/biz/ - Business & Finance

>>1116856
>Is there a guide you would recommend for getting started with index funds?
https://www.bogleheads.org/wiki/Getting_started

>>1116865
Your reading comprehension needs a lot of work. Good luck, snowflake.

>>1116743
>Also I've heard having many different kinds of investments helps you long before it hurts
Being diversified doesn't mean picking a bunch of different stocks. It means building a portfolio comprised of multiple asset classes and market exposures that provide the kind of risk/reward metrics that match your goals and investment horizon.

The number of individual stocks you'd need to own to minimize diversifiable risk the same as an index is very large. Owning 100 stocks reduces diversifiable risk by about 90%, and you'd need about 400 stocks to reduce diversifiable risk by 95% By contrast, you can reduce 99% of diversifiable risk with 1 index fund -- and at dramatically lower transaction costs.

>its kind of interesting making a semi educated guess and seeing if you can make some returns on it
I don't make a fuss if people want to take 5-10% of their portfolio and invest in individual stocks, sector overweighting, or other higher risk strategies. If that's consistent with your overall risk tolerance and goals, then fine.

However, too many people push the limits of this exception, and think it's fine to add even more speculative investments, or even to make their whole portfolio from individual stock picks. They rationalize this either due to special snowflake syndrome (they think they're the super-smart exception that can beat the market) or that their age/wealth/income is so small that they can take any level of risk they want without consequence (never true). Both forms of delusion lead to long-term underperformance.

But if you can be disciplined and want to allocate a small portion of your portfolio to more speculative investments, that's up to you. Just wait until you've already built your core portfolio of index funds to sufficient levels that your "play account" won't hurt your long-term compounding.

>>1116511
>but why weigh by market cap?
If you're buying an asset class (like gold) for its downside hedging effect (like anon), then of course you'd set your allocation percentage by market capitalization. Otherwise, how else would you know you're getting the desired financial effect inside your portfolio?

You repeatedly strain yourself to analogize indexing to individual stock picking, but I'm not sure you have a sufficient grasp of the fundamentals of investing to be making these arguments. Every comparison you've tried so far has been idiotic.

>>1116528
>Do you buy a set of securities because you believe they will go up over time?
For the 20th time in the thread, yes.

There's a myriad of differences between indexers and stock pickers, but both share the common goal of growing their wealth. What differs is how the strategy they use to achieve that goal.

Indexers use a sound, widely adopted and accepted investment principles (thanks for the nice phrasing, anon). One that has been academically tested under a peer-reviewed scientific methodology for decades by the world's leading experts in finance and academia. And, while it's no guarantee of future results, the indexing strategy has been demonstrably and dramatically more successful than other approaches historically.

By contrast, individual stock pickers make guesses, hunches, and predictions about the future. No different than gambling, playing the lottery, or calling a coin flip. They even "win" occasionally, although it's hard to ever consider them winners due to the obscene level of fees and taxes they bear. It's a strategy which has proven to return between 4-8% lower returns annually than indexing, according to the Dalbar studies of the last two decades.

So, bottom line, there's your difference: 4-8% annually. Over a lifetime, an indexer will be dramatically more wealthy than an individual stock picker thanks to that performance drag. Thus, in the one goal that both share, the indexer wins.

>>1116427
>Vanguard Retirement Funds have changed several time
Vanguard changes its indexes for several reasons, none of which have anything to do with chasing return.

They do it to add diversification, such the Target Retirement Fund going from a Three-Fund Portfolio to a Four-Fund Portfolio by adding International Bonds.

They do it reduce tracking errors. Not every index is equally accurate at tracking the benchmark, and sometimes they come in high or low. Either is an undesirable result, and Vanguard will drop an index with an inherent tracking issue.

And lastly, and most commonly, they do it to lower expenses. Indexes are the intellectual property of their publisher (e.g., Standard & Poors, Dow Jones, Morgan Stanley Capital International, etc.). Investment companies like Vanguard must pay licensing fees to use these products. If Vanguard can switch to a competing index with the same basic coverage and accuracy, then both Vanguard and its investors win.

