Where to invest my money?

[68PGunner]

The only question that really matters is why do you think you know something about this stock that the rest of the world doesn't?

Short term prices are created by emotion and momentum. Long term prices are created by actual fundamentals. The rest of the world doesn't value stocks based on actual fundamentals. That's very obvious. If not, value investors wouldn't make money in the end. Let's revisit this thread in 2-3 years.

I made a similar call about Chevron 2 years ago when it was at $67-70 on sdn: Fidelity

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[urge]

The only question that really matters is why do you think you know something about this stock that the rest of the world doesn't?

You make money when the majority of people are pricing a stock wrong. He is banking on earnings per share of 15 like it was before. In that case a $300 price is pretty good. If he is right he will double his money or more. If he is wrong he will loose half his money, or less since the stock has already taken the hit. The math works out in his favor in the long run.

 

[pgg]

You make money when the majority of people are pricing a stock wrong. He is banking on earnings per share of 15 like it was before. In that case a $300 price is pretty good. If he is right he will double his money or more. If he is wrong he will loose half his money, or less since the stock has already taken the hit. The math works out in his favor in the long run.

This is how traders and gamblers "make money" ... in a high risk fashion.

Market returns are there for the taking. It's totally possible (and easy ... and IMO wise) to make money simply by taking market returns. You don't have to pick anything. It's not a zero sum game. There doesn't have to be a loser for there to be winners. By picking individual stocks and making them a large part of your portfolio you're dramatically increasing your odds of losing.

Increase your expected return (and risk) by choosing a higher % equity vs fixed income assets. Then go take a nap or drink a beer.

 

[sevoflurane]

Yup.

Nothing wrong with play money... so long as it is exactly that... play money.

 

[sevoflurane]

Bought Transocean a long time ago... had a great run up to $40 something...
Now it's worth $8 and change. Play money.

Bought CRUS when it was $8. This year it hit $71 and then got hit hard to $55. Play money.

Bought 35k worth of Admiral shares total stock market back in 2008. Kicked some serious ass without even looking at it. Retirement money and not play money. Outperformed nearly everything I own.

 

[sevoflurane]

A better question for this thread would be what is your current age, what is your retirement age and what is your current asset alocation... not what is your favorite stock... unless we are talking play money.

 

[urge]

Bought Transocean a long time ago... had a great run up to $40 something...
Now it's worth $8 and change. Play money.

Bought CRUS when it was $8. This year it hit $71 and then got hit hard to $55. Play money.

Bought 35k worth of Admiral shares total stock market back in 2008. Kicked some serious ass without even looking at it. Retirement money and not play money. Outperformed nearly everything I own.

What's the ticker for Admiral? I'm not sure I'm looking at the proper one.

 

[sevoflurane]

What's the ticker for Admiral? I'm not sure I'm looking at the proper one.

Lower operating cost for investing 10k or more (i think it's 10K... don't remember).

 

[okayplayer]

A better question for this thread would be what is your current age, what is your retirement age and what is your current asset alocation... not what is your favorite stock... unless we are talking play money.

Age 33. 2 physician household. Retirement age 52-53 (whenever last child leaves house).

70% VTSAX
10% RERGX
10% DFCEX
10% VGSLX

I have a long time horizon, high risk tolerance and a lot of stable income between my wife and I - hence 100% equities.

 

[urge]

Lower operating cost for investing 10k or more (i think it's 10K... don't remember).

Meant the ticker symbol.

Is it vtsmx?

 

[WisNeuro]

Meant the ticker symbol.

Is it vtsmx?

VTSAX is the admiral version of VTSMX

 

[dmk5n]

I have a long time horizon, high risk tolerance and a lot of stable income between my wife and I - hence 100% equities.

Pure Cojones

 

[Psai]

Pure Cojones

Is it really? I am also 100% equities

 

[dmk5n]

Not judging...admiration rather than admonishment. I can only sleep soundly at 70/30. I wish I could be at 100% equities...

 

[Shimmy8]

I'm a new attending and at 90/10.

