Show HN: Simplifying 401(k) Advice - Feedback?
kivalia.com
kivalia.com
http://www.kivalia.com/plans/moderate-portfolio/226/oracle-c...
All I have to do is right click and 'delete node' in Chrome, and I get to see everything without an account.
Also, I could just go to the javascript console and run this: $.unblockUI();
If you are going to block people, at least do it right.
That said, we would like those who find the information of value to sign up so we can update them as the models change.
"Edit: I'm the co-founder of Kivalia." We've spent about 1 1/2 years developing the above-linked community-based 401(k) advisory service offering, which is now live. We'd welcome feedback from the community to help us refine the design/flow/usability of the service offering.
The specific problem we're solving is "How should I invest my 401(k) money, given the market environment and the options available to me specifically?"
My partner and I have deep domain expertise (quant finance & investment advisory experience - 25 years or so between us) and as such, run the risk of creating something intuitive to us, but too geeky for mass consumption.
I’ll be active in the comments section
Thanks! B
Best, David
On the UI/UX side, the look and feel is very slick, but I'd like to see some deeper tutorial type explanations for things like beta and risk profiles rather than short "help" style definitions.
More fundamentally, it is hard to garner a real understanding of the sites' investment philosophy. That's something I'd really want to know before I send a friend or relative to this sort of website.
For example, although it is clear that the site favors active portfolio management, beyond just re-balancing, what is its take on active versus passively managed underlying funds? Is past performance being used as a predictor of future performance? What is the weight given to fees? What about internal leverage? And so on.
I wonder where the inflection point is where you are better off investing after tax.
If you're selecting lowest fee fund within specific classes, that will probably serve you relatively well...of course then you need to weight the fund classes. How do you handle that decision?
There are a few themes that we're playing on with regards to the advice, and we'll try to express them more clearly on the site as we move forward. These are:
1) Most of the investment options available to participants are really a mix of a number of market sectors...for example, Vanguard Wellington (http://www.kivalia.com/assets/vwelx/vanguard-wellington-inv). The name tells me nothing, but if one evaluates it, it looks like the mix of assets shown at the bottom right of the page referenced above...a mix of stocks and bonds. So we do a good job of mapping what various investments look like.
2) Getting the overall allocation right is the most important aspect of investing...and explains maybe 80% or more of one's overall returns. How much do I want in large cap growth, small cap value, international, etc.? That's incredibly hard for an individual to do when you have a bunch of vaguely named funds. Of course it's much easier to do when one has a list of sector-based index funds to work with.
3) Philosophically we're indifferent between active and passive funds...they're each just combinations of asset classes with a fee tacked on. What's most important to us is the exposure to various sectors a particular fund provides you, after fees.
4) Yes, our algorithms take into account each fund's respective management fees; so all else being equal we'd be biased towards the lower cost (better performing) alternative.
5) Past performance is definitively NOT a predictor of future performance. We simply show results for transparency sake in an effort to allow users to see whether or not we're adding value to the process.
6) We do build in "tilts" to our advice based on expected returns over a substantially long time horizon. These tilts are intended to bias portfolios towards sectors that look more attractive at any point in time, and away from sectors that are less attractive in our view. That said, it is a simple process to tighten down our algorithms to force the recommendations to a more benchmark-y look and performance.
re: actively managed funds
Even beyond price, it is hard to know exactly what you are getting. A fund may be in the large cap value segment generally, but what if the fund manager hates financials or loves energy? Or even worse what if he hates financials this year, but loved them last year? Trying to diversify properly with such idiosyncratic building blocks seems a frustrating excise.
Re: overall allocation
I noticed that you have three model portfolios based on risk tolerance (conservative, moderate, aggressive) and you measure them versus target date funds as a benchmark. Are those different models intended to account for personal risk tolerance as well as time to retirement?
re: managed funds or what you're getting in a particular fund. Our style maps for each fund (shown in the bottom right of any fund detail screen) break down how a fund is behaving relative to the overall market, showing % weights in 30 different sectors. Sectors at present are only as granular as small cap growth, emerging markets, international value, etc. but it's a start. We'll make it more granular over time.
Re: Allocations The models will not adjust (ie. decrease beta) like target date funds over time. The various models are meant for personal risk tolerance more than time to retirement.
The best advice is to make sure you contribute enough to receive the matching contribution, and then immediately roll the money out into an IRA as soon as you leave the employer. This will allow you access to a much wider range of investment vehicles.
Also in a 401(k) plan you get to purchase mutual funds at NAV which you cannot do through an IRA.
I don't believe there is a one size fits all ("best advice") solution to personal finances. Though I do agree with making sure you max the matching.
I don't believe that's correct. My understanding is that all mutual funds (excl. closed-end funds) must trade at NAV regardless of the type of account they're held in.
