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Re: Good active funds to use in 401ks w/o index funds?

You already mentioned expense ratio and turnover, but those are the first things I consider and they're usually enough to narrow the field to one or two obvious winners. One needs to be careful with e/r and turnover criteria. Reducing the e/r by 50% starting at 100 bps gets you 50 bps but that same...
by Doc
Thu Oct 30, 2014 1:41 pm
 
Forum: Investing - Theory, News & General
Topic: Good active funds to use in 401ks w/o index funds?
Replies: 11
Views: 896

Re: Good active funds to use in 401ks w/o index funds?

The imperfect criteria I try to use include: (1) lowish ER for category, no 12b-1 fee, no load; (2) good diversification; (3) lower turnover rate, so not very "active"; (4) very long fund history; and (5) reputation of firm. Of course Vanguard has easily recognized quality managed funds i...
by Doc
Thu Oct 30, 2014 1:02 pm
 
Forum: Investing - Theory, News & General
Topic: Good active funds to use in 401ks w/o index funds?
Replies: 11
Views: 896

Re: "Schwab Intelligent Portfolios"

magneto wrote:"Schwab’s computer algorithm is going to suggest and manage a portfolio of ETFs for you."

Hmmm.

Where does 'intelligent' come in?


Maybe you have to use your intelligence to pick from the suggestions the computer offers. :idea:
by Doc
Thu Oct 30, 2014 12:49 pm
 
Forum: Investing - Theory, News & General
Topic: "Schwab Intelligent Portfolios"
Replies: 39
Views: 2455

Re: "Schwab Intelligent Portfolios"

This is something that might appeal to me. As I get older, I may decide that I don't want to spend the time managing my investments anymore. It seems to me though, you could do the same with something like a Target Risk fund. There is something in me that wants interaction with a live person. A cus...
by Doc
Wed Oct 29, 2014 2:42 pm
 
Forum: Investing - Theory, News & General
Topic: "Schwab Intelligent Portfolios"
Replies: 39
Views: 2455

Re: Just curious

Last week I had a gnarly cost basis question at Vanguard. A secured email question got a response in one day. :) The response was that they would answer my question in 20 business days. :( Meanwhile Schwab had the question solved and live on line months ago. :P Doc: Forgive me for asking, but if Sc...
by Doc
Wed Oct 29, 2014 2:33 pm
 
Forum: Investing - Theory, News & General
Topic: "Schwab Intelligent Portfolios"
Replies: 39
Views: 2455

Re: "Schwab Intelligent Portfolios"

Would this convince anyone here to open a taxable account/IRA with Schwab (or move their taxable account/IRA from Vanguard to Schwab)? No thanks :happy Depends whether you need to have a question answered. Last week I had a gnarly cost basis question at Vanguard. A secured email question got a resp...
by Doc
Wed Oct 29, 2014 1:16 pm
 
Forum: Investing - Theory, News & General
Topic: "Schwab Intelligent Portfolios"
Replies: 39
Views: 2455

Re: Checking monthly - may not even notice the October "cras

Noise can be good.

I rebalanced according to my IPS bands and already made $975.75 on the new lot of the equity fund I bought. :mrgreen:
by Doc
Wed Oct 29, 2014 10:45 am
 
Forum: Investing - Theory, News & General
Topic: Checking monthly - may not even notice the October "crash"
Replies: 45
Views: 3205

Re: Yield Curve Investigations

To compound the problem, my textbooks subdivide interest-rate risk (term risk) into two components, price risk and reinvestment risk, but it seems common practice to equate interest-rate risk with only the price component, and to call out reinvestment risk as a separate category. For example, Vangu...
by Doc
Wed Oct 29, 2014 10:01 am
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 26
Views: 2009

Re: Yield Curve Investigations

Some of the replies so far have touched on issues related to the risk structure of interest rates, which deals with yields for fixed-income securities of the same maturity but with different risk characteristics. It would be helpful if people would use the phrase "term risk" and "cre...
by Doc
Tue Oct 28, 2014 5:40 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 26
Views: 2009

Re: So do we care more about change in bond price or bond yi

One thing I noticed is that there are STRIPS with the exact same maturity date but different prices/yields. Explanation? From the announcement of the recent 30 year bond auction. Minimum Amount Required for STRIPS $100 Corpus CUSIP Number 912803EJ8 Additional TINT(s) Due Date(s) and August 15, 2044...
by Doc
Sun Oct 26, 2014 10:58 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: "Vanguard converting mutual fund accounts to brokerage?

