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post #4771 of 6082

Anyone have experience going long the VIX? I'm sitting here watching it come back down and with it so cheap, I want to pick up some protection.

 

Are ETNs the way to go here (VXZ)? I assume they bleed money since they just continually roll futures?

post #4772 of 6082
Quote:
Originally Posted by idfnl View Post

I've been holding all my shit lately. I sold TSLA, but that's it.

Unrelated, so its a long story but I'm curious about what funds you guys are recommending. I am a fan of Vanguard already, so anything outside of that. I'm providing input on a new 401k setup for a small business. Within this plan there is a fair amount of freedom to trade anything, even ETF's.

What funds are you guys sitting on? (if you mention a name, can you give me a sense of how risky you think it is? Also, I am particularly sensitive to fees)

Lastly, I mentioned ETF's, any rationale + or - towards their use in a 401k. As an example, I was thinking of GLD as a component.

In a 401K I would only buy BND and VTI, but that's just me. I don't see the point of holding gold in a long term account. If you want an extra hedge against inflation sub out some of the BND for VTIP or BSV.

Also, if you want to do a mixture of buy-and-hold index investing and market-timing stock picking I would definitely make sure to do the latter in the tax-advantaged account.
post #4773 of 6082
Quote:
Originally Posted by idfnl View Post

I've been holding all my shit lately. I sold TSLA, but that's it.

Unrelated, so its a long story but I'm curious about what funds you guys are recommending. I am a fan of Vanguard already, so anything outside of that. I'm providing input on a new 401k setup for a small business. Within this plan there is a fair amount of freedom to trade anything, even ETF's.

What funds are you guys sitting on? (if you mention a name, can you give me a sense of how risky you think it is? Also, I am particularly sensitive to fees)

Lastly, I mentioned ETF's, any rationale + or - towards their use in a 401k. As an example, I was thinking of GLD as a component.

 

GLD--make it 5% of your portfolio and hope this fraction never goes up.

 

Funds I am sitting on--only index based with less than 0.10% in fees. 

post #4774 of 6082
Idfnl, as an investor I would want to see; SP 500 index, Dow index, mid-cap, small-cap, big-cap and stock market sectors such as tech, bio-tech, pharma, finance, industrials, consumer staples, ect. Also, while I expect bonds to do poorly in the next few years I would still want to see plenty of bond indexes offered in a 401k.

My 401k offerings are limited to some major indexes and whatever the advisor who built the plan was hot on, so I have it staked in Mid-cap and SP500 index, with a tiny bit of long-term bonds. I would still like to be able to get heavy into financials, for instance, without being limited in choice.
post #4775 of 6082

Small businesses can get a wide variety of options for a 401k plan but what I have found is that the Expense Ratios are rather high for basic  S&P 500 indexes or Bond funds.  Since my wife is at a <50 employee company, the best expense ratios in her plan are for the X years-to-go funds but they are still 0.50%.  I think we are paying 0.77% for the S&P 500 fund....

post #4776 of 6082
I'm a little new to this personal finance thing so in the span of two years have gone from holding cash in a TFSA to GIC's to RBC MF's and now just opened a Questrade account and will be shifting over my RRSP (like your 401K?) and TFSA (I think that's like your Roth?) to invest in some bonds and equities (ETF's). So feeling pretty good about getting a handle on this stuff for the first time.

I know you guys are usually posting about individual stocks but with a small chunk of change and minimal income for the next 6 months (I break even day to day with some emergency $ set aside but waiting to qualify before working again) and both minimal interest or knowledge in the market I'm curious about stocks but smart enough not to play that roulette game just quite yet so while I read about your amazing trades I'm looking for the safe basics at this point...

