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Re: Experience with big spike in earnings (stock options)

Thanks for the advice all. I'm curious though how others hand handled the big differences in their annual income or an early spike that they never saw again later vs. specifics of stock options. Any additional thoughts would be appreciated! You cannot do much planning with RSUs since they vest auto...
by Wagnerjb
Tue Sep 30, 2014 7:19 am
 
Forum: Personal Finance (Not Investing)
Topic: Experience with big spike in earnings (stock options)
Replies: 8
Views: 941

Re: Southwest Airlines Engulfing, Reversal Candle Signals Do

It would have been neater if he would have told us to buy Southwest Airlines at $10/share about 18 months ago. Full disclosure - I have owned shares of Southwest Airlines in my passive large cap portfolio for a dozen years and I have no intention of selling (and paying huge capital gains) because of...
by Wagnerjb
Mon Sep 22, 2014 1:41 pm
 
Forum: Investing - Theory, News & General
Topic: Southwest Airlines Engulfing, Reversal Candle Signals Downsi
Replies: 55
Views: 3217

Re: IRS Relents! Notice 2014-54 permits Basis Isolation

Alan - many thanks for posting this and highlighting the implications for us. It seems that while this is an improvement for many, it won't allow a Boglehead to cherry-pick his after-tax money out of his 401k plan. Let's say he has $200,000 in his 401k plan, of which $20,000 is after-tax money. He w...
by Wagnerjb
Fri Sep 19, 2014 9:47 am
 
Forum: Personal Finance (Not Investing)
Topic: IRS Relents! Notice 2014-54 permits Basis Isolation
Replies: 66
Views: 5492

Re: Randomly-weighted stock portfolios beat the index

If I were reviewing this for a journal I would insist on a running two additional tests: 1) Test the market-cap weight portfolio against a set of random- weight portfolios that are centered around market-cap weights , and 2) Test the random-weight portfolios in the current draft against a pure equa...
by Wagnerjb
Mon Sep 15, 2014 10:08 am
 
Forum: Investing - Theory, News & General
Topic: Randomly-weighted stock portfolios beat the index
Replies: 28
Views: 2009

"Money for Nothing", a stock pick from Morningstar

I was cleaning out old e-mails and I had saved an article from Morningstar in 2009 where the author insisted that the "inefficient market serves up a (near) freebie". http://news.morningstar.com/articlenet/article.aspx?id=303719 We subsequently purchased Myriad Pharmaceuticals (MYRX) for a...
by Wagnerjb
Fri Sep 12, 2014 1:33 pm
 
Forum: Investing - Theory, News & General
Topic: "Money for Nothing", a stock pick from Morningstar
Replies: 2
Views: 594

Re: Options vesting period coming to close, need advice

2) The estimated income from option #1 would increase my net worth by about 75% If you are 25 years old and your net worth is $2,000 I might recommend one course of action. If you are 55 years old and your net worth is $800,000 I would recommend a drastically different course of action. For the 25 ...
by Wagnerjb
Fri Sep 12, 2014 9:25 am
 
Forum: Investing - Help with Personal Investments
Topic: Options vesting period coming to close, need advice
Replies: 8
Views: 509

Re: Churning Account

My father-in-law fell victim to a similar fate. He was in his 70's and was a widower, and I took a look at his brokerage statements once and noticed the volume of trades was rather high. I called the broker and complained, but the broker insisted that the FIL had approved every trade. I asked my FIL...
by Wagnerjb
Tue Sep 09, 2014 1:03 pm
 
Forum: Personal Finance (Not Investing)
Topic: Churning Account
Replies: 1
Views: 379

Re: An inefficient market creating drag on index returns

They are certainly not hedging the front running with options, as someone had suggested earlier. Can you prove that statement? I know that Vanguard and other indexers do use options, at least to manage cash flow. Not off hand but their tracking error would be a lot higher if they were. They may eng...
by Wagnerjb
Tue Sep 02, 2014 9:07 pm
 
Forum: Investing - Theory, News & General
Topic: An inefficient market creating drag on index returns
Replies: 54
Views: 3748

