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Folster

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I thought an investing thread separate from the market thread could be valuable for those more interested in long term investing vs the daily market discussion where they can ask questions and discuss strategies/investments.

No question is dumb. I've heard them all.

I have a few high level things I am working on to share initially when I have a moment.

Any and all information shared or provided by members is for informational purposes and is not investment advice. Remember this is primarily a sports message board.
 

BigRedRage

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Sounds great.

I'm an unsophisticated investor. I look at companies that I have strong faith in moving forward. Products that I love, I think are improving and more.

My primary companies like this? TSLA, NVDA, MSFT, COST. I am actually a few days away from getting back into trading. I sold most of those to buy a house, kept all my TSLA. Plan on buying more TSLA and buying back my investments in those companies butthen will be playing the game again and looking for new pets so I am looking forward to this thread on top of the others I follow.
 

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As exports of LNG start to ramp up I'm looking at DVN as a possible long term. Well established in the Permian. They could go from a mid to a major in the industry.
 

dscher

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Thanks dude. Looking forward to high level info. I'll always be a listener/reader.

I'm the conspiracy theory TA guy in the corner if anyone needs me.

:D
 

BigRedRage

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Adding GOOG to my tree. Another company with strong fundamentals and products I use daily.
 
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Folster

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Adding GOOG to my tree. Another company with strong fundamentals and products I use daily.
Love GOOG, but I think they are overpriced if you are looking for exceptional returns moving forward. I'd be more open to adding to my 2 measly shares during pullbacks after the split when adding won't throw my exposure out of whack.

I need to update DCF model on them.
 

BigRedRage

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Love GOOG, but I think they are overpriced if you are looking for exceptional returns moving forward. I'd be more open to adding to my 2 measly shares during pullbacks after the split when adding won't throw my exposure out of whack.

I need to update DCF model on them.
With Google, for me, it's just a comfortable parking space that I don't have to worry about and with a pending stock split on the horizon, I figure there is a good chance it goes up quote a lot over the next 2-5 years. I bought, today, what I would equate to around 5% of my investment capital.

I'd love to see models and analysis on them though. The follows I have only talk about it briefly, this was more of a gut buy based on good fundamentals and long term parking space.
 

Mainstreet

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Anyone know anything about annuities?
 

BigRedRage

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Current stack, by ranking
TSLA
Goog
Nvda
MSFT
Cost
Bmbl

I can't access crypto until Friday, probably btc/eth go above bmbl at a minimum.

Bmbl, btw, a female friendly dating app, seems like a strong play for that fact. Many apps are too commitment centric for the new gen or, like tinder, are known as hookup apps. Bumble is the casual of tinder but with a relationship vibe. Felt it's worth a flirt at the bottom of my list.

I was super curious about Airbnb but their charts don't look good to my dumb eyes
 
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Any talk about asset allocation revolves around equity/stock exposure and US equity exposure reigns supreme.

One of the simplest and most efficient ways of getting that US exposure is with a Total US or Broad Market index fund or ETF that gives you exposure to large, mid, and small cap US stocks. Most index funds have an ETF version like VTSAX and VTI. Both follow the same underlying index.

I prefer ETFs due to their greater liquidity and zero commissions at most brokers. Sometimes the index funds will have a $20 transaction fee unless you are buying them directly from the fund company itself. The downside of ETFs is that you are unable to set-up a DRIP or automatic recurring investment.

So which total US market ETF is best? You cant go wrong with any of the major players, but I think SPTM is best as it tracks the S&P 1500 index which includes the S&P 500 large, 400 mid, and 600 small cap indexes. Other Total US market ETF's attempt to own nearly every US company. From the funds listed below, SCHB holds over 2500 companies while VTI holds over 4,000.

The reason why is because the underlying S&P indexes like the S&P 1500 have a quality filter and hold less stocks as a result. They do not include every company within their market cap range. They exclude unprofitable companies. For a company to be initially included, their most recent quarter must have positive earnings and the sum of their earnings for their prior 4 quarters must be positive as well.

So the S&P indexes exclude most of the garbage SPACs, IPOs, meme stocks, and hype trains. Sure you miss out on a Tesla until they are profitable and most of the moonshots, but you also miss out on the countless companies that come crashing down to Earth.

Look at these returns of the 4 big dogs from iShares, Schwab, SPDR, and Vanguard from close of business 3/21/2022. All 4 have an internal expenses of just 0.03% so they are all on an equal playing field with respect to cost.

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It should be noted that SPTM only started tracking the S&P 1500 in 2019 so data prior to 3 years ago isn't relevant even though SPTM is still the winner in the 5 and 10 year returns. It used to track a broader US index, the same as ITOT I believe. Take a look at that YTD and 1 year Total Return. Significant outperformance by SPTM while no earnings growth stocks were getting slaughtered. I have no doubt that this would have looked different in early 2021 during the height of the speculative craze, but now that we have seen the tide roll in and out, we have the data.

