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by Doc
Wed May 27, 2015 10:07 am
Forum: Investing - Theory, News & General
Topic: Reducing the Black Swans
Replies: 54
Views: 4891

Re: Reducing the Black Swans

^The difference between SV and "the market" is the tracking error. When the market takes off but leaves SV in the dust you feel left out and doubt the strategy. This can be avoided by using a 2x SP500 ETF instead of SV. You still get the benefit of risk compression / tail reduction. But n...
by Doc
Wed May 27, 2015 9:19 am
Forum: Investing - Theory, News & General
Topic: Reducing the Black Swans
Replies: 54
Views: 4891

Re: Reducing the Black Swans

... and you're taking on tracking error risk to try to supercharge your equity returns. If your equity position is 100% SV and you are using a SV index fund where is the tracking error? Moreover tracking error is not in and of itself a risk unless you mean the SV will have higher variance than TSM....
by Doc
Wed May 27, 2015 8:51 am
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

If you're saying that the "intermediate term" mutual funds that investors have been selecting is different from the Barclay's aggregate--well of course it is. What does this have to do with the index? I'm saying: that the "intermediate term" mutual funds that investors Morningst...
by Doc
Tue May 26, 2015 7:10 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

So you're saying that although the percentage of government issues increased, the credit quality of all the non-government issues in the index declined, and therefore the average credit quality within the index decreased? No. I'm saying that the increase in Treasury/Agency issues in the index cause...
by Doc
Tue May 26, 2015 6:41 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

For all of you that are jumping on me: Even Vanguard founder Jack Bogle, who practically invented index funds, says 70% in U.S. government bonds is too much. He’s proposed that the index be reworked to increase its exposure to corporate bonds. July 9, 2014 http://www.kiplinger.com/article/investing/...
by Doc
Tue May 26, 2015 6:36 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

Interesting... this is not what I expected. According to Barclay's, the credit quality within the Aggregate Index has been getting lower over the last five years. Doc? Do you know why? Yes. It's the reaction to the 2008 financial crisis that caused the change. As I said up thread: the Government bo...
by Doc
Tue May 26, 2015 4:58 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

Doc: the explanation for the apparent average / market paradox is simple and both of us have mentioned it before: the market as consists of all holders of bonds is larger than the market that consists only of funds. There is no paradox here. It's the category that doesn't represent the market, at l...
by Doc
Tue May 26, 2015 4:16 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

Their investment choices are even less relevant than those of pension funds, since having to support high ERs while still looking reasonable to the non-risk-adjusting eye is a constraint you don't have. For the last seven years the category average fund AFTER EXPENSES has been outperforming the ind...
by Doc
Tue May 26, 2015 2:38 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

This is still "your father's TBM" because it still invests in the "total bond market". But we as retail investors do not invest in the "total bond market". Rather we invest in that part of the market that is defined by mutual funds. This is part of the difference betwe...
by Doc
Tue May 26, 2015 9:00 am
Forum: Investing - Theory, News & General
Topic: Reducing the Black Swans
Replies: 54
Views: 4891

Re: Reducing the Black Swans

Have you read the book? It is only about 80 pages, extremely easy reading and can be had for $10 through Kindle. i suggest you do read it, but if you cannot, Swedroe's bottom line is that by properly structuring the portfolio, with the heavy use of SV instruments, you give up the potential for extr...
by Doc
Tue May 26, 2015 8:28 am
Forum: Investing - Theory, News & General
Topic: Are Bond ETFs a bad idea?
Replies: 43
Views: 2763

Re: Are Bond ETFs a bad idea?

I don't see this difference. Maybe it is a time frame thing or maybe you are comparing Total Return to NAV. This is easy to do if you are not careful when comparing ETFs with MFs. I pulled it from the product comparison tool on Vanguard's advisor website. I changed the rolling return chart from M* ...
by Doc
Mon May 25, 2015 6:55 pm
Forum: Investing - Theory, News & General
Topic: Are Bond ETFs a bad idea?
Replies: 43
Views: 2763

Re: Are Bond ETFs a bad idea?