Does anyone know if there is a minimum balance required for the sweep account? My prior understanding (which may have been incorrect?) is that you had to maintain a $3,000 Money Market balance to have a brokerage account. You need a sweep account, but I've held less that 100 bucks in the Roth IRA m...
by Doc
Sun Oct 26, 2014 10:46 am
 
Forum: Investing - Theory, News & General
Topic: "Vanguard converting mutual fund accounts to brokerage?
Replies: 104
Views: 10934

Re: Query re Vanguard letter urging brokerage account by Nov

oneleaf wrote:He stated that they are still working on transitioning accounts for Flagship clients.


toto238 wrote:I'm thinking if I was in charge, I would start small and simple and get bigger.


Oh great, since we are in the middle I guess we get transitioned in ~2019 when our next TIPS ladder matures. :annoyed
by Doc
Sat Oct 25, 2014 3:31 pm
 
Forum: Investing - Theory, News & General
Topic: "Vanguard converting mutual fund accounts to brokerage?
Replies: 104
Views: 10934

Re: Query re Vanguard letter urging brokerage account by Nov

My rep stated that they are still working on the transition for Flagship clients, which seems like they are starting with smaller accounts. Any Flagshippers get transitioned yet? Does that mean they started with Flagship and haven't finished with them yet or does it means starting with small accoun...
by Doc
Sat Oct 25, 2014 2:57 pm
 
Forum: Investing - Theory, News & General
Topic: "Vanguard converting mutual fund accounts to brokerage?
Replies: 104
Views: 10934

Re: Active bond funds better than indexes? Pimco thinks so

Re: Oppenheimer We noted in recent reports that this fund's managers' bets on some higher-quality corners of the bond market, including nonagency mortgage bonds and the long-term debt of large banks, were holding it back relative to peers. I can't find anything on Schwab total bond back in '08 but I...
by Doc
Fri Oct 24, 2014 6:27 pm
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: So do we care more about change in bond price or bond yi

Note for example the first two rows. Same duration, 13 basis point drop in yield, 7.75 point drop in coupon, and 0.87 year drop in term to maturity. We need more examples. I notice the spread is different. The older higher coupon may have some liquidity issues. Could there be a "bid duration&q...
by Doc
Fri Oct 24, 2014 6:01 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

I think it looks better than the previous chart.

Kevin M wrote:Image


Maybe there is too much data. Is there anything that the "spikes" have in common? Are they random or is there something else in there that we can speculate about?
by Doc
Fri Oct 24, 2014 5:17 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: Active bond funds better than indexes? Pimco thinks so

One thing the 2008 GFC taught me was to be wary of excessive returns in bonds over the benchmark. No matter when you learned it being "wary of excessive returns in bonds over the benchmark" is the best advice I have read in this thread. I would only add that one should make sure that the ...
by Doc
Fri Oct 24, 2014 5:10 pm
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: Active bond funds better than indexes? Pimco thinks so

Doc, imagine a bright, ambitious, novice investor, who isn't content to assemble a portfolio by choosing from Vanguard funds that have the word "total" in them. How would you suggest spotting the rare rotten apples like Oppenheimer Core Bond Fund, Schwab Total Bond Market Fund, and Fideli...
by Doc
Fri Oct 24, 2014 3:18 pm
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: So do we care more about change in bond price or bond yi

A common interpretation of YTM is the annualized rate of return you would earn if you reinvested all coupons at a rate equal to the YTM. That is a common interpretation but it isn't actually true. If you look at the equation to determine YTM it is the present value equation which in non bond speak ...
by Doc
Fri Oct 24, 2014 2:43 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: Active bond funds better than indexes? Pimco thinks so

