Market commentary you deem relevant

[Beendare]

Thats not a derail @Fowl Play ….its pertinent to the discussion of maxing out investment returns.

 

[SDHNTR]

I guess, I’ve just never found a good one. I spent years looking for a planner who would help me navigate ISO’s, AMT, credits, tax planning, etc. I never found the mythical planner/cpa who would actually bring value to me. So picked up some books and learned it myself. I’m sure they are out there though. But me, nor 100’s of my colleagues never found one.

I’m part of a financial group chat with 250 other engineers (aerospace) who compare/contrast different investments, financial planners, etc. even in that format of searching for one. With many of us trying 3-5 unique ones. Never found one who did what I needed for less than 1.8%.

Sorry for derailing the thread a bit. Market Commentary that I deem relevant is listening to tech or engineering summits that talk about new or emergent technology. Then trying to find an angle to invest in it, either companies that would benefit directly from the new technology OR companies that produce components to feed the new technology. Example would be NVDA. As soon as I realized that graphics cards were being used to mine crypto, I invested heavily in NVDA and AMD. The whole metaverse/ AI boom was icing on the cake. Of course, I’ve had just as many flops as winners. So… I still throw money at companies I think will 100x, but bulk of it is in boring investments.

TBH, you are asking a lot. CPA and CFP are two separate skill sets, thus the difference in designation. You probably can’t expect someone to do both jobs, at least not well. Yes, I know some firms and even some individuals do perform both tasks, but after 25 years in this biz, I’ve never seen it done well at a high level. Kinda like hiring a handyman to do some of both electrical and plumbing work on your house. Simple jobs, OK, but if you want to build your dream home, you’re gonna hire specialists. If your needs are complex, and it sounds like yours are, you want specialists IMO.

1.8% is high. I don’t know anyone who charges that much. But it’s a sliding scale, the more you got, the smaller % you should pay.

The new or emerging tech stuff is a tough one. You’d need someone intimately familiar with early stage companies. That’s a non starter for me. Not my bag. Again, that’s something that requires a very unique and specifically dedicated skill set. If you’re gonna do that well, that’s all you’re gonna do. My clients already have money and are far more concerned with making it last than they are hitting the next home run. Again, I think you’d be very hard pressed to find someone with a consistent track record of identifying productive opportunities to invest in new tech, while at the same time managing significant wealth later in a client’s life. Those are two different skills.

Perhaps your experience stems from the fact that the FA’s you have encountered in the past were disingenuous. They told you what they thought you wanted to hear, told you they could do it all, and then, not surprisingly, failed to meet your rather unique expectations. Personally, I would’ve told you up front I’m not the guy for you.

In short, respectfully, I can understand why you have been displeased and I think it may stem from the fact that you probably need several financial professionals, and instead are trying to find one jack of all trades.

 

[Kilboars]

@Ross,

Well said (written?)!! To think that anyone is truly interested and working towards your financial well-being other than you is seems pretty foolish and naive to me. After watching my parents struggle, especially my mom, I realized very quickly that NO company or financial person is going to really help me with my financial goals and retirement.

So true and any person investing your money should first and foremost be a fiduciary.

Only about 5% of financial advisors are.

 

[Clarkdale17]

So true and any person investing your money should first and foremost be a fiduciary.

Only about 5% of financial advisors are.

That's the real problem. Why lose 1% right off the top and give it to someone who is not even legally required to act with your best interest in mind?

 

[180ls1]

Only a small fraction of what a good financial advisor actually does is select investments. Financial planning is where the true value is experienced.

Yup, and even if you only look at investment returns with an advisor vs without an advisor on average the advisor clients come out ahead net of fees.

 

[SDHNTR]

Yup, and even if you only look at investment returns with an advisor vs without an advisor on average the advisor clients come out ahead net of fees.

That’s because a lot of individual investors need to be protected from themselves. For those, paying 1% is far less costly than their own mistakes.

 

[180ls1]

That’s because a lot of individual investors need to be protected from themselves. For those, paying 1% is far less costly than their own mistakes.

People won't admit to it though. Just look at this thread.

People also don't know what they don't know. A good plan many times adds more than $100K of value but most don't know that.

 

[SDHNTR]

That's the real problem. Why lose 1% right off the top and give it to someone who is not even legally required to act with your best interest in mind?

That may have been true years ago, not anymore. Most FA’s are fiduciaries now.

Or additionally, not all licensed reps are FA’s, far from it. Many are involved in admin, management, analysis, inside sales, etc and have no interaction with public investors, so even if true, those numbers are dramatically skewed.

