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Re: Risk--Again. The common stepping stone

Look at the progression of William Bernstein's books, and his own acknowledgement that he started out too complex I loved Intelligent Asset Allocator ! Just saying... :happy Yeah, as did I. I was just reflecting on Bernstein's own words that I remember reading somewhere. He said something about eng...
by Kevin M
Wed Feb 25, 2015 8:53 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 45
Views: 2323

Re: Risk--Again. The common stepping stone

There continues to be confusion here between the fundamental concept of investment risk, different types of investment risk, various measures of that risk, the validity of those measures, and other things such as behavioral risks (e.g., selling in a panic). I don't really understand what the goal is...
by Kevin M
Wed Feb 25, 2015 4:47 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 45
Views: 2323

Re: REITs [Why did Vanguard's REIT lose 2% today?]

I usually don't ask why something has moved up or down, but whether or not it's enough of a move to trigger selling or buying based on my (somewhat flexible) investment policy. I think the market is complex enough that it's often hard to really know why a security or index moves the way it does, and...
by Kevin M
Wed Feb 25, 2015 1:52 pm
 
Forum: Investing - Theory, News & General
Topic: REITs [Why did Vanguard's REIT lose 2% today?]
Replies: 33
Views: 3080

Re: REIT Allocation and Bond Fund Types Help !

I want to emphasize a point that powermega already made: You can make your 2014 IRA contribution until April 15, 2015, and then you can make your 2015 contribution any time before April 15, 2016. So you could contribute up to $11,000 this year. This applies to either Roth IRA or Traditional IRA cont...
by Kevin M
Wed Feb 25, 2015 1:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: REIT Allocation and Bond Fund Types Help !
Replies: 9
Views: 870

Re: REIT Allocation and Bond Fund Types Help !

Welcome to the forum goaztecsfight ! You've shared much of the info already, but the standard recommendation is to post your situation in a standard format for asking portfolio questions. See link below in signature line. If you decide to follow this, you can simply edit your original post. You also...
by Kevin M
Wed Feb 25, 2015 12:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: REIT Allocation and Bond Fund Types Help !
Replies: 9
Views: 870

Re: Why Bonds With 20 Year Horizon?

It's a good question. Sounds like you have a high willingness to take risk. Ability to take risk is high based on expected investment horizon, but of course that's not guaranteed (possible disability, etc.). Unless you're already wealthy, there is not a lack of need to take risk. Note that Vanguard ...
by Kevin M
Tue Feb 24, 2015 3:17 pm
 
Forum: Investing - Theory, News & General
Topic: Why Bonds With 20 Year Horizon?
Replies: 23
Views: 1471

Re: Someone Else Filed My Tax Return

It happened to me too--about three years ago, IIRC. I just mailed the paper return; didn't contact the IRS or do any of the other stuff you mentioned. No problems since. I owed taxes, so I assume the IRS was happy to get the money. Maybe they've tightened up on the procedures since then.

Kevin
by Kevin M
Tue Feb 24, 2015 2:49 pm
 
Forum: Personal Finance (Not Investing)
Topic: Someone Else Filed My Tax Return
Replies: 29
Views: 2614

Re: A case for long term government bonds

Kevin - Thank you for that helpful explanation. Your're welcome. So when those longer term rates dropped so much during January, is it a mistake to attribute that drop in rates to investors buying those bonds? I'm no expert, but a general principle of economics is that price is driven by supply and...
by Kevin M
Tue Feb 24, 2015 2:22 pm
 
Forum: Investing - Theory, News & General
Topic: A case for long term government bonds
Replies: 40
Views: 3032

Re: A case for long term government bonds

Novice question here. Can anyone explain why has so much money gone into long term bonds despite the Fed expressing its intent to tighten? Since 12/31/13, the 10 year rate dropped from 3% down to 1.67% earlier this month and the 30 year dropped to 2.25%. Who is buying all these low-yielding long te...
by Kevin M
Tue Feb 24, 2015 1:03 pm
 
Forum: Investing - Theory, News & General
Topic: A case for long term government bonds
Replies: 40
Views: 3032

Re: Risk--Again. The common stepping stone

Thanks to all, very insightful feedback. I think part of my problem is that defining stock risk, bond risk, investing risk, do not cover all risks. Of course not. Investment risk is related to the uncertainty of expected return of an investment. That has nothing to do with risks like getting in a s...
by Kevin M
Tue Feb 24, 2015 12:40 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 45
Views: 2323

