My favorite ETF is SPY (S&P500) and DIA (Dow Jones Industrial Average)

I own these in my ROTH. I have 80% in Dow Jones and 20% in S&P500. In my brokerage account I also own these ETFs and a bunch of other stocks based on the Magic Formula. The name sounds sketchy, but the method seemed promising. However, after more research I've decided this "magic formula" isn't so magical after all. I've done the formula for about 1 and a half to 2 years now. It hasn't performed very well. It is still above 0%, but not anywhere close to the benchmark for the last two years.

I'm looking for more ETFs/stocks to diversify. Is owning just S&P 500 and Dow Jones diversified enough? I don't want to get too diversified. I'm pretty sure S&P500 doesn't have anything in foreign markets which may be a good thing for me to get into.

My ROTH is my safe money. My brokerage is my moderate risk account. So I need to figure out what to do with this extra money that I will be taking out of these magic formula stocks each 3 months progressively for the next year. I need something good to put this money into. I'm leaning on the side of some sort of ETF or ETFs of some kind, but I'm open to suggestions.

I'm also considering purchasing my first house as a hedge against everything going to hell and also to live in.

I want to pick something for long term. Hopefully like 10 to 20 years or so. I can do mid or short term too, but preferably something that will be around for awhile. I'm pretty open to suggestions.

I was looking at TWMJF as one of my more risky investments a couple months ago since marijuana could possibly grow. I think pot will become legal in a lot of states in the following years. However, looking at the financial chart on Yahoo finance it shows -27.97M in operating cashflow and -55.45M in leveraged cashflow. Should this be a red flag? A few months ago I decided not to invest, because this may be a bad sign. TSE may be another good option? In the movie the graduate that one guy says "plastics" so maybe TSE is a good idea.

Thoughts?

Look into just buying a ton of BRK.B. Yeah Warren Buffett may die and screw up your returns for a year or two, but that company has a long history of making lemonade when the market goes down.

It's also a very diversified conglomerate with holdings that are in very different sectors.

Big advantage to it is no fees for very good active management basically.

There's no such thing as "too diversified" - it's one of the few true free lunches out there. Unless you're making a bet that you're smarter than the market (which you're not), you should buy maximally diversified total market ETFs - VTI for US and VXUS for international.

Don't like this allocation. Why would you prefer the Dow over just straight S&P 500?

As another poster already said, I'd just by VTI + VXUS. Right now with SPY & DIA, you have no exposure to mid/small cap or international.

I'm a fan of Warren Buffet so I'll take a look at BRK.B.

VXUS seems like just the thing I may be looking for. The international factor is appealing.

I liked the stocks in Dow Jones. Apple, Disney, and Visa were some stocks I was a fan of. I was fairly optimistic about Visa. Visa is used by a lot of people and I think there will always be people who don't pay off their debts making Visa rich. Also, Visa is a pretty good tool to build credit which I don't think is going away any time soon. Visa also pays a dividend which is a big plus in my book. I love dividends. Off the top of my head if I had to choose the number 1 credit card it would have to be Visa. Master Card would be number 2.

Wow, I thought facebook was in the Dow. Not sure why I thought that, but just figured out that it isn't in there. Shucks. Perhaps that is a stock I can get. FB doesn't pay a dividend unfortunately, but it still is a good company. I may have missed the boat on that one though. On the other hand, my gut feeling tells me FB will do very well in the future.

I like the idea of doing some diversified stuff, because I'm not all that knowledgeable about the stock market.

... See the issue here is that your opinion about Visa isn't worth very much. It's the consensus view, which means it's baked right into the price.

Making money on the stock market isn't just about picking out 'good stuff' and buying it. What they are selling it for is at least as important as what you are buying. Right now almost all stocks are grossly overpriced... Which is why everyone keeps acting like the sky is about to fall.

You should 100% be buying VTI instead of S&P 500 or Dow. That's effectively buying a piece of the entire US Stock Market.

Honestly, for you, it would be WAY smarter just to put all your money into a Target Date Fund. That gets you exposure to the entire world and takes away all decision making.

But your opinion on BRK isn't baked into its price?

No. They're not cheap, but far from grossly overpriced.

We clearly disagree about what constitutes 'overpriced'. BRK tends to underperform as a stock relative to the performance of the tangible assets underlying it. It's also basically a large actively managed fund that charges no fees. I don't love it's price level today though. I don't love almost ANY of the current price levels.

And I've put my money where my mouth is. I'm 100% in cash and eagerly awaiting the crash so that I can get back in with leverage... Or just invest it into my real world business. Current price levels are simply not offering me anywhere near enough return for the risk they are asking for.

Right now if you subtract the goodwill and debt from BRK's balance sheet you're left with 171B in net assets. Subtract that from the 486B in market cap and you've got 315B in price for ~15B in net profit per year. Puts their price/earnings as ~21. Not amazing but not awful either. Definitely MUCH better than most SP500 components.

why do you prefer cash over a gold/silver etf?

Because I'm not an idiot. I'm in cash because I can't afford to take any real volatility without getting a very strong return. Gold/silver have lots of volatility and no underlying return.

I'm sorry but you have implied a LOT about your own thinking (in this case lack thereof) with the question.

This. I think it is possible to outperform solid ETFs with highly scrutinized analysis, but it takes a ton of work. May as well just go for the free money and set aside a small % for gambling.

the real question is cash vs moneymarket but im assuming BS is using the terms interchagably

VXUS and VTI payout no dividends. How unfortunate. This leads me to think S&P 500 is better.

