Daily General Discussion and spitballin thread - November 30, 2021 Investing |
- Daily General Discussion and spitballin thread - November 30, 2021
- Daily Advice Thread - All basic help or advice questions must be posted here. November 30, 2021
- For Those Who Want to Invest in Oil Companies: You Need to Know their Hedging Strategies
- The "Doubling-up" to get around the wash sale rules...
- The Fallacy of taking bigger risks when you are young
- Is AltoIRA a scam? They aren't responding to my inquiries to close my account.
- has anyone used titan invest?
- Thoughts on Nintendo / $NTDOY long term?
- Why does seemingly nobody talk here about investing in P2P loans?
- Buybacks vs issuing dividend -- the breakdown.
- The Final Oil Short of 2021- Update 2
- Orders for Durable Goods Slid 0.5% in October
- Anyone just trying to match SPY with minimum drawdowns?
- Structure of a VC Fund: Who owns what?
- Anyone here have any firsthand knowledge/experience with REITs focused on single-family homes?
- Index fund within S&S ISA - Tax Implications
- Why wouldn't you use Margin with the five factor index model?
- Gold vs Bitcoin/Ethereum for Inflation: Settling Misconceptions
- Instead of investing in 401k inves into VT world stock
| Daily General Discussion and spitballin thread - November 30, 2021 Posted: 30 Nov 2021 02:02 AM PST Have a general question? Want to offer some commentary on markets? Maybe you would just like to throw out a neat fact that doesn't warrant a self post? Feel free to post here! This thread is for:
Keep in mind that this subreddit, and this thread, is not an appropriate venue for questions that should be directed towards your broker's customer support or google. If you would like to ask a question about your personal situation or if you are asking for advice please keep these posts in the daily advice thread as that thread is more well suited for those questions. Any posts that should be comments in this thread will likely be removed. [link] [comments] |
| Daily Advice Thread - All basic help or advice questions must be posted here. November 30, 2021 Posted: 30 Nov 2021 02:01 AM PST If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions, you should include relevant information, such as the following:
Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq And our side bar also has useful resources. Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions! [link] [comments] |
| For Those Who Want to Invest in Oil Companies: You Need to Know their Hedging Strategies Posted: 30 Nov 2021 08:07 AM PST For those who want to invest in oil stocks, a piece of the puzzle that you cannot ignore is the fact that US producers have differing strategies for hedging oil price movement, potentially limiting both their upside/downside. Despite a record FY2021 of operational cash flow, many of the US oil stocks are sitting on big a pile of unrealized losses due to their hedging. Don't be fooled by management's obfuscation. This is real loss that need to be dealt with at some point. This hedging could partly explain why, even though when WTI rallied to $80/bbl, oil stocks still languish at 30-60% below their pre-COVID levels (and also because the companies ate away a lot of shareholder's equity to survive COVID). Even if you're bullish on oil price and want to invest in the oil stocks, you need to look at the way the companies you invested in have their hedging strategies. One of the thing I predicted is that the upstreamers will start diverging in performance come 2022 because of their hedging strategies starting to diverge significantly. Many of them have stated during earning calls that they will no longer hedged at the same level as they did in 2021, thus making their income stream more affected by a rise or fall in oil price. If you look at the chart in the WSJ link below: Most of the oil companies on the chart hedged about 50-75% of their total production in 2021, thus severely limiting their upside when oil price rose. Come 2022, some companies have stated that they will no longer hedge most of their production going forward. This could be a blessing or a curse depending on what oil price will be in 2022. One thing is for certain: you can't rest on your laurels just buying any US producers without thinking about their hedging strategies. [link] [comments] |
| The "Doubling-up" to get around the wash sale rules... Posted: 30 Nov 2021 10:24 AM PST I have a question about the common "doubling-up" strategy to get around the wash sale rule, on stocks that you have unrealized loss but plan to keep it longer term. Today (Nov 30) is the last day for implementing this strategy for this year. The strategy involves buying the same number of shares (or if cash is tight you can buy calls) of the stock you already own but it's down for the year. You then sell the original shares on Dec 31. I have a question, however, this strategy will work if the market continues to go up between now and then, but if market tanks between now and Dec 31 wouldn't this strategy just double up your losses? Why not just sell your losers at the end of the year and then buy back 31 days later? I must be missing something since this "doubling-up" strategy seems to be very popular... [link] [comments] |
