Discussion ***Official*** 2024 Stock Market Thread 💰

[Charmonium]

I don't know much about what's being called AI. I think it's more accurate to call them language learning models and to so some extent, text/language generation.

But behind the scenes, you still need the logic to deal with whatever solution you want to achieve. True AI could just be told what to do but I think what we're calling AI is more focused on being able to extract "meaning" from text and generate new text based on whatever text it's been trained on.

If I'm right about that then AI will be invaluable for increasing productivity but it doesn't really have the ability to "think." So while Ai will definitely contribute to the bottom line, you're still going to need the human intelligence necessary to cobble together useful projects. And that takes time.

 

[dullard]

I don't know much about what's being called AI. I think it's more accurate to call them language learning models and to so some extent, text/language generation.

But behind the scenes, you still need the logic to deal with whatever solution you want to achieve. True AI could just be told what to do but I think what we're calling AI is more focused on being able to extract "meaning" from text and generate new text based on whatever text it's been trained on.

If I'm right about that then AI will be invaluable for increasing productivity but it doesn't really have the ability to "think." So while Ai will definitely contribute to the bottom line, you're still going to need the human intelligence necessary to cobble together useful projects. And that takes time.

You are talking about generative AI. So far, it has been focused mostly on large language models (LLMs). They are helpful for aiding in writing documents--especially getting you started or past writer's block. Heck, I use it to write documents that I really don't want to write (but I still put in the effort to edit it).

But, AI is so, so much more than generative AI. Just look at what HP is doing with HP Print AI. No more printing ads when printing from a website or graphics split on multiple pages. That is all taken care of for you. https://www.hp.com/us-en/newsroom/press-releases/2024/hp-print-ai.html

Then there is AI to auto translate languages in real time, make conference calls actually good (no more background noise issues, no more crackly audio, no more terrible background blur where it looks like a 5-year old cut you out and glued you onto a new page), manipulate your photos (even Paint can now automatically remove objects, see here removing a twig https://pub-c2c1d9230f0b4abb9b0d2d9...024/10/Generative-Erase-in-Paint-1024x640.png), etc.

Heck, the thing that I'm most excited to see is Microsoft's AI search. No more needing to memorize the exact file name or exact tag/keyword used. Just type "BBQ Party" into a search and your barbeque party photos show up (notice how BBQ and barbeque are not the same keyword). https://pub-c2c1d9230f0b4abb9b0d2d9.../2024/10/Improved-Windows-Search-1024x576.png

 

[Charmonium]

@dullard - thank you for the additional info. I did actually know some of that. For example a few weeks ago I an article saying that GE had use AI come up with a room temp/pressure super conductor.

I really hope it's possible to create something like that. Wouldn't it be funny if AI can create a solution the problem which then in turn, would offset of the increase in electricity we'll need to support AI use.

Oh, and let's not forget things like cold fusion. Even relative simple shit like the traveling salesman problem. For the latter, it might not be possible to prove an AI result with a math theorem, but you can probably assume that you're pretty damned close.

 

[Charmonium]

Here's another good example. Say you're a bank that serves areas in FL hit by Helene and/or Milton.

A guy walks into your office for a loan. He's owns a small business and is eligible for SBA funding.

But oh, wait - the SBA just ran out of cash since f'ing politicians don't want to come back from break to authorize it.

Now as a banker, you don't really have a problem waiting to get paid - that's your baguette and butter. What you CAN'T afford to do is lose money.

So . . . who ya gonna call? Your choice is a lawyer who specialized in such things or asking a legal AI.

Not a tough call.

 

[nOOky]

Over the last year, the return of that basket has been quite good (10.6% to 34.0% for the various funds) if you compare it to what you should expect in a normal year (6% to 10%). But, yes, if you compare it to an aggressive fund in the last very good year, they didn't quite perform up to that level. I just don't want you to expect such large returns in the future. Nice to have, but uncommon.

I see problems with that particular mixture. VTINX and VSCGX are basically identical. There is no reason to own both. See the yellow and orange curves below. Since VSCGX has the higher fee, I'd ditch that one.
View attachment 109454

Next problem: VASGX and VSCGX invest in the exact same 4 mutual funds and nothing else. The only difference is that one is more conservative mixture than the other. It looks diverse to have so many funds with different names, but if they are investing in the same underlying items, it really isn't that diverse. Meaning if one of the underlying funds goes down, three of your four funds will go down in flames with it. One more reason to dump VSCGX.

Then buy something a bit more diverse. These simple portfolios are diverse and tried-and-true. Pick one and go with it. https://www.bogleheads.org/wiki/Lazy_portfolios I personally go with something quite similar to Bernstein's Coward's Portfolio listed there. Although, I have half as many bonds (since I'm not yet nearing retirement) and invest it in more in the total stock market and large cap stocks.

