Investing General Discussion

I like ideas in general and have taken some from here and incorporated them into my own strategies, but the more day tradey something is, the less meaningful I find it.

Given that, you should understand the difference between someone saying they like Pltr at 8 (long term) vs sold my pltr lot at 12, (short term profits), but I can see how it could be confusing.

would the solution be to make a day traders shit show fiesta thread and keep the long term general one? Probably not. People will learn what’s what on a long enough timeline and dum dums would still get confused reading both threads and make the mistakes we all had to make to get slightly decent at stonks.

I rebalance a lot for clients and the day tradey stuff does give me ideas sometimes on sector direction, so it’s got some good info for sure. I just prefer when people talk about companies or macro things

There’s nothing wrong with the target date, but if you take it one step further and ask yourself where will growth be over the next 10 years, then what is the answer?

No one knows, but if you’re right on 2/3 sectors, then you can buy those funds (if your plan has things like VGT available) and really get your schlong going. I do something like target the sectors with 50% of my moneys and just buy the market as a whole with the rest as a hedge against my stupidity.

Going with tech, communication, and healthcare. If I can nail 2/3, then win. If you see something like a cataclysmic drop in a sector you believe in, then overweight your % and see if you can catch it at a good time.

You have to do the research a little on what your plan has for options, and if you don’t feel like doing all that crap, then just target date it lol

Foler said:

My lil fun portfolio will have to take to the backburner.. I will say the vanguard 2065 target date fund in my 401k is slaying it at +17.95% ytd pretax return. Seems pretty good right? Not sure I could beat that throwing it into my own mix of 2-4 funds.

Click to expand...

This is the right question to ask, and I think the answer might surprise you. Let's take a look at this Vanguard 2065 fund. Below is its composition (e.g. these are the 4 "funds" that the target retirement fund has picked and their relative weights)


So Vanguard funds for - Domestic Stocks (VSMPX): 54%. International Stocks (VGTSX): 36.3%. Domestic Bonds (VTBIX): 6.9%. International Bonds (VTILX): 2.8%.

Let's look at the performance of each of those:

Boy, it looks like those Domestic Stocks are really killing it. Does Vanguard have some secret blend that is allowing it to achieve this incredible performance?

No, it's basically just the S&P500:


So Vanguard took your money, invested some of it in the S&P500(ish), and then put some in international stocks and bonds which had a lower return.

So if you really wanted to outperform the retirement fund, you could have picked ONE thing yourself--SPY (the S&P500 ETF), and gotten an extra 5% this year.

That said, I'm not saying Vanguard 2065 is garbage. Setting international aside, those bond funds making 5.26% and 9.15% aren't necessarily "underperforming", they are just much less risky than stocks and therefore are providing a lower return as a result. On a risk-adjusted basis, they're probably performing fine relative to the S&P 500. If the market had collapsed instead of blown up this year (see 2022), those stable single percentage gains from the bond funds would still have been there, and you would have come out a huge winner. The 2065 fund probably handily outperformed S&P500 last year, but on average it will return less.

It is you, as an investor, that has said "I want a lower risk profile, and therefore I am willing to take a lower return by investing my money in safer but lower return assets".

Unless you are in the 50+ age range, I think this is a massively detrimental position to take and will have enormously negative impacts on your long-term wealth.

For idiots like me who can't play fucking Geometry Wars with price charts, my single largest earnings potential is my ability to absorb higher risk due to my (relative, 35ish here) youth + financial situation (money you can invest and never need to draw on until retirement) and reap the larger expected returns that this brings. Your risk profile now is what will define your long-term wealth. You could buy nothing but 20-year Treasuries, earn 4% for the rest of your life, and from a risk-efficiency perspective, you would have a perfect score. But obviously, you would have left what I expect will be literal millions of dollars on the table by not taking full advantage of your ability to absorb short-term risk.

Back off my soapbox and on Vanguard: That bond mix is only going to increase each year. This is what the 2030 retirement fund looks like now:


So now is the time to decide if you want to be in bonds at this stage of your life. Maybe so! But I would bet if you're looking 35 years out for retirement, you'd rather be risking more to make more unless you truly have a use case for an "stable" 10% of your portfolio, or you have a thesis about a coming crisis.

So basically:

1. The fund is doing well because everything is doing well
2. You could very easily have gotten a higher RETURN yourself by taking on more RISK. Stocks vs. bonds is the quintessential question here.
3. Now is the time to decide what you want to do with respect to #2
4. If you read "more risk" and immediately think about 300% returns on Life Bank Corp or buying near-expiry options for pennies on the dollar, stick with your financial adviser.

This is long enough, so I'll save my thesis on domestic vs international stocks for another time.

I still like total market funds (VTSAX for Vanguard, or FSKAX for Fidelity). You get the small caps that the S&P misses. Now, small caps have performed like shit since covid, but if you're making a bet on the US economy and not just the tech stocks, it makes sense to me.