OT, chinese ETF, high risk, too high?

[jimcav]

That is the basic question I have. My situation is that my mom unexpectedly passed last year and the net effect to us was an 80k hit. So I am selling my "future" retirement home in the midwest to get that down payment back and get back on track. I actually should be in better place to invest more than my goal of 10% a year. My initial foray into the stock market was in 1998 and involved a recently separated active duty acquaintance turned morgan stanley advisor who put me in Enron, AOL-Time Warner--you get the idea--buy high, sell low. I have a Roth but really started it too late, which has tracking funds like a USAA bond fund, QQQ, DOW spyder, etc. I guess my question is to just keep doing that type of thing, or given recent sell off over trade war concerns to try a chinese ETF, or ? I have seen some excellent investment/financial/retirement threads here so thought I'd ask those smarter than I about this subject? The goal here is to hopefully retire earlier than the 9-10 years I have as current goal; if the high reward pans out, and if not, keep on keeping on the old 9-10 year plan. I already have 529s for my boys that auto adjust in risk as they near college, and they are on track to cover it.
I thought about paying ahead on our home, but it is not the home I want to retire in, and the loan is 3%, so I thought it may be better to go after higher returns...
thank you Paceline!

[MattTuck]

oh boy. Where to start.

I guess the best advice I could give, if you want to play Asia is to invest in a diversified portfolio of Asian markets. Japan, China, Vietnam, etc.

That said, this graph might be of interest to you. I think we're currently around a P/E of 23.

https://www.zerohedge.com/sites/default/files/inline-images/SP500-Valuations-30yr-Returns-061518.png?itok=SGB-mhL6

[saab2000]

For long-term (years) parking of money I’d probably put it in a low fee S&P index fund at a known low fee brokerage firm

[Ken Robb]

Is your "future ret. home" rented for enough to cover expenses on it? In some areas appreciation of real estate over the long haul MIGHT be better than alternative investments.

[jimcav]

oh boy. Where to start.

I guess the best advice I could give, if you want to play Asia is to invest in a diversified portfolio of Asian markets. Japan, China, Vietnam, etc.

That said, this graph might be of interest to you. I think we're currently around a P/E of 23.

https://www.zerohedge.com/sites/default/files/inline-images/SP500-Valuations-30yr-Returns-061518.png?itok=SGB-mhL6
I was thinking with news of opening stocks to the average mainland chinese individual later this year, the bubble will continue up? know there is risk, that i sort of the point for higher reward, maybe an emerging market fund like MSCI or Vanguard emerging market fund--I'm just googling on that stuff though.

[joosttx]

I have been able to make consistent returns above S&P over the last 10 years investing in domestic securities. About 65% of our money I manage without aid of brokers or funds. I think with D&D and investing in what you know you probably could minimize risk and get good returns without going to China. I spend about 5-6 hours a week doing this.

[jimcav]

Is your "future ret. home" rented for enough to cover expenses on it? In some areas appreciation of real estate over the long haul MIGHT be better than alternative investments.

the main issue apart from the unexpected debt frm my mom's passing was it was 1890 farmhouse on acreage with barn workshop etc. it all needed work, which i love to do, but then i developed a C6 radiculaopthy and now can't do it--didn't buy it to pay a contractor (and can't), so need to sell.

[jimcav]

For long-term (years) parking of money I’d probably put it in a low fee S&P index fund at a known low fee brokerage firm

curious your take on advantage of SPY vs DIA--more diverse I guess (500 vs 50?)
thx!

[saab2000]

:)curious your take on advantage of SPY vs DIA--more diverse I guess (500 vs 50?)
thx!

No idea. My advice is just repeating Warren Buffet and John Bogle.

[fmradio516]

Is it worth investing in the S&P 500 today with all that is going on? If it drops, it will eventually come back, but it seems like this would be the thing to invest in if/when there is a crash.

[MattTuck]

curious your take on advantage of SPY vs DIA--more diverse I guess (500 vs 50?)
thx!

Jim,

Vanguard has the total stock market index (VTI) which includes small as well as large cap stocks. In fact, most of these indices are market cap weighted, which means you have much more exposure to the larger firms anyway.

DIA is a fairly concentrated group of mega cap firms. Yes, different industries, but very large cap. You miss all exposure to the small and medium cap stocks.

