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Re: bond allocation as retirement nears

dcarste already has a thread on dcarste's portfolio: Bogleheads • View topic - Can you improve this constructed portfolio?. I suggest any discussion of dcarste's portfolio be directed there. Let's not hijack the OP's thread too much.

Kevin
by Kevin M
Mon Apr 27, 2015 10:04 pm
 
Forum: Investing - Help with Personal Investments
Topic: bond allocation as retirement nears
Replies: 14
Views: 523

Re: bond allocation as retirement nears

I'd like to provide some balance to counter what I think is some bad information being shared here. I am retired, have a portfolio of 30/70 stock/fixed-income, and about 70% of my fixed income is in direct CDs, so about 50% of my total portfolio. What you (OP) do is up to you, but seeing another pos...
by Kevin M
Mon Apr 27, 2015 9:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: bond allocation as retirement nears
Replies: 14
Views: 523

Re: bond allocation as retirement nears

A CD purchased directly from a bank or credit union could be an excellent choice for this portion of your portfolio. I explain why in this blog post: GE Capital Retail Bank 5-Year 2.3% CD . The bank name is now Synchrony Bank, the rate on the CD is 2.25%, and the rate on the 5-year Treasury is 1.36%...
by Kevin M
Mon Apr 27, 2015 9:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: bond allocation as retirement nears
Replies: 14
Views: 523

Re: Bond question

If you are making $80K/year, then you are not in the 28% bracket, but probably in the 25% bracket: 2014-2015 Tax Brackets | Bankrate.com . The conventional wisdom here seems to be that tax-exempt bonds are priced to be about break-even with taxable bonds in terms if risk/return for someone in the 25...
by Kevin M
Mon Apr 27, 2015 8:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond question
Replies: 5
Views: 306

Re: Bond question

The most common advice is to hold bonds in tax-advantage accounts, but some decent arguments have been put forth to hold bonds in taxable accounts. If you do hold fixed income in a taxable account, then you might want to consider using a tax-exempt bond fund if you are in a tax bracket higher than 2...
by Kevin M
Mon Apr 27, 2015 7:42 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond question
Replies: 5
Views: 306

Re: 1 year short term investments

If you don't mind making 10 debit card purchases per month, arranging for one electronic deposit per month, and checking your online account a few times per month, you can earn 3% on a reward checking account. Other than that, it's about 1% in an online savings account. So you're only looking at $50...
by Kevin M
Mon Apr 27, 2015 7:32 pm
 
Forum: Investing - Help with Personal Investments
Topic: 1 year short term investments
Replies: 5
Views: 369

Re: How to best utilize TSP in retirement, particularly G Fu

Simplicity is nice, but I would have a hard time passing up the free lunch of the G fund: longish-term Treasury rate with no default risk or term risk.

Kevin
by Kevin M
Mon Apr 27, 2015 4:55 pm
 
Forum: Investing - Help with Personal Investments
Topic: How to best utilize TSP in retirement, particularly G Fund
Replies: 8
Views: 628

Re: iBond partial redemption question

TD will post your 1099 online, but they don't mail you anything.

Kevin
by Kevin M
Mon Apr 27, 2015 4:48 pm
 
Forum: Investing - Theory, News & General
Topic: iBond partial redemption question
Replies: 6
Views: 280

Re: revising a living trust vs. new one..

I'm surprised your trust doesn't allow amendments. The trusts I've done using the NOLO book and templates do allow amendments. If your trust does not allow amendments, then I don't know that amending in entirety is an option. The benefit of amending in entirety is that you don't have to re-title ass...
by Kevin M
Mon Apr 27, 2015 12:40 pm
 
Forum: Personal Finance (Not Investing)
Topic: revising a living trust vs. new one..
Replies: 2
Views: 228

Re: Vanguard Balanced Index from Cradle to Grave

I think the main thing an approach like this misses is the large change in the ratio of human capital to financial capital as one ages. Granted, a young person may not have the required willingness to take risk to incorporate their human capital into their asset allocation reasoning, but I think it'...
by Kevin M
Sun Apr 26, 2015 7:53 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard Balanced Index from Cradle to Grave
Replies: 32
Views: 2933

Re: International Stock Poll: Emerging vs Developed Ratio

Vanguard lists Korea as 1.5% of VT (Total World) and Greece as 0.0%. Qatar is not listed, so assume it is included in other at 0.0%. Hard to see how these differences explain the discrepancy of 9% vs. 13%.

