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Re: Beta vs Excess Returns

I am no expert, but on I think on average beta can explain around 70% of the returns. However, you cannot applied this 70% to one particular stocks, since for some stocks beta can explain more than 70% while other stocks beta can explain less than 70%.
by kmok
Thu Dec 18, 2014 8:58 pm
 
Forum: Investing - Theory, News & General
Topic: Beta vs Excess Returns
Replies: 3
Views: 400

Re: HSA question

An HSA account is like an IRA on steroids. You take the tax deduction when you contribute money, but when you use the money in your HSA for medical expenses and qualified health insurance premiums, it comes out tax-free as well. Now this is true for federal tax. State tax can be different. It depend...
by kmok
Thu Dec 18, 2014 4:56 pm
 
Forum: Personal Finance (Not Investing)
Topic: HSA question
Replies: 8
Views: 643

Re: Risk-Adjusted Equity Returns - CAPM vs. Fama-French

The three factor model is an improved and more precise model compared to CAPM.

Now I don't think there is much of an argument that small premium is due to higher risk.

There is a lot of debate whether the value premium is due to higher risk, or whether it is a free lunch.
by kmok
Thu Dec 18, 2014 2:07 am
 
Forum: Investing - Theory, News & General
Topic: Risk-Adjusted Equity Returns - CAPM vs. Fama-French
Replies: 15
Views: 905

Re: Why a Boglehead doesn't invest in individual companies?

Diversification is one of the few free lunch in investing. It allows lower risk based on an given expected return. Even if you own 50 stocks, you won't take full advantage of diversification. In a given year, only a small portion of the companies beat the market, the marjority trailed the market. Yo...
by kmok
Wed Dec 17, 2014 12:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why a Boglehead doesn't invest in individual companies?
Replies: 48
Views: 3824

Re: Could it be worth using Roth even in a high tax bracket?

Sure, there are uncertainty of future taxes, and even your future income, returns, withdraw rates, retirement age, and etc. Since all of these factors are not certain at the moment, even if you are expecting to be slightly worse off by contributing to Roth, it may make sense to diversifying your con...
by kmok
Tue Dec 16, 2014 7:16 pm
 
Forum: Investing - Theory, News & General
Topic: Could it be worth using Roth even in a high tax bracket?
Replies: 37
Views: 2328

Re: Invest in One Lump Sum or Spread Out?

Lump sum has higher risk but higher expected return. Spreading out has lower risk but lower expected return.
by kmok
Tue Dec 16, 2014 4:41 pm
 
Forum: Investing - Help with Personal Investments
Topic: Invest in One Lump Sum or Spread Out?
Replies: 9
Views: 599

Re: Stronger protection against personal lawsuits

It is different from state to state. If you are doing it, make sure it is a separate account, not an account with direct Roth ira contribution.
by kmok
Sun Dec 14, 2014 9:24 pm
 
Forum: Personal Finance (Not Investing)
Topic: Stronger protection against personal lawsuits
Replies: 12
Views: 1789

Re: Rebalancing Question

I think the standard answer is that expected returns from stocks are higher than bonds. Since Roth is tax-free, that is where you should hold stocks. Bonds (to the extent your AA allows) should be in Traditional Tax-Deferred accounts, tIRA and 401k. This is true if you do tax-adjust. Huh? Precisely...
by kmok
Sun Dec 14, 2014 12:51 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rebalancing Question
Replies: 5
Views: 659

Re: Rebalancing Question

Leeraar wrote:I think the standard answer is that expected returns from stocks are higher than bonds.

Since Roth is tax-free, that is where you should hold stocks. Bonds (to the extent your AA allows) should be in Traditional Tax-Deferred accounts, tIRA and 401k.

L.


