AUTHOR: Humble Reader on 7/7/2025 FIRST: David Powell on 7/7 | RECENT: David Lancaster on 7/8
Comments
Taxes and deficit: One major political party ignores the problem; the other has convinced almost everyone that lower taxes are the solution to everything. As a recent retiree I am embarrassed about how little I pay in taxes.
Thanks for your very informative reply. For now I am just “window shopping” and will not change my investments. I prioritize low expense, and do not invest in something unless there is enough history (10-year minimum) to get some feeling for how an investment may perform under various market conditions. One of my spreadsheets is the annualized performance of all my investments (mutual funds and ETFs) going back to inception, 1998 to 2012 in my case. So I can estimate how my current portfolio would have performed during the dot-comm bust or great recession, and know for sure it’s performance since 2012.
My dentist wanted to show me his Porsche (not sure what model) and he spoke of his indecision over upgrading it with a custom exhaust system that cost about what I paid for my second-hand Canyon pickup truck, or simply buying a new Porsche. At least I know where what I pay for my crowns and implants is going.
The S&P 500 Momentum Index and SPMO ETF contain 100 holdings but do not appear to be any more concentrated than the S&P 500 itself. In fact, for the largest sector, information technology, the S&P 500 index is at 31% and the momentum index is only 22%. I am wondering if the recent performance increase could be due to a self reinforcing feedback effect; when a stock appears on a momentum index it tends to increase the price of the stock. If more people, or bots, are using momentum strategy than in prior years that could be a factor. Is there a momentum bubble?
Thanks for the suggestions. Yes, a REIT fund could add some diversification to my broad market and sector index funds. And yes, by not selling winners to rebalance it keeps the momentum going.
I divide my investment assets into three classifications and have these rebalancing percentage targets: 50% Growth, 33% Broad market index, and 17% Fixed income. I do not rebalance between equities/bonds, domestic/international, growth/value, or large-cap/small-cap. Fixed income assets are holdings that are not affected by market declines (eliminates bond funds) and are currently cash in high-yield bank accounts, money market funds, CD’s, and I-bonds. The goal here is to not ever lose value. Only real risk is to inflation and so far these have been successful in that goal. This week I took advantage of the recent surge in growth equities to trim a little off the top of my two highest return growth funds in my Roth account and added a money market fund in that account with the proceeds. Prior to this the Roth was 100% growth. This gives me a little more tax-free fun money. I already hold enough for two years of RMDs in a money market fund in my traditional IRA in case things go south. And can fund more than six years of spending from the fixed income assets. I will eventually change my percentage targets to reduce growth investments and increase the broad market index investments but have no time table for this and it will be slowly accomplished.
The mutual fund and ETF performance measurement I most value is the hypothetical growth of a $10,000 10-year investment with reinvestment of dividends and distributions. At Schwab's www.schwab.com/research/mutual-funds/quotes/summary (no log-in required) the investment result stated as the cumulative dollar amount can be viewed or downloaded in a "report card" pdf file. The cumulative performance over the prior 10-year period seems like a good way to integrate the shorter term ups and downs. Yes, past performance is not a guarantee of future performance but it does seem like there may be some correlation. And if investment X performs better than investment Y for a 10-year period it seems like that relationship may continue into the future (at least for a while) even if both investments are impacted by market events and changes. Example broad market index fund $10,000 10-year performance stated as growth in dollars and as equivalent compound interest rates (as of April 30, 2025): QQQ $46,803 15.44% Nasdaq-100 index fund
SWPPX $31,419 11.45% S&P 500 index fund
SWTSX $29,459 10.80% Total U.S. stock market index fund
VT $22,980 8.32% Total world market index fund Not coincidentally I avoid funds that have less than 10-years of history. I also look at the historic performance back to a fund's inception, especially performance during recessions and other severe market events. And I ask myself what would my current investment portfolio do during these events and if I would be OK with it.
Since we as a society have decided (via our elected representatives) to fund various governmental functions at certain levels then by definition while there are budget deficient’s then taxes are not high enough. At least this is my position as a true fiscal conservative. False: The idea that governmental functions and spending are non-productive. False: The idea that there are enormous amounts of waste and corruption that if only eliminated would result in a balanced budget and reduced taxes. False: The idea that regulations (for business, environmental protection…) only result in inefficiencies and costs. The reality is that most business regulations (such as setting national standards for products and processes) promote economic growth and were actively lobbied for by business. And there are orders of magnitude of savings resulting from environmental protection regulations. As a side note I find it interesting that servicing the national debt results in a “tax” that disproportionately transfers wealth from the younger to the older, and from the poor to the rich, due to the demographics of who invests in “safe” government bonds (looking at you typical Humble Dollar reader).
Thanks! By the way, in the link to the IRS 1099r draft document the i1099r--dft.pdf file name was displayed using a single long dash instead of two short dashes, or it appeared this way on my browser screen.
How would the IRA custodian know what the IRA distributions were for? We have IRA check-writing and could use these for any purpose but currently only use for QCDs. Our IRA custodian (Schwab) is out of the loop on this.
Comments
Taxes and deficit: One major political party ignores the problem; the other has convinced almost everyone that lower taxes are the solution to everything. As a recent retiree I am embarrassed about how little I pay in taxes.
Post: Quinn rants about taxes-but maybe not what you think.
