Are these Wise Investments? I Got Good Results

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arca
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Are these Wise Investments? I Got Good Results

Post by arca »

Hi guys.. In a real time stock simulator I had invested in VOO, VTI and VFTAX for the past 8 days and gained 4.01% which comes to a profit of around $5,000. As a result I'm very motivated now to invest in these same funds. But I have 3 questions before I make any decisions...

1) Had this been real investing would it have been wise to sell these investments and pocket $2,000 and put the rest of the $3,200 back into these funds?

2) Are these vanguard funds wise picks? Or which investments do you think are better?

3) Are these good investments on their own without adding any bonds to hedge against?

Looking forward to your replies!!
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David Jay
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Re: Are these Wise Investments? I Got Good Results

Post by David Jay »

There are several issues here:

First, stock fund investing should only be done with money that you do not need for at least 5 years. It is possible for the value to drop 50% (as it did in 2008) and you don’t want to have to sell when the market is down.

Second, trying to “time” the market - only get the price increases and avoid the price drops - is almost impossible to do consistently. We recommend a “buy-and-hold” strategy of purchasing stock funds and holding them until you need to withdraw the money, presumably when you retire.

That being said, VOO (SP500) or VTI (Total US market) are great choices. They have a large overlap (about 85%) so it is not really necessary to hold both.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Beensabu
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Re: Are these Wise Investments? I Got Good Results

Post by Beensabu »

[OT comment removed by admin LadyGeek] read this stuff (if you haven't already in the last 7 years):

https://www.bogleheads.org/wiki/Boglehe ... philosophy

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://www.bogleheads.org/wiki/Asset_allocation
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Re: Are these Wise Investments? I Got Good Results

Post by arca »

David Jay wrote: Mon Oct 25, 2021 10:38 pm There are several issues here:

First, stock fund investing should only be done with money that you do not need for at least 5 years. It is possible for the value to drop 50% (as it did in 2008) and you don’t want to have to sell when the market is down.

Second, trying to “time” the market - only get the price increases and avoid the price drops - is almost impossible to do consistently. We recommend a “buy-and-hold” strategy of purchasing stock funds and holding them until you need to withdraw the money, presumably when you retire.
[OT comment removed by admin LadyGeek] Appreciate the reply but need to correct you on something. I never said anything about timing the market nor is it my wish to do so. These 3 vanguard funds drew my attention based on their historical performance which led me to become excited about investing in them outside a simulator. I "invested" in them for a week and $5,200 profit was my result.

The buy and hold strategy is one I respect. But I will not wait til I'm about to croak to reap its benefits, with all due respect. Theres got to be flexibility also.

That being said, VOO (SP500) or VTI (Total US market) are great choices. They have a large overlap (about 85%) so it is not really necessary to hold both.
But VTI covers small and medium caps which have outperformed large caps last time I checked. What are your thoughts on that? Therefore, dont you think I should keep it?

.
Jaymover
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Re: Are these Wise Investments? I Got Good Results

Post by Jaymover »

I think you should do some basic research as suggested in previous posts, or speak to a financial advisor before committing your life savings to shares. The share market has a habit of tanking just after you tip it all in, just saying.

It is a good time to do some research and make a plan as the share market is at historic highs and so you are probably not going to miss out on much

It is important to set long term goals when investing. You can take various month on month stats for any ETF and see a dramatic gain, or loss. It is all random just generally up over 14 years or more
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Re: Are these Wise Investments? I Got Good Results

Post by Northern Flicker »

Many of us were actually in the market with a position like VTI or other similar diversified fund, and actually realized the return that you only simulated.
Last edited by Northern Flicker on Tue Oct 26, 2021 1:53 pm, edited 2 times in total.
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Re: Are these Wise Investments? I Got Good Results

Post by arca »

Jaymover wrote: Tue Oct 26, 2021 2:39 am The share market has a habit of tanking just after you tip it all in, just saying.
I can agree with that.
It is a good time to do some research and make a plan as the share market is at historic highs and so you are probably not going to miss out on much.
Uhh but thats what I'm doing now.
You can take various month on month stats for any ETF and see a dramatic gain, or loss. It is all random just generally up over 14 years or more
I understand.. appreciate the positive feedback in making me aware of that potential pitfall. That said, the various vanguard funds I've researched so far have tracked up over the years and as such have made me confident in their future growth. If you can add something else do let me know. Thank you.