Re: An inefficient market creating drag on index returns

Gus Sauter of Vanguard has indicated that he believes their S&P500 fund (and all others I assume) lose 25bps to front running of the index. Owning the Total Stock Market index fund probably minimizes front-running, but that requires you to own a plain vanilla portfolio. If you want to tilt to hi...
by Wagnerjb
Tue Sep 02, 2014 11:51 am
 
Forum: Investing - Theory, News & General
Topic: An inefficient market creating drag on index returns
Replies: 54
Views: 3748

Re: DIY Index Fund

The best part about doing this would be the 0% expense ratio and only paying for transaction fees which for several brokers are inexpensive or free depending on how large your portfolio is. I am not sure this strategy is worthwhile if you are only saving the ER. You better be generating significant...
by Wagnerjb
Tue Sep 02, 2014 10:06 am
 
Forum: Investing - Theory, News & General
Topic: DIY Index Fund
Replies: 25
Views: 2355

Re: Process to gift securities to UGMA

In paying for educational expenses, I don't think it matters who actually pays. If you pay, be sure to keep a good record of the payments, and reimburse yourself from the UGMA. Obviously, it is better to have the UGMA pay directly if that is practical. I don't see anything wrong with your plan. Howe...
by Wagnerjb
Tue Sep 02, 2014 9:09 am
 
Forum: Personal Finance (Not Investing)
Topic: Process to gift securities to UGMA
Replies: 7
Views: 395

Re: How to become a millionaire retiree -- then and now

Why only a 30-year working career? If the person has a four year college education and then a 30-year career, they are retiring in their very early 50's. I would call that retiring quite early. Try running the models with a 40-year working career (which would also qualify as retiring early). I bet y...
by Wagnerjb
Sun Aug 31, 2014 2:00 pm
 
Forum: Investing - Theory, News & General
Topic: How to become a millionaire retiree -- then and now
Replies: 67
Views: 9951

Re: Do Bogleheads worry about institutional risk?

I keep the majority at Vanguard but I also keep a decent amount at Fidelity for exactly the reasons you suggest.

Best wishes.
by Wagnerjb
Thu Aug 28, 2014 10:01 am
 
Forum: Investing - Help with Personal Investments
Topic: Do Bogleheads worry about institutional risk?
Replies: 33
Views: 1712

Re: 401(k) poll - lawyer/oil and gas worker/airline employee

Most small E&P companies pay well and have generous benefits. This is to make up for the fact that they probably won't be around more than a few years When I graduated in the early 1980's, most of us wanted to go to growing industries. My colleagues went to biomedical and tech industries, while...
by Wagnerjb
Thu Aug 28, 2014 9:59 am
 
Forum: Personal Finance (Not Investing)
Topic: 401(k) poll - lawyer/oil and gas worker/airline employee?
Replies: 29
Views: 1774

Re: Motif Investing - own the S&P500 for less

TLH will burn fees, so they're work opposite of saving fees. TLH is free if you don't pay commissions...and many people don't pay commissions these days. As a Flagship member at Vanguard, I sure don't. If you plan to cash out, and eventually pay taxes, I don't see tax deferment as a huge savings, u...
by Wagnerjb
Thu Aug 28, 2014 9:09 am
 
Forum: Investing - Theory, News & General
Topic: Motif Investing - own the S&P500 for less
Replies: 91
Views: 5920

Re: Motif Investing - own the S&P500 for less

I agree that at the 5bp level, you'll probably not get many takers for the time-vs-reward tradeoff. Agreed. In my opinion, the only way this makes sense is for the tax benefits. With the updated TLH value being worth ~50bp extra (not included in my original estimates), now you're talking $5k/year (...
by Wagnerjb
Wed Aug 27, 2014 5:31 pm
 
Forum: Investing - Theory, News & General
Topic: Motif Investing - own the S&P500 for less
Replies: 91
Views: 5920

Re: Motif Investing - own the S&P500 for less

More generally, I'd like to discuss any cost or benefit factors I may have overlooked, as well as practical aspects to implementing this approach to index investing. One factor to consider is your ability to diversify away from your employer. You may have employer stock options, or you may have Res...
by Wagnerjb
Wed Aug 27, 2014 3:49 pm
 
