Investing Changes

[WisNeuro]

For all of the investment savvy people out there, any big changes you're making to your portfolios with the likely round of fed rate cuts going through this year and next, and likely recession in a 1-3 year time span? Might be fun to talk finance, seeing as how many psych people are pretty clueless about such things.

Most of my stuff won't change as it's geared towards long-term holdings and some ups and downs are part of the game, passive income streams also likely fairly static. But, I was thinking of taking some more positions in REITs, specifically VGSLX, thoughts?

---

Members don't see this ad.

 

[AcronymAllergy]

Haven't looked into it much, but I should start. At this point, my only mindset is: recession coming, cheaper stocks, keep pumping in money.

I don't know how I feel about REITs, which is probably mainly due to ignorance. I've heard some folks say the mortgage market is in a bad way more so than in 2007-2008; I don't know that this would really impact equity REITs, but maybe...?

 

[WisNeuro]

Haven't looked into it much, but I should start. At this point, my only mindset is: recession coming, cheaper stocks, keep pumping in money.

I don't know how I feel about REITs, which is probably mainly due to ignorance. I've heard some folks say the mortgage market is in a bad way more so than in 2007-2008; I don't know that this would really impact equity REITs, but maybe...?

REITs aren't necessarily impacted by the mortgage market per se, although it could benefit them by being able to buy more properties at a lower monthly cost. They pass along dividends from the owning and operating of real estate, at a basic level. I'd first say to max out 401/403 and your personal IRA first, and if you still have some spare change for investing, then looking into other opportunities. I may increase my stock holding after the next recession, when things hit some lows, looking into other exposure at the moment.

 

[PsyDr]

Vanguard is excellent. As in, the SEC investigated them for having too LOW of fees. I think Buffet has said that his wife(s) should put all their money in vanguard mutual funds when he passes.

Last recession, I threw what money I had into basic industrial stuff (e.g., argon gas producers), larger back of the house tech companies, blue collar things (e.g., uniforms), smaller luxury consumer (e.g., booze), HFTs, several commercial/non residential REITs, and a fair number of the dividend aristocrats with DRIP set on. DRIP stuff went well due to price averaging. Blue collar stuff went well, I assume because corporate america was able to snag a bunch of desperate people. Booze went very well, especially diageo since their brands are super popular in china. Tech did well, because there were some attempts at consolidating the industries. HFTs are performing well, although I don't fully understand how to judge their performances. Aristocrats went well, so long as I stayed up on all the google alerts and read their news. I stupidly included a mailing company, as if mailing isn't a dying industry.

Lost money on baby boomer bets like buying funeral home stocks, because I thought they'd start dying off. Stayed away from AFLAC because I thought people would try to go on disability, and I was wrong. Lost money on shipping stocks.

Right now, avoiding bond funds. Avoiding international funds (don't trust chinese prospecti, can't gauge the effects of brexit). Mainting but not increasing non commerical REIT holdings. Looking at increasing holdings in large apartment companies, because I believe they are pricing their units in areas in such a way as to prevent individuals from buying, so as to create lifelong customers. Looking at increasing HFT holdings. Looking at increasing consumer and small business loan/finance companies. Have several areas I'm looking into, but have not done my homework .

Overall dip philosophy: consumers get screwed, and put into lower paying stuff. I also tend to read the 13Ds and 13Fs on the SEC website. You don't have to be smart, you only have to do what the smart people do.

 

[StellaB]

I’ve moved my short term into a pretty defensive position, but my long-terms have not changed. I would be wary of REITs myself, as the housing market is so out of sync with incomes across most of the country. I think a lot of real estate based investment is currently overvalued and I’m not convinced long term upkeep costs have been adequately priced in, but that’s just my perspective. If you already own rental real estate, you’re already exposed in that area. I tend to be more bearish overall, FWIW

 

[StellaB]

Absolutely second that vanguard is the way to go. Hard to make any kind of profit when the house takes half your earnings!

 

[Sanman]

Vanguard is excellent. As in, the SEC investigated them for having too LOW of fees. I think Buffet has said that his wife(s) should put all their money in vanguard mutual funds when he passes.

Buffet is a big fan of index investing and Vanguard. Though, his instructions upon his death are to put the money into the S&P 500 index. He likes it better than something like VTSAX due to the decreased volatility from the lack of exposure to small cap stocks. He is a big proponent if U.S. large cap stocks. Looking at the data trends, he might have a good point. However, I am still not sure about cuting out small caps and VTSAX and SP500 track each other pretty well.