On a separate note, would you guys please answer my original questions? I'd appreciate it.

.
Last edited by arca on Tue Oct 26, 2021 10:22 am, edited 2 times in total.
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Wiggums
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Re: Are these Wise Investments? I Got Good Results

Post by Wiggums »

I would not take some or all of the profits after an 8 day run. We are typically buy and hold investors. As you accumulate wealth, you must consider the tax drag of switching funds or selling stock. Especially shares held under one year.
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Re: Are these Wise Investments? I Got Good Results

Post by minimalistmarc »

They are wise investments. Yes you should have some bonds. I don’t think you are ready to put significant money into the markets yet, wait and educate yourself on this site, you’re not going to get all the answers from this brief discussion.
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Re: Are these Wise Investments? I Got Good Results

Post by sizzlefuzz »

arca wrote: Mon Oct 25, 2021 10:05 pm Hi guys.. In a real time stock simulator I had invested in VOO, VTI and VFTAX for the past 8 days and gained 4.01% which comes to a profit of around $5,000. As a result I'm very motivated now to invest in these same funds. But I have 3 questions before I make any decisions...

1) Had this been real investing would it have been wise to sell these investments and pocket $2,000 and put the rest of the $3,200 back into these funds?

2) Are these vanguard funds wise picks? Or which investments do you think are better?

3) Are these good investments on their own without adding any bonds to hedge against?

Looking forward to your replies!!
1) It depends, however in the vast majority of cases it makes more sense to stay in the market and take advantage of growth. A cornerstone of BH philosophy is "time in the market" over "timing the market". With that dollar figure, you would probably just want to keep it invested and play the longer term.

2) The funds are fine, personally my taxable balance is only held in VTI. VOO is a good substitute if you prefer it. Looking at the top holdings of VFTAX (I was not familiar with that mutual fund) also seems to have a lot of overlap with both VTI & VOO so sticking to one fund will save you on expense ratio, etc.)

3) This depends on how old you are and what your risk tolerance is.You might want to read the "asking portfolio questions" thread and post some additional information.
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MrJedi
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Re: Are these Wise Investments? I Got Good Results

Post by MrJedi »

VOO and VTI are both good, diversified funds. Many people use them to capture the US stock market. Especially VTI is considered an option for a core component of the 3 fund portfolio that is often mentioned here. VOO is a subset of VTI, so it is usually unnecessary to use both unless you have a very specific technical reason. I am less familiar with VFTAX, but it at least looks fairly diversified.

The amount of stocks vs bonds you have is a key metric for your asset allocation. This is probably the most important knob you have for controlling risk. Sometimes people lump cash in with bonds (fixed income), others treat it separately. Either way, cash and/or bonds will dampen the volatility of your portfolio and give you assets to draw from if your stocks take a beating.

In general most people here would probably recommend buy and hold. You sell when you need money (most often retirement, but it could also be a major expense that you cannot pay out of your normal income/cash flow). Trying to peel away profits and maneuver in and out of stocks would be trying to time the stock market, which most here are against and could be considered borderline gambling. It can also generate extra tax in a taxable account.
Last edited by MrJedi on Tue Oct 26, 2021 7:45 am, edited 2 times in total.
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David Jay
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Re: Are these Wise Investments? I Got Good Results

Post by David Jay »

arca wrote: Tue Oct 26, 2021 2:32 amThe buy and hold strategy is one I respect. But I will not wait til I'm about to croak to reap its benefits, with all due respect.
What is your goal? What is your reason for investing? Is it to buy a vacation home in 10 years? It it to fund college for a pre-schooler? The stock market is only a reliable investing choice for periods over 5-7 years so investing on that time schedule is appropriate.

