Talking Stocks 2.0

[hartsy]

Originally Posted by MrGoat

Had a conversation with my FIL yesterday and he thinks I have too much money sitting in the bank and that I should instead invest it in a money market account because I can’t lose.

As some here know, I had a rough upbringing and then some pretty unpleasant life experiences due to losing everything. This makes me want to keep most (roughly 90%) of my money readily accessible in various FDIC insured checking and savings accounts spread between multiple institutions.

I was self trading in the market and made some but eventually lost more than I made. I pulled out of everything except what was already in retirement accounts.

I would rather have what I have and make a smaller percentage than risk losing it all at this point (this has become a significant ideal of mine in the last 8 months or so, if not longer).

We self insure our home and one account is simply our insurance account in case God forbid we have a catastrophic event.

Would taking my money from these various accounts that are insured by FDIC be in my best interest to put into a money market account when the security of that money means more to me than the potential money it can make in a money market account?

We each have a a few different retirement accounts that not included in this but in the market and funded monthly.


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You are really hurting yourself having 90% of your money in cash or cash equivalents. I would strongly encourage you to start looking at some kind of strategy or plan to start shifting your assets to investments.. You are slowly losing money every year you stay all cash to inflation.

[MrGoat]

Originally Posted by hartsy

You are really hurting yourself having 90% of your money in cash or cash equivalents. I would strongly encourage you to start looking at some kind of strategy or plan to start shifting your assets to investments.. You are slowly losing money every year you stay all cash to inflation.

Thanks for the reply. My thing is if all goes to hell that money that was supposed to make me money could be nothing. Many I know lost everything in the recession and listened to their advisors and liquidated at major losses to try to preserve what capital they had left. Which was significantly less than adjusting for inflation.

At least the money I have I know exactly what I have and what it’s worth at any particular day. It’s not the same with a money market account in my understanding. He said something along the lines of “if it loses a dollar then it gets dropped”. I don’t know what he meant by that unless that’s something he has told his FA to do. Seems like a pain in the ass for everyone if that’s the actual case.

Is it really so bad to just make money and sock it away in various ways without investing into the stock market? I’m not looking at my investments to get “rich” unless it’s something connected to a hard asset. I am looking to preserve what I have made that should be more than enough to supplement our other income sources in retirement to ensure us or our family never has to need for anything long after we are gone.

I understand I may be leaving money on the table but the security of knowing I have this amount far exceeds the thought of I could have x more of this or x less of this if I put it into an uninsured account.

How does being in a money market account mitigate my fears and protect me and my family from losing everything?

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[vipereaper30]

Originally Posted by MrGoat

He said something along the lines of “if it loses a dollar then it gets dropped”. I don’t know what he meant by that unless that’s something he has told his FA to do. Seems like a pain in the ass for everyone if that’s the actual case.

Sounds to me like he may have been referring to breaking the buck.
https://www.investopedia.com/terms/b...tment%20losses.

Are you familiar with Treasury Direct and treasuries? Something I'd recommend taking a look at to compare against your interest rate on what you have in the bank.

[MrGoat]

Originally Posted by vipereaper30

Sounds to me like he may have been referring to breaking the buck.
https://www.investopedia.com/terms/b...tment%20losses.

Are you familiar with Treasury Direct and treasuries? Something I'd recommend taking a look at to compare against your interest rate on what you have in the bank.

I am not but thanks for clueing me in!! Will check it out!!


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[hartsy]

Originally Posted by MrGoat

Is it really so bad to just make money and sock it away in various ways without investing into the stock market? I’m not looking at my investments to get “rich” unless it’s something connected to a hard asset. I am looking to preserve what I have made that should be more than enough to supplement our other income sources in retirement to ensure us or our family never has to need for anything long after we are gone.

At the end of the day its your money and you can do whatever you would like! However, the idea is that you at least keep up with inflation. You can invest in accordance with your risk tolerance and look at things like bonds and treasuries. The HYSA game looks good now, but that may not always be the case. Over time your "cash" becomes worth less and less.

