investing in ETF

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bigato
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Re: investing in ETF

Post by bigato » Fri Jul 19, 2019 6:31 pm

Aaah, Ray Dalio's "Principles" book is big but not so heavy and actually don't touch so much on economy itself. It's divided in two sections: "Principles for Life" and "Principles for work". His other book that is probably more dense (haven't read it yet) and is actually focused on economy is "How to Navigate Big Debt Crisis".

I'm a big fan. I can see that some people could call him simplistic, and I bet he ignores a lot of factors that people more versed in the field consider fundamental. The scholar way probably would be to study like Warren Buffet, Ben Graham, etc. Warren Buffet results clearly show this. But for me, learning Economy through Ray Dalio is akin to learning psychology through MBTI: it's known to be incomplete and in the case of MBTI even flawed, but yet it touches on the 20% more important that will open my mind to the rest over time.

To me, learning a complex subject from first principles would be like learning car mechanics starting by the principles of how to design parts and melt metals. It's probably the proper scientific way, but I just can't. Just show me a car working, make me listen to the sound of a problematic engine for example. Drive with me and make me see how, when I accelerate, at the peak of speed the engine reaction changes and that must be a leaking fuel injection that is giving in under higher pressure (by the way I just made this up and have no idea what I am talking about regarding cars). Only then open the thing and show me the pieces, and only explain a few at a time. I'll get more interested and absorb more over time. My brain just can't digest too much at once.

Jason
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Re: investing in ETF

Post by Jason » Fri Jul 19, 2019 7:40 pm

Mister Imperceptible wrote:
Fri Jul 19, 2019 4:47 pm
I think it’s important to observe that Buffett’s wife will have so much money that she cannot play in smaller markets without buying whole companies, so 90% into an S&P 500 fund is the one of the only autopilot investments she could make without moving markets.
Warren Buffet has made it perfectly clear that he does not recommend that the average investor should pursue the benefits of compound interest through index funds, not individual stock picking. That would be like Michaelangelo telling everyone with a paint brush that they could produce the Sistine Chapel. He heeped high praise on John Bogel for allowing the rest of us hoopleheads to participate in the stock market through low cost indexing.

So I don't think its important to observe how much money his wife had in the context of this discussion. It was the spirit, not the law, of the anecdote and how it applies to the thread topic.

In all due respect, the OP asked a basic, practical question about investing. A question that really deserves a "Yes, fucking do it. It's like learning how to ride a bike with training wheels." But instead they are told to read prospectuses, and do their due fucking diligence and told of the nuances of having too much money to invest. "The know it show it" index is through the roof. ETF's are half a click above a savings account. It's like a father dumping his spare change into his kids piggy bank when they are asleep. Or maybe stealing it. But at least lessons are fucking learned about money and human nature in the process.

bigato
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Re: investing in ETF

Post by bigato » Fri Jul 19, 2019 7:49 pm

Ray Dalio told the same, something along those lines: "This stuff is hard, we have whole teams working on it 24/7 and lots of experience and yet we can't always nail it. Normal people should just stick to a portfolio that will fare reasonably well in all conditions".

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Dream of Freedom
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Re: investing in ETF

Post by Dream of Freedom » Fri Jul 19, 2019 9:05 pm

Last edited by Dream of Freedom on Sat Jul 20, 2019 4:32 am, edited 1 time in total.

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unemployable
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Re: investing in ETF

Post by unemployable » Fri Jul 19, 2019 10:38 pm

bigato wrote:
Fri Jul 19, 2019 7:49 pm
Normal people should just stick to a portfolio that will fare reasonably well in all conditions".
Fun fact: Bridgewater offers its idea of just that. All-Weather, as opposed to Pure Alpha, its macro fund.