This is true if you do tax-adjust.
by kmok
Sat Dec 13, 2014 10:51 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rebalancing Question
Replies: 5
Views: 659

Re: Building a new Excel spreadsheet

Dividends and capital gains distributions increase the total share count and add to the cost basis of the original investment - so they don't come in at zero cost, they are added to the most recent cost basis. They however are not part of any XIRR calculation, so they don't get treated the same as ...
by kmok
Thu Dec 11, 2014 5:21 pm
 
Forum: Investing - Theory, News & General
Topic: Building a new Excel spreadsheet
Replies: 33
Views: 2980

Re: Building a new Excel spreadsheet

So the entry for a dividend or cap gain would only record the # of shares and the current value (today's NAV)? And the gain would be equal to the current value and would fluctuate with the NAV? Similarly, any fees or redemptions would only record the # of shares and the NAV on that date? And the lo...
by kmok
Thu Dec 11, 2014 2:59 pm
 
Forum: Investing - Theory, News & General
Topic: Building a new Excel spreadsheet
Replies: 33
Views: 2980

Re: Building a new Excel spreadsheet

Assuming all dividends are reinvested, you can treat this as a purchase of shares with $0.
by kmok
Thu Dec 11, 2014 1:13 pm
 
Forum: Investing - Theory, News & General
Topic: Building a new Excel spreadsheet
Replies: 33
Views: 2980

Re: How to Split 3 Fund Portfolio Across Taxable, Roth, & 40

Some would argue that you should put the high growth-style assets in your ROTH, because that's the only account of the three that won't have to pay taxes on your profit at the end of the road (when you sell/withdraw). So, in the case of the 3 Fund Portfolio, the highest growth (well, what's going t...
by kmok
Wed Dec 10, 2014 6:43 pm
 
Forum: Investing - Theory, News & General
Topic: How to Split 3 Fund Portfolio Across Taxable, Roth, & 401K?
Replies: 9
Views: 458

Re: How to Split 3 Fund Portfolio Across Taxable, Roth, & 40

Sorry - what do you mean by tax adjust? Tax-loss harvesting? You have accounts with different tax treatment (taxable, tax deferred, and tax-free), equal dollar amounts in those accounts have different after-tax gains/losses. Therefore, if you want to optimize the after-tax value of your portfolio, ...
by kmok
Wed Dec 10, 2014 6:13 pm
 
Forum: Investing - Theory, News & General
Topic: How to Split 3 Fund Portfolio Across Taxable, Roth, & 401K?
Replies: 9
Views: 458

Re: How to Split 3 Fund Portfolio Across Taxable, Roth, & 40

The answer depends on whether you tax-adjust, and if so how you tax-adjust. On top of this, there is no right or wrong answer on whether you should tax adjust.
by kmok
Wed Dec 10, 2014 5:58 pm
 
Forum: Investing - Theory, News & General
Topic: How to Split 3 Fund Portfolio Across Taxable, Roth, & 401K?
Replies: 9
Views: 458

Re: Early Retirement

For 50+ years, I think SWR of 2.0% would make more sense. Also, I think 75/25 portfolio might be too aggressive at retirement.

At the end, it is about how much risk you are willing to take, and the good news is you can afford not to take much risk.
by kmok
Wed Dec 10, 2014 4:58 pm
 
Forum: Personal Finance (Not Investing)
Topic: Early Retirement
Replies: 19
Views: 3381

Re: How does turnover increase costs?

Turnover might cause higher capital gains tax. On ER, turnover is just one of the cost. There are other cost not impacted by turnover. I suspect turnover is not even a significant part of the ER. In this case, Fidelity needs to make a profit. Vanguard doesn't. If Vanguard charges too much, the exces...
by kmok
Wed Dec 10, 2014 4:06 pm
 
Forum: Investing - Theory, News & General
Topic: How does turnover increase costs?
Replies: 12
Views: 495

Re: Roth IRA

You should able to rolloever to an existing Roth IRA but I would highly recommend against this. You should use a separate Roth IRA account for asset protection purposes. 401k gives you much better protection than IRA. A IRA that is directly coming from 401k is the gray area and is different from sta...
by kmok
Wed Dec 10, 2014 1:56 pm
 
