Re:At Blackrock, machines are rising over managers to pick s...
by davenbuster on Sunday April 02, 2017 @10:22PM
(#14020204)
One tax advantage to approximating an index with individual stock positions is "tax loss harvesting": sell one stock at a loss and buy an equivalent. e.g., sell Coke and buy Pepsi. An advisor told me that you can add ~1% to your after tax returns. You need sufficiently large positions such that rebalancing transaction fees are negligible.
Re:At Blackrock, machines are rising over managers to pick s...
by loeg on Sunday April 02, 2017 @06:47PM
(#14019476)
> I expect that there are tax advantages to holding individual stocks rather than an index fund.
None that I am aware of. Mutual funds can force capital gains realization, but ETFs do not.[0]
IMO there's no reason to roll your own index fund when you can just buy an ETF with a very low expense rate. If you have enough money that rolling your own (costs a fair amount to manage) is cheaper than the public fee, you might be eligible for a special shareclass rate anyway.
[0]: http://www.investopedia.com/articles/investing/090215/compar...
Re:At Blackrock, machines are rising over managers to pick s...
by wahnfrieden on Sunday April 02, 2017 @09:50PM
(#14020126)
Here's one: as a US citizen living in Canada, I'm unable to invest in ETFs in Canada (e.g. Vanguard Canada's S&P500) without suffering punitive taxes and onerous reporting to the IRS. If it's an active investment, then it's fine, it's taxed as normal.
Re:At Blackrock, machines are rising over managers to pick s...
by user5994461 on Sunday April 02, 2017 @06:48PM
(#14019483)
Unless you're playing with a million dollar, the fees for rebalancing are more expensive than any returns you might make. Especially if you have to trade hundreds of funds separately.
Don't rebalance quarterly either. Index funds are long term, meaning years.
Is finding a subset an active strategy? Depends. Do you do it every day, or do you figure out your subset and then buy and hold for fifteen years?
Is it passive when you rebalance against your target quarterly?
I think we can all agree that it's not passive when you are doing HFT, and anything which involves picking new stocks daily or weekly is active -- but having an algorithm do the rebalancing against your existing target daily and executing when a threshold is met? You're not making new picks, just readjusting against what you've already picked.