What makes me queasy about actively managed bond funds is not that the manager's choices are different from the contents of the Barclay's Aggregate Index. It is that the actively managed bond funds I've looked at are so sophisticated that I literally cannot understand what is in them. A lot of talk...
by Doc
Thu Oct 23, 2014 11:54 am
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: Active bond funds better than indexes? Pimco thinks so

Uh huh ... even index funds can be subject to manager risk at times, as was TBM back then. Index funds greatly minimize the risk - and when they err, it tends to be a small tracking error, not a 40%-50% drop. The article is about bonds funds. I know - that's what I was talking about. I was addressi...
by Doc
Thu Oct 23, 2014 8:55 am
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: So do we care more about change in bond price or bond yi

stlutz & Kevin You guys are quick. It took me 'til 04:52 local time Thursday to realize the "duration connection". What's especially frustrating was that I went to the "zero" analogy several days ago to avoid the maturity/duration problem and then didn't realize it when it ca...
by Doc
Thu Oct 23, 2014 8:52 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

I didn't notice because of the way my data is lined up in the spreadsheet, and the wiggles are actually a bit understated in the graph since each point is an average of yields for that maturity date. Use the "chart" display on Fido's site. I understand that people don't like premium bonds...
by Doc
Wed Oct 22, 2014 8:45 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

Note that there are many more maturities for non-zeros (hence the gaps in the red curve), and note the little wiggles in the curve for non-zeros. I don't see any obvious reason for the wiggles, e.g., due to different coupons. It looks like they are older bonds with very high coupons. I looked at th...
by Doc
Wed Oct 22, 2014 6:13 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: Active bond funds better than indexes? Pimco thinks so

The article is about bonds funds. Check the end of the article -- they decided to make their case for active stock management as well ! Finally, should we just restrict our use of active managers to bonds given the evidence Bogle, Malkiel and many others present? Not so fast … In “Can Mutual Fund ‘...
by Doc
Wed Oct 22, 2014 3:19 pm
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: Active bond funds better than indexes? Pimco thinks so

Uh huh ... even index funds can be subject to manager risk at times, as was TBM back then. Index funds greatly minimize the risk - and when they err, it tends to be a small tracking error, not a 40%-50% drop. The article is about bonds funds. However, there are reasons why the simple arithmetic doe...
by Doc
Wed Oct 22, 2014 2:58 pm
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: Active bond funds better than indexes? Pimco thinks so

However, there are reasons why the simple arithmetic does not work out as cleanly in the bond world. I have reached a similar conclusion about bond index funds over the past several years. But the problem is not index versus active so much as it's the indices themselves. Index investing only works ...
by Doc
Wed Oct 22, 2014 2:18 pm
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: Why do Engineers Think They’ll Be Good at Picking Stocks

technovelist wrote: +1. Engineers are great.
As a "software engineer", I'm not a real engineer, but I could probably play one on TV.


No, in my experience software "engineers" only speak Greek so you can't be on TV unless you are playing one on a cable business channel. :beer
by Doc
Wed Oct 22, 2014 1:46 pm
 
Forum: Investing - Theory, News & General
Topic: Why do Engineers Think They’ll Be Good at Picking Stocks?
Replies: 132
Views: 9450

Re: Active bond funds better than indexes? Pimco thinks so

The big danger in this is manager risk - the risk that the manager of your active bond fund will do something really stupid. This is not just theoretical - it happens a lot. That's a very good point. Come to think of it, that's exactly what Bill Gross did, at PIMCO (!), back in 2011. And something ...
by Doc
Wed Oct 22, 2014 12:33 pm
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2464

Re: Why do Engineers Think They’ll Be Good at Picking Stocks

In engineering numbers are only useful as data if there is a covering law that explains the relationship between or among the numbers. Gravity is a covering law. The strengths of materials is a covering law. We don't know if earthquakes have a covering law. And we certainly don't know what it is. S...
by Doc
Wed Oct 22, 2014 12:21 pm
 