Investing in the market for short periods can result in serious losses. Use a historic tool and simulate investing in VTI or VOO for one month, from February 23, 2020 to March 23, 2020. Or for one year, March 1, 2008 - March 1, 2009.
arca wrote: Tue Oct 26, 2021 2:32 amBut VTI covers small and medium caps which have outperformed large caps last time I checked. What are your thoughts on that? Therefore, dont you think I should keep it?
Again, the overlap is about 85% because VTI and VOO cap-weighted. The larger companies dominate the performance of either fund. If you use any tool (such as Morningstar or Portfolio Visualizer) and graph the performance of VOO and VTI over a reasonable period (say 5 years or 10 years) you will find that the performance is similar.

I like VTI myself for philosophical reasons (i.e. “Total” market) but either one will be fine. Purchasing both will not have a large affect on the upside or the downside of your long term performance.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: Are these Wise Investments? I Got Good Results

Post by LeftCoastIV »

To your question (1), if you sold and realized the gain, when would you get back in (after incurring short-term capital gains taxes)?
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Re: Are these Wise Investments? I Got Good Results

Post by Kenkat »

I believe the key to long term wealth is to invest early and often, letting gains compound over time. Long term, we all expect the stock market to go up. That gain your saw last week was a nice one, it won’t happen every week or even every year, but the long term trend is up.

When I first started investing I remember that the Dow was at 2700. I remember that sometime in the year 2000, the Dow was around 14,000, the S&P 500 was at 1400 or so and the Nasdaq 100 had hit 5,000. Shortly after that, the market crashed. Oh well, I don’t need that money yet. Through all of that time, I just kept adding money to the market every time I got a paycheck or had some extra money to put to use. Year after year, I just kept plowing that money in. Never took it out, never cashed in any profits as I realize my ability to see the future is very limited.

So my advice would be - you’ve found some solid funds with a solid company. Start putting some money regularly into VTI. Spend some time understanding what that fund does and what other funds might compliment it. But the single best thing you can do, assuming you have time on your side (i.e., you are young and starting out, not old like me) is to start putting money into the market and take advantage of the compound growth that is possible and probable over the long run.
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Re: Are these Wise Investments? I Got Good Results

Post by tashnewbie »

OP, I see you joined 7 years ago and in your first post you asked about how to invest $80k. See: viewtopic.php?f=1&t=148831&p=2223983#p2223983.

You repeatedly asked about what to do with that same $80k at least 2 times in 2019.

Did you make a plan with respect to the $80k and your money in general? What did you decide?

If you have a plan, I suggest following it with respect to any new money you have to invest.
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Re: Are these Wise Investments? I Got Good Results

Post by Sandtrap »

arca wrote: Mon Oct 25, 2021 10:05 pm Hi guys.. In a real time stock simulator I had invested in VOO, VTI and VFTAX for the past 8 days and gained 4.01% which comes to a profit of around $5,000. As a result I'm very motivated now to invest in these same funds. But I have 3 questions before I make any decisions...

1) Had this been real investing would it have been wise to sell these investments and pocket $2,000 and put the rest of the $3,200 back into these funds?

2) Are these vanguard funds wise picks? Or which investments do you think are better?

3) Are these good investments on their own without adding any bonds to hedge against?

Looking forward to your replies!!
(Dis Laimer)
Response based only on and within the context of the OP's post and nothing more:

1. Good timing has made you money. The action here is similar to Vegas gambling where you take your original principle off the table then only play with your winnings. If that disappears, then walk away with your money at no loss.
In this context only. . . . try it but be sure not to tap back into the money in your pocket.
I think this is the context that you're approaching. Is this true?