65 total stock market
25 total international
10 total US bond

Lot of debt to pay off, but current goal/planning I'll be able to make my 18k/year contribution, $3400 HSA, and pay off loans within 5 years. 3.5 if I really bust ass and pick up extra. Employer also kicks in 32k/year so if I have to cut down my own contribution shouldn't be an issue.

 

[btbam]

Pure Cojones

100% equities at 33 is not pure cojones, 100% at 65 is.

 

[BLADEMDA]

Age 33. 2 physician household. Retirement age 52-53 (whenever last child leaves house).

70% VTSAX
10% RERGX
10% DFCEX
10% VGSLX

I have a long time horizon, high risk tolerance and a lot of stable income between my wife and I - hence 100% equities.

It's not bad. I would have more exposure to small/mid cap domestic as well as foreign equities. There is more "growth" potential in the small cap foreign equities as well as the emerging markets.

 

[BLADEMDA]

 

[BLADEMDA]

I typically hold a balanced portfolio with a tilt to foreign/emerging market equities. My allocations are more complex than a typical portfolio as I hold multiple fund managers for foreign equity, emerging market bonds, foreign bonds,etc. They have outperformed their indices as a group. Domestic equities are primarily ETFs as I do not believe out-performance is likely from active management over a long period of time.

 

[BLADEMDA]

I hold exposure to Foreign mid/small cap sector as well in my portfolio along with developed international and emerging markets.

 

[BLADEMDA]

The Bottom Line
Asset allocation is a fundamental investing principle because it helps investors maximize profits while minimizing risk. The different asset allocation strategies described above cover a wide range of investment styles, accommodating varying risk tolerance, time frames and goals.

Once you've chosen an appropriate asset allocation strategy, remember to conduct periodic reviews of your portfolio to ensure you're maintaining your intended allocation and are still on track to your long-term investment goals.



Read more: Achieving Optimal Asset Allocation Achieving Optimal Asset Allocation
Follow us: Investopedia on Facebook

 

[BLADEMDA]

One study suggests that more than 91.5% of a portfolio’s return is attributable to its mix of asset classes. In this study, individual stock selection and market timing accounted for less than 7% of a diversified portfolio’s return.

A widely cited study of pension plan managers said that 91.5% of the difference between one portfolio’s performance and another’s are explained by asset allocation.

https://blogs.cfainstitute.org/investor/2012/02/16/setting-the-record-straight-on-asset-allocation/

I would add a low cost, tax-efficient, diversified portfolio offers one the best chance to achieve realistic financial goals over the long run.

Asset Allocation Calculator | SmartAsset.com

 

[deleted126335]

60/40 stock bond. age 56. All passive - Not necessarily cap weighted. Uncertain when I will retire.

DFA, Vanguard, iShares, Research affiliates strategies.

small cap 4.8%
small value 7.5%
Large 5.4%
Large Value 7.8%
Int small cap 4.5%
Int small cap value 5.4%
Int Large cap 4.5%
Int Large Value 5.4%
REIT 5%
Int REIT 5%
Emerging markets 4.2%
Bonds/cash 40% All very high quality. CDs, Treasurys, TIPs, I Bonds, EE Bonds. Vanguard muni bond funds. Zero junk or foreign or emerging market bonds.

 

[BLADEMDA]

60/40 stock bond. age 56. All passive - Not necessarily cap weighted. Uncertain when I will retire.

DFA, Vanguard, iShares, Research affiliates strategies.

small cap 4.8%
small value 7.5%
Large 5.4%
Large Value 7.8%
Int small cap 4.5%
Int small cap value 5.4%
Int Large cap 4.5%
Int Large Value 5.4%
REIT 5%
Int REIT 5%
Emerging markets 4.2%
Bonds/cash 40% All very high quality. CDs, Treasurys, TIPs, I Bonds, EE Bonds. Vanguard muni bond funds. Zero junk or foreign or emerging market bonds.

Doze has that "tilt" towards Foreign/Emerging equities discussed in this thread. Even though Doze is a truly informed investor I've done well with my Foreign Bond Funds.
https://money.usnews.com/funds/mutu...y-series-emerg-mkts-debt-fd/fedcx/performance

PFORX - PIMCO Foreign Bond (U.S. Dollar-Hedged) Fund Institutional Class Mutual Fund Quote - CNNMoney.com

I hold these funds in my retirement portfolio so tax efficiency isn't an issue. I also chose active management for many of my foreign investments as I believe they added value.

