I just came here to say fuck the US Securities Act of 1933. I am sure it must have some very important reason for existing, but at the moment it is preventing me from doing anything reasonable with my money.

In all seriousness, though, does any US Person who has lived abroad somewhat long term have any experience doing money business in the country of residence?

Specifically, I am trying to put some money (15K) aside for further education in about 7–10 years, and I am looking for an option to at least keep inflation at bay. Every option I look at from a Swiss bank has a clause in the fine print, blaming the US Securities Act of 1933 for not allowing any US Persons to even look at or distribute the document. Archive.org

Is my only option to invest in American banks? I just worry that it will complicate Taxes to a painful degree. I would appreciate any hints in the right direction

Looking for a brokerage with functional, individual API access to, at least, account positions, balances, and equity/fund/bond prices. Used to be happy with TDA, but they got bought by Scwab, whose API has been "pending" for six months.

I like to review my financial situation near the end of the year to prep for tax season, give to charity, etc. For any who cannot access the article or are too lazy, here are the things they recommend:

1. Tax loss harvesting
2. Contribute to retirement accounts
3. Convert IRA to Roth
4. Reassess risk tolerance
5. Review RMDs - only for 73+
6. Charitable contributions
7. Fund accounts for dependents

I check most of these, but more importantly I look at the new limits for 401k and IRA, as well at HSA limits for the upcoming year.

Is there something you like to do financially at the end of the year?

In this post, I'll provide a lot of basic information about investing, with links to additional reading for various concepts. Most of these concepts are not US-centric, though I will be mentioning US-specific details, such as tax-advantaged account types.

What's the difference between a mutual fund, etf, and index fund?

A mutual fund is a financial vehicle where assets from a large number of investors are pooled to be invested as one entity. Mutual funds have strategies, and investors invest based on how well the fund executes that strategy. For example, you may compare two large cap funds, and they have similar returns but one has a much lower expense ratio (the fees for running the fund), so you may choose the cheaper fund. Mutual funds generally can only be purchased after market hours, and only through a brokerage that has an agreement with the fund. If you buy a fund through a brokerage that doesn't sponsor the fund (e.g. if you buy a Vanguard fund from E-trade), you'll pay a fee for each transaction, whereas you'll pay nothing if you buy it from the brokerage the mutual fund is associated with (e.g. a Vanguard fund from Vanguard). With a mutual fund, you generally invest a certain amount of money, and the amount of shares really isn't that important.

An ETF is very similar to a mutual fund, except it is traded like a stock. So if you want to buy a share of an ETF, you'll just pay whatever commission your brokerage charges (often $0), just like you would with any other stock. However, since it trades like a stock, you can generally only trade in whole shares, unless your brokerage allows fractional share trades. So an ETF is essentially a mutual fund that is traded like a stock.

An index fund is a specific kind of mutual fund/etf, where the strategy is based on an index. This means the fund manager has a lot less input on how the strategy is executed, since they're trying to match a specific asset allocation instead of buying winners. For example, one popular index is the S&P 500, which is defined as the top 500 companies in terms of market cap (what the market thinks they're worth), and index funds tracking the S&P 500 will by based on the percentage of market cap a given stock has. For example, let's say Microsoft is 10% of the S&P and Apple is 15%, the fund would buy 10% Microsoft shares and 15% Apple shares, and the rest would go to the rest of the companies in the index in the same fashion. Since there's less analysis of individual companies, index funds can operate on very low expenses.

When comparing funds, focus more on the expenses and strategy instead of past performance, because past performance does not guarantee or even indicate expected future results.

So in short:

• mutual fund - you invest money, and the manager buys stocks/bonds according to a defined strategy
• etf - you buy shares, and the manager buys stocks/bonds according to a defined strategy
• index fund - restricts the manager to a very specific strategy, where purchased stocks/bonds must match a defined index

The vast majority of active fund managers fall behind the S&P 500. So in general, you'll probably be better off with an index fund instead of an actively managed mutual fund.

