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Re: Student Loan question regarding 'Pay Ahead Status'

So anyway, there is this policy (or scheme) called "Pay Ahead" Status. If I choose to pay more than my monthly rate, the additional payment DOES NOT GO to reducing the principal; it goes to the next month's payment (unless you inform them you want to be removed from the default 'Pay Ahead...
by market timer
Thu Jul 24, 2014 1:39 am
 
Forum: Personal Finance (Not Investing)
Topic: Student Loan question regarding 'Pay Ahead Status'
Replies: 1
Views: 33

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

All of them seem to focus on only leveraging stocks and ignore MPT which tells us that we get a higher risk-adjusted return by leveraging a balanced portfolio of stocks and bonds. I would argue that they are ignoring a fundamental piece of risk management. I agree with this. Summary: If you believe...
by market timer
Wed Jul 23, 2014 11:38 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 105
Views: 5041

Re: Is there any downside to investing in bond futures?

I am not an expert on bond futures, so I would appreciate corrections of any errors or bad assumptions I may have made here. It does look like it should be possible to take the same risk as a treasury mutual fund while earning around 0.5% more. That's a big % given present interest rates! Your numb...
by market timer
Wed Jul 23, 2014 10:53 pm
 
Forum: Investing - Theory, News & General
Topic: Is there any downside to investing in bond futures?
Replies: 73
Views: 1509

Re: Is there any downside to investing in bond futures?

Perhaps I was being a bit hasty there, but the risk of the interest rates shifting is always there for any bond investment, and that part is extremely well documented. But if we make the assumptions that none of us have a crystal ball with respect to interest rates, it makes sense to talk about two...
by market timer
Wed Jul 23, 2014 10:44 pm
 
Forum: Investing - Theory, News & General
Topic: Is there any downside to investing in bond futures?
Replies: 73
Views: 1509

Re: Reaching Severe Burnout - Can I Scale Back Career?

What if you just started working hours at your current job that you hope to find in your new career? The worst that can happen is they lay you off, pay you some severance, and you can collect unemployment while searching for something else. More likely, they give you a token bonus and stop promoting...
by market timer
Wed Jul 23, 2014 1:42 pm
 
Forum: Personal Finance (Not Investing)
Topic: Reaching Severe Burnout - Can I Scale Back Career?
Replies: 33
Views: 2212

Re: Is there any downside to investing in bond futures?

To be more concrete, if risk free was 0.25% and a 2 year treasury paid 1% (both annualized), we would expect the PV of a $100 bond to be $100/(1+0.75%)^2 = $98.52 and hence that would be the future contract price? If so, we could expect to earn both the $1.48 difference between now and maturity by ...
by market timer
Wed Jul 23, 2014 9:19 am
 
Forum: Investing - Theory, News & General
Topic: Is there any downside to investing in bond futures?
Replies: 73
Views: 1509

Re: How indexing let these retirees live footloose and fancy

If they are college educated and retired at age 38 that gives them what....15 years of social security earning history? Those upcoming social security checks aren't going to be very big. Social Security is highly progressive. You hit the first bend point around $400K lifetime income under SS cap. A...
by market timer
Wed Jul 23, 2014 3:55 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 34
Views: 3335

Re: Is there any downside to investing in bond futures?

So, in a nutshell, if you don't plan to take advantage of the leverage that bond futures allow you, you might as well buy the bond itself: it's no different. The tax treatment is also different, since interest income on a cash bond is converted to capital gains on the futures. This is valuable for ...
by market timer
Wed Jul 23, 2014 1:34 am
 
Forum: Investing - Theory, News & General
Topic: Is there any downside to investing in bond futures?
Replies: 73
Views: 1509

Re: Mortgage Prepayment Question

Your payment was probably received near the end of the statement period. For most of the month, interest accrued based on the higher balance. Next month, I think you'll see a much smaller allocation to interest.
by market timer
Wed Jul 23, 2014 12:26 am
 
Forum: Personal Finance (Not Investing)
Topic: Mortgage Prepayment Question
Replies: 33
Views: 1420

Re: Is there any downside to investing in bond futures?

