patrick.net

I am beating a dead horse here.

Index funds are fine, and have a few small advantages to ETFs, which are also index funds which trade like stocks. An index fund is preferred to an ETF for long term investments.

The key to an index fund is it will not underperform the stock market because it’s a representation of the stock market. Some managed mutual funds fail, and are worse than the index.

I prefer managed funds for retirement accounts.

I was just on the phone to my ex girlfriend of 1983. She now has some bucks.
She’s paying an “adviser” for her investments. The fee is 1%.
She said she now has $900,000
“So, you’re paying someone $9000/ year (and rising) to do nothing, that’s like burning 9 grand in the street.”
She’s still working!

She resists figuring it out or letting me help her.

I'm considering buying into an index or ETF for commodities with divys for a very long term hold. Very long.

Like food or something.

just_passing_through says

I'm considering buying into an index or ETF for commodities with divys for a very long term hold. Very long.

Like food or something.

Are you thinking kinda like as a replacement for the stability portion of your portfolio, like how bonds have been historically used? Or more as a growth story, betting on rising food costs?

Hircus says

Or more as a growth story, betting on rising food costs?

Food and materials like Uranium. Uranium would be a 3 year hold. I'm pretty much an amateur when it comes to commodities though. I'm also shit when it comes to understanding expense ratios and stuff like that. I need to read a bit more.

https://fs.blog/brain-food/july-6-2025/

Every app wants your decision in seconds. Every employer wants results this quarter. Every investment platform profits when you trade. Meanwhile, the boring investor who indexed and touched nothing decades ago owns your neighborhood. Who's winning?

Put it all in a 3x leveraged 'Hawk Tuah Coin' ETF.

Trust me bro!

Patrick says

This may actually be better advice than Hawk Tuan coin ETFs, now that I think about it.

There are lots of people who completely agree with dollar cost averaging into SPY. (aka the 'VOO and Chill' strategy).

There's a whole active community of such people on Reddit. r/Boggleheads

Named for John Boggle, author of "The Little Book of Common Sense Investing" who inspired the VOO and Chill strategy.

Its like the IBM of investing strategies... Nobody ever got fired for doing VOO and Chill.

Patrick says

Again, I think mutual funds are always a mistake.

Buying mutual funds means giving away fees you could keep for yourself simply by buying the underlying stocks in the fund and holding them.

Think of mutual funds like a casino: if the lights are on, the customers are losing money.

If the mutual fund exists and is paying "fund managers", the customers are losing money.

The good news is that it's trivial to look up which stocks a fund holds and just buy all those stocks yourself.

What I do, and I'm not a great investor (so saying that up front). But you can see what those funds invest into, it's public. So I just match what they do on my own. It works ok, might just end up investing into an index and leave it alone, less headaches.

Day trading sucks, I suck at it. Tried it, was losing more often than winning and had more stress than I wanted or had time for.

Fortwaye says

What I do, and I'm not a great investor (so saying that up front). But you can see what those funds invest into, it's public. So I just match what they do on my own. It works ok

Just copy Nancy Pelosi's stock picks.

My favorite fund lately is Vanguard Tax Managed Capital Appreciation (Admiral shares).

The fund is like an index fund but when they sell something for a gain, they seek a loss from another stock to cancel the gain out. This fund is like having an IRA without required withdrawals. The money you take out someday is taxed for capital gains, not as income.

clambo says

This fund is like having an IRA without required withdrawals

Called a "Roth."

It's just more fun to invest and research yourself and you stay sharp. But it's definitely a lot of work, so.I can see both sides of the coin though I prefer this kind of work. Been averaging 18% p.a. for over a decade, so far so good. Latest project is auto swing and arbitrage trading in the cloud as well as AI assisted trading.

Headset is correct; the advantage of the Vanguard fund is of there are no contribution limits.

Today the limit for a Roth is either $7000 or $8000 (over age 50).

That's not a shitload of money these days.

Never exclude the Roth, rather after you max it out you can put extra money somewhere to grow.

clambo says

Today the limit for a Roth is either $7000 or $8000 (over age 50).

Clearly you've not heard of the Mega Backdoor Roth:

The contribution limits for a Mega Backdoor Roth depend on the specific features of your employer's retirement plan. Generally, the strategy allows for large contributions to Roth accounts, potentially up to $70,000 annually, though this can vary based on the plan's structure and the individual's circumstances.

So, the "backdoor Roth" requires you are working for someone else with a W2?

I was self-employed and had extra dough to invest beyond a SEP-IRA and a Roth IRA, so I found Vanguard Tax Managed Capital Appreciation suited me well.

www.financology.net

This is Finster's from iTulip's blog back in the day.

GlocknLoad now that you've got this feedback... are you willing to share what you decided to do?

I have historically been something like 40% real estate, 40% 'VOO and Chill', 10% speculative stock picks, 10%PE/VC. I bucked the general advice and never held much bonds when I was younger.

But recently shifted most of my 'VOO and chill' to precious metals and short term bonds... trying to hang on to some dry powder.

I am currently 0% Hawk Tuah Coin.

clambo says

So, the "backdoor Roth" requires you are working for someone else with a W2?

1. Roth IRA
Who can contribute: Income limits apply (2024: $161k single / $240k married for full contributions).
Max contribution: $7,000/year ($8,000 if 50+).
Flexibility: No required minimum distributions (RMDs). Can withdraw contributions (not earnings) anytime, tax- and penalty-free.
Investment options: Self-directed (stocks, bonds, ETFs, etc.).

