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Re: 529 CO Stable Value Plus vs. EE Savings Bond

Thanks for the comments. Purchase limits ------------------ For EE bonds, $10K per year per owner, including $10K in account owned by living trust, so for me, $20K per year. Would be $30K/year for a couple with a living trust. For 529, can contribute $14K/year per beneficiary ($28K for married coupl...
by Kevin M
Sun Mar 29, 2015 1:06 pm
 
Forum: Investing - Theory, News & General
Topic: 529 CO Stable Value Plus vs. EE Savings Bond
Replies: 3
Views: 278

529 CO Stable Value Plus vs. EE Savings Bond

Late at night. Hope this makes sense. First draft. 529 CO Stable Value Plus plan provides 3.09% safe yield through 2015, which if used for qualified educational expenses is tax free. If used otherwise there is a 10% penalty and regular income taxes on earnings. So contribute to a plan for your grand...
by Kevin M
Sun Mar 29, 2015 6:38 am
 
Forum: Investing - Theory, News & General
Topic: 529 CO Stable Value Plus vs. EE Savings Bond
Replies: 3
Views: 278

Re: Rick Ferri's 30 year market forecast 2015

Fair enough.

Kevin
by Kevin M
Sun Mar 29, 2015 6:05 am
 
Forum: Investing - Theory, News & General
Topic: Rick Ferri's 30 year market forecast 2015
Replies: 73
Views: 6752

Re: Does a Fixed Income 529 Make Sense Even if Overfunded?

If one planned that, then I hope they would not invest their 529 plan predominantly in a fixed income fund. Why not? I don't have any other alternatives to earn a safe 3.09% tax free in 2015 (or 2.65% or whatever tax-equivalent return after taxes and penalty if used per the OP). Also consider an al...
by Kevin M
Sat Mar 28, 2015 9:53 pm
 
Forum: Investing - Help with Personal Investments
Topic: Does a Fixed Income 529 Make Sense Even if Overfunded?
Replies: 17
Views: 784

Re: Does a Fixed Income 529 Make Sense Even if Overfunded?

Don't want to steal the thread, but add a wrinkle to spur even more dialogue over the same topic. What if owner A (you or me) overfunds for beneficiary B and C (their kids). Fast forward 20 years and their is still considerable monies in the accounts and the kids have been done with schooling for a...
by Kevin M
Sat Mar 28, 2015 9:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Does a Fixed Income 529 Make Sense Even if Overfunded?
Replies: 17
Views: 784

Re: Rick Ferri's 30 year market forecast 2015

555 , this is why I said we would need to see Rick's assumptions about future yield curves if the strategy is to roll 30-year and 10-year Treasuries, say annually or monthly (he did not specify zeros, but you can get a similar effect with coupon bonds). Again, without a specification of the bond st...
by Kevin M
Sat Mar 28, 2015 8:55 pm
 
Forum: Investing - Theory, News & General
Topic: Rick Ferri's 30 year market forecast 2015
Replies: 73
Views: 6752

Re: Suggest a good passive allocation 4 hi-tax-bracket inves

The truth is, I've read what you've written several times and I'm still not sure I entirely understand exactly what you are concluding. In fact, I've spend about 40 minutes typing and retyping this response. When you say "sometimes taking the extra risk" pays off, I believe you are referr...
by Kevin M
Sat Mar 28, 2015 4:15 pm
 
Forum: Investing - Help with Personal Investments
Topic: Suggest a good passive allocation 4 hi-tax-bracket investor
Replies: 41
Views: 3339

Re: Rick Ferri's 30 year market forecast 2015

The estimated expected returns for the longer-term bonds are meaningless unless Rick explains the assumed investment strategies. Here are two possibilities: ⋅ Buy the bond, hold it, and reinvest dividends in bond with same original maturity. Rinse and repeat with additional coupon payments...
by Kevin M
Sat Mar 28, 2015 3:19 pm
 
Forum: Investing - Theory, News & General
Topic: Rick Ferri's 30 year market forecast 2015
Replies: 73
Views: 6752

Re: Does a Fixed Income 529 Make Sense Even if Overfunded?