Thanks for the detailed reply. I spent a bit of time with the account this morning, but I am struggling to find out how to change the investment types from what my brother had them at, perhaps because it is an inheritance IRA? Regardless I tried calling a Vanguard advisor, but I don't have time here at work to sit on hold and wait as I actually have to work, so I'll have to try an advisor at another time.

 

[AdamK47]

Thanks for the detailed reply. I spent a bit of time with the account this morning, but I am struggling to find out how to change the investment types from what my brother had them at, perhaps because it is an inheritance IRA? Regardless I tried calling a Vanguard advisor, but I don't have time here at work to sit on hold and wait as I actually have to work, so I'll have to try an advisor at another time.

Generally you need to sell the positions which will go into your core position (cash). You can then buy whatever new position you want with the settled cash.

Not sure what the tax implications are on an inherited IRA. It really would be best to reach out to Vanguard to discuss it.

 

[nOOky]

Generally you need to sell the positions which will go into your core position (cash). You can then buy whatever new position you want with the settled cash.

Not sure what the tax implications are on an inherited IRA. It really would be best to reach out to Vanguard to discuss it.

Yessir I have been scheming on working with an advisor online. This type of IRA is taxed as normal income, it is not a Roth.

 

[Brainonska511]

Generally you need to sell the positions which will go into your core position (cash). You can then buy whatever new position you want with the settled cash.

Not sure what the tax implications are on an inherited IRA. It really would be best to reach out to Vanguard to discuss it.

Depends on the fund and account type. Vanguard let's you exchange between mutual funds directly but not between ETFs. If it's set up as a brokerage account, it isn't a big deal to cash out a fund and move it elsewhere, since the cash will always be in the shell of the IRA. And if it's mutual funds, just do direct exchanges.

 

[repoman0]

I shifted my and my wife’s 401k contributions a bit away from SPY/total market and toward total bond market, large cap value and small cap. Our overall allocation has like 80% total US market weight right now. Maxing out both accounts including one mega backdoor Roth will take a long time to meaningfully shift allocations but I don’t really like buying total market right now at IMO unreasonable tech valuations.

 

[Charmonium]

@repoman0

I shifted my and my wife’s 401k contributions a bit away from SPY/total market and toward total bond market, large cap value and small cap. Our overall allocation has like 80% total US market weight right now. Maxing out both accounts including one mega backdoor Roth will take a long time to meaningfully shift allocations but I don’t really like buying total market right now at IMO unreasonable tech valuations.

In an environment where the Fed is cutting rates, the last thing to want to do is buy mid to long term bonds.

I assume you know this but for the folks at home - bond price is inversely proportional to interest rate on the bond.

So let's say you have $1000 bond with a coupon rate (check investopedia for the meaning of technical terms like this) of 5% - which is equal to the current market interest rate for similar debt paper (riskiness) and let's say, 10 year maturities which is also the terminal date of your bond.

I don't think you actually have to clip coupons any more (which were print on the piece of paper that created the bond). The point though is the same - once per year for each of the 10 years, you get a check in the mail for 50 bucks = 0.05 * 1000.

As long as you hold the bond to maturity, you won't have any actual losses (or gains) regardless of prevailing interest rates. Every fixed return debt instrument essentially creates it's only little universe.

cont'd

 

[Charmonium]

But let's say that after a couple of years, you want your 1k back.

The issuer doesn't care since he's not obliged to pay you before the maturity date. So you're basically going to have to find your own buyer. And that buyer is going to want the current, prevailing, market for paper of the same or very similar grade.

To continue the example. Let's say that halfway into the life of the bond, you decide to sell. But in those 5 years, the relevant interest rate has zoomed up to 10%. What does that mean for you?

Essentially you need to take the static rate of 5% and back that into the sale price. IOW, what principal amount that generates $50 per year works out to a 10% APR? In algebra - 0.10X = 50. Solve for X.

At this point, you are shocked, shocked I say, that the most you can get for $1k bond is 500 bucks.

Sucks to be you.

 

[Charmonium]

@repoman0 - As for your other 2 choices . . . . large cap value and general small cap.

Both of these should work well for you as long as the Fed is cutting rates. In particular, small caps like the Russell 2000 tend to lag the market but recently have been showing signs of life.

However "small," as a general rule, also means riskier.

 

[Charmonium]

If something doesn't seem right with my explanation, pls go back and note the edits.

 

[Indus]

An index fund is just a fund that tracks against some arbitrary index - it can be set up as an ETF or a typical mutual fund. Any investing is subject to risk. But if Vanguard funds go belly up, we'll have bigger problems on our hands.