| The Fallacy of taking bigger risks when you are young Posted: 29 Nov 2021 11:10 AM PST I hear this all the time. Take bigger risks when you are young. When you are in your 20's its fine to go heavy in high risk/high reward stocks. But this is flawed reasoning. The truth is taking big risks when you are young is more risky because of opportunity costs. People always mention compounding interest over decades. But fail to apply this to investing in risky stocks when you are young. Lets say you are 20 years old and you have $10k to invest. Its common to hear people say you can be more risky since you are so young. And even if you do YOLO and lose it all you can easily recover. But think opportunity cost. What did you really lose doing a YOLO? $10,000 Invest in an index fund that returns 8.5% annualized return Withdraw at 65 years old That $10k becomes $400k. So you basically lost $400k because you YOLOed on a risky stock. If you hold till 70 you lost $600k. At age 90 you can give your children and grandchildren $3.2 million. Or you could have fun and lose it all on a risky stock. Bottom line is a young persons greatest asset is TIME. Throwing investment time away by taking unnecessary risk is a massive mistake. I'm not saying don't buy stocks that are risky hyper growth companies. But also don't gamble needlessly. Because you are gambling much more than that couple hundred or thousand you see next to the stock ticker. [link] [comments] |
| Is AltoIRA a scam? They aren't responding to my inquiries to close my account. Posted: 30 Nov 2021 11:33 AM PST I used to have a Lending Club IRA account with Strata Trust Company. Earlier in the year, Lending Club forced everyone with an account to change over to AltoIRA. I've closed out all of my positions in my Lending Club account, and now I just have a ton of cash sitting in AltoIRA. I have tried to contact AltoIRA repeatedly, but no one has answered my online inquiry, and all of the different options on their phone line simply go to voicemail. I have $35k+ in cash sitting in AltoIRA, and I'm stuck. Are they a total scam? What else can I do to retrieve my funds from them? [link] [comments] |
| Posted: 30 Nov 2021 08:01 AM PST Seems like they try to market themselves as a hedge fund for lower net worth individuals. I was debating trying them as a new bucket in addition to my brokerage, IRA, 401k and HSAs. I was wondering how your guys' experience was with them if you have ever used them. I have been trying to read up on them. I like to put my money in a variety of places. Ive also considered fundrise, touzi and other real estate platforms as well, but seem to be drawn to titan the most. [link] [comments] |
| Thoughts on Nintendo / $NTDOY long term? Posted: 30 Nov 2021 12:46 PM PST I'm just about the biggest Nintendo fanboy around, so take this with a grain of salt: but it seems insane to me that we're at a 52w low. Yes, I know there's no sign of Switch Pro yet, but IMHO next year's lineup looks amazing, Switch Pro or Switch 2 will be announced soon, hopefully the movie is a box office hit and opens things up to new folks. The Pikmin mobile app is pretty great too! Plus that fat dividend. Anyway, I'm long regardless and will keep collecting the dividend/supporting mostly because I'm a fan. But curious for everyone's thoughts. [link] [comments] |
| Why does seemingly nobody talk here about investing in P2P loans? Posted: 30 Nov 2021 11:41 AM PST It seems like very interesting financial instrument. It's similar to bonds, but with higher interest rate, but not necessarily more risk. It seems to be bellow stocks in pure profitability, but is much less volatile. During minor economic downturns (like current C19 crisis, adequate performance was also achieved in 2008 crisis) it is the best performing asset class. Seems like a complete no brainer to have it in your overall investing portfolio, along with ETFs and bonds, but hardly anybody does that. I get that in US it has shit track record, but in Europe has quite good track record. It also seems to be doing well in South Asia (and doing exceptionally well compared to their stock market). There have been some scams like Envestio, but if you look at stock brokerage scams, those are more common than P2P lending scams. Also if you are new to P2P lending, but follow safe investing guidelines (diversifying your capital into many small loans, avoiding questionably high interest rates and even better, spreading your investments in several P2P lending platforms) you are very unlikely to lose money, meanwhile in stock market you are overwhelmingly more likely to lose money. And