"That is, the price that investors pay to purchase mutual fund and most UIT shares is the approximate per share NAV, plus any fees that the fund imposes at purchase (such as sales loads or purchase fees). The price that investors receive on redemptions is the approximate per share NAV at redemption, minus any fees that the fund deducts at that time (such as deferred sales loads or redemption fees)."
In 401(k) the loads or purchase/redemption fees are usually waived (with the exception of short term redemption fees which are sometimes imposed for not holding funds at least 30-90 days to discourage people trying to "day trade" mutual funds).
Also, I did forget to mention that, in addition to waiving CDSC charges, large plans can usually qualify for cheaper share classes of the funds. For example Admiral or Signal shares at Vanguard rather than the retail Investor shares.
I've got to agree w/ your last point - it is typically best to move money into an IRA. There are cases however where a larger employer may be able to get lower cost funds than would be available to you in a stand-alone IRA.
What is most important is putting away enough money to maximize any company match you might get.
But you're right, the limited options can be problematic; and that's why we've created Kivalia.
Details on how you decide a fund rating would be nice.
The "Forecasts that drive our models" doesn't tell me what's really going on. First item: "US Small Cap vs Large". So you're biased toward small cap? That's the implication, but it's not explicit. I'd like to read why. Also, two of the three listed items talk about international (without any explanation), yet my specific plan recommendation has just a sliver of international exposure despite several options in that regard.
Usability: after finding my company's plan and creating an account, if I click on "401k guidance" in the top nav, I don't expect it to show the search field to find other company plans. Rather, I expect it to show me my plan(s). (I see it's under My Stuff, but that's less obvious.)
Very good start!
We'll want to revisit ratings as we build out - to look at the graphic representation of excess returns in a universe and then customize ratings around reasonable percentiles.
On the +/++ and -/-- portions of the ranking: these are simply momentum scores for the sector in which the fund participates. So, an A++ fund is a manager who is doing well on a risk adjusted basis, in a sector that has strong current momentum.
We'll need to be more explicit on the biases. You're right they don't tell me much. The biases are clearly based on the forecast 10 year returns. At present we are negatively disposed to international generally. You can actually read through our views on the blog: http://www.kivalia.com/blog/post/2013/07/11/Investment-Outlo...
See if that helps.
Will take usability thoughts into account as well. Thanks!
I worked for a while at a Uni that had something like a 401(k) which made an automatic contribution of 10% of base pay (on top of what you get paid) that started on day one. By default half of that went to Fidelity and the other half went to TIAA-CREF. I sold out Fidelity and converted my TIAA-CREF to an annuity because TIAA-CREF offered something very different from my other investments.
That's probably the best plan you can get these days, although I'd really be impressed if somebody offered me a defined benefit plan.
Anyhow I'm the kind of guy who buys XIV and doesn't look at the P&L figuring I'll win because the other guys will look at the P&L and blink and I won't.
Daily inverse VIX?!? Have you heard the expression "picking up nickles in front of a steamroller"? Not to mention the cost and tracking error.
It's not "picking up nickles in front of a steamroller" because there isn't any steamroller, unless you are using leverage. If you're using leverage or having to deal with anxious customers, it isn't for you.
The tracking error is in your favor because of contango, and that's the reason I invest in XIV, not because I think the VIX will go down. Ought of all the inverse volatility products I picked XIV because it profits from contango the best.
Also the cost isn't bad because the trading they are doing is simple and mechanical, it's the kind of thing I could do myself (and might do slightly differently) if I was working on a scale where trading costs were not so bad.
The phenomenon that implied volatility exceeds realized volatility is a force that is as strong, or stronger, as the force you harvest with beta. If they threw Rupert Murdoch in jail for sedition against the human race and outlawed "news" as we know it, that might change, but as long as people are hearing "sell in may and go away on CNBC", XIV is going to keep going up.
The one thing I worry about is that VelocityShares might blow up or that expanding volumes of volatility trading might cause a discontinuity in the options market. So long as XIV doesn't blow up, it is going to make money in the long term.
I'm sure we'll come back to this, but we'll want some stable ETFs to use as factors. Russell had a slew of interesting ETFs but closed them down due to lack of interest.
It would be hard to recommend volatility selling to anybody who you've got a fiducial responsibility for. People really don't like drawdowns.
Our advice is applicable in a number of ways.
The chinese yuan is an edge case (ie. we don't classify it well because it's currently outside the granularity of our framework - that will change), but if you think about it, probably not a bad choice. The yuan is pegged to the U.S. dollar and has a return (unlike US money market).
So simply, yuan is being used as a U.S. fixed income proxy in this case. The benchmark for the conservative models is about 40% bonds, 60% stocks.
Tell you what you can do - subscribe to the model and add a U.S. treasury ETF (eg. TLT) to the list...then re-run the models. My hunch is you'll find it heavily weighted in the models.
I think you're obligated to do something like this if you're in any way providing active advice.
Kivalia provides plan participants ongoing, actionable advice on how to invest the funds held in their individual accounts.