[piratfisk]

Originally Posted by MrGoat

Many I know lost everything in the recession and listened to their advisors and liquidated at major losses to try to preserve what capital they had left. Which was significantly less than adjusting for inflation.

Ugh, this made my heart hurt. I can't imagine a wealth management team member/investor/advisor telling his/her clients to sell when the market is at the bottom. And, forgive me if this following statement is perceived as privileged, but what absolute goon is going to listen to someone that says "your dollar today is worth less than what it was yesterday, let's sell your assets so we solidify that it really is worth less" instead of roller coaster metaphor? I haven't been wrong today yet, but I'm of the mentality that you never truly "win" or "lose" until you stop playing the game... You never realize your gains until you cash out, you never realize your losses 'til you sell at the bottom...

[Mccall86]

Originally Posted by piratfisk

Ugh, this made my heart hurt. I can't imagine a wealth management team member/investor/advisor telling his/her clients to sell when the market is at the bottom. And, forgive me if this following statement is perceived as privileged, but what absolute goon is going to listen to someone that says "your dollar today is worth less than what it was yesterday, let's sell your assets so we solidify that it really is worth less" instead of roller coaster metaphor? I haven't been wrong today yet, but I'm of the mentality that you never truly "win" or "lose" until you stop playing the game... You never realize your gains until you cash out, you never realize your losses 'til you sell at the bottom...

Agreed. Investing is a roller coaster and the only ones who get hurt are the ones that jump off. The s&p recovered in 4 years from the 2009 bottom and now look where it’s at.

[BroncoOne]

Originally Posted by piratfisk

Ugh, this made my heart hurt. I can't imagine a wealth management team member/investor/advisor telling his/her clients to sell when the market is at the bottom. And, forgive me if this following statement is perceived as privileged, but what absolute goon is going to listen to someone that says "your dollar today is worth less than what it was yesterday, let's sell your assets so we solidify that it really is worth less" instead of roller coaster metaphor? I haven't been wrong today yet, but I'm of the mentality that you never truly "win" or "lose" until you stop playing the game... You never realize your gains until you cash out, you never realize your losses 'til you sell at the bottom...

I agree. In the Great Recession it was time to buy, not sell and lock in a loss (if you had the time to ride it out)

As noted, you can invest in US Treasuries which are paying high rates and the interest income is free of stat tax, but you in FL so it’s not such a benefit for you. Still, it is among the safest possible investments and you are getting north of 5% in the shorter term notes.

You should look at money markets. The breaking the buck trend was when interest rates were near zero. That is not the case now. Most online brokerages have money markets north of 5% and you can typically access your cash in 24 hours. You should have plenty of notice should rates start to crater, which looks very unlikely in the “higher for longer” fedspeak environment. Note that the yield is an annual one and factors in reinvesting the interest payments.

That said, SOME exposure to dividend paying blue chip stocks, at the least, is usually a good idea for most investors.

[piratfisk]

Just solidified a healthy position in $LLY & $XHB.

[904VT]

Originally Posted by SMD

So many on here would benefit from reading and adopting bogle’s principles.

Jack actually destroyed modern markets and we are all worse off because of his philosophy that was forced into the market. The index products have caused more volatility in the broader market and more dislocation from fundamentals. Those indices are cap weight so they force investors to buy high and sell low which we all know is not ideal. The old philosophies of Benjamin Graham would be better reading. Bogle’s forced philosophy of extreme fee pressure has made investors worse off by crowding out many competitors. Meanwhile, critiquing 10 basis points at the expense of active management that can give improved risk management. As Apple grows the index buys more and a higher price. When it goes down, it sells. Constantly buying high and selling low. Bogle fooled a lot of investors with his garbage.