Personally, I am moving towards more of a long term set it and forget index fund portfolio for most of my money, through Vanguard. This will likely be an 80/20 equities to bonds. I am debating the international vs domestic exposure. It will likely be an 60/20/20 domestic, international, and bonds. As far as REITs, I have family that own some and I am not as comfortable with some of the risk. Right now, I am more interested in real rental property as an investment and extra stream of income in case I want to jump into PP in the future.

 

[AcronymAllergy]

For folks considering real-estate investing, are you leaning residential, commercial, or both?

 

[Sanman]

For folks considering real-estate investing, are you leaning residential, commercial, or both?

Right now mostly residential under 5 doors as that is what will likely work best with the level of funds I have a available. A small duplex or triplex would be ideal.

 

[StellaB]

I think both residential and commercial are fairly overvalued at the moment, probably commercial moreso. My current plan is to wait for a dip to get into residential. One I will avoid like the plague is the relatively new class of commercial in high-end student housing. Lots of those projects going belly-up before even completing. Student debt awareness is heightening, too, so I wouldn’t want to heavily invest in something so dependent on free and easy government money.

 

[WisNeuro]

For folks considering real-estate investing, are you leaning residential, commercial, or both?

I'd stick to REITs generally, some are blends of both.

 

[PsyDr]

I agree with @StellaB

I would encourage reading about how to be excluded from the Fair Housing Act. Includes not using a broker, size, etc. I wouldn't want the federal government having jurisdiction in who and how I rent to people.

 

[AbnormalPsych]

I'm still somewhat new to the finance game as an ECP, but White Coast Investor has helped me get up to a reasonable speed.

I hadn't thought about REITs for the next few years, but that is an interesting thought. In general, since I am so far from retirement I can ride through a few bear markets. I was just planning to max out 401k and IRA in VTSAX. I'm 100% stocks right now. I also have a pension from my medical system that I will vest into in a couple more years which is giving me a bit more confidence to think aggressively. Loving all your ideas. Definitely going to do some more research on this and open to direct suggestions from you all!

 

[WisNeuro]

I agree with @StellaB

I would encourage reading about how to be excluded from the Fair Housing Act. Includes not using a broker, size, etc. I wouldn't want the federal government having jurisdiction in who and how I rent to people.

Luckily my rental property was in a jurisdiction where that was not a problem. In the metro area I am currently in, they are proposing limiting tenant screening. The outcome of that will definitely influence my possible future rental buying in this particular market.

 

[WisNeuro]

Loving all your ideas. Definitely going to do some more research on this and open to direct suggestions from you all!

Depends, after maxing out 401k and your IRA, do you have a sizable chunk left over that you'd like to invest. Also, as PsyDr will tell you, does your networth allow you to become an accredited investor? If so, the opportunities available increase substantially. There are some business investing opportunities available to some non-accredited investors, but they are limited to certain states/cities depending on legislation.

 

[PsyDr]

@WisNeuro

Not screening tenants.. I meant, the TYPE of property, if you use a broker, how many units you have, if they are attached, etc. That is the determining factor. In our field, this is one of the determinign factors for if a person can have an emotional support animal.

Angel investing can be awesome, a PITA, or a big loser. Got some a big one right now, where I'm hoping for a big payout. Which probably means that I'll just lose that money.

 

[WisNeuro]

Not screening tenants.. I meant, the TYPE of property, if you use a broker, how many units you have, if they are attached, etc. That is the determining factor. In our field, this is one of the determinign factors for if a person can have an emotional support animal.

Ah, I misunderstood. Mostly because the proposed rules have been big news here lately. Those of us who have/had investment residential rentals have been eagerly awaiting the results.

 

[AbnormalPsych]

Depends, after maxing out 401k and your IRA, do you have a sizable chunk left over that you'd like to invest. Also, as PsyDr will tell you, does your networth allow you to become an accredited investor? If so, the opportunities available increase substantially. There are some business investing opportunities available to some non-accredited investors, but they are limited to certain states/cities depending on legislation.

I likely won't have enough to become an accredited investor for awhile, as I've turned a positive net worth and started building wealth somewhat recently, but I have not looked into that yet. I will have to check this out my state and city.

I'm at the point of optimizing my 401k and IRA strategy, with an eye on what my next step after will be.

 

[WisNeuro]

I'm at the point of optimizing my 401k and IRA strategy, with an eye on what my next step after will be. Will have a little bit left over but not a ton.

WCI and Bogle's stuff are great primers. Once you have teh 401k and IRA maxed and have some extra capital available outside of living expenses and whatnot, my personal preference is to take some slight risks in ventures that have the potential to supply passive income streams. I'm still relatively young and in great financial shape, so even a hit or two isn't bad. As I get older, that risk stratification will likely change, but it's worth taking some swings at this point.

