top five countries are UK, Japan, Germany, Australia, France), 0.25% E/R: http://www.desjardinsassurancevie.c...ement/Documents/taux-rendement/fonds_0260.pdf
US Equities, 0.18% E/R: http://www.desjardinslifeinsurance....lutions/Documents/rates-return/funds_0221.pdf

I could split it this way:
40% US
35% Canadian (20% equities/40% bonds/40% small cap equities)
25% World-wide excluding US.

I would do

40% US
40% World-wide
20% Bonds (or 10% Candian equities and 10% Canadian bonds if you dont want that many bonds)

Why? because its more diversified and might have a lower expense ratio thanks to not having small cap equities

personally, i would just drop the small cap fund due to the .6 expense ratio. If you want Canadian small cap exposure, invest in a cheaper one in your taxable account.

 

[Ether_Snake]

But the return has always been great. I'd feel dumb leaving it out. I'd prefer it over non-small cap Canadian equities. But I guess you're right, I should do that in my non-taxable account (yeah, I don't make any investments anymore that are taxable! Unlimited tax free account(s)).

 

[Piecake]

But the return has always been great. I'd feel dumb leaving it out. I'd prefer it over non-small cap Canadian equities.

But youre chasing past performance. Just look at this chart. the sectors are all over the place. Its simply a better bet to invest in them all and take the average return than gambling on a specific sector

 

[Ether_Snake]

But youre chasing past performance. Just look at this chart. the sectors are all over the place. Its simply a better bet to invest in them all and take the average return than gambling on a specific sector

Sure, but the same time it says World-Wide but it's obviously not. It's first and foremost five countries, with 20% in the UK and 20% in Japan.... And my guess is the UK = financials and Oil, just like the Canadian funds. It's a bit misleading, the choices aren't very good. Sure it's more diversified, but not much beyond different countries, and not even many.

edit: Anyway yeah I'll go with what Pie suggested, but I'll do 45% US, 35% "World-Wide minus NA", 10% Canadian bonds 10% Canadian Equities.

 

[James Sawyer Ford]

Sure, but the same time it says World-Wide but it's obviously not. It's first and foremost five countries, with 20% in the UK and 20% in Japan.... And my guess is the UK = financials and Oil, just like the Canadian funds. It's a bit misleading, the choices aren't very good. Sure it's more diversified, but not much beyond different countries, and not even many.

Anyway yeah I'll go with what Pie suggested, 40% US, 40% "World-Wide minus NA", 20% Canadian bonds.

Global market cap consists largely of only a few countries. You're diversifying based upon market cap and not a random selection of geographical regions equally.

Keep that in mind.

US and ex-US stocks by their very nature are very diversified.

 

[Piecake]

Sure, but the same time it says World-Wide but it's obviously not. It's first and foremost five countries, with 20% in the UK and 20% in Japan.... And my guess is the UK = financials and Oil, just like the Canadian funds. It's a bit misleading, the choices aren't very good. Sure it's more diversified, but not much beyond different countries, and not even many.

Anyway yeah I'll go with what Pie suggested, 40% US, 40% "World-Wide minus NA", 20% Canadian bonds.

Too bad the international one doesnt include Canada, lol (obviously does in US). Actually, I would probably put 5% into Canadian equities (thats a large cap index fund or something? -cant read french) and take 5% away from worldwide

That would keep you more diversified by including Canada, but not overexposing yourself to Canadian equities. Plus, itll lower your expense ratio very slightly

 

[Ether_Snake]

So having settled the choices for my RRSP (edited the distribution a bit), now I'm looking at my taxable/taxfree portfolio, and I want to keep it simple. I won't sell everything to re-invest in this right away, but over time as I sell stocks I'll transfer exclusively to this.

I found this so far:

US only
E/R of 0.15%: https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9562

World-wide excluding US, E/R of 0.37%: https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9555

Emerging markets, E/R of 0.49%: https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9556

Canada
E/R of 0.18%: http://ca.ishares.com/product_info/fund/overview/XIU.htm
E/R of 0.09%: https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9554

I'm thinking of splitting it: 40% US-only, 25% World-Wide excluding US, 20% emerging markets, 15% Canada.

What do you think?

 

[Javaman]

How often do you guys rebalance your 401k?

Once every 5 years or so. I don't sweat it too much despite watching the daily fluctuations.

 

[Piecake]

So having settled the choices for my RRSP (edited the distribution a bit), now I'm looking at my taxable/taxfree portfolio, and I want to keep it simple. I won't sell everything to re-invest in this right away, but over time as I sell stocks I'll transfer exclusively to this.