Anyway, it might have been a poorly selected fund if he somehow lost money in that time period, considering the return the S&P500 would have provided: https://www.officialdata.org/us/stocks/s-p-500/1992?amount=10000&endYear=2005

I guess so..

Those are great questions. Our crystal balls for the future are broken right now. So, we can only say what is most likely to happen. (As a side note: everyone who thinks they have a great idea to get rich quick also has a broken crystal ball). We are working on repairing the crystal balls, but until that happens:

1) If you follow the hot idea of the moment, the fad stock, the latest get rich quick scheme, you are most likely to end up losing money in the long run, maybe breaking even if you are lucky.

2) If you buy and sell regularly, then most likely you are going to break even at best.

3) You can predict the next Apple or next NVidia stock and get fabulously wealthy. But, most likely that won't happen.

4) Only 55% of businesses make it 5 years. Only 25% of businesses make it 15 years. Think about that before you invest all your money into one company.

5) How do you guarantee that you invest in the next big thing and also guarantee that you don't lose your shirt in a company that fails? Easy: buy a little bit of everything. If the underwater basket weaving company becomes the next Crocs and stupidly profits selling ugly junk? Guess what, an index fund owns it and so could you. If that thing-a-bob company goes under, guess what, the index fund is only 0.1% in it and you'll never notice that small of a loss.

Hint, yes get index funds.

6) Which index fund to buy? My crystal ball is broken. I don't know which index fund will do the best or which will do poorly. But, I do know which index funds will milk you of 1/3rd of your money. That is any index fund with a fee much over 1%. Heck, I won't buy funds with a fee much over 0.1%. A 2% fee doesn't sound like much. But that is 2% of your money, every year for as many years as you own that fund. That adds up quickly to a big chunk of your fortune.

Start with a low fee S&P500 fund (VFIAX) or Total stock market fund (VTSAX). As long as you are choosing a broad, low-fee fund, it doesn't matter which one you pick. What matters is that you get your money into a fund and how long you are there. Then, as time goes on, you can add a few more funds to get even more diverse.

Ok noob question time..

I looked at quite a few index fund types (tech, energy, dividend paying) and it seems they all fell off a cliff in 2020 and still haven't recovered. Thanks Trump!

For some reason I don't feel like an idiot anymore for investing in principal secured indexes which are based on the whole S&P 500 and not just some cherry picked stocks.. which could grow but could really go down too.

I understand your crystal ball isn't functioning properly but other than Tech, Energy, Dividend Yield funds.. what other kinds of funds are there?

Is there something that tracks the entire market or maybe something that just tracks the S&P500?

 

[Charmonium]

Oh man. I think I need to be checked for dementia since everything I just said supports buying bonds in a declining rate enviroment.

And weird thing is, I do actually know this.

I bought 4 individual stocks back in March. One was VPC, Virtus Private Credit. My whole motivation was the virtual guarantee that the fed would cut rates.

But I got tired of waiting so I sold it and kept DTCR, GOLD and PFE

 

[AdamK47]

I guess so..



Ok noob question time..

I looked at quite a few index fund types (tech, energy, dividend paying) and it seems they all fell off a cliff in 2020 and still haven't recovered. Thanks Trump!

For some reason I don't feel like an idiot anymore for investing in principal secured indexes which are based on the whole S&P 500 and not just some cherry picked stocks.. which could grow but could really go down too.

I understand your crystal ball isn't functioning properly but other than Tech, Energy, Dividend Yield funds.. what other kinds of funds are there?

Is there something that tracks the entire market or maybe something that just tracks the S&P500?

VTI / VTSAX

Tracks the CRSP US Total Market Index which includes around 4,000 companies. Large, mid, and small cap.

 

[biostud]

And well beyond 17% YTD.

18% YTD

 

[dullard]

I looked at quite a few index fund types (tech, energy, dividend paying) and it seems they all fell off a cliff in 2020 and still haven't recovered.

For some reason I don't feel like an idiot anymore for investing in principal secured indexes which are based on the whole S&P 500 and not just some cherry picked stocks.. which could grow but could really go down too.

I understand your crystal ball isn't functioning properly but other than Tech, Energy, Dividend Yield funds.. what other kinds of funds are there?

Is there something that tracks the entire market or maybe something that just tracks the S&P500?

I generally go with two investment management companies: Vanguard and State Street. This is because they charge low fees, sometimes drastically lower fees. I'll go through my whole thought process so you can see why I am guiding you in one direction. I'll do it with Vanguard, since State Street is more 401k focused and your company might not offer it.