In summary, you can't go wrong with any of these funds with their simplicity, cost, and performance, and they will all likely outperform 80-90% of investors and fund managers over the long term. However, in the long run I think you'll see higher returns and less volatility with SPTM or a fund that uses underlying S&P indexes vs Russell or other non-qualitative indexes.
 
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Folster

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With Google, for me, it's just a comfortable parking space that I don't have to worry about and with a pending stock split on the horizon, I figure there is a good chance it goes up quote a lot over the next 2-5 years. I bought, today, what I would equate to around 5% of my investment capital.

I'd love to see models and analysis on them though. The follows I have only talk about it briefly, this was more of a gut buy based on good fundamentals and long term parking space.

I updated my GOOG DCF assuming you have a minimum required rate of return of 10% of your investments, I value GOOG as seen below depending on your revenue growth estimates for them.

10%: $1,800 (pretty conservative if not bearish)
15%: $2,000
20%: $2,240
25%: $2,500

For context, GOOG grew their revenue 26.5% a year over the last 5 years. That kind of growth will be hard to continue considering their size.

GOOG dropped to $2500 recently during the NASDAQ bear market. I could see that as a fair value which is sometimes reasonable to pay for a fantastic company. Not everything needs to be on the clearance rack to buy if it's quality and GOOG certainly is quality.

I'd personally want to get it for under $2300, but I may never get that opportunity to provide a margin of safety.
 

elindholm

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Any talk about asset allocation revolves around equity/stock exposure and US equity exposure reigns supreme.

One of the simplest and most efficient ways of getting that US exposure is with a Total US or Broad Market index fund or ETF that gives you exposure to large, mid, and small cap US stocks. Most index funds have an ETF version like VTSAX and VTI. Both follow the same underlying index.

I prefer ETFs due to their greater liquidity and zero commissions at most brokers. Sometimes the index funds will have a $20 transaction fee unless you are buying them directly from the fund company itself. The downside of ETFs is that you are unable to set-up a DRIP or automatic recurring investment.

So which total US market ETF is best? You cant go wrong with any of the major players, but I think SPTM is best as it tracks the S&P 1500 index which includes the S&P 500 large, 400 mid, and 600 small cap indexes. Other Total US market ETF's attempt to own nearly every US company. From the funds listed below, SCHB holds over 2500 companies while VTI holds over 4,000.

The reason why is because the underlying S&P indexes like the S&P 1500 have a quality filter and hold less stocks as a result. They do not include every company within their market cap range. They exclude unprofitable companies. For a company to be initially included, their most recent quarter must have positive earnings and the sum of their earnings for their prior 4 quarters must be positive as well.

So the S&P indexes exclude most of the garbage SPACs, IPOs, meme stocks, and hype trains. Sure you miss out on a Tesla until they are profitable and most of the moonshots, but you also miss out on the countless companies that come crashing down to Earth.

Look at these returns of the 4 big dogs from iShares, Schwab, SPDR, and VTI from close of business 3/21/2022. All 4 have an internal expenses of just 0.03% so they are all on an equal playing field with respect to cost.

You must be registered for see images attach


It should be noted that SPTM only started tracking the S&P 1500 in 2019 so data prior to 3 years ago isn't relevant even though SPTM is still the winner in the 5 and 10 year returns. It used to track a broader US index, the same as ITOT I believe. Take a look at that YTD and 1 year Total Return. Significant outperformance by SPTM while no earning growth stocks were getting slaughtered. I have no doubt that this would have looked different in early 2021 during the height of the speculative craze, but now that we have seen the tide roll in and out, we have the data.

In summary, you can't go wrong with any of these funds with their simplicity, cost, and performance, and they will all likely outperform 80-90% of investors and fund managers over the long term. However, in the long run I think you'll see higher returns and less volatility with SPTM or a fund that uses underlying S&P indexes vs Russell or other non-qualitative indexes.

Is there something similar to SPTM that isn't market-cap weighted? I feel like market-cap weighted "total index" kinds of things really end up being small-basket funds of the top 25 or so companies (like the S&P 500 index itself is). All of the smaller stocks that "balance" the fund are basically decoration, with minimal influence on the overall performance one way or another.
 

BigRedRage

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The only ETF I currently own is FFND. I like it because the head of the fund is a guy I follow for investment fundementals a lot, super smart dude, trust his research and decisions. He is a TSLA bull and 13% of his fund is current TSLA but the overall etf is pretty solid IMO.
 
