Madison MoneySports - Personal Finance Thread

[Evan]

Actively Managed beating index funds by 3%? Its simply not true. In fact, its often the other way around.

https://money.usnews.com/investing/artic...-investors

A year-end study by S&P Dow Jones Indices found that "over the 10-year investment horizon, 82.14 percent of large-cap managers, 87.61 percent of mid-cap managers, and 88.42 percent of small-cap managers failed to outperform (their index benchmarks) on a relative basis."

So in over 80% of cases, not only are you paying extra fees, you are making less money.

https://www.wsj.com/articles/index-funds...1496701157

Id quote this one, but Id be quoting the whole article. Just read the whole thing.


Even if you dont want to "work on your own car" / pick your own funds, roboadvisers have much lower fees than an FA and will automatically diversify and rebalance your funds. They even include a % of bond funds depending on your risk appetite.
Its an easy button.

[WRXtranceformed]

Actively Managed beating index funds by 3%?   Its simply not true.   In fact,  its often the other way around.

https://money.usnews.com/investing/artic...-investors

A year-end study by S&P Dow Jones Indices found that "over the 10-year investment horizon, 82.14 percent of large-cap managers, 87.61 percent of mid-cap managers, and 88.42 percent of small-cap managers failed to outperform (their index benchmarks) on a relative basis."

So in over 80% of cases,  not only are you paying extra fees,  you are making less money.

https://www.wsj.com/articles/index-funds...1496701157

Id quote this one,  but Id be quoting the whole article.  Just read the whole thing.


Even if you dont want to "work on your own car" / pick your own funds,  roboadvisers have much lower fees than an FA and will automatically diversify and rebalance your funds.   They even include a % of bond funds depending on your risk appetite.  
Its an easy button.

We could trade articles back and forth about the pros and cons of hiring a professional to manage your money.  At the end of the day I still believe that you are doing yourself a disservice if you don't research all options including using a good FA.  Investing in my opinion is not just about picking good index funds and letting machine learning guide your future.  Your life situation is constantly changing and unless a machine can advise you on what financial changes you should make, you're doing yourself another disservice imo

[Evan]

Im going to be honest with you Lee, that sounds like sales talk.

Your finances are a number not an emotion, and Id like to know a life situation, given no other tradeoffs, where you would rather that number be smaller.

[Apoc]

Your finances are a number not an emotion, and Id like to know a life situation, given no other tradeoffs,  where you would rather that number be smaller.

I think the difference is not everyone can disconnect emotion from that number and some would rather pay a fee to avoid emotion (fear, mostly) from interfering.

[WRXtranceformed]

Im going to be honest with you Lee,  that sounds like sales talk.

Your finances are a number not an emotion, and Id like to know a life situation, given no other tradeoffs,  where you would rather that number be smaller.

I don't have anything to sell here, I'm not a financial adviser 

It's not about smaller numbers, its about keeping that number as high as possible despite life changes or market changes that may force you to readjust your strategy along the way (ie. your wife gets pregnant with twins, you decide you want to pay for a college fund, you get hospitalized with cancer, you're ready to retire and want to shift to fixed income investments, your tax structure changes, etc. etc. etc.).  If you're managing your money the same way in 30 years as you are now, especially considering the tax implications of retirement, inflation and maintaining a standard of living, you're doing it wrong imo.  

I've already got a tailored plan of attack in place to meet my specific goals, regularly review it and make changes if necessary to address those things and that will continue into retirement.  Do you?  If your answer is yes, good job, you're among a very small % of people in America that are actually able to do it themselves.  If you don't have an actual plan to meet your retirement goals (ie. you're setting and forgetting it), it should give you something to think about, research and add to your plate as a priority to "wrench on" yourself.

I am an SME in my line of work at this point, I am competent but not an expert in finance or investment strategy. As Chris said in so many words, I'm buying the peace of mind of expertise and proven track record so that I don't have to worry about making those decisions completely on my own.

[.RJ]

It's not about smaller numbers, its about keeping that number as high as possible despite life changes or market changes 

Strategy != selling products

[WRXtranceformed]

It's not about smaller numbers, its about keeping that number as high as possible despite life changes or market changes 

Strategy != selling products

Having a fear of a person selling something to you is so millennial, you're older than that.  Does it make you feel better being sold to by a computer?  

Get off my lawn RJ!

[Apoc]

So, bitcoin. Eh?

[.RJ]

It's not about smaller numbers, its about keeping that number as high as possible despite life changes or market changes 

Strategy != selling products

Having a fear of a person selling something to you is so millennial, you're older than that.  Does it make you feel better being sold to by a computer?  

Get off my lawn RJ!

