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2016 Investment Strategy?


Tpoppa
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I put $500 into my Robinhood account... Free trades!  No fees!  I plan to start swing trading as soon as it clears :)

 

Suggestions?

By fees, I think he meant mgmt fees that are part of many investments.   One of the advantages of index funds is that the mgmt fees are typically low.

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I heard on the radio this morning that weight watchers stock  has tripled in the last few weeks.  Oprah bought 10% of the company, and then endorsed their weight loss system.  Wish I'd known that was coming...  I think it was only like $12-$14/share.

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Expense fees will eat you alive if you aren't paying attention. 

 

Absolutely, and...

 

By fees, I think he meant mgmt fees that are part of many investments.   One of the advantages of index funds is that the mgmt fees are typically low.

 

FWIW I've worked in the financial industry for 16 years (in I.T., but privy to how banks and investment houses make money).  If you use a professional brokerage house with an adviser that takes 1% of your portfolio holdings for give you professional advice, then pay another 1-2% in front-loaded acquisition fees, then pay another 1-2% in management fees (expense ratios) on the stocks you buy, you need to make 3-5% just to break even.  That may not seem like a lot with a tiny portfolio in aggressive investments where you're largely gambling on making (or losing) big, but with large balances usually found in IRAs, even (of not especially) when you're highly diversified, you're essentially giving 3-5% of your value away every year.  I.e. with a $100,000 IRA, that's several thousand dollars a year.  It didn't take me long to chafe, even knowing that my then-employer was benefiting from the arrangement, which secondarily improved my stock price.

 

A better alternative (for me anyway) has been to stick with index funds with very low management fees.  Vanguard and Fidelity have some of the lowest, especially with their SP500 funds, but other low-cost ETFs are available as well - you just have to look at their holding classifications, expense ratios, historical performance compared to peer funds and pick sets that make the most sense for your risk appetite.

 

For me at 48, that means a lot of Vanguard SP500, some small and medium cap index funds and a "target retirement year" fund that auto-scales its risk stance year after year, from more aggressive to more conservative as I age.

 

I'm leaving out some details but that's the majority of my investment strategy and it's doing as well for me as I need.  I'm delighted not to lose several grand/yr on dubious management advice and I'm OK not having to chase the latest hot stock every month, day or hour.

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Absolutely, and...

 

 

FWIW I've worked in the financial industry for 16 years (in I.T., but privy to how banks and investment houses make money).  If you use a professional brokerage house with an adviser that takes 1% of your portfolio holdings for give you professional advice, then pay another 1-2% in front-loaded acquisition fees, then pay another 1-2% in management fees (expense ratios) on the stocks you buy, you need to make 3-5% just to break even.  That may not seem like a lot with a tiny portfolio in aggressive investments where you're largely gambling on making (or losing) big, but with large balances usually found in IRAs, even (of not especially) when you're highly diversified, you're essentially giving 3-5% of your value away every year.  I.e. with a $100,000 IRA, that's several thousand dollars a year.  It didn't take me long to chafe, even knowing that my then-employer was benefiting from the arrangement, which secondarily improved my stock price.

 

A better alternative (for me anyway) has been to stick with index funds with very low management fees.  Vanguard and Fidelity have some of the lowest, especially with their SP500 funds, but other low-cost ETFs are available as well - you just have to look at their holding classifications, expense ratios, historical performance compared to peer funds and pick sets that make the most sense for your risk appetite.

 

For me at 48, that means a lot of Vanguard SP500, some small and medium cap index funds and a "target retirement year" fund that auto-scales its risk stance year after year, from more aggressive to more conservative as I age.

 

I'm leaving out some details but that's the majority of my investment strategy and it's doing as well for me as I need.  I'm delighted not to lose several grand/yr on dubious management advice and I'm OK not having to chase the latest hot stock every month, day or hour.

Well said.  For index funds it should be almost infinitesimal with how much work that actually takes.  Typically international will run you more but that also makes sense.  Bottom line is do your homework.  I am also a proponent of combining 401k and Roth.  Gives you more control over your taxes come retirement time. 

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One of the first mistakes I made as an investor was to open a "managed account" with a quarterly advisory fee.  After 3 quarters I ditched the advisor and learned to manage it myself.

Yup.  I don't trust people to make decisions that benefit me when they make money from actions not always in alignment with my finances.

Edited by MichaelS
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Oil is soooo low right now.  What to do?

Buy cheap oil stocks then go instigate a war between Iran and Saudi Arabia.  Please let me know just before you get to step two so I can join in the profiteering. 

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Buy cheap oil stocks then go instigate a war between Iran and Saudi Arabia.  Please let me know just before you get to step two so I can join in the profiteering. 

 

Anyone here work for Halliburton?

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