/biz/ - Business & Finance

40's
$1.8MM IRA & 401k combined

>>829275
>>pay outrageous fees for managed funds instead of using an index fund
Not all managed fund fees are outrageous. An appropriate allocation to low-cost actively managed funds can be a fine complement to a core portfolio of index funds.
>>don't use a Roth IRA or Roth 401k
Depends entirely on your individual income and tax circumstances. Also, not everyone even has the option to contribute to a Roth account due to the income restrictions.
>>don't balance their portfolio quarterly
Frequent rebalancing is a drag on performance, due to, among other things, the adverse tax consequences. Efficient rebalancing should be done on a threshold basis, not by the calendar. Studies suggest that rebalancing only when your allocations are out of alignment by 10% or more will lead to better long term returns.
>>put money into a target date fund
While it's true that many early target-date funds were poor choices due to the excessive fees, that has changed in recent years. A number of funds (including Vanguard) charge low fees and charge them only at the top-level fund, avoiding the double-dipping fees that used to plague all-in-one funds. Indeed, today these funds offer tremendous value because you're getting asset and strategy rebalancing for free.
>>don't use annuities or structured notes
I've yet to find a single insurance-based product that wasn't a rip-off once you tear into the details.

>>824488
If I start filling my extra free time with 4chan, please put a bullet in my head.

>>824514
>Could you brief me on how he quantified luck?
I don't have a math or statistics background, so I'll admit that I'm not qualified to discuss the methodology. I'll leave that to the experts.

The authors themselves explain it as follows:

>The challenge is to distinguish skill from luck. Given the multitude of funds, many have extreme returns by chance. A common approach to this problem is to test for persistence in fund returns, that is, whether past winners continue to produce high returns and losers continue to underperform (for example, Grinblatt and Titman (1992), Carhart (1997)). Persistence tests have an important weakness. They rank funds on short-term past performance, so there may be little evidence of persistence because the allocation of funds to winner and loser portfolios is largely based on noise.

>We take a different tack. We use long histories of individual fund returns and bootstrap simulations of return histories to infer the existence of superior and inferior funds. We compare the actual cross-section of fund α estimates to the results from 10,000 bootstrap simulations of the cross-section. The returns of the funds in a simulation run have the properties of actual fund returns, except we set true α to zero in the return population from which simulation samples are drawn. The simulations thus describe the distribution of α estimates when there is no abnormal performance in fund returns. Comparing the distribution of α estimates from the simulations to the cross-section of α estimates for actual fund returns allows us to draw inferences about the existence of skilled managers.

I believe the ELI5 summary would be that they compared the actual results of fund managers to a random picks over meaningful periods of time. Not unlike like the old WSJ contest pitting professionals against stocks picked from a dart board, but in a more scientific manner.

>>824195
Yeah, I pretty much retired last year. I still have my license, but I haven't done any client-billable work at all in 2015.

>>823763
>for you to realize any gains with G, you have to sell it
And for you to realize any gains with D, you have to NOT re-invest your dividends, which makes the spread between G and D even wider.

Besides, as >>823784 mentions, there's very little need to discuss the construction of an income generating portfolio amongst an audience who should be focused on growth. Other than myself, I don't think there's many retirees (early or otherwise) on this board.

>>823509
>What's the procedure for "selling" part of your index fund
The procedure is whatever is whatever your brokerage or fund family provides. Pretty safe to assume that any reputable place to buy funds or ETFs is going to have both online and telephone trading. Just look at the website of wherever you plan to buy your funds.

>is it possible to divide it among several different index's?
Of course. This is called diversification and its what most smart people do. The research shows this is the optimal way to make long-term investments.

A typical US index fund portfolio would ideally be made up of four core funds allocated along the following or similar lines:

US Total Stock Market Index 57.2%
International Stock Index 32.5%
US Total Bond Market 7.2%
International Bond Index 3.1%

Of course, the numbers can be tweaked according to your risk tolerance and goals. But the above percentages would be good for a typical investor with say 35+ years before retirement (i.e., a 25-30 year old).