[FLGatorM5]

Originally Posted by 904VT

Jack actually destroyed modern markets and we are all worse off because of his philosophy that was forced into the market. The index products have caused more volatility in the broader market and more dislocation from fundamentals. Those indices are cap weight so they force investors to buy high and sell low which we all know is not ideal. The old philosophies of Benjamin Graham would be better reading. Bogle’s forced philosophy of extreme fee pressure has made investors worse off by crowding out many competitors. Meanwhile, critiquing 10 basis points at the expense of active management that can give improved risk management. As Apple grows the index buys more and a higher price. When it goes down, it sells. Constantly buying high and selling low. Bogle fooled a lot of investors with his garbage.

Why not tell us what you really think?

I don’t disagree, but remember the pendulum swings both ways. I think many have already moved beyond his over simplified view…thinking SMAs with focused strategies, tax management, etc.

Increased competition and price pressure? good (over time).
Being the cheapest guy on the block (guess who)? poor interface, crumbling cyber security, lack of employee retention…

[scarlet knight]

You can diversify with index funds from different markets. And there are equal cap weighted index funds like RSP. But you make some valid general points, 904VT.

[Krash]

At the peak of the 2008 financial crisis, I put more money into the stock market, including bank stocks. My neighbor (at that time) sold everything for a huge loss. I vividly remember him telling me how much of a mistake I was making. He was even mocking and making fun of me at a neighborhood party. I wasn’t really happy about it and just kept my mouth shut.

Today, I’m the one who retired at 60. I’m the one with a big fancy home on a lake front property. He’s still working and likely will be until his 70s. So that’s that.

But even as far back as 2009 and 2010, it was obvious I made the right decision. No doubt that those who stood their ground and bought more stock did better than those that sold everything for a loss.


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[Romeojk]

Originally Posted by Krash

The 2008 recession is an interesting test case for me. At the peak of the financial crisis, I put more money into the stock market, including bank stocks. My neighbor (at that time) sold everything for a huge loss. I vividly remember him telling me how much of a mistake I was making. He was even mocking and making fun of me.

Today, I’m the one who retired at 60. I’m the one with a big fancy home on a lake front property. He’s still working and likely will be until his 70s. So that’s that.

No doubt that those who stood their ground and bought more stock did better than those that sold everything for a loss.


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Sounds like he’s your ex-neighbor.


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[Krash]

Originally Posted by Romeojk

Sounds like he’s your ex-neighbor.


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Yep, I live in FL now.


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[Krash]

Originally Posted by 904VT

Jack actually destroyed modern markets and we are all worse off because of his philosophy that was forced into the market. The index products have caused more volatility in the broader market and more dislocation from fundamentals. Those indices are cap weight so they force investors to buy high and sell low which we all know is not ideal. The old philosophies of Benjamin Graham would be better reading. Bogle’s forced philosophy of extreme fee pressure has made investors worse off by crowding out many competitors. Meanwhile, critiquing 10 basis points at the expense of active management that can give improved risk management. As Apple grows the index buys more and a higher price. When it goes down, it sells. Constantly buying high and selling low. Bogle fooled a lot of investors with his garbage.

I never did much research into this but I often wonder if these large index funds are good or bad for investors. Same with many of these ETFs. I feel like they have too much influence on overall market valuations. If lots of people suddenly bail on them, then it drives prices down more than it should. But again, I never really researched that, so maybe not. Plus, I’m not exactly doing bad, so I have nothing to complain about.


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[enjoythemusic]

Originally Posted by Krash

Yep, I live in FL now.

Good man. It's a nice day to go fishing out of your back yard.

[SDGT3]

I'll be the contrarian here and argue in favor of index funds, specifically the S&P500 funds as there are several reasons.

First, they've democratized the usage of funds and have been an entry point for many including first time investors. Those that are not savvy in finance or investing can pretty much participate with little to no maintenance.

Second, the lower fees enable an investor to realize much more than a managed fund.

Third, an SP500 fund ETF is extremely tax efficient with limited turnover vs. what an active manager may do.

Fourth, there is ample evidence that over a long period of time active money managers cannot match the returns of an index fund when expenses and fees are taken into account.

