Also worth knowing: Charles Schwab has reduced the minimum investment to $1 for 10 different index funds, many of which have expense ratios of 0.06% or lower. Their S&P 500 fund, for instance, has an expense ratio of 0.03% for any investment amount. Vanguard by comparison charges 0.15%, 0.04% for investments greater than $10k, and 0.03% for $3+ million.
That sounds much cheaper than the 0.25% that Betterment charges me. Do you happen to know if they offer a traditional/roth IRA and how much they charge?
They do. Vanguard doesn't charge anything extra for retirement accounts. It's just a matter of ticking a box when you sign up. Schwab is probably similar.
What if Schwab raises the .03% fee for their S&P 500 mutual fund to .06% in a few years?
They can change their rates anytime right? In that case it would have better to stick with VOO? Of course Vanguard could raise their rates too.
The one advantage of Vanguard is that the company itself is owned by its funds. So the very people who pay the admin fees are the ones who vote the leadership in or out. So raising fees would be unlikely unless necessary and they are known to be very frugal as a company as well so I feel like they are unlikely to need more fees. Especially with almost $3 Trillion under management.
Of course, there isn't any real cost to switching. So you could always switch to Schwab or vice versa as needed.
There isn't a large cost to switching brokerages and keeping the same funds (although it's a pain and some places do claw back $50 or so on the way out the door), but there could be a major cost to switching funds within your brokerage, eg. switching from SCHB to VTI. If you're not in a tax-deferred account, that switch will cause you to realize capital gains and pay a 15% tax at the moment of sale.
That's why I prefer to stick with Vanguard: like you explained, fund holders are their corporate owners and they're supremely unincentivized to perform a bait and switch. Schwab, on the other hand, could decide to raise admin fees 10 basis points tomorrow if they decided the revenue justified the increased churn.
Yeah, I think "a community for index fund investors" already exists, and it's the boglehead forums and wiki.
Index fund investing is (relatively) simple and (relatively) boring. Honest questions: What does an app with leader boards, individual portfolios, and stock picking add to that or how does this app fit in with that philosophy?
The only thing it seems to add is the opportunity for people to sell you high-margin investment products -- which is exactly what index fund investors are trying to avoid. Any investment product with a marketing budget is taking fees to pay for that, which means they will be unattractive to index investors.
My thought when going around the investment communities is that the challenge is not really the quantity of information/advice, but the quality. Anyone can give stock picks. To me, I'd like to understand more about the person's track records (historical returns) before following his advice.
I started working with my colleague to build Keel to facilitate the verified information flow. People who are selling their stock/fund ideas on Keel will have to integrate directly with their personal brokerages. This way, users who are looking to follow credible ideas can see not only the historical returns, but also the real buy/sell activities.
Working around brokerages is challenging but I believe transparency is an important missing piece in all of the online/offline sources of investment advice. Hope this will help those who offer credible ideas shine, and save time and money for those who look for advice. And (here comes to the self-promote part), if you think this is interesting, check it out: https://keel.io
Of course, if you don't think it's interesting, still let us know how we can make it more interesting to you!
How to schedule saving for retirement, annual fees, ETFs vs index Funds, index allocations, optimal portfolios based on personal temperament, and when to (very seldomly) change allocations (if ever)?
Any tips for investors in Europe? (Germany or UK in my personal case).
I understand that these strategies are not country-specific, but not sure if Vanguard is accessible to non-US citizens, and there might be tax implications in different countries. That's why I'm asking.
For folks in the United Kingdom, Vanguard index funds are now accessible through their new website[0]. Their website was released mid May 2017 and has caused a good shakeup[1] in the individual investor space as other stock brokers commission charges are incredibly high.
One thing about Index trackers is that the research and all the hype is largely about S&P500 and the US stock market. Europe wide indices are more complex and I haven't seen as much research. EuroStoxx 50 is very bank heavy and only has 50 stocks, the 600 is wider but not so popular. There is more of a case to buy active funds in Europe.
For tax specific stuff you should look at your regional sites eg
> (Germany or UK in my personal case) [...] not sure if Vanguard is accessible to non-US citizens, and there might be tax implications in different countries
Vanguard operate mutual funds in the UK priced and traded in GBP, through their UK subsidiary. They're available through most major trading platforms. The one thing to note about Vanguard's UK funds is that the management fees are higher than their US equivalents (but still one of the cheapest in the UK market).