Its not a fear of people selling me things, its a fear of being sold snake oil.  I also dont have the time/patience to sort through whether a FA is trying to sell me bullshit or not - they're not very transparent about their performance history over time (and how many have been at it 10-20 years?).  I think if this were 5 years ago, then you might be right but the robots are a game changer.  They do all of the active management for me at a really low fee, faster and more accurately than a guy that looks at my stuff once a quarter/year... IMHOMO. But I'm very much a set it and forget it and ride it out long term and I'll be alright strategy. And right now, I'm just setting aside as much as I can to play catch up for pissing away all my money in my 20's.

Probably a market out there for an FA that doesnt sell any investmnet products.  Or an app, for the millenials.

[Jake]

a guy that looks at my stuff once a quarter/year... IMHOMO.

Does your woman know about this?

 But I'm very much a set it and forget it and ride it out long term and I'll be alright strategy.  And right now, I'm just setting aside as much as I can to play catch up for pissing away all my money in my 20's.

Weird, I'm finally trying to not piss away all my money. Just ignore the E36 in the trailer. Definitely is nice to see the 401k grow and past-401-turned-IRA's grow as well. Fidelity has this neato little retirement prediction tool on their website that lets you enter your goals and attempts to show how you'll be doing by whatever age. I'm solidly in "good" territory but obviously would like to amp it up even more.

[D_Eclipse9916]

I know you got this, but I urge everyone to be aware of the assumptions made in their models.  I have a pension plan through Deloitte aside from our 401k, but it truly isnt that much.  I almost died laughing when I got a piece of mail stating the value amount when I hit retirement (like astronomical for this pension).  Then I looked at the assumptions, they sure have rosy colored glasses.

[Evan]

I know you got this, but I urge everyone to be aware of the assumptions made in their models.  I have a pension plan through Deloitte aside from our 401k, but it truly isnt that much.  I almost died laughing when I got a piece of mail stating the value amount when I hit retirement (like astronomical for this pension).  Then I looked at the assumptions, they sure have rosy colored glasses.

The retirement calculators also assume that your expenses will be the same as they are now. Which is silly.

No, Im not living in the DC area and putting 2 kids in daycare/private school / college when I retire.

Living on a boat in mexico is pretty damn cheap.

[V1GiLaNtE]

I know you got this, but I urge everyone to be aware of the assumptions made in their models.  I have a pension plan through Deloitte aside from our 401k, but it truly isnt that much.  I almost died laughing when I got a piece of mail stating the value amount when I hit retirement (like astronomical for this pension).  Then I looked at the assumptions, they sure have rosy colored glasses.

After I left and got my statement I figured it was enough money to have a nice "Fuck you Deloitte" lunch a month.

[Senor_Taylor]

Good news!

I went to check on my 401k contributions, gearing up to raise them since what I have in my budget was only like $200 a month.

Well, it turns out I was contributing 3 times that much, and for some reason I was chunking 11% into my pre tax 401k. My company matches 50% to 6%, so I dialed back my pre tax to 6% and bumped my Roth IRA up to 6% from 0%. If I bump my Roth up much more, I'll be maxing it out. I took that money I planned to add to my 401k and bumped up my student loan payment so I can hopefully have it paid off in ~6 years at this rate! Might ride it out and see if I can bump it up more. The rate on these loans are 3.5-4% so they don't seem bad. Is that something to look into refinancing? They don't help me on taxes since the interest accrued isn't enough for me to not just use a standard deduction.

Does that sound like a good idea?

Thoughts?

[Apoc]

The market's been pretty hot, so it's not hard to beat that interest rate by dumping into investment. I don't think there's much more room to refinance down, but I know very little about student loan debt these days. Not really knowing your financial situation, it sounds like you're doing it right. Keep an eye on your money though. If your rate of return nears your interest rate, adapt. Also, never go below the 6% match. That's free money.

[V1GiLaNtE]

Good news!

I went to check on my 401k contributions, gearing up to raise them since what I have in my budget was only like $200 a month.

Well, it turns out I was contributing 3 times that much, and for some reason I was chunking 11% into my pre tax 401k. My company matches 50% to 6%, so I dialed back my pre tax to 6% and bumped my Roth IRA up to 6% from 0%. If I bump my Roth up much more, I'll be maxing it out. I took that money I planned to add to my 401k and bumped up my student loan payment so I can hopefully have it paid off in ~6 years at this rate! Might ride it out and see if I can bump it up more. The rate on these loans are 3.5-4% so they don't seem bad. Is that something to look into refinancing? They don't help me on taxes since the interest accrued isn't enough for me to not just use a standard deduction.

Does that sound like a good idea?

Thoughts?

Nice job man! That's awesome! I wouldn't worry about refinancing since they interest rate is pretty favorable. They only thing you can do is continue to monitor your spending and see if there are areas for improvement. However, if you're able to do all this and still have money leftover to pay bills, grab a drink, rent, etc. then I would feel like I was in a good spot and you should enjoy it! Saving should be something that occurs that you completely forget about.

[Senor_Taylor]

Good news!

