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So as not to muddy up other threads with off-topic conversations around investing, I figured it would be helpful to have a specific thread on personal finance, investing, the stock market, etc.

 

All major indices are trading just below major highs (S&P 500 ~2,400 / DOW ~21,000 / NASDAQ ~ 6,150).  Nearly the entirety of the "Trump Bump" ended on 3/1 (at least from an S&P/DOW outlook).  Indexes are up ~6% YTD, but again...flat or slightly down since March 1st, although the NASDAQ is up another 4% since 3/1, meaning it's up ~13% YTD.

 

Take this thread in any direction you want - advice, questions, discussion.

 

Investor Profile:

Years investing: ~7

Major Goals: Retirement (early if possible), meaning my horizon for the majority of my investments is 25+ years

Risk Tolerance: Aggressive

Investment Knowledge: Good (not great and definitely not advanced, e.g. have not executed any calls, puts, etc.)

Feel free to use the above mini-profile or add more to your own profile, if you wish to share.

 


Very Stable Genius

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Thanks for this.  This is interesting.  It seems the market is doing really well right now, I don't have much invested yet but work for a great company who is pushing a lot into 401k well above the normal thresholds (% of salary near the max allowed).  This has allowed me to focus on my loans while not putting much in myself

 

Funds are really growing quickly.  I expect to remain aggressive in my portfolio until at least 35 but will go at the discretion of my advisor, who was introduced to me through my boss and does a great job.  I wouldn't want to have a friend doing this, always heard that advice, but good to have an unbiased advisor who has a good track record

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Great topic.

 

Regardless of a company including a 401k matching program or not, everyone should have a Roth IRA of which you can, and should, contribute up to $5500 annually.

 

As for what to invest in, you don't get more undervalued than Netflix and Apple. My hunch is Chipotle will be returning to its 700pt'ish highs as well.

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^ Generally speaking if you get a match on your 401k you want to invest up to the maximum amount of the match.  That is free money and you leave it on the table otherwise.  Then you should contribute to either a Roth or Traditional IRA up to the MAX (I prefer Roth.)  I stick to ETF's through Vanguard because  of the low cost.  Many studies have shown that you will generally do better in the long run with index funds than by actively managed portfolios. 

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I used to do this for a living but I don't have the energy to do a full upload of what I learned. I've do have the energy for tidbits:

 

RE: Roth IRAs vs. Traditional. Unless you feel you are going to be making massively less money in 10 years (like when a pro athlete leaves the league), always go with Roth.

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^ Generally speaking if you get a match on your 401k you want to invest up to the maximum amount of the match.  That is free money and you leave it on the table otherwise.  Then you should contribute to either a Roth or Traditional IRA up to the MAX (I prefer Roth.)  I stick to ETF's through Vanguard because  of the low cost. Many studies have shown that you will generally do better in the long run with index funds than by actively managed portfolios.

 

This is good advice for a lot of people, especially for those taking a passive approach with their investments. Most people don't understand how much money they lose with high cost funds over their lifetime.

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Regardless of a company including a 401k matching program or not, everyone should have a Roth IRA of which you can, and should, contribute up to $5500 annually.

 

As for what to invest in, you don't get more undervalued than Netflix and Apple. My hunch is Chipotle will be returning to its 700pt'ish highs as well.

 

There are phaseout limits on a Roth IRA (are those people here, though? kidding) and if you make too much to contribute to a Roth IRA, you can backdoor convert to a Roth.

 

I have heard/read that some people prefer a Traditional IRA over a Roth for a couple reasons.  1) You get that tax deduction now (i.e. more investable money) and 2) if you're not planning on having a large taxable income in retirement, you probably won't pay a lot of tax on an IRA distribution anyway -> if you're just living off of retirement money and social security.  A Roth does save on paying tax on that distribution, of course, but if it's not going to be taxed anyway....just a thought (I still contribute to a Roth, fwiw).


Very Stable Genius

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^ Generally speaking if you get a match on your 401k you want to invest up to the maximum amount of the match.  That is free money and you leave it on the table otherwise.  Then you should contribute to either a Roth or Traditional IRA up to the MAX (I prefer Roth.)  I stick to ETF's through Vanguard because  of the low cost. Many studies have shown that you will generally do better in the long run with index funds than by actively managed portfolios.