Kevin
by Kevin M
Sun Apr 26, 2015 7:37 pm
 
Forum: Investing - Theory, News & General
Topic: International Stock Poll: Emerging vs Developed Ratio
Replies: 55
Views: 2513

Re: International Stock Poll: Emerging vs Developed Ratio

. Twelve years ago a 13% allocation to EM was about 3 times the market cap weight ot about 4%, today its close to the market cap weight (of around 13%). Robert, you must be using a definition of EM different from Vanguard. Its Total World Stock Index fund, which tracks FTSE Global All Cap Index, cu...
by Kevin M
Sun Apr 26, 2015 3:56 pm
 
Forum: Investing - Theory, News & General
Topic: International Stock Poll: Emerging vs Developed Ratio
Replies: 55
Views: 2513

Re: International Stock Poll: Emerging vs Developed Ratio

Whatever the market cap of the Total International Index is. I know it varies. I suspect this would be a fairly popular poll option. Yes, at 18.6%, it currently fits in the choice with the most votes (30), but that is only slightly ahead of the second most popular choice of 21%-31% EM (29 votes). K...
by Kevin M
Sun Apr 26, 2015 2:00 pm
 
Forum: Investing - Theory, News & General
Topic: International Stock Poll: Emerging vs Developed Ratio
Replies: 55
Views: 2513

Re: Cash as an asset class?

Cash, CDs, and short term bonds cannot be relied on to provide positive real returns, so are not investments in the relevant sense. Is a 5-year Treasury note an investment? How about a 7-year? Ten-year? Is any bond an investment? Where do you draw the line? A good 5-year CD yields 2.25%, and a 5-ye...
by Kevin M
Sat Apr 25, 2015 7:11 pm
 
Forum: Investing - Help with Personal Investments
Topic: Cash as an asset class?
Replies: 35
Views: 2777

Re: Age in Bonds Poll

I prefer the ability, willingness and need to take risk framework rather than an age in bonds type of framework. Contrary to many others here, this has led me to a fixed-income allocation that is larger than my age, due to low need to take risk coupled with fairly low willingness to take risk. If I ...
by Kevin M
Sat Apr 25, 2015 4:19 pm
 
Forum: Investing - Theory, News & General
Topic: Age in Bonds Poll
Replies: 72
Views: 3674

Re: International Stock Poll: Emerging vs Developed Ratio

watchnerd wrote:EM is 15% of my total portfolio.
EM is 27% of my equities
EM is 50% of my international equities

Based on this, which poll answer should I pick?

It seems quite clear that you would pick 41-50% Emerging / 50-59% Developed.

Kevin
by Kevin M
Sat Apr 25, 2015 3:52 pm
 
Forum: Investing - Theory, News & General
Topic: International Stock Poll: Emerging vs Developed Ratio
Replies: 55
Views: 2513

Re: International Stock Poll: Emerging vs Developed Ratio

The poll seems clear to me, especially if you read the OP that explains it. If you own only Vanguard Total International, then your ratio of EM/Dev is 18.6/81.4 using Vanguard definitions. If you also own separate DM and EM funds, you must do some arithmetic to determine your overall ratio. As some ...
by Kevin M
Sat Apr 25, 2015 2:58 pm
 
Forum: Investing - Theory, News & General
Topic: International Stock Poll: Emerging vs Developed Ratio
Replies: 55
Views: 2513

Re: International Stock Poll: Emerging vs Developed Ratio

I anchored on a target of 25% of international in emerging markets back when that was about cap weight in Vanguard Total International. Mostly because of tax-loss harvesting, I ended up with some developed market and emerging market funds in a 75/25 ratio, which I maintain (currently EM is 26%). But...
by Kevin M
Sat Apr 25, 2015 12:36 pm
 
Forum: Investing - Theory, News & General
Topic: International Stock Poll: Emerging vs Developed Ratio
Replies: 55
Views: 2513

Re: Looking for advice on Bene IRA

Many of us include an international stock fund in our portfolios because we believe it adds diversification; specifically, it reduces country-specific risk. Others, like John Bogle himself, think it is unnecessary. I include international stock funds in my portfolio. A good starting point for you wo...
by Kevin M
Fri Apr 24, 2015 11:32 am
 
Forum: Investing - Help with Personal Investments
Topic: Looking for advice on Bene IRA
Replies: 48
Views: 1649