What is a stock?

A stock represents marketable pieces (shares) of ownership in a company. When a company is incorporated, the owner splits the company into some number of shares, and those shares can be sold individually to raise money to grow the company. The owner of the company is one with more than half of the shares (otherwise called a controlling stake), and if nobody owns a majority of the shares, it becomes a democratic system where each share represents a vote. In practice, only very large shareholders end up voting for board members, and the board hires a CEO that ends up making the rest of the day-to-day decisions.

This is true for both public and private companies, though purchasing shares in a private company cannot typically be done on the market and needs to be done through existing shareholders. When a company "goes public," private shares are converted to public shares and can then be sold on the open market.

If your company offers an employee stock purchase plan, make sure you know how you can liquidate those since shares in a private company can be very difficult to sell.

What is a bond?

At a high level, a bond represents a unit of debt for some organization. Basically, you're lending that org money, in exchange for them paying you back at some rate over some period. Some bonds pay dividends (i.e. you'll get the interest at regular intervals), and others instead are paid off at the end of the bond period in a lump sum.

Bond Ratings

Bond ratings represent the rating issuer's confidence that the organization will repay its debts as agreed. These ratings vary a little by rating org, so I'll be using S&P's rating system here.

Each rating consists of a letter in the range A-D with a + or - sign or number (e.g. A+, A-1, etc), and it works similar to letter grades in schools. The higher the grade, the lower the risk. In general:

• A-1/AAA+ - investment grade; top possible score
• A-2/AA - investment grade, strong score
• A-3/A - investment grade, adequate risk
• B - speculative, currently meeting commitments
• C - speculative, vulnerable to default/non-payment
• D - speculative, in default

Money market funds will stick to investment grade bonds, and "junk" bonds are the bottom two groups (C and D).

The main rating groups are S&P, Fitch, and Moody, and they can use different rating systems, especially for different types of bonds (e.g. a short-term vs long-term bonds can use different systems from the same org, as shown above with A-1 vs AAA).

In general, the higher the rating, the lower the return, but also the higher the probability that you'll actually get the return promised.

Tax implications

There are several types of bonds, like corporate, government, and municipal, and each have different tax implications. What follows is very high-level, there's a lot of nuance in the bond market wrt taxes:

• corporate - taxable at state and federal level
• government - Treasury bonds are taxable at the federal level only
• municipal - not taxed at state or federal level - there are exceptions, and some states require municipal bonds to be from the local state to be exempt from taxation (e.g. NY and CA are particularly strict)

There is a lot of nuance, so look into your local and state tax laws to ensure you understand.

Asset allocation

Your asset allocation refers to how your investments are distributed across different asset classes. The most popular asset classes are stocks and bonds, though there are other asset classes investors may be interested in, such as:

• real estate
• precious metals
• futures - e.g. purchase contracts for commodities (e.g. you could trade barrels of oil)

Asset classes can be broken down further, such as for stocks:

• market sector - tech vs utilities vs manufacturing, etc
• growth vs value - value means companies that are likely undervalued, growth means companies that have shown strong returns vs competitors; there's also dividend strategies (i.e. companies that tend to return profits to shareholders instead of investing in the core business)
• market cap - large cap (massive companies like Microsoft and Apple), mid cap, and small cap (smaller companies, like Jack in the Box, Polaris, etc)

Choosing an asset allocation can be an overwhelming process, and there are a lot of strategies that people claim works. The more important thing is to understand your strategy and stick with it instead of shifting with the trends (if you always buy what recently performed well, you'll be essentially buying high and selling low).

