Episode #125 of the Stack Overflow podcast is here. We talk Tilde Club and mechanical keyboards. Listen now
55

Mathematically it seems like the expected rate of return, whatever that might be, is the same for both. An aggressive strategy is higher risk and higher reward. A conservative strategy is lower risk and lower reward. That is not true. Roughly, the mathematical analogue of "higher risk and higher reward" is "higher standard deviation and higher mean". In ...


29

Holding pure cash is a problem for 401K companies because they would then have follow banking rules because they would be holding your cash on their balance sheets. They don't want to be in that business. Instead, they should offer at least one option as a cash equivalent - a money market fund. This way the money is held by the fund, not by 401K ...


24

TL;DR: Cash is king — and bonds are not cash. I've written about this in this other answer. Here's part of it: [...] inflation aside, why do we want our "equivalent to cash" position to be relatively liquid and principal-protected? When it comes time to rebalance your portfolio after disastrous equity and/or bond returns, you've got in ...


16

As others have said, this opinion is predicated on an assumption that early in your life you have no need to actually USE the money, so you are able to take advantage of compounding interest (because the money is going to be there for many many years) and you are far more tolerant of loss (because you can simply wait for the markets to recover). This is ...


14

Having cash and bonds in your portfolio isn't just about balancing out the risk and volatility inherent in equities. Consider: If you are 100% invested in equities and the market declines by 30%, you'll be hard pressed to come up with additional money to "buy low". You'll miss out on the rebalancing bonus. But, if you make a point of keeping some portion of ...


13

See how the fund shows the % net? It simply means that $100 in assets is actually $150 in Bonds and Other, with $50 borrowed to do so. As of Aug 2015, this anomaly appears to be gone, they are now net long bonds and cash positions.


13

what else is wrong with focusing on less developed markets exclusively? Less developed markets are risky, because they're volatile and prone to high inflation. That means you can lose a lot of money. What am I missing? The debt burden isn't as bad as you think it is. If the developed Western economies crash, everyone else's will too.


12

A lot of people (and it's common advice) only have x% of their portfolio invested at any given time. Depending on your tolerance for risk, you might leave 10-30% in cash/money market, for example. Also, if you're still earning and saving, that amount of cash will grow every month as you continue to grow your nest egg. That's where the money comes from.


10

Any fee based financial adviser should be able to help you. I don't think you need to worry about finding a 401K specific adviser. I'm not even sure that's a thing. A good place to start is the National Association of Personal Financial Advisors. The reason I specifically mentioned a fee based adviser is that the free ones are working on sales commissions, ...


10

Let the man be. If you've tried again and again to convince him, and haven't, maybe he doesn't want to be convinced. It's his money, and he has every right to manage it as he sees fit. You can advise him, but its his call whether he accepts your advice or not, and for what reasons. And suppose you push and push and it gets through? Now either he has more ...


10

The short answer: zero. dg99's answer gives some good reasons why. You will basically never be able to achieve diversification with individual stocks that is anywhere close to what you can get with mutual funds. Owning individual stocks exposes you to much greater risk in that random one-off events that happen to affect one of the companies you own can ...


10

A standard 2050 lifecycle fund allocation like LifePath 2050 index funds will generally have a very tiny allocation to cash (~1% in this example) because as you mention the target date is far out and cash is not a long term investment. However, for LifePath dynamic funds Allocations are flexible to capture opportunities in changing markets. If you look ...


9

(Leaving aside the question of why should you try and convince him...) I don't know about a very convincing "tl;dr" online resource, but two books in particular convinced me that active management is generally foolish, but staying out of the markets is also foolish. They are: The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns ...


9

The question is asking for a European equivalent of the so-called "Couch Potato" portfolio. "Couch Potato" portfolio is defined by the two URLs provided in question as, A 50:50 allocation of assets between a long position in an stock fund; and a long position in a fixed-income index fund. Holding these two long positions for five years at a minimum, and ...


9

Consider this: You're 20, the year is 2008, and your $15K savings are slashed in half because S&P500 crashed. In 50 years, when you need to go to groceries with that money, the S&P500 has gained 2000% since. Now consider you're 70, the year is 2008, and your $15K savings are slashed in half because S&P500 crashed. But now, you're going to the ...