Is it possible to look up what the implied rate on the futures somehow? Can I count on it being around the federal funds rate? If you have access to Bloomberg, you can look up the implied repo rate for the cheapest-to-deliver bond. I'd be curious to know if there are ways to get this info for peopl...
by market timer
Wed Jul 23, 2014 12:04 am
 
Forum: Investing - Theory, News & General
Topic: Is there any downside to investing in bond futures?
Replies: 73
Views: 1509

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

Yes, I agree with the rationale of Mortgage Your Retirement. In fact, I think OP's method of leveraging into a balanced fund makes more sense than a leveraged bet on equities, due to capturing the benefits of the term premium (positive expected return, negatively correlated with equities). Implemen...
by market timer
Sun Jul 20, 2014 10:46 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 105
Views: 5041

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

Won't the partial treatment of futures as short term capital gains end up wiping out most, if not all, of that 0.39% free lunch, unless you're market timing and never planned to hold your position for a full year? Johno was talking about holding the futures in an IRA. Taxes definitely complicate th...
by market timer
Sun Jul 20, 2014 12:18 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 105
Views: 5041

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

Won't the partial treatment of futures as short term capital gains end up wiping out most, if not all, of that 0.39% free lunch, unless you're market timing and never planned to hold your position for a full year? Johno was talking about holding the futures in an IRA. Taxes definitely complicate th...
by market timer
Sat Jul 19, 2014 1:01 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 105
Views: 5041

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

But aside from the tax problem, or say we're considering an IRA, you can also lever/delever with index futures and achieve a negative expense ratio, as follows. Say you have $200k to invest in stocks and *don't* want to lever. Put $150k in an FDIC insured money market account at .95%. Put the other...
by market timer
Sat Jul 19, 2014 12:18 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 105
Views: 5041

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

market timer, Is it fair to say that he (Market Timer) was day trading? Your approach is much more likely to be successful; however, keep in mind the behavioral risks that can be brought on from market volatility. Your timing is similar to mine in summer 2007, at an all-time stock market high. Also...
by market timer
Fri Jul 18, 2014 11:42 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 105
Views: 5041

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

Is it fair to say that he (Market Timer) was day trading? I agree that it is a very good example of how quickly leverage can destroy your entire portfolio. There are a few key differences between his approach and what I am proposing: 1) He was trading individual stocks (C, BAC, GE) and stock index ...
by market timer
Fri Jul 18, 2014 10:31 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 105
Views: 5041

Re: Ways to lose money and destroy personal wealth by invest

Spending so much time watching the market that it distracts you from your job, family, or education.
by market timer
Thu Jul 17, 2014 10:55 am
 
Forum: Investing - Theory, News & General
Topic: Ways to lose money and destroy personal wealth by investing
Replies: 81
Views: 9150

Re: Moving from Midwest to Coastal Cities: COL Adjustment?

Using an online calculator, here are a few examples (not knowing where you live now): $80,000 in origin city equals $X in NYC (Manhattan): Chicago - $151K Minneapolis - $163K Ann Arbor - $171K Cleveland - $176K Detroit - $184K Cincy - $191K Des Moines - $193 Columbus - $199K They couldn't (probably...
by market timer
Wed Jul 16, 2014 12:24 am
 
Forum: Personal Finance (Not Investing)
Topic: Moving from Midwest to Coastal Cities: COL Adjustment?
Replies: 25
Views: 2485

Re: Overseas Residents And the Affordable Health Care Act

Here is an earlier thread on this topic: viewtopic.php?f=2&t=137773

I'm living overseas permanently and losing my US insurance coverage soon, curious if there is anything that needs to be done now with regard to compliance with ACA.
by market timer
Tue Jul 15, 2014 11:20 pm
 
Forum: Personal Finance (Not Investing)
Topic: Overseas Residents And the Affordable Health Care Act
Replies: 10
Views: 1070

Re: Sell taxable account to pay down student loans?

Why would you accelerate student loan repayment when your mortgage has a higher interest rate? If anything, I'd pay down that loan first.
by market timer
Mon Jul 14, 2014 9:53 pm
 
Forum: Investing - Help with Personal Investments
Topic: Sell taxable account to pay down student loans?
Replies: 15
Views: 945

Re: Merton: 401(k) retirement plans face crisis

It's hard to forgive LTCM, and this does seem like it is based on the same core logic. How does one possibly draw this conclusion? I don't see anything in the logic of this plan that is even remotely related to core strategies employed at LTCM. What are the strategies you see that are the same? Obv...
by market timer
Sat Jul 12, 2014 12:03 pm
 
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 16791

Re: What after-tax income could you live on today?

