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Re: Bogleheads 2014 Hedge fund contest

There seems to be an error in the results of The Golden Horde (adrian2)

Seems the Apple split has not been calculated correctly --- sorry Adrian2.


fd
by FinancialDave
Mon Jul 28, 2014 1:17 am
 
Forum: Investing - Theory, News & General
Topic: Bogleheads 2014 Hedge fund contest
Replies: 153
Views: 12088

Re: Honda Fit, Civic

You don't say where you live and how much snow driving you have to do every year but I sure like the CR-V. The AWD is a real plus. The 30mpg of the CR-V can't come close to the Fit's mileage, so it depends on what you need the car for.

fd
by FinancialDave
Fri Jul 18, 2014 3:34 pm
 
Forum: Personal Consumer Issues
Topic: Honda Fit, Civic
Replies: 32
Views: 3039

Re: Do Wellesley's Equities Outperform?

If you need more income you buy Wellesley, if you need more growth - Wellington is your fund. And if you want more range in your "risk adjustment" you can make it a 3 fund portfolio by adding the Total Stock Market Fund. By doing this it allows me to adjust the fixed income allocation fro...
by FinancialDave
Thu Jul 03, 2014 6:57 pm
 
Forum: Investing - Theory, News & General
Topic: Do Wellesley's Equities Outperform?
Replies: 41
Views: 4812

Re: Article: bonds pensions SS

you guys going to count on Social Insecurity ? I'm pretty sure SS isnt legally guaranteed. As such it probably isn't a true asset. However, if you are close to retirement then its more & more likely to be there as an income stream. I am 30 years out so I am saving & investing as if it wont ...
by FinancialDave
Fri Jun 27, 2014 1:47 pm
 
Forum: Investing - Theory, News & General
Topic: Article: bonds pensions SS
Replies: 49
Views: 3217

Re: Article: bonds pensions SS

you guys going to count on Social Insecurity ? I'm pretty sure SS isnt legally guaranteed. As such it probably isn't a true asset. However, if you are close to retirement then its more & more likely to be there as an income stream. I am 30 years out so I am saving & investing as if it wont ...
by FinancialDave
Fri Jun 27, 2014 12:57 am
 
Forum: Investing - Theory, News & General
Topic: Article: bonds pensions SS
Replies: 49
Views: 3217

Re: Article: bonds pensions SS

I think your examples in starting at 1929 could be better ran at a later date 1959. 1929 we didn't have SSIu, Fed. regulation, or reasonable margin controls. Many other stuff different in 1929 VS 1959,1949,1939. It is not really about comparing regulation or the many other things that change over t...
by FinancialDave
Wed Jun 25, 2014 2:13 pm
 
Forum: Investing - Theory, News & General
Topic: Article: bonds pensions SS
Replies: 49
Views: 3217

Re: Article: bonds pensions SS

:oops: Finally, some one said the obvious: SS acts as a bond as does pensions. I am not as sure about equity in a house. I am an advocate for 100% equity in IRA and 401k, until one is fairly certain that they will have enough in retirement. 8-) And if someone does not have enough in retirement, doe...
by FinancialDave
Wed Jun 25, 2014 12:38 pm
 
Forum: Investing - Theory, News & General
Topic: Article: bonds pensions SS
Replies: 49
Views: 3217

Re: Article: bonds pensions SS

It is not a new perspective. It has been hotly debated here many times. I also note the these articles always end up recommending you increase your holdings in stocks. But if you factor in the value of SS (and/or housing), or more properly simply subtract them from income needs, you may find that y...
by FinancialDave
Tue Jun 24, 2014 6:47 pm
 
Forum: Investing - Theory, News & General
Topic: Article: bonds pensions SS
Replies: 49
Views: 3217

Re: Article: bonds pensions SS

Social Security is not strictly speaking an "asset", and a WSJ reporter should know better. Also, using the full value of the house seems reckless. If the justification is based on downsizing, for example, it only makes sense to consider the difference in prices between the two houses. SS...
by FinancialDave
Tue Jun 24, 2014 2:24 pm
 
Forum: Investing - Theory, News & General
Topic: Article: bonds pensions SS
Replies: 49
Views: 3217

Re: No bonds at all.

We can argue all day I do agree with the above anyway! If someone has 30 years to invest and choses to go 100% stocks in order to capture maximum expected return, have they really considered the diminishing returns effect as they transition from 80% to 90% to 100%? The risk theoretically skyrockets...
by FinancialDave
Mon Jun 23, 2014 10:50 pm
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

Seems like just about everybody has an opinion!