Re: A case for long term government bonds

Check out chart #3 in this Forbes piece from 2013, illustrating outperformance of 25 year zero coupon vs. S&P 500. http://www.forbes.com/sites/investor/2013/10/22/is-the-bond-rally-of-a-lifetime-finally-over/ Yes, this is what we've been determining if we could validate. I posted a similar char...
by Kevin M
Tue Feb 24, 2015 3:50 am
 
Forum: Investing - Theory, News & General
Topic: A case for long term government bonds
Replies: 40
Views: 3032

Re: Risk--Again. The common stepping stone

I don't know. Having a significant exposure to statistics in a professional capacity before even looking at investing, I am not sure what the challenges are for a person not coming from that background. I know for sure that, for example, trained musicians hear and appreciate things in music that I ...
by Kevin M
Mon Feb 23, 2015 3:24 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 45
Views: 2323

Re: Risk--Again. The common stepping stone

The above comments by Kevin are very good. I think there is truly less complication over risk than is made out to be. Thanks. I could tell from your previous comments that we are pretty much on the same page on this one. Part of Kevin's discussion assumes that a person has in mind a clear view of w...
by Kevin M
Mon Feb 23, 2015 2:49 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 45
Views: 2323

Re: Risk--Again. The common stepping stone

The textbook definition of investment risk works well for me. The words may be slightly different from one book to another, but the fundamental concept is common. From one textbook (Reilly, 1994): Risk is the uncertainty that an investment will earn its expected rate of return. But then we need to b...
by Kevin M
Mon Feb 23, 2015 1:27 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 45
Views: 2323

Re: A case for long term government bonds

All fixed income indices, including those published by Barclays (formerly Lehman Brothers), roll their constituents monthly, at month end. In the case of the 30-year benchmark index, the most recently auctioned 30-year at the end of each month is held in the index for the next month. From 2002 to 2...
by Kevin M
Mon Feb 23, 2015 12:04 pm
 
Forum: Investing - Theory, News & General
Topic: A case for long term government bonds
Replies: 40
Views: 3032

Re: A case for long term government bonds

Just to add to Kevin M's statistics, from 1981 (inclusive) to 2014: Great to have haginile join the conversation! 1) Barclays 30-year on-the-run Treasury index delivered a total return of 9.3% per year (geometric), annual volatility of 12.6% & information ratio of 0.7. Numbers for my series are...
by Kevin M
Sat Feb 21, 2015 3:10 pm
 
Forum: Investing - Theory, News & General
Topic: A case for long term government bonds
Replies: 40
Views: 3032

Re: Risk/Return Spectrum

^Or just use PortfolioVisualizer as I recommended. Modify the three portfolios to be 100% US stocks, 100% Total Bond, and 100% Money Market, as done here . http://s26.postimg.org/i3wjq0w55/Stocks_bonds_cash_cumulative_log.png And I still think it's useful to also show it on the linear scale, to help...
by Kevin M
Sat Feb 21, 2015 1:30 pm
 
Forum: Investing - Theory, News & General
Topic: Risk/Return Spectrum
Replies: 19
Views: 1040

Re: Risk/Return Spectrum

I am making a chart to show some young people about investing in different asset classes and to show them the importance of saving and starting to invest when they are young, volatility and the need to stay the course, and living within your means. Wow, a lot of stuff to get across in one chart! As...
by Kevin M
Sat Feb 21, 2015 12:11 pm
 
Forum: Investing - Theory, News & General
Topic: Risk/Return Spectrum
Replies: 19
Views: 1040

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

I believe the spreadsheet sources are the same as used by PortfolioVisualizer. The Frequently Asked Questions lists these data sources for gold:

Gold
KITCO returns (kitco.com) 1972-2004
GLD ETF 2004-2014

Kevin
by Kevin M
Sat Feb 21, 2015 10:45 am
 
Forum: Investing - Theory, News & General
Topic: Spreadsheet for backtesting (includes TrevH's data)
Replies: 642
Views: 398652

Re: A case for long term government bonds

I did some work on estimating returns on annually rolling 30-year zero-coupon bonds since 1981 or 1982. My calculations do show that it has returned more than S&P 500, but not 6.3X. I get 2.8X for 1981-2014 and 3.8X for 1982-2014. Note that changing the start date by only one year makes a huge d...
by Kevin M
Fri Feb 20, 2015 7:49 pm
 
Forum: Investing - Theory, News & General
Topic: A case for long term government bonds
Replies: 40
Views: 3032

Re: Risk/Return Spectrum

I am making a list of asset classes and ranking them by expected risk/return for a project and I would appreciate any feedback and more asset classes and feedback/changes on the rankings. Can you tell us about the project? Are you interested in historical returns or expected returns? What sources o...
by Kevin M
Fri Feb 20, 2015 1:08 pm
 