(Incidentally, when I compared the performance of VCLT to VLTCX, the VCLT actually performed better, so perhaps Vanguard isn't forcing ETF shareholders to bear the costs of MF trading.) I don't see this difference. Maybe it is a time frame thing or maybe you are comparing Total Return to NAV. This ...
by Doc
Sun May 24, 2015 4:05 pm
Forum: Investing - Theory, News & General
Topic: Are Bond ETFs a bad idea?
Replies: 43
Views: 2763

Re: Are Bond ETFs a bad idea?

I do expect them to include trading costs, actually. That's why I pay more for the less liquid markets, it's not like the accounting is more difficult -- it has to be trading costs. Expense ratios do not include trading costs. The Hidden Costs of Mutual Funds Portfolio managers can rack up steep ex...
by Doc
Sat May 23, 2015 4:15 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

Doc -- I thought that in other contexts (like investing in Treasuries directly) you agreed that the diversification argument doesn't apply. Again, answer this question from my full #2 -- would you have an issue with someone investing their 30% or 40% bond allocation entirely in Treasuries? If not, ...
by Doc
Sat May 23, 2015 8:09 am
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

I suppose the questions are: what do we expect the bond index to represent? What role does the index-tracking fund play in our portfolio? Is there a better way to provide the same effect for lower cost, greater diversification, or some other benefit? Is the "total" bond index the right on...
by Doc
Sat May 23, 2015 8:02 am
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

It is not clear that it is the high quality -- The Morningstar is not specific about it. (http://corporate.morningstar.com/us/documents/MethodologyDocuments/MethodologyPapers/MorningstarCategory_Classifications.pdf, page 33): The Morningstar's description uses the term "Investment Grade" ...
by Doc
Sat May 23, 2015 7:48 am
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

Undoubtedly ... Two observations: 1) Why would "the bond market" that we need to "adequately represent" consist only of funds? ... 2) Why obsess over representing the market anyway? 1) Because most Bogleheads invest in funds not individual securities. Therefore when we want to i...
by Doc
Fri May 22, 2015 5:26 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

"Roughly the same time period" is key. The starting and ending points matter. There are several posts about cherry picking, head spinning and the time period concept that Rob makes. The point of a rolling return chart is that it eliminates these problems (Except perhaps for the head spinn...
by Doc
Thu May 21, 2015 12:54 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

Doc, please comment on the relatively liquidity of government issues and corporate issues, their proportions in Total Bond and Intermediate-Term Bond Index, and whether liquidity should be a concern for bond mutual fund investors today. Yes, Total Bond has relatively less risk and less return than ...
by Doc
Thu May 21, 2015 12:07 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Re: Not your father's Total Bond Market Fund anymore

There are a bunch of questions that are all related. You're tracking the wrong index. Vanguard Total Bond Market Index (VBTLX ) tracks the Barclays US Aggregate Bond Index I don't understand. What's the problem? Spell it out for me. How is it relevant to compare TBM to Intermediate Term? The post is...
by Doc
Thu May 21, 2015 8:07 am
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 86
Views: 8726

Not your father's Total Bond Market Fund anymore

The impact of '08 still continues after some eight years. Three year rolling return chart for Vanguard Total Bond Market fund compared to the category average: http://i62.tinypic.com/1zbvtxx.jpg http://quotes.morningstar.com/chart/fund/chart?t=VBTIX&region=usa&culture=en_US&dataParams=%7...
by Doc
Tue May 19, 2015 7:48 am
Forum: Investing - Theory, News & General
Topic: criteria for picking an active fund
Replies: 22
Views: 1498

Re: criteria for picking an active fund

3) Picking the highest performer has proven not to work. But eliminating the poorest performance over multiple time frames is a different storey. I call this my "dog killer". Doc, this sounds more like a "performance killer" to me. ... You say that nine out of your ten picks con...
by Doc
Sun May 17, 2015 2:41 pm
Forum: Investing - Theory, News & General
Topic: criteria for picking an active fund
Replies: 22
Views: 1498

Re: criteria for picking an active fund

The article which might/would t be considered as self serving ... is funded by Fidelity)suggests that using two criteria to filter funds for consideration may result in picking an actively managed fund that will outperform I use a multi-factor approach. As an example: Your Screen (small value or bl...
by Doc
Fri May 15, 2015 3:47 pm
Forum: Investing - Theory, News & General
Topic: Why is Vanguard's Web Site So Bad?
Replies: 64
Views: 5010

Re: Why is Vanguard's Web Site So Bad?