In a comment in his blog post on this ( Colorado Stable Value Plus 529 Plan: 3.09% Return Guaranteed In 2015 ), tfb posts this formula for the after-tax, after-penalty tax-equivalent yield: gross return * (1 – tax bracket – 0.1) / (1 – tax bracket) So for a combined marginal tax rate of 30% and gros...
by Kevin M
Sat Mar 28, 2015 2:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Does a Fixed Income 529 Make Sense Even if Overfunded?
Replies: 17
Views: 784

Re: Does a Fixed Income 529 Make Sense Even if Overfunded?

If I put in money into Colorado stable value fund now and later if they change the rate, will the rate only apply to the new deposits or also to the existing deposits? If the new (lower) rate is applied to existing money too, then it cannot be compared to a CD right? The rate changes annually, and ...
by Kevin M
Sat Mar 28, 2015 1:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: Does a Fixed Income 529 Make Sense Even if Overfunded?
Replies: 17
Views: 784

Re: Vanguard HealthCare Fund

I think health care is a stable industry overall, however, as a physician, I feel holding the fund puts me at higher risk as health care is where I make my money as well. One of the most rational observations so far. I may slowly move away from it and purchase individual stocks which interest me wi...
by Kevin M
Fri Mar 27, 2015 9:51 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard HealthCare Fund
Replies: 57
Views: 4745

Re: Suggest a good passive allocation 4 hi-tax-bracket inves

Let's try to nail this one down: To be clear, you can only use $3,000 in harvest loss to deduct from earned income, but harvesting more loss could be used to offset capital gains dividend gains, right? Yes, capital losses can be used to offset ordinary income up to $3,000 per year. Losses beyond tha...
by Kevin M
Fri Mar 27, 2015 9:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: Suggest a good passive allocation 4 hi-tax-bracket investor
Replies: 41
Views: 3339

Re: Suggest a good passive allocation 4 hi-tax-bracket inves

A lot going on here, so let's just focus on one thing at a time. Usually in order to make these kinds of decisions, my approach would be to look at historical returns instead of just the current SEC yields. Is this a flawed approach? I take a buy and hold strategy and I'm mostly oblivious to the lar...
by Kevin M
Fri Mar 27, 2015 9:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Suggest a good passive allocation 4 hi-tax-bracket investor
Replies: 41
Views: 3339

Re: Newbie.. 401k & investment advice please

I personally would lean toward using more of the stable value fund in the 401k @ 3% over using TBM in IRA @ about 2% with more interest-rate risk. So closer to the latter suggestion. Just make sure you understand the restrictions on withdrawals from the SV fund. Typically you can't transfer directly...
by Kevin M
Fri Mar 27, 2015 4:33 pm
 
Forum: Investing - Help with Personal Investments
Topic: Newbie.. 401k & investment advice please
Replies: 40
Views: 2695

Re: Placing brokerage account into a living trust

In the above comment, I'm assuming your brokerage account is a taxable account. If an IRA, then the answer is "no". You cannot really put your IRA in your living trust, and there is no need to do so, since IRA assets do not go through probate, but are passed directly to named beneficiaries...
by Kevin M
Fri Mar 27, 2015 4:03 pm
 
Forum: Personal Finance (Not Investing)
Topic: Placing brokerage account into a living trust
Replies: 7
Views: 478

Re: Placing brokerage account into a living trust

The main benefit of living trust is avoiding probate. I assume that's why you have your living trust, and why you put your house in it. For the same reason, you want to put your brokerage account in your living trust. Transfer on death is an alternative, if your estate plans are simple. It is easy t...
by Kevin M
Fri Mar 27, 2015 3:48 pm
 
Forum: Personal Finance (Not Investing)
Topic: Placing brokerage account into a living trust
Replies: 7
Views: 478

Re: Suggest a good passive allocation 4 hi-tax-bracket inves

For example, when comparing Intermediate-term TE with Long term PA TE bond fund, I would save 3.06% in taxes on all gains from the LT PA fund. However, if in one year there's 1% change in interest rates, your rule of thumb say I'd lose 5.5% from the Interm TE fund but I'd lose 8% from the LT PA fun...
by Kevin M
Fri Mar 27, 2015 3:39 pm
 
Forum: Investing - Help with Personal Investments
Topic: Suggest a good passive allocation 4 hi-tax-bracket investor
Replies: 41
Views: 3339

Re: Wise move to move some $ to cash before bear market?

