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Re: Mortgage = negative bond, Rent = negative income?

looking at it as negative bond makes no sense The very fact of a mortgage is that you currently do not have the cash to purchase the object of desire (or it is a leverage) This is not necessarily the case. I could pay off my mortgage tomorrow if I wanted to, but it isn't in my interest to do so. I ...
by grabiner
Tue Apr 22, 2014 8:30 pm
 
Forum: Investing - Theory, News & General
Topic: Mortgage = negative bond, Rent = negative income?
Replies: 6
Views: 815

Re: Does RSP performance offset it's expense ratio?

RSP systematically buys losers and sells winners in order to maintain the equal weight scheme. A cap weighted midcap index doesn't do that. It does, but in a different way. Mid-cap stocks which grow become large-cap, and the index must sell them. Large-cap stocks which shrink become mid-cap, and th...
by grabiner
Tue Apr 22, 2014 8:22 pm
 
Forum: Investing - Theory, News & General
Topic: Does RSP performance offset it's expense ratio?
Replies: 12
Views: 670

Re: vtmfx-Vanguard Tax Managed Balanced Fund

I don't like this particular fund, even in a taxable account. It is tax-efficient as long as you hold it, but it is more likely to become inappropriate for your holdings because it locks you into a specific allocation. If you hold the balanced fund and want to sell bonds (to hold bonds in your retir...
by grabiner
Tue Apr 22, 2014 8:16 pm
 
Forum: Investing - Help with Personal Investments
Topic: vtmfx-Vanguard Tax Managed Balanced Fund
Replies: 3
Views: 477

Re: How is your Tax-Advantage Portfolio Different?

And I believe the Principle of Tax-Efficient Fund Placement is correct once you adjust for after-tax value . If you will retire in a 25% bracket, and you put $30,000 in a risky investment in your Roth IRA, you lose $15,000 if the investment loses half its value. If you put $40,000 in a traditional ...
by grabiner
Mon Apr 21, 2014 11:27 pm
 
Forum: Investing - Theory, News & General
Topic: How is your Tax-Advantage Portfolio Different?
Replies: 17
Views: 1023

Re: Why is it better to put stock funds in taxable accounts?

I use a three-fund portfolio with just Vanguard Total Stock Market (VTSAX), Total International (VTIAX), and Total Bond (VBTLX). My understanding of the recommendations for tax-efficiency would be to the Total Bond in tax-advantaged accounts as much as possible and Total International in taxable ac...
by grabiner
Mon Apr 21, 2014 10:56 pm
 
Forum: Investing - Theory, News & General
Topic: Why is it better to put stock funds in taxable accounts?
Replies: 10
Views: 1194

Re: How is your Tax-Advantage Portfolio Different?

1) Are there specific investments (if I owned them), that are better if inside a Roth rather than a SEP IRA? No, however Roth IRA space is limited and IMO precious. If you load up Roth IRA with very aggressive holdings, you can experience catastrophic declines in Roth IRA balances. For example, I h...
by grabiner
Mon Apr 21, 2014 10:51 pm
 
Forum: Investing - Theory, News & General
Topic: How is your Tax-Advantage Portfolio Different?
Replies: 17
Views: 1023

Re: paydown strategy for mortgage

Same situation here. We have a 2.75% mortgage with 9 years remaining. I calculated that it costs me 1.63% after tax because our state taxes use up our entire standard deduction, and therefore the entire mortgage is deductible. Vanguard Intermediate Term Tax Exempt Admiral is paying 2.03% after tax ...
by grabiner
Mon Apr 21, 2014 6:46 pm
 
Forum: Personal Finance (Not Investing)
Topic: paydown strategy for mortgage
Replies: 40
Views: 3027

Re: Tax cost of "one fund in taxable"

Grabiner, could you please specify what you would consider a "relatively low tax bracket" for the purposes of this discussion? My rule of thumb (not based on good data) is that munis are priced to break even with taxable bonds of comparable risk in a 25% bracket. Thus, if you are in a 25%...
by grabiner
Mon Apr 21, 2014 6:43 pm
 
