/biz/ - Business & Finance

>>714026
An incorporation document or shareholders agreement is a good way (probably the best way) to deal with the "what if" scenarios needed to keep the business viable if relations breakdown among the partners. I hate to sound like a cynic, but I can't tell you how many client consultations start off with the following sentence: "The business was going great, and then one of my partners ...."

Its even tougher when its a gf, a family member, or a wife. Its not easy to plan out in advance what will happen to the business if you break up or grow apart, but its still the right thing to do.

This thread reminded me that my very first client ever was a small-scale manufacturer of pet treats. They made pizza-themed treats for dogs, if I recall correctly.

The business was run by a young married couple, and they made decent money as I recall. They were well on their way to a comfortable lifestyle, with the possibility of a nice upside if the product caught on with a national retailer or was bought our by a national manufacturer.

Unfortunately for them, they allowed their horrible personal lives to infect the business. The husband turned into a coke fiend and snorted away much of the profits. The wife, also not blameless, got caught sleeping around. This all precipitated a messy divorce and a legal battle for the company.

Left without stable leadership, the business basically withered and died on the vine.

I only mention it because its an important lesson for small business owners: keep your personal shit out of the business (easier said than done) and be careful who you team up with because you'll have to deal with their baggage too.

>>703960
This is shit-tier bait. Of course there is such thing as a literal index fund. Traditional mutual funds existed for decades before ETFs started trading in 1993. Index funds (literal index funds) have existed since 1976, the first being Vanguard's S&P 500 Index Fund (VFINX).

Does a fund track an index perfectly? No. Does that detract from their successful deployment in a fully-diversified, low-cost fund strategy? No. You aren't telling anyone anything they don't already know.

>But unlike the index, the ETF pays taxes
Huh? ETFs and traditional funds are regulated investment companies, and under IRS regulations do not pay taxes. For tax purposes, they are pass-through entities assuming they follow the regulations (which they all do).

>It's borderline scammy
Ok, thanks for the insight Mr. Tinfoil Hat.

>worked at a ETF provider starting with vanguar
Janitor? Mail room? Because you clearly have little idea what your talking about.

>>703021
I think there is none better than Vanguard. Schwab and Fidelity are pretty competitive on index fund fees, but Vanguard is the only investor-owed mutual fund company out there.

When Schwab & Fidelity make profits (and they do), it benefits their owners. When Vanguard makes profits, it benefits its investors (i.e., you and me).

https://about.vanguard.com/what-sets-vanguard-apart/why-ownership-matters/

OP, I'm sorry that you ran into this level of autism in response to your very simple and very relevant question.

For a long-term investing strategy, choosing between ETFs and traditional index funds typically comes down to two important considerations: (a) fees, and (b) trading costs.

Since you said above that you're planning to invest in-house at Vanguard (>>702922), trading costs are the same between the two options. As you probably already know, Vanguard offers commission-free trading on its own ETFs. At the same time, Vanguard does not charge loads on its index funds. So there are no trading fees either way.

As for fees, the deciding factor will be whether you qualify for Admiral class shares or not ($10,000 and up for index funds). If yes, then you'll have the same fees as the equivalent ETF. If not, then your traditional fund will have a slightly higher fee. This is often the key factor between the two for new investors with small starting accounts.

A couple final points:

1. Vanguard charges a $20 annual account service fee for all brokerage accounts unless you are Voyager or above ($50,000 total assets). For traditional funds, the $20 account fee is charged only if your aggregate fund balances are less than $10,000. So its easier to avoid the annual fee with traditional funds.

2. A brokerage account (ETFs) is more flexible going forward because you can buy any exchange-traded security. You can also provision your brokerage account with margin and options trading, if you choose.

3. A traditional fund account is better for automatic periodic investments, such as fixed monthly withdrawals from your savings account. Some people like to add to their investment accounts automatically on a regular basis, and this requires a traditional fund account.

Good luck with your account.

>>691197
Umm... okay then.

>>690928
>state his argument and leave
Huh? I don't troll threads, and I try very hard not to repeat myself in the same discussion. But if someone asks me a question, or if the debate progresses to new arguments (e.g., as has happened several times in this thread) why is it incumbent upon me to depart?

I don't try to repress your opinions. Some return courtesy would be appreciated.

>He won't convince us and we won't convince him.
Who is "us" and "we" in this statement? Is there some organization of anti-indexers on /biz/? Do you have a name for yourselves? Honest questions.

>>690902
>Do you think that there is any edge to be had at all if you work hard at this?
I know its controversial to assert that hard work and talent won't yield investment results because that's a recipe for success in almost every other area of life.

And I do believe that hard work and talent can lead people to find market inefficiencies that will, in some cases, allow them to make profitable trades.

The question is whether there is sufficient profit in those inefficiencies to overcome the higher (a) risk, (b) volatility, (c) fees and commissions, and (d) taxes, of such a strategy. Currently, the research says no.

>>690889
Someone with a finance background can probably explain this is more detail, but I suspect that leveraged decay (aka beta slippage) would doom this strategy over any meaningful period time.