As others have said, you can also just buy ETF versions of most of their funds, which are regular shares traded on the stock market. In that case you're buying in USD.
As far as tax is concerned it's treated just like any other investment (and if you're tax resident in the UK and still have an ISA allowance you can just put it in there and negate the tax entirely).
The idea of indexing doesn't require a specific index. It is more general than that. The idea that average returns are pretty good, and average returns with low cost-of-management are even better.
In order to get average returns, the key is simply to own a tiny fraction of the entire market, whatever "market" means to you. The focus has long been on the S&P simply because it has historically done a pretty good job of representing the US equities market, it is market-cap weighted (unlike the Dow), and the earliest index funds tracked the S&P.
It's my expectation, stated without proof, that it should be easy to find a comparable index in Europe, if you want to match the average European return.
The key idea behind index investing is paying low fees.
Non index funds perform the same as index funds (and research indicates you can differentiate the ones that outperform a priori with any method). But those funds have higher fees.
Good info! Sorry, our accounts keep getting rate limited.
I personally like to follow my own index fund portfolio. Then when I first started index investing there was about a 90 day period where I had to research and figure out what I wanted my own portfolio to be.
Also index funds do change over time. For example if you have more taxable income you will want a more tax advantaged index fund portfolio. You'll also want a special portfolio for your retirement accounts, and maybe something for your kid's 529 plan, etc...
There are many popular index fund communities for these reasons, plus lots of people find investing fun and interesting and like to learn more about it and help others.
I think this portfolio lacks an "antifragile" asset. Invest, say, 5% in something with high risks, high returns, and potentially anticyclic, such as cryptocurrencies.
To automatically see your returns rather than manually input your holdings, check out https://www.keel.io. Keel allows you to compare your returns to successful investors, and subscribe to their portfolios.
Well, if you are on a trajectory of a 30-year career job at one company with little to no changes in your income but adjustments and raises, then you probably don't need such a community. But judging based on Boggleheads forums, there's a need. Yearly re-balancing, changing your goals, windfalls, unplanned expenses, adjusting for tax efficiency, switching jobs, re-doing your portfolio because you did it horribly when you started, helping others who have a messy portfolio, and of course, the many questions every n00b has when they start.
Of course, Boggleheads would do just fine for any of these, but more options never hurt.
If this is about index funds specifically, that is definitely not clear. If anything I think this is NOT about index funds, but individual stocks. Index funds are basically set it and forget it, so why would I want to continuously use this app? Just buy some $SCHB, $SPY, $VTI, or whatever combo of index funds you want and that's it. Daytraders, swing traders, and people buying individual stocks would want to use an app on the regular.
> Index funds are basically set it and forget it, so why would I want to continuously use this app? Just buy some $SCHB, $SPY, $VTI, or whatever combo of index funds you want and that's it.
Because of re-balancing. Say you invest in three index funds at a 70/20/10 split. One of those funds performs much better than the others over time, leaving you with a distorted ratio. So you re-balance to get back to your original 70/20/10. Typically you'd re-balance one or two times a year.
Ideally you want to avoid selling to rebalance, so if you're investing regularly (once a month, for example) you want to know exactly which funds to put your money in to each time to maintain your percentage split.
Something that's never made sense to me about stocks:
Unless you're extremely wealthy, any money you are able to save (outside of retirement money) is probably money you are going to want to use for something to improve your life in the semi-near future. Buying a house or car (or just a better one) for example.
With that assumption in place, under what circumstances does investing in index funds make any sense whatsoever? The entire market crashes on occasion due to herd mentality, and yet even given that level of risk index funds still take many years to appreciate in value significantly. It seems like an absolutely terrible place to put money that isn't specifically intended for retirement or something like a 529 plan.
It's pretty popular in the Financial Independence crowd, where the goal is to get enough money to be able to live on interest alone. It's not for the extremely wealthy, rather the somewhat high-income middle class. You can even make it work with less income if you can manage to cut your expense.
Most people adjusts (ie: increases) their spending when they get additional income, but it doesn't have to be that way. In the end it's a lot about trade-off, like for exemple do you prefer stuff like going out to restaurant, owning a car, etc.