 

This is good advice for a lot of people, especially for those taking a passive approach with their investments. Most people don't understand how much money they lose with high cost funds over their lifetime.

 

I'm waiting for the Warren Buffet bet to finalize next year.  He plunked $100K into Vanguard's S&P 500 fund and let it ride and then asked for hedge fund or active managers to compete to see who had the better ROI after fees.  He's up huge.


Very Stable Genius

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MY preference for Roth IRA is that I assume the risk for tax rates increasing in the future are likely greater than them decreasing.  Contrary to belief we are currently in low tax environment that I humbly do not believe is sustainable over the long run. 

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MY preference for Roth IRA is that I assume the risk for tax rates increasing in the future are likely greater than them decreasing.  Contrary to belief we are currently in low tax environment that I humbly do not believe is sustainable over the long run. 

 

This.  Absolutely this.  There is no way that the trickle down economics push is sustainable and as such taxes will have to eventually be jacked up in the next 10, 20, 30 years to cover the debts issues created by Republican/Trump tax policies.  When that happens those that have saved the most will be required to pay the price in higher taxes.  I only hope there is no after-the-fact adjustment of Roth IRA rules to tax some of the proceeds of those of us that can see the train wreck coming.


"Someone is sitting in the shade today because someone planted a tree a long time ago." - Warren Buffett 

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Have been following this for a little while - https://seekingalpha.com/article/4075363-quadruple-leveraged-etfs-sec-second-thoughts

 

The SEC is reconsidering its approval of quadruple-leveraged ETFs.

 

There hasn't been a whole heck of a lot of history with leveraged ETFs, as most have only been in existence during the current 8-year bull run.  UPRO for example, which seeks to track 3X the daily rate of the S&P 500, started trading in June 2009 around $7.20/share.  It's now worth over $100/share.  Of course, when the next bear hits, if you hold that ETF, you will be hit much harsher.

 

Volatility kills returns for any leveraged ETF, but like I mentioned, we haven't seen that side yet as a majority of the trading days have been to the positive side over the last 8 years.


Very Stable Genius

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MY preference for Roth IRA is that I assume the risk for tax rates increasing in the future are likely greater than them decreasing.  Contrary to belief we are currently in low tax environment that I humbly do not believe is sustainable over the long run. 

 

This.  Absolutely this.  There is no way that the trickle down economics push is sustainable and as such taxes will have to eventually be jacked up in the next 10, 20, 30 years to cover the debts issues created by Republican/Trump tax policies.  When that happens those that have saved the most will be required to pay the price in higher taxes.  I only hope there is no after-the-fact adjustment of Roth IRA rules to tax some of the proceeds of those of us that can see the train wreck coming.

 

As long as there is enough balance in the Congress to keep these instruments stable. I know there were proposals a few years ago from the Obama Admin to try and do away with Roth's and start taxing gains in there as people withdraw their money because 30-50 years from now, this will be a large middle class tax savings. The government will take a huge hit down the line and there are a number of economists, especially those who lean to the left who hate Roth's because of the tax shelter it creates and the windfall that the government can receive down the line by taxing them.

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^ Generally speaking if you get a match on your 401k you want to invest up to the maximum amount of the match.  That is free money and you leave it on the table otherwise.  Then you should contribute to either a Roth or Traditional IRA up to the MAX (I prefer Roth.)  I stick to ETF's through Vanguard because  of the low cost. Many studies have shown that you will generally do better in the long run with index funds than by actively managed portfolios.

 

This is good advice for a lot of people, especially for those taking a passive approach with their investments. Most people don't understand how much money they lose with high cost funds over their lifetime.

 

This x 100, and I'd even go one step further and say a vast majority of people should be taking a passive approach. Even most full-time financial professionals have an awful record of beating the market over the long haul, and randomness explains a lot of the "winners" out there.  Even if you are not an ardent efficient market adherent, it's certainly efficient enough to make genuine insight virtually impossible to recognize.

 

I highly recommend Burton Malkiel's classic "A Random Walk Down Wall Street.": https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338  If you have the time and interest, it's better then wasting money on a financial adviser.

 

[Typo]

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^That Malkiel book is one of the best out there.

 

The average person trying to beat the market themselves ends up like playing lotto numbers using birthdays -- locking out any numbers over 31.