Forum: Investing - Theory, News & General
Topic: Tax cost of "one fund in taxable"
Replies: 7
Views: 1022

Re: 529's not recommended

Re: 529 Plans The state tax deduction is relatively insignificant in the big picture, you only get that once and you pay the expense ratio 15 times if you start when a child in 5 yo. And you are paying the expense ratio every year on all the appreciation as well as 15 years on the original contribu...
by grabiner
Sun Apr 20, 2014 11:59 pm
 
Forum: Personal Finance (Not Investing)
Topic: 529's not recommended
Replies: 24
Views: 2728

Re: Do you use a dry powder/tactical asset allocation strate

I don't have dry powder as such, but I rebalance regularly. I made a stock purchase in October 2008, near the market bottom, because the falling market had taken me from my target 10% bond allocation to 14%, so I sold bonds to buy stock.
by grabiner
Sun Apr 20, 2014 10:15 pm
 
Forum: Investing - Help with Personal Investments
Topic: Do you use a dry powder/tactical asset allocation strategy?
Replies: 23
Views: 1802

Re: Taxable Acct Investing for 10-15yr Time Horizon

The allocation is different from the account. When you make the down payment, the payment amount should be 100% bonds, but your taxable account could still be 100% stock; you would then sell stock to make the down payment, and move bonds to stock in your 401(k) to keep the same stock allocation. No...
by grabiner
Sun Apr 20, 2014 7:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: Taxable Acct Investing for 10-15yr Time Horizon
Replies: 18
Views: 1495

Re: Tax cost of "one fund in taxable"

The cost of holding a balanced fund in taxable is not in holding the fund, but in changing the fund. If you have separate stock and bond funds in taxable, and you want to sell bonds (to spend the money, or to hold more stocks, or to hold a different type of bonds, or to hold bonds in a different acc...
by grabiner
Sun Apr 20, 2014 7:12 pm
 
Forum: Investing - Theory, News & General
Topic: Tax cost of "one fund in taxable"
Replies: 7
Views: 1022

Re: Silver, Gold or Cobra

Are these plans with the same insurer? This is probably the most important issue; if there are different doctors in the network, you want a plan which covers the doctors you see. If you have a large emergency fund, the higher deductible of the Silver plan is the best choice; the premium difference i...
by grabiner
Sun Apr 20, 2014 6:40 pm
 
Forum: Personal Finance (Not Investing)
Topic: Silver, Gold or Cobra
Replies: 4
Views: 590

Re: From Rags to Riches to Rags (NYTimes.com)

The author of the NYT piece conflates two very different things: realized income and wealth. "It turns out that 12 percent of the population will find themselves in the top 1 percent of the income distribution for at least one year. What’s more, 39 percent of Americans will spend a year in the...
by grabiner
Sun Apr 20, 2014 6:34 pm
 
Forum: Personal Finance (Not Investing)
Topic: From Rags to Riches to Rags (NYTimes.com)
Replies: 8
Views: 2384

Re: Taxable Acct Investing for 10-15yr Time Horizon

This is possible provided that it is consistent with your risk tolerance. You wouldn't want your home down payment to be 80% in stock, but it would be reasonable for your retirement funds to be 100% stock and your home down payment funds to be 40% in stock, which might result in an overall 80% allo...
by grabiner
Sun Apr 20, 2014 6:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Taxable Acct Investing for 10-15yr Time Horizon
Replies: 18
Views: 1495

Re: paydown strategy for mortgage

If it were long-term, I would have advised against paying it down, and suggested building a mortgage pay-down fund in municipal bonds which could be used to pay off the mortgage later if appropriate. (You are just as debt-free if you have no mortgage as if you have a $200K mortgage and $200K in bon...
by grabiner
Sun Apr 20, 2014 12:26 pm
 
Forum: Personal Finance (Not Investing)
Topic: paydown strategy for mortgage
Replies: 40
Views: 3027