The FI crowd is 90% expense management and 10% investment. It seems like most folks there have a goal to stop working but are willing to do that and live like a pauper the rest of their lives. If that works for them, great, but I'd much rather work at a job I love, make very good money, and enjoy my life, rather than "retire" at 35 and live on $24k/yr in interest for the rest of my life.
I'd love to see a Financial Independence plan around growing [a] business(es) and retiring early but not crazy early (40-55) and living on a substantial middle/upper-middle income for several decades.
I've read some of those web sites and they're insufferable. Buy a house in cash so you have no payments, shop only at Goodwill, collect rain water for drinking, and never, ever get sick, and you, too can retire at 40!!
Sure, there are people in the FI crowd trying get by on $15k a year. Not my cup of tea, but if they're happy that way I say more power to them. But the community is a spectrum -- there's also a fairly large contingent (composed mainly of doctors, engineers and other high-income workers) whose savings at early-retirement time seem to cluster around ~$3M, allowing for retirement spending of $90-100k. That buys a solid lifestyle by almost anyone's standards. Obviously, that's predicated on having a high-earning career and taking saving seriously, but it's totally doable in 10-20 years.
Do-able? Maybe. High-earning is an understatement though. If you want to reach $3M in 20 years, you'd need to save about $100K per year, assuming, say, an annually compounding 4% interest rate across your savings and investments. A lot of people who might consider themselves high-earners don't even make that much in a year, let alone are able to save it.
Even assuming you're a gambler and put all your savings into stocks and get that mythical "steady 7%" return, you need to set aside $75K every year to reach $3M in 20 years.
I'm not claiming to be the world's best saver, but I think I live frugally enough, and after 20 years into a fairly good tech career, my savings is an order of magnitude+ less than that.
I don't think a 7% interest rate is unreasonable. One of the advantages of planning on early retirement means that you can take on a lot more risk with your investments, eg. putting everything into stocks (which isn't really "gambling" -- over long periods they've only ever gone up). If the markets are totally hammered the year you want to retire, no problem -- just keep working a few more years until they recover. And saving $75k a year is also quite reasonable if you have a high income, like a doctor or well-compensated engineer. I’m only a couple years into my career and am supporting my wife and kid, but we’re on track to save a bit more than that this year.
Of course, the lifestyle choices we make aren’t for everyone, and that’s fine. But they’re also not totally crazy. We can save that much still live about as well as the median American, and a lot better than the median human.
> I'd love to see a Financial Independence plan around growing [a] business(es) and retiring early but not crazy early (40-55) and living on a substantial middle/upper-middle income for several decades.
That's roughly my plan. My goal is to achieve financial independence, but my wife and I will continue working even after that. FI just gives us the freedom to do work the way we want.
My current projections put us at retiring roughly when we hit 40.
I just started my own business, which I hope to grow into a indiehacker/lifestyle type business; not a rapid growth startup. Just something I like working at and that earns a reasonable income.
All that said, I'm not sure why you think $24k/yr is a pauper lifestyle. In fact that's roughly our yearly expenses once we achieve "initial FI" * . That's in Southern California, and we hardly live like paupers.
By the way, I never got involved in the FI "crowd". I read through /r/personalfinance in the past, and check it occasionally. It's definitely very heavily expense management. Makes sense, since most people are really bad at expense management. And there is definitely not a lot of discussion about where to draw the line between cutting expenses and having fun. I can imagine that FI specific communities would be much worse in that regard.
But I think all of that is driven by the fact that these communities are composed of, well, everybody. And most everybody can only dream of maxing their IRA. For people in the HN crowd financial management is quite a bit different. We need advice on what to do after we max our 401k! (HINT: Start your own company and do a solo 401k). I think a lot of us are also very privileged already in what work we do. If you're a programmer, you can generally find a programming job you life that pays very well. For most everybody else, finding a job you life is either rare, or would mean taking a massive pay-cut. So while most people dream of FI being an escape from work, I think a lot of the HN crowd is like me; dreaming of FI as just ... freedom. Freedom to take a year off and work on a startup. Freedom to work for a local company for $150k/yr instead of working for Google to earn that fat $300k/yr.