Based on your posts in this thread, it sounds like your willingness to take risk may be too low to justify a 70/30 portfolio. The comment about bailing out in 2008 supports this. Perhaps you would be better off with something like 50/50, with the intention of increasing your allocation to stocks if ...
by Kevin M
Thu Mar 26, 2015 9:10 pm
 
Forum: Investing - Theory, News & General
Topic: Wise move to move some $ to cash before bear market?
Replies: 64
Views: 5322

Re: Google voice

toofache32 wrote:You can't send/receive photos through text either, at least last time I tried maybe a year ago.

What I've been seeing recently is pictures attached to texts being sent to my Gmail; I see a text like "MMS received" in Google voice text.

Kevin
by Kevin M
Thu Mar 26, 2015 8:34 pm
 
Forum: Personal Consumer Issues
Topic: Google voice
Replies: 57
Views: 4331

Re: Suggest a good passive allocation 4 hi-tax-bracket inves

I guess I'll just follow what Vanguard does. I've had international stock target at 40% of equities for several years now, so Vanguard is finally catching up with me ;-) Of course their timing probably will work out better, since international has under-performed in recent years. I'm still having a...
by Kevin M
Thu Mar 26, 2015 2:33 pm
 
Forum: Investing - Help with Personal Investments
Topic: Suggest a good passive allocation 4 hi-tax-bracket investor
Replies: 41
Views: 3339

Re: Hedging interest rate risk

Thank you Kevin. The formula I found for a perpetual's duration was D = (1 + R)/R, based on the coupon rate R. Perhaps there should be an adjustment if the bond isn't trading at par, I'm not sure. Maybe you use the yield instead (= R * par / price)? The value of 16.67 was modified duration for a 6%...
by Kevin M
Thu Mar 26, 2015 1:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: Hedging interest rate risk
Replies: 6
Views: 704

Re: Removing an asset from a living trust: Taxable event ??

So perhaps a CA estate attorney can weigh in here. In a community property state, individual assets of Spouse A and Spouse B are, for all practical purposes, co-mingled regardless of the title. Of course, the dates of marriage and/or co-habitation can play a role, and pre-nups are entities unto the...
by Kevin M
Thu Mar 26, 2015 11:41 am
 
Forum: Personal Finance (Not Investing)
Topic: Removing an asset from a living trust: Taxable event ??
Replies: 12
Views: 1042

Re: Hedging interest rate risk

Chan_va wrote:I am probably missing something basic, but if the interest rate is fixed, what is there to hedge? You are unaffected by rising rates right?

I think the idea is that the share price will fall as a function of rising rates.

Kevin
by Kevin M
Wed Mar 25, 2015 10:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Hedging interest rate risk
Replies: 6
Views: 704

Re: Vanguard HealthCare Fund

It seems that high growth expectations are priced in--at least to some extent. P/E ratio is 37.4, vs. P/E of 21.4 for Total Stock. Earnings growth rate is only 3.5% vs. 13.9% for Total Stock. Source: Stock Fund Attributes

Kevin
by Kevin M
Wed Mar 25, 2015 10:00 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard HealthCare Fund
Replies: 57
Views: 4745

Re: Suggest a good passive allocation 4 hi-tax-bracket inves

If I load up his 50K with TBM, what's left of the million outside the retirement accounts is more like 84/16 than 80/20. I would view retirement and taxable accounts as one portfolio if intended for the same goal (bequests, other long-term). So TBM is part of the 20%. So you put 150K of the million...
by Kevin M
Wed Mar 25, 2015 9:22 pm
 
