Investment for a 30-year old

[chang]

I opened up a joint account with my stepson, who make a small initial (first ever) investment. My recommendation was VT. About a year later, I am somewhat disappointed in it. Any better recommendations?

[dave]

VT is fine. Add more while the price is depressed.

[fishingrod]

VT is about the safest investment for a 30 year old. It is diversified across the world, it is a mix of growth and value, and pays a dividend to compound over time.

If the worlds stock market goes up over time as has happened in very long periods of time, then one will not miss out. Yes, it will move with the market, isn't this what we want at least.

Are you not entertained?

Seems harmless!!

[fishingrod]

With just VT, one will only have to figure out when to start exposure to the bond market. That would seem a long way off, but it is important to get a small/little exposure early on, and advantageously, so one can gauge and feel the inverse relationship of stocks vs. bonds.

[galeno]

VTI is a better choice for Gringos. Lower ER. No hidden taxes.

The problem with VT for a USA domiciled investor is the hidden cost of dividend withholding taxes on the ~40% of non-USA domiciled equities.

9.8% for non-USA developed dividends.
11.2% for EM dividends.

For non-US investors like me it's the opposite. Using UCITS ETFs

VUSA (SP500) we'd pay 15% DWT
VWRD (TWSM) we pay 12.4% DWT

[chang]

I’m glad I checked; I don’t see VTWAX / VT listed here…

personal.vanguard.com/pdf/FASFTCWS_R_012022.pdf

So I am not getting any tax credit for foreign taxes paid.

[ronnie]

Buy an Energy ETF. PXE, OIH, XES, IEZ, RYE, VDE. Energy is the leading sector right now. I don't see a let up anytime soon.

[fishingrod]

"if, at the close of its fiscal year, more than 50% of a fund’s total assets are invested in securities of foreign issuers, the fund may elect to pass through to shareholders the ability to deduct or, if they meet certain holding period requirements, take a credit for foreign taxes paid by the fund."

Foreign holdings in VT are less than 50%.

Much better to hold separate foreign holdings in taxable account, so one can use the foreign tax credit.

[fishingrod]

Mixture of VEU and VSS comes to mind for foreign. And VYM or SCHD for your VEIRX choice.

[chang]

Jun 3, 2022 13:29:47 GMT fishingrod said:

Mixture of VEU and VSS comes to mind for foreign. And VYM or SCHD for your VEIRX choice.

That sounds like a bet against US growth/tech. I don’t think I’d make that bet for a 30-year old. But VTI/VEU might make more sense than VT from a tax standpoint.

Also, VTI and VEU are both cheaper than VT!

[chang]

Jun 3, 2022 12:04:37 GMT ronnie said:

Buy an Energy ETF. PXE, OIH, XES, IEZ, RYE, VDE. Energy is the leading sector right now. I don't see a let up anytime soon.

In retrospect, this was terrific advice. But I'm still not going to do it (although I hold a few energy stocks myself).

[Chahta]

Oct 10, 2022 19:14:04 GMT chang said:

OK, so the account has been in VTI & VEU for a few months and lost 13-22%. I ought to take the tax loss and reconfigure. I'm still looking for a 100% equity solution. It's not a lot of money (< $10k) ... maybe I can be more imaginative. How about all AMZN?

Chang, you know now is the time to plow more back in. Nothing is going up. He should do anything possible to put more in. I have a 529 for a grandchild and would only plow more back in.

AMZN? You know not to put all the eggs in one basket. OK buy 3 shares.

You are being "fearful, so now I must be greedy".  

[anitya]

Every change you make should be in line with the objective of the account and the lessons you are trying to impart.

As an aside, one can take a tax loss and still buy similar but not identical securities.

[Deleted]

I have been debating between VT, VTI and VOO.

[chang]

Actually, Fido has some interesting ETFs, see below. The expense ratios 0.29-0.39% are higher than VOO/VEA, but not outrageous. YTD and 1Y, FLRG is ahead of FXAIX (S&P500) by a whopping 5-6%, so it looks like their strategy is actually working.

On the other hand, the foreign version FDEV has tracked (and occasionally lagged) VEA, so it hasn't worked at all.

FLRG's Prospectus stated objectives

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The fund seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity U.S. Multifactor IndexSM. Normally investing at least 80% of assets in securities included in the Fidelity U.S. Multifactor IndexSM. The Fidelity U.S. Multifactor IndexSM is designed to reflect the performance of stocks of large and mid-capitalization U.S. companies with attractive valuations, high quality profiles, positive momentum signals, and lower volatility than the broader market.

FDEV's Prospectus stated objectives

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The fund seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity International Multifactor Index. Normally investing at least 80% of its assets in securities included in the Fidelity Targeted International Multifactor Index and in depository receipts representing securities included in the index. The Fidelity Targeted International Multifactor Index is designed to reflect the performance of stocks of large- and mid-capitalization developed international companies that have attractive valuations, high quality profiles, positive momentum signals, lower volatility than the broader developed international equity market, and lower correlation to the U.S. equity market.

