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Re: The Worst Investment You Can Make: Buying a Home

Sell your house. Invest the money. Use the earnings to pay for rent forever.
by billyt
Thu Aug 28, 2014 8:51 am
 
Forum: Investing - Theory, News & General
Topic: The Worst Investment You Can Make: Buying a Home
Replies: 135
Views: 15862

Re: The Risk of Short-term Bond Funds

Thanks. I have basically been saying this over and over again to little avail. After a while, I get to exhausted to respond anymore.
by billyt
Tue Jul 08, 2014 6:18 am
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10863

Re: The Risk of Short-term Bond Funds

Dollar cost averaging into a bond fund for 30 years and out for 30 years is essentially the same as holding for 60 years. Money you need this month to pay your bills should be in a bank account. Money you need to spend for the next few years should be in short term bonds or CD's. Match your duration...
by billyt
Fri Jul 04, 2014 8:14 am
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10863

Re: The Risk of Short-term Bond Funds

This thread (and almost all the bond-panic threads) repeatedly miss the central point. All the worry is over interest rate risk (or duration risk). If you start investing at age 30 and die at 90, your holding period is 60 years, or something like 20x the duration of an intermediate bond fund. In suc...
by billyt
Fri Jul 04, 2014 7:44 am
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10863

Re: The Risk of Short-term Bond Funds

Most of us hold a balanced portfolio of stocks and bonds for our investing lifetime. We are dollar cost averaging into (accumulating) and out of (decumulating) over this long time frame. Under these conditions, an intermediate term bond fund will always significantly outperform a short term bond fun...
by billyt
Wed Jul 02, 2014 2:32 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10863

Re: The Risk of Short-term Bond Funds

The article shows returns since 2009 and quotes 1, 3 and 5 year returns. TBM returns more over all three time frames as is totally expected given its higher yield. TBM will always return more than a short term fund over a reasonably long time periods, as the returns of bond funds is determined almos...
by billyt
Wed Jul 02, 2014 1:47 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10863

Re: The Risk of Short-term Bond Funds

It is good to see this nice clean rebuttal of all of those 'bond panic' threads from the last few years. It is hard to understand why folks think they know more than the market. Glad I stayed the course.
by billyt
Wed Jul 02, 2014 1:33 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10863

Re: Is a 2% withdrawal rate bulletproof ?

You can either optimize your AA for maximum portfolio balance (for your heirs), or maximum portfolio survival (for you). These are 2 entirely different and opposite goals, so you can't optimize for both.
by billyt
Fri Jun 13, 2014 10:50 am
 
Forum: Personal Finance (Not Investing)
Topic: Is a 2% withdrawal rate bulletproof ?
Replies: 48
Views: 3987

Re: Should risk be stated in dollars terms instead of AA %?

I would think it makes the most sense to look at risk as a dollar amount. How much can you afford to lose?
by billyt
Fri Jun 13, 2014 10:22 am
 
Forum: Investing - Theory, News & General
Topic: Should risk be stated in dollars terms instead of AA %?
Replies: 54
Views: 1402

Re: 30 year TIPS under 1%

Except for tax considerations, dividends are meaningless bookeeping. It is the total return that counts.
by billyt
Fri May 30, 2014 11:08 am
 
Forum: Investing - Theory, News & General
Topic: 30 year TIPS under 1%
Replies: 25
Views: 2127

Re: If Treasury Yield's stay low.....then what?

What we are trying to recover from here was a banking crisis, not a business cycle recession. This is a very different animal. The recession has been over for some time now. The effects of the near collapse of our banking system may, and indeed perhaps should, be with us for many years to come. Do w...
by billyt
Mon May 26, 2014 8:32 am
 
Forum: Investing - Theory, News & General
Topic: If Treasury Yield's stay low.....then what?
Replies: 14
Views: 2331

Re: Using Dr. Pfau's research

Just to be clear: #3 is not a rising equity glide path. It is a constant equity model.
by billyt
Tue May 20, 2014 6:46 am
 
Forum: Investing - Theory, News & General
Topic: Using Dr. Pfau's research
Replies: 27
Views: 2378

Re: Using Dr. Pfau's research

The idea is that you spend from the bond side first. Your risk is not increasing and you tend to have better outcomes. Start with $100k in stocks and $300k in bonds. Let the stocks grow as you draw from the bond side. If you are not adding to stocks, you are not increasing your risk.
by billyt
Tue May 20, 2014 6:09 am
 
Forum: Investing - Theory, News & General
Topic: Using Dr. Pfau's research
Replies: 27
Views: 2378

Re: Down payment question

We spent five days looking at potential vacation homes recently. Not quite ready to pull the trigger, but wanted to get a sense of the market we are interested in. In any case, contacted listing agents on a range of properties. We were shown 14 properties by 7 different agents. Not a single question...
by billyt
Mon May 19, 2014 6:26 am
 
Forum: Personal Finance (Not Investing)
Topic: Down payment question
Replies: 17
Views: 965

Re: "Bond investing: Is a bear still out there?"