My info sources are Canadian Couch Potato and the Greater Fool (Garth Turner's blog). The plan is to start out with a 40% bond and 60% ETF's (mostly TSE Vanguards) split as per below.
Warning: Spoiler! (Click to show)
RRSP: (40%) Canadian Bonds – VAB
I figure long term, stable, and as I put $ into TFSA over time, I’ll lower bond allocation to about 30% to match my age, but for now since I’m just stepping into this world and I also won’t have much income for 6 months or so, I’d rather keep 40% of ‘stable’ stuff. Plus dollar wise it’s almost exactly a 40% chunk so works out nicely that way.

TFSA: (60%)
?(10%) Canadian REIT– ZRE or maybe VRE
(20%) Canadian equity – VCN
(20%) USA equity – VUN
(20%) International equity – 2/3 XEF (international) + 1/3 XEC (emerging))

Questions: Warning: Spoiler! (Click to show)
1. With all this talk of doom and gloom bubble popping of the RE market, should I avoid 5-10% allocation in REITS and just wait it out for an unknown period until there's a dip and then buy in? So for example put the 20% evenly into all Cad/USA/International and if in the next 6-12 months there’s a REIT dip, then I can adjust and put 5-10% in there, or maybe around January if I add the $5.5k into the TFSA I can just buy the REITS then…
Or should I buy in now and keep reassessing every 3-4 months and at the slightest sign of a pop reallocate away from it? So buy in and ride this wave up and sell when it’s time. I see writing on the wall like Garth Turner’s blog, Moodys apparently just downgraded Canadian banks, etc so just worried there's something big coming. Then again worst case it's what like a 30-50% market crash that affects 10% of my portfolio and some overlap into Cad equities and bonds?

2. If I'm holding 40% Cad bonds (RRSP) and then 20% Cad large cap equities (TFSA), and potentially adding 10% Cad REITS, (20% left each for USA and International), isn't that too heavily biased towards Canada?

2b. Lastly, if there's such a RE pop about to happen, what will be the impact of the 40% Cad bonds I own? Is that good or bad for my bonds? Should I be buying USA bonds instead or something?

3. Oh just one more random question… Greater Fool Garth is recommending putting some of that bond money into preferred share index ETF’s (like CPD, ZPR, XDV)…
thoughts?



Thanks guys!
Edited by Master-Classter - 6/15/14 at 9:12am
post #4777 of 6082
I've reduced my bond holdings to the bare minimum needed for regular income. I don't want to be a bondholder aside from that because they will adjust downward when the rate is finally raised. Don't get too hot and heavy into REIT's unless you need a large but very unreliable income, with a substantial downside and not much upside.

I am personally in american and european equities, and would happy stake the majority of my portfolio in an SP 500 index if individual stocks were not an option. I reinvest my dividends, and fallow very closely the financials and news reports of the companies that I own (about 30 at the moment). I own stocks in sectors that people are highly in need of, rather than discretionary, and diversify pretty well within these sectors.

Currently, I have stocks in finance, oil & gas, tobacco, big pharma, telecom, manufacturing, consumer staples, alcohol, insurance, utilities and railroads. I avoid anything very heavily reliant on a booming RE market, super leveraged financials, spec tech and spec pharma. I also avoid small cap, and a great deal of mid-cap.
post #4778 of 6082
Quote:
Originally Posted by Master-Classter View Post

Warning: Spoiler! (Click to show)
I'm a little new to this personal finance thing so in the span of two years have gone from holding cash in a TFSA to GIC's to RBC MF's and now just opened a Questrade account and will be shifting over my RRSP (like your 401K?) and TFSA (I think that's like your Roth?) to invest in some bonds and equities (ETF's). So feeling pretty good about getting a handle on this stuff for the first time.

I know you guys are usually posting about individual stocks but with a ~$50K portfolio and minimal income for the next 6 months (I break even day to day with some emergency $ set aside but waiting to qualify before working again) and both minimal interest or knowledge in the market I'm curious about stocks but smart enough not to play that roulette game just quite yet so while I read about your amazing trades I'm looking for the safe basics at this point...

My info sources are Canadian Couch Potato and the Greater Fool (Garth Turner's blog). The plan is to start out with a 40% bond and 60% ETF's (mostly TSE Vanguards) split as per below.

