So... how do I need to "further" my investing knowledge?

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TheBogleWay
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So... how do I need to "further" my investing knowledge?

Post by TheBogleWay » Mon Dec 11, 2017 4:32 am

Hey everyone. I'm going to summarize my knowledge on "investing" right now.. and I'd like those of you who know more than I do to tell me what else I need to know. I'm wondering if I know enough or if I need to learn more.

I understand:
  • -The concept of being frugal and putting spare money in investments
    -The idea behind emergency funds
    -A lazy 3-fund portfolio, learned mostly from this forum. I do about 60% total US, 25% total INTL and 15% BND via Vanguard and low ER index funds
    -I understand the value of 401ks, using them, as well as IRA. I use a Backdoor Roth every year and max that and my 401k out.
    -I've learned that while it's a debated topic, I think most posters here explained that your bond allocation may be best inside a 401k so I do that. That's where I keep my bonds.
    -rebalancing, and spending my extra energy on increasing my W2 so that I can have more to invest, stay the course and aim for long term compound interest.
That's basically all that I do for my "investing" life, I keep it very simple with those 3 funds. My nest egg is starting to get a decent size at about $700k as of Dec 2017, and I expect it to hit $1m in the next 1.5-2 years should the market continue to be at least average or better.

So now that I have a decent amount in there, I want to know if you guys think my knowledge and plan is good enough. Or.. from my summary above, is there anything I'm missing or not doing?

livesoft
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Re: So... how do I need to "further" my investing knowledge?

Post by livesoft » Mon Dec 11, 2017 5:19 am

How is your tax knowledge? Do you understand what you can do now to minimize your taxes in 5, 15, 36 years?
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TheBogleWay
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Re: So... how do I need to "further" my investing knowledge?

Post by TheBogleWay » Mon Dec 11, 2017 5:27 am

livesoft wrote:
Mon Dec 11, 2017 5:19 am
How is your tax knowledge? Do you understand what you can do now to minimize your taxes in 5, 15, 36 years?
Not quite.. I'm positive there's some valuable information I'm missing there, and I'm not just being modest.

Here's the thing... right now, I'm a full standard employee with one job. I receive a W2. Not married (won't be true for long. No business. No dependents. Buying my first home soon but it will be to live in, one single home and not an investment property. I don't sell stocks and never have/don't have plans to anytime soon. Outside of marriage and home buying, I don't expect the rest to change anytime soon... I mean maybe a surprise kid at most. I've heard of tax loss harvesting and get the general idea behind it but (fingers crossed) given that I'm in diversified index funds, I don't expect I'd need to use those... right?

Given those facts.. I'm probably the most simple "tax" situation possible for an American right?

Now that you know that, do you still think there are tax advantages I'm missing?

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FiveK
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Re: So... how do I need to "further" my investing knowledge?

Post by FiveK » Mon Dec 11, 2017 5:50 am

TheBogleWay wrote:
Mon Dec 11, 2017 5:27 am
Now that you know that, do you still think there are tax advantages I'm missing?
Probably nothing significant.

If you read through Investment Order and Prioritizing investments and can say "yes, doing all that" (or have good reasons why not) then the likelihood you are missing anything significant gets even smaller.

The Wizard
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WeRe: So... how do I need to "further" my investing knowledge?

Post by The Wizard » Mon Dec 11, 2017 8:16 am

Couple of points:
1) Your aim is long term Growth, not long term "compound interest".
2) And you want to be knowledgeable about your long term Savings Rate, at least 10% of gross income to start, going up to 25-30% of gross as the years go on.

That tax-loss harvesting thing is an advanced topic, meaning that you want to max out your 401(k) contribution and your Roth IRA contribution first, which is around $24,000 combined. Once you max out that tax sheltered space, your taxable account is next, and that's where TLH applies...
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JBTX
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Re: So... how do I need to "further" my investing knowledge?

Post by JBTX » Mon Dec 11, 2017 9:22 am

Taxes are generally pretty simple for a single employee

One thing you probably don’t need right now but down the road you will is when to use traditional
IRA vs Roth and to start thinking about Roth conversions etc as you approach retirement. Also down the road you’ll need to understand safe withdrawal rates.

You probably don’t need to worry about it now but if the markets tank it’s probably worth considering some tax loss harvesting in your taxable accounts.

Sounds like your better off in knowledge than 95%+ of investors out there so congrats!