I agree in principle that no one knows the future. However, for me, Ben Bernanke's opinion that rates may not normalize within a current retiree's lifetime carries somewhat more weight than dozens of anonymous posters who are dead certain that rates have no where to go but up, and soon!
by billyt
Sat May 17, 2014 9:05 am
 
Forum: Investing - Theory, News & General
Topic: "Bond investing: Is a bear still out there?"
Replies: 34
Views: 2423

Re: "Bond investing: Is a bear still out there?"

No less than former Fed chair Ben Bernanke expects rates to stay low for quite a long time: from recent REUTERS article: "At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back ...
by billyt
Sat May 17, 2014 6:28 am
 
Forum: Investing - Theory, News & General
Topic: "Bond investing: Is a bear still out there?"
Replies: 34
Views: 2423

Re: Intermediate bond fund yields are getting ridiculous

So 5 year to 10 year is 5 year differnce, at .2% per year is 1%. The ten year yield is barely 1% more than the 5.
by billyt
Thu May 15, 2014 2:23 pm
 
Forum: Investing - Theory, News & General
Topic: Intermediate bond fund yields are getting ridiculous
Replies: 20
Views: 2682

Re: The Great Bond prediction Bust of 2014

Taking profits is confusing bonds with stocks. Over a reasonable investing lifetime, virtually all of the bond fund return comes from the interest. You only get the interest if you continue to hold the bonds.
by billyt
Thu May 15, 2014 8:17 am
 
Forum: Investing - Help with Personal Investments
Topic: The Great Bond prediction Bust of 2014
Replies: 12
Views: 1680

Re: The Great Bond prediction Bust of 2014

Thats funny. The last I heard interest rates had no where to go but up and bond funds were going to crash and burn. Seems like I have been hearing that for some time now.
by billyt
Thu May 15, 2014 7:38 am
 
Forum: Investing - Help with Personal Investments
Topic: The Great Bond prediction Bust of 2014
Replies: 12
Views: 1680

Re: Filing for SS Early and Investing

Consider these results from the FIRECALC monte carlo simulator: Today's retiree, age 62, has a nest egg of $500,000 and wants to withdraw $38,000 a year, inflation adjusted. This retiree has a SS PIA of $20,000. Starting SS at 62 yields $15,000 a year, inflation adjusted. This strategy has a 78% pro...
by billyt
Sun May 11, 2014 1:41 pm
 
Forum: Personal Finance (Not Investing)
Topic: Filing for SS Early and Investing
Replies: 26
Views: 1716

Re: Delay Social Security to age 70 and Spend more money at

No Midareff, that is again dead wrong. You can use any withdrawal rate you care to or change it on a daily basis, but you have to apply the same withdrawal rate history to both scenarios. Makes not one bit of difference.
by billyt
Mon May 05, 2014 1:22 pm
 
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 143
Views: 13399

Re: 2008 housing inventory

Judicial impediments to foreclosures in NY are significant and many houses are still making their way through the system. The buy and rent them out scenario for outside investors is not such a good proposition in NY either. So this is playing out in slow motion.
by billyt
Mon May 05, 2014 1:07 pm
 
Forum: Personal Finance (Not Investing)
Topic: 2008 housing inventory
Replies: 6
Views: 930

Re: Delay Social Security to age 70 and Spend more money at

No Midareff, that is dead wrong. For a given withdrawal rate, both scenarios are equal. If you claim at 62 you have a larger portfolio at 70 (and larger annual withdrawal at a given rate), but less in SS income. If you claim at 70 you have a smaller portfolio (and annual withdrawal), but higher SS i...
by billyt
Mon May 05, 2014 1:04 pm
 
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 143
Views: 13399

Re: Delay Social Security to age 70 and Spend more money at

Midareff: You are needlessly confusing yourself and perhaps others. None of these things will matter in an apples to apples comparison, as any future stock market changes and different annual withdrawal amounts will affect both scenarios (62 and 70) in an identical fashion. You are simply buying a h...
by billyt
Mon May 05, 2014 12:54 pm
 
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 143
Views: 13399

Re: Delay Social Security to age 70 and Spend more money at

Delaying gives you a higher guaranteed floor. Even in the catastrophic event that your portfolio goes to zero before you die, you still have more money to spend by deferring. Also remember that the benefits are inflation indexed income.
by billyt
Mon May 05, 2014 12:30 pm
 