Re: What Muni Bond in Taxable Brokerage Account

With this large a portfolio, you might also look at Vanguard NJ Long-Term Tax-Exempt (VNJUX for Admiral shares). It has a transaction fee at Fidelity, but the fee is a one-time cost for each purchase, and the 0.35% lower expenses and complete exemption from AMT may make up that difference. (Alternat...
by grabiner
Sun Apr 20, 2014 10:02 am
 
Forum: Investing - Help with Personal Investments
Topic: What Muni Bond in Taxable Brokerage Account
Replies: 7
Views: 737

Re: paydown strategy for mortgage

Why anyone would want to pay off a low rate, long term Mortgage escapes me. Are all your other housing expenses going to evaporate, too ? The mortgage is no longer long-term, given the discussion here. If it were long-term, I would have advised against paying it down, and suggested building a mortg...
by grabiner
Sun Apr 20, 2014 9:48 am
 
Forum: Personal Finance (Not Investing)
Topic: paydown strategy for mortgage
Replies: 40
Views: 3027

Re: M* caution on emerging markets dividend ETFs

(EEMS also includes 6% in India and 5% in Hong Kong, which are not in EEMS unless Hong Kong is considered part of China). Isn't that like saying, "The S&P500 is 94% American companies, unless Virginia is considered part of America"? :happy Data corrected: (EEMS also includes 6% in Ind...
by grabiner
Sun Apr 20, 2014 9:44 am
 
Forum: Investing - Theory, News & General
Topic: M* caution on emerging markets dividend ETFs
Replies: 15
Views: 1200

Re: M* caution on emerging markets dividend ETFs

livesoft wrote:And you own which of these (full disclosure)?


I don't own any of them, but I know that they are popular among international slice-and-dicers. My Roth IRA is full of US value and REITs, and I won't hold a dividend-weighted ETF in my taxable account.
by grabiner
Sun Apr 20, 2014 9:40 am
 
Forum: Investing - Theory, News & General
Topic: M* caution on emerging markets dividend ETFs
Replies: 15
Views: 1200

M* caution on emerging markets dividend ETFs

Be Cautious with Emerging Markets Dividend ETFs What I see as the most important caution: Using the MSCI Emerging Markets Index as a guide, the emerging markets are a group of around 20 countries scattered around the globe. These economies are more different than they are similar, as each has its o...
by grabiner
Sun Apr 20, 2014 12:38 am
 
Forum: Investing - Theory, News & General
Topic: M* caution on emerging markets dividend ETFs
Replies: 15
Views: 1200

Re: SPY vs VOO [SPDR S&P 500 Index vs. Vanguard 500 Index]

One that surprises me:

26. The average holding period for the 2050 Target Retirement Date ETF (TZY) is about 3 weeks

Target-date funds are supposed to be bought and held until 2050; who is trading it so actively? (Are institutions arbitraging TZY against the underlying assets?)
by grabiner
Sun Apr 20, 2014 12:16 am
 
Forum: Investing - Theory, News & General
Topic: SPY vs VOO [SPDR S&P 500 Index vs. Vanguard 500 Index]
Replies: 4
Views: 609

Re: paydown strategy for mortgage

Thanks everyone. The advice seems to be overwhelmingly supportive of paying down the mortgage in two years. A couple of additional data points that may still not change your advice. First, our interest rate is quite low at 2.75% on our fixed mortgage. At that rate, it wouldn't be worth paying down,...
by grabiner
Sun Apr 20, 2014 12:01 am
 
Forum: Personal Finance (Not Investing)
Topic: paydown strategy for mortgage
Replies: 40
Views: 3027

Re: Switching Banks

Credit card companies encourage you to use rewards cards for one reason, to get you to carry a balance and pay interest every month. For every boglehead that pays their balance in full (we carry three rewards cards and haven't paid credit card interest since 2004), there's probably 1000 customers t...
by grabiner
Sat Apr 19, 2014 11:56 pm
 
Forum: Personal Finance (Not Investing)
Topic: Switching Banks
Replies: 30
Views: 2416