>>690876
Investment forums are flourishing because people like to talk about money, especially during a bull market. It's really hard to pick "bad" stocks wen you've had market conditions like we've enjoyed for the last 6 years. Everyone thinks they're a genius when there's some green numbers in their portfolio.

None of that translates into individual investors outperforming indices over the long term.

>common sense that the market is more efficient than any trader could be
Understand that individual traders do worse the more efficient markets are. Stock pickers try to profit from market inefficiencies, such as price/value disparities or supply/demand differences.

Part of the reason why index investing is better than stock picking is that market inefficiencies are very rare and very small. In today's market, there's more profit in betting on long-term global growth than gambling on price swings.

>>690824
That's what back testing and practice accounts are for.
Practice accounts (among their many other flaws) may tell you whether you got lucky, but they won't tell you that you're skilled. Back-testing is even worse, because you can only back test a programmatic set of trading criteria. You can't back-test judgment calls, by definition.

>Absence of evidence is not evidence of absence.
Yes it is. You can conjure up hypothetical outlier examples, but that doesn't change the fact that the highly educated, highly motivated, and highly skilled managers at trading firms consistently underperform the benchmarks. These folks are relevant because (a) we know a lot about them, and (b) we know a lot about how their investments perform over periods of time. We don't study them because they are Wall Street. We study them because they are the available data.

Yet even if I accept your example of the prodigy stock trading hiding away in a Montana cabin, all that proves is that exceptions exist. But no one claims that exceptions don't exist. What I claim is that neither intelligence, effort nor resources determine whether you'll be the rule or the exception. So unless there's some way to show that our reclusive trader achieved his success through anything other than dumb luck, you're not moving the needle on this argument.

>>690675
Unlike your physical or metal abilities, when you start investing you begin behind the veil of ignorance, You don't know if you're going to be the 95% or the 5%. You only know the odds, and the odds aren't good.

Michael Jordan was a McDonald's All-American before he went to college, and was a national college star before he turned pro. By the time Jordan committed to being a professional basketball player, there was no chance he wouldn't succeed at the highest level of the professional game.

Furthermore, Jordan's success on the basketball court is a direct result of his athletic gifts, his training effort, and his game preparation. However, there is no evidence that talent, effort, or research have any statistically meaningful effect on investment performance. If there was any such correlation, we would expect to see trading firms with the smartest managers, most analysts, and best data far exceed the performance of the market indices. However, we know for a fact that this does not happen.

Finally, lets drop the pretense that Bogleheads don't take risks. All investing entails risks. The question isn't whether to take risk; its how to optimally get the highest risk-adjusted return consistent with your investment goals and time horizon. For most people, in the most common situations, the answer is 100% clear: low-cost long-term index investing.

>>690624
>could you please explain ?
Its a bit hard to articulate, but there are aspects of practicing law that you can't learn until you're doing them. How to deliver an opinion without exposing your firm to excess risk. How to convince a client to to what's in their best interests. How to make a client feel like your fees are both justified and necessary. How to maintain client relations in the face of an adverse development. How to convince a client that you're better than the other 8 firms clambering for their business. How to be impressive to the firm without being taken advantage of by the firm. How to navigate the ethics rules, how to navigate the ethics rules when your opponent is violating them. This is just off the top of my head.

>>690612
>just pick winners
We all can't have a perfect track record of stock picking like you. I look forward to reading your profile in the Wall Street Journal, since you're undoubtedly destined for glory as the greatest market trader of all time.

>>690548
>Any tips on how to convince relatives and friends to invest their cash?
For me, the convincing factor was the science. Index investing isn't about John Bogle; its about the reams of peer-reviewed studies showing that John Bogle was right. I tell people, "You don't have to trust ME about index investing because there are hundreds of market researcher and economists, and hundreds of years of market data, that all say the same thing as me."

But also recognize that you can lead a horse to water but can't make them drink. People who are nervous about putting their money into the market are going to stay nervous and pull it out -- at the wrong time. Its probably better not to invest than to invest without really buying in for the long-haul.


>>690561
>How much Insight into the workings of the market did your corporate law degree give you?
One of the biggest lessons I've learned from person experience is that a company's performance often has little to do with the fundamentals that investors look at. I've worked with dozens of companies -- including market-traded companies -- that got into financial trouble due to problems that NO AMOUNT of investor due diligence could have discovered or predicted.

The list of thing that can tumble an otherwise healthy company are almost endless. Changes in the law, industrial or environmental accidents, criminal activity by senior managers, patent, copyright & trademark problems, unexpected technological obsolescence. Even something as common as a death or illness affecting a key manager can have a snowball effect.

This is why you buy the index, and avoid stock picking. There's too much randomness in the fortunes of individual stocks; better to own the whole industry than get stuck owning the loser.

>>690465
>I want to know if there is anything i could do to immerse myself even more in Law like having a mentor or an internship .what who you advise me to do before ,between or after law school ?
There's not much you can or should do to prepare for law school. Law school is just school -- a bit more competitive, perhaps, but its still about being good at testing and being good at writing. Same as college, in my experience.

Don't fuck around as a 1L. Unlike college, you don't have time to "get your bearings" in law school. Your earliest grades will either put you ahead or behind your classmates, and that can mean a lot when it comes to summer internships and jobs.