Forum: Investing - Theory, News & General
Topic: Motif Investing - own the S&P500 for less
Replies: 91
Views: 5920

Re: Kitces - Think Twice about those Conversions

Alan: I have been harping on this risk since the day I joined the old forum at Morningstar in 2002. As you indicate, it really only applies to those with higher incomes and asset levels. But anybody who has been paying attention to AMT, taxation of social security, phase outs of deductions and exemp...
by Wagnerjb
Fri Aug 22, 2014 1:16 pm
 
Forum: Investing - Theory, News & General
Topic: Kitces - Think Twice about those Conversions
Replies: 15
Views: 2994

Re: Kitces - Think Twice about those Conversions

I appreciate the link. I found the example he gave to be laughable. He described a married couple with income of $350,000 a year and $15,000 of itemized deductions. I can't imagine someone with that income having only $15,000 of deductions. Is there any state in the union that has taxes that low? E...
by Wagnerjb
Fri Aug 22, 2014 9:59 am
 
Forum: Investing - Theory, News & General
Topic: Kitces - Think Twice about those Conversions
Replies: 15
Views: 2994

Re: Why don't utilities get any praise

Thanks to a recent thread by Gambler, I recently learned that utilities pays the highest dividend among all the Vanguard funds at 3.5%. For investors seeking income, why is it that utilities are not really suggested or brought up? It's usually bonds or REITs for income. I declare my own dividends, ...
by Wagnerjb
Fri Aug 22, 2014 9:15 am
 
Forum: Investing - Theory, News & General
Topic: Why don't utilities get any praise
Replies: 39
Views: 3741

Re: Pay cash for flight on sale, or use FF mileage quandry

I usually convert FF miles to dollars at 1 cent per FF mile, so anytime I get a flight for less than 1 cent a mile, I pay cash. I do the same. Also, keep in mind that you might need the miles some day for an urgent trip. If you find yourself needing to (for example) go to a funeral you will probabl...
by Wagnerjb
Fri Aug 22, 2014 8:43 am
 
Forum: Personal Consumer Issues
Topic: Pay cash for flight on sale, or use FF mileage quandry
Replies: 30
Views: 2226

Re: Way to maximize Retirement Savings Contribution Credit

So basically my best bet is to wait until tax time to find out the exact figure of what will maximize her tax credit. Then we can go from there. That's exactly what I do for my son. He is independent (barely) and not earning a significant amount....certainly not enough to save $2,000 in an IRA. But...
by Wagnerjb
Wed Aug 20, 2014 5:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: Way to maximize Retirement Savings Contribution Credit
Replies: 11
Views: 589

Re: To be truly rich, take stock of your life before investi

Investing and LBYM leads to financial independence, which means freedom. It's as simple as that. Well said. I agree completely. Nobody is going to get rich working for $60,000 for 40 years - even if you save every dime. The truly rich achieve their status through high earnings power, not through &q...
by Wagnerjb
Wed Aug 20, 2014 3:19 pm
 
Forum: Investing - Theory, News & General
Topic: To be truly rich, take stock of your life before investing
Replies: 30
Views: 4540

Re: [live off dividends?] How the rich stay/get richer??

The rich are not rich because of dividends. It's because they work harder and are willing to take more risks than others. Perhaps a little luck helps, but it would be an anomaly for someone to make $2 million dollars one year and then drop everything to sit back and collect dividends. JT Having the...
by Wagnerjb
Wed Aug 20, 2014 11:41 am
 
Forum: Investing - Theory, News & General
Topic: [live off dividends?] How the rich stay/get richer??
Replies: 62
Views: 5006

Re: How the rich stay/get richer??

The example I'm thinking of is someone who can live off $40,000 in dividends might need $2 mil if invested in the total stock market index fund (dividend yield is around 2%?) Since the person has no need to tap principal they can invest for maximum growth (i.e., put it all in the total stock market...
by Wagnerjb
Tue Aug 19, 2014 10:08 pm
 
Forum: Investing - Theory, News & General
Topic: [live off dividends?] How the rich stay/get richer??
Replies: 62
Views: 5006

Re: HSA account debit cards for suckers?