I found this so far:

US only
E/R of 0.15%: https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9562

World-wide excluding US, E/R of 0.37%: https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9555

Emerging markets, E/R of 0.49%: https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9556

Canada
E/R of 0.18%: http://ca.ishares.com/product_info/fund/overview/XIU.htm
E/R of 0.09%: https://www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9554

I'm thinking of splitting it: 40% US-only, 25% World-Wide excluding US, 20% emerging markets, 15% Canada.

What do you think?

I like it. Hopefully Vanguard can eventually lower those expense ratios because you'd be paying half or more less in fees in the US (Vanguard funds are owned by the stockholders and run at cost, so if they can lower it, they will)

You might be a bit more heavily weighted into emerging markets, but I think that's fine.

Bonds are going to be in your 401k? Its good to have bonds, even if its only 10% of your portfolio for asset allocation and reducing risk due to bonds and stocks being poorly correlated. video explanation of it

Personally, I like bonds in a tax advantaged account because bonds are very tax inefficient, but there is also another line of thinking that its best to put your highest return funds in your 401k and other tax advantaged accounts to grow them. I'm sure there is math involved to show you that sweet spot, but im not really concerned with it. Bonds wont suck forever. I really dont want to continually mess with what funds are in my taxable and tax advantaged accounts

 

[Ether_Snake]

Yeah they're only in my 401k.

Now the problem is figuring out which account to use. Preferably it would all go in my tax free account, but I'm nearly maxed out for this year. Which means I can start to invest in the above funds now, but a good chunk will be in my taxable account, unless I get sneaky but I don't want to do this for those types of investments.

So I guess I can make a contribution to one of those funds in my tax-free account, but then won't be able to add for the rest of the year to that particular fund. I can contribute to the other funds in my taxable account, until I can offload some stuff from my tax-free account and transfer them to it next year.

Should have cleared my tax-free account in december, would have been a nicer clean start. But subsequent years would have been limited to $5k contributions, so I would still have to put some of it in my taxable account.

I guess in the end I'll be putting money in all of those funds in both accounts, or else select one in particular for the tax-free account only. Difficult to figure out which one.

 

[Zoe]

Any recommendations on where I should set up an IRA?

 

[Piecake]

Any recommendations on where I should set up an IRA?

Vanguard

Vanguard is owned by the funds themselves and, as a result, is owned by the investors in the funds. Personally, I like that business model and want to support it because You arent enriching some banker or fund manager that might not have your best interest at heart

Buying and selling vanguard funds is commission free and the expense ratios of the funds are insanely low. Make sure you go electronic to eliminate the account fees

 

[Husker86]

Vanguard

Vanguard is owned by the funds themselves and, as a result, is owned by the investors in the funds. Personally, I like that business model and want to support it because You arent enriching some banker or fund manager that might not have your best interest at heart

Buying and selling vanguard funds is commission free and the expense ratios of the funds are insanely low. Make sure you go electronic to eliminate the account fees

Hmm, that sounds better than what I'm doing now.

I went with Fidelity since I already had an account and they have commission free ETFs (iShares) which was a nice bonus.

Is it easy to transfer a Roth IRA? I might consider doing that in the future.

 

[Piecake]

Hmm, that sounds better than what I'm doing now.

I went with Fidelity since I already had an account and they have commission free ETFs (iShares) which was a nice bonus.

Is it easy to transfer a Roth IRA? I might consider doing that in the future.

I think it just involves filing a few forms

https://investor.vanguard.com/what-we-offer/personal-services/concierge-services

You can call Vanguard up with any questions

https://personal.vanguard.com/us/literature/openaccountforms

My guess the form is in-kind Transfer

 

[speedline]

The only investment I have is my 401K and I've only had it for about 5 years now. I wasn't taught anything about putting money aside for retirement as neither of my parents had a 401K, and neither of them lived to see retirement.

Anyway, my 401K is 80/20 stocks to stable fund/money market through t rowe price. My employer matches up to 6% so I put in 6% as well. Was wondering if I should bump that up to 10% or should I take that little extra and invest somewhere else instead?

Can the stock market really sustain these all time highs or is a huge correction looming? Investing is scarey for me tbqh.

 

[Piecake]

The only investment I have is my 401K and I've only had it for about 5 years now. I wasn't taught anything about putting money aside for retirement as neither of my parents had a 401K, and neither of them lived to see retirement.