The vast majority of clients interviewing financial advisors now will find them to be fiduciaries. And if not, they should hit the door running.

 

[z987k]

View attachment 668796

Equal weight funds do exist. There's a myriad of types of S&P ETFs. They're not all weighted like the s&p itself. There's also funds that track other indexes that have almost no cost.

 

[z987k]

I’ve read articles ect about investing for a LOOONG time.

I’ve been more interested in real estate investments, and some other things. It’s all worked out great.

2 years ago I finally set up a traditional retirement account. I Wanted some more diversification.

I finally set up a retirement account. I maxed out my contributions to that account the last two years, and will continue to do so. I just have the $ come out of my check each month.

In all the years I have looked at different stock market investments,long term an index fund or total stock market index fund seems hard to beat for me personally.

I honestly wish I would have started this long ago. The money isn’t taxed going into the account, and I get a 3 percent match from the business. If my thinking is correct I’m up around 33 percent before even factoring in the gains in the stock market versus just leaving the money on my check and doing something else with it.

In 2022 and 2023 I put $29500 in total

If I would have left it on my paycheck I would have brought home around $20,000 out of the $29500 over 2 years. That $29500 I put in the tax deferred account is worth almost $44000.00 today with the employer match, and market gains.

So instead of an extra $833 per month on my paycheck, I maxed out a simple IRA, put the money in total stock market index fund and it’s $44k after 24 months!

I always knew it was a good idea, but never thought it was that good!

What a powerful tool to build wealth.

Depending on how much you make(that you have enough extra income to do this), but you can put a whole lot more than that in a tax advantaged account. The maximum is 69k this year between you and your employer. If your employers contribution and your 23k 401k personal max this year don't get you to 69k you can use the backdoor and mega backdoor roth to top it up to 69k.

 

[Kilboars]

That’s because a lot of individual investors need to be protected from themselves. For those, paying 1% is far less costly than their own mistakes.

You need to have the stomach for self-investing. I say buy established companies stocks each year to max out a Roth IRA for starters and look at it every 5-10 years whether you need to or not.

And just get back to earning more in you day job.

I started that way in my late 20's and my stock portfolio is really the money I enjoy.

Home renovations.
World trips
New cars.
Life style all from my stocks.

 

[SDHNTR]

Depending on how much you make(that you have enough extra income to do this), but you can put a whole lot more than that in a tax advantaged account. The maximum is 69k this year between you and your employer. If your employers contribution and your 23k 401k personal max this year don't get you to 69k you can use the backdoor and mega backdoor roth to top it up to 69k.

Maybe. A lot of 401k plans disallow an after tax excess contribution. And backdoor “rules” are muddy. I’m not going to get into the tax law here, but this strategy isn’t necessarily available to everyone. Consult your tax advisor.

 

[Hnthrdr]

Well said Matt…its a huge problem that only gets the press in focused financial sites.

I’ve turned my focus to macro stuff now that I’m officially old…but there are a lot of very smart younger folks that will probably make a lot of $$ shorting and then solving this problem with office buildings.

I know one guy trying to buy these on the cheap and convert them to residential but it’s not as easy as you think Due to the building core not being conducive to many residential units.

There was one building in SF that sold for something like $300m 5 yrs ago that just auctioned for $80m about a yr ago….They took a huge hit.

Biggest hurdle I’ve seen with this is building codes, lots of outdated office buildings that if turned from commercial to residential would require massive overhauls which would make that sort of flip insolvent… which is why many of them are sitting. Now if local government greases the wheels with lax building codes on office flips I could see it happen, especially if the builder promises low/ no income spaces. Here in Denver, the city can openly disregard a lot of its building code when it’s illegals or homeless shelters

 

[z987k]

Maybe. A lot of 401k plans disallow an after tax excess contribution. And backdoor “rules” are muddy. I’m not going to get into the tax law here, but this strategy isn’t necessarily available to everyone. Consult your tax advisor.

There's no reason they can't except your employer not setting it up right. This can be fixed. It costs them $0.
They're really not that muddy. It's really straight forward how to do it and all the big companies(fidelity, schwab, vanguard) are familiar. For example, we're with fidelity and you can call and talk to their workplace financial people and they can show you how to set it up correctly.
If you earn a paycheck it should be available, and if it's not it'd be something I'd talk to your employer benefits people over. I don't think I'd accept a job where they didn't have after tax contributions. The long term tax implications would be a minimum of .5mil.

