OT: Investing - Stocks/Mutual Funds/Bonds/Crypto

[HaroldinGMinor]

My theory is that if your investment horizon is 20+ years out there is no real reason to invest in bonds. Yeah your portfolio may take a bigger hit during a downtown but as long as you are in it for the long haul you should make that up and then some when it recovers. Obviously not everyone is comfortable with that kind of a swing though.

[Stannis]

Anybody got tips for filing taxes on Crypto?

I was messing around with Crypto this year for fun, and pulled away (sold everything). I'm not exactly sure how much I made or lost though. I converted some currencies to others as well. I was using Coinbase and Coinbase Pro. And the transaction histories look all messy and stuff.

I only put like 300 bucks in, and there's no way I made more than 40.

I still want to report correctly though so I don't get flagged for an audit.

I usually use TurboTax free and do it myself. Will I have to purchase the Premium version this time? Should I get with a pro?

[MickeyDavis]

Anybody got tips for filing taxes on Crypto?

I was messing around with Crypto this year for fun, and pulled away (sold everything). I'm not exactly sure how much I made or lost though. I converted some currencies to others as well. I was using Coinbase and Coinbase Pro. And the transaction histories look all messy and stuff.

I only put like 300 bucks in, and there's no way I made more than 40.

I still want to report correctly though so I don't get flagged for an audit.

I usually use TurboTax free and do it myself. Will I have to purchase the Premium version this time? Should I get with a pro?

I wouldn't sweat it for $40, the IRS will never know:

During any tax year, if you have more than $20,000 proceeds and 200 transactions in a crypto exchange, you will get a Form 1099-K indicating proceeds for each month. ... If you receive a Form 1099-B and do not report it, the same principles apply. Likewise, Coinbase, Kraken and other US exchanges do report to the IRS.

^^^That's the same way it works with Paypal transactions if you sell on Ebay. $20K and at least 200 transactions and you have to report it, otherwise not.

So yes technically you owe taxes on your $40, but personally I'd let it go.

Here's more info:

https://www.investopedia.com/tech/how-prepare-bitcoin-tax-filing/

[jschligs]

Correct, $40 the IRS won't give a rats butt. They're looking for the $10,000+ group.

[GBBucks]

Disagree entirely on ETF's that track indexes being the way to go.

Funds that track indexes and generally, most passive funds, show no discretion regarding the most important part of investing: PRICE and Valuation.

To earnings. To cash flow. To Book value. Whatever metric you think is important.

People that are price agnostic have suffered greatly throughout the history of stock markets. Even worse so when we consider inflation and the loss of purchasing power of their dollar over time.

There are many wrong times to get into the market. Look at this chart and you'll be able to find an incredible amount of years in which it would have taken you 10, 20, even 30 years to make back your initial investment, adjusted for inflation or not. Diversification and price sensitivity is the way to go. Incurring losses is the easiest way to lose the power of compounding returns. I don't think the world is ever going to get rid of economic and market cycles.

https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart

If you are better at evaluating individual stocks (based on any criteria: price, earnings, valuation, whatever) Over the long haul than the index, you should be on Wall Street managing a multi billion dollar mutual fund.

Chances are, you are not.

I'm not managing one (too new to the industry - hopefully in the future), but I do in fact work at a multi billion dollar investment manager with mutual fund and hedge fund products.

And in 20 years when I've had my own firm and can buy the bucks, I'll still be reading these forums for the analysis and advice haha.

The worst thing an average investor can is try to time the market.

I agree with that entirely. I think market timing is a fruitless endeavor. I'm not advocating for that in the slightest, merely saying that just dumping all your money into SP500, DJIA, NASDAQ, etc tracking index funds is not a good idea.

It almost doesn’t matter your timeline. Active management fails Much more often than it succeeds.

https://www.google.com/amp/s/www.cnbc.com/amp/2019/03/15/active-fund-managers-trail-the-sp-500-for-the-ninth-year-in-a-row-in-triumph-for-indexing.html

The odds get worse the longer the timeline, but even over 1 year, 2/3 of active funds fail. Add the extra fees and....