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Folster

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Is there something similar to SPTM that isn't market-cap weighted? I feel like market-cap weighted "total index" kinds of things really end up being small-basket funds of the top 25 or so companies (like the S&P 500 index itself is). All of the smaller stocks that "balance" the fund are basically decoration, with minimal influence on the overall performance one way or another.

I doubt there's and equal weighted S&P 1500 ETF. But, it looks like Invesco offers RSP, EWMC, and EWSC, that equal weight the S&P 500, 400, and 600 respectively. The downside is that expense ratios while not extreme are kinda high 0.20 for the 500 and 0.40 for the 400 and 600.

I imagine they have underperformed recently, especially the 500 as so much of that index relies on the mega cap companies that have outperformed and factor in the sheer growth of indexing as well as auto investing 401Ks that have pumped continuously oversized amounts into the biggest names.

I'll take a closer look though when I have a chance.
 

Mainstreet

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I know enough to feel confident to tell almost everybody to stay far away. But what do you got?

I'm not feeling comfortable in the stock market and CDs and Money Market are paying low rates. I keep hoping the Fed will raise the interest rate.
 
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I'm not feeling comfortable in the stock market and CDs and Money Market are paying low rates. I keep hoping the Fed will raise the interest rate.

How old are you if you don't mind me asking? And are you currently invested, if so how are you allocated?
 

Mainstreet

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How old are you if you don't mind me asking? And are you currently invested, if so how are you allocated?

It's a bit complicated as I'm not planning for my window. I'm probably going to have to get some legal advice.
 

elindholm

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especially the 500 as so much of that index relies on the mega cap companies that have outperformed and factor in the sheer growth of indexing as well as auto investing 401Ks that have pumped continuously oversized amounts into the biggest names.

Exactly. All of the John Q. Investors out there are creating disproportionate demand for the biggest names, in my opinion. The tide will shift on that sooner or later. So an ETF that's dominated by the mega caps isn't a whole lot better than owning the mega caps themselves. I have GOOGL and MSFT but have avoided the others (directly; they're in mutual funds I own, of course). I was tempted by AMZN dipping below 3000, which was probably a steal at that point, but they're a little bit too far on the evil side for me. Also, I'm not exactly at the income level where one throws $3000 around casually.
 
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Folster

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Exactly. All of the John Q. Investors out there are creating disproportionate demand for the biggest names, in my opinion. The tide will shift on that sooner or later. So an ETF that's dominated by the mega caps isn't a whole lot better than owning the mega caps themselves. I have GOOGL and MSFT but have avoided the others (directly; they're in mutual funds I own, of course). I was tempted by AMZN dipping below 3000, which was probably a steal at that point, but they're a little bit too far on the evil side for me. Also, I'm not exactly at the income level where one throws $3000 around casually.

Your hypothesis would suggest that a Total Market ETF like SPTM would be slightly better than an S&P 500 fund moving forward. In my retail retirement account, I hold the 500, 400, and 600 separately with IVV, IJH, and IJR. I'm overweight small and mid compared to the S&P 1500.
 
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Folster

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It's a bit complicated as I'm not planning for my window. I'm probably going to have to get some legal advice.

The biggest issue I see with annuities is complexity. I've never met a client who understood their annuity. They typically have high fees and commissions that make them appealing for insurance agents to hawk.

One common problem I see in certain popular annuities is two separate growth buckets they provide. They sell you on the income bucket and the growth rates that are promised. For instance, they'll advertise guaranteed 10% simple growth of your income for 10 years.

That means that if you put in 100K you'll get exactly 10K in growth per year with no compounding of your income. This sounds great as your 100K is guarantee to be 200K after 10 years. But after 10 years you have 2 values, a cash value which is significantly below 200K and likely closer to 100K and 200K in income potential. So you can take out the lower cash value or annuitize the 200K and take monthly payments until you or your spouse die. That 200K can only be converted to monthly income streams. Meanwhile the insurance company will continue to invest and make tons of money off of your money while you are taking your monthly payments. If anything changed in your needs and goals over that 10 years and you need/want the cash, you get a paltry return. And if you annuitize the 200K income figure, that's locked in and you can't change your mind in the future.
 

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Homebuilders are also taking a tumble. Going to analyze the big dogs and see if I can find an opportunity.
I think investors/traders are seeing the inevitable recession and contraction of lending. With the 2/10 on its way to inverting right now, the 3mo/10 could be next. If new lending is drying up then homebuilders could see a decent drop from here.
 
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Folster

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I think investors/traders are seeing the inevitable recession and contraction of lending. With the 2/10 on its way to inverting right now, the 3mo/10 could be next. If new lending is drying up then homebuilders could see a decent drop from here.

But so many Millennials are entering the household formation phase of adulthood. I can't see demand falling that much unless there is a real rough inflation with massive job losses.
 

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