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What they are stating is that taking 1% of a 7% return is the same as taking 14% of the return for themselves. .01/.07 = 14.3% Ed This is just sensationalism for the sake of the "print," and frankly from people who should know better. Using your own logic - Sure spending $1 (remember your...

arcticpineapplecorp. wrote:thank you both. Makes sense. I will certainly look at fees mutual funds/advisors charge in a different light now.

An even more enlightening way to look at is that a 1% fee compounded over 30 years lowers your retirement savings by about 25%.

fd

Also seems like an admission: of economists’ ignorance about what moves the market And an interesting paper by Shiller: “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?” Stock prices seem to have a life of their own That pretty much explains why indexing works. fd

don't confuse outcome with strategy - this will not work for everyone and certainly not for anyone who can't stick to the plan. Can I ask what year you retired? Been retired a little over a year. I agree, that most do not have a strategy, but this was not my case. My strategy (as an Engineer) was t...

Cramer's show has several different parts, they're not all of the same utility. The best part is the first five to ten minutes where explains things and describes what's going on, I learned a ton from him by just watching that part of the show. The am I diversified segment is useful in that most of...

The real question is if your human capital is more bond like or more stock like. When I graduate I am going into corporate finance. My income will probably have an equity like component to it (especially as far as restricted stock bonuses is concerned), so I feel that my career will likely exhibit ...

Rkhusky, I inherited a bond fund with a 14 year duration that some investment genius had put my parents into. A 2% rise in rates would cause a 28% drop in that fund. But a 3% rise in rates in some intermediate bond funds would also cause a 15-18% drop. Given that 5% was considered an insultingly lo...

I am also not suggesting that anyone choose their AA from my example, only that I see no logic that makes me think adding bonds to a portfolio right now is going to in any way increase their returns. The primary purpose of bonds is not to increase returns, but to reduce volatility. A secondary purp...

I don't see where over the long term one is greatly rewarded for the risk of a 100% equity portfolio. Years back I met with a Vanguard advisor who offered the following information: For the period of 1926 to 2009: This would be a very dangerous world if everyone drove their car by looking in the re...

I don't see where over the long term one is greatly rewarded for the risk of a 100% equity portfolio. Years back I met with a Vanguard advisor who offered the following information: For the period of 1926 to 2009: This would be a very dangerous world if everyone drove their car by looking in the re...

Anyway 97% equities, 2 % cash, 1% I-bonds. 100% supplemental retirement income from stock dividends (roughly 30% of total equities). Rest set up for long term growth. Why the 1% ibond? Is this a desired allocation? Realistically, it's a tiny effect, if you had $10k and had a 1% advantage over a yea...

age 61, retired, pension (which is really fixed income, even though most don't count it). Anyway 97% equities, 2 % cash, 1% I-bonds. 100% supplemental retirement income from stock dividends (roughly 30% of total equities). Rest set up for long term growth. Despite what you might think, the pension a...

I always suggest you should try to do a 50/50 split Roth to non-Roth. My $.02 is however is that it seems absurd that there would be a bill to tax Roth earnings, as this essentially does away with the Roth - it would just be a taxable account. If you want to know the truth, the government makes a lo...

In general, if stocks are doing well I don't really care how bonds are doing. I have a mostly equities portfolio and it would have done fine overall during the last four years even if I owned bonds that lost 5% in value every year. I only care that correlations go negative when stocks tank. Here is...

The first point you made is great but all you guys are missing EVEN BIGGER DISASTER IN TREASURIES GOING ON RIGHT NOW. Look at how fast the Treasury fund and the Total Bond fund are falling behind the corporate fund. That gap started in 2011 when the gov't reduced treasury rates way below market pri...

I enjoyed this post, but a person who bases their bond expectations on this time period is asking to be seriously disappointed. This is so much of a quiet understatement, I had to chuckle. Here is another great line in this thread: ... the behavior and the risk/reward characteristics will be simila...

Thank you very much for the suggestions! I will definitely open a nondeductible IRA and then convert it to a Roth. Just be sure to familiarize yourself with the exact procedure before you do it. For instance, you cannot have any other non-Roth IRA's, as the taxable portion of any conversation that ...

The Roth is a much harder sell in your tax bracket and since you already have some Roth, you at least have a start. If it was me I would probably still do about 20% to the Roth and 80% to the pre-tax. As you have already figured out, the Roth will come in handy later in helping adjust your tax rate ...

fd, This would be true if not for the higher cost. On an after fee and after trading cost basis, RSP performed about 0.66% below the S&P 500 EW index since inception. This puts it below the Capital Markets Line. There are cheaper ways to get mid-cap stock exposure if that's what you're seeking....

Rick,
On the CML line it looks like the RSP is almost 2% above the SP500?

In fact over the last 10 years the RSP has out performed the Vanguard VFINX by better than 2% even after the higher expenses with a lower Beta.

fd

The Guggenheim S&P 500 Equal Weight ETF (NYSEArca: RSP) turns 10-years old this week, and that's creating a lot of hype in indexing land. The performance has been very good relative to the cap-weighted S&P 500. But things aren't always what they seem (or never what they seem on Wall Street)...

What you might think as beneficial is the excess returns you get with a lower Beta and risk - without venturing into the Small Cap space, where companies just by the fact of their size generate more risk without necessarily more return.

fd

These funds seem too confusing. I don't think they would have John Bogle's blessing. Simplicity is best and these funds seem like a gimmick to me. I'm surprised Vanguard is promoting them. So my opinion on the managed payout funds is probably inline with the rest of the bogleheads I just don't real...

I have a slightly different question. If dividends don't matter, why is there such a cult trying to throw stones at those that use that strategy for a defined purpose. We all know (or should know) that there is NO hard evidence that will predict the future of any strategy. As pointed out there can b...