the last benefit of P2P investing is that it's very easy to get in and start doing it, as many people are already familiar with what interest rate, debt, collateral and etc are, meanwhile stock (including ETFs) and bond market is completely alien, unless you read a lot about them beforehand. I invested some money in P2P lending starting 2020 winter (December) and so far after 127 completed loans I have an average interest rate somewhere in 11% range, with lowest being 8% and highest being 18.5%. I only invested in loans issued in EUR to avoid conversion rate fluctuations and only in loans that had left up to 12 month remaining term. I did purchase some secondary market loans too. Many loans had delayed payments, but most of them didn't get dangerously long delayed (over 60 days). I haven't had any defaults so far. In case of default, there is buyback obligation, but hopefully I won't have to find out if it's actually functional. Some people have said that it's only as strong as company backing it (which is true). Some people didn't see it working, meanwhile others have seen it working without problems. The chance of ir working is in 60%-80% rate on my rough estimate, but if you avoid lending operators with poor reputation or poor financial situation, you can increase your chance of buyback obligation working as intended. Anyway, I think that unlike many alternative investments like crypto or angel investing, P2P lending looks sensible, risks are obvious and well communicated, there's proper reason why it would be profitable and it's not speculative, not volatile, but with varying interest rates depending on time, lending platform, quality of loans, how much lending operator takes as profit and some other things. Why they have nearly no recognition? Other alternative investments are far more well known, despite being way more controversial and probably not great investments at all (more like speculatives). [link] [comments] |
| Buybacks vs issuing dividend -- the breakdown. Posted: 29 Nov 2021 09:04 PM PST This post will detail my ideas of how buybacks are far superior than the value of dividends. A company can do a couple different things to issue a monetary reward to its shareholders. The first, is to issue a dividend. A shareholder gets a monetary amount for holding a stock. Say a company who's stock is worth $10 a share, with a total of 1 million shares, issues a $1 dividend. The company is not actually now worth $9 a share as some people would be led to believe, as there is a greater than zero chance that shareholders have automatic dividend reinvesting, or will use those dividends to buy more shares of the same company. This isn't always true because a company's sentiment and such can lead it to go higher or lower than expected due to dividends, so you can't always predict the movement of a company based on an issuing dividend. The problem with a dividend issuance from a company is that it gives the shareholder a choice of what to do with the money -- go buy a new pair of shoes, go out for a nice meal, or buy shares from a different company. That means there is a less than 100% chance that those funds will be reinvested to buy shares. This is where buybacks come in. Companies can buy back shares at any point they would like, whenever they feel like it would best benefit the company. Say we have the same scenario, a company's stock is worth $10 and they buy back the same amount that the dividend would have been, 1 million dollars. So the company is now worth $11, right? Wrong again chief. There is such thing as velocity of money in asset purchases. The amount of money spent on a company in stocks increases the value of the company much more than the money spent. Microsoft currently trades around 24 million shares a day in volume, and they have 7.5 billion issued shares. That's about 9.5% of its total market cap traded per month. A spike of buying power over a short period of time, say a few weeks, would significantly boost the companies growth. I didn't calculate other companies average daily volume but for the sake of the experiment I chose the biggest company in the S&P and the Nasdaq. Now dividends also have the same bonus. Money reinvested in the company also gives the velocity effect of volume spikes giving more value than what is spent, however those that do decide to reinvest their dividends don't all do so in sync and at the most opportune time, not quite creating the most efficient use of velocity, therefore making the buyback the more efficient use of capital, even when dividend reinvest percentage would be at 100%, which just doesn't happen. Losing the amount of shares you own when you sell doesn't matter. You can sell fractional shares when you need to sell to get the amount of capital you need. All that matters in investing related to this topic is the total value of your portfolio. Currently and in the past long term capital gains are always taxed better than dividend payments, and the investor gets to decide when to sell. For most of us, taking too many dividends isn't an issue but as you get older and have had enough dividend bearing stocks over the years, yearly dividends could be more income than you planned on taking, so you end up paying taxes you wouldn't have rather paid if a company was issuing buybacks the whole time. [link] [comments] |
