Advice for Autonomous Investing

[no_free_lunch]

Hello,

 

I have a real world situation where I need to step way back from investing.   I know the recommended strategy is to use index funds.  However, even with that I have some concerns as to which index fund, there are many options.  I can pick some good ones for today but I am concerned what will happen in 10 years.  I am trying to setup my investments so they can run without me, just based on very simple instructions.   I am actually even thinking about assigning the funds to a wealth manager (sigh).   What would people do in this situation, what is the easy button if you want to make the minimal number of decisions but not lose your funds to fees (and possibly fraud?).  I am not thinking about return here, just hoping to match inflation or a touch more.   The main thing is it has to be an extremely simple investment solution and one that can stand for (ideally) decades.

[DooDiligence]

Berkshire?

[gfp]

47 minutes ago, DooDiligence said:

Berkshire?

Yeah, I hope you are OK no_free_lunch, but if it's open ended like you describe it can't really be in a two year note or something so I would put it in government securities money market or Berkshire or some combo of the two.  Berkshire is tax efficient as well.

[sleepydragon]

2 hours ago, no_free_lunch said:

Hello,

 

I have a real world situation where I need to step way back from investing.   I know the recommended strategy is to use index funds.  However, even with that I have some concerns as to which index fund, there are many options.  I can pick some good ones for today but I am concerned what will happen in 10 years.  I am trying to setup my investments so they can run without me, just based on very simple instructions.   I am actually even thinking about assigning the funds to a wealth manager (sigh).   What would people do in this situation, what is the easy button if you want to make the minimal number of decisions but not lose your funds to fees (and possibly fraud?).  I am not thinking about return here, just hoping to match inflation or a touch more.   The main thing is it has to be an extremely simple investment solution and one that can stand for (ideally) decades.

my ex employer didn’t allow PA trading, but I didn’t have to sell any stocks I already held when I joined( I am not allowed to buy ). So before I joined I sold pretty much everything and moved almost all of my money into BRK. I outperformed SP index

 

[no_free_lunch]

Oh boy. I just sold BRK from all accounts, except taxable ones.  Perhaps I need to reconsider that decision. Would you all really be comfortable holding BRK without buffet?  

[Vish_ram]

VTI VIG VYM (decreasing order of volatility & return). when you start off, put most of $ on first one, then slowly add/trim to 2nd & 3rd. Then live off the dividends that these generate. 

[Malmqky]

39 minutes ago, no_free_lunch said:

Oh boy. I just sold BRK from all accounts, except taxable ones.  Perhaps I need to reconsider that decision. Would you all really be comfortable holding BRK without buffet?  

I’m not the smartest person out there, but I don’t see why not.

Greg, Ted, Todd, and Ajit are all capable, ethical people I trust to run the company. Berkshire is nice because even ignoring the wholly owned stuff, half of the stuff they own you can feel good about holding for decades. Plus you have the potential dividend if the new managers recognize they aren’t Warren and instead focus on maximizing investor returns via stuff like that instead of stock picking.

 

Is Berkshire really that different from a curated SP500 type index even without Buffett?

Edited May 12, 2023 by Malmqky

[no_free_lunch]

3 hours ago, Vish_ram said:

VTI VIG VYM (decreasing order of volatility & return). when you start off, put most of $ on first one, then slowly add/trim to 2nd & 3rd. Then live off the dividends that these generate. 

 

This is solid advice.  The only thing I can add is, I might split 50/50 between these products and ishares equivalent for diversity.

Edited May 13, 2023 by no_free_lunch

[WayWardCloud]

I'd buy VTI and be done with it. Basically a completely agnostic toll booth on the entire world.

If you can't bring yourself to holding just one ETF then Betterment is a good hands-off wealth management tool. It rebalances between asset classes et harvests tax losses automatically for you according to the risk profile you have initially chosen.

 

Hope you're doing well. Take care,

Edited May 13, 2023 by WayWardCloud

[sleepydragon]

4 hours ago, no_free_lunch said:

Oh boy. I just sold BRK from all accounts, except taxable ones.  Perhaps I need to reconsider that decision. Would you all really be comfortable holding BRK without buffet?  

When Rockefeller’s empire got disbanded, it’s many spin offs made shareholders much richer decades after he dies.

 

Buffett has always been conservative, and bend backward to prevent the stock price from rising too fast. He doesn’t want to disappoint people and he doesn’t want to attract shareholders who won’t stay for long.

 

if Buffett is gone, more likely or not the stock price will go higher , imo 

[no_free_lunch]

3 hours ago, Malmqky said:

I’m not the smartest person out there, but I don’t see why not.

Greg, Ted, Todd, and Ajit are all capable, ethical people I trust to run the company. Berkshire is nice because even ignoring the wholly owned stuff, half of the stuff they own you can feel good about holding for decades. Plus you have the potential dividend if the new managers recognize they aren’t Warren and instead focus on maximizing investor returns via stuff like that instead of stock picking.

 

Is Berkshire really that different from a curated SP500 type index even without Buffett?

It lacks tech is my main concern.   What if there is some huge boom and you miss out.  I would need to keep at least something, over half, maybe two thirds in index funds.   

