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EdLaFave

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Everything posted by EdLaFave

  1. I'm sure the people who spent 10 minutes googling the rules for debt forgiveness are quite happy they're not funding the lifestyle and retirement of an advisor. What I'm saying generally is that the value an advisor brings in any arena is almost certainly outweighed by the cost of the advisor. This is the most charitable statement I can make with ethical advisors in mind. The vast majority of advisors are very much unethical and I can promise you they're hurting people full stop. The delivery driver provides value that is easily outweighed by their cost, but at least they're improving the quality of my life. An advisor, on net, just sucks away your money with nothing in return.
  2. I certainly have my opinions, but I'm not interested in getting into moral judgments of good and bad. I'm interested in getting into objective assessments of whether or not an advisor is worth their fee. They're not. The best advisor recognizes that they have no predictive power over the market and therefore invests you in total market index funds or a fund-of-funds (target date, fixed allocation, etc.) that contains total market index funds. I've taught countless people to do this on their own in about 10 minutes. So who here wants to pay for an advisor's salary just so you can avoid spending 10 minutes to learn that you need to put your money into a low cost target date fund or 3 individual total market index funds? The worst advisor will put you into high cost actively managed funds, churn the accounts so you consistently pay a bunch of sales charges (i.e. loads), and significantly trail the overall market return over the long term. It is impossible for an advisor to be worth their salary because: Investing is supremely simplistic; even a child could do it. Nobody can predict the market in the short term, which means you can't beat total market index funds in the long term. Since advisors can't, by definition, bring skill to the table, all they can do is bring minimal knowledge and a hefty price tag. They're not worth it, even the ethical ones.
  3. I'm going to fix this for you by quoting THE hero to every investor everywhere, "in investing, you get what you don't pay for." I also want everybody reading this thread to understand that the usage of the term "DIYer" is misleading because kind of implies that you need to spend lots of time gaining expertise and at the end of the day maybe you'll botch the job. If you spend 10 minutes reading my Investing 101 page, you'll know 90% of everything you'll ever need to know and the other 10% are essentially simplistic optimizations, which are worth far less than the bill of a CFP. So I hope everybody walks away secure in the knowledge that there is no reason for anybody to pay. Please, keep your hard earned money in your pocket!
  4. Only 1.25% 😂 If anybody is reading this thread and trying to understand investing then please understand that is outrageously expensive. The individual mutual funds you invest in will have a fee. Anything over 0.16% is considered expensive. Fidelity even has index funds that charge 0%. The 403b/457b account itself will charge you fees just to own the account. The best vendors charge you tens of dollars per year. In general if you’re being charged an annual fee that’s a percentage of your account then you’re likely being taken advantage of; if that fee is more than 0.15% then you’re definitely being taken advantage of. So to summarize, the best accounts charge you a total of between 0-0.08% and if you’re paying more than about 0.30% then it’s time to make some moves. If you’re paying above 1% it is robbery. If the stock market returns 6% in the year and 3% of it is eaten up due to inflation then paying somebody 1% actually consumes 33% of the real return! Also be aware that nobody knows what the market will do in the short term so you’re not getting any value from paying an advisor. They’re just as blind as you even though they work really hard to hide that fact.
  5. Let me phrase it more precisely... The younger generations are worse off than older generations were when they were young due to steadily increasing wealth and income inequality. If you came of age in the 70s or preceding decades, then you and your family had a greater share of this nation’s income/wealth than somebody coming of age today. So yes, Millennials and Gen Zers face massive structural problems that simply didn’t exist for Boomers.
  6. That’s a good one; I hadn’t heard it until today. I’ve got so much empathy for regular folks who lose their jobs in a downturn. The stress of that is so overwhelming, I’m actually surprised the suicide/overdose stats associated with it aren’t higher.
  7. The cost of college relative to the income you can earn serving burgers and beer has absolutely skyrocketed since you went to school.
  8. Without getting dragged into the weeds, we know one thing for sure. Ever since the 70s or 80s income and wealth inequality has been rapidly accelerating. Almost by definition, that means the younger you are the worse off you are. So yeah, the younger generations have a lot of legitimate problems to complain about.
  9. Money spent on me is a well structured government program. Money spent on you is socialism. Come on, we all get it, right?
  10. I won't give my own opinions, but the problem is that they're holding conflicting ideas in their head. On one hand they're not counting on social security (i.e. socialism) being there for them and on the other hand they're counting on high taxes due to the expansion of socialism.
