ROTH IRA Question-Calling LetsRun Investing Gurus

BostonRunCoach wrote:

I started a Betterment Roth IRA 2+ years ago... I had no prior financial experience.

Basically for a .25% fee, they spread out your investments. You chose the risk level.

I chose 100% stocks but if you want to be more conservative you can put some percentage into bonds. Of the $5500, I usually I do $3000 on first of the year and then spread out the rest of the $2500 bi-weekly. This allows more time in the market but spreads some risk. Is this the best way to do it? I have no idea. But seems to be working well so far!

I have invested $15,300 and have gotten a $3,200 return... (21% simple earnings, 24% time-weighted return)

BostonRunCoach,

What was your Betterment IRA performance January-February 2016? What was your annualized return through 10/30/2016?

I think this would be very interesting information.

Igy

Ghost of Igloi wrote:

The poster Ms. CFA decries the lost purchasing power of allocating the contribution to money market, but evidently has no problem in an investor suffering losses that could represent decades of purchasing power.

Exactly. The stock market always - ALWAYS - not only comes back, but sets new record highs. History supports this. A money market will stay relatively flat while inflation roars past.

With the money market fund, the purchasing power is lost forever. With stocks, it is gone temporarily but will return to it's previous position before roaring higher.

I have no idea how someone who claims to have 20 years in the business can not understand this most simple of investment concepts. I'm calling troll.

Indeed I do. $337,000 of my portfolio is directly attributable to my and my employer's contributions. And I do recognize that the next 19 years may not be as generous as the past years have been, which is why I am going with a growth rate that approximates the rate of return that I have enjoyed over the 16-17 years that I have been contributing. The reality is that timing the market is not for novices and many of the professionals cannot get it right and the costs associated with hiring a professional to do it simply outweigh the potential benefit as I see it since I cannot be sure that they would do any better than the market itself.

Sorry Ms. CFA, it is the truth. I actually work with individual investors. I understand your simple assumption, and that is what it is simple. I would never throw someone's Roth IRA blindly into anything, let alone a stock market trading at one of the highest valuations in history. That is the difference between you and me, you work (or think) in the theoretical. I work with people.

Do you know her?

Ghost of Igloi wrote:

What are you doing with your CFA?

Igy

None of your business... but judging by your investment advice thus far, probably more for my money than you & your CFP are for yours.

That said, I'll give you props for trying to duck my previous points and completely switching the subject.

Lurker wrote:

Indeed I do. $337,000 of my portfolio is directly attributable to my and my employer's contributions. And I do recognize that the next 19 years may not be as generous as the past years have been, which is why I am going with a growth rate that approximates the rate of return that I have enjoyed over the 16-17 years that I have been contributing. The reality is that timing the market is not for novices and many of the professionals cannot get it right and the costs associated with hiring a professional to do it simply outweigh the potential benefit as I see it since I cannot be sure that they would do any better than the market itself.

Lurker,

Makes sense and good luck.

A healthy allocation to high quality short duration bonds can reduce the volatility of an all equity portfolio, and at these valuations likely increase the compounding.

Igy

Idbouga wrote:

Actually, I used my data-supported beliefs that nobody can consistently beat the market by playing the timing games you advocate based on Shiller P/E or any other measure.

Feel free to post a thread on the day when you think we all should jump back into stocks. We'll see how right you turned out to be.

While I absolutely agree timing the market is a failed strategy, Igloi's got a valid point. Valuations are sky-high. At the 8th(???) year of an economic expansion. Other factors suggest a correction is closer rather than further away.

If you move money out of volatile equities today, are you timing the market if a correction begins in August, 2018? What if a correction begins in September, 2017?

If OP is young and has 25 more years before retirement, watching for the next contraction isn't a high priority. If OP had 5 years before retirement, their funds shouldn't be heavily weighted for stocks anyway.

And I would note that my investment history covers two of the bigger recessions in US history, so I am not sure it is fair to suggest that I am being overly optimistic based on sterling past performances.

ldhouga,First off see my response to Ms CFA. I didn't necessarily disagree with your points, but will address them, since you asked in a rather curt way."So what to do? Well, if I'm a young 20-something with a long investment horizon, am I really better off going full tilt into the money market? Until when... I see the billboard one day telling me it's safe now to jump back into stocks? Or when the rear-looking Shiller PE ratio suggests things are undervalued now? Compared to when... and why then?"Well, seeing that the current S& 500 PE is 24 and EPS is where it was 6/30/2014 when the index was at 1,972 and the PE was 19. So, I would wait until the index was under 2,000 to allocate any funds. By the way the S&P 500 traded at 2,088 days before the election and up to that point was flat for two years. The rally since then was based on the Trump Trade (tax cuts and infrastructure spending), so I would assume we will be there sooner than later.Since you say you are a CFA, you should know these things.Igy

Idbouga wrote:

Ghost of Igloi wrote:

What are you doing with your CFA?

