NFT: Stocks Question for you experts

First off I think you have a lot more Apple than you think, all these funds also own a chunck of Apple. A quick look up shows that both SPY and VTI have Apple as their largest holding, at around 7% of the fund. So in reality you own a lot of Apple. If you are trying to consolidate risk and hit some kind of "breadth", which I think is what you mean, then I would recommend staying with SPY. I'd also pick another fund or two for specific areas to get more exposure in them. For example maybe add a tech fund, or a financial focused fund, an energy fund, or a utilities fund (whatever you like).

This will give you more rounded exposure, but by eliminating individual stocks it will reduce the risk.

yeah I guess I do own a lot of AAPL. Fortunately it's done well.

Ashamed to admit I bought into Coinbase when it was really really high. I'm down on it but I won't sell in case it ever does rebound.

Don't worry too much about the Expense Ratio. On $100K, 0.03% is $30, and 0.09% is $90. Both ETF's gain enough to cover that amount handily.

AAPL is the largest single stock held in SPY, it's probably big in VTI too. That's a large chunk of your overall portfolio.....not that AAPL is going to go belly-up anytime soon.

Do you have a 'sector' that you like to follow ?? Anything particular in your Work Experience ? Health Care ? Energy ?
A play on AI like BOTZ has been blowing up lately.
?Look at some of the Spider ETF's.

Unless you have time to do lots of research on your own, you can do a whole lot worse than SPY and VTI. Just stick to those. If you're adding to those positions every so often, I'd go two-thirds in VTI and one-third in SPY (just to balance things out before you can go 50-50 again). Once in a while you'll come up with a really strong conviction on something (an individual stock), and that's fine too. But your 'meat and potatoes' diet for now is perfectly acceptable.

I wish i had started feeding into SPY in 2015 when i first started "investing"...heavy emphasis on the quotations.

In comment 16130434 The Dude said:

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I wish i had started feeding into SPY in 2015 when i first started "investing"...heavy emphasis on the quotations.

You're still young, plenty of time.

In comment 16130408 DC Gmen Fan said:

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yeah I guess I do own a lot of AAPL. Fortunately it's done well. Ashamed to admit I bought into Coinbase when it was really really high. I'm down on it but I won't sell in case it ever does rebound.

For future reference. The number one priority when investing is preserving your capital. Use stop losses whenever you are speculating on a stock. Don’t fall in love or marry a stock to the point you continue to ride downwards. If it no longer has the same valid reasons for initially buying it be willing to cut your losses and get out.

We’ve all been there but if you can learn to be disciplined with losers you will make much more over a lifetime of investing.

To begin with, the S&P 500 is NOT a diversified index. It is dominated by seven companies- Apple, Microsoft, Tesla, Alphabet, Amazon, Nividia and Meta. These seven stocks account for more than 95% of the 2023 gains in the S&P 500. The other 493 stocks are essentially flat (collectively). With your investment in Apple and owner ship of funds, you have a lot of risk in owning a large portion of your assets in one name. A concentrated position. While it mat work well now, it may not in the future. Then what?

As a fiduciary, I encourage my clients to diversify. I do not use ETFs or mutual. Especially for a taxable account, these pooled investments are very tax inefficient. And if pooled investments are used for fixed income exposure, that is dangerous, as 2022 has showed us.

Once in retirement, it is about distributions, and the ability of your portfolio to generate the income you need to maintain your lifestyle. ETFs and mutual funds limit your ability to generate the necessary income.

Just my two cents, It is how I work with clients and difficult to steer clients away from stocks that have treated them very well.

In comment 16130445 Matt123 said:

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In comment 16130434 The Dude said: Quote: I wish i had started feeding into SPY in 2015 when i first started "investing"...heavy emphasis on the quotations. You're still young, plenty of time.

I know i get it. Live and learn. I've fed it pretty well the past few years....but I just look back at some of the...lets say ill-advised investments made and what that money would be today if it were in SPY. Again, lessons learned!

ETFs are not tax efficient? I thought that’s exactly what they are used for and one of the main reasons they are chose over mutual funds.

Also, as a CFP, if you don’t recommend ETFS/mutual funds, what do you offer your clients?

Don't want to speak for johnyb, but I think he meant that Bond ETF's are not efficient in a taxable account. If you want to hold bonds, an IRA or 401K would be the more efficient place.