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 143
Views: 13399

Re: Delay Social Security to age 70 and Spend more money at

Yes red5, you have indeed validated the tread title. No magic here, just simple math that you could do with a pencil and paper. You spend down extra portfolio dollars to by an extra SS annuity. If you want the most guaranteed dollars to spend annually, this is the way to go.
by billyt
Mon May 05, 2014 11:50 am
 
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 143
Views: 13399

Re: Delay Social Security to age 70 and Spend more money at

Yes, mptfan, your math is correct. So is Cutthroats and FIRECALC. Delaying until 70 results in a greater income stream starting at age 62, or a greater likelihood of portfolio survival with a given withdrawal rate. If one wants to maximize the money received from social security, then you need to do...
by billyt
Mon May 05, 2014 10:58 am
 
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 143
Views: 13399

Re: Delay Social Security to age 70 and Spend more money at

I've said this before and I will say this again. If you don't come to the conclusion that waiting until 70 allows you to spend more at 62, then your math is bad. Please go to FIRECALC and run some scenarios. Deferring till 70 increases your safe withdrawal rate, starting at 62. It's math, not opinion.
by billyt
Mon May 05, 2014 9:28 am
 
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 143
Views: 13399

Re: Social security at 62 vs 70

If you want to enjoy more money at 62, delay until 70. You can spend more starting at 62.
by billyt
Wed Apr 30, 2014 4:15 pm
 
Forum: Investing - Theory, News & General
Topic: Social security at 62 vs 70
Replies: 76
Views: 5834

Re: Social security at 62 vs 70

It baffles me that people continue to misunderstand this issue. The math is straightforward but people just keep getting it wrong. Don't take my word for it, run some scenarios in FIRECALC. Delaying until 70 allows you to spend more money now (at 62) and improve the chances of your portfolio lasting...
by billyt
Wed Apr 30, 2014 3:23 pm
 
Forum: Investing - Theory, News & General
Topic: Social security at 62 vs 70
Replies: 76
Views: 5834

Re: Is it risky to drawdown bond fund principle?

The only things that matter are your total portfolio (including the stocks) return and your withdrawal rate. How you withdraw the money makes not one whit of difference, except to the extent that it changes your asset allocation. If you are spending something like 4% of your portfolio or less every ...
by billyt
Wed Apr 30, 2014 10:59 am
 
Forum: Investing - Help with Personal Investments
Topic: Is it risky to drawdown bond fund principal?
Replies: 41
Views: 2171

Re: Social security at 62 vs 70

You can explore the effect of different claiming strategies using FIRECALC, and I highly recommend it. I think you will consistently find that for a give success rate and starting portfolio value, you can generate a greater income stream starting at age 62 if you delay claiming SS until 70. Thus, yo...
by billyt
Tue Apr 29, 2014 12:55 pm
 
Forum: Investing - Theory, News & General
Topic: Social security at 62 vs 70
Replies: 76
Views: 5834

Re: Are TIPS right for retired investors?

You are thinking about this backwards. If you buy a TIPS yielding 1%, you will get a 1% real return, no matter what inflation does, expected or unexpected. It is the nominal bonds that have inflation expectations built into them, and they will have either positive or negative real returns depending ...
by billyt
Thu Feb 13, 2014 3:58 pm
 
Forum: Investing - Theory, News & General
Topic: Are TIPS right for retired investors?
Replies: 64
Views: 4345

Re: Are TIPS right for retired investors?

Again. Equities are not bonds. There is no guarantee that equities will keep up with inflation, and some evidence that they will do poorly in high inflation. TIPS will give you a real return. If real rates rise, TIP fund NAV will temporarily fall, but you will earn more in the long run. Rising rates...
by billyt
Thu Feb 13, 2014 2:56 pm
 
Forum: Investing - Theory, News & General
Topic: Are TIPS right for retired investors?
Replies: 64
Views: 4345

Re: Are TIPS right for retired investors?

Why are you focusing on a single one month interval out of the whole chart? Look at the long term. TIPS do exactly what they say they will do, which is provide a real return. If real rates are low, TIPS will not do anything spectacular. If inflation takes off, you will slowly lose money in nominal b...
by billyt
Thu Feb 13, 2014 2:49 pm
 
Forum: Investing - Theory, News & General
Topic: Are TIPS right for retired investors?
Replies: 64
Views: 4345

Re: Are TIPS right for retired investors?

Bad idea. Equities are not bonds.
by billyt
Thu Feb 13, 2014 2:40 pm
 
Forum: Investing - Theory, News & General
Topic: Are TIPS right for retired investors?
Replies: 64
Views: 4345

Re: Are TIPS right for retired investors?

1) the charts are the actual (nominal) returns over the last ten years.