 

[Ollie123]

Doing nothing to prepare that I haven't already done. Everything currently in Vanguard target date funds just because its easier and most everything is in tax-advantaged accounts besides our EF.

My evidence-based focus extends to investments and empirical data is pretty clear that someone who sets automatic contributions to an index fund and forgets they have investments until the day before their retirement is probably going to do vastly better than someone taking a more active role. Folks who do this professionally tend to lose money the more they do and I have no reason to think I'm better at this than they are.

So for me...its really just about making sure we max our tax-advantaged accounts and trying to convince my wife to push our gross savings rate from 25% to 30% sometime in the next couple years. That will have 10x the impact of any changes in asset allocation, barring anything crazy. I'm too lazy to own rental property (god I can't even stand all the stuff we have to do managing our house) and I'm too conservative for things like hedge funds.

I'm glad to see some discussion of this issue. I grew up <far> from wealthy and to my knowledge my parents still keep everything in a Bank of America savings account earning negative real interest. Have thought about doing some work on the relationship between financial stress and mental health just because its so damn common and finances are arguably stigmatized even more than mental health. The parallels and interactions between the two seem pretty meaningful from my clinical observations.

 

[PsyDr]

@Ollie123 that's for active trading, not investing. There is an important difference.

A Random Walk Down Wall Street is an interesting and accessible read about this. Includes some basic stat stuff.

 

[Ollie123]

Not entirely clear what specific part of my post you were referring to, but I have read Random Walk and many others.

Active trading definitely lowers returns...I am not sure there is any doubt there at this point, as much as certain brokerage firms might wish there was. Wondering if there may have been some confusion as we are certainly investing boatloads. If my post conveyed that we weren't investing or that I was recommending against it, that wasnt my intention. I am just partial to broadly diversified funds one can stick to through thick and thin. If I am changing my allocation based on my assumptions about where the market is heading....that would be active trading, no? Or at a minimum stock picking assuming one did hold the new acquisitions long term. I am not sure the data on successful stock picking is any more compelling...

 

[StellaB]

Not entirely clear what specific part of my post you were referring to, but I have read Random Walk and many others.

Active trading definitely lowers returns...I am not sure there is any doubt there at this point, as much as certain brokerage firms might wish there was. Wondering if there may have been some confusion as we are certainly investing boatloads. If my post conveyed that we weren't investing or that I was recommending against it, that wasnt my intention. I am just partial to broadly diversified funds one can stick to through thick and thin. If I am changing my allocation based on my assumptions about where the market is heading....that would be active trading, no? Or at a minimum stock picking assuming one did hold the new acquisitions long term. I am not sure the data on successful stock picking is any more compelling...

If I understand the difference correctly, everything you're saying is correct. I think PsyDr might be referring to direct investing as opposed to owning shares. As in, owning a piece of a small, private company.

 

[WisNeuro]

Ollie, correct me if I'm wrong, but I imagine that you're simply referring to the notion that the average person, would outperform most other average investors by simply investing in broad index funds and rebalancing portfolios for less risk as one ages. I think what PsyDr and I are alluding to is that with our earning potential, we are not average investors, and have more opportunities open to us that the average investor does not. We also habe a much higher potential to weather risk. Whereas the average investor could be in some dire financial straits if they made a 50k bet on a high risk high reward investment and it went belly up, some of us could take that hit without impacting our retirement too much.

 

[Sanman]

Ollie, correct me if I'm wrong, but I imagine that you're simply referring to the notion that the average person, would outperform most other average investors by simply investing in broad index funds and rebalancing portfolios for less risk as one ages. I think what PsyDr and I are alluding to is that with our earning potential, we are not average investors, and have more opportunities open to us that the average investor does not. We also habe a much higher potential to weather risk. Whereas the average investor could be in some dire financial straits if they made a 50k bet on a high risk high reward investment and it went belly up, some of us could take that hit without impacting our retirement too much.

I believe he is referring to the research showing that the S&P 500 index outperformed 98% of active traders/fund managers. I forget the time period it was measured over.

 

[WisNeuro]

I believe he is referring to the research showing that the S&P 500 index outperformed 98% of active traders/fund managers. I forget the time period it was measured over.

Indeed, that's mostly what I was referring to. I believe that some of us are advocating for non-market based investments as part of your overall retirement income plan. They tend to be higher risk, but substantially higher reward, which is a bit outside of the passive vs active investing debate.

 

[Sanman]

Indeed, that's mostly what I was referring to. I believe that some of us are advocating for non-market based investments as part of your overall retirement income plan. They tend to be higher risk, but substantially higher reward, which is a bit outside of the passive vs active investing debate.

