The Investment Thread

[nate82]

The dividends could be taxed at 0% depending on your tax bracket.

https://www.corporatemonkeycpa.com/2018/02/22/taxes-on-dividends-and-capital-gains-under-the-tax-cuts-jobs-act/

 

Another option other than an FA could be a CPA if you want to go that route. Finding a good FA is hard as there are so many of them I suggest getting to know one and feeling them out if they are going to be a good fit. If you want to start looking on your own I would suggest asking an accountant as you should be asking them a few things about taxes also. You could be paying 0% on your dividends.

[ilikewisco]

I appreciate all of the info everyone has provided. We are going to continue to research our options and not rush into anything, possibly seeking professional help if we feel this is just too much for us to handle. I know a lot of people say get into the market as soon as possible, but I think we'd be better served to go in with confidence in our choices than just invest to get in.

 

And thank you Nate again for providing extremely useful info, once she starts school paying no taxes on dividends should be a great way to cover expenses.

[superfly]

Thank you Nate for the advice, it is very helpful. I take a contrarian view on markets so feel it's always over sold. It just seems like all the gains from the recession far outpaced the real economy, and that seems like the market is running on fumes. But I guess if you think about everyone in the country investing in 401k's and the world putting money into the US markets it makes some sense. Thank you for the advice on bonds, I always thought they are a safe way to invest if you invest in highly rated bonds. I guess the return is not worth the safety though. We will be using this advice and taking the long view, as we should.

 

After I get my student loans paid off I plan to invest for the short term and learn the hard way. I'm reading Security Analysis now and plan to set up a for fun portfolio soon and keep trying to learn more about finance and markets. Once I track the fun portfolio I will be able to see some of my shortcomings hopefully. I do have a degree in economics, but it really has made me more of a cynic than believer in markets. I ended up pursuing a graduate degree in engineering and that is what I do for work now, so I don't use the econ in my job other than developing the economics of future projects.

 

Edit: Would it be a good idea to use Vanguard FA? They charge 0.3% per year. My gf thinks it might be worth doing, the fees are less than the FA she had been talking to originally. We are just a little worried we might not be sophisticated enough for this amount of money and do not want to do anything foolish.

 

From another view (I tend to be more bullish)...the market has been digesting a massive run from election night 2016 until late 2017/early 2018 as the economy catches up so to speak.

 

http://i67.tinypic.com/2dumk90.png

 

Wages are increasing, employment is increasing, and many of these jobs are better paying (and full time vs the part time job market of the prior many years due to the healthcare bill incentivizing employers to do it).

 

If your GF wants to own some stocks I would start out looking at simple things like AT&T (T) and Apple that are paying a fat dividend and see how it goes from there before venturing off into riskier things. I own the ETF SCHD (US big cap dividend) and AT&T in my IRA at the moment.

 

I would definitely keep at least part of it with a professional, but do whatever you feel most comfortable with.

[homer]

I appreciate all of the info everyone has provided. We are going to continue to research our options and not rush into anything, possibly seeking professional help if we feel this is just too much for us to handle. I know a lot of people say get into the market as soon as possible, but I think we'd be better served to go in with confidence in our choices than just invest to get in.

 

And thank you Nate again for providing extremely useful info, once she starts school paying no taxes on dividends should be a great way to cover expenses.

 

Over time small cap stocks out gain large caps. And if you are looking at a 15 - 20 year timeline then you have wiggle room with risk (obviously risk is personal though). So you could potentially put a large percentage in a small cap index fund. But if that is too risky by your standards then I'd probably just put almost all of it in a large cap index fund and let compounding interest work its magic.

 

If you are are worried about inflation you can diversify and use part of it to invest in some real estate.

[nate82]

 

Over time small cap stocks out gain large caps. And if you are looking at a 15 - 20 year timeline then you have wiggle room with risk (obviously risk is personal though). So you could potentially put a large percentage in a small cap index fund. But if that is too risky by your standards then I'd probably just put almost all of it in a large cap index fund and let compounding interest work its magic.

 

If you are are worried about inflation you can diversify and use part of it to invest in some real estate.

 

Instead of actual real estate not sure if you are suggesting that but an REIT also works.

 

There are other tax implications for REIT and other real estate investments. Should really talk to a tax accountant first before talking to a FA IMHO.

[nodakfan17]

I work in Financial Services and am generally distrustful of your average financial advisor. Most are glorified salespeople. However, I’d strongly entourage you to visit with a few bank trust officers - highly qualified individuals who are lawyers, accountants, or both. There is virtually no downside risk involved, besides your time. They’ll give you their best efforts pitch for your dollars and you can simply walk away if you’re uncomfortable. I don’t pay for investment advice, but I do pay for legal and tax advice.

[ilikewisco]

I did get a chance to talk to a friend who was a FA and still works in the industry. I wanted to pass on a couple things mentioned that weren't mentioned here in case anyone were interested.

 

It can be a good idea to have both active and passive funds in a portfolio. An actively managed fund may have better returns in down times or different types of market conditions where adjusting the fund will outperform a passive fund.

 

With large sums it can be a good idea to invest in increments so you are not exposed to as much risk as investing it all at once. The swings of the market will be averaged out than if you were to invest it all at once.

 

It doesn't seem like taxes are an issue at this time. Going to make some adjustments on what we had originally planned, so generally:

 

5% mining

10% intermediate bond

5% high yield bond

15% broad international

5% small cap international

25% large cap 500 index

20% mid cap

15% small cap

 

And try to cover all the boxes between growth/value. Might eliminate the mining and increase large cap. May put some of the stock funds in active managed, maybe 10-15% of large and mid cap.