:oops:
by FinancialDave
Mon Jun 23, 2014 10:07 pm
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

TIPS suffered more due to declining inflations expectation, but if you're a TIPS investor thinking in "real money" this doesn't make a difference to you. I don't recall seeing many posts about TIPS abandonment, either. High quality bonds are fundamentally safer than equities, by nature. T...
by FinancialDave
Mon Jun 23, 2014 4:34 pm
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

There is nothing in the principals, as far as I can see, that mandates any bonds at all. fd, You are right that our principles don't mandate any bonds. But, the explanations do suggest bonds, specially for new investors that have not been tested in a bear market. Our philosophy is very well balance...
by FinancialDave
Fri Jun 20, 2014 1:11 pm
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

There is nothing in the principals, as far as I can see, that mandates any bonds at all.

In fact when I ran the Boglehead asset allocation calculator a year or two ago, it gave me 0% bond allocation (only 2 funds instead of 3.)

fd
by FinancialDave
Thu Jun 19, 2014 11:35 am
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

Reminder: One of our guiding principles is: Never bear too much or too little risk . From the Wiki: Learn about the "magic" benefits of poorly correlated investments--most notably, owning both stocks and bonds. Less remember that poorly correlated does not necessarily mean no risk, NOR th...
by FinancialDave
Wed Jun 18, 2014 11:36 pm
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

B) if you only have like 20k in a roth, it will make more by future conturbations, than actual returns. No, asset allocation aside, compounding wins. Future contributions will not "make" more. Compounding plus tax free earnings equals larger growth. The most valuable capital a young perso...
by FinancialDave
Wed Jun 18, 2014 4:47 pm
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

What if someone new started investing in a roth? Sense the roof is so low, whould it not advacte have as much return as possible? Yes future contubrutions added is more at that point when its so low compared to one that has 500k or more. The more you have the more you want to keep, however when doe...
by FinancialDave
Wed Jun 18, 2014 11:06 am
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

Yep, lots of recency bias happening here. Unless you are a robot with the heart of steel, the average portfolio must have some allocation to bonds. We need a mini market crash to straighten out all of the 100% equities posts that have been going on over the last year or so.... :twisted: And just wh...
by FinancialDave
Wed Jun 18, 2014 12:24 am
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

No bonds at all. What is peoples opion about this. When you are at the accumulating stage 100% equiltys. In retirement get enough annuiltly to have a (floor to live on) and rest in stocks?? Perhaps I'm in the minority here, but I see being 100% in stock equities as very, very different than a "...
by FinancialDave
Wed Jun 18, 2014 12:04 am
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: No bonds at all.

berntson wrote:
Image

Notice that even though the all-stock portfolio lost a lot more during the tech bubble and the great recession, the all-stock portfolio never had less money than the 50/50 portfolio.


Sure it did in years 2, 3, 4, 5, 6.
by FinancialDave
Tue Jun 17, 2014 11:37 pm
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11832

Re: Target Date Funds in 401(k)

Also, let's be clear on Target Date Funds - they are just another form of allocation fund, where YOU choose the allocation and glide path you want to be on. Hopefully, most users of target date funds can understand that to lighten up on the bond allocation just run the "Date" out in years....
by FinancialDave
Fri Jun 13, 2014 8:15 pm
 
Forum: Investing - Theory, News & General
Topic: Target Date Funds in 401(k)
Replies: 20
Views: 1746

Re: In what ways does a retired person's portfolio differ?

* If you haven't done so already, Simplify for benefit of yourself, your caregivers and your heirs. Thanks Taylor, as this is an often forgotten action, that usually takes care of a lot of the other problems. Personally, I have not changed my allocation at all in retirement (2012), except for the f...
by FinancialDave
Thu Jun 05, 2014 12:06 pm
 
Forum: Investing - Theory, News & General
Topic: In what ways does a retired person's portfolio differ?
Replies: 88
Views: 8018

Re: Can we have negative interest rates?

Wow! This was educational to me as I was unaware that interest rates could truly be negative on savings accounts and have been historically sometimes. That really would be a "tax" on deposits so to speak as I would be paying them to keep my money. It would be better "under the mattre...
by FinancialDave
Wed Jun 04, 2014 1:13 pm
 
Forum: Investing - Theory, News & General
Topic: Can we have negative interest rates?
Replies: 33
Views: 3163

Re: "Get out of bond funds"

Doc wrote:
ogd wrote:ginmqi: the Thau book is a definitive guide; the only other one that I'd recommend is Larry's "The Only Guide to a Winning Bond Strategy You'll Ever Need".


Ditto.


And you can get it on Amazon for 48 cents (plus shipping)!

fd
by FinancialDave
Sat May 24, 2014 12:11 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: Concerning Bonds and Bond Funds....