| The Final Oil Short of 2021- Update 2 Posted: 30 Nov 2021 12:07 PM PST Fellow investors, I provided the first update on my short thesis a few days ago (https://www.reddit.com/r/Burryology/comments/r2odo0/the_final_oil_short_of_2021_update_1/) Today, oil spot price and the market at large continue to have problem digesting the COVID news, with WTI continuing to fall to $65/bbl (just $2 away from the lows during Delta wave). Yesterday, I gave it a 60/40 that oil price would continue to slide when it was at $70/bbl. As I have closed my put position, the only thing remaining is where to initiate a long position on my favorite "best in breed" O&G. What is surprising to me is that the oil stocks have all shown a lot of resiliency in the face of sharp corrections in spot price (contrary to what happened during Delta, when oil stock was almost in lockstep with spot price). This could be due to a couple reasons: (a) the oil market is predicting that the current correction will be short-lived; (b) the spot market got a little bit ahead of itself during the October runup so now we're seeing the unwinding of those trades; (c) the oil stocks have proved that they are still generating an awful lot of cash even when WTI was at $62/bbl so investors are more willing to hold now; (d)-(z)???. Past history with Delta suggests that we still have a bit more runway for things to get worse in the medical/epidemiology sense before it gets better with cases and sentiment. So far, news on Omicron indicate that the virulence of the virus might decrease but it can spread faster than other strain. Moderna CEO stated that he didn't think the current vaccines will provide the same level of immunization for Omicron. Despite all of the bad news during Delta, market recovered within weeks of the Delta's bottom. My conclusion is that my oil short thesis (now that oil is just $2 away from the Delta's lowest point) no longer has the same degree of margin of safety that it did when oil was at $80/bbl and the world was clearly heading toward another COVID wave. Within the next couple days, I will observe and start to add to my long position on US producers. However, I give it a 60/40 that oil stocks still have some room to fall from here if spot price trades sideway at this level for a while. Edit: US' new cases hit 216k yesterday, maybe the result of the pend up cases during the long holiday? I still think it is clear that another wave is coming to the US. [link] [comments] |
| Orders for Durable Goods Slid 0.5% in October Posted: 29 Nov 2021 08:06 AM PST New orders for manufactured durable goods in October decreased A SEASONALLY ADJUSTED $1.2 billion or 0.5% to $260.1 billion, the U.S. Census Bureau announced. This decrease, down two consecutive months, followed a SEASONALLY ADJUSTED 0.4% September decrease. Excluding transportation, new orders increased A SEASONALLY ADJUSTED 0.5%. Excluding defense, new orders increased A SEASONALLY ADJUSTED 0.8%. Transportation equipment, down three of the last four months, drove the SEASONALLY ADJUSTED decrease, 2.0 billion or 2.6% to $75.3 billion. Shipments of manufactured durable goods in October, up five of the last six months, increased A SEASONALLY ADJUSTED $4.0 billion or 1.5% to $261.5 billion. This followed A SEASONALLY ADJUSTED 0.6% September increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, A SEASONALLY ADJUSTED $2.3 billion or 3.2% to $75.3 billion. Unfilled orders for manufactured durable goods in October, up nine consecutive months, increased A SEASONALLY ADJUSTED $3.1 billion or 0.2% to $1,249.7 billion. This followed A SEASONALLY ADJUSTED 0.7% September increase. Machinery, up nineteen consecutive months, led the increase, up A SEASONALLY ADJUSTED$1.4 billion or 1.2% to $113.7 billion. Inventories of manufactured durable goods in October, up nine consecutive months, increased A SEASONALLY ADJUSTED $2.8 billion or 0.6% to $466.0 billion. This followed A SEASONALLY ADJUSTED 1.0% September increase. Fabricated metal products, up thirteen consecutive months, led the increase, up A SEASONALLY ADJUSTED $0.9 billion or 1.4% to $61.0 billion. https://www.floordaily.net/flooring-news/orders-for-durable-goods-slid-05-in-october [link] [comments] |
| Anyone just trying to match SPY with minimum drawdowns? Posted: 29 Nov 2021 08:52 PM PST Optimization = Mean Variance Targeted Return = 17 Benchmark = Vanguard 500 Index Investor Assets = TQQQ, SCHD, IEF, IAU, TLT, O, UPRO, QLD Optimized to