And that’s the best finance minds on Wall Street with institutional resources working full time with billions of dollars at stake. If you think you’re doing it alone.... you probably aren’t.

While I agree that a vast majority of active managers are not worth their weight in salt, I don't think that 10 years (or the 9 quoted in the title) are an accurate representation of active manager vs passive investing returns due to the fact that there hasn't even been a market cycle.

Also, as someone stated above, it takes a lot of guts to have an investment philosophy and stick to it when it's not working. I'm a value investor, and clearly the last 9 years have not been kind to value, but over the very long run (which is important to the vast majority of us that aren't about to die, haha) value investing beats passive, growth, price agnostic investing.

[midranger]

Don’t drink the kool aid my friend. Would be interested to see 10 year or life of fund returns of your product after fees and compare to indexes. It’s like a 95% certainty that it lags.

[midranger]

Remember, when you bet on an index, you’re really betting on human ingenuity to continue creating/inventing products that other people want to buy.

[Stannis]

I wouldn't sweat it for $40, the IRS will never know:

During any tax year, if you have more than $20,000 proceeds and 200 transactions in a crypto exchange, you will get a Form 1099-K indicating proceeds for each month. ... If you receive a Form 1099-B and do not report it, the same principles apply. Likewise, Coinbase, Kraken and other US exchanges do report to the IRS.

https://www.investopedia.com/tech/how-prepare-bitcoin-tax-filing/

Correct, $40 the IRS won't give a rats butt. They're looking for the $10,000+ group.

Thanks guys. I always get a little paranoid because I have some friends who got audited even though they file honestly (at least what they tell me).

I actually just did the math, and I lost 50 dollars when trying out Crypto lol. I didn't make anything. Since I lost, but don't care to prove a capital loss, should I still answer honestly when the form asks if I invested in virtual currencies or just check no?



Anyways, if anybody has a Cryto exchange they recommend, let me know. I might go back and invest < 1%, once I'm satisfied with my regular investments.

I'm not really a fan of Coinbase and Coinbase Pro. The transaction logs are not accurate if you transfer between accounts Coinbase and Pro. And the fees seem pretty high

[GBBucks]

Don’t drink the kool aid my friend. Would be interested to see 10 year or life of fund returns of your product after fees and compare to indexes. It’s like a 95% certainty that it lags.

Haha. Funny calling fundamental research and value investing the kool aid when it’s been around since the late 1920’s (1934 if you count Security Analysis as the start) and index/passive investing is much younger and more of a fad.

The investing strategy we employ dates to the mid 1980’s and has been used across multiple firms. $1 invested in our strategy at its inception has grown to ~$100, SP and Nasdaq ~$42 to 45, DJIA ~$50.

It’s okay to have some index investments. I’d advise people to find an investment advisor who...

1. Understands that markets and economies have cycles (and preferentially who have lived through at least 1 full one)
2. Knows that valuation and price matters
3. Understands that volatility isn’t risk
4. Is long-term oriented and doesn’t chase performance/worry about career risk
5. Knows that just owning US based indexes isn’t diversification

[midranger]

So, assuming your fund has been around 30ish years, you’re claiming that after fees your investors have seen around a 17% annual return every. Single. Year.

Yeah. I’m calling bull ****. But feel free to post the fund name. We can easily see if that’s accurate. If it is, I’ll even invest in it.

[HaroldinGMinor]

I think the reason most institutional investors can't beat the market is that they operate on annual timelines. They have to show they did something over the course of a year or three years or five years. Individuals don't have to do that. We can take more risk which is the big (only?) advantage we have over the big guys. I do think you can beat the market consistently over the long haul (by 3 - 5%) but most don't have the gumption to stick to a strategy that maybe lags while the rest of the herd is making money. Also, the dips will be more severe and a lot of people don't like that either. In addition, it takes a lot of time and study to develop a strategy that you are comfortable sticking with through thick and thin. So long story short - index funds make the most sense for the vast majority of people.