9

Your employer decides what options you have in the 401k. You can talk to your HR about that. There are requirements for diversity of various types of investments, money-market funds is being one of them. That is the investment account equivalent of cash. While it is not really cash but rather short term bonds - the term is generally very short and the risk ...


8

If you are comfortable with the risk etc, then the main thing to worry about is diversity. For some folks, picking stocks is beyond them, or they have no interest in it. But if it's working for you, and you want to keep doing it, more power to you. If you are comfortable with the risk, you could just as well have ALL your equity position in individual ...


8

It's likely that the main reason is the additional currency risk for non-USD investments. A wider diversification in general lowers risk, but that has to be balanced by the risk incurred when investing abroad. This implies that the key factor isn't so much the country of residence, but the currency of the listing. Euro funds can invest across the whole ...


7

That's a lot of manual checking-in to see if everything is performing the way you "want". Not to insult your intelligence, but that is not your job, and doing that on a monthly basis is going to eat a lot of time. Plus, most 401(k) programs have lockout periods wherein changes can't be made without incurring additional fees (related to distributions, etc). ...


7

I think you may be drawing the wrong conclusion about why you put what type of investment in a taxable vs. tax-advantaged account. It is not so much about risk, but type of return. If you're investing both tax-advantaged and taxable accounts, you can benefit by putting more tax-inefficient investments inside your tax-advantaged accounts. Some aggressive ...


7

There are a few main economic reasons given why investors show a strong home bias: Added currency risk which MSalters explains very well in another answer Local investors may have superior information about local economies and be looking to profit from it Tax burden on foreign investment can be larger in some countries A number of countries limit foreign ...


6

The main restrictions you see with IRA's involve contributions, and not the actual investments themselves. I would be indifferent to having a single investment across multiple accounts. It might be a bit trickier to manage, especially if your strategy involves some specific asset allocation. Other than account management though, there's no big issue.


6

0.13% is a pretty low fee. PTTRX expenses are 0.45%, VINIX expenses are 0.04%. So based on your allocation, you end up with at least 0.08%. While lower than 0.13%, don't know if it is worth the trouble (and potentially fees) of monthly re-balancing.


6

Vanguard might be the top provider of no-load mutual funds around. Attempting to do better than 0.13% in fees is just as likely to cost you more time than the money you're attempting to say. You're in your first job out of school--you've got better things to do with your time.


6

Your adviser cannot advise you if you don't tell him the whole picture. You don't have to invest everything with the adviser, you can just say that you have the cash allocation portion already invested elsewhere, and he can consider your portfolio based on that information. He works for you and you pay him for this work, why would you want him to provide a ...


5

For the sort of medium term horizon you mention, a balanced portfolio weighted more towards high grade corporate bonds but with at least 20% stocks would be a safe bet. The key principle to remember for any horizon beyond short-term (less than 1 year) is diversification. In your case, being based in Switzerland, I encourage you to look past companies and ...


5

How much should a rational investor have in individual stocks? Probably none. An additional dollar invested in a ETF or low cost index fund comprised of many stocks will be far less risky than a specific stock. And you'd need a lot more capital to make buying, voting, and selling in individual stocks as if you were running your own personal index fund ...


5

Googling vanguard target asset allocation led me to this page on the Bogleheads wiki which has detailed breakdowns of the Target Retirement funds; that page in turn has a link to this Vanguard PDF which goes into a good level of detail on the construction of these funds' portfolios. I excerpt: (To the question of why so much weight in equities:) In our ...


5

If you have retirement savings, the HSA should not be considered in isolation, but as part of your complete asset allocation. The HSA is a unique account in that the funds go in pre-tax, grow tax free, and then for qualified expenses, are withdrawn tax free. With healthcare being the biggest risk to one's retirement portfolio (i.e. a large unknown in that ...


5

Taking examples from this loosely Googled page: http://www.fundlibrary.com/features/columns/page.asp?id=14406 If you find, or calculate, the standard deviation (volatility) of the returns from your various investment classes you will find they range from low-risk (low volatility), such as Cash, to high-risk (high volatility), such as Strategic Growth. The ...


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