Link to comment from July 8, 2025
Thanks for your very informative reply. For now I am just “window shopping” and will not change my investments. I prioritize low expense, and do not invest in something unless there is enough history (10-year minimum) to get some feeling for how an investment may perform under various market conditions. One of my spreadsheets is the annualized performance of all my investments (mutual funds and ETFs) going back to inception, 1998 to 2012 in my case. So I can estimate how my current portfolio would have performed during the dot-comm bust or great recession, and know for sure it’s performance since 2012.
Post: Got Momentum?
Link to comment from July 8, 2025
My dentist wanted to show me his Porsche (not sure what model) and he spoke of his indecision over upgrading it with a custom exhaust system that cost about what I paid for my second-hand Canyon pickup truck, or simply buying a new Porsche. At least I know where what I pay for my crowns and implants is going.
Post: Quinn is intrigued by the Lamborghini-style of managing money
Link to comment from July 8, 2025
The S&P 500 Momentum Index and SPMO ETF contain 100 holdings but do not appear to be any more concentrated than the S&P 500 itself. In fact, for the largest sector, information technology, the S&P 500 index is at 31% and the momentum index is only 22%. I am wondering if the recent performance increase could be due to a self reinforcing feedback effect; when a stock appears on a momentum index it tends to increase the price of the stock. If more people, or bots, are using momentum strategy than in prior years that could be a factor. Is there a momentum bubble?
Post: Got Momentum?
Link to comment from July 7, 2025
Thanks for the suggestions. Yes, a REIT fund could add some diversification to my broad market and sector index funds. And yes, by not selling winners to rebalance it keeps the momentum going.
Post: Got Momentum?
Link to comment from July 7, 2025
I divide my investment assets into three classifications and have these rebalancing percentage targets: 50% Growth, 33% Broad market index, and 17% Fixed income. I do not rebalance between equities/bonds, domestic/international, growth/value, or large-cap/small-cap. Fixed income assets are holdings that are not affected by market declines (eliminates bond funds) and are currently cash in high-yield bank accounts, money market funds, CD’s, and I-bonds. The goal here is to not ever lose value. Only real risk is to inflation and so far these have been successful in that goal. This week I took advantage of the recent surge in growth equities to trim a little off the top of my two highest return growth funds in my Roth account and added a money market fund in that account with the proceeds. Prior to this the Roth was 100% growth. This gives me a little more tax-free fun money. I already hold enough for two years of RMDs in a money market fund in my traditional IRA in case things go south. And can fund more than six years of spending from the fixed income assets. I will eventually change my percentage targets to reduce growth investments and increase the broad market index investments but have no time table for this and it will be slowly accomplished.
Post: Rethinking Rebalancing by Jonathan Clements
Link to comment from July 4, 2025
The mutual fund and ETF performance measurement I most value is the hypothetical growth of a $10,000 10-year investment with reinvestment of dividends and distributions. At Schwab's www.schwab.com/research/mutual-funds/quotes/summary (no log-in required) the investment result stated as the cumulative dollar amount can be viewed or downloaded in a "report card" pdf file. The cumulative performance over the prior 10-year period seems like a good way to integrate the shorter term ups and downs. Yes, past performance is not a guarantee of future performance but it does seem like there may be some correlation. And if investment X performs better than investment Y for a 10-year period it seems like that relationship may continue into the future (at least for a while) even if both investments are impacted by market events and changes. Example broad market index fund $10,000 10-year performance stated as growth in dollars and as equivalent compound interest rates (as of April 30, 2025): QQQ $46,803 15.44% Nasdaq-100 index fund SWPPX $31,419 11.45% S&P 500 index fund SWTSX $29,459 10.80% Total U.S. stock market index fund VT $22,980 8.32% Total world market index fund Not coincidentally I avoid funds that have less than 10-years of history. I also look at the historic performance back to a fund's inception, especially performance during recessions and other severe market events. And I ask myself what would my current investment portfolio do during these events and if I would be OK with it.
Post: What’s the Best Way to Measure Investment Performance?
Link to comment from June 4, 2025
Since we as a society have decided (via our elected representatives) to fund various governmental functions at certain levels then by definition while there are budget deficient’s then taxes are not high enough. At least this is my position as a true fiscal conservative. False: The idea that governmental functions and spending are non-productive. False: The idea that there are enormous amounts of waste and corruption that if only eliminated would result in a balanced budget and reduced taxes. False: The idea that regulations (for business, environmental protection…) only result in inefficiencies and costs. The reality is that most business regulations (such as setting national standards for products and processes) promote economic growth and were actively lobbied for by business. And there are orders of magnitude of savings resulting from environmental protection regulations. As a side note I find it interesting that servicing the national debt results in a “tax” that disproportionately transfers wealth from the younger to the older, and from the poor to the rich, due to the demographics of who invests in “safe” government bonds (looking at you typical Humble Dollar reader).
Post: Are taxes too high? I don’t think so
Link to comment from May 28, 2025
Thanks! By the way, in the link to the IRS 1099r draft document the i1099r--dft.pdf file name was displayed using a single long dash instead of two short dashes, or it appeared this way on my browser screen.
Post: New in 2025 – Code Y on 1099-R box 7 for QCD’s
Link to comment from April 27, 2025
How would the IRA custodian know what the IRA distributions were for? We have IRA check-writing and could use these for any purpose but currently only use for QCDs. Our IRA custodian (Schwab) is out of the loop on this.
Post: New in 2025 – Code Y on 1099-R box 7 for QCD’s
Link to comment from April 26, 2025