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Does anyone here know about REITs?  If I sell commercial real estate, can I avoid capital gains taxes by reinvesting that money in a REIT?

 

No you cant take advantage of the 1031 rules because selling a piece of commercial real estate and investing in a REIT would not be a like-kind exchange since a REIT is more of a secured instrument and offers the liquidity typical real estate  does not.

If you are looking to take advantage of 1031 rules You can invest in a real estate syndicate and take advantage of like kind exchange rules. This will not get you liquidity you may desire but it will allow you to be invested in a partnership to share the risk.

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Does anyone here know about REITs?  If I sell commercial real estate, can I avoid capital gains taxes by reinvesting that money in a REIT?

 

Don't know anything about taxes, but you can buy stock in REITs just like any other stock. Some of them pay out really good dividends. I really don't  know why they're not more popular given the returns, maybe they are riskier than I realize, but the stuff I have seems pretty stable over the past few years.


www.cincinnatiideas.com

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Does anyone here know about REITs?  If I sell commercial real estate, can I avoid capital gains taxes by reinvesting that money in a REIT?

 

Don't know anything about taxes, but you can buy stock in REITs just like any other stock. Some of them pay out really good dividends. I really don't  know why they're not more popular given the returns, maybe they are riskier than I realize, but the stuff I have seems pretty stable over the past few years.

 

Vanguard has some REIT ETFs which pay some nice dividends. They are traded just like stocks.  I think putting a small portion of portfolio is a good idea depending on what your goals are. 

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http://www.financialsamurai.com/a-massive-generational-wealth-transfer-is-why-everything-will-be-ok/

 

^Interesting post (article?) here from a few years ago.  Millennials have a reputation for not saving enough for retirement, emergencies, etc. but as the author points out, A LOT of young people are set up to inherit quite a bit of money from their parents, perhaps even assistance with buying a house.  So why save 15+% when they have a few hundred thousand dollars (if not more) coming their way in the future?


Very Stable Genius

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Amazon blazing to a 1000 pts. Time for a 7-for-1 stock split. Let the non-institutional investors have a little fun with it. You too Google.

 

Since Apple's 2014 7-1 split and Netflix's 2015 7-1 split, both are up 53 and 63 percent, respectively. 

 

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This is the toughest time for me...what to buy when the market is at a record high!

 

You'd basically be asking this question of yourself since 2013 with just a couple minor dips along the way.  Best strategy is to stay the course - no one really knows when this bull market will end, and most of us won't be able to "time" it very well.  Every significant sell-off since 2009 has been immediately followed by a new record high within a month or two.  Are we really set up for a 2000 or 2008 style crash?  Again, we don't know.

 

I'd personally stay the course until we see signs of an '00 or '08.  If and when we get to that point, you could consider buying the SDS ETF from ProShares.


Very Stable Genius

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^ I"ll check that out later.  I am a fan of Financial Samurai.  Also, a huge fan of Mr. Money Mustache.

 

Not super familiar with either, but have been poking around and reading some from each.  Some interesting stuff there.  I'm definitely on a "super saver" plan when I compare to friends and peers.  I may dive into my expenses more and see where I can trim some stuff out, but I want to get through one year of consistent income and expenses first (new job, new house) to see where things shake out.


Very Stable Genius

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I started investing about 7 years ago (35yo now). At first, I took an old-school approach by buying high dividend/low growth stocks. After a few underperforming years, I changed my approach to investing in companies with "wide moats." I started buying Visa and Apple 4 years ago and I have done well. If I had to recommend 1 stock to a new investor, it would be Visa.

 

What are some good financial books?

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^^ Some of the biggest lessons in personal finance that I find important:  Avoiding lifestyle inflation, do not buy new vehicles (try to buy one that you can pay cash for), live closer to work if possible (this reduces your need for a new car and may allow your family to get by with 1 car), and use public transit, bicycle or other methods of commuting to work. 

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A lot of the Trump bump earlier this year was just Republican blue-collar building/maintenance-trade small business owners thinking that Trump was going to make all of their fantasies about taxes and regulation come true overnight. The market is still very emotional and moves on feelings rather than facts despite all the computers involved these days.

