Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
The compounded 15 year return for fidelity balanced fund is 9% . Your 15 year cd returns are about 5% and that is with a decade that had 2 back to back recessions and almost a total financial collapse.
Almost 2x the money at a more favorible tax rate or even no taxes if in a taxible account
that was one of the crappiest times in history and that was the end result , so yep well worth it .
MathJak, where are you seeing the Fidelity Balanced Fund coming in at 9% compounding over the previous 15 years? The fund is pretty much similar to Vanguard Wellington which did a collective average return of just over 7% at about 7.41% Vanguard Wellington
But again what's the compounding rate on that? Isn't it safe to say it's about 6% if that much?
The Long Term CDs over this time period (as I showed in my calculation in full in my thread) did 5% compounding.
Why take on all of the risks of a Balanced Fund just to make 1% more?
And MathJak I understand there were recessions back then, but your advice is to buy/hold and over 15 years you will be all set. So bringing up the recessions at this point shouldn't even be done if you are saying they technically don't matter if you just have the pucker factor to stay in the fund and ride out the roller coaster.
Long Term CDs are at 3% right now as I showed you, they are going to go back up as the Market corrects itself and also as the Fed increases the Fed Rate back. So we are going to see (my prediction) from at least 2016 - 2036 over the next 20 years, about the same thing with Long Term CDs v.s. Balanced Funds that we seen in the 15 year period we are analyzing, where the Balanced Funds might have 1% higher per year in compounding.
Is 1% extra worth that risk?
Also MathJak I have to make sure you are aware of the fact, that Mutual Funds aren't the only vehicles allowed for IRAs, you can invest your IRA money in Long Term CDs as well. So they will get the same tax benefits if we are discussing IRAs.
do you know what a compound rate is ? total returns on morningstar and most other websites are calculated as compound returns , each year is figured as is and then the next year is figured on top of it . they are already compounded returns . not average returns .
i had corrected the typo it was 7% not 9%.
Last edited by mathjak107; 08-22-2015 at 08:22 AM..
MathJak, where are you seeing the Fidelity Balanced Fund coming in at 9% compounding over the previous 15 years? The fund is pretty much similar to Vanguard Wellington which did a collective average return of just over 7% at about 7.41% Vanguard Wellington
But again what's the compounding rate on that? Isn't it safe to say it's about 6% if that much?
The Long Term CDs over this time period (as I showed in my calculation in full in my thread) did 5% compounding.
Why take on all of the risks of a Balanced Fund just to make 1% more?
And MathJak I understand there were recessions back then, but your advice is to buy/hold and over 15 years you will be all set. So bringing up the recessions at this point shouldn't even be done if you are saying they technically don't matter if you just have the pucker factor to stay in the fund and ride out the roller coaster.
Long Term CDs are at 3% right now as I showed you, they are going to go back up as the Market corrects itself and also as the Fed increases the Fed Rate back. So we are going to see (my prediction) from at least 2016 - 2036 over the next 20 years, about the same thing with Long Term CDs v.s. Balanced Funds that we seen in the 15 year period we are analyzing, where the Balanced Funds might have 1% higher per year in compounding.
Is 1% extra worth that risk?
Also MathJak I have to make sure you are aware of the fact, that Mutual Funds aren't the only vehicles allowed for IRAs, you can invest your IRA money in Long Term CDs as well. So they will get the same tax benefits if we are discussing IRAs.
boy , i really think you need to get educated before commenting.
WRONG ! cd's in ira's or taxable accounts do not get special capital gain rates . they are always taxed at regular income rates.. if you have tax efficient index funds they belong in a taxable account or roth where they can benefit not in a deferred ira being hit with regular income rates . if you have tax efficient equity funds then only income stuff should be in that deferred account since no matter where you put it they will be taxed at regular rates ..
equity's held out side of retirement plans are taxed at low or no capital gain rates s long as they meet the holding requirements .
for someone with little understanding of things and so many comments you sure have a lot of wrong facts and mis-understandings of what good planning is . .
Last edited by mathjak107; 08-22-2015 at 08:24 AM..
stocks vary yearly by 40-60% from their high to the low .
while yes, we were higher this year , don't forget it is the same equity's that gave you that cushion to that level you fell from.
in other words levels we fall from and end up at would not even be the levels if you were not invested in the first place .
someone can lose 40% of their portfolio and still be ahead where they would have been not being in equity's the last 5 years as an example . the insight growth model i was in saw 100k grow to 2 million since 1987 in nothing special fidelity funds . you can lose more than 1/2 and still be ahead of shying away from the markets all those years .
over time markets are higher highs and higher lows but the lows are still higher than most would be if they shy'd away from investing in equity's .
while those with no experience or knowledge about investing here worry about the drops they fail to realize that for most of history these drops are to levels you wouldn't even reach not being an investor over the decades .
Stop asking questions like this to try and support your Strawman argument of "I'm not educated". I have already calculated compounding rate of returns in my thread and showed them to you in full detail. I was the one who even BOUGHT UP the concept of compounding rate of returns, I have never even seen you mention them Mr. "I'm So Smart, but Tucker99 Is Such A Novice"
Quote:
....total returns on morningstar are calculated as compound returns , each year is figured as is and then the next year in top of it . they are already compounded returns . not average returns .
Quote:
i had corrected the typo it was 7% not 9%.
Yeah, Mr. "I'm So Smart" I was going to say that 9% isn't 7% on any day, but to continue.
Post your source on Morning Star only using compounding returns? Where are you getting this information?