Re: Looking for advice on Bene IRA

You started off on the right track: Let me first start off and say, I have made financial planning mistakes and I am coming here to get put on the right path. The "mistake": My bro in law is a financial advisor, he used to manage his own books, he left for JP Morgan. I don't trust his opin...
by Kevin M
Wed Apr 22, 2015 6:36 pm
 
Forum: Investing - Help with Personal Investments
Topic: Looking for advice on Bene IRA
Replies: 48
Views: 1649

Re: Looking for advice on Bene IRA

I did like the performance I had in my 2055 fund, but you bring up a good point. Everyone likes the performance of their stock funds since 2009 (although US has done better than international). The question here is how you will react when stocks drop 30%, 40%, 50% or more, like in 2008-2009. Would ...
by Kevin M
Wed Apr 22, 2015 1:48 pm
 
Forum: Investing - Help with Personal Investments
Topic: Looking for advice on Bene IRA
Replies: 48
Views: 1649

Re: Looking for advice on Bene IRA

Moving your inherited IRA to Vanguard and using a Target Retirement fund is an excellent idea. Sounds like you've done your homework, but be sure to do a direct trustee-to-trustee transfer. Open your Vanguard account, then fill out the IRA transfer form. Vanguard will handle it from there. Call Vang...
by Kevin M
Wed Apr 22, 2015 12:05 pm
 
Forum: Investing - Help with Personal Investments
Topic: Looking for advice on Bene IRA
Replies: 48
Views: 1649

Re: Cash as an asset class?

My liquidity criteria to consider something cash usually are: I can sell it or use it within one or two business days with no loss in value to buy something else . Then in effect cash is not a meaningful asset class for investing purposes. Please expand; this does not compute. Note that the "s...
by Kevin M
Wed Apr 22, 2015 11:09 am
 
Forum: Investing - Help with Personal Investments
Topic: Cash as an asset class?
Replies: 35
Views: 2777

Re: Cash as an asset class?

Would it be OK to count pensions as part of one's cash asset type? The more typical question is whether or not one should count pensions and social security benefits as part of their bond allocation. You can find many forum discussions about this with a Google search something like this: pension &q...
by Kevin M
Tue Apr 21, 2015 9:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: Cash as an asset class?
Replies: 35
Views: 2777

Re: Cash as an asset class?

I track cash as a separate asset class, but don't have a specific target for it. Currently it is about 5% of my portfolio. I am retired, so cash funds my living expenses beyond what is funded by unearned income. I sell stocks or bonds to top off my cash, but not according to a strict policy. I don't...
by Kevin M
Mon Apr 20, 2015 10:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: Cash as an asset class?
Replies: 35
Views: 2777

Re: Cash as an asset class?

We have cash as part of our AA because I am still trying to get comfortable with bonds, and also because not having cash in 2008-2009 was a wake up call (I wished I had cash). So yes, it is about 10% of our AA. I like cash, especially when it is earning more than short-term bonds (e.g., Treasuries ...
by Kevin M
Mon Apr 20, 2015 7:21 pm
 
Forum: Investing - Help with Personal Investments
Topic: Cash as an asset class?
Replies: 35
Views: 2777

Re: Professor Damodaran's on Fed's control of interest rate

I've seen the arguments from others also that the Fed's power with respect to setting longer-term interest rates is limited. That said, even if the primary driver is economic fundamentals, the Fed still has some influence (and furthermore, the perception of influence is self-fulfilling and amplifie...
by Kevin M
Mon Apr 20, 2015 3:45 pm
 
Forum: Investing - Theory, News & General
Topic: Bernanke's Blog: why are interest rates so low?
Replies: 52
Views: 6854

Re: Mailing tax returns

I'm getting all nostalgic here :D and wondering if tv news still has a story each April 15th with video of people driving by the post office and handing their tax envelopes to postal employees at midnight. I got rid of my tv a few years ago, so I have no way of knowing if this still goes on now tha...
by Kevin M
Sat Apr 18, 2015 8:10 pm
 
Forum: Personal Finance (Not Investing)
Topic: Mailing tax returns
Replies: 56
Views: 3772

Re: New Vanguard White Paper: "Factor-based investing" (Apr

I think Vanguard's Factor-based investing research paper is a good read. Key takeaways: Much of the research documents empirical evidence of excess risk-adjusted returns: Figure 1 outlines seven commonly discussed factor exposures that are notable both for the extensive literature documenting each, ...
by Kevin M
Sat Apr 18, 2015 7:55 pm
 