Hello Vanguard! Are you reading this? If any Vanguard folks want to send me a PM, I am available for consulting on your improvement of your web site. I don't think you'd be so willing after you find out how low a rate they offer you. What they really need to do first is to spend enough money to hir...
by Doc
Fri May 15, 2015 3:34 pm
Forum: Investing - Theory, News & General
Topic: I'm so glad I bought bonds in taxable!
Replies: 13
Views: 3523

Re: I'm so glad I bought bonds in taxable!

I split the difference. Since I have a decent sized taxable account, I split my bonds approximately 50/50 between my 401K total bond fund and my taxable intermediate term tax exempt muni bond fund. I am in the 39.6% tax bracket therefor munis in taxable are a good option for me. I believe that this...
by Doc
Thu May 14, 2015 4:51 pm
Forum: Investing - Theory, News & General
Topic: I'm so glad I bought bonds in taxable!
Replies: 13
Views: 3523

Re: I'm so glad I bought bonds in taxable!

... if the majority of you tax-advantaged is in non-Roth the numbers will work out very different ... No. If the ROTH and tIRA/401K are compared on a consistent pre-tax or post-tax dollar basis for the contribution the two give the same after tax amount on withdrawal. The only difference is if a hi...
by Doc
Sun May 10, 2015 11:02 am
Forum: Investing - Theory, News & General
Topic: Swedroe: Credit Risk Not Worth It
Replies: 43
Views: 5263

Re: Swedroe: Credit Risk Not Worth It

While it's essential for investors to choose an asset allocation with the right amount of risk for them, IMO believing that stocks are risky and bonds are safe is a dangerous misunderstanding of fundamental investing principles. The problem is that a lot of Bogleheads here think that bonds means a ...
by Doc
Sun May 10, 2015 9:26 am
Forum: Investing - Theory, News & General
Topic: Swedroe: Credit Risk Not Worth It
Replies: 43
Views: 5263

Re: Swedroe: Credit Risk Not Worth It

Taylor Larimore wrote:Bonds let us sleep well. Stocks let us eat well.

Worth repeating.
by Doc
Sun May 10, 2015 8:18 am
Forum: Investing - Theory, News & General
Topic: Swedroe: Credit Risk Not Worth It
Replies: 43
Views: 5263

Re: Swedroe: Credit Risk Not Worth It

My main point is that it's not possible to build a portfolio that reliably smooths out dips from panics, so don't try. Get the overall risk level right and then diversify the types of risks in the portfolio as best you can. It is actually possible to build a portfolio that reliably smooths out dips...
by Doc
Sat May 09, 2015 5:31 pm
Forum: Investing - Theory, News & General
Topic: Swedroe: Credit Risk Not Worth It
Replies: 43
Views: 5263

Re: Swedroe: Credit Risk Not Worth It

It's always worth remembering that not all market participants experience "risk" in the same way. What might make sense for a pension fund might not make sense for my individual portfolio (for example, my future obligations are real while many institutions have future obligations that are...
by Doc
Fri May 08, 2015 5:27 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Ultra-Short-Term Bond Fund now available
Replies: 49
Views: 7308

Re: Vanguard Ultra-Short-Term Bond Fund now available

Here's how it fared from 2007-2010, against Vanguard short-term investment grade (VFSTX) You can get protection from an equity bear by going ultra short or very high grade. How about a short treasury fund like Vanguard Short-Term Treasury Inv VFISX http://s9.postimg.org/t4y8cx2sf/Capture.jpg Vangua...
by Doc
Fri May 08, 2015 8:32 am
Forum: Investing - Theory, News & General
Topic: Calculating duration when rates are negative
Replies: 16
Views: 2623

Re: Calculating duration when rates are negative

richard wrote:How do you calculate duration (or modified duration) when rates are negative, such as on many TIPS today.