RRSP: (40%) Canadian Bonds – VAB
I figure long term, stable, and as I put $ into TFSA over time, I’ll lower bond allocation to about 30% to match my age, but for now since I’m just stepping into this world and I also won’t have much income for 6 months or so, I’d rather keep 40% of ‘stable’ stuff. Plus dollar wise it’s almost exactly a 40% chunk so works out nicely that way.

TFSA: (60%)
?(10%) Canadian REIT– ZRE or maybe VRE
(20%) Canadian equity – VCN
(20%) USA equity – VUN
(20%) International equity – 2/3 XEF (international) + 1/3 XEC (emerging))

Questions:
1. With all this talk of doom and gloom bubble popping of the RE market, should I avoid 5-10% allocation in REITS and just wait it out for an unknown period until there's a dip and then buy in? So for example put the 20% evenly into all Cad/USA/International and if in the next 6-12 months there’s a REIT dip, then I can adjust and put 5-10% in there, or maybe around January if I add the $5.5k into the TFSA I can just buy the REITS then…
Or should I buy in now and keep reassessing every 3-4 months and at the slightest sign of a pop reallocate away from it? So buy in and ride this wave up and sell when it’s time. I see writing on the wall like Garth Turner’s blog, Moodys apparently just downgraded Canadian banks, etc so just worried there's something big coming. Then again worst case it's what like a 30-50% market crash that affects 10% of my portfolio and some overlap into Cad equities and bonds?

2. If I'm holding 40% Cad bonds (RRSP) and then 20% Cad large cap equities (TFSA), and potentially adding 10% Cad REITS, (20% left each for USA and International), isn't that too heavily biased towards Canada?

2b. Lastly, if there's such a RE pop about to happen, what will be the impact of the 40% Cad bonds I own? Is that good or bad for my bonds? Should I be buying USA bonds instead or something?

3. Oh just one more random question… Greater Fool Garth is recommending putting some of that bond money into preferred share index ETF’s (like CPD, ZPR, XDV)… thoughts?



Thanks guys!


Fellow Canadian here.

1)You're trying to market time here with REIT, and no one will know when the Canadian RE bubble will pop. And even if it pops, does it make sense to wait for VRE to drop 5%, 10% or 20% before buying it? Are you able to tell when it bottoms? My feeling is that it's a lot simpler to set up an initial allocation, and then stick with it.

http://www.rickferri.com/blog/strategy/the-problem-with-market-timing/

2) 20% allocation to Canadian stock market is heavy, since our market is only 4-5% of the world's market.

https://personal.vanguard.com/us/funds/tools/benchmarkstatistics

In Canadian Couch Potato's portfolio, it's evenly split between Cad, US and international. The reason is because no one knows which will out perform in the future, so it's just simpler to split them evenly in a 60/40 portfolio. Personally I'm keeping mine at 10-15% of my stock portfolio, and heavy in the US. You'll have to decide for yourself on how much your Canadian stocks will weight, and also depending on your outlook as well.

2b) Again, no one knows for sure what'll happen to Canadian bond when the RE market tanks. If a snake oil salesman tells you otherwise, run in the opposite direction.

3) I had some CPD, about 5% of my portfolio, but I'll be switching out of it when I'm investing new money. CPD is good because the dividend are eligible dividends, thus you can qualify for Canadian dividend credit. If you have no other income, you can potentially earn $40-50k in eligible dividends while paying little tax. For me, I'm still in the accumulating phase and I have no need for income stream, thus I'm moving the CPD money into other stock ETF's

Lastly, 40% in bond ETF is good when you're starting out, it keeps volatility low. Since you're just starting out, it'll be disheartening to see your net worth drops 30-50% in a severe bear market, and turning you off from stock market for the rest of your life, so having a portion in bond will keep you invested for the long term. You might tell yourself that you're ok with 50% drop of your stock, but you won't know until the real thing happens. It's like a pilot practicing crash in a flight simulator is different than in an actual crash, there are just something you can't describe to a virgin.

