Investing General Discussion

So I just used the quote feature for the first time, and it blew my fucking mind!

Blazin said:

Eomer do you hedge at all us dollar to candian dollar? Not really worry about it?

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No hedging at all, no. So looking at it one way, currently about 55% of my portfolio is CDN, 30% is USD, and the rest is mostly Euros, pounds and yen. In practical terms most of my money is held in TSX/CDN traded ETF's, but I do have a fair amount of NYSE/USD Vanguard ones from when I first set up my portfolio back in 2009 when I moved to a true index portfolio. But obviously the value of the ETF's holding US/International stuff will fluctuate in value relative to the loonie, as well as whatever's going on in their own local currency terms. Some friends get annoyed when I'm happy the loonie went down, because that typically means my portfolio has increased in value. 2015 was not a great year in most stock markets, but it was decent for me because the loonie shit the bed along with the price of oil. This year, it's been somewhat the opposite, but because the price of oil and also gold have been going up, my Canadian holdings have been going up while the rest has been treading water due to the loonie also going up and offsetting local gains.

The way that the Couch Potato blog explains it is that while a "true index" portfolio for a Canadian would only allocate about 3-4% of the equity portion to the TSX, it makes sense for a Canadian to bump that amount significantly given that most of their expenses, incomes, debts etc are going to be in the currency as well. A "true index" portfolio might well fluctuate a lot more with even more currency exposure. That makes sense to me. The same could be said for an English or French investor. The downside is that you're then skewing your portfolio to whatever the local mix is: the TSX is very heavy on oil+gas, minerals, gold etc.

The argument for keeping bonds only in your local currency is similar. If the bond portion is supposed to be the more stable part of your portfolio, you probably don't want to be adding currency risk to it.

I'm not doctrinaire about any of the above, though. If I were to start spending more time traveling and/or semi-retire, I'd certainly consider dropping the Canadian proportion. Or if I read a compelling argument for why I should change, I'd certainly consider it. The main thing is just not constantly changing strategies or trying to guess where the fuck currencies are going, because that's basically impossible.

Tinycoffin said:

So how do you play this, dividends being payed on the quarter on average. Whats your time frame I doubt your doing a buy and old on ETFs?

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Timeframe is that I will hold until I die or Google finds out how to not die. Of course, I will make changes to the portfolio along the way, but basically the strategy is: Every month, I buy more with savings (or hold cash for a few months if the exchange rate is bad/market is overpriced). At the same time, the shares that I am holding will generate dividends month by month, and that goes into the cash pool for buying. The normal analogy is a snowball; every month the pile of cash grows, and in growing will help generating more dividends that in turn make the pile bigger...

Right now, what I am holding is generating a small dividend every month. I have mini goals along the way ("dividends should get me a round at the bar every month" -> "dividends should cover car insurance for a month" -> "dividends should cover mortgage payments" -> ... ) etc, all the way to the big goal: Dividends should exceed my current salary.

At that point, I will have a choice: I could retire and play around with my own little projects and not worry about income, or I could keep working. But I will have that choice.

I'm holding the ETFs. They are just another way to diversify as I build the portfolio, but over time they will become a smaller slice of the pie (right now they are about 20%, target is closer to 10%)

If I wanted to find a pool of investors looking to get into commercial real estate ownership, where would I start?

Friends and family, or any one of the numerous CRE crowdfunding websites?

I liked investing in Fundrise projects before they switched to their REIT model.

Need some advice...

As we all know, interest rates for a bank savings account is so stupid low it makes zero sense to keep your money there. So, alternatively, I've been placing any extra cash into a Vanguard ETF - specifically the VTI Total Stock market ETF.

I sold all my shares earlier this week because I'm becoming real nervous as the market continues to break record highs. Many indicators point to a meltdown.

My question is, is there a safe asset class to put my money in at this point? Are bond ETFs reasonably safe? Something like short-term government or corporate bonds? Or something else entirely?