Here are some popular asset allocations (I've listed what I think is interesting below):

• Bogleheads strategy - buy stocks according to market cap, bonds according to age; three fund portfolio, two fund portfolios; the global market cap is ~55-60% US stocks, 40-45% international stocks; bond percent should be 100 - your age (quite conservative)
• 60/40 - 60% stocks, 40% bonds - generally recommended for retirees and those close to retirement, though some do it throughout their investment career
• "Permanent portfolio" - 25% gold, 25% cash (or Treasuries), 25% stocks, 25% bonds - intended for asset preservation and ends up being quite conservative
• dividend portfolio - buy almost entirely stocks with high dividends (one strategy is Dogs of the Dow, and then plan to live off dividends in retirement

There are a ton of exotic ones as well, such as Hedgefundies Excellent Adventure (lots of leverage in a portfolio intended to match risk of non-leveraged portfolios). Don't do anything like that without fully understanding how all of the pieces work, and even then, I recommend one of the above over anything that uses leverage.

Account types

Most countries offer tax-advantages to encourage residents to at least partially fund their own retirement. This will cover US-specific tax-advantaged account types, though similar structures exist in many other countries, and searching for " " will probably yield articles with information for resources for your region.

Here are the main account types, you may have access to some but not all:

• 401k - employer-sponsored retirement plan
• IRA - individual retirement account - available to everyone
• HSA - health savings account, must have a high-deductible health plan; essentially becomes an IRA once you hit 65
• 457 - employer sponsored plan offered at many state and local government agencies, and some non-profits
• 403(b) - similar to 401k, but offered to teachers, private non-profit employees, and some others

There are others, but these are the ones you're likely to run into that are relevant for retirees.

There are two main types of tax advantages these offer, referred to as traditional and Roth, though there are nuances for each account type. In general:

• traditional - get a tax deduction on contributions, no taxes on growth while it's in the account, pay taxes when you withdraw
• Roth - no deduction on contributions, no taxes on growth, no taxes when you withdraw

If your tax bracket is the same when you contribute and when you withdraw, Roth and traditional accounts are equivalent. As a quick demonstration, let's say you have a 10% tax rate, you invest $10k, your investments double, and you withdraw everything all at once:

• Roth (post-tax) - invest $9k ($10k - $1k taxes), grows to $18k, withdraw $18k
• traditional (pre-tax) - invest $10k, grows to $20k, withdraw $18k ($20k - $2k taxes)

There are limits to how much you can invest in tax-advantaged accounts, and traditional accounts sometimes have income limits to receive a deduction. There are strategies to maximize your tax-advantaged, so if you think you don't qualify, please ask since you may have options (e.g. a backdoor Roth IRA if you're over the income limit for Roth IRA contributions).

Long term capital gains vs income tax brackets

Regular brokerage accounts have no tax advantages, but they do have the advantage that gains are taxed as capital gains instead of income, whereas a traditional IRA/401k/etc is taxed upon withdrawal as income. Long-term capital gains brackets are lower across the board for the same income level vs income tax, and there's a 0% long-term capital gains bracket that corresponds to most of the 12% income tax bracket, then 15% up to the middle of the 32%/35% brackets, and then 20% thereafter. Short-term capital gains are taxed as income, so be careful to only sell assets that qualify as long-term capital gains.

There are situations where a regular brokerage account can be advantageous over taking a tax deduction for a traditional account. Here's an article about why you may want to use a traditional account and invest the tax savings in a brokerage vs a Roth account (target audience is early retirees, but it's applicable to traditional retirees as well). It's a fairly niche case, but applicable to surprisingly many people.

Tax-efficient fund placement

Let's assume you have a mix of assets in the following:

• Roth account
• traditional account
• taxable brokerage account

In general, you'll want to do the following:

• Roth account - highest growth since it's 100% tax free
• traditional account - capital gains generating investments with relatively low growth, e.g. bonds and dividend heavy stocks
• taxable brokerage account - international stocks because of the Foreign Tax Credit (e.g. you get a part of the taxes you paid back), assets with low capital gains distributions, and low need for rebalancing

However, the benefits here are far less than the benefits for using the right account types for you. For example, the Foreign Tax Credit is something like 0.23%/year of your taxable investments if you're invested in something like VTIAX, and you'll be paying taxes on something like 2.8% of that same investment. So use your tax advantaged space first, and then optimize from there.