 

I'm just chicken I guess, there is nothing wrong with this strategy.  Berkshire is huge and very diversified, good chance it outperforms the market because it's not quite as overpriced.  Have to admit, BRK is down a touch since I sold, I am wavering and may put some funds back in.

Edited May 13, 2023 by no_free_lunch

[Spooky]

Just buy the VOO and set up automatic dividend reinvestment. Don't need to think about it.

 

OR buy VOO in a tax sheltered account until maxed out and then allocate the rest to BRK in a taxable account.

[SharperDingaan]

A different approach ....

 

Calculate what you would pay in MER per $1M of Assets Under Management; assuming 1.5%, it's about 15K/yr/million [1Mx1.5%]. Spend 5-10K every 1-2 years for a report, an asset mix, and a once-off investment recommendation assuming no further asset mix rebalancing for 12-24 months. Thereafter; have either your PA, or investment designate make the trades, and get out of the way.   

 

The higher the AUM, the more cost effective the approach. Repeat, reliable, once-and-done business also makes you very attractive to the fee-only advisor. Systematic 3rd party objectivity, and ability to acclimatize/train successors are bonus. Common practice amongst wealthier families where there is little interest/ability, and not limited to purely the 'investment' realm. Pre-nuptial agreements, trophy wives, heiresses, significant-other training, etc.

 

It requires a change in mind-set, and it works very well 

 

SD

[ValueArb]

On 5/12/2023 at 7:02 PM, no_free_lunch said:

It lacks tech is my main concern.   What if there is some huge boom and you miss out.  I would need to keep at least something, over half, maybe two thirds in index funds.   

 

I'm just chicken I guess, there is nothing wrong with this strategy.  Berkshire is huge and very diversified, good chance it outperforms the market because it's not quite as overpriced.  Have to admit, BRK is down a touch since I sold, I am wavering and may put some funds back in.

 Berkshire has missed every tech boom of the last 50 years, and I think it’s done fine. The only problem with Berkshire is it’s now so enormous that it isn’t likely to beat the market by much going forward. You can produce superior returns buying it when cheap and selling while dear, but they involves work you don’t seem to want.

 

I’m not sure why index funds aren’t the right solution, few professional portfolio managers are likely to beat them. The one thing academia can tell you is to overweight small caps, less liquid stocks historically provide significantly higher returns. So go total stock market in US and Europe, or small cap in both.

Edited May 15, 2023 by ValueArb

[sleepydragon]

2 minutes ago, ValueArb said:

 Berkshire has missed every tech boom of the last 50 years, and I think it’s done fine.

And he didn’t miss AAPL

[ValueArb]

2 minutes ago, sleepydragon said:

And he didn’t miss AAPL

He was 40 years late though.

[Spekulatius]

35 minutes ago, ValueArb said:

He was 40 years late though.

40 years late was still early enough though.

 

If concerned about lack of tech exposure through BRK, I would just add a little QQQ here.

[Spooky]

On 5/15/2023 at 9:56 PM, ValueArb said:

The one thing academia can tell you is to overweight small caps, less liquid stocks historically provide significantly higher returns. So go total stock market in US and Europe, or small cap in both.

 

Do you have a recommendation for small cap ETFs you like? Do you think the typical small cap ETF actually captures the returns of the small cap factor or are they forced to sell the position due to its size too early?

 

I've always wondered why Buffett recommends buying the S&P 500 rather than something like VTI which includes small caps.

 

 

Edited May 17, 2023 by Spooky

[Spekulatius]

1 hour ago, Spooky said:

 

Do you have a recommendation for small cap ETFs you like? Do you think the typical small cap ETF actually captures the returns of the small cap factor or are they forced to sell the position due to its size too early?

 

I've always wondered why Buffett recommends buying the S&P 500 rather than something like VTI which includes small caps.

 

 

I would go with an ETF that mimics the SP600  rather than the Russell 2000. SP600 is basically a small cap ETF curated to include predominantly profitable companies, while the Russell 2000 tends to include a lot of crap. i forgot which podcast it was (Zacks?) but the argument for SP600 vs Russell 2000 made sense and I recall it outperformed as well.

https://investor.vanguard.com/investment-products/etfs/profile/vioo

Edited May 17, 2023 by Spekulatius

[no_free_lunch]

On 5/17/2023 at 10:56 AM, Spekulatius said:

I would go with an ETF that mimics the SP600  rather than the Russell 2000. SP600 is basically a small cap ETF curated to include predominantly profitable companies, while the Russell 2000 tends to include a lot of crap. i forgot which podcast it was (Zacks?) but the argument for SP600 vs Russell 2000 made sense and I recall it outperformed as well.

https://investor.vanguard.com/investment-products/etfs/profile/vioo

Just wanted to chime in and say this makes a lot of sense.  If you can get some curating for next to no cost, why not.  Lots of funny stuff happens at these smaller companies, it seems smart to put basic filters on and you are still very diversified.

 

For similar reasons I have some money in Canadian small cap funds.  They seem to match or exceed indexes, even with a 1 percent expense rate.  It's possible that smaller space is not so "efficient". 

Edited May 26, 2023 by no_free_lunch