Re: Taxable Acct Investing for 10-15yr Time Horizon

Thank you so much for the advice. Just to be clear, would you recommend something similar to the following: His Roth $75K in VTIAX (22.9% of Total Portfolio, Vanguard Total International Stock Market Index Fund, ER 0.14) $15K in VBTLX (4.6% of Total Portfolio, Vanguard Total Bond Market Index Fund,...
by grabiner
Sat Apr 19, 2014 11:52 pm
 
Forum: Investing - Help with Personal Investments
Topic: Taxable Acct Investing for 10-15yr Time Horizon
Replies: 18
Views: 1495

Re: paydown strategy for mortgage

Paying off a mortgage while maxing out your tax-deferred accounts is often a good idea, and since you can pay it off quickly, it's probably the right strategy. Essentially, paying off the mortgage is itself an investment; if you put $10,000 towards your 4% mortgage today, you will owe $10,816 less i...
by grabiner
Sat Apr 19, 2014 5:23 pm
 
Forum: Personal Finance (Not Investing)
Topic: paydown strategy for mortgage
Replies: 40
Views: 3027

Re: Question on borrowing from IRA

Thanks all. Yes I am under 59. I essentially need to liquidate 4k to show enough future cash reserves -about 6 months- on a mortgage (they don't consider funds kept in retirement). I'm finishing my residency and will be starting as an attending physician this summer. I don't actually need money to ...
by grabiner
Sat Apr 19, 2014 5:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Question on borrowing from IRA
Replies: 12
Views: 633

Re: Retirement defeasance

Why not buy some TIPS and view each future payment as its own zero? You happen to own all of them, but if you want TIPS STRIPS you have them, in effect. The coupons will help defease expenses in the earlier years, and the principal is for the later years. It shouldn't be so hard to plan all that ou...
by grabiner
Sat Apr 19, 2014 5:08 pm
 
Forum: Investing - Theory, News & General
Topic: Retirement defeasance
Replies: 29
Views: 2648

Re: Taxable Acct Investing for 10-15yr Time Horizon

Thanks Quickfoot, other than low expense ratios, are there any other drawbacks to be aware of with municipal bond funds? I used to have one a couple of years ago, but I don't have much experience with them. Would USAA Tax Exempt Fund (USATX) (ER 0.52) be a good option? The keys to any bond fund are...
by grabiner
Sat Apr 19, 2014 4:59 pm
 
Forum: Investing - Help with Personal Investments
Topic: Taxable Acct Investing for 10-15yr Time Horizon
Replies: 18
Views: 1495

Re: Taxable Acct Investing for 10-15yr Time Horizon

If your taxable account will be double what you need for your down payment (assuming normal market growth), you can keep your down-payment fund in your retirement account, and your taxable account all stock. Then, when you need to make the down payment, you can sell enough taxable stock to make the ...
by grabiner
Sat Apr 19, 2014 4:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: Taxable Acct Investing for 10-15yr Time Horizon
Replies: 18
Views: 1495

Re: Thoughts: Buy Muni's for an IRA?

the only muni bonds that might make sense to hold in an ira at this time would be ones with substantial prospects for capital gains. Yes , I am talking about Puerto Rico and/or Detroit but these investments are high risk high reward and it is unlikely you know more about their proospects than the p...
by grabiner
Fri Apr 18, 2014 10:36 pm
 
Forum: Investing - Theory, News & General
Topic: Thoughts: Buy Muni's for an IRA?
Replies: 4
Views: 474

Re: Extra Mortgage Payments and Emergencies

Welcome to the forum! If you make an extra payment towards principal on a mortgage, this does not eliminate the requirement to make regular payments in the future. (Depending on how your mortgage is set up, it may reduce the payments due; for example, on an ARM, the payment will reset annually based...
by grabiner
Fri Apr 18, 2014 9:46 pm
 
Forum: Personal Finance (Not Investing)
Topic: Extra Mortgage Payments and Emergencies
Replies: 1
Views: 404

Re: Let's play mortgage roulette!

Our broker is providing three options for us. I confess that the term "jumbo" loan scares me. I fear it is irresponsible or that we're somehow being taken. Please note we're in a HCOL, so our mortgage of $460,000 conforms (in our area, it must be under $470,000 to conform). Here are our t...
by grabiner
Fri Apr 18, 2014 9:43 pm
 
Forum: Personal Finance (Not Investing)
Topic: Let's play mortgage roulette!
Replies: 2
Views: 854

Re: Is it ever okay to use IRA to pay off student loan?

