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Great article, Larry. Timely, and easy (even for me!) to understand. Thanks.

So would you agree that for someone who can stay within FDIC limits, Total Bond Market Index at this time does not provide sufficient return to compensate for duration risk. In that case, I would need about a 1.0% risk premium, and the current premium is only 0.5%. Basically, until either MM rates ...

I guess nobody wants to discuss the relative merits of using 1% bank money markets vs 1.5% intermediate term bond index funds for the fixed income portion of the portfolio until the compensation for taking on duration start to improve. Even a 1.5% risk premium over T-bills or mutual fund MMs doesn'...

I hope I don't offend anybody, but I have wondered for a while about something I heard Allen say in a boglehead expert panel session video I watched online. If I remember correctly, the panel was talking about international allocation. Rick Ferri said something like how he split Euro/Pacific 50/50,...

Since the statutory authority for the "full faith and credit" backing of FDIC is somewhat murky (http://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation#.22Full_Faith_and_Credit.22), it might be better to compare CDs to agency bonds of similar duration, rather than Treasuries. ...

KarlJ wrote:

G-Money wrote: If interest rates stay low for 20 years, you would have been much better off sticking with intermediate funds.

Making this assumption is not worth staking a retirement on IMO.

Something is definitely wrong if the movement of interest rates in any direction is enough to derail your retirement.

Following this logic, then the only sensible thing would be to have 100% or your equity allocation invested in a true world index fund. Anything else would be half measures. I'm not saying 100% in a true world index fund is wrong, only pointing this out to show the logical conclusion. Thus Jack Bog...

Declining interest rates have persisted in recent decades resulting in excellent bond returns, but I doubt that this situation can be counted on to continue in the future. Shortening duration in the present environment results in near zero returns, however these funds can be tapped to meet emergenc...

I still concluded some time ago that non-brokered CDs provided a superior risk/return profile, especially when compared appropriately (e.g., since a CD has essentially no credit risk if one stays within insurance limits, it's more appropriate to compare them to treasuries, not to TBM or anything el...

Look, I'm really trying to understand this, rather than be a stick in the mud. I'm looking for some actual long-term data that supports the conclusion that putting "x" percentage in foreign/international is actually better than simply staying in the SP500 or the Total Market (US) with Van...

nisiprius, We're on the same page. It has generally in the banks' financial interest to permit early withdrawals because interest rates have been declining. Over the last 30 years, the banks took interest rate risk, lost, and depositors looking to withdraw early let them off the hook (and paid them ...

Look, I'm really trying to understand this, rather than be a stick in the mud. I'm looking for some actual long-term data that supports the conclusion that putting "x" percentage in foreign/international is actually better than simply staying in the SP500 or the Total Market (US) with Van...

You are correct and more importantly it passes the smell test of common sense. In the globalized world we live in and money can flow ANYWHERE in the world why would one expect better returns in U.S. vs. Europe or Europe vs. U.S.?? I expect the same expected return with basically the same risk. The ...

Density of water is easy: 1,000.00 kg/m³. No idea about wet sand or dirt.

Assuming you just wanted to redeem early because interest rates rose, you'd suffer the same impact of interest rate risk, you just wouldn't see it in the interim. This is simply the illusion created by not having bank CDs marked to market. No, it is not an illusion because, provided the bank DOES a...

For example: an Ally 5-year CD is currently paying 1.5% with an early withdrawal penalty of 60 days' interest, but no interest rate risk. Except there is interest rate risk. As you know, Ally only gives you the right to early withdrawal with Ally's permission . You don't have an automatic right to ...

What's your definition of "advantage"? If by "advantage" you mean increased return without increased risk, then I believe there has historically been higher annual returns from a mix of U.S. and EAFE with the same or lower standard deviation than from holding 100% of either one. ...

With the expectation of rising interest rates a given for many, . . . which Bogleheads should know is already priced into the prices and yields of bonds, one might conclude that it is reasonable to lower the duration of bond holdings in a portfolio in order to minimize loses in the short-term. Perh...

For example: an Ally 5-year CD is currently paying 1.5% with an early withdrawal penalty of 60 days' interest, but no interest rate risk. Except there is interest rate risk. As you know, Ally only gives you the right to early withdrawal with Ally's permission . You don't have an automatic right to ...

What about checking other lenders to see if you can get a lower rate on a 15-year? Check Amerisave, Aimloan, NMA, Firstib, local banks and credit unions, etc. Would be surprised if you couldn't do better than Provident's quote (although Provident usually has competitive rates). You could also use th...

Could be liquidity. Could be the mind's tendency to find patterns where none exist. How consistent are these spikes? Every day? Multiple times a day? Once per week? How significant is significant? A 1% spike? 5%? How persistent is this trend? I'd look back over more than just the last 5 trading days...

This does not have to be all or nothing. There is nothing magic about having half your bonds in TIPS. There's really no "should" about TIPS either. If you want TIPS, just keep the amount that is easy to have. Agreed. Why don't you just direct all future fixed income savings towards TBM? N...

Whew! I was going into withdrawal!

If you think threads with a few hundred posts is a lot, you ain't seen nuthin': http://www.bogleheads.org/forum/viewtopic.php?f=10&t=88005&newpost=1538021 (Taylor's 3-fund portfolio thread, 455 posts). http://www.bogleheads.org/forum/viewtopic.php?t=5934 (Market Timer's leverage/margin call/...