If you investment thesis is that chinese stocks will go up because of broader access to the markets, then I see now reason why you shouldn't put some money into it. As long as that is a small part of a broader, globally diversified portfolio, it shouldn't make much difference.

It sounded to me like you were trying to 'make up for lost time' with a high risk investment, and putting a big chunk of your wealth into a single investment. That is generally a bad idea. Sometimes capital preservation is more important than capital appreciation... and leading into your retirement is one of those times.

[echappist]

That is the basic question I have. My situation is that my mom unexpectedly passed last year and the net effect to us was an 80k hit. So I am selling my "future" retirement home in the midwest to get that down payment back and get back on track. I actually should be in better place to invest more than my goal of 10% a year. My initial foray into the stock market was in 1998 and involved a recently separated active duty acquaintance turned morgan stanley advisor who put me in Enron, AOL-Time Warner--you get the idea--buy high, sell low. I have a Roth but really started it too late, which has tracking funds like a USAA bond fund, QQQ, DOW spyder, etc. I guess my question is to just keep doing that type of thing, or given recent sell off over trade war concerns to try a chinese ETF, or ? I have seen some excellent investment/financial/retirement threads here so thought I'd ask those smarter than I about this subject? The goal here is to hopefully retire earlier than the 9-10 years I have as current goal; if the high reward pans out, and if not, keep on keeping on the old 9-10 year plan. I already have 529s for my boys that auto adjust in risk as they near college, and they are on track to cover it.
I thought about paying ahead on our home, but it is not the home I want to retire in, and the loan is 3%, so I thought it may be better to go after higher returns...
thank you Paceline!

hell, you can beat that by getting a 3-yr CD.

Jest aside, caveat emptor when it comes to the Chinese economy. You don't know which ones are propped up by the government, which ones have tacit approval of the government, and which ones might receive a death sentence if its owners fall out of favor with the party. Manipulation is also rife. It's the antithesis of an efficient market.

btw, if you haven't already, head over to bogleheads.org

[echappist]

I have been able to make consistent returns above S&P over the last 10 years investing in domestic securities. About 65% of our money I manage without aid of brokers or funds. I think with D&D and investing in what you know you probably could minimize risk and get good returns without going to China. I spend about 5-6 hours a week doing this.

undoubtedly, you won't be sharing what your secret sauce is, but do you purchase individual stocks or just mutual funds/ ETFs? Also, is the criteria you apply value investing or is it something else?

[jimcav]

Jim,

Vanguard has the total stock market index (VTI) which includes small as well as large cap stocks. In fact, most of these indices are market cap weighted, which means you have much more exposure to the larger firms anyway.

DIA is a fairly concentrated group of mega cap firms. Yes, different industries, but very large cap. You miss all exposure to the small and medium cap stocks.

If you investment thesis is that chinese stocks will go up because of broader access to the markets, then I see now reason why you shouldn't put some money into it. As long as that is a small part of a broader, globally diversified portfolio, it shouldn't make much difference.

It sounded to me like you were trying to 'make up for lost time' with a high risk investment, and putting a big chunk of your wealth into a single investment. That is generally a bad idea. Sometimes capital preservation is more important than capital appreciation... and leading into your retirement is one of those times.

I guess I view it as I will get my down payment back, and it provides an opportunity. The property is such I can't afford to keep it--would require more money than i have now that my time (diff job) and physical ability have changed since the purchase. It isn't enough money in and of itself to change our course, unless it generates a high return. I read an article about new CDR (like ADR but diff) will generate new wave of investment so thought with recent beat down it might be a wise gamble (oxymoron i know)

[jimcav]

hell, you can beat that by getting a 3-yr CD.

Jest aside, caveat emptor when it comes to the Chinese economy. You don't know which ones are propped up by the government, which ones have tacit approval of the government, and which ones might receive a death sentence if its owners fall out of favor with the party. Manipulation is also rife. It's the antithesis of an efficient market.

btw, if you haven't already, head over to bogleheads.org

I checked with our bank, usaa, barclays, and a general google search and even locking in 10k plus it was 3

[echappist]

I checked with our bank, usaa, barclays, and a general goggle search and even locking in 10k plus it was 3

You need to buy it via a brokerage account. I buy it in my Roth IRA account. Vanguard requires minimum purchase of $10000 (for new issues), Schwab and Fidelity require $1000.