Mister Imperceptible
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Re: investing in ETF

Post by Mister Imperceptible » Fri Jul 19, 2019 10:53 pm

Jason wrote:
Fri Jul 19, 2019 7:40 pm
I know we have discussed this elsewhere including the thread I started regarding Buffett, I did read his biography, and I think where we disagree is that Buffett’s advice for the masses is questionable considering he has no alternative to saying what he is saying. Buffett is so big at this point that he cannot help but be “of the system” and therefore a rah-rah cheerleader for it. Even though we have all the evidence in the world regarding systemic problems and moral hazards, we are 10 years into this cycle and all Buffett can continue to offer, despite record valuations, is “if they drop interest rates even lower, equities are cheap, everyone keep buying stocks and if you get a chance to drop by Omaha, buy some furniture and jewelry and a T-bone steak.” It’s intellectually dishonest of him. Not unlike Dalio going on CNBC and saying capitalism isn’t working, as if our moral hazard system is true capitalism. If one of them just said “valuations are only sustained by never-ending liquidity and Wall Street bailouts forever and ever Amen” that would be truly “radically honest” and “principled” but no they aren’t saying that. They can’t say that.

So while I understand that buying Vanguard funds is empowering to a newbie who feels overwhelmed, and has helped most who have started investing in the last 10 years, I think it behooves anyone who thinks we have not reached a permanent plateau in stock prices to look under the hood and research more sophisticated strategies and tactics.

Notice Dr. Fisker, who does not run a multi-billion dollar holding company, advises some measure of caution. He and I probably just disagree as to what a better store of value is.

@OP
Tyler’s website is a great resource and tho I’ve never read it I am sure the book Dr. Fisker recommended is also.

Sclass
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Re: investing in ETF

Post by Sclass » Sat Jul 20, 2019 12:00 am

I posted these books up in another thread on Books to Learn Investing . The Morningstar link is a really good introduction for beginners.
Sclass wrote:
Tue May 27, 2014 8:08 am
Recent favorites are

Get Rich Carefully by Cramer.

Street Smarts by Jim Rogers.

Oddly, this online series at Morningstar is excellent for the basics. I just stumbled across it trying to look up accounting definitions.

http://news.morningstar.com/classroom2/ ... &CN=sample

+1 @Sepia’s comments on dipping your feet in are spot on. I started in my early twenties and lost a lot(not a lot but a large fraction of my small net worth at the time) of money. I think I only started to get positive repeatable performance ten years in. It took another ten years to confirm I was actually right and not just lucky (at least not luck alone :lol: ).

Stocks are a potent tool. That’s why you’re interested of course or else you’d be happy buying MSCI which is a great place to start by the way. With a potent tool you can get a lot of work done in a short amount of time. You can also get really hurt really fast.

By the way my paid investment advisor (responsible for 10% of my net) benchmarks to the MSCI. He beats it by 1% but charges me 1% in fees. :lol: What he does is he creates a mix of stocks that has the same percentages of tech, energy and materials, financials, healthcare, consumables, industrials etc. in half a dozen of the worlds significant economies like the MSCI but made up of his own picks ostensibly to juice his results to beat the index. You can do something similar by putting the majority of your money in the MSCI fund then using smaller amounts of speculative funds to put into some individual stocks that you find promising. Start with small amounts that you are comfortable losing.

I think I started out this way. It was a long time ago but I recall my first investment was some kind of total market index fund where I put most of my money. Over the years I moved out of it by gradually increasing my investments in individual stocks and also by liquidating the original fund. Eventually the tiny holding in the total market fund was gone and I had a basket of stocks.

My favorite piece of advice was small knowledge, small bet. Big knowledge, big bet. I later learned my mentor stole this from Ed Thorpe’s discussion of the Kelly Criterion. In simple terms, gamble with a small portion of your net worth when you’re a noob.

Good luck.

Quadalupe
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Re: investing in ETF

Post by Quadalupe » Sat Jul 20, 2019 1:20 am

Horsewoman, I sounds to me like the "sleep well at night" factor is very important to you, more than just returns. I would therefore suggest to look for investment strategies which have low volatility (i.e. no increases of 20% per annum, but also no crashes of -30%).

As an example: I personally chose the permanent portfolio. I put my money in stocks, bonds, cash and gold, 25% and all in ETFs. Rebalance each year or whenever one part exceeds/falls behind 35%/15%. Time spent on investing each month? Around 15 minutes buying the shares.

Of course, you should look around a little bit for various portfolio allocations, and some basic insight in economics can never hurt. But to reiterate my suggestion: look for a hands-off low volatility portfolio.

bigato
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Re: investing in ETF

Post by bigato » Sat Jul 20, 2019 6:37 am

Mister Imperceptible, I don't see the dishonesty in them because I don't see where what they speak is inconsistent (to my mind it isn't). Could you further explain it? I mean, at least Ray Dalio that I know has discussed at length the debt cycle/deleveraging and the roles central banks and governments play in it. He has even been invited by governments to explain his opinions on this multiple times. Could you elaborate? It's ok if you think it's better to open a new thread on the topic.

