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GA teacher

Finance novice searching for answers

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1 hour ago, GA teacher said:

just finished a documentary series on capitalism

What documentary was that?

Three quotes from the greatest American to ever live:

We must ask the question, "Why are there forty million poor people in America?" And when you begin to ask that question, you are raising a question about the economic system, about a broader distribution of wealth. When you ask that question you begin to question the capitalistic economy...one day we must come to see that an edifice which produces beggars needs restructuring. 

 

I am much more socialistic in my economic theory than capitalistic. Capitalism started with a noble and high motive but fell victim to the very thing it was revolting against.

 

There must be a better distribution of wealth and maybe America must move toward democratic socialism.

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On 7/6/2020 at 12:07 AM, EdLaFave said:

What documentary was that?

I was watching a documentary series from EBS Korea.  EBS is an education broadcasting station.  I wish I can post it here but it's in Korean... It was a 5-hour series and covered much history and topics.  The documentary covered John Adams and Kaynes vs Hayek and many more.  

I had to look up the quote and to find out who said it- MLK Jr. of course 🙂  It's so important to learn from history. 

A finance person from YouTube who recommended the above also suggested BBC's 2008 documentary,  "Ascent of Money"  (link to episode 1)

Perhaps you already watched it 🙂

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Hi guys!  I'm trying to move the assets to Vanguard's VINIX.  I finally got out of the Valic's guided portfolio service.  Should I move the assets to VINIX now or wait until tomorrow?  I think I may be late because it's already almost 5pm ET?  Did I have to do it before a certain time?  It's my first time doing this so I'm unsure and a bit nervous because I'm trying to move a lump sum of money from other mutual funds into here.  I got the analysis picture from finviz.com.

07.07.2020.jpg

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1 hour ago, GA teacher said:

Should I move the assets to VINIX now or wait until tomorrow?

The general answer to this question is always now. When you buy or sell a mutual fund you have to get the order in by 4 PM eastern, if you do the transaction will close based on prices at the end of the day.

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If you do it now you will get today's closing. If you do it after the markets close you will get tomorrow's closing. Just do it anytime you want.  Even after hours.No need to be nervous at all. The market fluctuates daily. You might get in when it closes high or you might get in when it closes lower. In the scheme of things it won't matter . 

What's important is that you pull the trigger and get that money over to VIINX.  I would ignore charts like the one you posted. It tells you only what happens daily. You are in this for the long term and daily stock gains and losses per stock means nothing.

Congratulations on making a positive , smart move.

 

Tony

 

 

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Thank you all so much for your help.  It takes a day for the assets to be moved around within the Valic platform so perhaps I will get today's closing rather than yesterday's.  It's assuring to hear that the timing of buying/selling doesn't matter since it's a long-term investment.  The world of finance is very complicated but I think I understand a lot more than before where I understood zero 🙂  Thank you guys again for guiding me!

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GA Teacher

2 hours ago, GA teacher said:

The world of finance is very complicated but I think I understand a lot more than before where I understood zero 🙂

Don't drink the kool aid that it is complicated. The  financial complexity is mostly   intentional  and deliberate . That way there is a demand for their services.  They make money by making you feel stupid and keeping you in the dark, draining you of your money long term with various fees.  When you own a few index funds at lowest possible cost  you are covering the total market and minimizing your long term risk. Keep reading and you will see what a facade the financial industry really is. I recommend you buy and read this book  https://www.amazon.com/Little-Book-Common-Sense-Investing/dp/1119404509/ref=sr_1_3?crid=2QAY7445XKKWY&dchild=1&keywords=bogle+little+book+of+common+sense+investing&qid=1594235911&sprefix=bogle+%2Caps%2C313&sr=8-3

Please keep asking questions, you seem like someone who wants to learn and grow on this subject. We are here to help. We sometimes go off the deep end here but you can learn a lot about investing by reading through our discussions and sometimes arguments.:) 