Use FICALC

http://www.ficalc.com/calc.tips
by Doc
Thu May 07, 2015 9:51 am
Forum: Investing - Theory, News & General
Topic: Vanguard Claims Title of World’s Largest Bond Fund
Replies: 20
Views: 2339

Re: Vanguard Claims Title of World’s Largest Bond Fund

The wide use of derivatives lets a fund reduce transaction costs and therefore take advantage of well known bond trading techniques like "riding the yield curve". An index fund can't do that. Moreover any large fund that has to or wants to make large moves without affecting the market prob...
by Doc
Thu May 07, 2015 9:03 am
Forum: Investing - Theory, News & General
Topic: Vanguard Claims Title of World’s Largest Bond Fund
Replies: 20
Views: 2339

Re: Vanguard Claims Title of World’s Largest Bond Fund

Regarding PTTRX, Isn't Vanguard Interm-Bond Index Fund the more appropriate benchmark? No. The duration is too long. Both PIMCO and Morningstar analyst use the BarCap Agg Index as the benchmark. If you want to get closer to the average credit quality while maintaining the duration the best choice ma...
by Doc
Tue May 05, 2015 10:43 am
Forum: Investing - Theory, News & General
Topic: Vanguard Claims Title of World’s Largest Bond Fund
Replies: 20
Views: 2339

Re: Vanguard Claims Title of World’s Largest Bond Fund

It's funny to me though that PTTRX has outperformed VBTLX the last 15 years, 10 years, 5 years, 3 years, 1 year, and YTD. And all but one rolling three year period for the last ten years at least. :? http://quotes.morningstar.com/chart/fund/chart?t=PTTRX&region=usa&culture=en_US&dataPar...
by Doc
Tue May 05, 2015 10:35 am
Forum: Investing - Theory, News & General
Topic: Concerned that Floating NAV Rules will disrupt Prime Money Market Fund?
Replies: 20
Views: 1207

Re: Concerned that Floating NAV Rules will disrupt Prime Money Market Fund?

I neglected to mention: Bond funds Interest accruing outside of NAV is not a rule, it's a choice of the fund manager. There are bond funds that include accrued interest in NAV. Vanguard's TIPS funds include accrued interest in NAV* FWIW Each fund declares a dividend every business day , with the ex...
by Doc
Tue May 05, 2015 8:30 am
Forum: Investing - Theory, News & General
Topic: Concerned that Floating NAV Rules will disrupt Prime Money Market Fund?
Replies: 20
Views: 1207

Re: Concerned that Floating NAV Rules will disrupt Prime Money Market Fund?

Of course different classes can have different NAV. Total Stock Market Admiral is $53.23, investor is $53.18. Bond funds usually don't show this, but that's because accrued interest is not part of the NAV . That's the key difference. Share classes that have a fixed ratio among them would also be po...
by Doc
Mon May 04, 2015 6:45 pm
Forum: Investing - Theory, News & General
Topic: Concerned that Floating NAV Rules will disrupt Prime Money Market Fund?
Replies: 20
Views: 1207

Re: Concerned that Floating NAV Rules will disrupt Prime Money Market Fund?

As for the two tickers, they are two share classes of the same funds. I have no idea what that means. The assets are not segregated. But when Vanguard has two share classes of the same fund, they can charge different expense ratios; companies with load funds can charge different loads, etc. etc. So...
by Doc
Sun May 03, 2015 2:19 pm
Forum: Investing - Theory, News & General
Topic: Vanguard governance and investor rights
Replies: 66
Views: 3418

Re: Vanguard governance and investor rights

How would revealing Vanguard compensation put the company at risk for losing talent? The risk only exists if Vanguard's compensation is lower such that Vanguard's executives know they can get better money elsewhere. For this reason, it's likely that Vanguard's compensation is about equal to other c...
by Doc
Sat May 02, 2015 11:51 am
Forum: Investing - Theory, News & General
Topic: Vanguard governance and investor rights
Replies: 66
Views: 3418

Re: Vanguard governance and investor rights

Who owns Vanguard Brokerage Service and do the holders of Vanguard Mutual Funds have any say in the operation of VBS or do they just pay for it?
by Doc
Thu Apr 30, 2015 3:08 pm
Forum: Investing - Theory, News & General
Topic: RE Social security being taxed--new chart by Scott Burns
Replies: 41
Views: 4684

Re: RE Social security being taxed--new chart by Scott Burns

For that calculation, you take the sum total of all income on lines 7-19 and 21 on the 1040, plus line 8b (tax-exempt interest). That's what I call "Other Income". It is everything except your SS benefits. When I did my "study" prior to this thread I also used "other income...
by Doc
Thu Apr 30, 2015 8:41 am
Forum: Investing - Theory, News & General
Topic: Vanguard Total Bond Market Index [Exp.Ratio] now only 0.07%
Replies: 20
Views: 3796