Forum: Investing - Theory, News & General
Topic: Risk/Return Spectrum
Replies: 19
Views: 1040

Re: A case for long term government bonds

But what caught my attention is the following statement: "In 1981, Shilling said we were “in for the bond rally of a lifetime.” Since then, a strategy of rolling a 30-year zero-coupon bond outperformed the S&P 500 by 6.3 times ." Is that right? I am trying to find data on the this bon...
by Kevin M
Thu Feb 19, 2015 4:59 pm
 
Forum: Investing - Theory, News & General
Topic: A case for long term government bonds
Replies: 40
Views: 3032

Re: Midcaps [Why does it seem to beat Total Stock Market?]

Sorry if this has already been posted: VIMSX or Vo (Vanguard Mid-cap) seems to always beat Total Stock market. This is not true. It's best understood by first understanding that Vanguard mid-cap fund is much more similar to VG small-cap fund than to a large-cap fund like Total Stock, 500 Index, or ...
by Kevin M
Tue Feb 17, 2015 3:20 pm
 
Forum: Investing - Theory, News & General
Topic: Midcaps [Why does it seem to beat Total Stock Market?]
Replies: 17
Views: 2428

Re: Total Bond: 23 years of SEC yield and distribution yield

Bond fund return can be decomposed into capital return and income return; Vanguard actually provides that breakdown for the most recent 15-16 years. Capital return is a function of price change, which of course is highly unpredictable. My working hypothesis has been that initial distribution yield s...
by Kevin M
Fri Feb 13, 2015 8:03 pm
 
Forum: Investing - Theory, News & General
Topic: Total Bond: 23 years of SEC yield and distribution yield
Replies: 64
Views: 6463

Re: What to do with 350K. Plop it in a 529?

I have $175,000 left on my mortgage (2.875%, 10-year). At that rate I figured I'd be better of investing the cash unless someone thinks otherwise. Note that the 3+% pretty-much-guaranteed in the CO 529 SV+ plan is higher than the mortgage rate, even before tax, and much higher after-tax, so no way ...
by Kevin M
Thu Feb 12, 2015 4:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: What to do with 350K. Plop it in a 529?
Replies: 36
Views: 3938

Re: What to do with 350K. Plop it in a 529?

You should at least be aware that the Colorado Stable Value Plus 529 plan currently pays a rate of over 3% for 2015 (it was a little under 3% in 2014, and about 3% in 2013). So unless your 401k offers a good SV plan, it's unlikely that you can find a better deal on fixed income in terms of the risk/...
by Kevin M
Thu Feb 12, 2015 4:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: What to do with 350K. Plop it in a 529?
Replies: 36
Views: 3938

Re: Total Bond: 23 years of SEC yield and distribution yield

So... if I am deciding whether to move from Total Bond to CDs, should I still compare the SEC yield vs the CD's rate (and EWP)? If distribution yield is consistently higher, am I making a decision based on the wrong premise? I think what the data shows is that SEC yield alone may not be the best me...
by Kevin M
Wed Feb 11, 2015 8:06 pm
 
Forum: Investing - Theory, News & General
Topic: Total Bond: 23 years of SEC yield and distribution yield
Replies: 64
Views: 6463

Re: Capital Gains Calculations

My understanding is that since I have no Short Term gains, the Long Term gains will be used to offset the Short Term losses. In doing so, I essentially lose the "advantage" of having ST losses offset since they are taxed at a different rate. Normally it is phrased the other way around; i....
by Kevin M
Wed Feb 11, 2015 2:08 pm
 
Forum: Investing - Help with Personal Investments
Topic: Capital Gains Calculations
Replies: 4
Views: 541

Re: How to invest for a goal

Larry Swedroe has a nice framework for evaluating risk, which considers ability, willingness and need to take risk. The ability part factors in investment time frame. I summarized his approach in a blog post a few years ago here: Risk Tolerance . You can see from the chart there that he would recomm...
by Kevin M
Tue Feb 10, 2015 11:29 pm
 
Forum: Investing - Help with Personal Investments
Topic: How to invest for a goal
Replies: 3
Views: 326

Re: Poll: Is MMM a force for good?