Forum: Investing - Theory, News & General
Topic: Roth IRA
Replies: 2
Views: 455

Re: Advantages of Solo 401K v SEP IRA

Solo 401k 's paperworks is a little more complicated. Though there is no way that should be the deciding factor. So contributing to solo 401k makes sense. You can used your spouse's income to contribute to your IRA. Note that it might not be deductible if your adjusted gross income exceeded the limi...
by kmok
Wed Dec 10, 2014 2:16 am
 
Forum: Personal Finance (Not Investing)
Topic: Advantages of Solo 401K v SEP IRA
Replies: 4
Views: 362

Re: Rollover from Solo 401K to IRA

You are your own employer so your contribution can be employer or employee contributions. The two have different contribution limits.
by kmok
Tue Dec 09, 2014 9:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rollover from Solo 401K to IRA
Replies: 11
Views: 691

Re: Help with choosing funds!

I was confused too... lol. Ok, so im just going to put it all out there. I chose the health fund because i am a health care provider, obama care should help drive everything up, and its past performance is excellent. Everyone needs healthcare and i don't see a huge downturn of the fund because of t...
by kmok
Tue Dec 09, 2014 9:17 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help with choosing funds!
Replies: 18
Views: 514

Re: Help with choosing funds!

I think Vanguard recommends no more than 5% of your portfolio be in sector funds. You have closer to 50% in the health and energy sector. Maybe consider some percentage in bond funds (age in bonds is a good rule of thumb for a starting point). Maybe add an international fund, although your actively...
by kmok
Tue Dec 09, 2014 9:09 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help with choosing funds!
Replies: 18
Views: 514

Re: Help with choosing funds!

I think Vanguard recommends no more than 5% of your portfolio be in sector funds. You have closer to 50% in the health and energy sector. Maybe consider some percentage in bond funds (age in bonds is a good rule of thumb for a starting point). Maybe add an international fund, although your actively...
by kmok
Tue Dec 09, 2014 6:34 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help with choosing funds!
Replies: 18
Views: 514

Re: Help with choosing funds!

Another reason I have so much in them is because they require a $3000 minimum. I figured they had more potential which is why I wanted a higher allocation of them in my portfolio. I'm just trying to be as agressive as I can be without overdoing it. Especially health fund, I don't know it is more ag...
by kmok
Tue Dec 09, 2014 5:51 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help with choosing funds!
Replies: 18
Views: 514

Re: Help with choosing funds!

Agreed with graphics0013 that we need more information. Just taking a quick look at your portfolio, you seem to have way too much in health funds and energy funds. These two sectors are already included in your 500 and extended market funds, so you are way over invest in these two particular sectors...
by kmok
Tue Dec 09, 2014 5:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help with choosing funds!
Replies: 18
Views: 514

Re: Why have more US than Intl Market Index?

Couple of reasons: 1. If you plan to retired in the US, your retirement expense will be tied to the dollar and the US economical growth 2. You can have a lower expense ratio investing in US equity. 3. You can do small and value tilts that yyoumay not be able to take advantage in international equity...
by kmok
Mon Dec 08, 2014 3:22 am
 
Forum: Investing - Theory, News & General
Topic: Why have more US than Intl Market Index?
Replies: 65
Views: 4054

Re: Net or Gross Exp. Ratio?

Basically, net expense ratio represents the amount actually paid as a percentage of assets under management, while the gross expense ratio is what shareholders would have paid if not for the waivers or reimbursements. So for the investor perspective, net expense ratio represent the historical actual...
by kmok
Fri Dec 05, 2014 10:46 am
 
Forum: Investing - Help with Personal Investments
Topic: Net or Gross Exp. Ratio?
Replies: 2
Views: 487

Re: Savings rate, when you start, withdrawal rate > AA

Use the Future Value Of An Annuity formula. saving rate impacts the C. When to start impacts n. asset allocation impacts i See how sensitive each variables are. Note that there is no free lunch in investing. Once you get the basic things right (such as diversification, investing expense, and etc), t...
by kmok
Fri Sep 19, 2014 3:33 pm
 
Forum: Investing - Theory, News & General
Topic: Savings rate, when you start, withdrawal rate > AA
Replies: 3
Views: 461

Re: Low Tax Bracket & Almost Retired - Tax Exempt or Not??