Links:

FIDELITY INTERNATIONAL MULTIFACTOR ETF -- FLRG

FIDELITY INTERNATIONAL MULTIFACTOR ETF -- FDEV

[chang]

Another interesting Fido ETF. 11% ahead of FXAIX over the last year.

FCPI's Prospectus stated objectives

---

The fund seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Stocks for Inflation Factor IndexSM. Normally investing at least 80% of its assets in securities included in the Fidelity Stocks for Inflation Factor IndexSM, which is designed to reflect the performance of stocks of large and mid-capitalization U.S. companies with attractive valuations, high quality profiles and positive momentum signals, emphasizing industries that tend to outperform in inflationary environments.

FIDELITY STOCKS FOR INFLATION ETF -- FCPI

[Deleted]

VEA has not made any money in last 15 years. Is that a good reason to buy it?

[chang]

Oct 11, 2022 14:28:15 GMT @waffle said:

VEA has not made any money in last 15 years. Is that a good reason to buy it?

Hard to say. It might be. If I were choosing between two 2007 vehicles, one with 15,000 miles and one with 250,000 miles, I might take the first one.

[Deleted]

What % are you thinking to allocate to VEA ~40% or lower?

[bb2]

I'd be asking not what but when.

[chang]

Oct 11, 2022 17:12:25 GMT @waffle said:

What % are you thinking to allocate to VEA ~40% or lower?

Exactly. 60/40 US/foreign.

[Deleted]

Oct 10, 2022 19:14:04 GMT chang said:

OK, so the account has been in VTI & VEU for a few months and lost 13-22%. I ought to take the tax loss and reconfigure. I'm still looking for a 100% equity solution. It's not a lot of money (< $10k) ... maybe I can be more imaginative. How about all AMZN?

AVGE is like VT, but with slight size and value tilts. It is an ETF of other ETFs and should be eligible for the FTC. It's new, but should mirror DGEIX which has been around since 2003.
70% US/30% INTL, so the allocation is not quite want you want.

[Norbert]

Oct 11, 2022 15:55:09 GMT chang said:

Oct 11, 2022 14:28:15 GMT @waffle said:

VEA has not made any money in last 15 years. Is that a good reason to buy it?

Hard to say. It might be. If I were choosing between two 2007 vehicles, one with 15,000 miles and one with 250,000 miles, I might take the first one.

VEA, along with all unhedged developed foreign, has been clobbered by USD strength. It could recover nicely once we see a move back into risky assets.

VEA is attractive with its collection of strong global names, a PE of only 11, a 4% yield, a value tilt, and a chart that has already found support at 2019 and earlier levels.

Margin of safety, anyone?

Excellent long-term hold, as part of a portfolio that also includes US Growth.

(Of course, there are quite a few foreign funds in this space with similar characteristics; DODFX, for example, with a different sector focus. But, I like VEA.)

[chang]

Oct 11, 2022 21:57:30 GMT @django said:

AVGE is like VT, but with slight size and value tilts. It is an ETF of other ETFs and should be eligible for the FTC. It's new, but should mirror DGEIX which has been around since 2003.
70% US/30% INTL, so the allocation is not quite want you want.

Thanks @django. Never heard about this fund before. I've heard of CEFs of CEFs, but never an ETF of ETFs. Interesting.

First question that pops up is whether foreign taxes will be split out on my 1099. (Incredibly, VT does not do this, which is why VTI/VEU is a better choice than VT for taxable.) 

I'm not sure about EM being over a third of the foreign exposure. Right now, I'd lean more toward developed markets.

Good find, though. Are the allocations to the underlying ETFs dynamic (changing)?

[Norbert]

Yes. Also, on picking companies with pricing power in response to inflation, check out INFL.

[chang]

Decided to K.I.S.S.: bought 60/40 VOO/VEA.

[chang]

Checking in 8 months later: VEA is up 29%, VOO is up 23%. The kid is happy with that. In fact, he's started a new job, and wants to try to add $1K a month now.

Given the modest size of the account (sitting at $12.5K now), I think I should just continue to add to the same funds in their current proportion. Right now it's 41% VEA, 59% VOO.

Anyone disagree?

[uncleharley]

Jun 19, 2023 12:50:20 GMT chang said:

Checking in 8 months later: VEA is up 29%, VOO is up 23%. The kid is happy with that. In fact, he's started a new job, and wants to try to add $1K a month now.

Given the modest size of the account (sitting at $12.5K now), I think I should just continue to add to the same funds in their current proportion. Right now it's 41% VEA, 59% VOO.

Anyone disagree?

Not me.