Agreed, if you have the cash to burn there are other options. That said, some of us are more risk averse and may take a "if it ain't broke" path to invesring. I really think it depends on what that kind of loss does to you psychologically.

 

[WisNeuro]

Agreed, if you have the cash to burn there are other options. That said, some of us are more risk averse and may take a "if it ain't broke" path to invesring. I really think it depends on what that kind of loss does to you psychologically.

Most definitely. There is no one size fits all plan. Really depends on your context. If you have high interest loans, or are saving for a house down payment, etc, then yeah, you probably don't want to go hunting for places to park an extra 20k just yet, as you already have a good place to park that money that is better for your long term prospects. But, if you do have extra capital after maxing out the usual retirement accounts, perhaps some degree of risk is the way to go, especially if it may afford you the chance at earlier retirement.

 

[Sanman]

Most definitely. There is no one size fits all plan. Really depends on your context. If you have high interest loans, or are saving for a house down payment, etc, then yeah, you probably don't want to go hunting for places to park an extra 20k just yet, as you already have a good place to park that money that is better for your long term prospects. But, if you do have extra capital after maxing out the usual retirement accounts, perhaps some degree of risk is the way to go, especially if it may afford you the chance at earlier retirement.

Yeah it also depends on risk tolerance. I am in a similar boat (No high interest loans, etc), but I may opt to accelerate the mortgage pay down and add to my non-retirement vanguard portfolio and not take on riskier investments. This is especially true because the wife is even less risk tolerant than I and may want to take a break from working. Paid off mortgage can mean mini-retirement or new business venture rather than a job.

 

[WisNeuro]

Yeah it also depends on risk tolerance. I am in a similar boat (No high interest loans, etc), but I may opt to accelerate the mortgage pay down and add to my non-retirement vanguard portfolio and not take on riskier investments. This is especially true because the wife is even less risk tolerant than I and may want to take a break from working. Paid off mortgage can mean mini-retirement or new business venture rather than a job.

Agreed, you have to find what works for you. I also heartily agree that you need to be on the same page as your partner, especially with financial disagreements being one of the biggest factors in divorce.

 

[PsyDr]

I thought Ollie was referring to the research that indicates that active TRADERS lose money.

In my understanding, trading is actively buying and selling of securities and commodities, especially in short terms. The research has consistently shown those people lose money. There’s publications that show that day traders, money managers, and more recently hedge funds don’t do as well as index funds.

INVESTING refers to buying and holding for more long term, at least to the point to avoid capital gains taxes. It is my understanding that the research doesn’t shown a losing trend for retail investors.

People like Buffett say that they believe in index funds, but they sure as hell don’t actually use them for their own investments. They are objectively better at it, and it is their full time job. I do NOT listen to pundits because I can’t see his advice given to millions of people would constitute a market inefficiency/value investing.

I only invest in things I think I understand. Retirement portfolio has the vanguard lazy portfolio stuff with some other stuff in there like FANGs and some individual companies I really believe in. I also have different stock accounts that are divided intodifferent strategies like DRIP. Which I then use the conservative account stuff for collateral for margins for slightly more active stuff like reading through famous funds SEC disclosures, and using odd stats from grad school (e.g., wavelet transform) . It’s a poor mans hedge fund. Sometimes I am more active, sometimes less. It depends on if I have any ideas, or if I understand something , or if I have the time.

Beyond that: I periodically angle invest at series A which can be a pain. I have a few residences, that I do not rent out because I think that mortgages are an easily accessible way to leverage purchasing power. I also have physical silver. And a lot of my office stuff is really investing (e.g., desk was slightly pricey but has a minor historical significance, so it retains value despite being labeled as a depreciating asset on taxes).

 

[LAPsyGuy]

I tend to like ETFs over Mutual funds for REITs, VNQ is good. BUT, given the general safety of REITs you’d be better offer selecting a list of about 15 individual stocks. Your div yield will be much higher than the 3.xx% you’ll get from an index or managed fund with the same risk levels. I recommend looking at Brad Thomas on Seeming Alpha for his picks.

For all of the investment savvy people out there, any big changes you're making to your portfolios with the likely round of fed rate cuts going through this year and next, and likely recession in a 1-3 year time span? Might be fun to talk finance, seeing as how many psych people are pretty clueless about such things.

Most of my stuff won't change as it's geared towards long-term holdings and some ups and downs are part of the game, passive income streams also likely fairly static. But, I was thinking of taking some more positions in REITs, specifically VGSLX, thoughts?