Forum: Investing - Theory, News & General
Topic: New Vanguard White Paper: "Factor-based investing" (Apr '15)
Replies: 21
Views: 3152

Re: yea or nay to 5 years CDs

I would use one or more 5-year CDs as long as you could get by somehow if the early withdrawal were disallowed. I think this is unlikely, but if I absolutely positively might have to access these particular funds before maturity I probably would not use a direct CD with maturity longer than my possi...
by Kevin M
Fri Apr 17, 2015 12:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: yea or nay to 5 years CDs
Replies: 21
Views: 2443

Re: Paying off rental with Heloc to move schedule e to sched

What did you mean by "It didn't cross my mind what I was doing with the rental mortgages"? Did you mean it was a no brainer to replace those with the HELOC. I meant that I don't recall whether or not I was still paying down the rental mortgages, but I probably was, and it never crossed my...
by Kevin M
Thu Apr 16, 2015 2:06 pm
 
Forum: Personal Finance (Not Investing)
Topic: Paying off rental with Heloc to move schedule e to schedule
Replies: 26
Views: 1378

Re: Paying off rental with Heloc to move schedule e to sched

I would have no qualms about taking out a loan on primary residence to pay off loan on rental to increase Schedule A deductions and reduce Schedule E expenses. I would not worry about it even if I didn't have $100K cash, but since you do have this cash, I really see no difference in options B and C....
by Kevin M
Wed Apr 15, 2015 3:12 pm
 
Forum: Personal Finance (Not Investing)
Topic: Paying off rental with Heloc to move schedule e to schedule
Replies: 26
Views: 1378

Re: Future income on 100,000 bond fund

Kevin...so are you saying the cds in combo with a high quality corp bond fund? Something like that. About 64% of TBM is in government bonds. You can beat the yield of most of those government bonds with good CDs, with about the same credit risk (a direct CD also lowers term risk due to the early wi...
by Kevin M
Tue Apr 14, 2015 1:40 pm
 
Forum: Investing - Theory, News & General
Topic: Future income on 100,000 bond fund
Replies: 16
Views: 2597

Re: Future income on 100,000 bond fund

With a 5-year CD earning 2.25% and a 5-year Treasury yield at about 1.4%, my preference is not to own any bond funds that hold Treasuries that earn less than a CD of same maturity. Even with a 20-year Treasury you're only earning about 2.3%. Therefore, I would not use TBM as the bond fund in this mi...
by Kevin M
Mon Apr 13, 2015 9:26 pm
 
Forum: Investing - Theory, News & General
Topic: Future income on 100,000 bond fund
Replies: 16
Views: 2597

Re: Couple of Q's about Roth IRAs / opening new Roth @ Vangu

If above the limit to do a full Roth contribution, you can contribute the rest (up to $5,500 total, each) to a traditional IRA, then convert it to a Roth. This is called a backdoor Roth contribution, and it is widely used by many forum members. The only catch would be if you or your wife already hav...
by Kevin M
Mon Apr 13, 2015 9:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: Couple of Q's about Roth IRAs / opening new Roth @ Vanguard
Replies: 7
Views: 522

Re: Bonds and interest rates: 2003 - 2007

Thanks for that investigation, Kevin. It's nice to confirm results with a rolled bond. You're welcome. Yes, I like analyses for which we can apply straight bond math, since we understand exactly what's happening, and it's nice when it happens to line up well with the performance of a particular bon...
by Kevin M
Sat Apr 11, 2015 3:22 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and interest rates: 2003 - 2007
Replies: 36
Views: 3449

Re: AA beyond achievement of your "number"

Two frameworks. 1. Ability, willingness, and need to take risk. If you have your number in safe assets that are somewhat protected against inflation, then you have low need to take risk. I would say your ability to take risk is low with current safe assets up to the number, but higher for anything a...
by Kevin M
Sat Apr 11, 2015 5:24 am
 
Forum: Investing - Theory, News & General
Topic: AA beyond achievement of your "number"
Replies: 22
Views: 2226

Re: Bonds and interest rates: 2003 - 2007

I thought it would be informative to look at the theoretical returns of a 5-year constant maturity Treasury (CMT) rolled monthly from 5/31/2003 - 5/31/2006, when the 5-year CMT yield increased from 2.30% to 5.04%. It turns out that this does indeed look very similar to the returns of VFITX during th...
by Kevin M
Fri Apr 10, 2015 8:27 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and interest rates: 2003 - 2007
Replies: 36
Views: 3449