One alternative is to just split the difference and put the money in something like the Wellington Fund, which has a pretty good long term history. You seem to be saying that I should take money that I would otherwise put into fixed income and instead put it into a fund that is 60% equity, in other...
by FinancialDave
Wed May 21, 2014 12:32 pm
 
Forum: Investing - Theory, News & General
Topic: Concerning Bonds and Bond Funds....
Replies: 19
Views: 2211

Re: When is a taxable account unnecessary?

I am speaking more from a retirement perspective - because hopefully that is the purpose of your investing plan. In retirement it is helpful to have liquid funds that are not going to generate a huge amount of tax to use should you want to spend a larger sum of money. Two accounts that can accomplis...
by FinancialDave
Wed May 21, 2014 11:56 am
 
Forum: Investing - Theory, News & General
Topic: When is a taxable account unnecessary?
Replies: 30
Views: 2040

Re: Concerning Bonds and Bond Funds....

I'm new here and love this site and all the helpful information so thank you all in advance! We all know that interest rates are at historically low rates and have been there for quite a while. Common knowledge tells us that when interest rates go up, bonds go down and vice versa. I think it can be...
by FinancialDave
Tue May 20, 2014 1:45 pm
 
Forum: Investing - Theory, News & General
Topic: Concerning Bonds and Bond Funds....
Replies: 19
Views: 2211

Re: Using Dr. Pfau's research

The idea is that you spend from the bond side first. Your risk is not increasing and you tend to have better outcomes. Start with $100k in stocks and $300k in bonds. Let the stocks grow as you draw from the bond side. If you are not adding to stocks, you are not increasing your risk. Billy, I did t...
by FinancialDave
Tue May 20, 2014 1:03 pm
 
Forum: Investing - Theory, News & General
Topic: Using Dr. Pfau's research
Replies: 27
Views: 2354

Re: Vanguard Managed Payout Fund

Wow, that list of funds overlaps in several places. I wonder why they swapped the intermediate bond fund, which had some overlap with total bond to emerging markets, which undoubtedly overlaps total international to a larger degree. I notice the managed payout fund has $1.5 billion in it: https://p...
by FinancialDave
Tue May 20, 2014 12:23 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard Managed Payout Fund
Replies: 11
Views: 1486

Re: Vanguard Managed Payout Fund

fyi, I agree about the Managed Payout Fund still trying to figure it out. Here is how it has changed over the last month: Managed Payout Holdings % numbers are for: Mar-14, Apr-14, Change Total Stock Market 24.6% 25.0% 0.4% Global Minimum Volatility 20.4% 20.3% -0.1% Total International Stock 20.3% ...
by FinancialDave
Tue May 20, 2014 2:03 am
 
Forum: Investing - Theory, News & General
Topic: Vanguard Managed Payout Fund
Replies: 11
Views: 1486

Re: "Get out of bond funds"

ogd, Thanks for pointing that out -- I corrected the original post to read that the bond Funds income improved from 5% to 6% with the inflows, not the investors. In the original post I was referencing nominal bonds and how inflows will affect cash flows to investors, without thinking about the later...
by FinancialDave
Tue May 20, 2014 1:43 am
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

No. The price that matters is the 71.30. This is the price at which new money comes in and the price at which the fund shares get divided up. It's the price that we're talking about, at which new inflows make a difference or not. The 78.35 is old news and no longer matters for anything other than t...
by FinancialDave
Sat May 17, 2014 2:05 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

Well, of course he has. He invested new money at higher market yields. Good for him. The new money is due to make ... $100 on $71.30. There is no difference between the old money and the new money. Their proportion doesn't matter. You could add a huge chunk of new money and it would make no differe...
by FinancialDave
Fri May 16, 2014 7:48 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

fd -- yes it's accurate, though the numbers are slightly off if we're still talking about a 5% / 7% scenario. You must resist the temptation to go back to talk of "interest" and simplifications that deal with only the $2500 (which I will resist responding to). There is no interest and bon...
by FinancialDave
Fri May 16, 2014 4:55 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

fd -- like I was saying, I too left out dividend reinvestment from the picture. This isn't the problem. <The second is the difference between "interest" and "return". Looking at total return: the 5% part of the fund makes $12500. The 7% part of the fund makes $13500. After 5 yea...
by FinancialDave
Fri May 16, 2014 1:18 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

ogd, You don't seem to be reading my threads as they continue to get simpler until I can get some agreement. My current FD bond fund has ONE 5% bond in it with a 5 year maturity. It has one investor (or 100) but at the end of 5 years the bond will have returned the original investment ($10,000 or $1...
by FinancialDave
Thu May 15, 2014 6:47 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

fd -- in your simplification you have lost track of capital returns, which are significant for an interest rate move this large, as the depreciated bond slowly returns to par value and recovers that 8.4% loss within 5 years. My math is as complex as it needs to be to represent reality and draw corr...
by FinancialDave
Thu May 15, 2014 6:05 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