The bottom line is, I need for wherever I place my money in has to be liquid and relatively low risk since this is essentially a savings account.

Even short term bond funds can suffer a capital loss over time periods of less than whatever their average duration is (probably 2-3 years). Not a significant loss, no, but you could see a decline in value of a few percent. If the money is truly short term savings that might need to be accessed at any moment, then really the only options are either a savings account or GIC's.

There's also concerns about tax efficiency, at least in Canada. Bond funds tend to be much less tax efficient than savings accounts or GIC's here. Maybe that's not the case in the US. But up here, if the money is in a taxable account and you're in the highest marginal tax bracket, most bond funds are really inefficient.

This article talks about that a bit: Ask the Spud: GICs vs. Bond Funds | Canadian Couch Potato

This is also relevant: Why GICs Beat Bond ETFs in Taxable Accounts | Canadian Couch Potato

Again though, things might be entirely different in the US.

What are you using the money for?

So I've been watching these videos by Mike Maloney, Hidden Secrets of Money, and I'm seriously considering starting to invest in gold and silver. I have his book, Guide to Investing in Gold & Silver, on order.

Has anyone gone this route and have any tips? Specifically, I'm wondering where do you store it? An in-house safe or something more secure like a safety deposit box?

Sounds like a great strategy if you want to make zero returns.

Why Buffett thinks investing in gold is stupid

Whatever happened to Rinthea, or whatever his name was? Back in the FOH days circa 2007/8 he was shouting from the rooftops that gold was the way to go, hyperinflation would be here any day now, and so on. Basically none of what he claimed came true.

ShakyJake, read this book and never look back: Amazon product ASIN 1118921283
Don't try to beat the markets or chase "foolproof" investment theories.

Might be. It automatically parses Amazon links. Here's a wiki instead: Bogleheads' Guide To Investing - Bogleheads

edit: Also, if you want a short, free read that covers similar territory, this is very worth look at: https://www.etf.com/docs/IfYouCan.pdf

Yeah, for sure. The accumulation phase is pretty simple for most people. If you've got enough squirreled away that you've got non-sheltered accounts and the like, then it's probably time to start paying a financial advisor, but only one that's not going to try to shoehorn you in to a bunch of shit that pays him trailers. And yeah, shit gets a lot more complicated when you're nearing or in retirement.

Many people, though, seem to think that to save for retirement that it's all about maximum returns. When the reality for most middle class people is that it's about maximizing your savings and avoiding debt and over consumption. If the difference between a comfortable retirement and penury for a given individual is the difference between a 5% IRR and a 6.5% IRR, then they really fucked up somewhere along the way.

Blazin said:

As much as I'm an avid proponent of investing I'm a full on nut about living debt free, many many investors will hurt their returns investing because of emotions and timing (which I completely get) but the benefits of debt free living are a lot harder to fuck up. People will often defend their debt filled lives with spreadsheets showing how they invest for better returns than their cost of money, but for normal middle class people the path to financial independence is almost never achieved through leveraged borrowing.

Millionaire next door is another good one for showing how through discipline even people with modest income can become quite wealthy. I became fully financially independent by the age of 34 my average income for the period from 1999-2012 was $138,000/yr. Once I was debt free is when my net worth really started to climb at a silly rate and if you don't increase your standard of living it begins to snowball. On one hand it's all rather "easy" but the discipline to stick with it year after year is where I see people fail,, but that's no different than the challenge of healthy living will power and discipline are always the real obstacles.

Oh and being an educated white male helps

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This is solid advice. I live the same way outside of my home mortgage I have zero debt and pay cash for everything. Your'e right about the net worth rapidly adding up I managed to bank about 70K last year. Fuck debt driven keeping up with the Jones mindset, get a handle on your needs vs wants and eliminate any debt you can. For me this has lead to a pretty stress free lifestyle and a feeling of being in control of my destiny. Sure people make fun of me about 12 year old car but fuck them.