Anyway, my 401K is 80/20 stocks to stable fund/money market through t rowe price. My employer matches up to 6% so I put in 6% as well. Was wondering if I should bump that up to 10% or should I take that little extra and invest somewhere else instead?

Can the stock market really sustain these all time highs or is a huge correction looming? Investing is scarey for me tbqh.

The priority is to invest in your...

401k to the company match
Fully fund your Roth IRA
Fully fund 401k

The reason for this is because you completely control what you invest in with a Roth and it will have no other extra fees or shitty funds with insanely high expense ratios

So I would open up a Roth IRA and invest in a low cost index fund/s (total stock market, total interational, and/or total bond)

Besides complete freedom, the Roth IRA is taxed differently. With a roth, you pay taxes on your income now, stick money in a roth, and it grows tax free. So when you want the money, you wont have to pay taxes on it. That's different from a 401k where you avoid taxes now, but pay them when you want the money.

Good to have a mix of the two

As for investment philosophy i would watch this video series.

http://www.bogleheads.org/wiki/Video:Bogleheads®_investment_philosophy

If you dont like investing and don't like the stress/uncertainty I would highly recommend it. Why? because its quite simple to just follow the market and there is no stress about picking the wrong stock or fund since you didnt pick a stock or fund to follow. You picked the entire market

And all time highs dont matter. If the market didnt continue to hit all time highs every year we would all be fucked. It supposed to go up and will go up.

 

[RumblingRosco]

-

 

[Ether_Snake]

Wait what do you mean by opening an account with Vanguard? Or did I misread that? I invest into those funds though my saving's account at my bank (online of course).

Also, what's the equivalent to a Roth IRA in Canada? I never liked the idea of being taxed later rather than being taxed and being taxed free later, because of inflation. Plus, taxing later will probably be done at a higher rate. If there's another account I don't know of, I want to put money in it pronto!

edit: Oh it's basically the TFSA, ok. Phew.

 

[Piecake]

Wait what do you mean by opening an account with Vanguard? Or did I misread that? I invest into those funds though my saving's account at my bank (online of course).

Also, what's the equivalent to a Roth IRA in Canada?

http://www.moneysmartsblog.com/canadian-tfsa-vs-american-roth-ira/

opening an account at vanguard

The advantages of opening an account at Vanguard and not somewhere else, but investing in vanguard funds is that Vanguard offers commission free Vanguard funds and etfs. So if you are just going to invest in Vanguard index funds it makes sense to open an account there because you wont pay any commission or fees (if you go electronic)

Huh, and that open account link has an option to transfer funds from an IRA held at another firm to vanguard, so you might want to see where that takes you, Husker

Seems like you can't open a Vanguard account in Canada. that sucks

 

[Ether_Snake]

http://www.moneysmartsblog.com/canadian-tfsa-vs-american-roth-ira/

opening an account at vanguard

The advantages of opening an account at Vanguard and not somewhere else, but investing in vanguard funds is that Vanguard offers commission free Vanguard funds and etfs. So if you are just going to invest in Vanguard index funds it makes sense to open an account there because you wont pay any commission or fees (if you go electronic)

Huh, and that open account link has an option to transfer funds from an IRA held at another firm to vanguard, so you might want to see where that takes you, Husker

Seems like you can't open a Vanguard account in Canada. that sucks

I see. I pay 10$ per trade. Interesting, too bad it's not available in Canada. Thanks for the info.

 

[Piecake]

I see. I pay 10$ per trade. Interesting, too bad it's not available in Canada. Thanks for the info.

Does Canada have some strict rules and regulations when it comes to non-banks opening up investment management firms and brokerage accounts? I just find it kinda odd that Vanguard doesnt have that option up there, and that price per trade is pretty steep.

In America, insane competition has dwindled it down to 4 bucks a trade with a bunch of perks like no fee etfs and refer a friend, etc

 

[Ether_Snake]

I'm not sure, but even their funds seem to be all new, so maybe Vanguard just set up shop in Canada recently.

Vanguard is basically a cooperative? I used to live in a coop, high quality housing at the lowest rent imaginable (no private owner). Beats buying.

 

[Piecake]

I'm not sure, but even their funds seem to be all new, so maybe Vanguard just set up shop in Canada recently.