Yay, I got to vote! I've enjoyed reading some of MMM's blog posts in the past. I'm frugal, and I think that MMM does a good job of challenging conventional consumerism, but I'm personally not interested in going to the extremes that he and his family do to save money at this point in my life. I thin...
by Kevin M
Tue Feb 10, 2015 11:13 pm
 
Forum: Investing - Theory, News & General
Topic: Poll: Is MMM a force for good?
Replies: 34
Views: 2883

Re: Impact of rising rates on vanguard bond funds

What I like is that interest rates fell in the first month of 2015, so that bond funds had an outstanding month. Since when does Total US Bond Market Index fund go up by 2.3% in a SINGLE month? This question piqued my interest. I don't have access to monthly returns for US aggregate bond index, but...
by Kevin M
Tue Feb 10, 2015 11:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Impact of rising rates on vanguard bond funds
Replies: 18
Views: 2080

Re: Impact of rising rates on vanguard bond funds

How would a Fed interest rate increase this year impact VFIDX the intermediate term investment grade fund compared to govt and treasury funds like VBILX, VSIGX or VFITX? I don't know that anyone really knows, but I believe a Fed funds rate increase is widely anticipated, so would expect that it is ...
by Kevin M
Tue Feb 10, 2015 9:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Impact of rising rates on vanguard bond funds
Replies: 18
Views: 2080

Re: Mr. Money Mustache: Hero or Foolish?

VictoriaF wrote:I started a poll to get the final definitive Bogleheads answer whether MMM is hero or foolish.

Victoria

I wonder why the poll got locked while this thread has been going on for many pages without getting locked.

Kevin
by Kevin M
Tue Feb 10, 2015 7:52 pm
 
Forum: Investing - Theory, News & General
Topic: Mr. Money Mustache: Hero or Foolish?
Replies: 410
Views: 59814

Re: bond funds: vfstx vs. vscsx ?

My purpose? I hold too much cash in an interest paying checking account and want to diversify without putting this into stock funds. So why have you zeroed in on these two funds? Have you considered CDs? You can buy a 5-year CD earning 2.25% or more from one of several banks and credit unions, and ...
by Kevin M
Tue Feb 10, 2015 1:18 pm
 
Forum: Investing - Help with Personal Investments
Topic: bond funds: vfstx vs. vscsx ?
Replies: 13
Views: 980

Re: Long Term bond performance during 1975-1981

Turns out the 20-year constant maturity Treasuries (CMTs) aren't bad for estimating returns per the OP, which indicated returns went from 8% in 1975 to 14% in 1981. Below are the return results, assuming a flat yield curve between 19 and 20 year maturities. In the table below the DecYld is the avera...
by Kevin M
Mon Feb 09, 2015 10:51 pm
 
Forum: Investing - Theory, News & General
Topic: Long Term bond performance during 1975-1981
Replies: 11
Views: 1021

Re: Long Term bond performance during 1975-1981

I am trying to find performance data of how long-term (30 year govt) bonds would have performed during 1975-1981. <snip> I understand 30 year rates went from 8% to 14%. I was going to use this FRB data source to estimate returns on 30-year bonds (similar to what #cruncher did, but using real data),...
by Kevin M
Mon Feb 09, 2015 2:44 pm
 
Forum: Investing - Theory, News & General
Topic: Long Term bond performance during 1975-1981
Replies: 11
Views: 1021

Re: Initial yield and subsequent N-year return

As a way of testing the reliability of estimating annual returns from annually rolling 5-year constant maturity treasuries (CMTs), using a 4-year final yield based on linear interpolation between the 3-year and 5-year CMT yields, I calculated annual returns for 1962-2014 using the 5-year and 4-year ...
by Kevin M
Sun Feb 08, 2015 8:14 pm
 
Forum: Investing - Theory, News & General
Topic: Initial yield and subsequent N-year return
Replies: 15
Views: 1006

Re: Ten Year Treasuries Up 1.68 to 1.95 This Week

Some perspective might be useful: http://s26.postimg.org/n4azutghl/CMT_10yr_3_years.png This is for the last three years through Thursday. Does the little jog up at the far right really look that interesting? Maybe look at some longer periods for even more perspective: 10-Year Treasury Constant Matu...
by Kevin M
Sat Feb 07, 2015 9:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Ten Year Treasuries Up 1.68 to 1.95 This Week
Replies: 24
Views: 1951

Re: Tax consequences of converting 401k to IRA, then to Roth

Is she retiring, or might she go to work at another company with a 401k someday? If so, she could leave it in current 401k for now, then transfer to new 401k later. Unless all 401k fund choices are absolutely horrible, I would leave it in the 401k for now to avoid preventing tax-free backdoor Roth c...
by Kevin M
Fri Feb 06, 2015 7:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Tax consequences of converting 401k to IRA, then to Roth
Replies: 6
Views: 407

