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Re: Why do we like dividends?

I like dividends in my taxable account since I am in the 15% tax bracket and under current law they are tax free . I am retired so I no longer reinvest them and they represent tax free money to me. Maybe and maybe not. Are you paying state income tax? Are you getting SS and are in the SS "tax ...
by Doc
Fri Nov 28, 2014 12:41 pm
 
Forum: Investing - Theory, News & General
Topic: Why do we like dividends?
Replies: 19
Views: 741

Re: Roth versus Traditional Debate

When dealing with this question you have to get used to thinking of tax rates as factors (in a product) not absolute amounts (terms in a sum). If you multiply by 0.75 on either side of 30 years of growth, the result is the same. If the factor at withdrawal is 0.82 (18% bracket), Traditional wins ev...
by Doc
Wed Nov 26, 2014 8:25 pm
 
Forum: Investing - Theory, News & General
Topic: Roth versus Traditional Debate
Replies: 17
Views: 1110

Re: Vanguard Ultra-Short-Term Bond Fund coming in early 2015

If it is late in the afternoon, and your Vanguard account is showing $452.16 in your Prime Money Market Account, and you have $20,000 in your checking account, can you successfully place an order for a) $5,000 of VTSMX, b) five TIPS bonds at auction? This a really weedy situation. If you are not ad...
by Doc
Wed Nov 26, 2014 3:45 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard Ultra-Short-Term Bond Fund coming in early 2015.
Replies: 39
Views: 4146

Re: Vanguard Ultra-Short-Term Bond Fund coming in early 2015

If it is late in the afternoon, and your Vanguard account is showing $452.16 in your Prime Money Market Account, and you have $20,000 in your checking account, can you successfully place an order for a) $5,000 of VTSMX, b) five TIPS bonds at auction? This a really weedy situation. If you are not ad...
by Doc
Wed Nov 26, 2014 10:42 am
 
Forum: Investing - Theory, News & General
Topic: Vanguard Ultra-Short-Term Bond Fund coming in early 2015.
Replies: 39
Views: 4146

Re: Vanguard Ultra-Short-Term Bond Fund coming in early 2015

It already works this way if you link a high yield checking account such as Alliant Credit Union's, which pays 0.65%. You have NCUA insurance up to $250k. You can make purchases from Vanguard and get the same-day NAV. You can sell and get the money into your checking account. You can have dividends...
by Doc
Tue Nov 25, 2014 6:44 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard Ultra-Short-Term Bond Fund coming in early 2015.
Replies: 39
Views: 4146

Re: Vanguard Ultra-Short-Term Bond Fund coming in early 2015

....that says anything about tax recordkeeping issues. Given that the 1099B's now track tax lots, is this an issue? Some very popular fund firms are having a very difficult time with wash sale accounting. Lots of luck trying to figure how to adjust for disallowed capital losses when you are making ...
by Doc
Tue Nov 25, 2014 10:22 am
 
Forum: Investing - Theory, News & General
Topic: Vanguard Ultra-Short-Term Bond Fund coming in early 2015.
Replies: 39
Views: 4146

Re: Vanguard Ultra-Short-Term Bond Fund coming in early 2015

nisiprius wrote:Help, Doc.

What's a reasonable ballpark guess for the yield?


0.23% if the e/r is 0.17%
by Doc
Tue Nov 25, 2014 10:15 am
 
Forum: Investing - Theory, News & General
Topic: Vanguard Ultra-Short-Term Bond Fund coming in early 2015.
Replies: 39
Views: 4146

Re: Vanguard Ultra-Short-Term Bond Fund coming in early 2015

Yet even though Vanguard is certain that investors will reject floating NAVs in a money market fund, Vanguard expects them to flock to an ultra-short bond fund, which has all of the same supposed deal-breaker problems. It will probably have a $100 minimum for additional investments like other Vg bo...
by Doc
Mon Nov 24, 2014 5:35 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard Ultra-Short-Term Bond Fund coming in early 2015.
Replies: 39
Views: 4146

Re: SEC Yield, YTM, Distribution Yield, Current Yield

The way Vanguard does it does avoid the problem of "buying the dividend"; i.e., buying a security shortly before it declares and pays a dividend, and having to pay ordinary income tax rate on it. With the way Vanguard declares bond fund dividends, you never buy a dividend; you only receiv...
by Doc
Sun Nov 23, 2014 3:58 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 68
Views: 6998

Re: SEC Yield, YTM, Distribution Yield, Current Yield

In the reports, we see these notes in "Notes to Financial Statements": 6. Distributions: Distributions from net investment income are declared daily and paid on the first business day of the following month. Annual distributions from realized capital gains, if any, are recorded on the ex-...
by Doc
Thu Nov 20, 2014 2:55 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 68
Views: 6998