I use the strategy that you suggest. I use my Visa card to pay for medical expenses, then I withdraw funds periodically from the HSA using a check. Seems like free money (or points) to me. This doesn't require any more bookkeeping by me, since I have always maintained a simple Excel spreadsheet with...
by Wagnerjb
Sat Aug 16, 2014 8:38 am
 
Forum: Personal Finance (Not Investing)
Topic: HSA account debit cards for suckers?
Replies: 5
Views: 993

Re: Are these 401l options terrible?

If the AMC/Asset fee is truly a cost that you - the employee - pays, then the plan is horrible due to the very high costs of all of the funds. And....if there is no company match, just skip the plan altogether. Not a hard decision, unless the AMC/Asset fee is something other than what it appears to ...
by Wagnerjb
Wed Aug 13, 2014 5:08 pm
 
Forum: Investing - Help with Personal Investments
Topic: Are these [401k] options terrible?
Replies: 28
Views: 2094

Re: "Cost" of foreign tax on international investing

A related conundrum: what is the "return" of an international fund? Is it the return net after withholding for foreign taxes, or should the hidden foreign tax be considered part of the return? For better or worse, fund companies are required to report the former. Fund returns are net afte...
by Wagnerjb
Tue Aug 12, 2014 9:36 am
 
Forum: Investing - Theory, News & General
Topic: "Cost" of foreign tax on international investing
Replies: 19
Views: 1437

Re: "Cost" of foreign tax on international investing

Irrelevant in what sense? You want to know what your tax liability will be when you hold $100 worth of international fund X in taxable versus $100 of something else. That's a key factor in fund placement decisions. I certainly agree that you want to know your tax liability. Of course. But for the g...
by Wagnerjb
Tue Aug 12, 2014 8:53 am
 
Forum: Investing - Theory, News & General
Topic: "Cost" of foreign tax on international investing
Replies: 19
Views: 1437

Re: Does domestic over weighting qualify as active managemen

larryswedroe wrote:wagner
Never did I say or imply that it was bad, just that it's an active decision. larry


Larry - I did not mean to suggest that you said active was bad. Sorry if my post came across that way.
by Wagnerjb
Tue Aug 12, 2014 8:30 am
 
Forum: Investing - Theory, News & General
Topic: Does domestic over weighting qualify as active management?
Replies: 26
Views: 1265

Re: A financial “guru” for world travelers?

Can people really fund fabulous Condé Nast traveler lifestyles by day trading for a few hours a day, as this person claims? Nope. And can he really teach the typical backpacker to do the same thing? Nope. But he doesn't have to teach you to trade, he just has to sell you his "system". He ...
by Wagnerjb
Mon Aug 11, 2014 6:12 pm
 
Forum: Investing - Theory, News & General
Topic: A financial “guru” for world travelers?
Replies: 18
Views: 2016

Re: Does domestic over weighting qualify as active managemen

any tilt away from market cap weighting is active management. Now that doesn't necessarily make it wrong as there may be very logical reasons why you might differ in risk ability from the market. For example, since employed in US you likely have your labor capital correlated more to US stocks, whic...
by Wagnerjb
Mon Aug 11, 2014 6:05 pm
 
Forum: Investing - Theory, News & General
Topic: Does domestic over weighting qualify as active management?
Replies: 26
Views: 1265

Re: Convert an option to LT gain with an RSU vest?

dickenjb wrote:At least if you are in AMT zone it is taxed at 28% not 39.6% marginal rate!