The decision you are making is another version of a very common decision: should you pay off a student loan or contribute to a Roth IRA? The disadvantage of paying off the student loan, in either situation, is that you will lose some tax-deferred savings. You can make that up in future years as long...
by grabiner
Fri Apr 18, 2014 8:32 pm
 
Forum: Personal Finance (Not Investing)
Topic: Is it ever okay to use IRA to pay off student loan?
Replies: 5
Views: 533

Re: Thoughts: Buy Muni's for an IRA?

This won't work. All withdrawals from an IRA are taxed at your regular tax rate, no matter what the IRA was invested in. (Similarly, in most states, IRA withdrawals are taxed even if the IRA was invested in Treasury bonds which are exempt from state tax.) Therefore, if you want to hold muni bonds, h...
by grabiner
Fri Apr 18, 2014 8:20 pm
 
Forum: Investing - Theory, News & General
Topic: Thoughts: Buy Muni's for an IRA?
Replies: 4
Views: 474

Re: Tried to get credit report - security questions don't ma

Edit: Equifax was the problem for me recently when I tried to open a Pentagon Federal CU account. Turns out Equifax did not have my most recent address. I was told that they are to be informed by the credit card companies about a new address. Anyway, I was glad to get that fixed. My Equifax report ...
by grabiner
Fri Apr 18, 2014 7:53 pm
 
Forum: Personal Finance (Not Investing)
Topic: Tried to get credit report - security questions don't match
Replies: 53
Views: 6097

Vanguard IRA Insights

Vanguard IRA Insights: are investors breaking from the traditional? There are three graphs in the article. 2/3 of all Vanguard IRA contributions are made to Roths, and this has been consistent for several years. (Allowing backdoor Roths doesn't have much effect here; before the backdoor was possibl...
by grabiner
Thu Apr 17, 2014 10:02 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard IRA Insights
Replies: 7
Views: 863

Re: High Yield Bonds as an Annuity?

David, is it the result of bonds in the portfolio literally defaulting, or is it a result of their market price dropping because investors see an impending default, and the fund manager selling at a loss rather than waiting for the default? Either one can happen. If a bond has a 50% chance of defau...
by grabiner
Thu Apr 17, 2014 9:51 pm
 
Forum: Investing - Theory, News & General
Topic: High Yield Bonds as an Annuity?
Replies: 23
Views: 1693

Re: Switching Banks

Thanks for the replies. Interesting about the recommendation to have more than one credit card. My credit rating is very good so I'm not trying to build it up and I prefer the simplicity of a single credit card, but I thought I had read somewhere that opening up additional credit cards was a negati...
by grabiner
Thu Apr 17, 2014 9:38 pm
 
Forum: Personal Finance (Not Investing)
Topic: Switching Banks
Replies: 30
Views: 2416

Re: Taxes owed in taxable account

Has VTSAX ever distributed capital gains? They certainly haven't recently. It hasn't distributed a capital gain since the ETF class was created, and the ETF class should allow it to avoid future gains. I have held Total Stock Market since 1997, and my records show that the last capital gain distrib...
by grabiner
Thu Apr 17, 2014 9:25 pm
 
Forum: Personal Finance (Not Investing)
Topic: Taxes owed in taxable account
Replies: 18
Views: 1014

Re: High Yield Bonds as an Annuity?

...I have seen discussions about the inherent NAV erosion in VWEHX, which apparently is something deliberate on the part of the Wellington managers. I can't remember the exact cause, though I believe it has something to do with managing bond purchases and sales only with income in mind, at a detrim...
by grabiner
Thu Apr 17, 2014 9:21 pm
 
Forum: Investing - Theory, News & General
Topic: High Yield Bonds as an Annuity?
Replies: 23
Views: 1693

Re: How is bond average maturity measured/reported

I believe that Vanguard and Morningstar calculate maturity differently for callable bonds; Morningstar uses final maturity, while Vanguard uses maturity adjusted for call provisions. Consider a bond issued in 2009 which matures in 2039 and which is callable in 2019. Since interest rates have fallen ...
by grabiner
Thu Apr 17, 2014 9:12 pm
 
Forum: Investing - Theory, News & General
Topic: How is bond average maturity measured/reported
Replies: 4
Views: 237

Re: How Are Catch Up Contributions Made?