Tony

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3 hours ago, GA teacher said:

finance is very complicated

All you really need to know:

  • Minimize your spending so you can maximize your investing.
  • Abandon the notion that you or anybody else can predict and therefore outperform the market in the long term.
  • Understand that stocks can drop by 50% very quickly, pick a bond percentage that will stop you from behaving foolishly during a crash. Know that stocks have the higher expected return.
  • Total market index funds give you diversification at rock bottom costs, which are the two keys to successfully picking funds.
  • You can own three individual total market index funds (bonds, domestic stocks, international stocks).
  • Alternatively you can own an all in one fund, which internally holds those individual funds (see target date funds that get more bond heavy over time or LifeStrategy funds that keep the same asset allocation over time).
  • Max out tax advantaged accounts first (IRA, 401k, 403b, 457b, etc.) and then put the rest of the money in a taxable account.
  • Whenever you have extra money, invest it regardless of what the market is or isn't doing.

It really isn't rocket science. Tony is 100% right.

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If i may add. The plethora of  actively mutual funds out there, even Vanguard's, are to bring in revenue through fees. At least, Vanguard's managed funds are almost as cheap as their index funds and much cheaper than most others.. Most managed funds are just variations of the same companies. If you own the Total Stock Market Index, An International Fund index fund and a Total Bond Market Index fund, you pretty much own the stock universe. It's all you need.

These guys loading you up with many  funds are not improving your performance long term.  It's easy to assume that stock funds with fancy names might be better. They are not. Any out performance by these funds is usually short term. They'll hype those returns but they will never tell you that overtime barely only 20% of these funds beat a basic index fund. And good luck finding these outperformers year after year out of thousands of choices.  Stick to index funds. 

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Thank you very much, gentlemen, for your summaries of the finance world 🙂  I will definitely keep coming back to this them to remind myself and ask more questions.  And sorry for the delayed thank-you; I've been kind of stressed about returning back to work and how everything will look like. 

So on Tuesday when transferring funds over, I was too scared and nervous to completely move over to VINIX (pic attached of my 457 pre-tax acct).  All I did was to get out of Valic's fixed annuity and PIMCO as both were 50% of my assets before; now they are 0% and transferred to VINIX.  I kept them in my 403 ROTH account because the asset % were much smaller and for the safety effect.  I left Blackrock just because my colleague has that as his only "bond" option guided by his financial advisor 🙂  I also hesitated moving Amfunds Europacific because it was listed as International funds and thought I should keep an int'l fund?  I should still take one more step and move everything over to the low-cost VINIX, right?  I'm taking truly small and slow steps here due to my lack of knowledge and confidence.

rebalance.png.jpg

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First, the quality and the specificity of the responses I can offer are directly related to your willingness to provide a full picture of your finances:

  • What is your desired asset allocation?
  • List all of your accounts.
  • How much money is in each account?
  • What funds are available in each account?
  • How much do you invest per year?
  • If there is a spouse involved then all of their information is relevant to varying degrees depending on whether you mix finances or not.

If you provide limited information then it really hamstrings our ability to give great suggestions and insight.

Second, I'm getting the impression that you really need to take the time to understand the basics of investing. I'm happy to explain it all, but I'm getting the sense that you're wanting to move forward in ignorance...and that's fine I guess because I can give you great input if I have the necessary information, but if I were you, I'd take the time to understand this stuff.

Third, you're moving forward without investigating the Charles Schwab option. I think that's a significant mistake. Unless of course, you plan to get things in order within this plan and then look into Schwab and possibly go through a second round of restructuring. That's fine I suppose even though it wouldn't be my approach.

 

17 minutes ago, GA teacher said:

All I did was to get out of Valic's fixed annuity and PIMCO as both were 50% of my assets before; now they are 0% and transferred to VINIX.

Annuities are basically always good things to get out of.