Re: Turbo Tax - schedule D now no extra cost

Just curious I've been using the online version for years , no problems , why would someone want the desktop version ?? Two main reasons. 1. You can file multiple returns with the desktop version. With my one copy, seven federal and seven state returns are filed each year. 2. You can quickly change...
by Kevin M
Fri Feb 06, 2015 4:37 pm
 
Forum: Personal Finance (Not Investing)
Topic: TurboTax '14 Deluxe (Desktop) Excludes Schedule D
Replies: 223
Views: 30480

Re: Portfolio Question - How is the best way for me to alloc

Vanguard actually recommended one of those LifeStrategy funds to me.<snip>I didn't see any LifeStrategy funds that contain index funds that track only the S&P either, so I decided to go with VFIAX which is a Vanguard fund that does. Correct. The Target Retirement and LifeStrategy funds use the ...
by Kevin M
Fri Feb 06, 2015 3:52 pm
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio Question - How is the best way for me to allocate?
Replies: 19
Views: 1821

Re: For those who have living trusts...

One thing our lawyer did was to prepare a 3 page signed, notarized synopsis of the trust agreement to give to financial services instead of the entire trust and that's been working very well. I have that too. It's called a "Trust Abstract". In my case I've found that most financial instit...
by Kevin M
Fri Feb 06, 2015 2:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: For those who have living trusts...
Replies: 43
Views: 4740

Re: For those who have living trusts...

I would definitely establish a living trust, unless perhaps you are in one of the few states where probate is really cheap and easy.... I would suggest the opposite. I woulld recommend one where there's a particular reason for doing so in a given case, of if someone is in a state where probating a ...
by Kevin M
Fri Feb 06, 2015 2:34 pm
 
Forum: Investing - Help with Personal Investments
Topic: For those who have living trusts...
Replies: 43
Views: 4740

Re: Should I use margin to buy a balanced fund?

Well, I'd like to think that it's strategy and not outcome that is delivering the stellar performance of the leveraged balanced portfolio. But the experiment has been going for less than half a year, so luck dominates the results right now. Exactly. It is instructive to view the chart Rob has so ki...
by Kevin M
Thu Feb 05, 2015 2:58 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 572
Views: 74187

Re: Initial yield and subsequent N-year return

^Interesting paper. Thanks for the pointer.

Kevin
by Kevin M
Wed Feb 04, 2015 9:36 pm
 
Forum: Investing - Theory, News & General
Topic: Initial yield and subsequent N-year return
Replies: 15
Views: 1006

Re: For those who have living trusts...

Regarding naming beneficiaries - I've already named my spouse as primary beneficiary for retirement accounts and I have joint registration for individual I-Bonds. But I am thinking about the case when both me and DW pass away at the same time. In such case, unless trust is named as secondary benefi...
by Kevin M
Wed Feb 04, 2015 8:54 pm
 
Forum: Investing - Help with Personal Investments
Topic: For those who have living trusts...
Replies: 43
Views: 4740

Re: Somewhat different approach to asset allocation

Yes, this is the approach Bernstein recommends for those approaching and in retirement, and I like it. He calls the safe portfolio the Liability Matching Portfolio (LMP), and the other portfolio, surprise, the Risky Portfolio (RP). If possible, start by deferring social security as long as possible,...
by Kevin M
Wed Feb 04, 2015 1:23 pm
 
Forum: Investing - Theory, News & General
Topic: Somewhat different approach to asset allocation
Replies: 12
Views: 936

Re: Total Bond: 23 years of SEC yield and distribution yield

There used to be a mechanism for the fund to make 3%-ish total returns steadily, albeit optimistically. There isn't anymore, at least based on the Monday yields. How do you figure? What is different about the mechanisms today than late 2012 when the 5-year Treasury rate was quite a bit lower than n...
by Kevin M
Tue Feb 03, 2015 9:13 pm
 
Forum: Investing - Theory, News & General
Topic: Total Bond: 23 years of SEC yield and distribution yield
Replies: 64
Views: 6463

Re: Total Bond: 23 years of SEC yield and distribution yield

It's becoming impossible for the distributions to continue at these levels without detracting from the value of the fund. It depends what you mean by "at these levels". If history is any guide, we can expect distribution yield to decrease much more gradually than SEC yield has decreased. ...
by Kevin M
Tue Feb 03, 2015 3:48 pm
 
Forum: Investing - Theory, News & General
Topic: Total Bond: 23 years of SEC yield and distribution yield
Replies: 64
Views: 6463
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