Re: Vanguard Total Bond Market Index fund is now only 0.07%

Is the 0.07% the e/r or the after tax total return? :twisted:
by Doc
Thu Apr 30, 2015 8:38 am
Forum: Investing - Theory, News & General
Topic: RE Social security being taxed--new chart by Scott Burns
Replies: 41
Views: 4684

Re: RE Social security being taxed--new chart by Scott Burns

My personal plan is to convert traditional to Roth before taking SS; however, with large accounts there will have to be a balancing act... and I'm struggling to comprehend all the necessary calculations. The idea of delaying SS and using the time after retirement and before SS to convert one's 401K...
by Doc
Thu Apr 30, 2015 8:26 am
Forum: Investing - Theory, News & General
Topic: RE Social security being taxed--new chart by Scott Burns
Replies: 41
Views: 4684

Re: RE Social security being taxed--new chart by Scott Burns

JW Nearly Retired wrote:Doc wrote:
Thanks guys,

I was right. I suffer from bias of the familiar. $48k in SS income - OMG.

Doc,
That amount is pretty darn ordinary for two people. The max for a couple who both waited until 70 would be a little more than $80k.
JW

Mrs. Doc was/is a school teacher. No SS worth mentioning.
by Doc
Wed Apr 29, 2015 4:33 pm
Forum: Investing - Theory, News & General
Topic: RE Social security being taxed--new chart by Scott Burns
Replies: 41
Views: 4684

Re: RE Social security being taxed--new chart by Scott Burns

For planning purposes I just assume all of my SS is taxable as ordinary income along with everything else. That way I don't stress over these marginal tax rates. Once I hit 70 and start SS, I can't really say "no" to whatever my taxable income will be as it will be comprised of RMD + Pens...
by Doc
Wed Apr 29, 2015 4:29 pm
Forum: Investing - Theory, News & General
Topic: RE Social security being taxed--new chart by Scott Burns
Replies: 41
Views: 4684

Re: RE Social security being taxed--new chart by Scott Burns

Thanks guys,

I was right. I suffer from bias of the familiar. $48k in SS income - OMG.
by Doc
Wed Apr 29, 2015 3:05 pm
Forum: Investing - Theory, News & General
Topic: RE Social security being taxed--new chart by Scott Burns
Replies: 41
Views: 4684

Re: RE Social security being taxed--new chart by Scott Burns

Most Bogleheads will have SS income greater than U - L. For them, the amount of "other" income you need (ordinary income + dividends + cap gains + tax exempt interest + etc) in order for 100% of your SS income to be 85% taxable is My favorite tax "gotcha" in this context is a Fe...
by Doc
Wed Apr 29, 2015 10:06 am
Forum: Investing - Theory, News & General
Topic: Spoke with a Schwab Representative...
Replies: 9
Views: 1846

Re: Spoke with a Schwab Representative...

From the OP's statement, I could infer that one needs $1 million held at Schwab in order for Schwab to let one purchase Vanguard Admiral share funds at Schwab. At least one Vanguard Admiral mutual fund is available at Schwab - Vanguard Total Stock Market Index Fund Admiral Shares. But for Instituti...
by Doc
Wed Apr 29, 2015 8:45 am
Forum: Investing - Theory, News & General
Topic: RE Social security being taxed--new chart by Scott Burns
Replies: 41
Views: 4684

Re: RE Social security being taxed--new chart by Scott Burns

There is beginning to be some confusion here about tax rates for "ordinary" income and LTCG/QD. From The link in footnote 2 in David Grabiner's post: Worksheet A. A Quick Way To Check if Your Benefits May Be Taxable Keep for your records A. Enter the amount from box 5 of all your Forms SSA...
by Doc
Tue Apr 28, 2015 12:15 pm
Forum: Investing - Theory, News & General
Topic: RE Social security being taxed--new chart by Scott Burns
Replies: 41
Views: 4684

Re: RE Social security being taxed--new chart by Scott Burns

Is there any advantage to arranging to receive income as capital gains or qualified dividends, rather than ordinary income? No with respect to the SS taxation. When you are "in the zone" every dollar of non-SS income makes $0.85 subject to tax regardless of what the non-SS income is. I th...

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