Finally, there's this, and it's perhaps the most compelling reason given Warren Buffet's acumen in this very area:

“One bequest provides that cash will be delivered to a trustee for my wife’s benefit,” he wrote. “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”

Buffett recommended using Vanguard’s S&P 500 index fund.

While this strategy is straightforward and doesn't require constant monitoring or active trading, Buffett expressed a significant amount of confidence in it.

“I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers,” he said.

[Krash]

Originally Posted by SDGT3

I'll be the contrarian here and argue in favor of index funds, specifically the S&P500 funds as there are several reasons.

First, they've democratized the usage of funds and have been an entry point for many including first time investors. Those that are not savvy in finance or investing can pretty much participate with little to no maintenance.

Second, the lower fees enable an investor to realize much more than a managed fund.

Third, an SP500 fund ETF is extremely tax efficient with limited turnover vs. what an active manager may do.

Fourth, there is ample evidence that over a long period of time active money managers cannot match the returns of an index fund when expenses and fees are taken into account.

Finally, there's this, and it's perhaps the most compelling reason given Warren Buffet's acumen in this very area:

“One bequest provides that cash will be delivered to a trustee for my wife’s benefit,” he wrote. “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”

Buffett recommended using Vanguard’s S&P 500 index fund.

While this strategy is straightforward and doesn't require constant monitoring or active trading, Buffett expressed a significant amount of confidence in it.

“I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers,” he said.

I agree. It’s hard to argue with any of those. The point I was trying to make, and I didn’t do a good job of expressing it, is how much influence these funds might have on a specific individual stock (or vice versa). For example, there are only 10 stocks that account for ~20% of the S&P 500 due to their weighting.

Also, the largest shareholders aren’t individuals. Instead, they’re Vanguard, BlackRock, State Street, et al.

If people suddenly decide to dump their mutual funds or ETFs, it could adversely affect some of these stocks.

I’m not saying any of this is good or bad, but it’s just something to consider.


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[piratfisk]

Originally Posted by BroncoOne

I agree. In the Great Recession it was time to buy, not sell and lock in a loss (if you had the time to ride it out)

As noted, you can invest in US Treasuries which are paying high rates and the interest income is free of stat tax, but you in FL so it’s not such a benefit for you. Still, it is among the safest possible investments and you are getting north of 5% in the shorter term notes.

You should look at money markets. The breaking the buck trend was when interest rates were near zero. That is not the case now. Most online brokerages have money markets north of 5% and you can typically access your cash in 24 hours. You should have plenty of notice should rates start to crater, which looks very unlikely in the “higher for longer” fedspeak environment. Note that the yield is an annual one and factors in reinvesting the interest payments.

That said, SOME exposure to dividend paying blue chip stocks, at the least, is usually a good idea for most investors.

Just wanna clarify one thing, unrelated to investing: I do not live in Florida. San Diego is nicknamed "America's Finest City." Not by me, and IDK if it's the "finest," but the weather is nice.

[7sins]

Originally Posted by SDGT3

I'll be the contrarian here and argue in favor of index funds, specifically the S&P500 funds as there are several reasons.

First, they've democratized the usage of funds and have been an entry point for many including first time investors. Those that are not savvy in finance or investing can pretty much participate with little to no maintenance.

Second, the lower fees enable an investor to realize much more than a managed fund.

Third, an SP500 fund ETF is extremely tax efficient with limited turnover vs. what an active manager may do.

Fourth, there is ample evidence that over a long period of time active money managers cannot match the returns of an index fund when expenses and fees are taken into account.

Finally, there's this, and it's perhaps the most compelling reason given Warren Buffet's acumen in this very area:

“One bequest provides that cash will be delivered to a trustee for my wife’s benefit,” he wrote. “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”

Buffett recommended using Vanguard’s S&P 500 index fund.

While this strategy is straightforward and doesn't require constant monitoring or active trading, Buffett expressed a significant amount of confidence in it.