2. Roth 401(k)
Who can contribute: No income limits.
Max contribution: $23,000/year ($30,500 if 50+). Employer ties:
Must be offered by your employer. May include employer match (but matches go into a traditional 401(k), not Roth).
Rules: Subject to RMDs (unless rolled into a Roth IRA). Early withdrawals (before 59½) are prorated (contributions + earnings).

Here's a very simple portfolio for someone who isn't an active investor/trader. And no, this isn't financial advice, just a story.

The idea here is that being highly 'tech laden', while a short term boon, could easily turn into a long term headache. The S&P500, right now, is over 35% vested in the tech sector, from Tesla to Broadcom (the Mag 7) sometimes a Mag 10, depending upon whom you ask.

So this portfolio makes its cornerstone the Dow Jones Industrial Average or the Dow30. One can buy DIA for that. The Dow30 consists of the high market cap blue chips such as Chevron, Verizon, IBM, etc. This should be 30% of one's portfolio.

Now, here are the high dividend individual stocks: Rio Tinto, Altria, British-American Tobacco, BHP Group, Vale, Petrobras Brazil. Out of this list, the last two are the riskiest ones so I'd split that into two holdings of 5% each. The others should be 10% with dividends reinvested.

Not to miss out on the tech sector, put in 10% for QQQ as the Nasdaq tracker. This way, the Mag 7 or Mag (10-15) don't pull you down if things go south.

And finally, not to get blindsided on the uncertainty of central banking/governmental behavior patterns, split that final 10% between Gold (GLD) and Silver (SLV).

Here's what one gains from this, income potential, instead of going all in on the Dow30. This produces a net income and in a tax deferred account ... one can live off the dividend stream instead of having to sell shares in old age. Here's a $10K portfolio's income stream for the past decade with no added funds ...

clambo says

So, the "backdoor Roth" requires you are working for someone else with a W2?

There's two 'back door Roth' protocols at play here.

For all types of ROTH's you need a corresponding amount of earned income - but not necessarily W2 income. Self employed income is acceptable.

You are correct in that the standard 'back door Roth' means converting Traditional IRA money into an annual Roth IRA contribution which is limited to $8k for 50+ year olds.

As Maga Chaos Monkey posted above, there is a second backdoor Roth called "Mega backdoor Roth" and this is done through your 401k - so in fact this one does require you to have W2 income, I should think. The MEGA version allows for much higher annual contributions of employer sponsored plans - With catch up's and matching I'm sure you can get to the $70k mentioned by MCM. The main caveat of this is that YOUR COMPANY PLAN HAS TO ALLOW IT. That's a big rub since I worked for a couple of big pharma companies (Abbott and JNJ) and neither had a plan that would allow it.

With the advent of ROTH 401k's (which is a third thing) I'm not sure that the Mega Backdoor Roth is a thing anymore - it's been over a decade since I looked at it. However, since the main purpose of doing any back door is to get around the maximum income limits of a ROTH contribution, a Mega Backdoor would still make sense?

There's also a weird quirk in 2025 and 2026 tax law regarding catch up contributions for anyone that will be between 62 and 64 during those years - you get an extra $3,750k 401k contribution limit on top of the existing $7,500 catch up contribution limits.

Saving's and Tax should not be this complicated - but how else would your congressman get to pick the winners and losers?

stfu says

There's also a weird quirk in 2025 and 2026 tax law regarding catch up contributions for anyone that will be between 62 and 64 during those years - you get an extra $3,750k 401k contribution limit on top of the existing $7,500 catch up contribution limits.

For individuals aged 60-63, SECURE 2.0 allows for increased 401(k) catch-up contributions. In 2025, those eligible can contribute up to $11,250 as a catch-up contribution

It's if you are aged 60-63 at the end of the year, not 62-64. Yes I checked. Yes, I will turn 60 before the end of the year that's why I checked.

If the "backdoor Roth" means you convert an IRA to a Roth IRA this is usually taxable.

I have converted a few bucks from an IRA to a Roth IRA and they sent me a 1099R and it's income.

I still like a tax efficient investment (Vanguard Tax Managed Capital Appreciation).

Edit: I mentioned it here somewhere, but I also bought a Vanguard Variable Annuity with extra dough decades ago.

This contains mutual funds which are called "sub accounts", and my expense ratio is very low.

You can stash a million bucks in one of these, and Uncle Sambo will never know you did; its contents aren't reported to the IRS, unlike your 401K, IRA, etc.

To avoid any unwanted distributions, I set the "annuity age" to age 99 in the contract.

Of course like all retirement accounts it's immune from civil judgement, which means you can run over a Mexican with a baby stroller and the shyster can't touch it.

clambo says

So, the "backdoor Roth" requires you are working for someone else with a W2?

I think so yeah. Mine is through Fidelity and my employer. I've been dumping my paychecks into that for almost 4 years.

what’s QQQ Rin?

Fortwaye says

what’s QQQ Rin?

It's the basic ETF which tracks the Nasdaq100. It's more or less, the main 'tech sector' tracker.

The reason why I don't like the S&P500 is that the Mag 7-10 tech sector stocks are nestled into their returns w/o trying to separate 'em out.

This keeps a layer of separation between the Nasdaq and Dow30.

"How NOT to Invest" by Barry Ritholtz

Fortwaye says

what’s QQQ Rin?

An index fund tracking Nasdaq 100.