Re: VBS upgrade roll out has started

I will be interested to hear from quicken users as to how the Vanguard upgrade impacts them. I have just recovered from a bit of a mess with their recent issues and hope I will not have more of the same. Alansteven Not to worry Intuit has a better IT department than Vanguard. (If you are addressing...
by Doc
Mon Nov 17, 2014 3:52 pm
 
Forum: Personal Finance (Not Investing)
Topic: VBS upgrade roll out has started
Replies: 92
Views: 13188

Re: VBS upgrade roll out has started

Might have made progress today. Got hold of a "Brokerage" associate that managed to get 1 account (or 2 depending on how you count) converted and promised to work on the other 2 (or 4 depending on how you count) and promised to get back within the next 1 or 2 days on the others. As backgro...
by Doc
Mon Nov 17, 2014 3:49 pm
 
Forum: Personal Finance (Not Investing)
Topic: VBS upgrade roll out has started
Replies: 92
Views: 13188

Re: VBS upgrade roll out has started

JamesSFO wrote:BTW I got my account upgraded (Flagship) but it took some pestering, minimal fuss in Quicken and all is well. Much easier to have one single account like at Fidelity and elsewhere for all of my holdings of one type.


Where did you start with the pestering? I can't find the right button to push.
by Doc
Fri Nov 14, 2014 7:30 pm
 
Forum: Personal Finance (Not Investing)
Topic: VBS upgrade roll out has started
Replies: 92
Views: 13188

Re: what is the actual value of my tax deferred accounts?

I did a mock tax return for myself 30 years older and with my conservative retirement goals. I factored in SS, what I expect to need in retirement, etc., and looked at what my net income for the year would be and adjusted until it met what I expect to need. At the end of the day I figured that my t...
by Doc
Thu Nov 13, 2014 4:23 pm
 
Forum: Investing - Theory, News & General
Topic: what is the actual value of my tax deferred accounts?
Replies: 53
Views: 3832

Re: what is the actual value of my tax deferred accounts?

I did a mock tax return for myself 30 years older and with my conservative retirement goals. I factored in SS, what I expect to need in retirement, etc., and looked at what my net income for the year would be and adjusted until it met what I expect to need. At the end of the day I figured that my t...
by Doc
Thu Nov 13, 2014 3:04 pm
 
Forum: Investing - Theory, News & General
Topic: what is the actual value of my tax deferred accounts?
Replies: 53
Views: 3832

Re: what is the actual value of my tax deferred accounts?

I discount pretax holdings by my current average (not marginal) tax rate. That's likely to be too conservative, since my total income is likely to be less in retirement, but tax rates could increase. I just use it to get a general idea of how much I have, and it does show a benefit in the numbers f...
by Doc
Thu Nov 13, 2014 10:11 am
 
Forum: Investing - Theory, News & General
Topic: what is the actual value of my tax deferred accounts?
Replies: 53
Views: 3832

Re: Why do HY Savings and CD rates dominate short-term bonds

It is going to take me some time to go through your post in detail but it looks good. One comment/question. Doc wrote: Hence using a higher return asset as the riskless asset may actually increase the risk of the portfolio as a whole. The flaw in this thinking is that it ignores that you can use a l...
by Doc
Thu Nov 13, 2014 9:58 am
 
Forum: Investing - Theory, News & General
Topic: Why do HY Savings and CD rates dominate short-term bonds?
Replies: 26
Views: 3058

Re: what is the actual value of my tax deferred accounts?

There aren't any taxes owed on a tax deferred account when there hasn't been a withdrawal, and when there is a withdrawal those taxes are owed in the year of the withdrawal (future) and then only if the extra income increases the tax bill for that year. I hear you but I don't agree. If I do my taxe...
by Doc
Wed Nov 12, 2014 4:17 pm
 
Forum: Investing - Theory, News & General
Topic: what is the actual value of my tax deferred accounts?
Replies: 53
Views: 3832

Re: what is the actual value of my tax deferred accounts?

OK I did some reading. It seems the standard accounting definition has to do with taxes actually assessed and payable in the current accounting period. These are carried as liabilities. A person owning assets in a tax deferred account does not have any such assessed taxes in any given year Hhmmnn! ...
by Doc
Wed Nov 12, 2014 3:28 pm
 
Forum: Investing - Theory, News & General
Topic: what is the actual value of my tax deferred accounts?
Replies: 53
Views: 3832

Re: what is the actual value of my tax deferred accounts?