[MickeyDavis]

I think it also matters if the account is static, no more money going in, or dynamic, regular additions to the account.

[midranger]

I mean if you’re constantly buying and selling out of positions based on strategy x, you’re also paying tax on gains which impacts your return. Sure you can write off your losses, but if your losses outweigh your gains, your return is negative (obviously not the goal). Don’t get that with a buy and hold.

I will repeat, if you have a strategy that beats the market by 3-5% over any horizon, you need to bring it to someone’s attention because every bit of wealth in America would be pumped into it. You’d be the richest man on earth. See: Warren Buffett.

[HaroldinGMinor]

I mean if you’re constantly buying and selling out of positions based on strategy x, you’re also paying tax on gains which impacts your return. Sure you can write off your losses, but if your losses outweigh your gains, your return is negative (obviously not the goal). Don’t get that with a buy and hold.

I will repeat, if you have a strategy that beats the market by 3-5% over any horizon, you need to bring it to someone’s attention because every bit of wealth in America would be pumped into it. You’d be the richest man on earth. See: Warren Buffett.

https://www.aaii.com/model-portfolios/stock-annual

This is based on small-cap value investing strategy. It's not constant buying and selling. It's buying, holding, re-evaluating periodically (maybe quarterly), and adjusting here and there. That's the active way to do it. The passive way (and the way I do it) is to put money in n equal-weighted S&P 500 ETF (RSP is the one I use). Most indexed ETFs are weighted towards the bigger market cap stocks. Equal weighted means the small caps get as much as the large.

As I said, institutional guys won't employ this strategy because they can't afford to miss the market by 15 - 20% (or more) in any given year.

[MickeyDavis]

Interesting. I belonged to AAII many years ago.

[midranger]

Small cap slant does yield higher returns typically, with more down side risk associated. That graph didn’t account for fees as far as I could tell. Not sure what pay them for access, but looks pretty good.

[HaroldinGMinor]

The fees are what you pay the broker when you make a transaction (so what is that these days like $5 depending on who you use?) and then obviously the taxes on proceeds. The idea is for an individual to own a portfolio of something like 20 stocks and sell based on set rules:

https://www.aaii.com/model-portfolios/stock-rules

I don't feel I am knowledgable enough to follow the active set of rules. Hence why I do the passive version. Maybe someday.

[midranger]

The fees are what you pay the broker when you make a transaction (so what is that these days like $5 depending on who you use?). The idea is for an individual to own a portfolio of something like 20 stocks and sell based on set rules:

https://www.aaii.com/model-portfolios/stock-rules

I don't feel I am knowledgable enough to follow the active set of rules. Hence why I do the passive version. Maybe someday.

Oh, so that’s just an idealized model? That makes sense.

It’d be interesting to see how people who follow this method do in reality.

[sidney lanier]

Maybe I'm just lazy, but in the last few decades my casual observation is that stocks seem to move together to such an extent that it doesn't matter all that much what your strategy is or which stocks you pick. With everybody running to one side of the boat, then the other side of the boat, it seems like the crowd is going to move you whether you fight it or not. Seems like on any given day things are pretty much all red or all green, and it doesn't matter much which things you're looking at.

I have a few industries I like because I think they will grow long-term, true, but other than that I think a dart-throwing monkey can do as well as an intellectually satisfying algorithm or strategy as long as he's throwing enough darts.

[midranger]

Maybe I'm just lazy, but in the last few decades my casual observation is that stocks seem to move together to such an extent that it doesn't matter all that much what your strategy is or which stocks you pick. With everybody running to one side of the boat, then the other side of the boat, it seems like the crowd is going to move you whether you fight it or not. Seems like on any given day things are pretty much all red or all green, and it doesn't matter much which things you're looking at.

I have a few industries I like because I think they will grow long-term, true, but other than that I think a dart-throwing monkey can do as well as an intellectually satisfying algorithm or strategy as long as he's throwing enough darts.

Part of this is because so much money has shifted to indexing. Prices do tend to move together.

I will say this, indexing falls apart completely if there is no one out there picking individual stocks.