I can't comment on your allocation options as I only make recommendations to US investors, but I'm sure you'll find suggestions out there. I do know that the bogleheads.org site has a lot of forum threads from Australian investors looking to craft smart index portfolios. I would start there, unless some Ausbro knows of a better site.

>>823426
>Why are they any worse or better than non-dividend stocks?
Consider two equivalent stocks -- a growth stock (Stock G) and a high-dividend stock (Stock D) -- both of which yield 10% per year. Stock G earns its 10% by price accumulation, and Stock D earns its 10% by paying a cash dividend. You own 1 share of each, and they are both worth $100/share. At the start, therefore, both Stock G and Stock D are worth $100.

At the end of 1 year, Stock G is now worth $110 (10% growth) and Stock D is still worth $100 but has paid you a $10 dividend. Your return on both stocks is the same -- before taxes.

After taxes, however, Stock G is still worth $110 (no tax consequences) but Stock D has only returned you $108 because you paid 20% in capital gains taxes on the dividends. So Stock G is ahead by $2.

Let's assume you're smart and re-invest your dividends. After year two, Stock G is now worth $121, and stock D is still worth $108 but has paid you a $10.80 dividend, reduced by taxes to $8.64, for a total gain of $116.64. Stock G is now ahead by $4.36

Hopefully you can now see where this is going. Every year the spread between Stock G and Stock D is going to get wider and wider because taxes aren't depleting any of your Stock G capital.

Lastly, while its true that Stock G will have higher accumulated gain (and corresponding taxes) than Stock D later in life, taxes later are almost always better than taxes now. Why? Because the earning potential of capital compounded over many years is always going to exceed increases (if any) in the capital gains tax rate unless things change wildly under the US tax system.

>Hopefully that was clear. I've been drinking.

>>823426
>Why are they any worse or better than non-dividend stocks?
Consider two equivalent stocks -- a growth stock (Stock G) and a high-dividend stock (Stock D) -- both of which yield 10% per year. Stock G earns its 10% by price accumulation, and Stock D earns its 10% by paying a cash dividend. You own 1 share of each, and they are both worth $100/share. At the start, therefore, both Stock G and Stock D are worth $100.

At the end of 1 year, Stock G is now worth $110 (10% growth) and Stock D is still worth $100 but has paid you a $10 dividend. Your return on both stocks is the same -- before taxes.

After taxes, however, Stock G is still worth $110 (no tax consequences) but Stock D has only returned you $108 because you paid 20% in capital gains taxes on the dividends. So Stock G is ahead by $2.

Let's assume you're smart and re-invest your dividends. After year two, Stock G is now worth $121, and stock G is still worth $108 but has paid you a $10.80 dividend, reduced by taxes to $8.64, for a total gain of $116.64. Stock G is now ahead by $4.36

Hopefully you can now see where this is going. Every year the spread between Stock G and Stock D is going to get wider and wider because taxes aren't depleting any of your Stock G capital.

Lastly, while its true that Stock G will have higher accumulated gain (and corresponding taxes) than Stock D later in life, taxes later are almost always better than taxes now. Why? Because the earning potential of capital compounded over many years is always going to exceed increases (if any) in the capital gains tax rate unless things change wildly under the US tax system.

>Hopefully that was clear. I've been drinking.

>>823331
I sympathize anon. One of the first things I learned when /biz/ started last year is how hard it is to implement a simple low-cost index strategy in some countries. Keep doing the best you can with the options available.

Good luck with your plan.

>>823314
>Why do you keep changing your ID and taking your trip off?
>Stop being a nigger

I haven't changed my ID once.

I guess I forgot to use my trip last post. Does that really bother you so much?

Why are you so angry? We're having a nice little thread here.

>>823161
Hehe. Keep moving the goalposts, kid.

>>823133
Actually I'm in my 40's and have close to $12 million in market investments. And my advice still stands.