Also, to answer the question about payouts, depending on which payout fund you are in, they can and have, gone up and down. While Vanguards goal is to protect the principal in the fund, there is no guarantee, however to protect that principal, they would have to adjust the payouts depending on the p...

80% is definitely way more than I would put in these funds, because they work similar to an annuity but without the longevity protection -- in other words you could go broke, as the payout can come from the principal in the account. There are also 3 different payout funds with different risk levels ...

Anyway, this thread has run its course, for me at least. I've given dozens of examples, yet every argument for high-dividend/stability-of-dividends/growth-of-dividends keeps making at least one of these mistakes: 1. Constructs a scenario that assumes that dividend stocks are higher returning, then ...

And if all the dividends that were paid were reinvested on the following day, just where does the stock price that PERMANENTLY fell go? I think you just realized that there is nothing magic about dividends! The price of the stock fell, you use the cash from the dividend to buy additional shares, an...

Yes your stock will pay the dividend but it PERMANENTLY falls by the amount of the dividend (relative to what it would have done if it had not paid the dividend). So if the market goes down 90% and the stock is perfectly correlated with the market it will fall 90% plus the amount of the dividend, n...

The high-dividend-yield portfolio’s annualized return was 1.27 percentage points greater than that of the total market portfolio (12.42 percent vs. 11.15 percent), which was enough to compound wealth 48-fold over the 33 years compared to 33-fold for the market portfolio. Only problem with this is t...

Sorry if this paper about HIGH-dividend stocks has been posted before. Dividend Investing: A Value Tilt in Disguise?, by Gregg S. Fisher, Journal of Financial Planning, April 2013 Executive Summary .... In seeking to better understand the outperformance of high-dividend-yielding stocks relative to ...

Thanks Taylor!

fd

As to risk overall and the potential impact- it is the economic risk. The 2000 recession was preordained by knowing certain economic measures. They are not taught to brokers, CFPS, small furry animals or much else. Same with 2006 and the forthcoming recession. It's going to take me a while to stop ...

Lot of good advice in this thread. This particular one by Learning_head struck me as very sensible: Your pick won't matter much for at least two reasons: (a) your savings at young age are MUCH more important than AA percentages (returns on smaller savings are insignificant relative to your income an...

Half today and half tomorrow.

FinancialDave, If I'm understanding you correctly, you consider 20 individual stocks that pay dividends to be the "bond" portion of your portfolio, and this is 33% of your overall portfolio? Is that right? Let's just call it "bond like" only from the perspective that what matter...

Bruce --like when a 2008 shows up Best wishes Larry If another 2008 shows up, it may just look like the last, in which the Dividend Growth index outperformed both large cap and small cap value indexes. http://img221.imageshack.us/img221/7880/vdigx.jpg This chart by the way shows the effect of the r...

I don't think there is any confusion about tax rates here...of course STCG are taxed higher than QDI. Prudent investors plan their finances so they don't realize any STCG, so that isn't an issue. And QDI are taxed the same as LTCG. The difference is that LTCG give greater control over when you real...

FinacialDave, If you achieve 0 taxes, you deserve a lifetime boglehead achievement award. I just finished my fed taxes and it hurts so bad. I think for now, LTCG and divs are taxed the same. But there is something going on in Wash that may change things. (PS: I never liked that capital losses were ...

In many cases dividends and LTCG are taxed at exactly the same rate. simple math shows that it makes no difference yet people keep trying to show examples that justify their belief. This is perfect example one is perfect Consider that the dividends are always taxed as income. When you sell shares t...

FinancialDave, The tax-man knows the tax law in all its complexity. The wise investor tries to minimize their taxes. I think (consult the tax-man for accuracy) there is an extra 3.8% tax levied on capital gains in 2013 for certain tax-payers to support Medicare. Sure, I agree, except if you make en...

As you noted, the tax-man knows there is a difference. Unfortunately, you have many dividends that would be happy to be in a taxable account, because zero tax would be paid on them. Others may have them in an IRA, which would be taxed at your ordinary rate -- which has been shown on numerous occasi...

And if I've reinvested for a long, long time - like my longest, 50 years, and then decide to take the divs, can an argument be made that in the long run I've come out ahead?? (Personal investment history bias showing here; it's hard to swallow that I've wasted my strategy.) BTW, just to clarify, AL...

Recently retired myself, but with larger nest egg, 3% mortgage, and no bonds, and no trouble sleeping because of the mortgage. So the logic is a little different for me, but I am paying it down at a somewhat aggressive rate, but mostly with non-taxable income (Roth and taxable account) so as not to ...

Hoops, not unless someone can predict the future could your question be answered, in the way it is asked.

That is what the evidence clearly shows---that the return of stocks that pay divs is no different than the return of ones that don't, all else equal. Best wishes Larry I guess we at least agree on one thing (at least by your pen) -- we have six pages of documentary on something that doesn't matter....

Series I bonds. You'll have to pay a 3 month penalty on the interest but you'll still do better than any other safe investments like CDs. If you absolutely have to stay at vanguard then a short term bond fund is the first thing that come to mind, other than a money market which will make next to no...

If your strategy depends on selling down any assets to generate this income, once the assets are sold, it is game over that the investment (that you sold) will be able to "come back" after the downturn. If your strategy is based on not having to sell assets, then that is a horse of a diff...

For a retired person more concerned with not losing money vs total return,is there any scenario where div paying consumer defensive and cons staples stocks would not hold their value more in a really bad say 5 year bear market?You can quote all the studies in the world but companies that make thing...

The positives that Larry does not seem to weigh against a "dubious" negative such as less diversification are "annuity like" income streams (if the dividend payers are chosen wisely), or a number of real market down years in a row, which would not particularly affect the dividen...