Author Topic: Hedgeable any reviewers?  (Read 1879 times)

krishnamba

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Hedgeable any reviewers?
« on: October 06, 2016, 02:58:25 PM »
Hi All

I am looking at Hedgable and wondering what experienced investors have to say about this new robo advisor based on its different approach.
https://www.hedgeable.com/tax-loss-harvesting-vs-downside-protection-white-paper

Fact #1

It’s mathematically impossible to increase the gross return of a portfolio by doing tax-loss harvesting. The only thing that you can optimize is your after-tax return, but the top line numbers can never be larger. Tax-loss harvesting evangelists are assuming you will invest any tax savings immediately into your portfolio.

Fact #2

In order to harvest a loss you have to lose money. You cannot make money by losing money, and despite what some may tell you, there is no guarantee that a market will quickly recover (or recover at all) after declining. Recovery may be probable, but it is not certain.

Fact #3

Tax-loss harvesting defers gains rather than eliminating them, because you eventually re-purchase the securities you sell. If those investments go up again, you will still be liable for taxable gains in the future. If you liquidate your portfolio after retiring, for example, you WILL pay taxes on any gains and you will often pay more if you harvested losses along the way.

Fact #4

By doing tax-loss harvesting every day, there is an opportunity cost of missing out on potential gains in the portfolio because of the 30 day wash-sale rule. In the example we use above, it is possible that you can pay less in taxes, BUT what if you could have received 2% more gains in your portfolio, giving you a 10% gross return instead of 8%? Is it worth saving a few basis points in taxes to miss out on a few hundred basis points in gains?

Fact #5

Tax-loss harvesting has the limitation of not impacting retirement accounts and other tax-advantaged accounts. There are nearly 50 Million IRA and 75 Million 401(k) accounts in America.
« Last Edit: October 13, 2016, 02:44:14 PM by krishnamba »

Driko

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Re: Hedgable any reviewers?
« Reply #1 on: October 06, 2016, 08:44:58 PM »
The fees look excessive. If I am reading it correctly, they are charging almost 5% to be in their hedge fund and even the low balance etf pool looks to be about .75 %

MustacheAndaHalf

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Re: Hedgable any reviewers?
« Reply #2 on: October 07, 2016, 07:47:58 AM »
krishnamba - I don't think you're enough of an authority to state what is impossible.  If the IRS loans you $1000 for 10 years, you can make money off of it.  No math even required for that - and that's what tax loss harvesting does.  You sell at a loss, the IRS gives you a credit - a loan - and you use the money loaned you by the IRS.  When you later sell the asset that gave the taxable loss, you effectively repay your loan to the IRS.

When you state things as fact, that are not facts, it suggests to me you're not open to learning.  You're trying to show you know it all.  A better approach might be asking about things you don't know.

Ramparts

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Re: Hedgable any reviewers?
« Reply #3 on: October 07, 2016, 08:51:44 AM »
krishnamba - I don't think you're enough of an authority to state what is impossible.  If the IRS loans you $1000 for 10 years, you can make money off of it.  No math even required for that - and that's what tax loss harvesting does.  You sell at a loss, the IRS gives you a credit - a loan - and you use the money loaned you by the IRS.  When you later sell the asset that gave the taxable loss, you effectively repay your loan to the IRS.

When you state things as fact, that are not facts, it suggests to me you're not open to learning.  You're trying to show you know it all.  A better approach might be asking about things you don't know.

The "facts" that krishnamba posted are copy/pasted from the hedgeable.com site, I assume in order for them to be discussed about so the OP can learn. I think the "I am looking at Hedgable and wondering what experienced investors have to say about this..." line is a clue that they are in fact open to learning.

krishnamba

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Re: Hedgable any reviewers?
« Reply #4 on: October 07, 2016, 10:10:18 AM »
The fees look excessive. If I am reading it correctly, they are charging almost 5% to be in their hedge fund and even the low balance etf pool looks to be about .75 %

If you could share where you see 5%.
I see a pricing chart from .75 going down to .3.
And the underlying etf highest at .22.

thanks

https://www.hedgeable.com/pricing
Total Client Asset Size
(all client accounts combined)   Total Yearly Wrap Fee
$0 - $49,999   0.75%
$50,000 - $99,999   0.70% (.05% fee break)
$100,000 - $149,999   0.65% (.10% fee break)
$150,000 - $199,999   0.60% (.15% fee break)
$200,000 - $249,999   0.55% (.20% fee break)
$250,000 - $499,999   0.50% (.25% fee break)
$500,000 - $749,999   0.45% (.30% fee break)
$750,000 - $999,999   0.40% (.35% fee break)
$1,000,000 and up   0.30% (.45% fee break)

krishnamba

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Re: Hedgeable any reviewers?
« Reply #5 on: October 13, 2016, 02:43:53 PM »
Hi All

I think one of the cool things we can appreciate about MMM is his risk taking on trying out new things.
I for my own personal reasons feel I can take risks and would like to document my rollover of 401k to Solo401k of 100k in Hedgeable.

