I agree that there is a lot of gambling and excessive risk taking going on. And I myself stick to a 3 ETF portfolio because I like the simplicity. But to call it almost entirely just gambling I think is missing the point. There is some interesting and good stuff happening now in the intersection of social media and low cost trading, and it makes sense I think for VCs to be investing in that space.
It is difficult to convey this because, in the end, you have no idea either so you don't know whether there is useful stuff on YouTube or if I am just talking nonsense too...but it is so bad, and it gives the misleading impression that picking stocks is very easy. It isn't, people do CFAs (allegedly, a hard exam), MBAs, and work in fund management every day for decades...and will never come close to being profitable (indeed, what is amazing is how many people have no knowledge but end up doing okay...it is remarkable...the post is a perfect example, no content, no apparent understanding of investing...somehow the guy is a billionaire from investing, like Chamath...amazing).
It is gambling (the distinction between gambling and investing is information), what most VCs are doing in the space is financial terrorism (stuff like WealthFront is an unbelievable scam, it is 1980s-style financial advice), and most people should take your approach (although it is still very easy to go wrong with 3 ETFs...most people will get there though).
A crazy thing went on early with ETH bot trading. Of course, if you are going to download a bot from Github which works on a few trends and technical indicators, you should not expect to make a lot of money. But many did -- It is easy to predict whether a rocket is going up. The features the bot used are still indicative (at other timeframes), because so many were running them, influencing the price in future timeframes.
> misleading impression that picking stocks is very easy
At least picking a stock yourself is easier than predicting what stock someone else will pick.
> MBAs, and work in fund management every day for decades...and will never come close to being profitable
That seems like a cosy lifestyle not worth bragging about, good job security. Rooting for the night janitor at a small hotel though, who put a 1000$ on doge coin when first reading about the rememe potential.
But I agree with the gambling and financial terrorism for kicks. More as a warning against financial irresponsibility, less as in "stay of my turf!".
One of the big advantages that savers have today are open platforms (there was a time when fund managers ran their own platforms), low dealing costs, low spreads, and ETFs. All that investors need to do is just work out the asset allocation themselves and they will save huge amounts. And I would guess 95% of people reading this are able to do it.
Just to be clear, we are looking for a least bad situation. Asset allocation is very complex, there is no way most investors can get an amazing result themselves but what most investors don't know is that WealthFront have zero chance too. So the aim is to equal what they do without their mad fees (I have no idea how they charge so much, marketing? I don't know, I know small advisers that were profitable charging lower fees...it makes no sense).
This doesn't matter for a retirement account, though.
[1] https://support.wealthfront.com/hc/en-us/articles/209348486-...
Wealthfront has economies of scale to write a program to perform tax loss harvesting automatically. Just because it's not worthwhile for me to do it manually myself doesn't make it not worthwhile for a program to do it automatically. Wealthfront does daily tax loss harvesting on individual stocks. That would be a tremendous amount of work for me to do manually.
That said, I don't know whether Wealthfront's benefit outweighs their 0.25% fee.
I guess what we really need is a well-regarded open source program that hooks into brokerage's API and does this advanced tax loss harvesting.
Does WealthFront do anything at the individual stock level? My understanding from looking at their landing page [1] is that they basically just allocate your money across a number of publicly traded ETFs:
> How do you choose my investments?
> We choose exchange-traded funds (ETFs) that track an index, such as the S&P 500 or emerging markets. Wealthfront chooses the ETFs with the lowest costs and proper tracking of their index.
Also, you pay the expense ratios of those ETFs in addition to the fees that WealthFront charges:
> What are the costs to invest?
> We’re glad you asked. Our annual advisory fee is 0.25%. On average, you’ll also pay a low 0.06%–0.13% expense ratio. Companies who run investment funds charge this fee, and it comes straight out of that fund’s performance (you aren’t billed directly). Everyone who invests in ETFs pays this fee.
I think would be fairly easy for any ETF investor to approximate WealthFront's tax-loss harvesting strategy in their own brokerage accounts. E.g. simply go in once a quarter and sell any lots of VOO for a loss where possible, and replace with an equivalent like SPY.
https://support.wealthfront.com/hc/en-us/articles/211005023-...
(I am a customer.)
> For example, if an investor sells the SPDR S&P 500 ETF (SPY) at a loss, they can immediately turn around and purchase the Vanguard S&P 500 ETF.