“I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers,” he said.

Agreed vs a mutual fund but not against a tax managed direct indexing equity SMA. For ~15bp you can get a SMA that tracks SPY but buys and sells individual positions to generate tax losses throughout the year. You can also tax loss harvest individual positions on your own accord opposed to an ETF which is not as tax efficient. Those capital losses that accumulate are incredibly valuable to offset future gains from investments and or real estate yet you still track the return of SPY very closely. Look at Eaton Vance Parametrics Equity SMA for example.

[Romeojk]

I’m wondering peoples thoughts on Verizon (VZ). I’m a bit concerned with dividends going forward.

It pays a good dividend, but earnings have been going down the past few years.

I planned to hold it as part of my portfolio in retirement (hopefully retire within 4yrs) with some good dividends and plus I generally like Verizon and the service I’ve had over the past 40ish years. But Mint mobile and others are making a compelling case to switch.

I guess I really don’t want to get caught with my pants down if they pull what Paramount did to me with their dividend cuts. Right now I hold about 20 stocks and VZ is about 6%.

And if I do jump ship what ship am I boarding, what’s a good solid replacement?

I got some info from a quick google search, and I know I need to spend more time looking deeper.
“Verizon 2023 annual EPS was $2.75, a 45.65% decline from 2022. Verizon 2022 annual EPS was $5.06, a 4.89% decline from 2021. Verizon 2021 annual EPS was $5.32, a 23.72% increase from 2020.”



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[austinp]

How do we feel about NVDA? They report today. Any predictions on where the price goes? Anybody buying before close today?


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[Krash]

Originally Posted by austinp

How do we feel about NVDA? They report today. Any predictions on where the price goes? Anybody buying before close today?


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50/50

Long term I feel great about it.

But I’m not sure what to think about today’s earnings report. I suppose we could see a dip. Hopefully not.

I’m just glad my Financial Advisor bought this for me a while back. We’ll find out soon enough…




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[Krash]

NVDA soaring after hours post earnings announcement. Announces 10 for 1 split.




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[brandrea]

Originally Posted by Krash

I agree. It’s hard to argue with any of those. The point I was trying to make, and I didn’t do a good job of expressing it, is how much influence these funds might have on a specific individual stock (or vice versa). For example, there are only 10 stocks that account for ~20% of the S&P 500 due to their weighting.

Also, the largest shareholders aren’t individuals. Instead, they’re Vanguard, BlackRock, State Street, et al.

If people suddenly decide to dump their mutual funds or ETFs, it could adversely affect some of these stocks.

I’m not saying any of this is good or bad, but it’s just something to consider.


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Asset allocation is key to any portfolio success IMHO. I prefer equal weight ETFs because of what you’re describing. Market weight and you end up with the not so magnificent 7 That’s fine when those stocks are ripping up the market, not so when they aren’t. I use equal weight ETFs for US and European exposure.

My individual stock holding strategy is to own the 2 largest Cap, dividend paying stocks in each of the 11 TSX sectors. This amounts to 22 stocks in total. I rebalance the portfolio each Jan so that of any one position is more than 4.5% it gets trimmed. If any one position becomes less than 4.5% I buy more.

I recheck each year to see that the same 22 companies are still the largest cap stocks and if they aren’t, I sell the position and buy the new company that’s taken it’s place.

This approach (known as the 2 minute portfolio) has served us well. By diversifying if one company has a bad quarter or year for that matter, it won’t unduly affect the entire portfolio.

I do not try to time the market.

This thread is so long but I’m sure I posted a stock chart showing how 2008-2009 looks like a mere blip on a long term stock chart when you look at it

[Krash]

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[904VT]

Originally Posted by SDGT3

I'll be the contrarian here and argue in favor of index funds, specifically the S&P500 funds as there are several reasons.

First, they've democratized the usage of funds and have been an entry point for many including first time investors. Those that are not savvy in finance or investing can pretty much participate with little to no maintenance.