By moving your funds from an annuity/bonds to a pure stock fund, you've significantly increased the risk of your portfolio. This isn't inherently good or bad because it depends on your psychology. However, this underscores the importance of understanding what you're doing before making changes and the importance of picking out your asset allocation, which is absolutely critical.

The plan you're in only has two bond funds and they're both more expensive than I think is fair, but that doesn't mean they should be dismissed outright. The BlackRock bond fund is referred to as "high yield," another name for that is often "junk bonds" and you can think of it as being "risky". You can see here that it lost almost as much money as the Vanguard stock fund did last year. I'm not saying that you should or shouldn't own that fund, but I am saying that you should believe this is a safe fund. The Pimco bond fund on the other hand contains bonds with much better credit ratings, I would consider this to be a bond fund that provides safety in bad times.

29 minutes ago, GA teacher said:

I kept them in my 403 ROTH account because the asset % were much smaller and for the safety effect

I don't know what this means. I don't know what "them" is? Maybe the bond fund and annuity? I don't know what you mean when you say the asset % were small. I don't know what you're referring to as safe.

Generally speaking you want your assets with the highest expected return to be in your Roth accounts because that growth won't be taxed when you pull it out.

31 minutes ago, GA teacher said:

I left Blackrock just because my colleague has that as his only "bond" option guided by his financial advisor

I've already commented on the Blackrock fund and steering away from a financial advisors advice is generally a good thing. However, I want to push you towards the idea that your decisions should be made based on you and sound investment logic.

32 minutes ago, GA teacher said:

I also hesitated moving Amfunds Europacific because it was listed as International funds and thought I should keep an int'l fund?

Again, this goes back to your desired asset allocation and knowing your complete financial picture would help.

If you want international then paying 0.53% for it is high, but still worth considering. However, you may be way better off using your IRA to purchase an international fund that charges between 0% and 0.11% to meet your desired international asset allocation.

Also, I don't think this fund includes developing markets, which is what the other fund has. So if you wanted to maximize your international diversification you may want to own both. I'd have to take a closer look.

37 minutes ago, GA teacher said:

I should still take one more step and move everything over to the low-cost VINIX, right?

I can't answer this without knowing about your other accounts and your desired asset allocation.

The only thing I can say is that this would give you an account with the lowest possible costs, no bonds, and no international exposure.

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Hey Guys.

I'm not going to add much here because Ed is 100% correct in his comments.  GA teacher, I do not like your choices outside of VINNX. HUGE MISTAKE.  You will evolve over time into understanding what we here are trying to tell you as it took me a while too to "get it" .  i made the same mistakes after being influenced  disingenuously (SP?) by the  current system  and wondered why my accounts never grew. It was the fees!!   I understand you have  limited choices  and obstacles presented but there are ways around it as Ed mentions. 

 

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On 6/30/2020 at 10:48 PM, ScottO said:

BRHYX looks like garbage as a bond fund.

Hey ScottO,

I'm trying to review this whole thread right now.  Would you be able to tell me why it looks like a garbage bond fund?  

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28 minutes ago, GA teacher said:

Would you be able to tell me why it looks like a garbage bond fund?  

Scott almost certainly said that for the same reasons I said what I said about it.

As a general rule, people buying stocks accept the volatility in exchange for larger expected returns over the long run. As a general rule, people use bonds to smooth out that volatility, knowing it will reduce their expected returns, because they know their personality would fold under the pressure of their portfolio dropping by 50% in a crisis.

This bond fund is invested in "high yield" bonds, which means it invest in bonds (i.e. loans) that are more likely to never be paid back. The flip side of that coin of course is that the interest on those bonds are higher to compensate for the risk. Ultimately these funds behave much more like stocks than a traditional bond fund.

I wouldn't say high yield bond funds are garbage. Just like people want to hold international stocks in addition to domestic stocks, maybe it makes sense to diversify by also holding high yield bonds. However, if you want to own high yield bonds then you definitely shouldn't be viewing them as a "safe" investment the way you traditionally view bonds.

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