Comparing any of this to the speculative gambling of individual stock pickers is laughable.

>>1116475
>I fully agree that 99.99% of the people on this board are not smart enough to pick stocks.
There's no evidence that 0.01% are either. You're still arguing for special snowflake status, and I'm afraid that's just a sad delusion.

>I suggest you read this
I started to, but I stopped when I got to the following line referencing secular bear markets:

"Of course you’re getting impatient; so are we."

Any financial journalist (I won't call them analysts) who is cheerleading for certain market conditions goes right in the trash. It would appear that you seek out "news" sources that simply reinforce your own bubble of ignorance. Inside your self-created echo chamber, I'm sure things do indeed look gloomy going forward. But you're living in fantasy land, as any objective observer can easily see.

So, without intending personal insult, my only possible conclusion is that you're a kook and a perma-bear. Sorry.

>>1116251
You're asking questions about the mechanics and fees of Australian investment accounts, which I really don't know. You'll need to ask someone more familiar with your local options, perhaps on the bogeheads.org forum.

I'd rather give no answer than guess and give you bad advice. Good luck.

>>1116252
I already said there was a relationship between QE and equity prices. I also said I question the degree and longevity of that relationship.

If you can't be bothered to read the posts in a thread, don't jump in at the end and make flyby shitposts.

>>1116243
Yeah, all I see is a chart with a Y-axis manipulated to create an apparent correlation in two line segments in the last 10% of the X-axis.

Don't be so gullible. I'm not.

>>1116207
>The Nikkei has doubled
Correlation is not causation. Plenty of markets have doubled in a given time span without QE.

To be clear, I don't doubt that QE has some positive impact on equity prices. However, I do not accept conclusory pronouncements about the degree or longevity of those effects. Anyone who clamours that the U.S. markets are going to plunge as a result of the Fed's cessation of QE is missing two important facts: (1) QE ended some 15 months ago, and the markets have not changed by any degree outside the standard variance for that time period, and (2) there is no direct evidence that the absence of QE will lead to any statistically significant market effects going forward.

Unless you have actual evidence to counter these points, you're just making a speculative guess.

Of course, you're entitled to make any guesses you want, follow any hunches you wish, and heed any gut feelings you have. But that's just not how some of us make financial decisions.

>I can't offer you a "safe, reliable, guaranteed return" that will work forever.
No one said indexing will work forever. There's already research that suggests when more than 60% of the market adopts indexing, it may become more optimal to pursue alternate strategies. But that's a problem for our great-grandchildren.

The only real question is do you, or anyone else, have a long-term investing strategy that outperforms indexing on a risk-adjusted basis?

Thing is: we already know you don't. People much, much smarter than you (and even me) have already proven this in peer-reviewed studies.

If and when a better method is proven, I'll be the first to change strategies. I doubt it'll happen in our lifetime, but you never know.

Still, I won't try to stop you from guessing the market's future, playing the lottery, visiting casinos, or betting on sports. It's your money, and you can lose it however you want. Just don't drag others down with you, okay?

>>1116180
>he thinks buy-and-hold is "bullshit"
>advocates market timing instead
Okay champ. Keep on ignoring the decades of research that unanimously conclude that the future short-term direction of the markets cannot be predicted.

Keep waiting for a "clearer direction" just like millions of your pals did in 2010. And 2012. And 2013. And even into 2014. Keep on being spooked by the normal fluctuations of the markets. You only missed a 250% six-year bull run, but that's a small price to pay since you avoided this month's whopping 10% down movement. Yikes.

>historical highs
Markets are at or near historical highs on 20% of ALL trading days, historically. If you're going to piss your pants to head to the sidelines every time we approach historical highs, you're going to dump your entire portfolio every five days. And of course, you'll also make massive mistakes on your entry points too, further adding to your losses. What a shit show.