The problem with investing and personal finance is that most “knowledge” out there is junk knowledge regarding market timing, trying to beat the market, etc.

asif408
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Re: So... how do I need to "further" my investing knowledge?

Post by asif408 » Mon Dec 11, 2017 9:56 am

I'd probably brush up on financial history and investor behavior. They probably won't change anything you do currently, but IMO it's a good idea to understand what has happened in the past and how people behaved in the past to give some insights into what you might be able to expect in the future. Whenever we have a crash in the future it will probably be different in some ways but also similar in other ways, and it's good to be prepared so you react in a productive way.

TheBogleWay
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Re: WeRe: So... how do I need to "further" my investing knowledge?

Post by TheBogleWay » Mon Dec 11, 2017 6:39 pm

The Wizard wrote:
Mon Dec 11, 2017 8:16 am
Couple of points:
1) Your aim is long term Growth, not long term "compound interest".
2) And you want to be knowledgeable about your long term Savings Rate, at least 10% of gross income to start, going up to 25-30% of gross as the years go on.

That tax-loss harvesting thing is an advanced topic, meaning that you want to max out your 401(k) contribution and your Roth IRA contribution first, which is around $24,000 combined. Once you max out that tax sheltered space, your taxable account is next, and that's where TLH applies...
I'm assuming my "long term savings rate" is just my savings of annual after tax income? Currently I'm saving over 50%, probably about 65-85% depending on the year, obviously a great number so I'm guessing I also don't need to focus on that?

Thanks

TheBogleWay
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Re: So... how do I need to "further" my investing knowledge?

Post by TheBogleWay » Mon Dec 11, 2017 6:50 pm

FiveK wrote:
Mon Dec 11, 2017 5:50 am
TheBogleWay wrote:
Mon Dec 11, 2017 5:27 am
Now that you know that, do you still think there are tax advantages I'm missing?
Probably nothing significant.

If you read through Investment Order and Prioritizing investments and can say "yes, doing all that" (or have good reasons why not) then the likelihood you are missing anything significant gets even smaller.
Thanks man. Just for the sake of the thread, I'll copy paste that investment order list and comment in bold after each one if I'm doing it.

0. Establish an emergency fund to your satisfaction - done a little bit/satisfactory level.
1. Contribute to your 401k up to any company match - done
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield. -done
3. Max HSA -My health insurance only allows for an FSA I believe (high deductable I think?) and FSA only allows for $500 to carry over.. so putting for example $5k into my FSA wouldn't make sense unless I planned on spending all $4,500 that calendar year - so I don't do.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level -I do a backdoor roth, income close to $250-290k/year. Maxing annually.
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5) -401k just about maxed I think
6. Fund a mega backdoor Roth if applicable. -don't do, without sounding whiny, this sounds really complex and not entirely sure it's worth it.. maybe I'm just being dumb though :)
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield. - my only debt is about 4% interest rate or lower, and because of that I prefer to keep that loan out and keep my money invested in stocks which should outperform that 4% on average.
8. Invest in a taxable account with any extra. -I do this.

Random Walker
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Re: So... how do I need to "further" my investing knowledge?

Post by Random Walker » Mon Dec 11, 2017 7:01 pm

Agree with reading financial history. It sort of builds up the muscles and fortitude to stay the course. A great book is Devil Take The Hindmost.

Dave

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FiveK
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Re: So... how do I need to "further" my investing knowledge?

Post by FiveK » Mon Dec 11, 2017 7:11 pm

TheBogleWay wrote:
Mon Dec 11, 2017 6:50 pm

3. Max HSA -My health insurance only allows for an FSA I believe (high deductable I think?) and FSA only allows for $500 to carry over.. so putting for example $5k into my FSA wouldn't make sense unless I planned on spending all $4,500 that calendar year - so I don't do.
Might be worth checking on this so the HSA/FSA distinction is clear to you. If you do have a High Deductible Health Plan (HDHP) then you may be eligible to fund an HSA. See Publication 969, and talk with your benefits' department, for more details.
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5) -401k just about maxed I think
With your income, no reason not to do the full $18K. :)
6. Fund a mega backdoor Roth if applicable. -don't do, without sounding whiny, this sounds really complex and not entirely sure it's worth it.. maybe I'm just being dumb though :)
Up to you. How much is it worth to pay 0% instead of 15% on all the qualified dividends and long term capital gains, and 0% instead of 33% on interest, short term cap gains, etc.?
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield. - my only debt is about 4% interest rate or lower, and because of that I prefer to keep that loan out and keep my money invested in stocks which should outperform that 4% on average.
With the T-note running ~2%, you are following this guideline. It may be on the aggressive side for some, but if your desired asset allocation does not include bonds then you are being consistent.

