Financial Update – Sept 2022

Another month, another update. A few random comments.

Good Reads/Listens/Watches

• WSJ on the versatility of the HSA (link).
  • Not much new here, but it was the first time I’d heard of this trick:
    • Children of parents with HSAs can qualify for their own HSA.
    • This is a mind-blower: Under current law, children such as recent graduates can fund their own HSA based on their parents’ health coverage.
      
      Say that Jane, age 23, is employed but still has health insurance through her parents’ high-deductible plan with an HSA. (Many children are covered by parental plans until age 26.) If Jane isn’t claimed as a dependent on her parents’ income-tax return, she can put up to $7,750—yes, the family amount—into her own HSA, even if her parents have funded their own. Jane doesn’t have to fund the HSA with her own earnings; someone else could give her the money for it.
• Welcome to Wrexham (link).
  • It’s like Ted Lasso, but real life.
• Beau Miles bids farewell to his beloved hat (link).
  • He is a masterful storyteller.
  • Here are his videos sorted by view count (link).
    
    

Life

• I visited Banff for the second time in 12 months (and the second time ever). This time it was for work. Mrs FP stayed home.
  • I managed to squeeze in 2 hikes:
    • Moraine Lake to Lake Louise (Caltopo Link).
      • While there are hordes of people near Moraine and Louise, hardly anyone hikes the 12 miles between the two. The (relative) solitude was much appreciated.
      • 3k elevation up, 3.5k elevation down.
    • Sulphur mountain.
      • This time, I didn’t visit the hot spring on the way down. Bummer.
• Life remains busy with 5 kids, though we are managing to keep our heads above water.
  
  

I visited this place too (Stanford). I don’t know how the faculty afford to live here.

Calgary food court. A bit more variety than in the US. The Great Canadian Hot Dog Arbitrage (GCHDA) is still alive and well. Based on current exchange rates, the hot dog + soda is $1.12 (=$1.5*0.75). 

Glorious, glorious poutine. 5.99 (+0.30 tax) CAD of pure (heart attack inducing) bliss. I had this “meal” twice in the span of 4 days. The first time was glorious. The second time, however, caused me to question the wisdom of my life’s choices.

The above was my attempt at grocery shopping / meal planning for several days in Banff.



Hike 1: Sulphur mountain. 2500 feet of elevation gain. I extended it to 9-10 miles by taking a detour. 

Hike 2: Moraine to Louise. Moraine pictured above.

Larch Valley.



Sentinel Pass, looking South.

Sentinel Pass, looking North (where the solitude began).



View of Sentinel Pass after descending to the North side.





Lake Annette.



Lake Louise.

This Month’s Finances

• The good:
  • Still employed.
  • A month ago, I transitioned my international holdings to Vanguard’s Total Int’l Stock Trust, which carries a 0.059% expense ratio yet delivers 0.15% of tax alpha. In my financial statement below, I now report the effective expense ratio to -0.091% (=0.059% ER – 0.15% tax alpha).
    • Footnote 11 below contains a bit more details.
• The bad/abnormal:
  • Markets are down.
    • I’m down:
      • $427k YTD. Ouch.
      • $323k over the past 12 months.
    • If I possessed a crystal ball, I’d obviously be a much wealthier man….
    • I have $18k of unrealized capital losses in my taxable account that I should eventually get around to TLH’ing.
  • $575 in travel for funeral.
  • $400 for repair of busted under-sidewalk sprinkler line.

Full version downloadable here (link).

 

Footnotes:

1. Fidelity unambiguously has the best HSA on the market. $0 admin fees + $0 expense ratio funds.
2. I lazily approximate home value as my historical purchase price.
3. I have a 15Y mortgage which results in much larger principal payments than a 30Y mortgage. Since principal payments are simply transfers from one pocket (assets) to another (debt reduction), I treat such cash flows as savings.
4. ~$0 cell phones described here.
5. All expenditures at Costco & Walmart are classified as “Food at home” for simplicity (even if it’s laundry detergent, clothing, medicine, toys, etc).
6. Nobody knows the perfect asset allocation. Just pick one and run with it. Use a target date retirement fund as a benchmark if you want some guidance (link). If you prefer to DIY (as I do), then a three-fund portfolio is great (link).
7. My low portfolio expense ratio is the primary reason why I don’t hold target-date funds, which have expense ratios anywhere from 0.16% to 1%. I can achieve a much lower expense ratio on my own due to Admiral shares, etc. And it’s not hard. Plus, a DIY portfolio allows one to tax-loss-harvest more easily.
8. ETF’s are slightly more annoying to hold relative to index funds. With ETF’s, you must deal with bid-ask spreads as well as the inability to buy partial shares (Fidelity now offers fractional shares). With a simple index fund, you don’t have to deal with either of these issues. Bogleheads discussion here (link).
9. I continue to own VTSAX rather than FZROX and in my taxable brokerage account because it is more tax efficient due to lower capital gains distributions. Bogleheads discussion here (link).
10. CA’s 529 plan has the lowest expense ratio US equity index fund of any in the US (link). I’d have 100% of our 529 money there if not for the state tax deduction we receive in our own state.
11. My Collective Investment Trust (CIT) version of Vanguard’s Total Int’l Stock Index has a 0.059% expense ratio, yet produces 0.15% of “tax alpha” due to reduced foreign tax withholdings. Vanguard implemented this change around 2019. Therefore, I report the effective expense ratio of negative 0.091% for this holding (=0.059%-0.15%). The “tax alpha” shows up in the performance differential in the fact sheets here (CIT vs MF) and is more thoroughly explained here. Unfortunately, this 0.15% of “tax alpha” is not available in the mutual fund version.

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