If anyone is interested please respond. I will do my best to keep a log and show how its going.

thanks

eudaimonia

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Re: Hedgeable any reviewers?
« Reply #6 on: October 13, 2016, 03:09:04 PM »
Pretty interesting concept - although it has nothing to do with tax loss harvesting. Clearly this is a momentum based (or similar flavor) market timing strategy. A huge taboo in this forum. Let the hoards of "indexing is the only true religion" descend to feast upon our blasphemous souls. :P

One other major X factor for me is I would need to know what their proprietary strategy actually consists of. Although I run a variant of a momentum based strategy in my own portfolio similar to several Bridgewater whitepapers - Ray Dalio isn't sharing his algos with me and I suspect Hedgeable won't either. That means you are relying on an expert smarter than you are. Personally, I find that situation to be untenable.

Other than those concerns, it seems like if Hedgeable can provide the same alpha as Bridgewater, this product would be very appealing since Bridgewater is closed to outside investment at this time (and when they were open the minimum account sizes were high seven figures). That said - who are these guys/gals and do they actually have a real track record beyond their hypothetical graph? That's the million dollar question. Until you can answer that I would say "buyer beware".

krishnamba

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Re: Hedgeable any reviewers?
« Reply #7 on: October 13, 2016, 03:27:44 PM »
This is the allocation given to me, I am going risk on, Aggressive portfolio.
I am wondering that because everyone is going to Index Funds
will hedge like portfolios out perform in short term i.e. next 10 years.
Bogle when interviewed always expresses a return to mean. I think "IMHO"
his answers recently in interviews point to active funds outperforming in next 10 years.

So considering I will still be contributing to a Solo 401k over the next 10 years and that I feel active
"robo/smart" funds will outperform in next 10 years. I am getting into this experiment.

   Cash : 1.9%

   Commodities : 6.4%
•   SPDR Gold Shares (GLD)

   Currencies : 1.8%
•   CurrencyShares Australian Dollar ETF (FXA)
•   CurrencyShares Japanese Yen ETF (FXY)
   
   EM Equities : 11.9%
•   iShares MSCI South Africa (EZA)
•   Global X MSCI Colombia ETF (GXG)
•   Vanguard FTSE Emerging Markets ETF (VWO)

   Fixed Income : 6%
•   iShares Core US Aggregate Bond (AGG)
•   Vanguard Total Bond Market ETF (BND)
•   iShares Floating Rate Bond (FLOT)
•   iShares 3-7 Year Treasury Bond (IEI)
   
   Intl Equities : 15.4%
•   iShares MSCI New Zealand Capped (ENZL)
•   iShares Core MSCI EAFE (IEFA)
•   Global X MSCI Norway ETF (NORW)
   
   Real Estate : 6%
•   Vanguard REIT ETF (VNQ)

   US Equities : 44.7%
•   ABM Industries Inc (ABM)
•   The AES Corporation (AES)
•   Ebix Inc (EBIX)
•   Ferro Corp (FOE)
•   H.B. Fuller Company (FUL)
•   Forward Air Corp (FWRD)
•   iShares Core High Dividend (HDV)
•   Itron Inc (ITRI)
•   Loews Corp (L)
•   Navigant Consulting Inc (NCI)
•   Ryder System Inc (R)
•   SCANA Corp (SCG)
•   Sysco Corp (SYY)
•   Tyson Foods Inc Class A (TSN)
•   Vanguard Total Stock Market ETF (VTI)
•   WageWorks Inc (WAGE)
•   Consumer Staples Select Sector SPDR ETF (XLP)

Bitcoin: 1.53%
Private Investments: 4.19%

eudaimonia

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Re: Hedgeable any reviewers?
« Reply #8 on: October 13, 2016, 04:09:41 PM »
Interesting selection of assets. Let us know what your returns are in 10 years if we're all still around.