Vanguard is basically a cooperative? I used to live in a coop, high quality housing at the lowest rent imaginable (no private owner). Beats buying.

yup, investors are the owners so we are all the bosses

http://www.bogleheads.org/forum/viewtopic.php?f=10&t=113441

You might like this thread/book. It discusses William Bernstein's book "Skating Where the Puck Was" and talks about his suggestion of small value tilting for young, risk taking investors

Shame your small cap etf expense ratio is so high. its only .1 in America

 

[speedline]

Thanks for the advice Piecake, will look into it

 

[Ether_Snake]

Looking at different countries, it's crazy how much Canada ETFs are usually HEAVILY dependent on the financial sector. Usually invested almost 40% into financials, followed closely by energy. Shows that our economy is probably in a dangerous position, especially considering record household debt and home prices. Usually when everything is in place for an impressive accident to happen, it tends to happen.

I can see the headlines already about the Canadian banks being fooled into thinking they could afford taking more risk since they had been so well managed, only to end up in the same situation the US had found itself before, rather than learn from it. All of this probably happening while the US housing market picks up

I wonder what size the financial sector represented before the crisis compared to today in the US?

 

[Piecake]

Found a better explanation about small value tilting. Not sure if i'm going to do it. currently I am holding a REIT index fund that i kinda want to get out of. Shit be overpriced. Not sure if i should switch it to small value or total stock market. hrmm. Actually, I think I might do that considering that my US stock is basically all SP 500, which doesnt hit small caps, thanks to that being the only decent option in my 401k. So i guess i wont be small value tilting, just diversfying to small value stocks, haha

http://www.bamwebsites.com/581292.pdf

Basically, the gist of it is getting greater returns because small value tilting diversifies risk, not just adds on more of the same risk if you simply allocated more stocks than bonds, and this method allows more bond allocation to reduce a severe stock drop risk while still giving good returns

Financial sector percentage in US

http://thinkprogress.org/economy/2011/12/14/389487/financial-sector-gdp-recession/?mobile=nc

 

[Zoe]

Vanguard

Vanguard is owned by the funds themselves and, as a result, is owned by the investors in the funds. Personally, I like that business model and want to support it because You arent enriching some banker or fund manager that might not have your best interest at heart

Buying and selling vanguard funds is commission free and the expense ratios of the funds are insanely low. Make sure you go electronic to eliminate the account fees

Thanks. I had been looking at Sharebuilder since they're always spamming me, but the have transaction fees.

The priority is to invest in your...

401k to the company match
Fully fund your Roth IRA
Fully fund 401k

I don't get any matching (and it's a 403b), so I guess I'll go straight to step 2.

 

[Piecake]

Thanks. I had been looking at Sharebuilder since they're always spamming me, but the have transaction fees.



I don't get any matching (and it's a 403b), so I guess I'll go straight to step 2.

If you want to buy and sell stocks in your roth ira, you will pay slightly higher fees with vanguard. Think its at 7 (never done it), but the purpose of opening up a vanguard account is to invest in their funds, and I personally think that index funds are the way to invest

 

[Ether_Snake]

Financial sector percentage in US

http://thinkprogress.org/economy/2011/12/14/389487/financial-sector-gdp-recession/?mobile=nc

I see. 8% isn't bad IMO for the US, but making 30% of all profits definitely is.

edit: They seem to be heading higher too, and that was in 2011.
edit: Wow it was at 45% in 2003-04.

 

[Piecake]

I see. 8% isn't bad IMO for the US, but making 30% of all profits definitely is.

edit: They seem to be heading higher too, and that was in 2011.
edit: Wow it was at 45% in 2003-04.

Lot easier to make profit out of nothing than actual things. Wouldnt surprise me if Canada is similarly weighted. Though id imagine that energy makes some nice profits as well. 90% profits goes to energy and financials! - just a guess

Just looked at Larry Swedroe's portfolio and investment philosophy. It sounds interesting, but I dont think im going to do it. I just like the thought of tracking the whole market. Diversifying risk by including value, large, and beta with a greater percentage of bonds just seems odd to me, and I don't know if i buy this diversifying risk thing (likely due to ignorance)

So yea, I'm just going to go with my man, Jack Bogle, and follow his advice

 

[WoodWERD]

I tried searching the thread and didn't come up with much, but maybe you guys can point me in the right direction. I'm interested in putting some money into a retail start-up in exchange for equity in the business, but I have no clue what kind of questions to be asking. Do you guys have some recommended reading to dig into?

I know that's pretty vague so if more info is needed let me know.

 

[RumblingRosco]

-

 

[Piecake]

Interesting reading, especially for Anno

There is No Reason to Chase Dividends

The evidence makes clear that there are no advantages in terms of returns to a strategy of investing in dividend paying stocks. In addition, such a strategy sacrifices diversification benefits. More importantly, as we have shown in prior posts neither a strategy of investing in high-yielding stocks or the stocks of companies that have shown a high growth in dividends has proven to be an efficient means of improving returns.