Jason
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Re: investing in ETF

Post by Jason » Sat Jul 20, 2019 7:00 am

Mister Imperceptible wrote:
Fri Jul 19, 2019 10:53 pm

So while I understand that buying Vanguard funds is empowering to a newbie who feels overwhelmed, and has helped most who have started investing in the last 10 years, I think it behooves anyone who thinks we have not reached a permanent plateau in stock prices to look under the hood and research more sophisticated strategies and tactics.
I made my first purchase of $3000.00 in VFINX in March, 2016 at $187.86 per share (due to reaching threshold of 70 shares it converted to VFIAX but it's the same fund just with lower fees). It closed yesterday at $274.88. It was down to $227 as recently in December. Upshot, that calculates to a 46% gain for my initial investment. That doesn't seem like a plateau to me. But of course, every generation has been accurate in their claim of when the anti-christ is coming.

Not to mention I didn't read a prospectus or conduct any due diligence. Maybe there are better and more sophisticated strategies and tactics and I could have gained more than 46% on that 3K. But I'm neither Warren Buffet nor JLF nor most importantly, someone who thinks they are. That's not to say I don't individual stocks. But in my investment plane, the individual stocks fly commercial. I keep my indexes and ETF's up front in business, plying them with drinks and shit.

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Re: investing in ETF

Post by jacob » Sat Jul 20, 2019 7:44 am

Mister Imperceptible wrote:
Fri Jul 19, 2019 10:53 pm
I know we have discussed this elsewhere including the thread I started regarding Buffett, I did read his biography, and I think where we disagree is that Buffett’s advice for the masses is questionable considering he has no alternative to saying what he is saying.
This! Buffett is pretty much locked into recommending the S&P500. It's his least-worst option. Min-max all the way ... here's how I reason it:

BRK can't absorb the liquidity insofar he told the masses (a lot of whom would unquestionably pile in on his recommendation alone) to put their money in BRK along with his own (or his family) and make the stock very volatile. If he recommended some other fund, current BRK investors might leave ---I mean, that's obvious right?---and destroy BRK market value (Shareholders would figuratively go insane!). Also, BRK is sufficiently large that it now needs to trade directly in the secondary market (the "stock market")---no more buying up the furniture store across the street.

Thus making a recommendation that adds price-insensitive investors (more fish) and their liquidity (to the ocean) is actually good for BRK. Investing and trading gets proportionally easier the less competition there is, that is, the fewer other people who actively try to beat it. At the same time, adopting the standard investment advice is just a good CYA move. Also in terms of his reputation/legacy, being wrong when others are wrong too is not nearly as damaging as being wrong when others are right or as rewarding as being right when others are also right. And the preferred strategy for being right (piling into BRK) when others are wrong is excluded for him.

PS: I'm not a BRK fanboy (sorry, if there's no dividend, I'm not interested), so I don't follow BRK in detail, but it was my understanding that much of BRK's stock trading and particularly BRK's technology adventures (like IBM :? ) are now driven by his lieutenants/eventual replacements. Jain and a few other guys.

Jason
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Re: investing in ETF

Post by Jason » Sat Jul 20, 2019 8:08 am

But I don't see that as the as in the question. The question is what choices do the masses have, irregardless of the altruism of Buffet's claim? You don't need Buffet to verify the value of Bogel. And you can talk about better and sophisticated ways of investing, but the masses are not capable of that. That's the whole point. That's why they have this 101 stuff and sometimes just staying in 101 is better than moving onto 201 when you are only capable of understanding a portion of it. Remedmial understanding of math and investing will suffice for the average person. The problems really start when non-remedial people or people who think they are non-remedial start telling the remedial there's a better way. The bottom line is investing is better than not investing. Let the remedial be happy being remedial as opposed to getting them in over their heads. Am I a more sophisticated investor than I was ten years ago? Yeah, but I'm still fucking remedial and I'm happier and better off for accepting that fact. And there does come a point when you start asking yourself "I wonder how much money do these non-remedial people actually have."