If you are in the phase-out zone of AMT, your marginal rate is 35%. :(
by Wagnerjb
Mon Aug 11, 2014 5:54 pm
 
Forum: Personal Finance (Not Investing)
Topic: Convert an option to LT gain with an RSU vest?
Replies: 15
Views: 1080

Re: "Cost" of foreign tax on international investing

[OK, so you don't want to limit the discussion to annual tax costs on dividends. I guess we are trying to approach this issue from completely different angles, so I will stick to the annual tax costs on dividends. Do you agree that for the guy in the 25% tax bracket, the foreign tax withholding is ...
by Wagnerjb
Mon Aug 11, 2014 5:45 pm
 
Forum: Investing - Theory, News & General
Topic: "Cost" of foreign tax on international investing
Replies: 19
Views: 1437

Re: "Cost" of foreign tax on international investing

That being the case, the annual tax cost for holding International in a tax-advantaged account is the foreign tax withheld. In a taxable account, I assume we agree that for "most" taxpayers, their US+State tax on their international dividends is higher than the foreign tax that was alread...
by Wagnerjb
Mon Aug 11, 2014 2:10 pm
 
Forum: Investing - Theory, News & General
Topic: "Cost" of foreign tax on international investing
Replies: 19
Views: 1437

Re: "Cost" of foreign tax on international investing

3% dividend yield, plus another 6% of dividend = foreign tax. Of that, 2/3 qualified, 1/3 not qualified. So on $100K invested, $3180 of dividends of which $3000 is distributed to you, and $180 withheld to pay foreign tax. The breakdown is $2120 QDI and $1060 non-QDI. In the 25% bracket, you owe 25%...
by Wagnerjb
Mon Aug 11, 2014 11:52 am
 
Forum: Investing - Theory, News & General
Topic: "Cost" of foreign tax on international investing
Replies: 19
Views: 1437

Re: Moving Average Backtest destroys Buy/Hold. Try for yours

It is my stance that anyone who says "buy and hold can't be beat" is either ignorant or victim to groupthink propaganda. I look forward to any objective intelligent discussion regarding my trading strategy & results. It is my stance that anybody who has figured out a trading strategy ...
by Wagnerjb
Thu Aug 07, 2014 1:08 pm
 
Forum: Investing - Theory, News & General
Topic: Moving Average Backtest destroys Buy/Hold. Try for yourself.
Replies: 59
Views: 4467

Re: 4 Sources of Synthetic TIPS

When TIPs were first introduced in the USA, I remember reading some research (done by Bridgewater) on the behaviour of inflation-protected bonds, which had been in existence in the UK and Israel before the US adopted them. That research convinced me of the diversification benefits of holding both TI...
by Wagnerjb
Thu Aug 07, 2014 8:40 am
 
Forum: Investing - Theory, News & General
Topic: 4 Sources of Synthetic TIPS
Replies: 3
Views: 657

Re: Peak Money Market Fund Yields in 1981-82

And even better when you take tax rates as well as inflation into account! Top marginal tax rate was 70% back then and even middle income folks could easily have found themselves paying higher marginal rates than the highest income taxpayers currently pay. The word "peak" in the title of ...
by Wagnerjb
Wed Aug 06, 2014 5:37 pm
 
Forum: Investing - Theory, News & General
Topic: Peak Money Market Fund Yields in 1981-82
Replies: 24
Views: 1706

Re: HSA Strategy for high income earners

Seems like the the appropriate strategy for high income earners; treating it as another retirement account (ie 401K). Is there something I'm not considering? I don't know a single colleague - those that I consider a "high earner" - that ever mentions their HSA. I suspect most true high ea...
by Wagnerjb
Mon Aug 04, 2014 8:42 am
 
Forum: Investing - Help with Personal Investments
Topic: HSA Strategy for high income earners
Replies: 79
Views: 5749

Re: Tax strategies with Employee stock option execution

Are you eligible for your company's executive deferred compensation plan? If so, that is a way to contribute dramatically more to a tax-deferred plan and as a result lower your taxable income. Let's say you defer your salary and/or bonus which amounts to $200,000 and you simultaneously exercise opti...
by Wagnerjb
Wed Jul 30, 2014 10:29 am
 
Forum: Investing - Help with Personal Investments
Topic: Tax strategies with Employee stock option execution
Replies: 4
Views: 310

Re: Stocks: losing money for 20-30 years not uncommon

MindBogler wrote:Obvious answer: don't invest in a single country's stock -- diversify globally.