 

[facted]

This is pretty conservative on the front end (20% bonds at 35!?!?!), but horribly agressive on the back-end. You'd be ok with 50% in stocks at retirement?! That's pretty much why a lot of the older guys in anesthesia (at least that I know) are still working...that 2008 drop hit them like a ton of bricks as they were getting close to getting out. At that point, you need to be almost out of stocks (10-20%) and more into fixed income.

 

[deleted126335]

This is pretty conservative on the front end (20% bonds at 35!?!?!), but horribly agressive on the back-end. You'd be ok with 50% in stocks at retirement?! That's pretty much why a lot of the older guys in anesthesia (at least that I know) are still working...that 2008 drop hit them like a ton of bricks as they were getting close to getting out. At that point, you need to be almost out of stocks (10-20%) and more into fixed income.

The Center of Gravity for Retirees | Portfolio Solutions

This respected financial writer recommends a 30/70 allocation for the retiree as a reasonable starting point.

 

[BLADEMDA]

This is pretty conservative on the front end (20% bonds at 35!?!?!), but horribly agressive on the back-end. You'd be ok with 50% in stocks at retirement?! That's pretty much why a lot of the older guys in anesthesia (at least that I know) are still working...that 2008 drop hit them like a ton of bricks as they were getting close to getting out. At that point, you need to be almost out of stocks (10-20%) and more into fixed income.

My plan is for 30-40% equities until the day I die. 40% if stocks are undervalued like 2009 or 30% if fully valued like today.

"I propose the center of gravity for those who have accumulated enough for retirement to be 30% stocks and 70% bonds. This is a conservative mix that has enough equity to growth with inflation and enough fixed income to keep portfolio volatility at bay. Historically, a 30/70 allocation has earned the highest Sharpe ratio. This is the point on the efficient frontier that has earned the best risk-adjusted return"

• 
  Figure 2: Efficient Frontier, 5-year Treasury notes and US stocks, 1926-2013, rebalanced annually
  
  

 

[BLADEMDA]

This is pretty conservative on the front end (20% bonds at 35!?!?!), but horribly agressive on the back-end. You'd be ok with 50% in stocks at retirement?! That's pretty much why a lot of the older guys in anesthesia (at least that I know) are still working...that 2008 drop hit them like a ton of bricks as they were getting close to getting out. At that point, you need to be almost out of stocks (10-20%) and more into fixed income.

I do think the chart is conservative at the front end. age 35-40, where I would want a 90/10 allocation. That said, I could see 80/20 at these market valuations.

At age 45 maybe scale back to 75/25 and again at age 50-55 to 60/40. At age 60 I would likely be no more than 50/50 but that's just me. After age 60 it just depends on one's "nest egg" vs "risk tolerance" whether the allocation remains at 50% or gets scaled back over time. With a life expectancy of 8o or so some people will need exposure to equities in the 40% range to avoid running out of money.

 

[BLADEMDA]

 

[BLADEMDA]

This is pretty conservative on the front end (20% bonds at 35!?!?!), but horribly agressive on the back-end. You'd be ok with 50% in stocks at retirement?! That's pretty much why a lot of the older guys in anesthesia (at least that I know) are still working...that 2008 drop hit them like a ton of bricks as they were getting close to getting out. At that point, you need to be almost out of stocks (10-20%) and more into fixed income.