[joosttx]

undoubtedly, you won't be sharing what your secret sauce is, but do you purchase individual stocks or just mutual funds/ ETFs? Also, is the criteria you apply value investing or is it something else?

I buy stocks, preferred stock and some bonds. I don’t own mutual funds. The secret sauce is don’t over think it and don’t be nervous . Find a sector you know about or can understand. Seek quality analysis compare to your assumptions. Find the strongest companies in ththe sector buy the ones with the lowest value. I like dividend stocks . Several years ago I liked MLPs like kinder Morgan now up until recently I like REITs. There is still value in those but it’s harder to find. My biggest winner thus far and I am stilling holding is TLP my biggest losser was Dutch royal shell before the spill.

[jimcav]

You need to buy it via a brokerage account. I buy it in my Roth IRA account. Vanguard requires minimum purchase of $10000 (for new issues), Schwab and Fidelity require $1000.

will check there

[Ken Robb]

Jim,



It sounded to me like you were trying to 'make up for lost time' with a high risk investment, and putting a big chunk of your wealth into a single investment. That is generally a bad idea. Sometimes capital preservation is more important than capital appreciation... and leading into your retirement is one of those times.

I thought the same thing but Matt is better qualified than I to comment. In my years as a real estate broker I saw a few people get very aggressive too close to retirement when they realized they didn't have enough saved/invested to live their dream. When their "can't miss" investments went south instead of having to cut back a little in retirement they had to cut back a lot and get part time jobs to make ends meet. Just for fun look up J. David Dominelli to see where many San Diego folks lost their shirts. It was a classic Ponzi scheme and his office was right across the street from mine.

[NYCfixie]

USAA mutual fees are only second lowest to Vangaurd. Also, how involved do you want to be with managing and researching your investments? Don’t invest in individual stocks unless you have the time to keep current on the analysis.

Our investment advisor is a family realative who was in private wealth management until she retired in her early 50s. Wharton MBA.

Her advice to me and my wife:
Purchase 10 low cost vanguard mutual funds and add at least 10% of your income each year after you have maxed out all 401k and IRA options. Do nothing else but rebalance every other year if needed.

We have done very well with this strategy.

[Ken Robb]

I just chatted with my Schwab broker last week and was surprised to learn that he could get better rates from local banks than I can get myself on CDs and the banks pay Schwab commissions to boot. It sure is a more convenient way for me than setting up new accounts at different banks on my own. We will be sure not to exceed the amount insured by FDIC in any one bank.

[jimcav]

USAA mutual fees are only second lowest to Vangaurd. Also, how involved do you want to be with managing and researching your investments? Don’t invest in individual stocks unless you have the time to keep current on the analysis.

Our investment advisor is a family realative who was in private wealth management until she retired in her early 50s. Wharton MBA.

Her advice to me and my wife:
Purchase 10 low cost vanguard mutual funds and add at least 10% of your income each year after you have maxed out all 401k and IRA options. Do nothing else but rebalance every other year if needed.

We have done very well with this strategy.

that was why i did tracking ETF stuff, and i guess a mutual fund is a more diversified but managed variation of that. To be clear I am on track to retire and this is "extra" won't affect that, only if it is hugely positive it frees me up to retire earlier or do something dumb like by a 911

[jimcav]

I just chatted with my Schwab broker last week and was surprised to learn that he could get better rates from local banks than I can get myself on CDs and the banks pay Schwab commissions to boot. It sure is a more convenient way for me than setting up new accounts at different banks on my own. We will be sure not to exceed the amount insured by FDIC in any one bank.

i believe it is with Merril Lynch so will ask her to check on CDs. I use etrade and didn't see any CD options there, think I'd have to open an etrade bank account

[Ozz]

...Her advice to me and my wife:
Purchase 10 low cost vanguard mutual funds and add at least 10% of your income each year after you have maxed out all 401k and IRA options. Do nothing else but rebalance every other year if needed.

We have done very well with this strategy.
^^

This....it does not have to be complicated or risky.