Re: Bonds and interest rates: 2003 - 2007

OK, thanks for the clarifications. I pretty much agree, except that I don't have much confidence in my timing acumen, so have preferred to shift gradually from bond funds to CDs as rates declined, rather than make big moves. As I've posted elsewhere, my average CD/Treasury premium for purchases sinc...
by Kevin M
Fri Apr 10, 2015 7:04 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and interest rates: 2003 - 2007
Replies: 36
Views: 3449

Re: Bonds and interest rates: 2003 - 2007

Just trying to clarify the apparent inconsistencies in remarks about timing with respect to the 2003-2007 period and now. So is it the CD premium over comparable-maturity Treasuries that is the timing signal, or does it also include a certain degree of yield curve steepness, or additional factors? K...
by Kevin M
Fri Apr 10, 2015 4:03 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and interest rates: 2003 - 2007
Replies: 36
Views: 3449

Re: Spreadsheet for backtesting (includes TrevH's data)

Right, some of the Portfolio Visualizer modules allow you to enter ticker symbols, but others only use the predefined asset classes. My understanding is that PV uses the same data as the backtesting spreadsheet. What does the spreadsheet do that PV doesn't do--just curious? You might put in an enhan...
by Kevin M
Fri Apr 10, 2015 3:55 pm
 
Forum: Investing - Theory, News & General
Topic: Spreadsheet for backtesting (includes TrevH's data)
Replies: 655
Views: 409440

Re: Bonds and interest rates: 2003 - 2007

So are we talking about the type of exquisite timing mentioned here? I characterize it thusly: this is a graph of IT Treasuries moving from 2.4% to 5.1% yield. The maximum drawdown compared to competitive cash (back then PMM was as good as savings accounts/CDs) was -5.7%, but it required exquisite t...
by Kevin M
Fri Apr 10, 2015 3:45 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and interest rates: 2003 - 2007
Replies: 36
Views: 3449

Re: Bonds and interest rates: 2003 - 2007

ogd wrote:Until I went to CDs in early February, that is.

So timing the bond market was a mistake in the last few years (without the benefit of hindsight), but it became a good idea in early February?

Kevin
by Kevin M
Fri Apr 10, 2015 2:35 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and interest rates: 2003 - 2007
Replies: 36
Views: 3449

Re: Placing brokerage account into a living trust

Are there any asset protection advantages to putting things such as a taxable account into a trust? Can creditors get access to these? IANAL, and was waiting for one of our trust attorneys to respond, but since nothing yet ... I don't believe a living trust provides any protection from creditors. M...
by Kevin M
Fri Apr 10, 2015 1:06 pm
 
Forum: Personal Finance (Not Investing)
Topic: Placing brokerage account into a living trust
Replies: 14
Views: 1187

Re: Bonds and interest rates: 2003 - 2007

^Mostly good explanations. Let's dig into the point about capital appreciation due to a consistently positively-sloped yield curve. Almost 40% of VWSUX holdings are for maturities of less than six months. Average maturity is 1.5 years. Here is the current breakdown by maturity: Under 6 Months 39.8% ...
by Kevin M
Fri Apr 10, 2015 12:58 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and interest rates: 2003 - 2007
Replies: 36
Views: 3449

Re: Bonds and interest rates: 2003 - 2007

The bond math I'm referring to includes declining bond premiums over time as well as the duration rule of thumb. The bond math relevant to this thread is the former; the latter has been the subject of numerous other posts, but I haven't brought it up as a relevant factor so far in this thread (as fa...
by Kevin M
Thu Apr 09, 2015 7:48 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and interest rates: 2003 - 2007
Replies: 36
Views: 3449

Re: Mailing tax returns

I e-file 5 family federal returns and mail one federal return each year and we mail the state returns to save the big fee TT charges for e-filing state returns. I always have used regular mail, and so far no problems.

Kevin
by Kevin M
Thu Apr 09, 2015 7:37 pm
 
Forum: Personal Finance (Not Investing)
Topic: Mailing tax returns
Replies: 56
Views: 3772

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 beneficiarie...
by Kevin M
Thu Apr 09, 2015 7:18 pm
 
Forum: Personal Finance (Not Investing)
Topic: Placing brokerage account into a living trust
Replies: 14
Views: 1187
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