I'd also reflect as to what you want out of the investment. Money? Development of some awesome product line? Just a solid company? How much can you risk on this company, financially and in terms of stress/time? Do you need/expect to make your money back in 1, 3, 5, 10 or more years?

That's important, because if your goal is simply money, it would be less risky and you'd have a better chance of getting a better return by simply investing in the market. I'd imagine it would be a whole lot less stressful too

 

[zou]

Interesting reading, especially for Anno

There is No Reason to Chase Dividends

That's important, because if your goal is simply money, it would be less risky and you'd have a better chance of getting a better return by simply investing in the market. I'd imagine it would be a whole lot less stressful too

Yeah, no. A portfolio with dividends reinvested would net you roughly 8x more than a regular portfolio over 50 years.

Edit: Just read the article, it's absolute garbage. The main premise is undeniably wrong and short term dividends often provided for a large majority of total gains (say the last 10 years).

 

[Piecake]

Yeah, no. A portfolio with dividends reinvested would net you roughly 8x more than a regular portfolio over 50 years.

Thats not what he is saying. He is saying chasing high yield dividend stocks does not yield better results. That is very different than reinvesting dividends

Today, we'll take a look at the findings of a March 2013 study, "Global Dividend-Paying Stocks: A Recent History," produced by the research team at DFA. The study covered 23 developed markets over the period 1991-2012.

The average annual returns were 9.1 percent for dividend paying stocks and 11.1 percent for nonpayers. However, the returns of nonpayers were more volatile than for dividend payers. The net result was that the annualized returns were the same 7.6 percent. However, by focusing on only dividend payers, an investor would exclude about 40 percent of firms, thereby sacrificing some diversification benefit.

 

[zou]

Thats not what he is saying. He is saying chasing high yield dividend stocks does not yield better results. That is very different than reinvesting dividends

No, high yields get only a passing mention. Neither the study nor the article about high yielding dividend stocks. In fact, the makes broad statements that are simply not true.

The evidence makes clear that there are no advantages in terms of returns to a strategy of investing in dividend paying stocks. In addition, such a strategy sacrifices diversification benefits. More importantly, as we have shown in prior posts neither a strategy of investing in high-yielding stocks or the stocks of companies that have shown a high growth in dividends has proven to be an efficient means of improving returns.

 

[Piecake]

No, high yields get only a passing mention. Neither the study nor the article about high yielding dividend stocks. In fact, the makes broad statements that are simply not true.

Today, we'll take a look at the findings of a March 2013 study, "Global Dividend-Paying Stocks: A Recent History," produced by the research team at DFA. The study covered 23 developed markets over the period 1991-2012.

The average annual returns were 9.1 percent for dividend paying stocks and 11.1 percent for nonpayers. However, the returns of nonpayers were more volatile than for dividend payers. The net result was that the annualized returns were the same 7.6 percent. However, by focusing on only dividend payers, an investor would exclude about 40 percent of firms, thereby sacrificing some diversification benefit.

Thats exaclty what its about. Its about high yield dividend stocks, and how there is no advantage of choosing those stocks over stocks that do not have dividends, and that you are sacrificing diversification to get that dividend for no real benefit. Not to mention the taxes and tax inefficiencies involved with dividend stocks

 

[zou]

Thats exaclty what its about. Its about high yield dividend stocks, and how there is no advantage of choosing those stocks over stocks that do not have dividends, and that you are sacrificing diversification to get that dividend for no real benefit. Not to mention the taxes and tax inefficiencies involved with dividend stocks

Your quote doesn't even include the word high yield.

 

[zou]

Oh lol, so apparently macro risks affect dividend paying stocks only.

However, by focusing on only dividend payers, an investor would exclude about 40 percent of firms, thereby sacrificing some diversification benefit.

Although less volatile than the capital gain component of stock returns, the aggregate stream of dividend payments is subject to the same broad, macroeconomic risks that affect capital gains.

 

[Piecake]

Your quote doesn't even include the word high yield.

So what? First you say that the premise is wrong by claiming that dividends are a major part of the return, but when I point out he is comparing all dividend stocks to stocks with no dividends, and the no dividend stocks outperformed the dividend stocks during that time period you talk about high yield?

Well, I obviously don't have the specific data for high yield, and I dont want to pay for it, but I trust the writer and confident that he knows what he is talking about. If you dont, thats fine.