Forum: Investing - Help with Personal Investments
Topic: Suggest a good passive allocation 4 hi-tax-bracket investor
Replies: 41
Views: 3339

Re: Hedging interest rate risk

Duration depends on the assumption you make about (or how you calculate) YTM. With coupon = YTM = 6%, duration is 16.67 years. If instead you assume YTM of 3%, duration is 33 years. I'm plugging in term to maturity of 300 years to get these values--plugging in longer terms doesn't change the duratio...
by Kevin M
Wed Mar 25, 2015 8:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Hedging interest rate risk
Replies: 6
Views: 704

Re: Vanguard HealthCare Fund

^Thank you! Now that we know it will drop in value, I vow to also invest a small part of my portfolio in VGHCX or the HC index ETF--but only after a significant decline; I'm thinking -30% or so. Or maybe just lag VTSMX by 30% between now and ... Someone please bump this thread when that happens. ;-)...
by Kevin M
Wed Mar 25, 2015 7:47 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard HealthCare Fund
Replies: 57
Views: 4745

Re: Vanguard HealthCare Fund

Although envious of its past performance, my only justification for adding it to my portfolio now would be ... past performance. This would simply be succumbing to hindsight bias. The only reasons I've seen here for justifying over-weighting healthcare seem to be based on the belief in some special ...
by Kevin M
Wed Mar 25, 2015 7:24 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard HealthCare Fund
Replies: 57
Views: 4745

Re: Suggest a good passive allocation 4 hi-tax-bracket inves

It's hard not to get into risk tolerance discussions when suggesting an 80/20 portfolio for someone described as "risk averse". From the description, it sounds like the friend is experiencing regret about not being in the market during the last few years of big returns. If I were helping a...
by Kevin M
Wed Mar 25, 2015 5:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: Suggest a good passive allocation 4 hi-tax-bracket investor
Replies: 41
Views: 3339

Re: Newbie.. 401k & investment advice please

If you follow all of the steps in tfb's blog post, TurboTax will generate form 8606 for you, properly filled out. Do the Roth conversion first, then answer all of the TurboTax questions accurately (per tfb's blog post). Then, if you have the desktop version of TT, you can go into forms mode to view ...
by Kevin M
Wed Mar 25, 2015 4:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Newbie.. 401k & investment advice please
Replies: 40
Views: 2695

Re: Diversification question

My answer for REITs is the same as for small and value: if you have to ask, don't do it, although again, I personally have an allocation to the Vanguard REIT fund, and am happy to keep it. I did shift my rebalancing band down some after all the talk about high REIT valuations about a year ago, and t...
by Kevin M
Wed Mar 25, 2015 1:55 pm
 
Forum: Investing - Help with Personal Investments
Topic: Diversification question
Replies: 24
Views: 1490

Re: "Looming Crisis" in Corporate Bond Fund Liquidity

My own view is that investors are not being compensated for either the credit or liquidity risks of corporate debt right now. Why? The Baa/10-year CMT spread was lower 10 years ago (about 160 basis points) than it is now (about 250 basis points), yet the 10-year return of Vanguard Intermediate-Term...
by Kevin M
Wed Mar 25, 2015 1:37 pm
 
Forum: Investing - Theory, News & General
Topic: "Looming Crisis" in Corporate Bond Fund Liquidity
Replies: 16
Views: 2583

Re: Why Bonds With 20 Year Horizon?

I think OP has thought this through pretty thoroughly, and apparently has both the ability and willingness to be 100% in stocks for a few more years. I personally don't have the willingness to take that much risk, but risk aversion is a very individual thing. With respect to expected returns, I happ...
by Kevin M
Wed Mar 25, 2015 12:41 pm
 
Forum: Investing - Theory, News & General
Topic: Why Bonds With 20 Year Horizon?
Replies: 72
Views: 5109

Re: Developed & Emgerging vs Total International?