http://barbarafriedbergpersonalfinance.com/add-bonds-to-all-stock-portfolio/
post #4779 of 6082
So here's a question: why buy bond funds or ETFs? Setting aside default you buy a bond and you know exactly what your coupon rate is going to be and it could well be tax advantaged. I know folks that are into bonds and they have tipped me more than once on some purchases. I bought some bonds at 62 cents on the dollar, got 6% tax free, that matured in about 30 months. They were issued by a large non-profit for a capital project. So I got not only 6% on the face value I made a killing when they matured. Granted I did not find this opportunity, I suppose there had to be risk as the bonds were trading at such a discount, but my friend apparently does this type of thing on a pretty regular basis.
post #4780 of 6082
Quote:
Originally Posted by Piobaire View Post

So here's a question: why buy bond funds or ETFs? Setting aside default you buy a bond and you know exactly what your coupon rate is going to be and it could well be tax advantaged. I know folks that are into bonds and they have tipped me more than once on some purchases. I bought some bonds at 62 cents on the dollar, got 6% tax free, that matured in about 30 months. They were issued by a large non-profit for a capital project. So I got not only 6% on the face value I made a killing when they matured. Granted I did not find this opportunity, I suppose there had to be risk as the bonds were trading at such a discount, but my friend apparently does this type of thing on a pretty regular basis.

That return sounds way too good to be 'true.' Assuming it must have been junk-bond status with that kind of return and presumed risk.
post #4781 of 6082
Quote:
Originally Posted by GreenFrog View Post

That return sounds way too good to be 'true.' Assuming it must have been junk-bond status with that kind of return and presumed risk.

No idea why it was so discounted. Organization in business for 40 years, as it's a non-profit you can pull it's 990s and it was doing well. My friends says he finds one or two such situations a year and has yet to be burned.

Edit: but back to my question. I probably should not have used my recent experience as I don't want to detract from the question. Why buy a fund, which can go up or down, vary in dividends, when you can sneak in to buy some bonds that will mature in the medium term and know exactly what ongoing cash flow they'll give you?
post #4782 of 6082
Perhaps it has something to do with it being a not-for-profit organization?
post #4783 of 6082
Quote:
Originally Posted by Piobaire View Post

No idea why it was so discounted. Organization in business for 40 years, as it's a non-profit you can pull it's 990s and it was doing well. My friends says he finds one or two such situations a year and has yet to be burned.

Edit: but back to my question. I probably should not have used my recent experience as I don't want to detract from the question. Why buy a fund, which can go up or down, vary in dividends, when you can sneak in to buy some bonds that will mature in the medium term and know exactly what ongoing cash flow they'll give you?

Pio, you'd buy a bond fund for the same reasons that you would set up a laddered bond portfolio, however the fund has the advantage of reduced cost and diversified holdings. Bond funds and individual bonds are two wholly different animals for the reason that you can't hold a bond fund to maturity, there are good reasons for wanting both. For instance; If you would prefer to ride the interest rate you would want to own the fund, but if you want to secure the rate you would want to own the individual bonds.

The irrational side of it for me, personally, is that I feel more at home in the stock market. It's in the blood, as a third generation stock market investor I feel like a fish out of water purchasing individual bonds, so I lean on bond funds when I want to own bonds.
Edited by SkinnyGoomba - 6/15/14 at 8:04am
post #4784 of 6082

I am 10% REITs and also 20% in bonds....doubt either of those will really change unless something major happens.  This is just our personal choice in our holdings and others will argue and disagree.

 

As for the Canadian guy, I wouldn't put so much of my money in one country (Canada).  I like to hold a broad portfolio of companies through funds so the risk is spread out.  While I do hold a big portion in the S&P 500, I still have other international exposure.

post #4785 of 6082
Nice jump -- $OREX up over 7% today! icon_gu_b_slayer[1].gif

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