My thoughts exactly!
by Wagnerjb
Tue Jul 29, 2014 7:48 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: losing money for 20-30 years not uncommon
Replies: 43
Views: 4321

Re: Owning individual stocks to harvest tax losses

Beliavsky: you might be able to do this, but remember for TLH to work you must invest in something extremely similar and come back to the original as soon as possible. This is harder to do with stocks and much easier to do with ETFs that are more specific than the usual (e.g. sector or country). Le...
by Wagnerjb
Tue Jul 29, 2014 1:46 pm
 
Forum: Investing - Theory, News & General
Topic: Owning individual stocks to harvest tax losses
Replies: 17
Views: 1144

Re: Tell me why I shouldn't buy individual muni bonds

However, even in CA which is much larger and diversified (I pay no attention to the supposed financial problems of the state, btw, since I'm getting paid for those thru yields if the market agrees) I don't hold or recommend over 50% of the bonds in one state. Fred indicated that this portfolio woul...
by Wagnerjb
Tue Jul 29, 2014 1:29 pm
 
Forum: Investing - Help with Personal Investments
Topic: Tell me why I shouldn't buy individual muni bonds
Replies: 32
Views: 2410

Re: Owning individual stocks to harvest tax losses

Since brokerage commissions are low nowadays, and bid-ask spreads are tight, it should be possible for investors with large-enough portfolios to outperform index funds on an after-tax basis, Some years I have a negative tax rate on my investments. I might have a $3,000 tax loss to deduct (at a 33% ...
by Wagnerjb
Tue Jul 29, 2014 1:21 pm
 
Forum: Investing - Theory, News & General
Topic: Owning individual stocks to harvest tax losses
Replies: 17
Views: 1144

Re: Tell me why I shouldn't buy individual muni bonds

Fred: your strategy is logical and well laid out. I am considering the same strategy myself when I retire in a year or two, although I will retire in Texas and not have the state income tax benefit that you will. I am well aware of the risk of paying a premium for bonds that are purchased through a ...
by Wagnerjb
Tue Jul 29, 2014 1:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Tell me why I shouldn't buy individual muni bonds
Replies: 32
Views: 2410

Re: Owning individual stocks to harvest tax losses

I do exactly as you suggest. I hold low-cost passive funds for Small Caps, International, REIT and fixed income. For my US Large Cap portfolio I hold between 30 and 40 individual stocks in my after-tax account. I aggressively tax manage that portfolio. I have been holding individual stocks (as well ...
by Wagnerjb
Tue Jul 29, 2014 12:42 pm
 
Forum: Investing - Theory, News & General
Topic: Owning individual stocks to harvest tax losses
Replies: 17
Views: 1144

Re: Do any boggleheads invest in individual companies?

However back to the general case, IMO those who would make a statement like 'you should have 50-100 individual stocks if you do it 30 *might* be OK' (50-100 is ridiculously too many from a practical POV, even 30 might be stretching it in that respect) are assuming the single stock investor is tryin...
by Wagnerjb
Tue Jul 29, 2014 12:03 pm
 
Forum: Investing - Theory, News & General
Topic: Do any boggleheads invest in individual companies?
Replies: 95
Views: 5832

Re: Do any boggleheads invest in individual companies?

A handful is significant uncompensated risk, but the function is an asymptote. 50 is more diversification that 15, but little more. At infinity the ratio of std deviation of portfolio of stocks (which have strictly uncorrelated idiosyncratic risk) is 39% as much as 1 stock. At 50 it's 41%, at 15 it...
by Wagnerjb
Tue Jul 29, 2014 8:50 am
 
Forum: Investing - Theory, News & General
Topic: Do any boggleheads invest in individual companies?
Replies: 95
Views: 5832

Re: Tax Free Karate Kid

I have done exactly that. I gifted money to the child, and made decisions (as Custodian) on how to spend the UTMA funds on discretionary expenses such as the karate lessons you mentioned. Some might give you a moral argument against this practice, but I won't. And an awful lot of people do this. I c...
by Wagnerjb
Fri Jul 25, 2014 4:50 pm
 
Forum: Personal Finance (Not Investing)
Topic: Tax Free Karate Kid
Replies: 1
Views: 328
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