I have purchased some VXUS. I was thinking going:
50% Dow
20% S&P 500
20% VXUS
10% VTI

I got VXUS before realizing I get no dividend from it. That just sucks. I really like that it gets international markets, but no dividend ughhh. Dividends are tax free in a ROTH which I believe is a huge plus.

I may just keep VXUS and get VTI anyway just cuz it is the entire market and that feels pretty diversified for a small amount. In progressing years, I'll probably stay away from getting more of them and just stick with Dow and S&P.

BRK.B pays no dividend either which sucks, but I've also read a lot on the internet about how it may outperform S&P 500 in the long run. I'll do more research before considering it further though.

May end up moving VXUS and VTI to my brokerage account since they pay no dividend, but meh. Not sure if I'm putting too much importance on dividends.


I did end up getting FB though in my less-risk-averse brokerage account. I'm feeling very good about Facebook. People are more addicted to Facebook than ever before. I also have been hearing stuff about them expanding their influence to younger children. Facebook is getting better at surveillancing people and selling information to other companies. Facebook also owns Instagram which is pretty popular among the younger generations. Is it overpriced? No clue, but Facebook is always full of innovation and growing so yeah.


I like having cash on hand. I won't be doing 100% like BoredSocial though, because I am definitely not in the same situation as you. I think keeping some cash on hand is a good idea for if/when the market goes south. I'll be able to push more in when the mighty bear shows its claws. Also probably good to have even more cash set aside in case of emergencies and in order to buy stuff.

Almost all (if not all) Vanguard ETFs pay dividends (i.e. distributions). Including VXUS and VTI. Where did you read otherwise?

Because you're in a ROTH I think you're overstating the importance of dividends (especially because, given your inexperience, you shouldn't be placing much value on the optionality of your available cash). As long as your funds are replicating the index (which VTI and VXUS will do), then the lack/existence of dividends should be a non-issue.

Don’t worry about dividends

Dividends are worse, if anything.

VXUS pays a good-sized dividend every quarter. So does VTI.

Why do you say this?

They cause taxable events in a brokerage account.

Sorry just first what do you mean by 'worse?' Worse than what?

All income is a taxable event. Why is dividend income a bad thing?

Appreciation of investments (like a BRK) in a taxable account do not trigger any taxable events until you sell. The taxes/income is deferred until you sell.

Quarterly dividends, like those from VTI/VXUS generate taxable events every time they throw off a dividend. The income from appreciation of these investments is deferred until you sell, which is generally where most of the gain comes from for equity investments.

This is why you do tax efficient placement of investments if you have a combination of tax sheltered and taxable accounts.

https://www.bogleheads.org/wiki/Tax-...fund_placement

There's nothing inherently bad about dividends...income is income. However, it's generally preferable to defer taxes as long as possible and to implement strategies that do that in your portfolio.

I should have prefaced that I'm not a tax / finance expert, but here's why I said what I said:

Fund A is going to return 10% over the next 30 years, and it pays no dividend because all of its gains are in the form of price appreciation.

Fund B is also going to return 10% over the next 30 years, but half of its gains are in the form of dividends and half of its gains are in the form of price appreciation.

If both funds are held for 30 years in a brokerage account, A > B because during the first year the dividends paid out by fund B will be taxed at your income rate. Then for the next 29 years, B's dividends will be taxed at capital gains rate, but only if they are 100% qualified dividends. Part of the quarterly dividend payment from VTI / VXUS are non-qualified dividends and are again taxed at your income tax rate.

For fund A, you just pay 100% capital gains rate at the end of the 30 years because it paid no dividends along the way.

So it would make sense to have your unqualified dividend paying investments in your tax free or tax deferred accounts, and your riskier investments in your taxable ones?

Thanks for the elaboration.

This is quoted from Warren Buffet himself to help with the no dividend policy compared to selling off yourself 4% a year when it becomes a long term hold.

"Let me end this math exercise – and I can hear you cheering as I put away the dentist drill – by using my own case to illustrate how a shareholder’s regular disposals of shares can be accompanied by an increased investment in his or her business. For the last seven years, I have annually given away about 4 1⁄4% of my Berkshire shares. Through this process, my original position of 712,497,000 B-equivalent shares (split-adjusted) has decreased to 528,525,623 shares. Clearly my ownership percentage of the company has significantly decreased.
Yet my investment in the business has actually increased: The book value of my current interest in Berkshire considerably exceeds the book value attributable to my holdings of seven years ago. (The actual figures are $28.2 billion for 2005 and $40.2 billion for 2012.) In other words, I now have far more money working for me at Berkshire even though my ownership of the company has materially decreased. It’s also true that my share of both Berkshire’s intrinsic business value and the company’s normal earning power is far greater than it was in 2005. Over time, I expect this accretion of value to continue – albeit in a decidedly irregular fashion – even as I now annually give away more than 41⁄2% of my shares (the increase having occurred because I’ve recently doubled my lifetime pledges to certain foundations)."

That link I gave gives a pretty great run down on ordering for investments by tax bucket.

Generally, I'll put my most risky (hopefully highest appreciation stuff) in tax-free accounts like our Roths or Health Savings Account because I hope they get huge in the long run. Then between tax-deferred and taxable accounts, I'll put any fixed income or REIT into the deferred accounts and more efficient equity stuff in the taxable.

This isn't a perfect/precise science. Right now, since i'm effectively 100% equity indexes...I don't sweat placement too much between tax-deferred and taxable, other than obvious things like REIT's. I effectively have some of the same indexes in both accounts, which is helpful for rebalancing to allow me to minimize/avoid selling anything in my taxable account.