In comment 16130519 rsmith32 said:

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ETFs are not tax efficient? I thought that’s exactly what they are used for and one of the main reasons they are chose over mutual funds. Also, as a CFP, if you don’t recommend ETFS/mutual funds, what do you offer your clients?

I am not a cfp but use one
You cannot sell individual stocks and harvest tax losses
I use a variety as actively managed accounts so you can see the stocks within. Basically looking under the hood and can weight positions accordingly.

Also if you have say 100 shares of apple you can then do covered calls with them vs selling outright

In comment 16130519 rsmith32 said:

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ETFs are not tax efficient? I thought that’s exactly what they are used for and one of the main reasons they are chose over mutual funds. Also, as a CFP, if you don’t recommend ETFS/mutual funds, what do you offer your clients?

You get those “ phantom capital gains” yr end in taxable accts
My clients get pissed when they pay taxes on something they haven’t sold
Always a pleasant discussion

In comment 16130468 johnnyb said:

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To begin with, the S&P 500 is NOT a diversified index. It is dominated by seven companies- Apple, Microsoft, Tesla, Alphabet, Amazon, Nividia and Meta. These seven stocks account for more than 95% of the 2023 gains in the S&P 500. The other 493 stocks are essentially flat (collectively). With your investment in Apple and owner ship of funds, you have a lot of risk in owning a large portion of your assets in one name. A concentrated position. While it mat work well now, it may not in the future. Then what? As a fiduciary, I encourage my clients to diversify. I do not use ETFs or mutual. Especially for a taxable account, these pooled investments are very tax inefficient. And if pooled investments are used for fixed income exposure, that is dangerous, as 2022 has showed us. Once in retirement, it is about distributions, and the ability of your portfolio to generate the income you need to maintain your lifestyle. ETFs and mutual funds limit your ability to generate the necessary income. Just my two cents, It is how I work with clients and difficult to steer clients away from stocks that have treated them very well.

I am not a CFP
But in the camp of keeping it simple for the first 1/2 million of retirement funds
SPY is definitely top heavy but a solid start. Is still own vanguard Wellington too
Classic balanced fund. But that in my 401k so don’t have to worry about tax efficiency

Tech is one of the few industries actually in a recession, or so believed to be by the tech companies themselves. That means QQQ is pretty good value at this moment vs something like SPY or VOO.

In comment 16130552 pizbo said:

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Tech is one of the few industries actually in a recession, or so believed to be by the tech companies themselves. That means QQQ is pretty good value at this moment vs something like SPY or VOO.

Isn’t the QQQ still mostly tech?
Or not anymore?
Johnny can give a solid asset allocation
Small cap and foreign should probably be included too

In comment 16130519 rsmith32 said:

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ETFs are not tax efficient? I thought that’s exactly what they are used for and one of the main reasons they are chose over mutual funds. Also, as a CFP, if you don’t recommend ETFS/mutual funds, what do you offer your clients?

So, RSmith you are telling me I am wrong? Really? Are you in th financial services business?

ETFs are NOT tax efficient. They exist to allow small individual investors the opportunity to hold a basket of stocks for a low cost. As mentioned, tax loss harvesting cannot be done when investing with ETFs. You also do not know what you own at any point in time, so transparency is non- existent.

I build portfolios with individual stocks and corporate or muni bonds. My portfolios reflect my cliens' goals and risk tolerance, so I am able to cuatomize the portfolio to reflect these goals and risk tolerance. Every client is different. ETFs and mutual funds do not offer transparenct and customization. I believe in knowing what you own, and, more importantly, why you own it. ETFs and other pooled investments try to fit a square peg ina round hole.

In comment 16130530 56n11bestever said:

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In comment 16130519 rsmith32 said: Quote: ETFs are not tax efficient? I thought that’s exactly what they are used for and one of the main reasons they are chose over mutual funds. Also, as a CFP, if you don’t recommend ETFS/mutual funds, what do you offer your clients? I am not a cfp but use one You cannot sell individual stocks and harvest tax losses I use a variety as actively managed accounts so you can see the stocks within. Basically looking under the hood and can weight positions accordingly. Also if you have say 100 shares of apple you can then do covered calls with them vs selling outright

Well said. Thank you.

Really interesting comments. Are there any reason aside from tax loss harvesting that ETFs/funds are inefficient?

I think there’s enormous technology risk embedded in those FANG stocks. We are on the cusp of a massive change to the information ecosystem. Those stocks are enormous, have very high valuations and each of them can be a has been in a decade. I just don’t see the upside and there’s plenty of downside.