At her marginal tax rate it may not make sense to invest in tax free bonds in her portfolio.
by kmok
Wed Aug 20, 2014 12:44 pm
 
Forum: Investing - Help with Personal Investments
Topic: Low Tax Bracket & Almost Retired - Tax Exempt or Not??
Replies: 11
Views: 1201

Re: Question about Tax Advantaged/Taxable Best Strategy

But the reason I bring this up is because the vast majority of the people who posted in this thread believed that even if you are currently and in the future at 25% to 30% marginal tax bracket, no tax-adjustment is needed for taxable account, which is in conflict with the boglehead wiki page Tax-ad...
by kmok
Mon Aug 18, 2014 4:40 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

I think some of it should be changed. Under current tax laws, a large number of people will be in the 0% capital gains/dividend rate in retirement. That's currently around $90k annual income for a married couple filing jointly with standard deductions. And in the mean time, the effective tax rate o...
by kmok
Mon Aug 18, 2014 3:42 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

You'll see in my calculation, that I discounted the returns from the taxable account exactly as you did. I'm thought that what we should do is FIRST set the STOCK/BOND mix. We do that by calculating exactly how much money is ours. Since the money in period 0 in the taxable account is completely min...
by kmok
Mon Aug 18, 2014 2:47 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

We set our asset allocation at a particular point (say every year). We decide we want 60% stocks 40% bonds. We of course want to set this percentage on the money that we actually own. This is the correct way to look at it if you want to know how much money you have right now, or how much money you ...
by kmok
Sun Aug 17, 2014 11:06 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

Doc is correct. You have to be careful to tax adjust your AA before these comparisons can be done meaningfully. If I ever have time, I will build a free comprehensive model of this just so people can play with a spreadsheet and see that it really is better these days to put their stocks in IRAs und...
by kmok
Sun Aug 17, 2014 6:36 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

I have shown you in details my calculations and assumptions, and citing in details from the bogleheads wiki page. Option 1: AA at end 82.5/(102.25+82.5)=0.4465 Option 2: AA at end 108.5/(108.5+77.5)=0.5833 Option 2 has a higher result because it is more risky . You are mixing the allocation at the ...
by kmok
Sun Aug 17, 2014 6:33 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

A Goggle search on "bogleheads roth vs traditional" produces over 20,000 results. I am not going to repeat all the discussion. I have shown you in details my calculations and assumptions, and citing in details from the bogleheads wiki page. If you disagree, you should point out why my int...
by kmok
Sun Aug 17, 2014 4:04 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

The OP stipulated that he wanted to maintain his AA. Therefore the pretax return is not dependent on location. And minimize taxes should maximize after tax returns. Perhaps the problem here is that some are equating $1 in a tIRA to $1 in taxable. This is generally not true because the accrued taxes...
by kmok
Sun Aug 17, 2014 11:29 am
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Can I combine a Traditional and Rollover IRA?

Each state is different, but generally speaking in terms of asset protection, 401k is much strongerly protected than IRA. It is possible that the court would treat a rollover IRA as 401k (since it is directly originated from a 401k). but if you combine the rollover with an IRA, you may have loss tha...
by kmok
Sun Aug 17, 2014 9:03 am
 
Forum: Investing - Help with Personal Investments
Topic: Can I combine a Traditional and Rollover IRA?
Replies: 4
Views: 1991

Re: Selling VSS in taxable to move to IRA?

Your considerations are all valid. However, unless you provide the information about your whole portfolio, it is impossible to address your question. My gut feeling based on the current limited information is that selling your equity fund in taxable account does not sound right.
by kmok
Sun Aug 17, 2014 1:10 am
 
Forum: Investing - Help with Personal Investments
Topic: Selling VSS in taxable to move to IRA?
Replies: 5
Views: 499

Re: Question about Tax Advantaged/Taxable Best Strategy

I think this the the confusion you have. If you are not willing to try to educate yourself but just try to re-argue points that have been made over the course of many years I can't help you. Happy investing. If you still want to continue, you can look at this link: http://www.bogleheads.org/wiki/Ta...
by kmok
Sat Aug 16, 2014 10:31 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Do Private Company's have an advantage ?