 

[BLADEMDA]

 

[dmk5n]

Blade,
I can't find this chart in Boglehead books,
Looks more aggressive than from Bogle's "Guide to Investing" e.g. Age in Bonds
Is this from the Boglehead's forum? Thanks

 

[BLADEMDA]

Blade,
I can't find this chart in Boglehead books,
Looks more aggressive than from Bogle's "Guide to Investing" e.g. Age in Bonds
Is this from the Boglehead's forum? Thanks



View attachment 223488

The chart I posted was from the Boglehead's forum. It is more agressive than the Bogle recommendation:


John C. Bogle elaborates his position, in the 2010 edition of Common Sense on Mutual Funds, pp.87-88:
"Long before the crash, I had fine-tuned my rule-of-thumb asset allocation model, centered at 50/50 for older investors in the distributions phase of their investment plan. Rather, I recommended -- as a crude starting point -- that an investor's bond position should be equal to his or her age. An investor age 65, then, would consider the propriety of a 65/35 bond/stock allocation. Clearly, such a rule must be adjusted to reflect an investor's objectives, risk tolerance, and overall financial position. (For example, pension and Social Security payments would be considered bondlike investments.) But the point is that as we age, we usually have (1) more wealth to protect, (2) less time to recoup severe losses, (3) greater need for income, and (4) perhaps an increased nervousness as markets jump around. All four of these factors suggest more bonds as we age

The enemy of a good plan is the dream of a perfect plan." -- John Bogle



Portfolio allocation models

 

[BLADEMDA]

 

[sethco]

Blade,

As I get older and move towards financial independence (I.e. Maybe Early retirement), I don't think my asset allocation will drop below 70% stock, even after I stop working. If you look at the Trinity study, the 75/25 mix has better chances of lasting long term than the 50/50 mix at a higher withdraw rate

Trinity study - Wikipedia

Just a little food for thought for those that don't believe in the aggressive asset allocation, especially if you want a 5% or higher withdraw rate.

 

[deleted126335]

View attachment 223490

Blade,

As I get older and move towards financial independence (I.e. Maybe Early retirement), I don't think my asset allocation will drop below 70% stock, even after I stop working. If you look at the Trinity study, the 75/25 mix has better chances of lasting long term than the 50/50 mix at a higher withdraw rate

Trinity study - Wikipedia

Just a little food for thought for those that don't believe in the aggressive asset allocation, especially if you want a 5% or higher withdraw rate.

The problem with that strategy is a bad draw of returns early in retirement with a stock heavy portfolio is not recoverable except by returning to work or by lowering future withdrawals. See Pascal's Wager.
Pascal's Wager and the Making of Prudent Decisions

Put another way, "do you feel lucky?"

 

[sethco]

The problem with that strategy is a bad draw of returns early in retirement with a stock heavy portfolio is not recoverable except by returning to work or by lowering future withdrawals. See Pascal's Wager.
Pascal's Wager and the Making of Prudent Decisions

Put another way, "do you feel lucky?"

Completely agree. Sequence of returns can be scary. The key is having the flexibility to lower your withdraw rates during down years. If your assuming a 30+ year retirement, you have to realize that the market will have corrections and downturns. However, in long term, it goes up quite consistently. If you notice the Trinity study figure, a lower stock ratio actually has a higher success rate in the short term for those planning a shorter retirement

 

[BLADEMDA]

The problem with that strategy is a bad draw of returns early in retirement with a stock heavy portfolio is not recoverable except by returning to work or by lowering future withdrawals. See Pascal's Wager.
Pascal's Wager and the Making of Prudent Decisions

Put another way, "do you feel lucky?"

Doze, we agree here. My plan is a 2.5% withdrawal rate so I'll keep my equity position less than 50% and likely under 40% as I get into my early 70's.

 

[deleted126335]

Completely agree. Sequence of returns can be scary. The key is having the flexibility to lower your withdraw rates during down years. If your assuming a 30+ year retirement, you have to realize that the market will have corrections and downturns. However, in long term, it goes up quite consistently. If you notice the Trinity study figure, a lower stock ratio actually has a higher success rate in the short term for those planning a shorter retirement

Lots easier said than done. Wouldn't it be more prudent and predictable to lower equity allocation? Or set up your required living expenses in a 30 year TIPs ladder or long term annuity(s) with an insurance company(s) and invest money above that level in stocks for luxuries (or heirs)? Seems a lot less uncertain.

 

[Shimmy8]

Thoughts from doze and blade on Fidelity 500 Index fund vs Extended Market? I can be pretty aggressive just trying to keep 3-4 fund plan.

 

[deleted126335]

Thoughts from doze and blade on Fidelity 500 Index fund vs Extended Market? I can be pretty aggressive just trying to keep 3-4 fund plan.