What was your original reasoning for the Developed/Emerging allocation? Other than simplification, do you have a well thought-out reason to change it so drastically now? You would be going from about 40% of international in EM to about 20%. If I did that, I would rather do it after an extended perio...
by Kevin M
Tue Mar 24, 2015 7:38 pm
 
Forum: Investing - Help with Personal Investments
Topic: Developed & Emgerging vs Total International?
Replies: 7
Views: 739

Re: Removing an asset from a living trust: Taxable event ??

No, moving assets into or out of a living trust are not taxable events.

Kevin
by Kevin M
Tue Mar 24, 2015 7:33 pm
 
Forum: Personal Finance (Not Investing)
Topic: Removing an asset from a living trust: Taxable event ??
Replies: 12
Views: 1042

Re: Diversification question

I would say that if you have to ask, you should not tilt. Although many forum members, including myself, feel that tilting to small and value makes sense for us, it is a hotly debated subject, and the "total market" crowd has some strong arguments in their favor. You will never find consen...
by Kevin M
Tue Mar 24, 2015 7:32 pm
 
Forum: Investing - Help with Personal Investments
Topic: Diversification question
Replies: 24
Views: 1490

Re: TIRA income limit because of pension plan

I already filed my taxes. Does that mean I can't recharacterize or is it the same as conversions? You can recharacterize and file an amended return; that's what I would do. Since you didn't get a deduction on the tIRA contribution, it won't change your taxes, but it will allow you to accurately rep...
by Kevin M
Tue Mar 24, 2015 7:11 pm
 
Forum: Personal Finance (Not Investing)
Topic: TIRA income limit because of pension plan
Replies: 6
Views: 252

Re: Vanguard HealthCare Fund

I don't, but I wish I had. It's more than just recently. According to M*, since 5/1984, $10K in VGHCX has grown to 1,542,859.75, while $10K in 500 Index (VFINX) has grown to 274,238.05. Also of note is that it held up better in 2008/2009. But since I can't invest in the past, and can't predict the f...
by Kevin M
Tue Mar 24, 2015 7:03 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard HealthCare Fund
Replies: 57
Views: 4745

Re: "Looming Crisis" in Corporate Bond Fund Liquidity

Interesting. I would expect this to show up as an illiquidity premium in corporate bond prices. I haven't seen any discussion of corporate/Treasury credit spreads widening. Let's look: http://s26.postimg.org/yn7b91r21/Credit_Spread.png So although it does look like a gradual increase in the last yea...
by Kevin M
Tue Mar 24, 2015 6:53 pm
 
Forum: Investing - Theory, News & General
Topic: "Looming Crisis" in Corporate Bond Fund Liquidity
Replies: 16
Views: 2583

Re: TIRA income limit because of pension plan

Note that you have until October 15, 2015 to recharacterize 2014 IRA contributions, but it's easier to do it before you file your tax return (you could file as late as October 15 if you file for an extension). Recharacterizing is is easier than converting, since the contribution is treated as if it ...
by Kevin M
Tue Mar 24, 2015 6:36 pm
 
Forum: Personal Finance (Not Investing)
Topic: TIRA income limit because of pension plan
Replies: 6
Views: 252

Re: TIRA income limit because of pension plan

You can recharacterize the tIRA contribution to a Roth IRA contribution. Vanguard can help you with this. If you haven't filed your taxes yet, you can report it cleanly. If you have filed already, you will have to amend your return. If you go above the limit for a direct Roth contribution, you can c...
by Kevin M
Tue Mar 24, 2015 6:29 pm
 
Forum: Personal Finance (Not Investing)
Topic: TIRA income limit because of pension plan
Replies: 6
Views: 252

Re: VanG Intermediate Term Bond Market Question

To put it in a standard analytical framework typically applied to bonds, the two main risk factors are term risk (interest-rate risk) and credit/default risk. Sometimes these risks pay off, sometimes they don't. In the period you looked at, as well as the longer periods shared here, the combination ...
by Kevin M
Tue Mar 24, 2015 4:27 pm
 