In my book the actual value of tax deferred accounts is exactly what the assets add up to. Accounting for possible future tax expenses is important for financial planning but is an exercise in something quite different from stating the "actual" value of something. The actual value of the ...
by Doc
Wed Nov 12, 2014 10:54 am
 
Forum: Investing - Theory, News & General
Topic: what is the actual value of my tax deferred accounts?
Replies: 53
Views: 3832

Re: Why do HY Savings and CD rates dominate short-term bonds

So for my personal portfolio management purposes, I currently will use a rate of at least 0.9% for the riskless asset, for the computation of Sharpe ratio, and for the construction of a capital allocation line. I actually thought about this the other day. If you use a higher rate for the capital al...
by Doc
Wed Nov 12, 2014 10:42 am
 
Forum: Investing - Theory, News & General
Topic: Why do HY Savings and CD rates dominate short-term bonds?
Replies: 26
Views: 3058

Re: Why do HY Savings and CD rates dominate short-term bonds

Will you now agree that a riskless asset combined with a portfolio of risky assets is indeed central to CAPM? Whether or not a savings account or CD is a reasonable proxy for a riskless asset is a different discussion. First we should agree on fundamental definitions. We never disagreed. I meant MP...
by Doc
Tue Nov 11, 2014 10:23 am
 
Forum: Investing - Theory, News & General
Topic: Why do HY Savings and CD rates dominate short-term bonds?
Replies: 26
Views: 3058

Re: Do actively managed funds outperform in recessions?

garlandwhizzer wrote:They make the market sound so complicated that the average investor can't possibly succeed without their help.

And they are probably correct. Emphasis on the average investor. As in Lake Wobegon all Boglehead children are above average.
by Doc
Mon Nov 10, 2014 12:14 pm
 
Forum: Investing - Theory, News & General
Topic: Do actively managed funds outperform in recessions?
Replies: 7
Views: 1017

Re: Do actively managed funds outperform in recessions?

This is an apples and baseballs comparison. Active management involves active choice of specific investment index management does not. It doesn't matter if the index is stock or bonds or some automatic mathematical combination. The quote from the article Larry cited addressed switching from stock t...
by Doc
Mon Nov 10, 2014 11:34 am
 
Forum: Investing - Theory, News & General
Topic: Do actively managed funds outperform in recessions?
Replies: 7
Views: 1017

Re: Do actively managed funds outperform in recessions?

Despite the advantage of being able to shift allocations from stocks to bonds, actively managed funds underperformed in 15 of the 16 countries, with the underperformance being statistically significant at the 1 percent level. So since we all have the option to switch from bonds to stocks we get to ...
by Doc
Mon Nov 10, 2014 10:12 am
 
Forum: Investing - Theory, News & General
Topic: Do actively managed funds outperform in recessions?
Replies: 7
Views: 1017

Re: Yield Curve Investigations

The blue curve labeled SpotFRB represents smoothed, model yields for continuously compounded zero-coupon securities (in bond-speak, "spot" seems to be used to reference to zero-coupon yields). These yields are derived by FRB using a parametric formula, with the parameters derived from tre...
by Doc
Mon Nov 10, 2014 9:19 am
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 71
Views: 7092

Re: Why do HY Savings and CD rates dominate short-term bonds

Go re-read the chapters on CAPM in your textbooks. MPT per Markowitz was all about the math for expected return, variance (or standard deviation), and covariance (or correlation) for combining risky assets, which is what you're talking about. One of the key contributions of CAPM was introducing the...
by Doc
Mon Nov 10, 2014 9:09 am
 
Forum: Investing - Theory, News & General
Topic: Why do HY Savings and CD rates dominate short-term bonds?
Replies: 26
Views: 3058

Re: Why do HY Savings and CD rates dominate short-term bonds

Maybe some people do, but I don't. As I've posted recently elsewhere, a portfolio combining direct 5-year CDs earning 2.5% with an early withdrawal penalty of 1.25% combined with a "risky portfolio" of stocks and bonds is more efficient than just owning stocks and bonds. A riskless securi...
by Doc
Sun Nov 09, 2014 7:00 pm
 
Forum: Investing - Theory, News & General
Topic: Why do HY Savings and CD rates dominate short-term bonds?
Replies: 26
Views: 3058

Re: Why do HY Savings and CD rates dominate short-term bonds

First of all, the whole discussion is very much dancing on the head of a pin. Second of all, there is no single "correct" strategy. Now, if someone is minded to delve into the nuances of bond investing, the basic drivers are expected return and risk . Agreed if you are only investing in b...
by Doc
Sun Nov 09, 2014 10:43 am
 
Forum: Investing - Theory, News & General
Topic: Why do HY Savings and CD rates dominate short-term bonds?
Replies: 26
Views: 3058