EDIT: * Forgot to clarify that "Initial FI", for us, occurs after our house is paid off so $24k/yr is without a mortage. I editted out long-winded sections of my original comment and forgot to clarify :P
Yeah, same here, mortgage is huge in these expensive areas. But having the house paid off is part of our FI plan. That's probably not true of the more hardcore FI crowd. They believe, rightly so, that stocks are better investments than a house and that a mortgage is basically just free investment money. I don't disagree, but I want to own a home ... just cause. So our investment portfolio is definitely real estate heavy :P I sort of balance it out by having less in bonds and more in stocks compared to the Boglehead's advised ratios (I don't see the value in having bonds for an FI plan anyway, but perhaps I'm just misunderstanding something?).
EDIT: See my edit above; I realized I forgot to clarify that my $24k/yr figure was excluding mortgage.
Borrowing on your home to invest is just a terrible idea. You may see higher returns on the aggregate in the market but doing so is a good way to lose your home. Too much risk and like you, I think the small spread (and it is very small) between your mortgage and market returns doesn't even cover the risk premium of the potential to lose your home.
The idea isn't to borrowing against your home to invest.
Rather, the idea is that after you have your mortgage, you put your extra money towards your stock/bond investments rather than putting extra money into the mortgage to pay it off early.
This is because the interest on your mortgage is quite low compared to the long-term stock market returns (7-8% after taxes/inflation). So your dollars are more valuable there than spent paying off your mortgage.
In other words, if you take two people, each buys the same home, but one pours all their extra money into their home and the other pours it into the stock market, in 20-30 years the one who poured all the extra money into the stock market would have a much higher net worth.
I don't think real estate/paying into your mortgage is risk-free. I'd say it's about as risky as long term investments into the stock market.
Over all of recorded history, the stock market has gone up 10%/year on average (not accounting for taxes/inflation).
The common rebuttal to that is that past performance is not an indicator of future performance.
Sure, but then you have to apply the same logic to the supposedly "risk-free" real estate. I think it's just as likely that your house becomes worthless as the stock market no longer giving 10% returns.
My more general argument is that for all intents and purposes the stock market is a gauge of the overall economy. If suddenly the stock market stopped returning 10%/yr the economy as a whole would be in serious trouble. No investments, real estate or otherwise, would be safe. Your stocks would be as worthless as money stashed under a mattress.
That's my logic, at least. Of course, as I said, I don't follow that logic personally. Not that I don't agree with it, just that I'm willing to sacrifice financially in exchange for the satisfaction of owning our home.
I'm afraid your logic is a bit flawed here. The home value increase or decrease does not factor in when considering your mortgage. Your mortgage continues to exist no matter where your home value goes.
You have to pay that same mortgage even if the market tanks and your home becomes worthless. Even in the case of just "letting it go" the bank will take your worthless house and will still come after you for what remains on the mortgage.
That is why putting money into your mortgage is a "risk free" investment at 4% (or whatever your rate is).
If you borrow against your home to invest you don't lose your home if the investments tank, you only lose your home if you can't make the loan payments.
Yes, but lets hope your income is not based on investment success and that your job is still safe even in a market crash. Of course, if you have a steady, locked in income from a very safe pension or trust fund, then go ahead and borrow on your home. You don't have to worry about losing it in that case.
But you only have to go back to 2008-2009 to see how well that worked out for a very large swatch of the American populous.
Where are you "multiple hours" away from work (presumably in a place that doesn't have salaries close to what you make now) and still paying $2k/mo+ in housing?
That's one way of doing it, but there's no one-size-fit-all solution. Some do what you said and just stop spending anything. Not everyone retires either, it's just that they do work they like because they can afford it rather than having to.
It's really a personal experience, I know myself I don't feel like my life is missing anything even if I'm putting money aside to my future. I'm still traveling at least once a year, and I eat pretty good food all the time. At the same time, I don't have a car and rent one whenever I need one.
What confuses me most is how people expect to pay for healthcare costs, which keeps going up. I'm an independent contractor and it costs me 1k a month. More than double with family.
Personally, if I was dependent on my assets for the income I use to eat, I wouldn't want those assets to be ones that can wildly swing in value.
If I had enough other investments that the stocks were just icing on the cake that wouldn't be an issue, but that kind of goes back to my point of being extremely wealthy and having truly extra money you can park in risky stuff.