Forum: Investing - Help with Personal Investments
Topic: VanG Intermediate Term Bond Market Question
Replies: 20
Views: 1821

Re: [New Member Observations- Covered Calls, Financial Advis

What percent of the investors, even in this esteemed forum, would want to take the time to learn how to do this? This seems like something one would have to pay and "adviser" to do. Probably an extremely small percentage. Maybe in the ballpark of investors that would consider investing in...
by Kevin M
Tue Mar 24, 2015 2:28 pm
 
Forum: Investing - Theory, News & General
Topic: [New Member Observations- Covered Calls, Financial Advisors]
Replies: 221
Views: 15650

Re: Newbie.. 401k & investment advice please

I am less confident that you should venture out into the back door contribution to Roth IRA at this point. It's pretty easy if you "get it", but there are also many ways to mess it up if you don't "get it". We see that at this time of year because people ask a lot of questions a...
by Kevin M
Tue Mar 24, 2015 2:05 pm
 
Forum: Investing - Help with Personal Investments
Topic: Newbie.. 401k & investment advice please
Replies: 40
Views: 2695

Re: Newbie.. 401k & investment advice please

I like grabiner's suggestions (advice given by other posters also is good). All I'll add is that the backdoor Roth is quite easy to do. Just call Vanguard and tell them you want to open a traditional IRA, then immediately convert it to a Roth IRA. They will walk you through the steps. It's actually ...
by Kevin M
Mon Mar 23, 2015 10:27 pm
 
Forum: Investing - Help with Personal Investments
Topic: Newbie.. 401k & investment advice please
Replies: 40
Views: 2695

Re: Admiral Shares vs Diversity? Beginner Question

I would stick with a Target Retirement fund for now, especially in an IRA. What matters much more than anything else at this point is your savings rate, so either choice is fine. I will have zero concerns if others suggest just sticking with Total Stock (US) for now, but the difference in expenses b...
by Kevin M
Mon Mar 23, 2015 10:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Admiral Shares vs Diversity? Beginner Question
Replies: 14
Views: 1269

Re: [New Member Observations- Covered Calls, Financial Advis

So all of the excess returns according to the model are from 2007/Q2-2012/Q1. Those are also the dates that we estimated options prices via a method that probably returns prices that are too high, as opposed a method that returns prices that are too low. (assuming 0.5% throughout) I rather chalk th...
by Kevin M
Mon Mar 23, 2015 10:05 pm
 
Forum: Investing - Theory, News & General
Topic: [New Member Observations- Covered Calls, Financial Advisors]
Replies: 221
Views: 15650

Re: [New Member Observations- Covered Calls, Financial Advis

And remember, the premiums have come down a lot since 2011, the current quarterly premium provided by OP being closer to 0.6%, after commission. Even OP mentioned that option prices are much lower than he was getting before. So the model assumes that option premium returns have been much lower (aver...
by Kevin M
Mon Mar 23, 2015 8:56 pm
 
Forum: Investing - Theory, News & General
Topic: [New Member Observations- Covered Calls, Financial Advisors]
Replies: 221
Views: 15650

Re: [New Member Observations- Covered Calls, Financial Advis

As promised, lee1026 provided estimated option premiums for 2007-2011, and noted that the options market "calmed down" after that. The arithmetic average of the option premiums provided for these 20 quarters is 2.4%. Plugging those estimates in, and using 0.5% as an estimated average premi...
by Kevin M
Mon Mar 23, 2015 7:37 pm
 
Forum: Investing - Theory, News & General
Topic: [New Member Observations- Covered Calls, Financial Advisors]
Replies: 221
Views: 15650

Re: Economist Article on role of government bonds

^This argument would support increased demand for government securities of any maturity. Considering the terms "shock absorber" and "margin of safety" used in the OP, I think the question is more about the capital appreciation due to falling interest rates offsetting capital loss...
by Kevin M
Mon Mar 23, 2015 3:29 pm
 
Forum: Investing - Theory, News & General
Topic: Economist Article on role of government bonds
Replies: 10
Views: 1394
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