Re: SEC Yield, YTM, Distribution Yield, Current Yield

I may get back to you on this when I get to the point of calculating values for the fund holdings. It has to be something that is feasible to do for several hundred holdings. If it's just a matter of entering a formula in one or a few cells for each bond (resulting in one or a few columns for all h...
by Doc
Sat Nov 08, 2014 5:39 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 68
Views: 6998

Re: SEC Yield, YTM, Distribution Yield, Current Yield

Price is the present value of the discounted cash flows, and YTM is the single discount rate that makes the discounted cash flows equal to price. The cash flows consist of coupon payments and principal repayment at the end of the holding period. The discount function for each cash flow is a functio...
by Doc
Fri Nov 07, 2014 5:10 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 68
Views: 6998

Re: SEC Yield, YTM, Distribution Yield, Current Yield

Ok, I think I understand. In Kevin's example, the 3.6% DY case assumes that the bond was bought at par, so there is no amortization of the premium possible. Exactly. That was just an example using some numbers to illustrate Jim's original point, and make sure we all agree on how it works. Kevin OK,...
by Doc
Mon Nov 03, 2014 7:56 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 68
Views: 6998

Re: SEC Yield, YTM, Distribution Yield, Current Yield

1) in reply to Doc I can't exactly tell where you're agreeing with Kevin and where you're disagreeing. 2) My understanding is that fund distributions are dependent on actual coupon payments received as well as IRS rules about how bond premiums are amortized. 3) A fund that bought those bonds at par ...
by Doc
Mon Nov 03, 2014 2:17 pm
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 68
Views: 6998

Re: SEC Yield, YTM, Distribution Yield, Current Yield

A fund that bought those bonds at par in the past would have a distribution yield of the average coupon divided by average price, so roughly 4/110 = 3.6% (ignoring expenses). But a fund that bought today would have a distribution yield of about (4 - 2) / 110 = 1.8%. Does that sound about right? Sou...
by Doc
Mon Nov 03, 2014 9:19 am
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 68
Views: 6998

Re: SEC Yield, YTM, Distribution Yield, Current Yield

Another comment on this. I actually loaded the holdings of Vanguard Intermediate-Term Treasury fund into a spreadsheet, and calculated average YTM. What I find puzzling is that a simple average for YTM of holdings on 7/31/2014 is 1.78%, which agrees with the stated YTM of 1.8%, but the weighted YTM...
by Doc
Sat Nov 01, 2014 8:36 am
 
Forum: Investing - Theory, News & General
Topic: SEC Yield, YTM, Distribution Yield, Current Yield
Replies: 68
Views: 6998

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 12:41 pm
 
Forum: Investing - Theory, News & General
Topic: Good active funds to use in 401ks w/o index funds?
Replies: 16
Views: 1373

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 12:02 pm
 
Forum: Investing - Theory, News & General
Topic: Good active funds to use in 401ks w/o index funds?
Replies: 16
Views: 1373

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 11:49 am
 
Forum: Investing - Theory, News & General
Topic: "Schwab Intelligent Portfolios"
Replies: 56
Views: 6017

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 1:42 pm
 
Forum: Investing - Theory, News & General
Topic: "Schwab Intelligent Portfolios"
Replies: 56
Views: 6017

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 1:33 pm
 
Forum: Investing - Theory, News & General
Topic: "Schwab Intelligent Portfolios"
Replies: 56
Views: 6017

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 12:16 pm
 
Forum: Investing - Theory, News & General
Topic: "Schwab Intelligent Portfolios"
Replies: 56
Views: 6017

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 9:45 am
 
Forum: Investing - Theory, News & General
Topic: Checking monthly - may not even notice the October "crash"
Replies: 51
Views: 4410

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 9:01 am
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 71
Views: 7092

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 4:40 pm
 
Forum: Investing - Theory, News & General
Topic: Yield Curve Investigations
Replies: 71
Views: 7092

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 9:58 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 14286

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 9:46 am
 
Forum: Investing - Theory, News & General
Topic: "Vanguard converting mutual fund accounts to brokerage?
Replies: 105
Views: 12314

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 2:31 pm
 
Forum: Investing - Theory, News & General
Topic: "Vanguard converting mutual fund accounts to brokerage?
Replies: 105
Views: 12314

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 1:57 pm
 
Forum: Investing - Theory, News & General
Topic: "Vanguard converting mutual fund accounts to brokerage?
Replies: 105
Views: 12314

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 5:27 pm
 
Forum: Investing - Theory, News & General
Topic: Active bond funds better than indexes? Pimco thinks so
Replies: 36
Views: 2550

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 5:01 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 178
Views: 14286
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