I am trying to simplify the math for both of us (or maybe just me). The example above is for brand new bonds. Call them a zero coupon if you like but I think the income is the same - except of course that you don't pay $10k for a zero, you would discount the price, but the effect is you still earn 5...
by FinancialDave
Thu May 15, 2014 4:54 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

In another reading, if you incorporate the initial loss and subsequent capital gains and the coupon reinvestment rates into one big picture -- yes, you are making the same 5% total return regardless of what you do. And you are making 7% on your newly devalued capital, again regardless of what you d...
by FinancialDave
Thu May 15, 2014 4:05 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

Let's say on day 1 you buy a 5 year bond fund with one brand new 5 year 5% bond in it. Day 2 interest rates jump to 7%. Day 3 Investors pile into the bond fund and double it's size. Day 4 fund managers invest the new money in 5 year 7% bonds, essentially increasing your income from 5% to 6%. Ah, bu...
by FinancialDave
Thu May 15, 2014 2:35 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

How about if we change the discussion for a minute. My bias is against bond funds because I can't control principal risk. Having said that assume you want a portfolio of 60% equities, 35% bonds! and 5% cash, with the cash being your emergency fund of say 6 months to 1 year. Now assume you don't wan...
by FinancialDave
Tue May 13, 2014 7:24 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

ogd, Here we disagree. Inflows and outflows simply don't matter when it comes to liquid bonds. A simple proof: let's take our point of agreement from before, that exchanging bonds for current ones with same maturity makes no difference to returns I actually don't think we are in disagreement, when ...
by FinancialDave
Tue May 13, 2014 6:28 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

The reason is you can sell the bond say at 1 year to maturity and buy a new 10 year, which effectively extends your duration by 9 years --- you have not improved the return on your original investment, you just bought a new 9 year investment which will have a yield based on todays rate. Nope -- I w...
by FinancialDave
Tue May 13, 2014 4:34 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

I guess I am not sure of your point here - other than there are times (like now) when it makes good sense to SELL your bond funds and invest in something better?? fd: read more carefully and try to see my point not yours. I am saying that it makes little sense currently to hold Treasuries close to ...
by FinancialDave
Tue May 13, 2014 2:33 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

Let's say you buy a block of $100,000 5 year bond with 2% coupon, just to make the math easy. Neglecting the commissions - over the 5 years you will earn $25,000 in interest and then get back your $100,000. You spend the income because you are retired and living off the bond. Doesn't matter what the...
by FinancialDave
Tue May 13, 2014 2:29 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

Concrete example from today's pricing. Maturity Coupon Bid Asked Chg Asked yield 8/15/2015 10.625 113.1563 113.1797 -0.0234 0.148 If you have 1000x of this bond, you could hold, make another $13280 in interest, get $100K at maturity, for a grand total of $113280. Or you could sell for $113150, put ...
by FinancialDave
Tue May 13, 2014 1:53 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: "Get out of bond funds"

Basically, if you have a bond fund with a duration of 5 years: Interest rates jump up 2 percent. Two things then happen. 1) the bond fund would drop in value ten percent, duration X change in rate = 10. That's bad. 2) the bond funds new bonds will start earning two percent more. That's good. At som...
by FinancialDave
Sat May 10, 2014 7:08 pm
 
Forum: Investing - Theory, News & General
Topic: "Get out of bond funds"
Replies: 147
Views: 22435

Re: In what ways does a retired person's portfolio differ?

So if I understand thx1138, having strong real returns in your first 10 years of retirement are crucial. So basically a lot of it comes down to...luck? Yukon50, You are exactly correct, except you have to understand the parameters. The reasonable assumptions are that your expenses vary overtime bas...
by FinancialDave
Wed May 07, 2014 7:31 pm
 
Forum: Investing - Theory, News & General
Topic: In what ways does a retired person's portfolio differ?
Replies: 88
Views: 8018

Re: In what ways does a retired person's portfolio differ?

So the dirty little secret in financial planning is that distribution portfolios (i.e. in retirement) act completely and totally different from accumulation portfolios (i.e. working and saving for retirement). Nearly everything you hear discussed with a financial adviser, and to a large extent on t...
by FinancialDave
Tue May 06, 2014 2:27 pm
 
Forum: Investing - Theory, News & General
Topic: In what ways does a retired person's portfolio differ?
Replies: 88
Views: 8018

Re: permanent portfolio modification

Please follow the ask Portfolio guidelines -- top post on this forum. It makes for better understanding of where you are coming from.

fd
by FinancialDave
Thu May 01, 2014 7:06 pm
 
Forum: Investing - Help with Personal Investments
Topic: permanent portfolio modification
Replies: 4
Views: 509
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