Now maybe your extreme turtling is appropriate for your particular circumstances. Perhaps you're a year or two from retirement. Perhaps your income is so small that you can't afford volatility in your investments. Perhaps you have ass cancer and only have a year to live. If any of these are true, then you keep on doing what you're doing.

The rest of us, with normal lives and long investment horizons, will do what's best for normal investors.

Good luck with the ass cancer and the market timing.

>>1116168
>Funny you left out 2015.
I left out 2015 for the same reason I left out 2011. Both were basically flat (2015 being slightly positive and 2011 being slightly negative).

That being said, I don't think you know what QE was. The government didn't buy equities or inflate equity demand. They bought fixed interest securities, increasing bank liquidity and driving down interest rates. Low interest rates caused some investors to increase their equity allocations, and that increased demand (and prices) by some degree.

Guess what? Interest rates were historically low in 2015 too, Oh by the way, they still are.

So your correlation argument has a lot of holes. QE might "artificially" inflate equity markets, and it might not. It didn't in Japan, which has a much longer history of QE than the US. The case is Europe is pretty mixed too.

The truth is, people like you don;t really need a justification to try to time the market, You see whatever pattern or signal or indicator you want to see, and then you make a guess. Your investment decisions are driven by emotion, but you dress it up with whatever argument makes you sleep at night. Good luck with that, snowflake.

>That's my only point here.
You haven't had a clear point the entire thread, other than that you have some bearish prediction, guess, or hunch about the future direction of the markets. Good for you, man, Every underperforming loser from Main Street to Wall Street says the same thing. So you'll just have to forgive those of us with a rational brain in our heads if we dismiss you as a kook and ignore your advice entirely.

>>1116105
>A lot of money has been artificially shoved into stocks so it's hard to see a situation where even more money could enter the field unless we start seeing much more positive economic signs.
So said skeptics in 2010. And 2012. And 2013. And 2014.

In truth, you have no idea how much uninvested capital and savings are available to the equity markets. You're just making a wild ass guess, and most likely a wrong one.

While it's going to be hard to pin down the amount of investing dry powder out there, we do know some things. We know that investments in private equity remain strong, even through the end of 2015. Investors continue to pump trillions into index funds. Clearly there is still uninvested capital out there, and bond yields are still miles from attractive.

Is there risk? Of course there's risk. Equity investing inherently bears risk, including indexing strategies. But if that's your only criticism -- that it's possible to lose money with index funds -- then congratulations on stating the patently obvious.

And yet, I can't help but notice that you STILL haven't told us the risk-adjusted alternative that's better....

>they always predict markets will continue to rise
No we don't. We predict that the markets will continue to benefit from the positive influences that helped make the markets a historically solid investment. We predict that GDP growth will continue. That populations will rise, buoying demand. We predict that the markets will get more efficient and more dynamic. That technology will continue to drive economic growth and efficiency in production.

Indexers don't predict that Exxon or Google will continue to rise next year. Rather, indexers predict that tomorrow's world will be incrementally more conducive to Exxon and Google (and every other stock), providing them with an enhanced opportunity to rise.

If you can't understand the difference between those two statements, then indexing just isn't for you kid.

>>1115826
Huh? Obviously markets don't always go up. Equity markets have fallen in 25 of the last 90 years, and bond markets have fallen in 14 of the last 90 years.

At this point you're just repeating yourself. I'm happy to have a discussion about investing, or even a debate, but I'm not going to waste my time in a one-sided conversation. You obviously have no interest in learning anything or fixing your bad habits. Good luck with your sector picking and your market timing.

>>1115815
Neither. First, I make no particular predictions about the future price direction of the markets. I do assume that the inherit positive bias that I described in >>1115617 will continue, an assumption that it supported by all available facts. Thus, for the long-term investor, the smartest decision is to maximize their time in market. That means the right time to invest is when you have money to invest.

Second, please stop suggesting that I advocate dollar-cost averaging. I've never made that statement, and I expressly disavowed it in this thread.