Igy

None of your business... but judging by your investment advice thus far, probably more for my money than you & your CFP are for yours.

That said, I'll give you props for trying to duck my previous points and completely switching the subject.

I started my IRA in the spring of 1987. The Dow went from 2700 to 1700 in 3 months later that year.

30 years later, it's at 21,000. Guessing where the market will be next month is a fool's errand. Sometime around 30 years from now, it will almost certainly be at 200,000. It makes little difference to your retirement if you buy a few shares of an index fund when the DOW is at 21,000 or 18,000. Buy regularly and consistently-and don't try to outsmart the market. You aren't that smart.

OP, it should be noted that "Ghost of Igloi" is a financial advisor for Morgan Stanley. To get around the new fiduciary rule, MS requires their clients to sign a waiver of the rule. In other words, MS advisors like Ghost will only work with clients who agree that the advisor does not have to make recommendations that are in the clients best interest. Keep that in mind while reading his "advice".

Lurker wrote:

And I would note that my investment history covers two of the bigger recessions in US history, so I am not sure it is fair to suggest that I am being overly optimistic based on sterling past performances.

Lurker,

I would argue we are in for more of the same. Nothing in my view of the economy would lead to any other conclusion. Case in point central bank policy is supporting all asset bubbles. If you question this, remember there are $Trillions of bonds trading at negative yields, that has not happened in 5,000 years of financial history.

Igy

Reality checker wrote:

OP, it should be noted that "Ghost of Igloi" is a financial advisor for Morgan Stanley. To get around the new fiduciary rule, MS requires their clients to sign a waiver of the rule. In other words, MS advisors like Ghost will only work with clients who agree that the advisor does not have to make recommendations that are in the clients best interest. Keep that in mind while reading his "advice".

That is BS. I opened up an account and purchased CDs for a 79 year old lady today. Disagree with my opinions, but don't spread lies.

Ghost of Igloi wrote:

Well, seeing that the current S& 500 PE is 24 and EPS is where it was 6/30/2014 when the index was at 1,972 and the PE was 19. So, I would wait until the index was under 2,000 to allocate any funds. By the way the S&P 500 traded at 2,088 days before the election and up to that point was flat for two years. The rally since then was based on the Trump Trade (tax cuts and infrastructure spending), so I would assume we will be there sooner than later.

Since you say you are a CFA, you should know these things.

Translation? "I make my buy and sell decisions based on a single metric."

Good luck with that, Igy. It's a bit of a bummer that the tide of empirical evidence continues to work against you by reinforcing the notion that there is no single consistent predictor of future performance, but you keep telling yourself that the Shiller P/E tells you - and your poor clients - all you need to know.

I am a CFA, yes. It's precisely because of that education that I wouldn't invest my money with you in a million years.

Ghost of Igloi wrote:

Reality checker wrote:

OP, it should be noted that "Ghost of Igloi" is a financial advisor for Morgan Stanley. To get around the new fiduciary rule, MS requires their clients to sign a waiver of the rule. In other words, MS advisors like Ghost will only work with clients who agree that the advisor does not have to make recommendations that are in the clients best interest. Keep that in mind while reading his "advice".

That is BS. I opened up an account and purchased CDs for a 79 year old lady today. Disagree with my opinions, but don't spread lies.

this

continuous saving into the stock market when you are in your 20s gives you the best chance to get very rich.

BostonRunCoach wrote:

I started a Betterment Roth IRA 2+ years ago... I had no prior financial experience.

Basically for a .25% fee, they spread out your investments. You chose the risk level.

I chose 100% stocks but if you want to be more conservative you can put some percentage into bonds. Of the $5500, I usually I do $3000 on first of the year and then spread out the rest of the $2500 bi-weekly. This allows more time in the market but spreads some risk. Is this the best way to do it? I have no idea. But seems to be working well so far!

I have invested $15,300 and have gotten a $3,200 return... (21% simple earnings, 24% time-weighted return)

You're getting robbed on those fees, try this instead

Ghost of Igloi wrote:

Reality checker wrote:

OP, it should be noted that "Ghost of Igloi" is a financial advisor for Morgan Stanley. To get around the new fiduciary rule, MS requires their clients to sign a waiver of the rule. In other words, MS advisors like Ghost will only work with clients who agree that the advisor does not have to make recommendations that are in the clients best interest. Keep that in mind while reading his "advice".

That is BS. I opened up an account and purchased CDs for a 79 year old lady today. Disagree with my opinions, but don't spread lies.

Wow. Your reply does absolutely nothing to counteract the other post.