I'm not sure if my original post just wasn't clear enough or something. Retirement is great, my point was about non-retirement money.
Building capital for a business is exactly the kind of medium-term goal I was referring to, where you wouldn't want it getting spoiled by a market crash at the wrong time.
Numbers. It's all about how you feel about that risk of crashing vs the potential payout.
Say I'm squirreling away $5k a year for a new car in 4 years. Every year I put in another $5k, so by the end, I've put in $25k.
If I put that in a typical savings account, I earn 0.1% and come out $50 ahead. Effectively 0, or losing value once you throw in inflation.
Go with stocks, at a 5% return, I end up with over $27k, and at 8% I have over $29k. It's also true that I could lose value, and that's the gamble.
So it's a matter of your comfort level, obviously, and if you can't afford to lose the money, don't invest. But in many many cases, the reward outweighs the risk.
I view it that I'm much, much more likely to get a return > 0.1% than experience a loss over 5 years, and I'm willing to accept the risk.
The issue is that even after dramatic crashes my impression is that stocks generally beat bonds long term. That means that if one person put all theirs in stocks and the other in bonds the one in stocks is likely going to have more money later, even if the market crashed a few times in between.
I agree with your point entirely, but my point is that most people don't just sock money away for decades if it isn't specifically retirement money. Usually it is saved for some medium-term goal, which stocks could potentially spoil. Aside from that risk, why even deal with the psychological effect of that uncertainty for a paltry gain?
Most people can't come up with $2k in case of an emergency. Most people are living paycheck to paycheck. Don't be most people.
There is a compromise between living for the moment and living for the future. If you are saving for a house then you can move those investments to a less risky investment option but still a better return than bonds or interest. Keep your medium-term investments separate from your retirement account. I have short term, long-term non retirement, and long-term retirement accounts.
The gain isn't paltry. The difference between a 2% rate of return and a 5% rate of return for $5k initial + $50/month over 30 years is around $22k. If you do $200/month it's $59k.
We made the app after having friends and family members get ripped off by financial advisors. The purpose of the app is to teach others about low fee index fund investing. Thanks!
Don't get me wrong, but this is one of the worst product landing pages I've seen. Except for the short marketing line, there's NOTHING about the product there (why it exists, where does it work, how does it work, is it free, and so on), and it makes me NOT clicking that AppStore link for sure.
We have a discussion area and a leaderboard, plus you can build a simple index fund portfolio and track it inside the app. I hope this helps explain, thanks!
You have identified a well known area of interest... but you are not solving a problem. If a problem can't be solved with conversation with a trusted friend or relative then it's a slim chance an app and leaderboard are the right answer.
so... stocktwits? I don't see the value here. what would I possibly gain from following the portfolios of random shmucks who are more likely than not losing money?
Yeah or bogleheads. There's no shortage of information on this topic, you just have to be willing to read it instead of overpaying some financial advisor.
I like the idea.... why should I trust you for financial advice? How are you licensed? How do I know you're not using my data for trading, How do I know you're not feeding me false data you've already traded on?
Good question. We don't give financial advice. The app allows you to make a simple index fund portfolio with stock data, then monitor other user portfolios if you want. You can discuss indexing with other index fund investors in the "discuss" area.
Our other account got rate limited and says "you are submitting too fast" so we made this one.
I'm sad to see there's no signup via email. I don't have Facebook or Twitter and, although I do have a Google account, I prefer not to use it to authenticate services.
This looks great! Looks very polished and like something I'd really be interested in, but I'd love to be able to see what it's about before signing in. Will you be adding a way to do that, or at least login with email?
I will check it out. I have been reading Tony Robbins - 'Master The Game' which talks about index funds as a better alternative to high fee managed funds. This sounds like it could be a good source of info for picking them
OR do a 3 fund portfolio like: https://www.bogleheads.org/wiki/Three-fund_portfolio
OR buy a target retirement fund from Vanguard: https://investor.vanguard.com/search/?query=Vanguard%20targe...
OR fill out a risk profile on Wealthfront/Betterment and invest there.
Bottom line is pick an approach and don't ever touch a damn thing.
I believe this advice can fit on a single web page and doesn't need an app, a community or otherwise.