If you're unable to post a comment with making unsubstantiated assumptions about my views, then don't post. And if you want to know something, ask a question.

>Also, congrats on the false dichotomy. That's your fourth (fifth?) logical fallacy of the thread.

>>1115800
>You make a lot of vague statements.
No, I really don't. I make a lot of statements that you have no idea how to answer, especially since I back up my statements with citations.

If you're unable to keep up with the discussion, try asking questions instead of doubling-down on your ignorance and making ridiculous, laughable comments.

>would you say now is a good time to begin a diversified ETF portfolio?
Yes. Assuming you have a steady income, and a fully-funded cash emergency fund, then yes.

Ask me 5 years ago: same answer. Ask me back in 2000: same answer. Ask me tomorrow: same answer. Ask me in five years: same answer, unless the alien invasion happens.

>>1115802
You can bitch and moan, but you did make an incredibly stupid comment that's directly contrary to established research. So maybe you don't really have grounds to complain....

>>1115768
Have fun following the lead of hedge fund managers.

>Why not add to your diversified ETF portfolio by buying weakness in certain sectors, like energy and emerging markets, instead of dollar cost averaging the whole thing at the historic peak of the broader index?

You choose your asset allocations based on your risk tolerances, your practical needs, your investment horizon, and your personal goals. Chasing any particular market segments, for any reason, means you're letting the markets dictate your portfolio structure. That's not smart.

Furthermore, there's no evidence that chasing weak sectors leads to greater alpha. Value stocks do not outperform a diversified long-term portfolio (the possible exception being U.S. small-cap value stocks). The segments you mention are just as likely to underperform going forward as anything else.

So, no, a smart investor is not going to overweight into dogs.

>Lastly, for the record, I don't recommend dollar-cost averaging either. That's the third time you've just made up or assumed something. Can you try discussing the actual posts in the thread and not the imaginary voices in your head?

>>1115687
>My first post read ">indexes only ever go up" and all my other posts verify how ridiculous that statement is.
Congrats anon. You've spent hours in this thread refuting an argument that you admit you made up. Must be nice to have the luxury to shitpost to that degree.

>/strawman general/

>As far as market timing
You make it sound super easy. So easy, that any one can do it.

Except that more than 90% who try, fail.

The markets aren't weather patterns. They don't have "headwinds" or other simple explanations. It's a complex multi-faceted system that no one to date has been able to accurately model.

And yet you pretend that you've done exactly that.

>/roleplaying general/

>>1115605
Oh hey look, an anonymous faggot is changing his argument because he got called out for (a) lying in his first posts, and (b) making strawman arguments in his second post.

In point of fact, stocks do enjoy strong positive bias from external factors. Nationalistic factors, such a GDP growth and population growth, positively influence local markets. Certain cultural changes also positively influence markets, such as women entering the work force, trends towards longer working hours, and less vacations. Developments in legal and regulatory structures eliminate market inefficiencies, such as corruption, price manipulation, and insider trading. And lastly, technological advancement generally contributes to both demand and efficiency gains, providing a strong positive bias in affected markets.

>>1115605
>I think you'd be crazy
Wow, yet another shifting argument. So now you're all about the market timing? Good luck with that.

Dalbar's been studying investor behavior for decades, and attempted market timing is the #2 biggest mistake that investors make (paying excess fees being #1).

>inb4 you're the special snowflake that successfully times the market

>>1115447
Strawman much?

Why would you make up a statement -- something that NO ONE in this thread said -- and then make 9 separate posts refuting the made-up statement?

I think its because you don't have a credible argument to make against indexing. All you can do is argue with yourself, Well, we're trying to have a serious discussion here, kid. If you want to play pretend, go elsewhere.

>>1115271
>>1115276
>>1115278
>>1115279
>>1115282
>>1115283
>>1115288
You selectively pick a handful of markets out of the hundreds that an indexer would be invested in, you present cherry-picked time frames that don't correlate to your other examples, you present inflation-adjusted results to avoid an apples-to-apples comparison, and then you lie about historic S&P 500 returns. You might as well throw up charts of the bottom performing S&P 500 individual stocks too, since we know, by definition, that some stocks in the index lag the index.

