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PaperclipPerfector  1yr ago (text post)   2476 thread views

Wellness Wednesday for July 19, 2023

The Wednesday Wellness threads are meant to encourage users to ask for and provide advice and motivation to improve their lives. It isn't intended as a 'containment thread' and any content which could go here could instead be posted in its own thread. You could post:

  • Requests for advice and / or encouragement. On basically any topic and for any scale of problem.

  • Updates to let us know how you are doing. This provides valuable feedback on past advice / encouragement and will hopefully make people feel a little more motivated to follow through. If you want to be reminded to post your update, see the post titled 'update reminders', below.

  • Advice. This can be in response to a request for advice or just something that you think could be generally useful for many people here.

  • Encouragement. Probably best directed at specific users, but if you feel like just encouraging people in general I don't think anyone is going to object. I don't think I really need to say this, but just to be clear; encouragement should have a generally positive tone and not shame people (if people feel that shame might be an effective tool for motivating people, please discuss this so we can form a group consensus on how to use it rather than just trying it).

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low risk:

  • I bonds from treasury direct. pays a fixed rate + inflation rate calculated twice a year, compounds semiannually. if you cash it before 5 years, you give up 3 months of interest. $10k limit per person per year. rates were ~10% last year, now it's 4.3%. inflation pegged means it's better than cash.
  • CDs. these are paying 3-5% right now depending on the term, and lock-in vs no penalty withdrawals. shop around for the best rates, it's usually marcus (goldman) or synchrony.
  • target date funds. these are commonly available in 401k plans. they have a 'target date' for when you expect to retire (2045, 2060, etc) and automatically adjust the allocations of stocks and bonds. usually highly diversified

moderate risk:

  • VOO, or QQQ. these are index funds tracking the S&P 500 (SPX) and and Nasdaq 100 (NDX) respectively. NDX is more heavily weighted towards big tech (so much so that they are doing a special rebalancing for the first time soon). Over the long term (decades) just investing in these ETFs will beat almost every active investing strategy. but over the short term (like last year) you could be down 30%. so maybe not a place to park your downpayment for a house.
  • for more diversification, VTI (total US market) or VXUS (total international market). more diversification means potentially less downside - also potentially less upside.
  • sector specific etfs like XSD (semiconductors), XLE (energy), REITS like O. beware of high expense ratios

someone below mentioned leverage. if VOO/QQQ and chill just works why not just apply a ton of leverage and eat that carry? well, because of leverage decay. there are levered ETFs like TQQQ (3x levered QQQ), and the catch is that it's 3x daily. so say you put $100 hundred into TQQQ day 1. on day 2 QQQ is up 10%, so you're up 30%, hooray you have $130! Then day 3 QQQ is down 10%, and you are down 30% of $130. You have $91. And you're paying a higher expense ratio. levered etfs haven't been around that long so there isn't a consensus on how much sense they make to hold long term - there's been some respectable attempts to be empirical about it.

other points:

  • always max out your 401k if you have one. if you get an employer match, it's literally free money.
  • roth ira too, if you're below the income limit
  • megabackdoor roth. this is a little complicated, and only works for some employers' plans, but basically you may be able to contribute post-tax dollars to your 401k and roll it into a roth
  • evidence suggests lump sum investigating beats dollar cost averaging, but it's marginal

Sorry, I really should have mentioned that I'm from Norway and that I have no previous exposure to finance terms. Much of your post is Greek to me. :)

ah, i shouldn't have assumed. non-US residents can invest in US securities but of course there will be tax implications both in the US and your country. probably too complicated unless you have a high net worth.

the general principles apply - most countries have some sort of tax-deferred retirement savings vehicle. also index funds instead of single stocks. savings accounts / CDs tell you the rate of return up front and are the lowest risk.

to some extent your government does this for you. norway has an absolutely massive sovereign wealth fund managing something like $250k per citizen

That Boglehead thread is a nice throwback. I remember reading it for hours and still not getting a conclusive answer.

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