Agreed with Tanelorn on compliance fee. Also, public companies tend to be in a bigger pressure to generate good financial results quickly as they have to do quarterly sec filing and stock prices are very sensitive the quarterly results.
by kmok
Sat Aug 16, 2014 5:20 pm
 
Forum: Investing - Theory, News & General
Topic: Do Private Company's have an advantage ?
Replies: 11
Views: 736

Re: Question about Tax Advantaged/Taxable Best Strategy

It is the tax on returns that matters , not the tax in the existing tIRA balance. You have to pay the 25% tax (whatever the assumption is here) on the existing balance no matter what you are investing, stocks or bonds. This is applicable to Roth, but we are not talking about that right now. You are...
by kmok
Sat Aug 16, 2014 4:09 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

The OP stipulated that he wanted to maintain his AA. Therefore the pretax return is not dependent on location. And minimize taxes should maximize after tax returns. This is not true. Perhaps the problem here is that some are equating $1 in a tIRA to $1 in taxable. This is generally not true because...
by kmok
Sat Aug 16, 2014 3:37 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

The OP stipulated that he wanted to maintain his AA. Therefore the pretax return is not dependent on location. And minimize taxes should maximize after tax returns. This is not true. Perhaps the problem here is that some are equating $1 in a tIRA to $1 in taxable. This is generally not true because...
by kmok
Sat Aug 16, 2014 2:22 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Question about Tax Advantaged/Taxable Best Strategy

Assuming the bonds are not tax free, you would most likely be better off in option B, because in taxable account long term capital gain tax is 15% and bonds tax would be at the marginal rate . The rate in IRA would be the same with stocks or bonds. So it is preferable to put stocks in taxable accou...
by kmok
Sat Aug 16, 2014 1:42 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934

Re: Should I Invest in both T-IRA & R-IRA?

I preferred the Roth route in the 25% tax bracket. Why?... I understand the RMD part, and it is a valid reason, but I think you are plain wrong on the first part in which you said you preferred Roth "Because the tIRA will save you one year of taxes, but will cost you taxes on multiples years o...
by kmok
Fri Aug 15, 2014 9:26 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I Invest in both T-IRA & R-IRA?
Replies: 34
Views: 1523

Re: Help a 19 year old with long term investing porfolio

Why do you feel the large growth fund is potentially not needed, and what would you put in its place? Agree with toto238 that your total stock market fund already includes large growth. Base on multiple research, the most famous by Eugene Fama and Ken French, value does better than growth in the lo...
by kmok
Fri Aug 15, 2014 8:44 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help a 19 year old with long term investing porfolio
Replies: 21
Views: 984

Re: Help a 19 year old with long term investing porfolio

First of all, you may be more risk averse than you thought you are. You don't want to panic during a market crash and sell your stocks at the market bottom. So I wouldn't recommend a 100% equity portfolio. 90%-80% equity would be reasonable. You can choose to take risk instead on value and small. Yo...
by kmok
Fri Aug 15, 2014 7:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help a 19 year old with long term investing porfolio
Replies: 21
Views: 984

Re: Please critique my portfolio

I think you should consider allocating more than 10% of your equity allocation to international stocks, especially consider the current valuations. I think 20-35% would be reasonable.
by kmok
Fri Aug 15, 2014 7:08 pm
 
Forum: Investing - Help with Personal Investments
Topic: Please critique my portfolio
Replies: 42
Views: 4318

Re: Question about Tax Advantaged/Taxable Best Strategy

The best strategy cannot be known today. It will only be known in hindsight. I like equities only in taxable, so I set my asset allocation to that effect. I keep all my fixed income in tax-advantaged. Would your opinion change if you were were going to implement a high tilt (e.g. a Larry Portfolio)...
by kmok
Fri Aug 15, 2014 5:24 pm
 
Forum: Investing - Theory, News & General
Topic: Question about Tax Advantaged/Taxable Best Strategy
Replies: 44
Views: 2934
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