I went to check on my 401k contributions, gearing up to raise them since what I have in my budget was only like $200 a month.

Well, it turns out I was contributing 3 times that much, and for some reason I was chunking 11% into my pre tax 401k. My company matches 50% to 6%, so I dialed back my pre tax to 6% and bumped my Roth IRA up to 6% from 0%. If I bump my Roth up much more, I'll be maxing it out. I took that money I planned to add to my 401k and bumped up my student loan payment so I can hopefully have it paid off in ~6 years at this rate! Might ride it out and see if I can bump it up more. The rate on these loans are 3.5-4% so they don't seem bad. Is that something to look into refinancing? They don't help me on taxes since the interest accrued isn't enough for me to not just use a standard deduction.

Does that sound like a good idea?

Thoughts?

Nice job man! That's awesome! I wouldn't worry about refinancing since they interest rate is pretty favorable. They only thing you can do is continue to monitor your spending and see if there are areas for improvement. However, if you're able to do all this and still have money leftover to pay bills, grab a drink, rent, etc. then I would feel like I was in a good spot and you should enjoy it! Saving should be something that occurs that you completely forget about.

Thanks! I worked on getting Mint set up last night so hopefully I can better track my spending habits. Things are tricky now with have so many things related to moving but hopefully it'll settle down. My biggest hurdle is not buying anything project car during the winter when I have nothing else to do. Luckily my drum set has kept me very satisfied when I'm bored.

Sent from my Pixel using Tapatalk

[D_Eclipse9916]

I know you got this, but I urge everyone to be aware of the assumptions made in their models.  I have a pension plan through Deloitte aside from our 401k, but it truly isnt that much.  I almost died laughing when I got a piece of mail stating the value amount when I hit retirement (like astronomical for this pension).  Then I looked at the assumptions, they sure have rosy colored glasses.

The retirement calculators also assume that your expenses will be the same as they are now.  Which is silly.  

No,  Im not living in the DC area and putting 2 kids in daycare/private school / college  when I retire.

Living on a boat in mexico is pretty damn cheap.

Yeah except for the fact healthcare will be more than putting your kids through daycare.  It's insane what current healthcare costs are right now with insurance.  Who knows what the future entails.

---

I know you got this, but I urge everyone to be aware of the assumptions made in their models.  I have a pension plan through Deloitte aside from our 401k, but it truly isnt that much.  I almost died laughing when I got a piece of mail stating the value amount when I hit retirement (like astronomical for this pension).  Then I looked at the assumptions, they sure have rosy colored glasses.

After I left and got my statement I figured it was enough money to have a nice "Fuck you Deloitte" lunch a month.

Pretty much    I mean if you stay there 30+ years, the service credit starts to become insane; but how many people stay in one job or 30 years in consulting?

[V1GiLaNtE]

I know you got this, but I urge everyone to be aware of the assumptions made in their models.  I have a pension plan through Deloitte aside from our 401k, but it truly isnt that much.  I almost died laughing when I got a piece of mail stating the value amount when I hit retirement (like astronomical for this pension).  Then I looked at the assumptions, they sure have rosy colored glasses.

The retirement calculators also assume that your expenses will be the same as they are now.  Which is silly.  

No,  Im not living in the DC area and putting 2 kids in daycare/private school / college  when I retire.

Living on a boat in mexico is pretty damn cheap.

Yeah except for the fact healthcare will be more than putting your kids through daycare.  It's insane what current healthcare costs are right now with insurance.  Who knows what the future entails.

---

I know you got this, but I urge everyone to be aware of the assumptions made in their models.  I have a pension plan through Deloitte aside from our 401k, but it truly isnt that much.  I almost died laughing when I got a piece of mail stating the value amount when I hit retirement (like astronomical for this pension).  Then I looked at the assumptions, they sure have rosy colored glasses.

After I left and got my statement I figured it was enough money to have a nice "Fuck you Deloitte" lunch a month.

Pretty much    I mean if you stay there 30+ years, the service credit starts to become insane; but how many people stay in one job or 30 years in consulting?

Tax accountants and lawyers. Otherwise, nobody.

[G.Irish]

Yeah except for the fact healthcare will be more than putting your kids through daycare.  It's insane what current healthcare costs are right now with insurance.  Who knows what the future entails.

Not even close right now.  Childcare/education is about 4 times as much as healthcare for the whole fam.  Once we get to elementary school age then the costs will be much, much smaller.

Healthcare in a lot of other countries is far cheaper than here for actual decent healthcare.  Plenty of countries with Western trained doctors and much lower costs to where you could pay out of pocket for a lot of procedures and still be way ahead.  Hard to know what healthcare law will be like in the US by retirement age but there are a number of choices with more reasonable costs and much lower costs of living.  Costa Rica for example, is a really good option that ranks higher than the US in some healthcare measures.  People better start practicing their Spanish...