Talking stocks, trading, and investing in general - Page 695
Been having fun creating asset mixes that combines the best of three worlds.
Some bonds for good measure.
Trying to identify the closest corresponding funds in Vanguard to bookmark for later.
The problem with factor premia is that factor rotation is like sector rotation or plain old stock picking: in the long run very tough to generate consistent excess return net of fee/trading/tax. Recall that 85% of "professional" active managers fail to do so over five years.
Better to just sit with 30%broad and break up the rest with momentum low vol small cap/SMID and value. High div is just a value avenue btw. Quality/profitability overlay in these or separate. US EAFE EM equal weight here too for these.
Then, instead of guessing when, pick a day once or twice a year, and rebalance to these targets. ie you're unemotionally selling high and buying low. Miss the best time to do so? Who cares. Demz the days. Your temporal approach will likely fare better than marketwatching and over/underreacting over many years.
Over 15 years (a full cycle) you get (should have)...100bps over the global broad market equity risk premium. So 9 not 8 if things rock..6 not 5 if things suck. Annualized, btw, so this is hellamore than it sounds.
Not particularly exciting...But at least you get it! Lol
Part of the question is that when I withdraw it in future, my current income is quite a bit lower than it might be when I retire, in which case does it make sense to even contribute now at all since I'm getting back only a bit of tax now but could get back 10-15% more tax in 2-3 years if I made the contribution then in future.
So in short, i can contribute now at a low bracket and get back a bit of tax and let it grow for a few years, or keep accumulating RRSP contribution room and save money in a non-registered account and when my income hits high enough that it's a bigger tax bracket and also closer to being above what my retirement income would be, then in future I'd start contributing it to the RRSP account. Which makes more sense to do?
Hopefully this makes sense and I'm not confused about it.
Usually for tax brackets the incremental amount is what is taxed at a higher rate. For instance, you make $10,000 and you are in the 7% tax bracket so you pay $700 tax. Next year you make $12,000 and are in the 10% tax bracket. For the first $10,000 you are only charged 7% then the incremental $2,000 is taxed at the 10%. So your total tax should be $900 instead of $1,200.
I don't quite get the full understanding of your situation but I always save money and usually the first X% is protected from current taxes and then I save some after tax where the gains are protected from tax when I withdraw it. It is a balancing act and usually depends on your income if it makes sense.
*dont forget to max out your TFSA with income first as that's tax exempt and probably in existential peril from the Libbbiez to boot!
So I understand how the marginal tax rates work, as per the example above, the first $10K versus $12K.
The question I'm asking is does it make sense to claim $5K this year and get back 5% ($250) and then next I claim $5K but becuase my income is higher now I get back 10% ($500), so total is $750, plus growth I had for a year on the first $5K+$250, or to claim $10K in year two to get back 10% tax because it's a higher income amount ($1000 return but no growth for a year or two)?. The numbers seem to support waiting until the higher tax bracket/income amount but I'm not sure if I'm missing something from the calculation besides one year's worth of growth that would make them a bit more comparable?
My understanding of retirement funds is that you're deferring taxes, so ideally you're contributing when your income and therefore taxes are higher than they will be when you take the money out (retirement). As an incentive for saving then so the gov doesn't have to carry you, they give you back the tax right away and you can let the principle and taxes compound until you retire, then you draw it all out and pay full income tax but ideally at a lower bracket.
ie there's a deemed (taxable) disposition ie capgain *now* on the transfer-out + the FMV lowers your taxable income so much on the transfer-in now + the additional year of sheltered yield that this will be a total $benefit > even if you think you'll be in a twice-as-much bracket next year for a better quantum ducked on taxable income.
BTW are you sure your combined tax exposure doubles exactly?
If so, congrats! :P