This just barely edges out SPY over the period that SCHD has existed. It also has about half the max drawdown and a much higher Sortino Ratio. Theoretically, anyone with 100% SPY should be happy to switch to the above portfolio. [link] [comments] |
| Structure of a VC Fund: Who owns what? Posted: 29 Nov 2021 03:11 PM PST The stakeholders in a VC fund are, more or less, the GPs managing the fund and choosing which companies to invest in, the LPs providing the money, and the companies being invested in. However, I'm not sure I understand who exactly owns what exactly. Let's try to work it through with a simple example:
How exactly does the flow of money works now, who owns what? If the 2% fee is accurate, it means that the 4 employees have exactly $200k to share as salary, or $50k each. Since VC investments tend to be locked up for a long time, let's assume that the 5 investments will not be exited until 5 years later. So, really, the VC employees will take fees of $10M2%5=$1M, or in other words, need 10% of committed capital just for their sustenance. On the flipside, this means that the LPs are really getting returns on only $900k, not $1M - their returns are negative by quite a bit just by virtue of paying a fee without having returns. Furthermore, that only leaves $9M to be invested. If we divide that evenly across the 5 startups, that's $1.8M, and let's just say we'd still get 25% stake for that. So now, year 0, fund A has five 25% ownership stakes, as well as $1M in cash to cover their salaries in the coming 5 years. Next question... Who really owns the stakes? Does each of the 10LPs own 2.5% of the 5 companies, directly in their name? Or just 2% because the fund will take an additional 20% (I heard it as the 20% rule) stake for their own profits? Let's say the latter is true, is everything still in the name of the VC, until they exit the investments? Or can LPs choose to sell their part of the share early? Let's say one of the five startups, which was implicitly valued at $1.8M/.25=$72M, is now worth $70.2M 5 years later, and the other 4 investments went bust. The 25% ownership is worth $18M, or a 80% return over 5 years, or rather around 16% return a year (but only paid after 5 years). So now the VC gets $3.6M to share, and the LPs each get $1.44M, for a 5-year-return of 44%, or a yearly return of around 8%, which is probably worse than the S&P500? Lots of assumptions in here - Are they more or less correct? How is a fund REALLY structured? Thank you! [link] [comments] |
| Anyone here have any firsthand knowledge/experience with REITs focused on single-family homes? Posted: 29 Nov 2021 12:09 PM PST Looking for inputs from those who either worked in this industry extensively or just have a lot of specialized knowledge in REITs focused on single-family homes. For example, I'm curious about your thoughts on the pros and cons of REITs focused on single-family homes as opposed to apartments. It seems like more of the major publicly-traded REITs are focused on apartments. I thought about this and I guess it makes sense (?) because one would think that REIT can better leverage their resources into a more consolidated investment (i.e. apartment) rather than having to continually research and invest into individual single-family homes? Does this logic make sense? Also, do you even think that REITs focused on single-family home is even a good business platform? It looks like too many smaller transactions along with all of its efforts and it might be better spent on large apartments or something more consolidated. In contrast, there are already many successful REITs focused on single-family homes. Are they just those few survivors or just have exception management? Lastly, do you have major doubts about REITs for single-family homes? Are you an advocate? Either way, why or why not? [link] [comments] |
| Index fund within S&S ISA - Tax Implications Posted: 29 Nov 2021 02:27 PM PST Hi, I've been reading a lot lately about how investing a couple of hundred a month into a broad index fund, say one that tracks the S&P 500 (e.g. VOO), could very well yield a lot of money if held for a good 30-50 years due to compounding interest. I notice a lot of articles speculating about how it could generate millions (I assume this is on a best case scenario of the stock market performing well for most of that period of time but still a lot of money even if its 6 digits). Presumably, when you come to cash out you'll have to pay tax. My question is as follows; couldn't you just invest in an index fund through a S&S ISA (provided its belos 20k a year of course) so as to avoid tax when you do come to cash out? [link] [comments] |