 

[SDHNTR]

There's no reason they can't except your employer not setting it up right. This can be fixed. It costs them $0.
They're really not that muddy. It's really straight forward how to do it and all the big companies(fidelity, schwab, vanguard) are familiar. For example, we're with fidelity and you can call and talk to their workplace financial people and they can show you how to set it up correctly.
If you earn a paycheck it should be available, and if it's not it'd be something I'd talk to your employer benefits people over. I don't think I'd accept a job where they didn't have after tax contributions. The long term tax implications would be a minimum of .5mil.

Not exactly. Many, if not most, of the largest companies in existence, with the largest and most well established 401(k) plans imaginable, do not allow excess after tax contributions. Mine included.

 

[Michael Rankin]

Depending on how much you make(that you have enough extra income to do this), but you can put a whole lot more than that in a tax advantaged account. The maximum is 69k this year between you and your employer. If your employers contribution and your 23k 401k personal max this year don't get you to 69k you can use the backdoor and mega backdoor roth to top it up to 69k.

I have a simple IRA

$15500 was max last year, $16000 is the max this year.

That is the maximum amount I can put in that account as far as I have been able research.

 

[MattB]

Biggest hurdle I’ve seen with this is building codes, lots of outdated office buildings that if turned from commercial to residential would require massive overhauls which would make that sort of flip insolvent… which is why many of them are sitting. Now if local government greases the wheels with lax building codes on office flips I could see it happen, especially if the builder promises low/ no income spaces. Here in Denver, the city can openly disregard a lot of its building code when it’s illegals or homeless shelters

A willingness to disregard building code doesn't make office building footprints smaller or move plumbing. There are lots of very real, practical aspects of office building design (especially with newer buildings) which makes conversion to residential prohibitive.

 

[Beendare]

Some of the areas we can improve is simple, for example;

Your company matches up to a certain % on 401k contributions- thats free money that grows tax deferred

Money sitting in a low interest bank acct making essentially nothing- Its worth considering; All of the investment companies have money market sweep accounts that you can trade in and out of in one day. No fees. Currently I own SNSXX through Schwab which is a weekly Treasury fund paying 4.73%, (it was higher a month ago) A guy can get 5% in some of these sweeps if they are made up of Corporate debt and bonds- a little more risk.

With bonds there are a couple major risk factors worth considering- duration and what backs the bond. In my case above, its the US gov.

Then there is the bigge- tax consequences. If you own a stock or option for less than a year, that profit goes right onto your yearly income.

It has really helped me to dump my losers in under a year. …and let my winners run long term instead of selling. This is one big advantage to owning a good LT investment, we can defer The tax consequences.

 

[z987k]

Some of the areas we can improve is simple, for example;

Your company matches up to a certain % on 401k contributions- thats free money that grows tax deferred

Money sitting in a low interest bank acct making essentially nothing- Its worth considering; All of the investment companies have money market sweep accounts that you can trade in and out of in one day. No fees. Currently I own SNSXX through Schwab which is a weekly Treasury fund paying 4.73%, (it was higher a month ago) A guy can get 5% in some of these sweeps if they are made up of Corporate debt and bonds- a little more risk.

With bonds there are a couple major risk factors worth considering- duration and what backs the bond. In my case above, its the US gov.

Then there is the bigge- tax consequences. If you own a stock or option for less than a year, that profit goes right onto your yearly income.

It has really helped me to dump my losers in under a year. …and let my winners run long term instead of selling. This is one big advantage to owning a good LT investment, we can defer The tax consequences.

There are high interest savings/MM paying 5% or right below it right now. Keep it under $250k and it's as little risk as you can possibly do.
SPAXX, which is the fidelity govt. MM that your cash sits in if you don't have any securities is at 4.97%.

 

[SDHNTR]

Some of the areas we can improve is simple, for example;

Your company matches up to a certain % on 401k contributions- thats free money that grows tax deferred

Money sitting in a low interest bank acct making essentially nothing- Its worth considering; All of the investment companies have money market sweep accounts that you can trade in and out of in one day. No fees. Currently I own SNSXX through Schwab which is a weekly Treasury fund paying 4.73%, (it was higher a month ago) A guy can get 5% in some of these sweeps if they are made up of Corporate debt and bonds- a little more risk.

With bonds there are a couple major risk factors worth considering- duration and what backs the bond. In my case above, its the US gov.

Then there is the bigge- tax consequences. If you own a stock or option for less than a year, that profit goes right onto your yearly income.

It has really helped me to dump my losers in under a year. …and let my winners run long term instead of selling. This is one big advantage to owning a good LT investment, we can defer The tax consequences.

Right, and index funds (nor traditional mutual funds either) don’t allow for tax loss harvesting. A diligent FA can often cover the fee using that one tactic alone.