I just thought the article was interesting and people who employ dividend strategies might find it useful to challenge their strategy. Personally, I don't do dividend or value. I do straight up Total Market, so it really doesnt matter to me. I did not mean for anyone to get butt hurt over it

Oh lol, so apparently macro risks affect dividend paying stocks only.

Dude, if you invest in significantly less stocks than the Total Stock Market you are going to be less diversified than an investor who invested in the total stock market. And he is not saying that. He is saying that dividends get cut or reduced in downward trends, meaning that you might not be getting your dividend if the stock is taking a nose dive

Hell, if you want to debate with the actual author and see what he thinks about high yield versus no dividend value, feel free

http://www.bogleheads.org/forum/viewtopic.php?f=10&t=113457

 

[RevoDS]

Dude, if you invest in significantly less stocks than the Total Stock Market you are going to be less diversified than an investor who invested in the total stock market. And he is not saying that. He is saying that dividends get cut or reduced in downward trends, meaning that you might not be getting your dividend if the stock is taking a nose dive

Yes, in theory. But in practice, things are quite a bit different.

The whole point of diversification is to minimize downside risk, but in falling markets, stocks tend to approach a 1:1 correlation where everything falls the same regardless of any individual consideration. So regardless of whether you're diversified into a thousand stocks or ten thousand, it doesn't matter because you'll still be exposed to roughly the same risk.

Did you ever wonder why the Dow closely follows the other indices despite comprising only 30 stocks? The stock market is so heavily correlated that past a certain point, there is just no benefit in diversification.

In fact, studies have shown that the point that offers the best risk/reward ratio is somewhere between 10 and 15 stocks. Below that, you are overly exposed to individual stocks, and above that, you start sacrificing potential for alpha without material benefits.

And that's without even mentioning two rather important facts:
1)Small caps, most of which pay no dividends, tend to be more volatile than large caps, most of which pay dividends. Thus, they outperform in bull markets and underperform in bear markets. Your statistic begins in 1991, right in the middle of the greatest bull market of all time, and ends in 2012 which was, yes, a bull market. How does that performance hold for, say, 1991-2009? How about 2000-2009?

2)In mentioning the risk of a dividend being cut (which is real), you're omitting the fact that dividends generally denote profitable companies. While dividends may be cut and their stocks may fall as much due to the increase in correlation during bear markets, by definition, dividend-paying companies represent a stronger group on a fundamental basis than non-dividend payers.

 

[Piecake]

Yes, in theory. But in practice, things are quite a bit different.

The whole point of diversification is to minimize downside risk, but in falling markets, stocks tend to approach a 1:1 correlation where everything falls the same regardless of any individual consideration. So regardless of whether you're diversified into a thousand stocks or ten thousand, it doesn't matter because you'll still be exposed to roughly the same risk.

Did you ever wonder why the Dow closely follows the other indices despite comprising only 30 stocks? The stock market is so heavily correlated that past a certain point, there is just no benefit in diversification.

In fact, studies have shown that the point that offers the best risk/reward ratio is somewhere between 10 and 15 stocks. Below that, you are overly exposed to individual stocks, and above that, you start sacrificing potential for alpha without material benefits.

And that's without even mentioning two rather important facts:
1)Small caps, most of which pay no dividends, tend to be more volatile than large caps, most of which pay dividends. Thus, they outperform in bull markets and underperform in bear markets. Your statistic begins in 1991, right in the middle of the greatest bull market of all time, and ends in 2012 which was, yes, a bull market. How does that performance hold for, say, 1991-2009? How about 2000-2009?

2)In mentioning the risk of a dividend being cut (which is real), you're omitting the fact that dividends generally denote profitable companies. While dividends may be cut and their stocks may fall as much due to the increase in correlation during bear markets, by definition, dividend-paying companies represent a stronger group on a fundamental basis than non-dividend payers.

What studies are these? Because I definitely am not going to buy that without a serious study. 10-15 seems way too low. Personally, I really see no reason to risk going after Alpha when you can slowly accumulate plenty of money over the long term so long as you just follow the market.

You might like his investment theories then since he heavily favors investing in high risk sectors such as small cap value and diversifying risk to hit small value, large, and beta while allocating a greater percentage of the portfolio to bonds. Basically, so you wont take a big hit in a bear while getting good returns in a bull.

Like I said, i dont have that data. And since the article is referencing a study conducted by a group for his firm, you'll likely have to pay to see it or ask him in that thread I posted and he'll should be better able to defend this than I can