jehanson

One of my favorite articles on investing, and a sobering read any time I get tempted to try active investing.

Does anybody know if there are any online tools that generates these RTM charts? For a while that's been my go-to toy project when testing out a new language/framework, but it'd be nice if there was something online integrated into legit data feeds for stock/fund performance.

There may be some survivorship bias here. Pleanty of people report that hitting water at high speed "feels like" hitting something solid. Very few people are alive to tell us what hitting somehting solid at high speed feels like.

This is why any analysis of Roth vs Tradiational is inherently flawed.

The maximum contribution amount for both Roth and Tradional accounts is $5,500.

If you're condidering funding a Roth with $5,500, that means that you committing $8,209 of pretax income (if your marginal rate is 33%) to the cause.

If you chose to go the Tradiational route with that $8,209, you'll put $5,500 in your Tradational account and have $2,709 of pretax earnings left over. Once you pay your 33% marginal tax on that, you'll have $1,815 left over to put into a taxable account.

So the real question is Would I rather have: $5,500 in a Roth IRA or $5,500 in a traditional IRA AND $1,815 in a taxable account.

At first glace the second option seems better, but this quickly evaporates when your time horizion is many decades in the future. The $1,815 you invested in the taxable account will see a slightly lower compound growth rate (as you have to liquidate a small fraction each year to pay the dividend/capital gains taxes that year). Even if the tax drag on your growth is just 40 basis points anually, that means over a 40 year horizon identically invested funds in the taxable account will be worth 15% less than in a tax-sheltered account.

For any reasonablly long time horizon, the extra tax sheltering of the ROTH is more advantagous than the higher nominal balance in the tradional&taxable scenario.

A frequentist is a person whose long-run ambition is to be wrong 5% of the time.

A Bayesian is one who, vaguely expecting a horse, and catching a glimpse of a donkey, strongly believes he has seen a mule.

http://www.statisticalengineering.com/frequentists_and_bayes...