  11. I understand that it somehow became trendy to say, without any understanding of the program, that social security won't be there. Interestingly enough the folks I most often hear this from are the same folks who tell me socialism is taking root in America and they're using Roth accounts now to avoid the sky high tax rates of the future. Having said all of that, if 75% of millenials are expecting to have saved enough to retire without social security or a pension...well, they'll be sorely disappointed when they have to face reality.
  12. IMO, the idea that most often fails to be understood and internalized is that (in the short term) we cannot predict anything and therefore we have NO control and that’s OK. I wonder if people in the west, with all the ideology inherent in that, struggle with this more than others? Is that a fancy way of saying we get emotional when short term volatility hits? I think we were around 35% down at one point and I felt nothing. I always doubted the people who told me I couldn’t predict how I’d feel until it actually happened. I’m a bit relieved their concerns were misplaced. I’ve got a similar approach. I don’t keep an emergency fund and every paycheck I immediately invest the excess amount after I pay bills. I don’t even give myself the opportunity to be tempted into timing the market.
  13. It’s amazing how Vanguard came up with so many words just to say, “Keep doing what you were doing in January.” I think it’s important to contextualize their comments on a 100% stock portfolio. They’re likely talking about risk-adjusted returns. Unless I have bad data, a 100% stock portfolio is expected to have higher returns. For early retirees this actually gives you a higher chance of success.
  14. The idea that somebody can eek out superior performance by dynamically changing their asset allocation and/or moving money into and out of the market is the single biggest reason investors under-perform the market, it makes high fees look negligible (they're not). Happily for you, by moving the money from international into a domestic fund you've come out ahead this time (although we can't say that for sure until you go back to your original asset allocation). I'm genuinely happy that's the case, but you achieved this gain by moving away from your desired asset allocation, which is suboptimal. Is what you specifically did the biggest sin in the world? Absolutely not, but you can TLH without modifying your asset allocation. For anybody reading, TLH (Tax Loss Harvesting) is when you realize a loss in your taxable account by selling, which allows you to apply a $3,000/year deduction to your income taxes. This can be a nice little consolation prize for suffering through a bear market. I've executed TLH sales several times over the last month (as well as recent pullbacks like 2016 and 2018) and I may be able to do it again in a few weeks. However, it is highly advisable to immediately move the proceeds of a TLH sale into a comparable fund, but not a "substantially identical" fund as the IRS likes to say. For example, you could exchange shares of VTIAX (Vanguard Total International) for shares of VFWAX, which essentially has the same performance as VTIAX, but lacks emerging markets. However, if you were to exchange from a Vanguard Total Market fund to a Fidelity Total Market fund then you might be breaking IRS rules. Unfortunately they haven't explicitly defined what "substantially identical" even means!
  15. Since 3/23/2020 international is up 15.38% and domestic is up 18.68% and it looks like we're set for a strong opening today as well. Absolutely anything can happen in the future, maybe the market drops another 40% from here? Maybe we've seen the worst of it? I don't know. If anybody re-reads these threads I hope they can learn from Bogle's words, "Don't do something. Just stand there!" Pick an asset allocation that will prevent you from panic selling when recessions hit (as they certainly will) and all you have to do from then on is just dump every spare dollar into your investments and don't sell until you need money in retirement. Give up on the notion that you can predict the market or you can execute some maneuver that'll save you from temporary pain; you can't.
  16. I suspect virtually nobody actually reads papers. They're told that the trinity study demonstrated that 4% is the safe withdrawal rate for retirement then they repeat it. Then you have entire FIRE communities repeating it until it becomes gospel. There's a subset of the FIRE community that I'm interested by. Most (all?) of these folks are in very high paying jobs, which often means they face two choices: Retire now, cut expenses to the bone, and if things don't go great then maybe pick up a part time "barista" like gig. Work another year or two at your current job and really solidify your nest egg. I'm intrigued by the folks who pick Option 1. Personally I'd hate the "barista" job in and of itself and I'd hate it even more due to the significant pay disparity between my career job and I'd hate the degree of uncertainty that my future rests on even more. I understand that people don't want to work more than they have to and they want to find a way out of their current less than enjoyable situation. I REALLY get that, but the risk-reward just doesn't add up to me. Sometimes I wonder if these high paying professionals have romanticized the so called unskilled jobs.
  17. You’re speaking to my soul with that one Steve. Why have we made living so stressful!
  18. I’ve looked at the math and even with all equities, I wouldn’t feel comfortable with only 25x annual expenses (what a 4% withdrawal rate requires) and a 60 year retirement window. I would however feel comfortable with 33x annual expenses (what a 3% withdrawal rate requires), that’s especially true if you get there during a bear market or early into a bull market. I fear that people who FIRE with 25x may not fully understand the risk because they may believe that the authoritative “trinity study” applies to them and it doesn’t. Still they’re more likely than not to be fine, but I personally want a 99%+ chance of success before I pull the trigger.