This is pretty similar to Morning Star which updates it's information more frequently: Vanguard Wellington
But even if you are correct, we are talking 7% compounding over the time period v.s. 5% compounding over the time period, 2% is still not WORTH IT to go through the roller coaster ride. I don't see how anybody doing that can justify it with any common sense.
Quote:
Originally Posted by mathjak107
boy , i really think you need to get educated before commenting.
WRONG ! cd's in ira's or taxable accounts do not get special capital gain rates . they are always taxed at regular income rates..
Here you go continuing with your "I'm so smart and you are so stupid and need education" comments.
First of all, you said nothing about Capital Gain Rates, you said tax incentives period, if you want to discuss Capital Gain Rates then you should have specified CAPITAL GAIN rates.
Now, when both of the investment vehicles are in an Traditional IRA, the principal and interest earned are both tax deffered until you pull the monies out at 59 1/2. In a Roth, the principal and interest are pulled out tax free. IRA CDs get the SAME tax treatment as IRA Mutual Funds, or IRA Stock Funds, or IRA Passive Real Estate Funds. It's all legally considered an IRA.
So how about YOU get educated on the topic? Mr. "I'm So Smart".
Quote:
if you have tax efficient index funds they belong in a taxable account or roth where they can benefit not in a deferred ira being hit with regular income rates .
Are taxes higher today or will they be higher at retirement? You don't know. So don't get up here saying that only using a Roth is the way to go when you can't predict tax rates. They might be higher but they might not be.
Quote:
equity's held out side of retirement plans are taxed at low or no capital gain rates s long as they meet the holding requirements .
No, really? I'm just finding that out Mr. MathJak, thanks for "educating" me my oh so intelligent, smart, grandmaster. . You know I'm such a novice and so stupid, and you are SO SMART, thank you for your kind teaching grandmaster....
Quote:
for someone with little understanding of things and so many comments you sure have a lot of wrong facts .
Another Strawman. You make up claims that I don't understand anything but you have nothing to back up this supposed misunderstanding. I clearly stated my points, with full detail, with references and with sources. Get that Strawman out of here.
It's still coming back to the same question, a question YOU have yet to answer:
- If Balanced Funds are compounding on average at 6% - 7%, and Long Term CDs were at 5%, why take on the risk of the Balanced Fund for an additional 1% - 2% compounding return? Does that make sense?
you will find out why , experience is the best teacher . 5 year cd's are now at 2.27% . you will be locked in to 2.27 . over the next 5 years stocks could triple that potentially , we don't know what they will do but that is the chance you take . . you on the other hand stand zero chance of beating 2.27%...
want to bet by the end of the year stocks have well passed your 2.27% in just a few months . we can start right now .
you will find out why , experience is the best teacher . 5 year cd's are now at 2.27% . you will be locked in to 2.27 . over the next 5 years stocks could triple that potentially , we don't know what they will do but that is the chance you take . . you on the other hand stand zero chance of beating 2.27%...
want to bet by he end of the year stocks have well passed your 2.27% in just a few months . we can start right now .
Lol, MathJak the more you type the more you contradict yourself.
Now you have been the main proponent of long term investing, using at least a 15 year track record. But here you are talking about short term 1 year return comparisons.
So which is it MathJak, do examine the previous 15 - 20 year numbers or the previous year's numbers?
5 Year CDs are about 2.30% - 2.5% right now across the country, 10 year ones are going for 3% if you dig deeper. When the Fed increases the rate (which will happen within the next year, I'm certain of it) 5 year CDs will go back to over 3% and 10 year ones should be nearing 4%. By 2018, I believe all Long Term CDs will average about 4%.
Throughout this time, the Stock Market will be experiencing a major correction as it depreciates like hell as the hot air is being let out of the balloon that's been pumped up for the last couple of years. Any credible Economist will tell you that the Stock Market is extremely pricey and over-valued right now, due PRIMARILY to the Fed. But the Fed can't do anything else going forward, it's done everything it can do, so Stocks have no where else to go but down. Lol, this is common sense but Mr. I'm So Smart can't see this, but me (you know, the non-educated simpleton) can see this clearly.
Plus understand, once again, you said you can only track the value of the investments over at least 15 years. That's what you said. So I showed you a Balanced Stock/Bond Index Fund and it's compounding rate of return performance over the previous 15 years v.s. that of Long Term CDs over 15 years. I took YOUR MANTRA and presented it TO YOU with full detail, resources and references. And it showed that the Balanced Fund only beat the Long Term CDs (compounding) by 1% - 2% which is not worth the roller coaster ride.
my point is equty's will likely beat you hands down ..
I'm sure the S&P 500 will out perform Long Term CDs lol, but who puts all of their money into the S&P 500 and doesn't diversify it into also including some level of Bonds MathJak? Come on, you are just digging for anything to come back with instead of getting down to the bottom line here.
Balanced Funds (which is what people will invest in) have only did 1% - 2% more in compounding rate of return over Long Term CDs over the 15 year period I showed you.
Which for the risk in those Funds, I think that's just not worth the hassle.
It's still coming back to the same question, a question YOU have yet to answer:
- If Balanced Funds are compounding on average at 6% - 7%, and Long Term CDs were at 5%, why take on the risk of the Balanced Fund for an additional 1% - 2% compounding return? Does that make sense?
I don't know if you saw it yesterday before the posts were deleted by a moderator. I had apologized to you and realized I was apply bond functionality to CDs and thus I was wrong the entire time so I'm the event you didn't see it, I apologize I wasn't attempting to troll
To your question though balanced fund vs long term CDs. You are guessingm at the future long term 5% just as you criticized the equity team for but let's assume is 5% vs 6-7%
That simple 1-2% more is 20-40% higher annually which leads to 25.5%-58.8% better end result
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