Conclusion

Investing can feel overwhelming, and there's so much conflicting information available out there. My personal advice is to keep it simple using tried-and-true methods that have consistently had good results in the past. Here's what I do:

• max my tax advantaged accounts
• 70% US stocks, 30% international stocks asset allocation - I think the US will continue to outperform, but I want to hedge my bets some
• buy low-cost index funds, one fund per account to keep it simple; in my case, this gets me close:
  • 401k - 100% US stocks
  • IRA - 100% US stocks
  • HSA - 100% international stocks
  • taxable brokerage - 100% international stocks
• I don't have any bonds because I'm not retiring anytime soon and I have a high risk tolerance (I didn't panic sell in 2008); I do count my emergency fund as my "bond" portion though, so there's that
• check on my investments about 1-2x/year to make sure everything is close to my target (if I'm over in US stocks, I'll swap some IRA space to international; if I'm over in international stocks, I'll swap some HSA space to US)

My IRA and taxable brokerage is at Vanguard, and my HSA is at Fidelity. When I switch jobs, I roll my 401k -> my IRA.

This got pretty long and I probably should've broken it up into multiple posts, so please let me know if there's an area you'd like more detail on and I'll consider making a post about it.

Most people take a simple view of cash: they have a checking account for spending and a savings account for savings, and if they get fancy, they'll have a CD for longer term savings goals. Power users will change to an online bank with better returns, and that's about as far as it goes. That certainly works, but we can do a lot better with few downsides and a lot of extra benefits.

I'd like to start with explaining how traditional banks work and then look at alternatives. Basically, banks make most of their money by lending it, either for mortgages, auto loans, credit cards, etc. Federal regulations require they keep a certain percentage of their assets in "cash," so they pay interest on checking and savings accounts to attract deposits. The larger the bank, the less they need to work for deposits since they have brand recognition. That's why you'll see higher interest rates at online only banks (e.g. SoFi, Ally, etc) than at huge brick and mortar banks (Wells Fargo, Chase, etc), they need to pay more to attract customers since they don't have branches to do so. However, they'll never pay more than a certain percentage of loan rates, otherwise they'll lose money. Switching banks is time consuming, so customers rarely do that, which means banks only need to have periodic promos to encourage people to move their money to them.

Let's compare that to a brokerage. Brokerages offer a variety of features, and most of their money is made on commissions from trades (or for free brokerages, bid/ask spreads) or from fees on funds they run. The friction in changing funds is pretty low, so funds often compete for low fees to attract investors, and the more investors they have, the lower their fees can be (managing $1B isn't that different from managing $10B in terms of costs). They sometimes offer loans (e.g. margin loans), but that isn't the core of their business, and those loans are backed by the debtor's own assets, not the brokerage's funds, so risk is much lower and not related to deposits by other customers.

So now that the high level differences between banks and brokerages are out of the way, let's look at products brokerages have and how they line up with traditional banking products:

• Money Market Funds - basically savings/checking accounts, but run by a fund manager instead of a bank; you can select from any number of money market funds, from funds that look to reduce taxes (e.g. buy mostly Treasuries) to funds that seek to maximize returns; interest is generally accrued daily and paid monthly; banks sometimes offer money market accounts, which are similar, but they operate a bit differently, and you only get the one they offer
• brokered CDs - similar to regular bank CDs, but you're buying them on the open market instead of from your bank; these CDs cannot be broken early like bank CDs, but they can be sold on the market like any stock for the current fair market value; this means they can reduce in value if you sell before maturity, but since you're able to shop for the best price, you usually get a much better return if you hold to maturity
• t-bills/notes/bonds - similar to brokered CDs, but issued by the federal government in increments of $1000; these are not subject to state and local taxes, and some brokerages allow them to be auto-rolled (when they mature, the same denomination will be purchased); there's no early redemption, but they can be sold at any time for fair market value
• municipal bonds - buy bonds directly from cities and whatnot; these are usually not subject to state, local, or federal taxes, but also have higher risk due to cities generally being less credible debtors than state or federal governments; I don't bother with these, but maybe they're worthwhile in states with higher taxes (mine is <5%, so not that high)

Generally speaking, the brokerage options over a greater return than traditional banking products because it's trivial for investors to switch products without changing brokerages.