>>823053
>I wonder if they apply to emerging markets too
I can't speak to the specifics of your country, but the available evidence says that the oft-repeated claim that active-management outperforms in marginally inefficient markets -- such as emerging markets -- is probably a myth.

http://www.etf.com/sections/index-investor-corner/swedroe-mythical-emerging-market-returns?nopaging=1

To be clear, I'm not completely against active management. I have about 30% of my portfolio in actively managed funds -- but they're /very/ low-fee funds with incredibly well-respected managers like PRIMECAP and Wellington. A fund with a 3.59% fee would never, ever be in my portfolio, period.

https://personal.vanguard.com/pdf/s356.pdf

>>823015
>The business is just some websites
That's not really enough information to assess the problem, but to be honest ad-based virtual businesses aren't my specialty anyway. You also keep combining your business and personal expenses in your posts, making it impossible to diagnose the situation.

I guess the only question I can be bothered to ask at this point is, why don't you get a job? Is this website thing honestly the most productive use of your time and skills, whatever they may be?

Good luck.

>>823017
>So, for those of us who only have the faintest idea what this is about, this is an indictment of managed funds versus indexed funds?
Yes, this is an incredibly damning indictment of active management from two of the smartest researchers in the field (including a Nobel prize winner).

The study finds that "most if not all active funds" have a /negative/ net alpha for investors over the long-term after accounting for fees and expenses.

To put it in my own words, the study says that when you take luck out of the equation, active fund managers don't beat the market. So the whole concept of "skill" in stock picking is bullshit.

>>822970
>I'd like to know how many of those without fees would beat the index.
According to Fama and French (two of the most influential modern market researchers), fewer than 16% of funds have alpha (performance above the market) greater than 1.25% per year (the minimum statistically significant quantum), and only about 2.3% have alpha greater than 2.50% per year, in each case BEFORE fund expenses and fees.

The study further found that when you account for fees and expenses, the numbers get really bleak. Something like 98-99% of funds fail to beat the markets on a consistent basis. This is even more damning that the "80%" figure that came out of earlier research because Fama and French adjusted for manager luck over the testing period.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021

>>822898
>My current thinking is to just keep trying to increase my income
Your head is in the right place: your income is too low. You say you're bringing in $3k/month but is that really income or is it just cash flow? Because if your running up debt at the same time, its not income.

I suspect the most important thing is something you didn't mention at all: why is your business operating at a loss? Is it still operating at a loss? What can you do (if anything) to turn things around (without incurring substantial additional debt)?

I have to say, that if you were forced to fund problems in your business on your personal credit card, the business may not be salvageable. I hate to sound pessimistic, but you haven't provided any information to suggest otherwise.

Also, are the rents on the condo covering the mortgage? The mortgage and expenses (including maintenance and insurance)? The mortgage, expenses, and taxes? If the answer to any of these is "no" you've identified another problem.

>source: 20 years as a bankruptcy lawyer

>>820160
>can a company go into bankruptcy completely out of the blue with no prior warning so that the stock loses all of its value?
Yes.

While it is often the case that a public company's financial troubles are evident in the trending price of the stock (along with many other indicators), there is no guarantee that shareholders will get any warning or indication of an impending bankruptcy filing. In fact, in the case of Chapter 11 reorganizations (the most common filing for public companies), the company will make diligent efforts to keep an impending filing secret from the public, so that it has time to prepare and hopefully negotiate a smooth transition into the restructuring process.

In addition, many factors can affect the timing of a bankruptcy filing that may make it impossible for any warning to be seen. First, a bankruptcy filing may be involuntary, i.e., one initiated by creditors. While rare among large public companies, it can happen.

Second, the company may seek bankruptcy as an emergency measure in response to external events. Things like an unfavorable court ruling, adverse regulatory action, and imminent litigation threats may cause a company to pull the trigger as a defensive measure.

Is this fair? Well, your opinion may be different, but the law says a shareholder has no right to advance warning of a company's major actions. This is particularly true in the case of a bankruptcy, because an insolvent company likely does not even owe fiduciary duties to its shareholders

>tl;dr ... see first line

>>798139
I'm pretty sure Canada follows similar rules.