If Vanguard changed-out the intermediate infl-protected with short-term infl-protected in their retirement asset-allocation accounts -maybe they know something we don't? Carl W. Don't count on it. Vanguard increased the stock allocation in its Target Retirement Funds just in time for the crash in 2...

I'm trying to remember the last time Buffet recommended bonds.

Here's a calculator that will show you how long it will take to break even. http://www.mtgprofessor.com/calculators/Calculator3a.html My rule of thumb had been to not refi unless I could break even in less than 12 to 18 months (3 of my refis had no closing costs at all). My guess is that with closin...

To answer your question about CD vs TBM, yes, a 5 year CD with a yield higher than TBM would have a higher expected return than TBM. But it wouldn't need to work out that way. The CD will definitely return its APY every year for 5 years. TBM however, could increase in NAV if interest rates were lowe...

SEC yield is a much better statement of the fund's current yield than distribution yield. A bond with an SEC yield of 2% and a duration of 7 years can reasonably be expected to return 2% annually over the next 7 years. When comparing bond funds, it is much more useful to compare SEC yield, credit ri...

If you can get 3.5% for no closing costs (which is different than no lender's fee--no closing costs includes no cost to you for appraisal, title insurance, filing fees, etc.), then there's no reason not to refi to that rate. If your goal is to pay off the loan in 10 years, I'm not sure it will be po...

How much are the closing costs?

No need to buy TLT or GLD (except relatively small slices for rebalancing). Just buy 30 year Treasuries at auction and buy this: http://www.time.com/time/specials/packages/article/0,28804,2016258_2016259_2016264,00.html Hah, that's funny but I don't want that much value sitting around my house, too...

For amusement value I looked up the daily trade values for my funds and realized I'd have to spread out my purchases if I didn't want to move the market: VBR $17.6 million VWO $757.1 million TLT $937.6 million GLD $1857.7 million So I guess dollar cost averaging is the way to go if you're going to ...

It was simple math for me. When I started out, I knew that I knew nothing about investing. As I was reading about mutual funds, I came across a description of an index fund--average returns with below-average costs. For someone who knew he didn't know what he was doing, this was immediately appealin...

I found that online resources report federal tax on lottery winnings is 25%. State taxes vary, California is 0%. Ordinary income tax. California tax is only zero on its own state lottery. Since Powerball is not a CA state lottery, the top tax rate of 13.3% will apply. a. California Lottery Winnings...

I found that online resources report federal tax on lottery winnings is 25%. Where did you find that? Here's what I found: The prize, no matter how the winners take it, is considered income. So the highest federal tax rate of 35% will apply. http://money.cnn.com/2012/11/30/pf/taxes/powerball-lotter...

I think a company the size of Vanguard could produce a set of funds similar to DFA in that they don't track an index per-se, are very low-cost, and don't require an advisor to sell them. Vanguard offers many low-cost actively managed funds which do a good job of sticking to their knitting. What OP ...

This is not about you, G-Money, or about me. It is about words versus investment strategies - and about how some words are more meaningful to some people, less meaningful (meaningless) to others. So, words like "market timing" used in relation to an investment strategy are just words. All...

I would not buy a Schwab mutual fund at eTrade if there was a transaction fee. I wouldn't buy any mutual fund with a transaction fee. Couldn't you buy the Schwab mutual fund at Schwab? Otherwise, look for no-transaction fee ETFs, whether at eTrade or elsewhere.

richard wrote:Everyone knows bond yields will increase and prices decrease at some point.

I must be behind the curve. I don't even know that much.

The whole reason I use Amazon is so I don't need to go somewhere to get something, it can just be delivered straight to my door. I can't imagine I'll be getting any use out of that option. I guess it's a nice feature for more valuable deliveries or folks who live in apartments/condos/etc.

"Market timing" is nothing but words. Yes. But words have meaning. Here's what I mean when I say "market timing": Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements. The predicti...

100% agree, LH. Market timing is market timing. I have no problem with "short bonds always," if that's what's appropriate for an investor. But I do have a problem with "short bonds now." Here is the way I look at it. You should "stay the course" in terms of your risk p...

Sounds familiar: http://www.bogleheads.org/forum/viewtopic.php?t=94579&f=2 I'm in the camp of avoiding counter-party risk in this situation. Cash for me. But where do you put the cash? :moneybag Invest according to your AA, taking into account your new need, willingness, and ability to take ris...

Sounds familiar: viewtopic.php?t=94579&f=2

I'm in the camp of avoiding counter-party risk in this situation. Cash for me.

100% agree, LH. Market timing is market timing.

I have no problem with "short bonds always," if that's what's appropriate for an investor. But I do have a problem with "short bonds now."

Thanks for the link. My guess is that the Balanced Index may once have had an annuity feature. Given the reference to the Wilshire index (which was replaced by MSCI, which was replaced by CRSP), my bet is the info is at least 10 years old. I currently hold Balanced Index in my 401k, and haven't seen...

So what you're saying is that Vanguard should be both Vanguard and DFA. I've never understood the thinking that Vanguard should be all things to all people. Vanguard is a store. If you like some of the products it offers, you should buy them. If you don't like some of its products, but prefer the pr...

I just checked the Vanguard page for annuities, and while there is a "Vanguard Variable Annuity - Balanced Portfolio," it is very different than the balanced fund. It's actively manage, investing in value stocks for the equity portion and corporate bonds for the fixed income portion. And s...

Interesting. When I look up VBIAX on the Vanguard website, I see this language under the "Investment Strategy" section: Investment strategy The fund employs a “passive management”—or indexing—investment approach designed to track the performance of two benchmark indexes. The fund invests b...