Forum: Investing - Theory, News & General
Topic: Why do Engineers Think They’ll Be Good at Picking Stocks?
Replies: 132
Views: 9450

Re: So do we care more about change in bond price or bond yi

And Kevin it is very possible to accurately do the discounted cash flow equations in your head if you had taken the time to memorize the data in the log table book when you were in high school which is very helpful if you are now of the age that you have to relearn Excel every time you load it. :be...
by Doc
Tue Oct 21, 2014 7:08 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

Also, if I download the quotes from Fidelity I don't have to interpolate to get the yields for maturities not reported on treasury.gov. I think the Treasury.gov charts are from the constant maturity calculation which is a multi (5?) factor spline fit. They changed their method just about the time o...
by Doc
Tue Oct 21, 2014 6:36 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: Pimco vs. Jack Bogle on active management of bonds

In the latest salvo of a surprisingly public debate between two of the biggest names in fund management, Bogle said the underperformance of Pimco's flagship Total Return mutual fund provides a timely reminder that for most investors, index funds are the way to go. Wasn't it less than a year ago tha...
by Doc
Tue Oct 21, 2014 11:16 am
 
Forum: Investing - Theory, News & General
Topic: Pimco vs. Jack Bogle on active management of bonds
Replies: 18
Views: 1992

Re: DOW Watchers Stomach Syndrome

JoMoney wrote:But the DOW ended "up" for the day... So should it be don't SELL near the opening bell?


Yea I fixed my post. I realized later that I meant "trade" not "buy".

Whether the "trade" mans sell or buy is only important to market timers.
by Doc
Tue Oct 21, 2014 11:01 am
 
Forum: Investing - Theory, News & General
Topic: DOW Watchers Stomach Syndrome
Replies: 25
Views: 2093

Re: DOW Watchers Stomach Syndrome

Doc, you've been here for a while. I don't recall you having such a visceral reaction to market noise. There really is more to life than focusing on the DOW intraday. Sometimes I get drawn in, realize what is occurring and fight tooth and nail to ward it off. It is what it is. I don't. I just happe...
by Doc
Mon Oct 20, 2014 12:58 pm
 
Forum: Investing - Theory, News & General
Topic: DOW Watchers Stomach Syndrome
Replies: 25
Views: 2093

Re: DOW Watchers Stomach Syndrome

Call_Me_Op wrote:Just noise.

Agreed but really LOUD noise.
by Doc
Mon Oct 20, 2014 10:12 am
 
Forum: Investing - Theory, News & General
Topic: DOW Watchers Stomach Syndrome
Replies: 25
Views: 2093

DOW Watchers Stomach Syndrome

As I walk away from watching the recorded news each morning I put on FOX business channel so DW can't mess up my recording inadvertently. This morning I noted that the DOW was down about 9 pts and as I reached the coffee pot I heard Maria Bartiromo say "IBM must not have opened yet. Oh it just ...
by Doc
Mon Oct 20, 2014 9:47 am
 
Forum: Investing - Theory, News & General
Topic: DOW Watchers Stomach Syndrome
Replies: 25
Views: 2093

Re: So do we care more about change in bond price or bond yi

I'll continue to use zero-coupon bonds since all return is from price-change, so it's easier to see the offsetting effects on price of maturation and yield-curve change. Kevin, first what are you doing up at 3 O'clock in the AM posting about bond yields. I have also been awake at that time but have...
by Doc
Sun Oct 19, 2014 1:00 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: 30 yr TIPs auction announced 16 oct: yield=1.10%?

Personally my investment philosophy is not to buy assets that have negative prospective real returns. So for me the risk would be getting shut out of the tips market for a substantial period of time. This is basically my argument for not buying the thirty now. You don't need to shut yourself out of...
by Doc
Sun Oct 19, 2014 11:13 am
 
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction announced 16 oct: yield=1.10%?
Replies: 93
Views: 6505

Re: So do we care more about change in bond price or bond yi

My summary of the simplified case used for illustration. Five year zero with 2% YTM. Original cost ~$900. Straight yield curve - slope is 0.4% per year. Two funds with different strategies. "F0-5" fund: A zero to five year fund - buy at auction and hold to maturity. Duration 2.5 years. YTM...
by Doc
Sat Oct 18, 2014 10:56 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