bigato
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Re: investing in ETF

Post by bigato » Sat Jul 20, 2019 8:23 am

I don't remember the "invest in sp500" answer by Buffet ever being a reply to "what should one invest right now to make money", but rather the answer to "how should one go about investing". What is expected as answer is obviously not the specific tatics but rather what should be the strategies and principles one should follow, and that was the way I saw Buffet answering it every time, in the best honest way he could. He also mentions that he spends most of his day reading and researching and that is not realistic for most people. I don't question that his financial size makes it not possible for him to give specific recommendations without that moving the markets, but this is tactics and thus orthogonal to his advice on strategy.

Jason
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Re: investing in ETF

Post by Jason » Sat Jul 20, 2019 8:41 am

It is possible to give another person good advice that simultaneously directly benefits you. It is also possible to give said advice for both selfish and unselfish reasons. But that's besides the point, because quite frankly, I could give a shit what lies in the depths of Warren Buffet's cash registering heart. But his message of investing to the best of one's ability, in American companies over the long haul kind of works, doesn't it? How one skins that cat can vary, but isn't the baseline message "do it" as opposed to "not do it" and those who have gotten on the field at whatever talent level they possess have done better than those who have stood on the sidelines saying things like "I think the game has plateaued." I mean hasn't history betrayed that kind of thinking enough to think shit keeps ultimately moving forward? Granted there was some high floor office building diving in the past, but nothing so irreparable that a detonation of a few nuclear bombs couldn't jump start our way out of.

horsewoman
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Re: investing in ETF

Post by horsewoman » Sat Jul 20, 2019 10:36 am

Quadalupe wrote:
Sat Jul 20, 2019 1:20 am
Horsewoman, I sounds to me like the "sleep well at night" factor is very important to you, more than just returns. I would therefore suggest to look for investment strategies which have low volatility (i.e. no increases of 20% per annum, but also no crashes of -30%).
Indeed, ruminating on this thread has that made very clear to me. "Sleep well at night" and "don't loose money to inflation" are my two main motivators when it comes to money. I do not "hanker after riches".
At the moment my salary is 630 EURO a month and put aside 600, so it seems I need very little money, even with a kid in private school and 4 horses. A lot of these expenses will go away in the foreseeable future (kid grows up, my two 24yo old horses will die in the next few years).
At this time we have 6 income streams, plus I'm working on setting up self-sustainable systems that will benefit us later, when we can not work part-time any longer. So while investing is something I`ll further "dip my toes in", I'm pretty sure that I can not muster up the interest of earning a black belt.

While Jacob as a scientist is naturally dismissive of anecdotal data, I see this differently. Everyone here is at least 2 Wheaton levels above me when it comes to investing, and at the same time there is such a large pool of different life models that I feel I've gotten some valuable pointers in this thread.
Quadalupe wrote:
Sat Jul 20, 2019 1:20 am
As an example: I personally chose the permanent portfolio. I put my money in stocks, bonds, cash and gold, 25% and all in ETFs. Rebalance each year or whenever one part exceeds/falls behind 35%/15%. Time spent on investing each month? Around 15 minutes buying the shares.

Of course, you should look around a little bit for various portfolio allocations, and some basic insight in economics can never hurt. But to reiterate my suggestion: look for a hands-off low volatility portfolio.
Thanks for the link! I'll check it out.

If any of my fellow Germans are reading along - bonds are "Staatsanleihen", aren't they?

Tyler9000
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Re: investing in ETF

Post by Tyler9000 » Sun Jul 21, 2019 2:27 pm

horsewoman wrote:
Fri Jul 19, 2019 3:15 am
This is obviously not a good thing, so I got reckless (ha ha!) 2 months ago and allotted 200€ a month to this fund: XTR.MSCI WORLD SWAP 1C.
It netted me 10,24€ since then. Wohoo!
400€ still go to rot on my savings account each month.