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I started investing about 7 years ago (35yo now). At first, I took an old-school approach by buying high dividend/low growth stocks. After a few underperforming years, I changed my approach to investing in companies with "wide moats." I started buying Visa and Apple 4 years ago and I have done well. If I had to recommend 1 stock to a new investor, it would be Visa.

 

What are some good financial books?

 

You definitely want to diversify your holdings with index funds/ mutual funds/ ETF's.  You expose yourself to too much volatility with individual stocks. 

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My gut suspicion is that a commercial real estate crash, of which perhaps we're already in, will put a multi-year damper on the rally.

 

It won't be as severe as the 2008 mortgage foreclosure crash, but if you look at all the accelerating list of empty storefronts and dead businesses nationwide, institutions that used to eat up a lot of real estate in malls and streets, you know something has to give.

 

 

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A lot of the Trump bump earlier this year was just Republican blue-collar building/maintenance-trade small business owners thinking that Trump was going to make all of their fantasies about taxes and regulation come true overnight. The market is still very emotional and moves on feelings rather than facts despite all the computers involved these days.

 

I've been paying attention to the slow down in vehicle sales and assuming that a recession is just around the corner.  The US economy is overdue for a recession.

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My gut suspicion is that a commercial real estate crash, of which perhaps we're already in, will put a multi-year damper on the rally.

 

It won't be as severe as the 2008 mortgage foreclosure crash, but if you look at all the accelerating list of empty storefronts and dead businesses nationwide, institutions that used to eat up a lot of real estate in malls and streets, you know something has to give.

 

 

 

Hipster parts of town and other areas of the core cities are raging so hard right now that almost everything else except very wealthy suburbs are having all the money and life sucked out of them. Unfortunately, a much smaller portion of The Market is invested in the urban growth than is invested in Applebee's, Sears and whatnot so The Market looks bleaker with these highly visible retail and restaurant stocks. So rather than Main St. vs. Wall St. it's more like 3rd Avenue Vs. Perimeter Drive.

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^^ Some of the biggest lessons in personal finance that I find important:  Avoiding lifestyle inflation, do not buy new vehicles (try to buy one that you can pay cash for), live closer to work if possible (this reduces your need for a new car and may allow your family to get by with 1 car), and use public transit, bicycle or other methods of commuting to work. 

 

I'm looking to buy a car soon and would likely buy slightly used, i.e. a certified used vehicle.  While I like the idea of paying cash for it, if I can borrow at 1.9% - 2.9% (depending on current specials), I'd be better served taking the debt and investing the money where I'd hopefully exceed 3%.  Hopefully.  That said, I do hate having a car payment and would try and pay it off early. 

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A lot of the Trump bump earlier this year was just Republican blue-collar building/maintenance-trade small business owners thinking that Trump was going to make all of their fantasies about taxes and regulation come true overnight. The market is still very emotional and moves on feelings rather than facts despite all the computers involved these days.

 

I've been paying attention to the slow down in vehicle sales and assuming that a recession is just around the corner.  The US economy is overdue for a recession.

 

Just finished lunch with a presentation by the chief investment officer at a local bank who said the next big bubble to cause disruption in the economy is going to be the subprime loans make on car sales. Less than 10% have been verified and they are now the same liar loans that caused the housing crisis 10 years ago.

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^ I was just reading about that somewhere actually.  They've been bundling the subprime auto debt and selling it off to investors.  Therefore, the originators have been getting very relaxed about verifying those loans. 

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A lot of the Trump bump earlier this year was just Republican blue-collar building/maintenance-trade small business owners thinking that Trump was going to make all of their fantasies about taxes and regulation come true overnight. The market is still very emotional and moves on feelings rather than facts despite all the computers involved these days.

 

I've been paying attention to the slow down in vehicle sales and assuming that a recession is just around the corner.  The US economy is overdue for a recession.

 

Just finished lunch with a presentation by the chief investment officer at a local bank who said the next big bubble to cause disruption in the economy is going to be the subprime loans make on car sales. Less than 10% have been verified and they are now the same liar loans that caused the housing crisis 10 years ago.

 

Absolutely. It won't be quite as earth-shattering and the home loans but it is going to be BAD. It's a good time to become a repo man because there are going to be a lot of Hyundais and Kias to go get. Their finance arm (they are the same company now) is notorious for subprime.

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