2. Within the context that you introduce, yes and no. You might stock trade in FAANG stocks within the same rubric that you propose since you're working with only short term and interested in short term it seems. Is this true?

3. Bonds or "fixed" unto themselves don't fit the context of #1-2 above. Hedging bonds is another matter.

Notes:
1
My responses are based on "trading" short term vs buy and hold investing for retirement which is the context you introduced.
2
I think a very good learning thing right now is not out of a book or discussion, for you, but to just try it with just a small portion of your money that would not effect you financially or future retirement investing strategy, if you did this.
3
Sometimes, the best lesson "at the time" is just to try something in real life. The lesson is experiential. Think of it as just an experiment and see. A similator is not "real life".
(do keep us posted)
4
If you are interested in a long term "buy and hold" type of financial strategy that's appropriate to retirement, then read the WIKI "getting started". But, otherwise, in the "trading context" scenario that you introduced, give it a try and just see what happens in real life.

OP: there's always a forever bantering about so many things and things like what you propose when introduced into any group of people to no end simply because people love to discuss and banter and all that. What's important is what you decide and do next. I suggest (that for you and only you) just take small pocket money and try it and see and learn.
Everyone learns differently.

j :D
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Northern Flicker
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Re: Are these Wise Investments? I Got Good Results

Post by Northern Flicker »

arca wrote: Tue Oct 26, 2021 3:08 am
Jaymover wrote: Tue Oct 26, 2021 2:39 am The share market has a habit of tanking just after you tip it all in, just saying.
I can agree with that.
It is a good time to do some research and make a plan as the share market is at historic highs and so you are probably not going to miss out on much.
Uhh but thats what I'm doing now.
You can take various month on month stats for any ETF and see a dramatic gain, or loss. It is all random just generally up over 14 years or more
I understand.. appreciate the positive feedback in making me aware of that potential pitfall. That said, the various vanguard funds I've researched so far have tracked up over the years and as such have made me confident in their future growth. If you can add something else do let me know. Thank you.

On a separate note, would you guys please answer my original questions? I'd appreciate it.

.
The answer to your question is that investments like VOO and VTI are wise investments if you have a long-term investment period. Any stock investment is an unwise investment if you have a very short investment holding period. I believe David Jay provided this answer above as well.
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Re: Are these Wise Investments? I Got Good Results

Post by LadyGeek »

I removed some off-topic comments. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.

...At all times we must conduct ourselves in a respectful manner to other posters.
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Re: Are these Wise Investments? I Got Good Results

Post by vanbogle59 »

arca wrote: Mon Oct 25, 2021 10:05 pm Hi guys.. In a real time stock simulator I had invested in VOO, VTI and VFTAX for the past 8 days and gained 4.01% which comes to a profit of around $5,000. As a result I'm very motivated now to invest in these same funds. But I have 3 questions before I make any decisions...

1) Had this been real investing would it have been wise to sell these investments and pocket $2,000 and put the rest of the $3,200 back into these funds?

2) Are these vanguard funds wise picks? Or which investments do you think are better?

3) Are these good investments on their own without adding any bonds to hedge against?

Looking forward to your replies!!
Are you still trying to decide how to invest the 80K you had in CDs 7 years ago?
I would suspect your 7 years of waiting should carry more weight than your 8 days of simulation.
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Re: Are these Wise Investments? I Got Good Results

Post by arca »

Wiggums wrote: Tue Oct 26, 2021 3:42 am I would not take some or all of the profits after an 8 day run. We are typically buy and hold investors. As you accumulate wealth, you must consider the tax drag of switching funds or selling stock. Especially shares held under one year.
Understood. Whats the tax impact on taking out funds then switching back?
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Re: Are these Wise Investments? I Got Good Results