Can pretty pretty please anyone tell me whether I'm an idiot because I'm
a) investing in things I do not understand (know that already, actually)
b) investing in the wrong thing
c) investing to little in this fund?
Lots of good advice in this thread already, but here's my two-cents:

a) Investing in things you don't understand generally isn't a good idea, so keep it simple and take the time to at least learn the basics. I see a few people have already recommended Portfolio Charts (the check is in the mail ;)), and I'll also point out that it also has data for German portfolios and index funds to help with your personal search.

b) A MSCI World fund is a terrific option. The part that I personally don't care for in your specific fund is the "swaps" that they're layering on top of the core holdings, as that type of financial maneuvering adds unnecessary complexity (risk) to an otherwise simple index fund. And the expense ratio is also a little high. If you like XTrackers, I prefer XDWD as it covers the same world market but with no swaps and at less than half the cost. Or you may also look at VGWL, EUNL, SPYY, and LYYA to see what you like best.

c) Nah. If anything, I might recommend buying another complementary fund or two (bonds, cash, gold, etc) to diversify beyond stocks. Try browsing these portfolios and see if anything resonates. Pick the right portfolio, and you can just let it do its thing without worry.

Mister Imperceptible
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Re: investing in ETF

Post by Mister Imperceptible » Mon Jul 22, 2019 5:40 pm

Jason wrote:
Sat Jul 20, 2019 8:08 am
And you can talk about better and sophisticated ways of investing, but the masses are not capable of that. That's the whole point. That's why they have this 101 stuff and sometimes just staying in 101 is better than moving onto 201 when you are only capable of understanding a portion of it.
That’s fair.
bigato wrote:
Sat Jul 20, 2019 6:37 am
Mister Imperceptible, I don't see the dishonesty in them because I don't see where what they speak is inconsistent (to my mind it isn't). Could you further explain it? I mean, at least Ray Dalio that I know has discussed at length the debt cycle/deleveraging and the roles central banks and governments play in it. He has even been invited by governments to explain his opinions on this multiple times. Could you elaborate? It's ok if you think it's better to open a new thread on the topic.
I posted my reply in the Warren Buffett thread.

Nomad
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Re: investing in ETF

Post by Nomad » Mon Jul 22, 2019 6:05 pm

@horsewoman
One thing I would say is that usually, there is a transaction fee for buying ETF's or individual shares but often there is no fee to buying funds.
So depending on your account type you may want to consider a global fund.
Some funds actually beat the market whereas a tracker fund by definition will just match it.

horsewoman
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Re: investing in ETF

Post by horsewoman » Tue Jul 23, 2019 1:47 am

Tyler9000 wrote:
Sun Jul 21, 2019 2:27 pm
Lots of good advice in this thread already, but here's my two-cents:
Thank you kindly, good sir! Very hands on advice, I appreciate that. Your portfolio charts are very interesting, but at the moment I'm still at the stage of googling and translating abbreviations (Yes, I'm that of a Noob).

I'm also reading up about bonds, since it looks that this is more fitting to my overall risk profile.
Nomad wrote:
Mon Jul 22, 2019 6:05 pm
@horsewoman
One thing I would say is that usually, there is a transaction fee for buying ETF's or individual shares but often there is no fee to buying funds.
So depending on your account type you may want to consider a global fund.
Some funds actually beat the market whereas a tracker fund by definition will just match it.
So it would be better to save up a lump sum and invest it once or twice a year? To save transaction fees?
But if I buy funds I need to know more about how a fund is performing, which propels me straight into analysis paralysis. So maybe for someone like me it is more efficient to take the loss of transaction fees instead of not investing enough. I'm not sure.

Nomad
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Re: investing in ETF

Post by Nomad » Tue Jul 23, 2019 6:11 am

horsewoman wrote:
Tue Jul 23, 2019 1:47 am
So it would be better to save up a lump sum and invest it once or twice a year? To save transaction fees?
But if I buy funds I need to know more about how a fund is performing, which propels me straight into analysis paralysis. So maybe for someone like me it is more efficient to take the loss of transaction fees instead of not investing enough. I'm not sure.
Personally, I would go with funds rather than ETF's unless you're investing in commodities such as Gold or similar.
There isn't really a reason to monitor a fund more than an ETF.

Try a fund screener or two, this one is quite simple.
https://www.youinvest.co.uk/research-to ... eener/fund
Pick morning star rating of 5, analyst rating of Gold and then select that the returns are greater than the category average for
YTD, 1 year, 3 year and 5 year.

That will give you a very small list to ponder.

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