I'm in the exact same boat. I max out my TSP and also max out a Roth with Vangaurd. I had previously heard that if you max max out the catch up contributions you lose the 5% agency max, is this true? If you max out contributions before the end of the year , you lose the match for the pay periods in...
by grabiner
Thu Apr 17, 2014 9:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: How Are Catch Up Contributions Made?
Replies: 15
Views: 1391

Re: Tried to get credit report - security questions don't ma

The same thing happened to me with Equifax. In April 2013, Equifax asked me, "You may have an auto loan, opened in or about March 2013. Which of these banks holds the loan?" I don't have one, but someone could have opened an auto loan in my name, which is why I want to check my Equifax cr...
by grabiner
Wed Apr 16, 2014 11:48 pm
 
Forum: Personal Finance (Not Investing)
Topic: Tried to get credit report - security questions don't match
Replies: 53
Views: 6097

Re: IRA Required Withdrawal and Tax Inefficiency

In the course of educating myself on personal finance I see that bond funds are recommended for regular IRAs because of bond tax inefficiencies. The income that bonds pay out then becomes deferred. However, my wife and I are at the age when we must take the required annual distribution from our IRA...
by grabiner
Wed Apr 16, 2014 10:40 pm
 
Forum: Investing - Theory, News & General
Topic: IRA Required Withdrawal and Tax Inefficiency
Replies: 9
Views: 909

Re: Asset Allocation in taxable account

Welcome to the forum! I'm active duty military and looking to invest in a taxable account with the purpose of building equity to be used to purchase a retirement home in 10-15 years. Will likely work approx. 10 years after military retirement but I do not want a mortgage once fully retired. Situatio...
by grabiner
Wed Apr 16, 2014 10:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: Asset Allocation in taxable account
Replies: 4
Views: 721

Re: I don't understand whether there are costs to rebalancin

My own strategy is to have a tolerance band for rebalancing, and only rebalance to the edge of the band. For example, if you have a 5% tolerance, you are willing to let your US stock be anywhere between 35% and 45% of your portfolio. With this tolerance, and with dividends not reinvested, you have r...
by grabiner
Wed Apr 16, 2014 10:13 pm
 
Forum: Investing - Help with Personal Investments
Topic: I don't understand whether there are costs to rebalancing
Replies: 16
Views: 1153

Re: B-shares

You should sell the B shares and not wait for them to convert to A shares. The reason is that you have already lost the redemption fee; it just hasn't been deducted from your account. For example, suppose you have a B share with a 5% redemption fee and a 1% 12b(1) fee which converts to an A share in...
by grabiner
Wed Apr 16, 2014 9:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: B-shares
Replies: 6
Views: 430

Re: Taxable account

Since you are using your taxable account for retirement, you should treat the taxable and tax-deferred accounts as a single portfolio. If you want to hold small-cap value, you could hold Small-Cap Value Index (which is available as a fund, or as the ETF VBR), but it would probably be better to hold ...
by grabiner
Wed Apr 16, 2014 9:53 pm
 
Forum: Investing - Help with Personal Investments
Topic: Taxable account
Replies: 2
Views: 393

Re: HSA cost benefit analysis

All I needed to see was the premium savings(2160-771.60 = 1388.40) plus the employer contribution($1,000), that's $2388.40 which is almost your deductible of $2,500? Am I missing something? You are missing something which makes it even more attractive; contributing to the HSA is tax-deductible, and...
by grabiner
Wed Apr 16, 2014 9:24 pm
 
Forum: Personal Finance (Not Investing)
Topic: HSA cost benefit analysis
Replies: 23
Views: 1664
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