Why not a total stock market fund or ETF?

 

[Shimmy8]

TSM wasn't available.

 

[BLADEMDA]

Why not a total stock market fund or ETF?

You will need to combine the Vanguard S and P 500 fund with the Extended Market Fund to cover 99%+ of the total stock market. Are you also going with a Vanguard Fund for international exposure? Emerging markets?

 

[BLADEMDA]

 

[BLADEMDA]

So, I would add REITS (maybe 5-6%). I would also think about adding International Small/Mid Caps like DLS to get you more of an international tilt (maybe 5%).

 

[BLADEMDA]

This is a good portfolio; it's simple. You could cut the bonds back to 10% because of your age and risk tolerance.

 

[BLADEMDA]

Another good portfolio for Equities and Reits:

 

[BLADEMDA]

I own one of the Vanguard Funds (ETF version). Since I own VWO and other emerging market funds I chose the one with less exposure to emerging markets. But, someone without another Emerging markets fund should choose the one with greater exposure to emerging markets.

 

[BLADEMDA]

The portfolio below is a good one. You could include REITS (domestic and international) by reducing the Bond Fund exposure to 10%. Maybe skip the long term bond fund in favor of an intermediate bond fund (5%) and a short term bond fund (5%) but if you think the 10 year yield on US debt isn't going any higher then the long term bond may be a better investment for you.

Vanguard S&P 500 ETF (NYSEARCA:VOO) or Vanguard Admiral Shares (MUTF:VFIAX) - This Vanguard 500 Index Fund buys the 500 stocks selected by S&P to represent the U.S. large cap stock universe. It has the advantage of being an index that is recognized and purchased around the world. A limited number of stocks with growing global demand and an incredibly low 0.05% expense ratio make this Vanguard S&P 500 index fund a good core holding for your portfolio.

Vanguard Extended Markets ETF (NYSEARCA:VXF) or Vanguard Admiral Shares (MUTF:VEXAX) - This fund contains all of the U.S. common stocks regularly traded on the New York Stock Exchange and the Nasdaq over-the-counter market, except those stocks included in the S&P 500 Index. This fund fills in the blanks that are missing from the S&P 500 Index. It holds a total of 3,078 US stocks, mostly mid and small caps, which gives you fantastic coverage of the U.S. stock market.

Vanguard Total International Stock ETF (NASDAQ:VXUS) or Vanguard Admiral Shares (MUTF:VTIAX) - This fund tracks the market-cap weighted FTSE Global All Cap ex US Index, which covers 99% of the world's global market capitalization outside the US. The ETF holds 5,512 stocks from 46 developed and emerging markets.

Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO) or Vanguard Admiral Shares (MUTF:VEMAX) - This fund offers investors a low-cost way to gain equity exposure to emerging markets. The fund invests in stocks of companies located in emerging markets around the world, such as Brazil, Russia, India, Taiwan, and China. The Vanguard Total International Stock fund listed above already includes these same Emerging Markets stocks but because it is market-cap weighted they do not have nearly as much influence as the larger companies in the fund. Due to the high volatility, I only add this Emerging Markets fund to my higher risk portfolios.

Vanguard Long Term Bond ETF (NYSEARCA:BLV) or Vanguard Investor Shares (MUTF:VBLTX) - This Vanguard bond fund tracks the Barclays U.S. Long Government/Credit Float Adjusted Index. This Index includes all publicly issued medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar denominated bonds that have maturities of greater than 10 years. This ETF uses a sampling method to replicate this index and currently holds 1,658 bonds.


Incredible diversification - Just five Vanguard investments and you will own 9,090 stocks and 1,658 bonds. This is a total of 10,748 holdings that you can buy for the cost of five Vanguard ETFs or Vanguard Index Funds, which are free to purchase if you use a Vanguard Brokerage account.


Vanguard ETF Portfolio For The Growth Investor | Seeking Alpha

 

[BLADEMDA]

The graph below shows the merits of diversification. The 5 Vanguard funds (or 5 ETF versions) clearly has out-performance vs the S and P 500.