2) Sure, chose a price chart rather than a return chart.
by billyt
Thu Feb 13, 2014 11:18 am
 
Forum: Investing - Theory, News & General
Topic: Are TIPS right for retired investors?
Replies: 64
Views: 4345

Re: Bonds today

I looked up the fund you are referring to on the Blackrock website and found the following cumulative returns:

6 mo 1%
1 yr -3%
3 yr 14%
5 yr 15%

What are you complaining about?
by billyt
Wed Feb 12, 2014 3:39 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds today
Replies: 42
Views: 2785

Re: Bonds today

I think that the bond funds NAV may be 8% lower than its peak, but the loss in terms of total return is much less.
by billyt
Wed Feb 12, 2014 1:15 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds today
Replies: 42
Views: 2785

Re: Bonds today

The total return on bond funds over the long term (1 to 2x duration) comes almost entirely from the interest. Almost none of the total return comes from price changes. Therefore, rising rates will increase the return of bond funds in the long run. Both the historical record and the first principles ...
by billyt
Wed Feb 12, 2014 9:41 am
 
Forum: Investing - Theory, News & General
Topic: Bonds today
Replies: 42
Views: 2785

Re: Riding the yield curve, in action

Holding to maturity clearly makes the case of the ladder worse.
by billyt
Sun Feb 09, 2014 1:37 pm
 
Forum: Investing - Theory, News & General
Topic: Riding the yield curve, in action
Replies: 40
Views: 3864

Re: Attempting to understand bonds

No, a bonds value will increase as it slides down the yield curve in a positive (normal) yield curve environment. The yield curve prices in future rate increases based on the market consensus. This is why shortening duration in anticipation of rising rates is likely to backfire. Do you know more tha...
by billyt
Sun Feb 09, 2014 1:36 pm
 
Forum: Investing - Theory, News & General
Topic: Attempting to understand bonds
Replies: 2
Views: 279

Re: Riding the yield curve, in action

In a positive yield curve environment, your returns are reduced if you hold to maturity. Why hold a Treasury for those last 2 or 3 years earning next to nothing when you can sell at a premium and reinvest at higher rates in longer treasurys or CDs? Bond fund mangers (and the indexes that follow thei...
by billyt
Sun Feb 09, 2014 1:32 pm
 
Forum: Investing - Theory, News & General
Topic: Riding the yield curve, in action
Replies: 40
Views: 3864

Re: Riding the yield curve, in action

That's right The Dan. Rolling your own bond ladder and holding to maturity reduces your returns. You are better off with a low cost fund.
by billyt
Sun Feb 09, 2014 12:50 pm
 
Forum: Investing - Theory, News & General
Topic: Riding the yield curve, in action
Replies: 40
Views: 3864

Re: Bond returns

OK, you are asking about the effect on your cash flow in a rising rate environment. Immediately after an instantaneous rate increase, your NAV will fall but your monthly cash flow will stay more or less the same. Gradually, you cash flow will increase. If rates continue to rise, your cash flow will ...
by billyt
Sun Feb 09, 2014 8:47 am
 
Forum: Investing - Theory, News & General
Topic: Bond returns
Replies: 4
Views: 639

Re: Bond returns

If interest rates rise, bond fund returns will increase. The price for better returns is a temporary hit to the NAV.
by billyt
Sat Feb 08, 2014 8:12 pm
 
Forum: Investing - Theory, News & General
Topic: Bond returns
Replies: 4
Views: 639

Re: Riding the yield curve, in action

It's so ridiculous really. No one wants to hear the truth, do the math, or accept factual information.

Sadly, this post will sink like a stone.

While "Why own bonds at all?" will be around for days.
by billyt
Sat Feb 08, 2014 8:08 pm
 
Forum: Investing - Theory, News & General
Topic: Riding the yield curve, in action
Replies: 40
Views: 3864

Re: Riding the yield curve, in action

odg:
No one wants to hear this. It would shake their obsession with bondmageddon and 100% stock portfolios!
by billyt
Sat Feb 08, 2014 6:30 pm
 
Forum: Investing - Theory, News & General
Topic: Riding the yield curve, in action
Replies: 40
Views: 3864

Re: Why Own Bonds at All?

You are wildly overstating your case. Maximum possibly remaining principal is a very unlikely outcome (1/# of runs). Look at the average remaining principal.
by billyt
Sat Feb 08, 2014 9:37 am
 
Forum: Investing - Theory, News & General
Topic: Why Own Bonds at All?
Replies: 492
Views: 31068

Re: Are Individual Bonds Right for You?

Vanguard does indeed have a Treasury index fund (VSIGX) that tracks The Barclays U.S. 3-10 Year Government Float Adjusted Index. It does not include TIPS, so you would need another fund for that.

What made you think Vanguard had no Treasury index?
by billyt
Thu Feb 06, 2014 5:27 pm
 
Forum: Investing - Theory, News & General
Topic: Are Individual Bonds Right for You?
Replies: 57
Views: 3071
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