For this and all the rest: keep up the good work!

TheBogleWay
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Re: So... how do I need to "further" my investing knowledge?

Post by TheBogleWay » Mon Dec 11, 2017 8:38 pm

FiveK wrote:
Mon Dec 11, 2017 7:11 pm
6. Fund a mega backdoor Roth if applicable. -don't do, without sounding whiny, this sounds really complex and not entirely sure it's worth it.. maybe I'm just being dumb though :)
Up to you. How much is it worth to pay 0% instead of 15% on all the qualified dividends and long term capital gains, and 0% instead of 33% on interest, short term cap gains, etc.?

For this and all the rest: keep up the good work!
Ah... sounds like I need to learn more! That's worth a lot. I should probably get on that... damn just when I thought I could relax ;) thanks man.

I'll research mega backdoor roths when I get the mental energy to do so.

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Peter Foley
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Re: So... how do I need to "further" my investing knowledge?

Post by Peter Foley » Mon Dec 11, 2017 8:58 pm

I agree with the comments about understanding behavioral aspects of investing. This will help you to stay the course during the next recession.
Why Smart People Make Big Money Mistakes by Belsky and Gilovich and Your Money & Your Brain by Jason Zweig are two oft recommended books on the subject.

I find the Belsky take on the matter an easier, more entertaining read. I'm sure Taylor has "Gems" from both on the forum.


Not to complicate your life, but I know one of my shortcomings is understanding which bond fund to use in the 3 fund portfolio (or should it be two bond funds for a 4 fund portfolio?).

TheBogleWay
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Re: So... how do I need to "further" my investing knowledge?

Post by TheBogleWay » Mon Dec 11, 2017 11:47 pm

Peter Foley wrote:
Mon Dec 11, 2017 8:58 pm
I agree with the comments about understanding behavioral aspects of investing. This will help you to stay the course during the next recession.
Why Smart People Make Big Money Mistakes by Belsky and Gilovich and Your Money & Your Brain by Jason Zweig are two oft recommended books on the subject.

I find the Belsky take on the matter an easier, more entertaining read. I'm sure Taylor has "Gems" from both on the forum.


Not to complicate your life, but I know one of my shortcomings is understanding which bond fund to use in the 3 fund portfolio (or should it be two bond funds for a 4 fund portfolio?).

I like to think I'll be ok "staying the course" - I do have time on my side, but that being said I've never been through a recession. I started investing ~6-7 years ago and it's been all uphill in my experience for the most part. So I'll read.

However.. what are the cliff notes? Is the general strategy if stuff starts tanking just don't sell no matter how tempting it is?


and yeah, I'd like to know what you learn about bonds.. I just use BND and keep it in my 401k.. is that not ideal?

snarlyjack
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Re: So... how do I need to "further" my investing knowledge?

Post by snarlyjack » Tue Dec 12, 2017 7:26 am

TheBogleWay,

First of all congrat's on what you have accomplished.

The "Cliff Notes" of my studying the "Millionaire Next Door" types.

Once they built their portfolio's:
1). Kept adding to the portfolio.
2). Never ever sold it, no matter what.
3). Their portfolio's were aged... Think old money.
4). Think of the Queen of England or the Hershey Trust (old money).
5). Like cooking...the stew has to simmer & cook.
6). Don't over think it, don't get complicated or fancy, keep it simple.
7). Tell me how you did 50 years from now, in the mean time have a good life.
That's the big secret.

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Peter Foley
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Re: So... how do I need to "further" my investing knowledge?

Post by Peter Foley » Tue Dec 12, 2017 9:45 am

TheBogleWay wrote:
However.. what are the cliff notes? Is the general strategy if stuff starts tanking just don't sell no matter how tempting it is?
For me the most important aspect was understanding "set points." If we bought something for a certain price we believe that is its value regardless of what the market says.

Yes, the general strategy is to set your AA during a non stressful time, put it in writing, and refer to it and follow it when stuff starts tanking. Writing an investment policy statement is a little more involved than this, but you asked for the Cliff notes version.

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