As for career advice, I would imagine its pretty helpful to be able to talk to a practicing attorney to give advice about the hiring market and specialization. Law school doesn't really teach you much about the actual day-to-day practice of law or how to maximize your chances of being successful at it. Law school teaches you how to think like a lawyer -- which is necessary, of course -- but only part of the equation for a successful career.

Do you have any family friends that are lawyers? I've talked to the kids of many of my friends, or friends of friends, over the years. I would think any decent person would do the same.

>>690526
>They can still raise in Q2
July is Q3. Its over Smokey.

>>690504
Hmm, well I own my own home, drive a luxury SUV, have motorsports toys, own more computers and tech toys than I know how to use, travel internationally for weeks, and spend thousands at restaurants and bars.

I've never been an advocate of extreme austerity, for the record. I believe in living according to your means consistent with your financial plans. But if you have the money to spend, then spend it. I've got a pretty comfy lifestyle if I do say so myself.

>>690489
>There are several reasons for this.
Derp. I should have included taxes as item #4. Trading is a horribly tax-inefficient strategy, especially compared to index investing. In almost every tax situation, this is going to be a huge reason driving down average investor performance.

>>690441
>How can you talk about a market's performance and say it's not an average or a mean?
The market's performance is a function of the stock price of the companies that make of the various indices. Whether we limited ourselves to the S&P 500 or look at broader metrics doesn't matter here.

However, there is no reason to assume that actual investors in the market perform the same as the companies that they're investing in. There are several reasons for this.

1. Fees and commissions. Self-explanatory I think.

2. Timing and selection. Investors, on average, make less than optimal choices about when to invest and what to invest in. Investors miss bull market performance buy buying in too late, or selling out too soon. Investors exacerbate bear market performance buy selling low. Investors also chase performance, buying last year's winner -- which often turns out to be this year's loser.

3. Time in Market. The single biggest factor determining investor performance is time in market. But investors sit on cash. They rationalize it as DCA or "dry powder" but in reality it just saps their returns.

For these reasons, the average investor trails the market indices by 4-8%. So let's be clear: the market performance is NOT the average performance of investors in the market. Why? Because the average investor is making mistakes like those outlined above.

>It's just impossible that nobody will outperform the S&P 500
None of what I just said excludes the possibility that some investors will outperform the markets. They do, but in very rare cases. And its impossible to know in advance whether you'll beat the market or not. So it's just not a very smart strategy to pursue.

>>690398
My credentials are indeed relevant because it tends to indicate that my advice comes from greater authority on topics where my experience substantially exceeds those of the typical 4chan user. This is particularly true on a board devoted to business and finance topics.

It's not ego to say that I know more than most anons about law, business, investing, and taxes. Its a fact. If that somehow offends you, that says more about your insecurities than about my qualifications.

I don't claim that my expertise makes me infallible, nor do I try to suppress contrary opinions or advice offered by other anons. Everyone is free to contribute to any thread, and that is the only relevant culture of 4chan applicable here.

I'm sorry you don't like trips. You're free to filter me if you prefer, or use an extension that shows all users as anonymous. Of course, you're free to keep bitching and whining about it too. I honestly don't care.

>>690394
>are they not losing money in the long run by not having it in positions that, like you said, mirror the market as closely as possible, i.e. index funds?
Yes, they are losing money in 80-95% of cases, over the long-term. The longer the investing horizon, the more the individual investor loses compared to the index. That's what the Dalbar studies have shown us for the last decade (see chart in >>690361).

Are some of these traders making money? Yes, probably. Everyone hits a lucky trade or gets lucky with timing if you try often enough. But the question is are they outperforming an index strategy over the long-term. And the answer is no, in 80-95% of cases.

>why are they trading?
Many reasons. The vast majority of investors have no idea how well they're actually performing because they lack the knowledge or tools to calculate a true ROI. Many of them are oblivious to the effect of fees and commissions on their returns. And in many cases, its pure Dunning–Kruger effect.

Let's also not forget that people like to brag about their winners, but tend to stay mum on their losers. If you believe what you read, then everyone on the internet is a fantastic trader with uncanny instincts and perfect timing. Sound likely to you?

>>690404
Huh? I said the market's performance is not the average performance of participants in the market. What does that have to do with the calculation methodology of the market indices?

One is the average of the investors' returns. The other is the average price of the constituent equities. Two completely different things.

>>690379
https://archive.moe/biz/thread/301031

>>690352
>so fucking irrelevant
You're correct that my wealth is largely irrelevant to this topic. What is relevant is my 20+ years practicing law, including my years as equity partner in big law. And my experience working with in-house counsel, and IB and consulting professionals. I've also counseled dozens of young attorneys who have left or thought about leaving large law firm practice. That's the authority I claim for the advice in this thread, but I respectfully contend that's pretty "fucking" relevant.

The rest was mention because OP asked about it. He (and you) are apparently not frequent visitors to /biz/ and therefore wouldn't know some of the "regulars" such as myself. That's fine; we all start somewhere Welcome to /biz/ anon, and enjoy your stay.