In comment 16130577 cosmicj said:

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Really interesting comments. Are there any reason aside from tax loss harvesting that ETFs/funds are inefficient?

Other inefficiencies are diversification, or lack there of, as already mentioned. Ability to manage risk is another- ypou have to control over what is in the portfolio. And owning more than one pooled investment may indicate you are diversified, but most of these funds own the same seven names, so you are just doubling down.

I work with a lot of clients who are retired and depend on their portfolio for income. I can target a yield, say 4%, 4% 5% or more, and also directly control the allocation between stocks and bonds.

In fixed income ETFs, you never hold your bond to maturity. In an environment like 2022, where interest rates are rising (and bond values falling), fund managers were forced to sell securities to satisfy redemptions, selling at a loss. As a fund holder, the value of your investment is determined by other investors. I like to think of it as swimming in a public pool vs. a pool in your own backyard. Owning individual bonds allows you to hold the bond to maturity, thus recouping the money you lent.

in the face right now.

I kept it simple. Buy and hold in Vanguard low cost index funds. Don't involve any financial advisors. Saved when I was young. I'm not even 50 and I already 3 million in my retirement fund, even with the shitty past year in stocks. Stealth wealth is the best and I can't wait to surprise everyone with my early retirement when I'm 50 and say adios MFs to everyone.

I think you misinterpreted the tone of my question there. It was a genuine question on ETFs and what you, as a CFP, recommend to clients…and no, I am not a financial professional

Isn’t that a way to use tax-loss harvesting with ETFs? I certainly can be wrong, but I think there some ways to do this in some scenarios.

Curious about your thoughts on QYLD? It was returning over 12% but got wrecked in this last bear market.

Also, what do you think about I-bonds from Treasury Direct? I have most of my fixed income stuff there.

have almost the exact same top holdings, what's the difference?

I bought SPY in March 2020 when the market tanked, i dont have any qqq right now but how is one better than the other?

In comment 16130665 cjac said:

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have almost the exact same top holdings, what's the difference? I bought SPY in March 2020 when the market tanked, i dont have any qqq right now but how is one better than the other?

Caveat. I may be mentally challenged. BUT
I bought some Tesla and nvidia pretty low ( over the last yr). :)
Will be volatile as hell, probably way over valued But both can also triple by 2030
Apple is my core. Does it beat market over next 5-7 yrs?
Will see how VR/AR takes off ( it will take a few yrs. But that product has crazy potential as they bring price down etc. also interested on how they get into autonomous cars, if at all)
90% of my funds are in etfs/ funds in retirement accts. Only speculate/ individual stocks last 10%

I pulled out in 2012 and invested almost 100% in Real Estate. Set up a self-directed IRA (Checkbook IRA) and never looked back. I am happy getting 10-12% returns annually on rents. Not to mention the potential asset appreciation when selling.

I'm older, so I wanted to see my investments. I am no fan of Vanguard, Fidelity, or Blackrock. I want to know where my money is going!

Good luck with your plans.

In comment 16130602 penkap75 said:

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I kept it simple. Buy and hold in Vanguard low cost index funds. Don't involve any financial advisors. Saved when I was young. I'm not even 50 and I already 3 million in my retirement fund, even with the shitty past year in stocks. Stealth wealth is the best and I can't wait to surprise everyone with my early retirement when I'm 50 and say adios MFs to everyone.

Yup. You're speaking my language.

In comment 16130602 penkap75 said:

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I kept it simple. Buy and hold in Vanguard low cost index funds. Don't involve any financial advisors. Saved when I was young. I'm not even 50 and I already 3 million in my retirement fund, even with the shitty past year in stocks. Stealth wealth is the best and I can't wait to surprise everyone with my early retirement when I'm 50 and say adios MFs to everyone.

Good job. This is the way.

In comment 16130694 upnyg said:

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I pulled out in 2012 and invested almost 100% in Real Estate. Set up a self-directed IRA (Checkbook IRA) and never looked back. I am happy getting 10-12% returns annually on rents. Not to mention the potential asset appreciation when selling. I'm older, so I wanted to see my investments. I am no fan of Vanguard, Fidelity, or Blackrock. I want to know where my money is going! Good luck with your plans.

Agree 100%. I am the same way and stay away from investments made of paper.