Second, the lower fees enable an investor to realize much more than a managed fund.

Third, an SP500 fund ETF is extremely tax efficient with limited turnover vs. what an active manager may do.

Fourth, there is ample evidence that over a long period of time active money managers cannot match the returns of an index fund when expenses and fees are taken into account.

Finally, there's this, and it's perhaps the most compelling reason given Warren Buffet's acumen in this very area:

“One bequest provides that cash will be delivered to a trustee for my wife’s benefit,” he wrote. “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”

Buffett recommended using Vanguard’s S&P 500 index fund.

While this strategy is straightforward and doesn't require constant monitoring or active trading, Buffett expressed a significant amount of confidence in it.

“I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers,” he said.

It’s kind of odd imo that Buffet made his wealth by doing the opposite of the advice he gave in the quote. Buffet has been a stock picker for years and invested in value and/or growth at a reasonable price. At least if were to recommend something like the equal weight SP500 it would take the cap weight influence out which conflicts with investing philosophies of buying low selling high. The idea of a tax-efficient and passive fund was originally for cheap exposure. But what they have evolved to and the cult like following has really been detrimental to markets with increased systemic risk. Poor companies receive capital influx by being part of the index alone. So while we can argue the cheap exposure and tax efficiency may be beneficial for the individual investor, if you dive deeper it has harmed the markets. I’d argue a simple cap weight buy high sell low is never better for any investor. Once you crowd out active management it becomes self fulfilling that they lag broad index. Because if stocks no longer trade in fundamentals they are only trading beta, fulfilling exactly what they argue.

[SDGT3]

Originally Posted by 904VT

It’s kind of odd imo that Buffet made his wealth by doing the opposite of the advice he gave in the quote. Buffet has been a stock picker for years and invested in value and/or growth at a reasonable price. At least if were to recommend something like the equal weight SP500 it would take the cap weight influence out which conflicts with investing philosophies of buying low selling high. The idea of a tax-efficient and passive fund was originally for cheap exposure. But what they have evolved to and the cult like following has really been detrimental to markets with increased systemic risk. Poor companies receive capital influx by being part of the index alone. So while we can argue the cheap exposure and tax efficiency may be beneficial for the individual investor, if you dive deeper it has harmed the markets. I’d argue a simple cap weight buy high sell low is never better for any investor. Once you crowd out active management it becomes self fulfilling that they lag broad index. Because if stocks no longer trade in fundamentals they are only trading beta, fulfilling exactly what they argue.

Undoubtedly you are correct insofar as how he made start, but I would argue that the way he made his money is really through compounding over the very very long life he has enjoyed. Most of his wealth came after the age of 65.

Things have changed since he first started investing and he was certainly unique in his investing procedures. Imagine how things have change from his early days to now with instant information, instant low friction trades and all the institutional competitors.. it's not easy to be a stock picker these days.

Finally, BRK hasn't matched the S&P 500 returns over the past 20 years, albeit it's been close. However the S&P pays dividends where BRK does not.

Full disclosere I'm invested in both the BRK-B and S&P. The pattern I've noticed in the past is that when there's a financial crisis, Buffett has the cash on hand to make great deals (think GFC) and used to make a killing during those hard times.

After the GFC, both monetary and fiscal policies have stepped in to stop the bleeding in economic volatility, which in turn, has not allowed the opportunities for someone like Buffett to come in and be the white knight.

The other pattern I've noticed is that during volatility in the economy, BRK does not go down nearly as much as the S&P500 or other indexes, so it does act as a more defensive position.

[BraveBold]

Buffett has generated superior -risk-adjusted- returns over very long periods of time. Sure, he has longevity and a good starting point (wealthy family as an enabler) but so do countless others.

As for his stock picking advice, it makes good sense. Michael Jordan might recommend a different general approach to playing the point guard position vs. the approach he took… and there is nothing inconsistent with doing one thing and advising another, when you are exceptional. In fact, it is excellent advice.