| Why wouldn't you use Margin with the five factor index model? Posted: 29 Nov 2021 07:51 AM PST I'm just starting to learn about Margin and wanted to make sure I'm not misunderstanding anything before going forward. My portfolio allocations are: After doing some portfolio backtesting I came to the conclusion that with a portfolio like mine the worst loss you can take is about 60% which was in 2008. I'm still very young, however, I really doubt that we'll see anything like that again. I'm planning to leave my old portfolio of about 100K as it is and start a new one from scratch using the same allocations on IBKR. The reason for this is that I've been investing since 2018 and know I can stomach volatility easily and wouldn't mind adding some more volatility for an increase in return. Margin fees are at 2.5% on IBKR (And lower for bigger portfolios). Taking the past performance of this portfolio, I can't imagine we go through a long period where this isn't met. However, this isn't fixed and could be increased in the future, if that is the case then I would de-leverage depending on the fee rate. I plan to use an initial margin of 80% (For every $100 I buy IBKR gives me $25 extra). The overnight maintenance margin on IBKR is 50%, meaning that for me to get margin called, I would need my portfolio to go down by 60%. As stated, this portfolio is going to be new, and I'll be putting money from whatever I save monthly into it, so even if I'm the worst market timer in the world averaging in will prevent me from buying at the top when such a 60% drop happens. And if such a situation were to happen, I can always transfer a part of my old portfolio and put it on IBKR to increase collateral. What do you guys think? Does this strategy make sense? Am I misunderstanding anything? Thanks for any replies! [link] [comments] |
| Gold vs Bitcoin/Ethereum for Inflation: Settling Misconceptions Posted: 28 Nov 2021 08:41 PM PST There's been a lot of threads lately on the subject of gold. Generally these pop up during or after a run-up or draw-down in value...
A lot of folks who invest in these asset classes do not truly understand why their investments are moving up or down in value. To make matters worse the ratio of shady or idiot gold/crypto pumpers are doing investors no favors. I'm hoping this post can clear a bunch of misconceptions. First, what do gold, BTC, ETH have in common? All are sound money, or another way to put it is they are nobody else's liability. Bonds are liabilities to a corporation. Cash (i.e. USD) is a liability to a central bank. Insofar as folks may want to protect themselves from central bank liabilities, crypto and gold share similar appeal. This is where comparison should stop. Repeat after me... "Gold is a classical currency. Crypto is an emerging currency." Let's park crypto aside for a few and explain what it means to be a classical currency. Gold, as a classical currency, has been "fully valued". Through hundreds - literally - of years, society has adopted an inherent & "stable" value in gold that, adjusting for inflation and some other factors I will go into, should neither appreciate nor depreciate much. In other words...absent these factors, the expected return on gold is 0% real. But but, gold has routinely had bull markets where it doubles in value, or bear markets where the value drops in half...and generally this does not track inflation. How can this be "stable"? The unfortunate truth for gold holders is that gold's short-term movements are much more tied down to several factors it has been pinned against. Real rates Since the US government started offering inflation-adjusted bonds, gold has had a competing asset denominated in the reserve currency that in years past offered greater than 0% real returns. US TIPS: bonds that are guaranteed to return some rate of return equal to inflation as measured by CPI-U, plus a fixed "real rate". Guaranteed by the nation with 10+ aircraft carriers, rule of law, and the strongest economy in the world. Notwithstanding flaws in CPI-U, it goes without saying that a rise in the fixed rate of TIPS makes gold less appealing, whereas a decrease in the TIPS fixed rate makes gold more appealing. This matters a big deal in how much institutional investors value gold. Consider the scenario where you own:
Now let's suppose real rates go up 1% the day after you purchased your assets. Oof, consider the opportunity cost you just ate...had you only waited one more day you could have had bought TIPS yielding an extra 1% real over 30 years. In actuality if you try to resell your TIPS on the secondary market, you're going to end up selling it at a loss of ~30%. And what about gold? All other factors equal, gold is also likely going to drop in value. Maybe even by more than 30%! All this can work in the reverse direction if real rates drop. Foreign exchange rates A second factor to consider is that the world does not entirely revolve around USD. Gold is just another currency. In the last 10 years, the USD has strengthened ~20% against a comparable basket of other world currencies (as measured by the DXY index). USD has been extremely resilient in the last year in particular. If you're an investor in India or Europe, you've