The statement is absolutely right and it's easy to prove. First, with a single bond: if I invested $10K four years ago in a zero coupon at about the current 1.45% yield (example works the same with 2% or any other number, edit: and it works the same with coupon bonds currently sitting at a premium)...
by Doc
Fri Oct 17, 2014 6:11 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

Doc: the simple risk story that I believe you're looking for is this: the 5-to-zero fund has a fifth of its assets in Treasuries in their final year making 0.09% yield; these Treasuries are, for the purposes of the individual investor with 1% bank accounts, deadbeats. The 5-to-1 fund doesn't, and i...
by Doc
Fri Oct 17, 2014 4:02 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: 30 yr TIPs auction announced 16 oct: yield=1.10%?

Another approach to the same result is to buy a ten and roll it three times or some combination of the same. That way you don't lock in the low 1% yield for thirty years. Doesn't this violate the no-arbitrage condition of market equilibrium? Are you assume the market is in disequilibrium? It seems ...
by Doc
Fri Oct 17, 2014 3:51 pm
 
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction announced 16 oct: yield=1.10%?
Replies: 93
Views: 6505

Re: 30 yr TIPs auction announced 16 oct: yield=1.10%?

Re amortization of (market) bond premium You don't have to amortize each year. You could ignore the purchase premium. Or you could wait until 2044 to deduct it. Maybe I have this backwards? You have to accrete Original Issue Discount (which is also the TIPS inflation increase). You have the choice o...
by Doc
Fri Oct 17, 2014 3:33 pm
 
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction announced 16 oct: yield=1.10%?
Replies: 93
Views: 6505

Re: 30 yr TIPs auction announced 16 oct: yield=1.10%?

Just placed my order. Here is a guide to help decide how much each bond will likely cost at auction: 1) Bloomberg shows the current price on the secondary at 113 + 8/32 = 113.25 2) The inflation factor is 1.02062 3) The accrued interest per bond is 2.936 per $1,000 of face or 0.2936 per $100 of fac...
by Doc
Thu Oct 16, 2014 7:20 pm
 
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction announced 16 oct: yield=1.10%?
Replies: 93
Views: 6505

Re: So do we care more about change in bond price or bond yi

Kevin I don't have the time to go through your detailed post but let me clarify a couple of points. By a static yield curve I mean that it doesn't shift during the time period under consideration but only for purposes of the discussion to try separate the different pieces of the "puzzle". ...
by Doc
Thu Oct 16, 2014 7:14 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

In reply to Kevin, we are in agreement except maybe for some of the tax aspects of amortization/accretion accounting and that not worth worrying about. The price change will depend on the steepness of the yield curve between the two points, or more simply, on the YTMs of the bond at the two points. ...
by Doc
Thu Oct 16, 2014 10:53 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

Kevin, I have not spent enough time analyzing your response but intend to later. What I am attempting to do is to simplify the problem as much as possible so that we can get away from what Vanguard does or what the shape of the yield curve is now or what it will be tomorrow. This is based on the cra...
by Doc
Wed Oct 15, 2014 8:24 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: So do we care more about change in bond price or bond yi

Let me set up a trivial example in order to try to understand what this is all about. We have two Treasury funds that invest only in a minimum number of five year zero coupon Treasuries. The yield curve does not change during our analysis. Fund 0-5 invests in five zero coupon securities and holds th...
by Doc
Wed Oct 15, 2014 11:59 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 13429

Re: "Vanguard converting mutual fund accounts to brokerage?

Anyone that converted had any issues with agent authorization settings transferring over? Maybe. (This is really screwy.) OK we haven't switched because Vanguard has issues. One was that our joint mutual fund account did not have an associated brokerage account. So I added one - still nothing in it...
by Doc
Wed Oct 15, 2014 11:44 am
 
Forum: Investing - Theory, News & General
Topic: "Vanguard converting mutual fund accounts to brokerage?
Replies: 104
Views: 10934
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