Post by arca »

minimalistmarc wrote: Tue Oct 26, 2021 3:55 am They are wise investments. Yes you should have some bonds. I don’t think you are ready to put significant money into the markets yet, wait and educate yourself on this site, you’re not going to get all the answers from this brief discussion.
smh
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Re: Are these Wise Investments? I Got Good Results

Post by Thesaints »

arca wrote: Mon Oct 25, 2021 10:05 pm Hi guys.. In a real time stock simulator I had invested in VOO, VTI and VFTAX for the past 8 days
That pretty much settles it.
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Re: Are these Wise Investments? I Got Good Results

Post by mikejuss »

OP, most Bogleheads purchase funds that they hold onto for years, even decades. Buying and selling in short spurts will leave you with less wealth in the long run. You'll also pay short-term capital gains taxes every time you sell, and that too will cripple your wealth. You want to build real wealth, right, not just rake in little $5,000 gains here and there? That's chump change if your investment horizon is many years.
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Re: Are these Wise Investments? I Got Good Results

Post by calmaniac »

arca wrote: Tue Oct 26, 2021 6:17 pm Understood. Whats the tax impact on taking out funds then switching back?
Capital gains tax on the profits
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Re: Are these Wise Investments? I Got Good Results

Post by HomerJ »

arca wrote: Mon Oct 25, 2021 10:05 pm Hi guys.. In a real time stock simulator I had invested in VOO, VTI and VFTAX for the past 8 days and gained 4.01% which comes to a profit of around $5,000. As a result I'm very motivated now to invest in these same funds. But I have 3 questions before I make any decisions...

1) Had this been real investing would it have been wise to sell these investments and pocket $2,000 and put the rest of the $3,200 back into these funds?

2) Are these vanguard funds wise picks? Or which investments do you think are better?

3) Are these good investments on their own without adding any bonds to hedge against?

Looking forward to your replies!!
VOO and VTI are good LONG-TERM investments.

They are not good 8-day investments.

If you do make a nice gain in 8 days in a LONG-TERM investment, you smile happily, but you normally do nothing, because it's a LONG-TERM investment. You don't sell after 8 days, and then later, buy back in for another 8 days, hoping that you always pick the right 8 days.

But there is a method that is somewhat similar to what you are talking about. It's called rebalancing.

Say you decide you want half your money in stocks for the long-term gains, but you want the other half of your money in bonds or CDs to be safer.

So that's a 50/50 stocks/bonds(or CDs) allocation.

If the market does well, like gain 20% over a year, you may find yourself sitting at 55/45 allocation... At that point you could sell enough from the stock fund and use it to buy bonds/CDs/cash to put yourself back at 50/50 again.

That's kind of like "locking in gains"...

But note that it takes a 20% gain in stocks to move the needle from 50/50 to 55/45. You wouldn't want to rebalance after just a 4% gain. And, of course, you'd want to do this in a 401k or IRA if possible. Otherwise you pay taxes as well.

I suggest you read some of the books and articles in the Boglehead wiki (link is near top of the page).
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Re: Are these Wise Investments? I Got Good Results

Post by KlangFool »

OP,

Investing means that you DO NOT CARE how much your portfolio returns in 8 days. Given that you CARE about how much your portfolio return in 8 days, you are NOT investing.

There are a range of possibility between CD (100% CASH) and 100% stocks. Your Asset Allocation can be in the range of 70/30 to 30/70.

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Re: Are these Wise Investments? I Got Good Results

Post by arcticpineapplecorp. »

considering your past posts, you should post according to "asking portfolio questions" (see link in my signature).

in this post you only answered some questions but not all:
viewtopic.php?f=1&t=296273&p=4866087#p4866087

you weren't working in 2014 or in 2019 in that post above but said you had $300/week side income, not sure what that means.

you wanted 20/80 (stock/bond) back then. Is that ratio still the same?

Can you give your current info according to asking portfolio questions, so you can get answers that are actually relevant to your individual situation.
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