probably been happy with your gold investment, whereas an American is seeing it fail to keep up with inflation. The reason is a strong US dollar is a headwind to dollar-denominated gold. In a world with no change in exchange rates - and no change in real rates - gold is expected to match inflation, but that's not the world we live in. Gold investors need to understand macro conditions are going to give way to major price fluctuations. What about crypto? Crypto is a completely different beast. As an emerging currency, society is still in the process of determining how much it is worth. The appreciation of BTC or ETH over the last few years has almost nothing to do with inflation, but instead almost entirely explained by fluctuations in coin adoption. As these are still emerging currencies, their stable value could be much more than where they currently are valued. It's important to note BTC and ETH are not yet stable currencies. Stabilization takes years, and generally only after they have been accepted geopolitically. In the case of gold it took hundreds of years alongside a history of government regulation and central bank ownership. The major risk of holding crypto are of geopolitical or technological nature. Consider the risk of major governments outlawing crypto, or a NewCoin emerging that steals adoption from other crypto currencies. Million dollar question, how much could crypto be worth? And is there any risk it de-monetizes gold? Needless to say, I believe the current market cap of precious metals and crypto are so tiny compared to the rest of invest-able assets that there's minimal risk of any "demonetization" in either direction. Classic currencies are...well...let's call them classic. To use an analogy, rock music did not "de-musicize" Beethoven. To add to that, there's enough room for multiple crypto currencies. Here's my take, and why the total asset market matters. Why do people invest? To trade liquidity and/or risk to grow (or maintain) wealth. Stock and bond markets were originally designed to allocate capital from someone that has cash to someone that needs it. The stock market was never designed to be a store of value for the retirement savings of the entire world. Yet, Americans in particular have universally agreed upon putting their entire life savings in the equity and liability of the top 500 publicly owned US companies. Chinese investors have decided to do the same with real estate. The problem...there simply aren't enough houses and public corporations out there to store all this value. With valuations near-stretched, investors are sitting with enormous amounts of cash on the sidelines and looking for alternate stores of value. IMO this gives way to my thesis that crypto adoption is primarily motivated by a lack of other invest-able assets. Portfolio placement Please consider none of this investment advice. I'm not your financial advisor... As already mentioned, gold is likely going to work against you - short term - if real rates are rising. An inflationary environment with a growing economy (in rate of change terms) is generally not ideal for gold. Gold excels as a safe haven during stagflation, characterized with rising inflation alongside stagnating growth. In earnest, this has not sustainably happened since the 1970s. Crypto on the other hand is still evolving. It's difficult to derive too much from back-tests considering the newness...however recent history has shown that it responds positively to high growth/high-inflation environments - such as the recent economic recovery - but does not respond well to general "risk off" conditions in asset markets. Truth be told, I'd be hard-pressed to pin crypto value to macro conditions...its long term value is instead going to be adoption of the coins. As for whether either has a place in your portfolio, IMO this is entirely up to your financial goals and risk tolerance. For someone that can stomach the volatility and desires a stagflation hedge, a small allocation (5-10%) of gold provides some protection. Crypto is an upside-capture asset; it serves a different role in a portfolio for investors that are looking to grow wealth and willing to take the risk on an emerging currency. I'll leave you all with this... All figures estimated, subject to change:
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| Instead of investing in 401k inves into VT world stock Posted: 29 Nov 2021 10:09 PM PST So my company doesn't do 401k match, is there any benefit to doing a 401k then? I can't find any info that says for example income tax rate (which is what 401k gains are tax on) is lower than capital gains rate. I know 401ks will have bonds and stuff so there's that, but VT is the most diversified stock ETF and I feel like it had more potential than bonds so instead of doing a 401k for retirement I just do this. Terrible idea? [link] [comments] |
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