All of the true wealth I have been able to build has come from real estate investments. No matter what the market is doing, real estate is always profitable.

With interest rates up, this is a great time to buy. If you are not comfortable diving in on your own, you can always invest with others who are developers and who know what they are doing.

Berkshire Hathaway is much like a mutual fund. They own 30 or 40 companies and invest in 30 or 40 more. Household names like Coca-Cola, J and J, etc. They also own a bunch of Apple but I think that's a good thing. You get the benefit of compounding dividends without having to pay taxes on the accumulation until you sell the stock.

In comment 16130602 penkap75 said:

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I kept it simple. Buy and hold in Vanguard low cost index funds. Don't involve any financial advisors. Saved when I was young. I'm not even 50 and I already 3 million in my retirement fund, even with the shitty past year in stocks. Stealth wealth is the best and I can't wait to surprise everyone with my early retirement when I'm 50 and say adios MFs to everyone.

Boom! This. I can guarantee you almost all the money managers out there can't touch the S&P 500. You're just wasting money outside the 'cheaper' index funds.

In comment 16130664 NNJ Tom said:

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Curious about your thoughts on QYLD? It was returning over 12% but got wrecked in this last bear market. Also, what do you think about I-bonds from Treasury Direct? I have most of my fixed income stuff there.

This is NOT a professional opinion. As far as Ibonds, you can now do better with investing in CDs getting 5% and above. However, if you have money already in IBonds, I wouldn't put new money into them. I would consider buying Ibonds that have a 0.9 fixed rate ABOVE inflation. That rate will last until through end of October. If you already invested your $10,000 per person this year, you can gift $10,000 to your spouse (and vice versa), locking in the rates at that time, and get them delivered in January 2024. Consider cashing $10K of your existing Ibonds that have a 0% fixed rate.

Pay attention to when the best time to cash those Ibonds. Follow the linked article below as to when the best month to exit your Ibonds.By the way, this website has many interesting and informative articles about IBonds. They will figure out what the variable rates will be two weeks before they are published by the Government. (Fixed rates won't be known until the Government announces them)

Personally. I am waiting until Mid October to hedge my bets as to what to do with my next purchase and sale. If i was to decide today, I will sell existing IBonds (0 percent fixed) I bought in January 2022, and use those funds to gift myself 2024 bonds, locking in the 0.9 fixed rate forever.

I hope this helps you about IBonds.


When to exit your IBonds - ( New Window )

In comment 16130602 penkap75 said:

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I kept it simple. Buy and hold in Vanguard low cost index funds. Don't involve any financial advisors. Saved when I was young. I'm not even 50 and I already 3 million in my retirement fund, even with the shitty past year in stocks. Stealth wealth is the best and I can't wait to surprise everyone with my early retirement when I'm 50 and say adios MFs to everyone.

I’ve been teaching my son this very thing, he is working while in college and already is off to a nice start. Compounding is such a powerful tool in investing and by far time us the most powerful factor in that equation

Good job!

.

In comment 16130602 penkap75 said:

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I kept it simple. Buy and hold in Vanguard low cost index funds. Don't involve any financial advisors. Saved when I was young. I'm not even 50 and I already 3 million in my retirement fund, even with the shitty past year in stocks. Stealth wealth is the best and I can't wait to surprise everyone with my early retirement when I'm 50 and say adios MFs to everyone.

I am with Penkap here. My head starts swimming when I read through Barron's and try to get a grasp on the nuances high finance. By and large, I own the same bluechip stocks and mutual funds I bought a long time ago that I rarely--if ever--dip into. If the world implodes and the whole thing goes belly up then I'm sure I will turn to the experts who are admittedly much brighter than I am, but thus far the "keep it simple, stupid" strategy has served me well.

In comment 16130602 penkap75 said:

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I kept it simple. Buy and hold in Vanguard low cost index funds. Don't involve any financial advisors. Saved when I was young. I'm not even 50 and I already 3 million in my retirement fund, even with the shitty past year in stocks. Stealth wealth is the best and I can't wait to surprise everyone with my early retirement when I'm 50 and say adios MFs to everyone.

Good for you! I like hearing things like this. I'm 64 and retired. When I was younger all I heard was you have to diversify and stick with the 60/40 rule. I didn't listen and did my own thing which involved heavy tech. My portfolio didn't get to $3 mil, but it was good enough with my pension to reire comfortably at 59 1/2.

Into mdy to diversify a little?