> The rationale is that the two S&P 500 ETFs have different fund managers, different expense ratios, may replicate the underlying index using a different methodology, and may have different levels of liquidity in the market. Presently, the IRS does not deem this type of transaction as involving substantially identical securities and so it is allowed, although this may be subject to change in the future as the practice becomes more widespread.
[1] https://www.investopedia.com/terms/s/substantiallyidenticals...
>There has been no IRS ruling on whether ETFs from two different companies that track the same index are considered substantially identical.
https://www.fidelity.com/learning-center/investment-products...
>Investment advisors and tax planners recommend against selling an index mutual fund from one fund company and buying another index fund tracking the same stock index from another mutual fund company.
https://finance.zacks.com/substantially-identical-mutual-fun...
>And while arguably swapping from index funds like SPY to IVV are almost certainly a wash sale abuse (or at least, a transaction that should trigger the wash sale rules)
https://www.kitces.com/blog/the-wash-sale-problem-when-tax-l...
If you look at Wealthfront's own documentation, when they do tax loss harvesting with ETFs, they find ETFs that track similar but not identical indexes:
https://research.wealthfront.com/whitepapers/tax-loss-harves...
Can someone help me understand this comment as to my knowledge WeathFront (WF) fees were the lowest in the industry. For example people talk about Vanguard fees as also being low but they're between 0.25% and 1% [1]. If it makes a difference I'm specifically coming at it from the lens of IRA retirement contributions.
Is the parent post saying the alternative is to figure out what specific stocks/ETF/index WF is purchasing and then purchase those with something like eTrade?
TIA
On the other hand, you pay that 0.25% fee that WealthFront charges every year, regardless of the performance of your portfolio, and it can pretty quickly amount to thousands of dollars per year.
Most brokerages (Vanguard, Schwab, Robinhood, etc) don't charge any sort of equivalent fee - they are free to open and maintain. And yes it is fairly easy to construct an equivalent portfolio made up of ETFs in a standard brokerage account. You would be losing out on the convenience of WealthFront's automated rebalancing and tax-lost harvesting, though.
Is the convenience of automated investment, rebalancing, and tax-lost harvesting worth paying 0.25% of your total account balance every year? For me, no. But I know some people who are really happy with services like WealthFront and Betterment. Especially for someone just getting started with investing, I would have no issues recommending those services.
Edit: also just noticed you are referring to a retirement account. In that case, WF's tax-loss harvesting feature would not be applicable (since retirement accounts are tax-free), so even less of an incentive to go with WF vs. DIY.
Would you mind just mentioning what that is?
Do you happen to have those links?
As an example, I did do a quick search just now on YouTube and a guy named Charlie Chang came up. [1]
I haven't actually watched any of his videos before, but I took a look through his introductory video and it all looks like pretty sound advice to me. He also does monthly videos where he recommends specific stock picks, and his fundamentals-based approached seemed totally reasonable to me. This is the type of content I had in mind when I said there are reasonable videos being published on YouTube.
That's a bit of an oversimplification because I do have some other assets I've picked up over the years. But the bulk of my net worth is invested in those 3.
If I were to start over again I might even just hold SCHB, which I feel has enough international exposure to make SCHF and SCHE somewhat redundant, while also being more efficient for taxation purposes.
Canada has a lot of resource companies which largely follow the global economy.
Most big corps have less than half of their sales in US.
Developed markets still pay with a visa/MasterCard and have iphones. Or the US owns a stake in their local equivalent. Or Amazon is expanding there.
Truly emerging markets barely have a stock market, but their citizens probably eye a Coca Cola, have an intel PC and an android phone doing searches on Google.
Betting exchanges can offer good liquidity, tight spreads and commissions as low as 2%
gamestop was the example of what happens in the limit - only the DTCC prevented a global financial crisis as a circuit breaker of last resort.
Casinos wont let you put a billion $$$ on red or black just because they have a 1/37 edge on the roulette wheel. That variance is to high.
There are failure modes
>> if enough gamblers stick to one ticker, they can break the market
HF's, I assume, has had this power all along and they probably tried more than once to break the market.
So, what's the difference then, between internet hive minds and HFs and why should one take more blame than the other when it comes to "breaking things"?
Casinos need to ensure that they have enough liquidity to withstand a large bet hitting. The law of large numbers only works if you can survive the short term swings.
Nonsense, a few private funds losing a lot of money is not a financial crisis, it's just another Tuesday.
True heroes. God love em.
(Friendly reminder that the DTCC is basically owned by "Wall Street".)
Also, saying "no more" to refer to a blip fad is a ridiculous healdit.