Hi. As title says.
About me: 23yo, no debt, $125k income, 401k maxed, 10k emergency fund, $50k cash floating around to invest, available money each month to invest after tax + rent + food + bills + fucking around money = approximately $3000.
Now here's my reasoning behind this.
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$16,666 into Vanguard S&P500, along with ~$1000/month deposit - Obvious choice. Simple, diversified, dollar cost averaging, Vanguard has lowest fees, mathematically sound, Buffett highly recommends it
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$16,666 into Wealthfront, along with ~$1000/month deposit - I am investing with a risk factor of 9/10. Maybe I should do 10? Here's the asset allocation. My initial thought process was "wow this is great". Hands off, great returns, $15k managed for free, then a low fee of 0.25% on top of their index funds. Then I read article 1, which highly advises against it. Basically rants about how crappy it is. Then I read article 2, which was the top response for the previous article. Basically this guy says Wealthfront can possibly have equal or slightly better returns than S&P500. Btw, both articles are amazing and highly recommended to read. One of the quotes from article 2 stood out to me:
Tax Loss Harvesting by itself makes up for the difference and then some – Wealthfront claims Tax Loss Harvesting can add approximately 1.29% annually (2.03% if one includes tax-optimized direct indexing). While I agree with Ross that this figure is huge and potentially overstated, there’s (a) no evidence he provides to the contrary and (b) just ignoring it is hardly sensible. So even if we decimate Wealthfront’s claim, we get to a 0.20% benefit from TLH with TODI. So this means that 1/10th of Wealthfront’s claimed Tax Loss harvesting makes up the fee difference by itself, and then some. I contend that Ross’ arguments show a misunderstanding of what TLH is and the mechanics of how it works. I’ll dive into this in depth in the TLH section.
- $16,666 into own stocks, along with ~$1000/month deposit - Yeah this is some gambling here. But I want risk. I want some part of my portfolio where I can point to and say hey, I made that decision. Not financially intelligent? Maybe. But personally rewarding? Definitely. Working as a SWE in tech, being in silicon valley, and being surrounded by tech my whole life, I can't help but see how tech has shaped everything around me. From culture, to society, to entertainment, to commerce, to everything. If anyone is familiar with Moore's Law or have watched The Transcendent Man, you can see how tech isn't stopping. I want maybe ~75% of this 33% to be in tech. Something like: microsoft, facebook, amazon, google, netflix, tesla, alibaba, jd, disney, chipotle, nike, underarmour. The other 30%, maybe in renewable energy? Weed? Esports? Any recommendations? Btw, I am not ONLY blindly picking stuff I feel are good (although there is some emotional bias into tech). I understand this market, and I am still constantly learning about the mathematics and valuations of companies
I also think the greatest resource to invest in is knowledge. The reason for Wealthfront vs S&P500 is I want to learn about their strategies in real time and how close of a margin they can get within each other. Then for my own stocks, yeah I understand it's gambling and I might not beat the market, but I don't think so entirely. (Any books to recommend here?) At my age and income level, 0 debt and 0 dependents, 401k maxed, and other 66% in index funds, I think I can have some leeway here.
What are everyone's thoughts? Welcoming all feedback :). Sorry long read, but I've became wildly intrigued with investing 2 weeks ago and read a BUNCH of stuff like 4+ hours a day. I just wish I started sooner.
Submitted May 17, 2017 at 01:29AM by investingthr0waway http://ift.tt/2rpaoUN