Not sure what you mean my the plaintiff being gone. If you can give me an accurate description of what you mean, I'll try to respond.

>>798134
>What are the hours of your /biz/ free legal clinic?
If you've got a question, feel free to ask here. I suspect this'll be slow moving thread, so I'll keep an eye on it.

>>798104
(Note: when asking a legal question, ALWAYS specify where you're from. Law differs widely from place to place.)

Assuming this is in the U.S., then yes the defendants are making a request to the Court to assess costs against the plaintiff.

Note that "costs" are not the same as "fees." Costs only includes things like court filing fees, photocopy charges, mailing costs, etc. It does not include attorneys fees.

Because the U.S. is not a "loser pays" jurisdiction, assessing costs or fees usually only happens when a party has abused the system in some respect (exceptions exist only when provided explicitly by law or contract). This might include filing a frivolous, unsubstantiated, or groundless complaint. Small abuses may result in costs being assessed, and larger abuses may result in fees being assessed as well.

Please, please, please move your Roth as soon as possible. The fees at State Farm are ridiculously high. You should consider any of the low-cost alternatives, such as Vanguard, Schwab, or Fidelity (although Vanguard is the best).

For example, the annual fee on the State Farm LifePath 2040 Fund (from your pic) is 1.63%. The fee on Vanguards Target Retirement 2040 Fund is 0.18%. In the fund world, that's a huge difference, and would add up to a lot of lost money over the years.

What you want to do is go to the Vanguard website and open a new account.as a Roth-to-Roth transfer (see pic related). You'll need to input information about the State Farm account, so it'll help if you have or print off a recent statement from them. If you have any problems, Vanguard has transfer specialists who can do everything over the phone.

Vanguard has a wide variety of funds that you can choose from (about 10 times as many as State Farm). As I mentioned above, they have a 2040 target date fund if you prefer an all-in-one approach. That's probably a good place to start, to be honest. Target date funds automatically give you broad diversification, and they automatically rebalance both annually and as you get older. Of course, if you prefer, you can freely change the funds you invest in at any time down the road, without fees or taxes.

Cheers, and thanks for your service.

Please, please, please move your Roth as soon as possible. The fees at State Farm are ridiculously high. You should consider any of the low-cost alternatives, such as Vanguard, Schwa, or Fidelity (although Vanguard is the best).

For example, the annual fee on the State Farm LifePath 2040 Fund (from your pic) is 1.63%. The fee on Vanguards Target Retirement 2040 Fund is 0.18%. If the fund world, that's a huge difference, and would add up to a lot of lost money over the years.

What you want to do is go to the Vanguard website and open a new account.as a Roth-to-Roth transfer (see pic related). You'll need to input information about the State Farm account, so it'll help if you have or print off a recent statement from them. If you have any problems, Vanguard has transfer specialists who can do everything over the phone.

Vanguard has a wide variety of funds that you can choose from (about 10 times as many as State Farm). As I mentioned above, they have a 2040 target date fund if you prefer an all-in-one approach. That's probably a good place to start, to be honest. Target date funds automatically give you broad diversification, and they automatically rebalance both annually and as you get older. Of course, if you prefer, you can freely change the funds you invest in at any time down the road, without fees or taxes.

Cheers, and thanks for your service.

>>795674
>California
You're apparently not aware that this is a regulated industry. For example, in California, it is against the law to charge a fee greater than 10% of the value of the unclaimed property (so your example above is completely illegal).

There are also stringent notice requirements. You basically have to inform people that they can get their property/money for free and that they're not required to hire you. That's going to cut down your acceptance rate dramatically, I would assume.

Lastly, if the state receives an application from you and from the original owner, the state will pay the original owner. Any of your "clients" who change their mind (or who simply want to fuck you over) can easily submit their own form and stop you from getting any money. Which is why you would NEVER front the money; that would be monumentally stupid IMHO.

>>792485
>What about Canada
There's a "Canadian version" of bogleheads. Check out:

http://www.finiki.org/wiki/Simple_index_portfolios

and related pages.