Here is Vanguard's list after I narrow it down to Index funds (active funds are expensive and really don't have a good track record) and funds that normal people can afford to get into (I assume you don't have millions of dollars sitting around for institutional shares). There are 60 of them and only 5 of those 60 have lost money in the last 5 years (I hope Oct 2019 is close enough to your cliff in 2020 to be relevant for the discussion).
https://investor.vanguard.com/inves...=admiral™_shares,investor_shares&filters=open

I would say that most advice is for beginners NOT to look at specific sectors like tech-only or energy-only (and dividend payments often are bad choices, especially if you are considering this for a taxable account). When you just start out, the last thing you want is all your eggs in one sector basket that goes off a cliff. Once you get a broad range of investments, then you can pepper in specific sectors here and there (maybe have a few percent of your investment be energy or a few percent be healthcare, etc.)

If you narrow it further to exclude sector specific funds and bonds you get this list of 28 funds: https://investor.vanguard.com/investment-products/list/all?managementstyle=index&assetclass=equity&shareclass=admiral™_shares,investor_shares&filters=open

Next, international stocks are far more risky (in this sense risk means volatile, not in the sense of losing all your money). And the worst performing funds are almost always the small cap growth funds (these are startups that are going after moonshots, which while they may pay handsomely, they also are quite likely to burn out and die). So, excluding those you can narrow it further to these 7 funds: https://investor.vanguard.com/investment-products/list/all?managementstyle=index&assetclass=equity-region-us,equity-market_cap-large-cap,equity-market_cap-mid-cap,equity-style-value,equity-style-blend&shareclass=admiral™_shares,investor_shares&filters=open

Any of those 7 are good funds. Most people advice you to start with one or two of those, the S&P500 tracking fund VFIAX or the total stock market fund VTSAX. These two funds cover a broad range of companies, have low fees, and have a track record of being proven long-term winners. As you can see, it doesn't matter which of the two you pick, they are almost identical in performance:

 

[IronWing]

Do you have any thoughts on the mixed asset class funds like Vanguard's Star, Wellington, and Windsor funds?

 

[dullard]

Do you have any thoughts on the mixed asset class funds like Vanguard's Star, Wellington, and Windsor funds?

I do own some of those because my 401k is quite limited in options. But, in general, I am not really certain that I see the need. They tend to track other funds that are cheaper. So, why wouldn't I go with the cheaper funds?

For example, The Windsor II (VWNAX), Vanguard Equity Income (VEIRX), and Value Index (VVIAX) all are invested in mostly large cap value stocks. They aren't any extra diversification since they rise together and fall together (see the graph below). But the mixed asset class ones are under-performing and higher fees.

• VWNAX: 36.5% over the last 5 years, 0.26% fee
• VEIRX: 27.6% over the last 5 years, 0.18% fee
• VVIAX: 59.3% over the last 5 years, 0.05% fee. Better performing, lower fee.

I would rather buy the underlying index fund, then just buy some bonds or CDs as you get closer to retirement to make it less volatile.

 

[Charmonium]

Cheaper isn't always better. For Example, The T. Rowe Price funds I own have higher fees but also higher returns. At least historically I think that's been true. I've gotten lazy in my old age.

Even so probably a a third is in Vanguard - although it looks like I be redeeming those before I start munching on the others,

One of the things they really humped hard in business school is that your best investment is going to be the one that is most diversified. And a certain level of randomness was implied in "diversified" (see portfolio theory but also efficient frontier theory).

But my experience hasn't supported that thesis. Information has value and if you ignore that and just roll the dice, the odds are that you won't do as well.

 

[Brainonska511]

Cheaper isn't always better. For Example, The T. Rowe Price funds I own have higher fees but also higher returns. At least historically I think that's been true. I've gotten lazy in my old age.

Even so probably a a third is in Vanguard - although it looks like I be redeeming those before I start munching on the others,

One of the things they really humped hard in business school is that your best investment is going to be the one that is most diversified. And a certain level of randomness was implied in "diversified" (see portfolio theory but also efficient frontier theory).

But my experience hasn't supported that thesis. Information has value and if you ignore that and just roll the dice, the odds are that you won't do as well.

Individuals != populations. You're portfolio doing better doesn't disprove the idea that the more diversified portfolio will be better, on average, when you look at returns across lots of individuals.

 

[FelixDeCat]

Gold at all time highs. I should have kept my stash of gold coins from 2019..

All sold to pay cash for a new car. Today the car is long gone and Gold has doubled.

 

[Red Squirrel]

Silver is high up there too. If I sold what I bought over the years I would get a nice return. Going to hold though.

 

[Charmonium]

Individuals != populations. You're portfolio doing better doesn't disprove the idea that the more diversified portfolio will be better, on average, when you look at returns across lots of individuals.

Think about this though - why does high end wealth tend to populate hedge funds. In terms of fees, theirs' are extraordinary.

So why are they so popular? Because the investors just want to feel special? No, because they produce higher net returns.