Here's what I do:

• checking/savings - invested at Fidelity in SPAXX, which currently yields ~5%, and I think it's ~30% state tax exempt; if my state had higher taxes, I'd probably opt for a Treasury-only fund; switching takes like 30s to enter a trade; Ally Bank savings is 4.25% and money market fund is 4.4%, and I use my brokerage as checking, so I'm getting 5% on all money held there (Ally checking is 0.10%)
• CD - I had a no penalty CD @ 4.75% @ Ally, which was a fantastic rate when I got it; Fidelity offers non-callable CDs @ >5% for periods from 3 months to 5 years, and Ally only offers those rates for 6-18 months (and they're still lower than Fidelity); I don't buy any because I buy...
• Treasuries - no equivalent at banks, but they're close enough to CDs; current rates are 5.2-5.4% depending on term (4 weeks to 52 weeks), and even notes (2-10 year terms) are 4.5-5%; my efund is invested in a t-bill ladder; I bought 13-week (3-month) t-bills every other week and set them to autofill, and my gains live in my money market fund (SPAXX @ 5%); this is half of my efund, with the other half in ibonds; if I need money, I either cancel the autoroll, or I sell the t-bill on the market

Here's my list of pros:

• significantly higher interest in checking (5% vs ~0.10%); no difference between "checking" and "savings," they're all just brokerage accounts
• more options for investment - I now feel comfortable keeping my efund, checking, and regular savings in the same place without having to sacrifice returns
• debit card rocks - Fidelity and Schwab both have worldwide ATM fee reimbursement and low/no foreign transaction fees (Fidelity is 1%, Schwab is 0%)
• can have cash savings and investments in the same place - Fidelity also has my HSA, and I may eventually move my IRA as well
• paycheck comes a day earlier - lots of banks offer this, but often only on their checking accounts

And some cons:

• SIPC instead of FDIC insurance - coverage is about the same, but FDIC is automatic, whereas SIPC requires me to make a claim; I doubt I'll ever need either
• a lot more options means the UI is a bit more complex; once familiar, it's not an issue
• some services don't play nice with brokerages - I keep an Ally account around just in case, and I honestly haven't noticed any real issues (sometimes I can only link accounts one way, but that's not an issue)

I switched from Ally to Fidelity last year for my primary bank and I'm loving it, and I highly recommend others give it a shot. If Fidelity isn't your speed, Schwab works well too. Vanguard doesn't offer a debit card, otherwise I'd recommend them as well (their money market funds are even better than Fidelity's). I used to shop around for better savings rates, and now I don't bother because Fidelity beats all of them on features and average returns (e.g. a better savings rate still loses if checking is near 0%).

Feel free to ask questions.

My partner recently started a new job. Prior to her employment I had been paying into my employer personal supplemental insurance as well as spousal insurance. Now that my partner has employer provided and options for employer supplemental life insurance, what should we be looking at doing? Do I stop my spousal life insurance? Or for dual income is it not bad to have both partners have self and spousal life insurance in case of things like lay offs? Also any general life insurance advice is welcome. I've never understood if it is wise to have supplemental life insurance provided by the employer or found in the open market. Thanks.

I wasn't aware of this until now, probably because I never needed it. But if you're usually a good, on-time tax filer, but you forgot this year for some reason, you can apply to get fees waived.

Anyone have any experience with this? Just wondering how useful it is in practice.