  19. DCA (as it applies to a pile of cash) mitigates risk in the sense that you aren't invested in the market, but not being invested in the market isn't a valid strategy. Bonds are a valid risk management strategy, sitting on cash is speculative and locking in the erosion of inflation. One easy way to see what a poor risk mitigation strategy DCA is, is to imagine somebody who is already fully invested and they're scared of market risk. Nobody in their right mind would ever recommend that this person take a lump sum out of the market and slowly dribble it back into the market. Sure doing so reduces risk, but I think we can all see how foolish that approach would be. The reason people can't see how foolish it is if somebody has a windfall is because we're incorrectly anchoring to the value of the portfolio on the day of the windfall and for a reason I can't explain people don't seem to anchor to the value of the portfolio on the day they're fully invested (at least in the context of DCA). Investing everything you have in the market isn't speculation or a gamble. Investing in single stocks is a gamble. Investing for the short term is a gamble. Investing in a single sector is a gamble. Putting all of your portfolio into the market is just plain investing. However, pulling money in or out of the market based on short term gyrations...that my friend, that's speculation.
  20. Yes. Time out of the market, on net, hurts returns. On average the stock market obviously goes up, otherwise we wouldn't put money in it. So if you sit on a pile of money for a fixed amount of time and slowly drip it into stocks, then statistically speaking you will miss out on gains (not losses). That's why you hear the phrase "time in the market, not timing the market" (or something along those lines). Of course, if you look at any individual time period you either lost or you won, but you're more likely to lose with DCA. The only utility of DCA is convincing fearful people stuck in a fallacy to get their money in the market. Of course I'd argue strongly that if they're so fearful then the real problem is their asset allocation. Now if you're just putting money in the market each time it becomes available to you (i.e. payday) then I don't really consider that to be a strategy. You're just investing whenever you can, not when you choose to believe it is a "good" time to invest.
  21. People conflate DCA a lump sum with regularly investing money with each paycheck. The the former has a lower expected return, the latter is absolutely recommended.
  22. I believe the IRS explicitly ruled that you can create a wash sale between your taxable account and your IRA. I don't believe they've explicitly ruled about employer sponsored accounts. I believe the spirit of the wash sale is pretty clear that it should apply to all accounts, but until the IRS makes it explicit then we don't know for sure. I don't play in that grey area.
  23. Without getting into the weeds, the Wash Sale is relevant to 30 days before Tax Loss Harvesting and 30 days after. If you wait 31 days after the sale, you could have bought right back into the fund that you sold from. When people tax loss harvest they often want to avoid being out of the market. To accomplish this they will immediately exchange from the fund with a loss to another fund as long as that other fund isn't "substantially identical." This is why whyme talked about exchanging a total market us fund for an S&P 500, they both have extremely similar performance, but you can argue the absence of small and medium size companies in the S&P 500 fund prevents it from being considered "substantially identical." This is a mental accounting fallacy. It isn't logical to treat money that is currently in cash differently than money that is currently in the market. We all have a total portfolio (regardless of what assets it is split between) and we all have to make a decision (every day) as to how that money is or isn't invested. What your portfolio was invested in yesterday has no bearing on what it should be invested in today. Either you think it is a good to have Y dollars in the market or you don't, it doesn't matter where those dollars were invested yesterday. This is absolutely marketing timing and market timing is usually considered cautious/fearful. Decisions you make based on short term market movements and this idea that you can predict the short term future, well that's market timing. Market timers often find ways to do the wrong thing twice. During a bad market they won't put their money in because they're being cautious. During a bull market they'll pour it all back in because things are "good". The proverbial sell low and buy high.
  24. The IRS says that if you buy a "substantially identical" replacement then it'll trigger a wash sale, which you clearly do not want to do. The IRS has not explicitly defined what "substantially identical" means. Somebody could make the proposed exchange and claim a loss. However, in the event of an audit, I sure wouldn't want to be in the position of making the argument that those two funds aren't substantially identical. Just a word for anybody reading these comments. This is a form of market timing and is particularly dangerous because this is exactly how people miss the recovery after a crash. If you want to invest successfully accept the reality that nobody can predict the short term future so all you can do is buy and hold (no matter what is or isn't happening).
  25. Any time you ask yourself a question that begins with “given what the market is doing now” it is almost certainly going to lead you to engage in market timing You have to get comfortable with the idea that nobody can accurately predict what the market will do over the short term. Trying to time the market is probably the number one way people lose money. To answer your question, it’s always a good time to leave a high cost vendor for a low cost vendor.
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