Let's also take notice of the fact that you haven't presented any better performing alternative strategy. So whatever the shortcoming of indexing, you apparently don't have anything better to offer.

>>1115321
>Never heard you index guys suggesting 5 year time periods.
Huh? It's pretty standard in the academic research to look at active investor 5-year performance as the minimum statistically significant time period. Longer is better, of course, but practical limitations have to be respected.

Of course, since you choose to ignore the research, you wouldn't know any of this.

But by all means, keep on shit-posting like usual, kid. Your posts are one of the most effective education tools I could imagine. You're a real life example of common investor logical fallacies and delusion.

By contrast, the individual stock picker is constantly buying and selling based on his guess, prediction, hunch about the future prospects of the stock and the markets as a whole. The individual stock picker tries to "buy low, sell high" and tries to "buy the dips" and sets price targets and stop losses and worries about "market sentiment" and trend lines and price support and moving averages.

All this noise leads to suboptimal timing decisions, according to the Dalbar studies. It feeds into the stock picker making speculative -- and more often than not -- emotion-driven financial decisions. Consequently, in 90+% of cases, the stock picker fails to beat the index.

So when we talk about the futility of individual stock picking, we're not dismissing stocks in general. Stocks are wonderful, and enjoy collectively a strong positive bias from outside influences that historically drive markets higher. As the saying goes: a rising tide lifts all boats.

>>1115106
>an index consist of individual stocks
True, of course, but there's two very important distinctions that need to be made.

First, the individual stocks in an index are selected by secular criteria, i.e., for reasons other than speculation about future performance. These criteria may be entirely objective (as in the case of a "total market" fund) or subjective (as in the S&P 500 or DJIA). But even in the case of subjective benchmarks, the publisher of the index is looking at thing like market capitalization, or sector representation, and isn't trying to predict how the stocks will perform.

By contrast, the individual stock picker is making selections based on his guesses, hunches, and predictions about the performance of his selections. Even when using seemingly "objective" criteria (whether TA or FA), the stock picker is still making a speculative prediction about future stock movements. To give the simplest example, a stock picker buys Apple, but passes on Google, because he predicts (guesses, gambles) that Apple will perform better going forward.

Unfortunately for the stock picker, studies prove time and time again the folly of trying to predict the future price movements of individual stocks. Thus, the stock picker fails to beat the index.

Second, an index doesn't make timing decisions to buy or sell its individual components. While the constituent stocks in an index do occasionally change, for the most part an index is pure "buy and hold" in the sense that the stocks in the index don't change based on market conditions.

(cont.)

>>1114818
>we are in a bear economy
Huh? We haven't had negative GDP growth since 2009. Stop watching so much Fox News.

>>1114689
Index funds (and ETFs) do pay dividends, interest, and maybe some (usually small) amount of capital gains. Those will be taxable outside of a 401k, IRA or similar.

When looking at information about any mutual fund, you can check the disclosures for information about the fund's historical distributions. This will usually be a good indicator.

>>1114673
I learned long ago not to give advice on something unless I'm sure about it. Unfortunately, currency hedging is just not within my wheelhouse.

I will note that what most caught my eye on the finiki page was the section on volatility. If currency hedging in Canada really does increase volatility, then its entirely counter-productive.

>>1114574
>Is it worth saving up for admiral shares compared to just buying investor shares right now for Vanguard funds?
No. Time in market is too important to put off investing. Admiral shares are a perk of having higher balances, not a threshold for getting started. Start now, and then convert (for free, tax free too) to Admiral shares later.

>>1114599
Like >>1114608 said, I'm not complaining about the board. I'm just pointing out the strange habits of a small minority of shitposters.

Lighten up Francis. Not everything I post has to be straight out of an academic journal.