[nodakfan17]

I think that’s a decent allocation. Personally, I love precious metals as a recession hedge. Maybe that’s why your FA friend is suggesting mining?

 

My knowledge of the law and trusts is minimal, but what happens if your GF gets cleaned out in a civil suit? Is the $500K safe? That’s something I might want to run by a trust officer. I’m overly cautious about that sort of thing and will probably explore some options once my assets hit a critical mass.

[GAME05]

I have a question for anyone who might understand taxes better than I do.

 

I will have to buy a home/condo or rent when I retire, which will be before 62 years old (maybe 56?), which means I can't pull from an IRA to pay for it. What would be the best way to save for this while paying the fewest taxes? All I can think is regular savings, but yearly capital gains would really cut into the total savings.

[ilikewisco]

The FA friend actually wasn't very enthusiastic on the mining, that was nate82's suggestion. I will suggest she talk to a trust officer. I told her to but she is stubborn and didn't think there was a need to get tax and law advice now. I will give her your scenario and hopefully she will see the benefit.

[ilikewisco]

I have a question for anyone who might understand taxes better than I do.

 

I will have to buy a home/condo or rent when I retire, which will be before 62 years old (maybe 56?), which means I can't pull from an IRA to pay for it. What would be the best way to save for this while paying the fewest taxes? All I can think is regular savings, but yearly capital gains would really cut into the total savings.

 

You can withdraw from your IRA at 59 1/2, so you won't have too much time before then. The only thing I can think of is open a brokerage account and invest in stocks and bonds, converting to bonds the closer you get. That way you would get a better return than a CD. This would only be a decent plan if you have some time before you plan on doing this, like 15 years. I'm pretty new at this though, so others may have better advice.

[nodakfan17]

I have a question for anyone who might understand taxes better than I do.

 

I will have to buy a home/condo or rent when I retire, which will be before 62 years old (maybe 56?), which means I can't pull from an IRA to pay for it. What would be the best way to save for this while paying the fewest taxes? All I can think is regular savings, but yearly capital gains would really cut into the total savings.

That’s a pretty open-ended question. What’s your risk tolerance? Do you currently use any tax-advantaged savings vehicles?

[homer]

You can pull from a Roth IRA for a first time home purchase I think.

[GAME05]

I'd heard you can pull the principal out of a Roth for a home purchase. So maybe the best bet is to do that, accept whatever debt it takes to pay for the remainder of the purchase, and then buy the rest in full once I'm 59.5.

 

I invest the minimum in the work 401k, which amounts to 12% plus a 5% work-throw-on. But I plan to do the rest myself, though that won't happen for another year because of a car purchase.

[nodakfan17]

Apologies if this has been discussed (I know I’m late to the party), but is anyone using Robinhood, the brokerage platform?

[homer]

Apologies if this has been discussed (I know I’m late to the party), but is anyone using Robinhood, the brokerage platform?

 

"use" is a strong word. I have an account and a few stocks but I don't trade regularly. It's my fun money to invest in small and micro caps.

[nodakfan17]

Apologies if this has been discussed (I know I’m late to the party), but is anyone using Robinhood, the brokerage platform?

 

"use" is a strong word. I have an account and a few stocks but I don't trade regularly. It's my fun money to invest in small and micro caps.

How do you like it? Seems like no one can beat them on price.

[homer]

Yeah it's dirt cheap. They don't trade all stocks though. A bunch of companies I've wanted to buy weren't available.

[nodakfan17]

3 months? Yikes. I just submitted an account application earlier today. Maybe a short wait will help stem some impulse buys. The application process was unbelievably easy. I’ve had to answer many probing questions for self-directed brokerage accounts I’ve held in the past (like providing an itemized net worth).

[homer]

3 months? Yikes. I just submitted an account application earlier today. Maybe a short wait will help stem some impulse buys. The application process was unbelievably easy. I’ve had to answer many probing questions for self-directed brokerage accounts I’ve held in the past (like providing an itemized net worth).

 

Oops, I deleted my post accidentally.

 

Yeah I applied then heard literally nothing for a month so I sent them an email. They replied saying something like their third party something something had rejected my application. Sorry, go trade somewhere else. So I forgot about them and then a few months later they sent me a welcome email. Really bizarre.

[nodakfan17]

I just had my application approved in a little over a day. I also received a free share of Sprint by using a referral code. Hopefully your experience was atypical.

[homer]

I just had my application approved in a little over a day. I also received a free share of Sprint by using a referral code. Hopefully your experience was atypical.

 

I know it happened to others around the same time that I applied. I think they were just inundated with new users during the bitcoin craze and didn't have server capacity to handle it.

[MrTPlush]

We are officially in the longest bull market in American history.

[Boomer5]

What’s the safest stock (oxymoron I know) you can buy? I’m thinking dividend aristocrat stuff like JNJ, XOM, BP type stocks. Any ideas for what will surely be a correction at some point.

[nodakfan17]

What’s the safest stock (oxymoron I know) you can buy? I’m thinking dividend aristocrat stuff like JNJ, XOM, BP type stocks. Any ideas for what will surely be a correction at some point.

This is obviously a loaded question, but I’ll bite and say check out PFF - the iShares US Preferred Stock ETF. Minimal upside, but low volatility and a 5% dividend yield.