michaeljmroger wrote: ↑
Tue Oct 29, 2019 10:33 am
EddyB wrote: ↑
Tue Oct 29, 2019 9:20 am
Stinky wrote: ↑
Tue Oct 29, 2019 9:01 am
birdog wrote: ↑
Tue Oct 29, 2019 8:35 am
OP, it appears the consensus here is overwhelmingly against your proposed strategy. I'm curious if your mind has been swayed by the responses or if you still plan to go ahead with your strategy?
I'm also interested in OP's updated decision process, if it's changed.
I can't get over the 70bp per year fee drag. That seems like a huge headwind to the strategy. I'm also intrigued by how the fund being quoted above has returned higher than TSM for 1,3, and 5 year periods, when 95% of fund managers don't beat their benchmarks over the long haul (another recent BH thread).
But maybe there is something here, at least for folks who have a large enough portfolio to replicate the total market with individual stocks.
I remain a skeptic, but am interested in hearing more.
I’m a skeptic that it will be a huge savings at that rate, but think a lot (not all) of the posts here have failed to understand what’s happening, so I’m not sure the weight of the number of votes is compelling. While I hope the OP is thinking about the points raised, if he’s facing approximately a 35% tax rate on capital gains and expects his heirs to be able to wipe away his unrealized gains, I don’t think it’s an unreasonable bet. I am influenced by having seen (not used) index-tracking SMAs that closely follow the index using sampling only.
You’re absolutely right. Most of the responses completely miss the point, so I gave up trying to explain the rationale (heck, even the cold hard facts I provided such as the net annual returns are dismissed). If people are genuinely interested to learn about the approach, they can read this article
from ETF.com’s Dave Nadig.
I love the Bogleheads, and I appreciate the skepticism, but I don’t think it’s unfair for me to say that there’s often a dogmatic attitude when it comes to anything that’s not the one and only 3-fund portfolio.
Ok, Michael. I'm gonna be straight with you. You're making it basically impossible for people to give you accurate personal advice, by being dodgy about your exact financial situation in this thread. So people are giving you general advice, which applies to most people in your situation: this is a bad idea.
Hey, maybe those nice "private client" people took you to lunch, maybe you had a long conversation with them on the phone and felt like you had a "connection", maybe they invited you to a private downtown city party with free booze, food, and entertainment. Maybe they sent you a birthday card, or a free iPad. Doesn't matter. 0.7% is 0.7%. In the vast majority of situations, you're underwater with your approach, not even accounting for the other expenses of such a strategy. Bogleheads aren't criticizing you because you don't have a 3-fund portfolio. Hell, some of the best supportive replies I've seen were in response to a guy doing a leveraged ETF strategy. Bogleheads are criticizing your strategy
because it is a bad idea
in the sense that some ideas are so clearly inferior to others that it's not even a question of asset allocation.
In another post, you mentioned that the SMA had a higher return than the index it was tracking, and you actually put that down as a reason in favor of the SMA. No. That is just performance chasing, and possibly data-mining by the salespeople to make sure they get 0.7% of whatever windfall you're about to receive. The fact you listed such tracking error as a "positive" tells me everything I need to know. You like the special treatment you're getting from the salespeople. That's fine. Private parties are cool, but you still aren't obligated to give those salespeople your money. You're going to be rich. Perhaps instead of seeking dodgy schemes that charge you 0.7% to play with your money (with no refunds if they screw up!), there are more productive things you could be doing. Such as taking the near-unanimous advice of the Boglehead forum...
Again, you haven't answered critical questions that would allow any good-faith individual to endorse this investing strategy. You've also insinuated that this forum isn't open minded towards alternative approaches. So I'm left to conclude you are here for validation, not honest feedback. So, congrats on the future tech IPO, it's a great feeling, and you've probably worked very hard for it. Best of luck. Spend some time considering what you're going to do once you're financially independent.