I would add: start in your 20's.;)

[biker72]

Purchase 10 low cost vanguard mutual funds and add at least 10% of your income each year after you have maxed out all 401k and IRA options. Do nothing else but rebalance every other year if needed.

We have done very well with this strategy.

I've too have done really well with this approach. Many years ago I invested in some high return CD's from Mexico. First few months were great but ultimately didn't turn out well.

[fignon's barber]

i believe it is with Merril Lynch so will ask her to check on CDs. I use etrade and didn't see any CD options there, think I'd have to open an etrade bank account



I would invest $8 in this book. It's really a quick read and will provide you with a nice framework. As for the Chinese etf exploration, I would highly avoid. My wife is a broker who was born in China. We talk about this all the time: one problem with investing in Chinese stocks is that you never know the real numbers, as they are manipulated by the government. Secondly, the Chinese market cannot withstand a prolonged trade war with the US (much worse than US). As for mutual funds, generally a poor choice. Over the last 2 decades, mutual funds have underperformed the market about 80% of the time, and then you pay them a fee for this underperformance.

[MattTuck]

that was why i did tracking ETF stuff, and i guess a mutual fund is a more diversified but managed variation of that. To be clear I am on track to retire and this is "extra" won't affect that, only if it is hugely positive it frees me up to retire earlier or do something dumb like by a 911

If you want a high risk, high return investment, consider some put options on Tesla :)

[joosttx]

If you want a high risk, high return investment, consider some put options on Tesla :)

My cousin is an analyst of Tesla for CNBC (really cool to see
Her on TV) and others. She would disagree.

[joosttx]

USAA mutual fees are only second lowest to Vangaurd. Also, how involved do you want to be with managing and researching your investments? Don’t invest in individual stocks unless you have the time to keep current on the analysis.

Our investment advisor is a family realative who was in private wealth management until she retired in her early 50s. Wharton MBA.

Her advice to me and my wife:
Purchase 10 low cost vanguard mutual funds and add at least 10% of your income each year after you have maxed out all 401k and IRA options. Do nothing else but rebalance every other year if needed.

We have done very well with this strategy.
Not having kids helps too

[saab2000]

As for mutual funds, generally a poor choice. Over the last 2 decades, mutual funds have underperformed the market about 80% of the time, and then you pay them a fee for this underperformance.

Can you elaborate? Warren Buffet has had bets with fund managers that he will beat them over a ten-year period with an S&P mutual fund vs a managed fund. He wins these bets.

S&P funds are also mutual funds and the good ones are available with fees as low as 0.03%. This price is available for the SWPPX fund from Charles Schwab and doesn't require a massive initial investment.

Are you referring to actively managed funds vs passive index funds? Over time the passive index funds normally win the race.

[echappist]

Can you elaborate? Warren Buffet has had bets with fund managers that he will beat them over a ten-year period with an S&P mutual fund vs a managed fund. He wins these bets.

S&P funds are also mutual funds and the good ones are available with fees as low as 0.03%. This price is available for the SWPPX fund from Charles Schwab and doesn't require a massive initial investment.

Are you referring to actively managed funds vs passive index funds? Over time the passive index funds normally win the race.

I think he’s referring to the actively managed funds (e.g. Peter Lynch’s fund)

Also, that Buffett bet wasnt exactly a fair bet, as the hedge fund alternative was a fund of funds, which means even more fee than 2 and 20. That said, it was good that someone took hedge funds to task for their high fees. Persnally, it’s all passive investing for me, save for a few shares of BrkB.

I think John Oliver puts it best when talking about retirement investing: it’s like going to Willy Wonka’s factory, and if you dont’t do anything stupid or highly risky you end up doing well by the virtue of being the least stupid guy/gal in the room

[joosttx]

I think he’s referring to the actively managed funds (e.g. Peter Lynch’s fund)


I think John Oliver puts it best when talking about retirement investing: it’s like going to Willy Wonka’s factory, and if you dont’t do anything stupid or highly risky you end up doing well by the virtue of being the least stupid guy/gal in the room

This is truth......

[fignon's barber]

I think he’s referring to the actively managed funds (e.g. Peter Lynch’s fund)



That's right. I was referring to actively managed funds, not index funds or ETF's.

[saab2000]

That's right. I was referring to actively managed funds, not index funds or ETF's.

Cool. I figured as much.