Let's see: -Paid off condo with no property taxes, free gym and pool included -Health insurance through wife's employer -No job, therefore no commuting or dry-cleaning costs -No car Basically, all I have to buy is food. For me, personally, $5K/year would provide a pleasant life, albeit with no trave...
by market timer
Sat Jul 12, 2014 9:18 am
 
Forum: Personal Finance (Not Investing)
Topic: What after-tax income could you live on today?
Replies: 48
Views: 4863

Re: Merton: 401(k) retirement plans face crisis

Actually, my contention is that I should cruise right along, ending up with $ 1.5 million or more when I do retire in 10 years time. Then, generating $40k per year is a snap and does not require all the money in something like an SPIA. I understand what Merton and Bodie et al are saying, but I thin...
by market timer
Sat Jul 12, 2014 12:50 am
 
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 16791

Re: Finally an audience with my brother on Finances

jerome99 wrote:He asked my opinion based on my and other's experience on this forum. Responding with a "go do your own research" doesn't reflect well on the community in my opinon.

Why don't you suggest he register here and set up his own thread for advice?
by market timer
Thu Jul 10, 2014 11:48 am
 
Forum: Investing - Help with Personal Investments
Topic: Finally an audience with my brother on Finances
Replies: 33
Views: 4079

Re: Advice for how to fund my wedding

I vote option 2. Money you'll likely need in 3-5 years should not be invested in the stock market. As another person who had a wedding abroad, you're making me feel bad for not offering to pay my family's airfare. I don't think $45K is that much to spend for this occasion, and you'll probably get mo...
by market timer
Wed Jul 09, 2014 7:08 am
 
Forum: Personal Finance (Not Investing)
Topic: Advice for how to fund my wedding
Replies: 54
Views: 2666

Re: Easy careers to last me to retirement?

Go back to school, take out loans to cover living expenses, sign up for PAYE. speak of the devil... got my fall catalog from my local community college in the mail today. I already have a BS but there's a section about job skill certifications. low responsibility, no expectations since I'm new to t...
by market timer
Sun Jul 06, 2014 11:35 pm
 
Forum: Personal Finance (Not Investing)
Topic: Easy careers to last me to retirement?
Replies: 92
Views: 13466

Re: Pay down (not off) mortgage?

My plan is to accelerate pay down and every $ in extra principal I contribute I will count toward my bond allocation, although it shouldn't much matter because the amount I pay down will not be a lot relatively speaking. But this makes the most sense since in 1-5 years I will be realizing that mone...
by market timer
Sat Jul 05, 2014 10:33 am
 
Forum: Investing - Help with Personal Investments
Topic: Pay down (not off) mortgage?
Replies: 51
Views: 4360

Re: Pay down (not off) mortgage?

My plan is to accelerate pay down and every $ in extra principal I contribute I will count toward my bond allocation, although it shouldn't much matter because the amount I pay down will not be a lot relatively speaking. But this makes the most sense since in 1-5 years I will be realizing that mone...
by market timer
Sat Jul 05, 2014 3:32 am
 
Forum: Investing - Help with Personal Investments
Topic: Pay down (not off) mortgage?
Replies: 51
Views: 4360

Re: Why is the market portfolio a tangency portfolio?

It is then an assumption, hypothesis, corollary to EMH that says the Tangent Portfolio must be the Market Portfolio. The Tangency Portfolio is not merely called the Market Portfolio. It seems this also requires the assumption that agents are homogeneous. Heterogeneity in risk aversion would lead to...
by market timer
Fri Jul 04, 2014 10:53 am
 
Forum: Investing - Theory, News & General
Topic: Why is the market portfolio a tangency portfolio?
Replies: 35
Views: 1098

Re: Why is the market portfolio a tangency portfolio?

It is then an assumption, hypothesis, corollary to EMH that says the Tangent Portfolio must be the Market Portfolio. The Tangency Portfolio is not merely called the Market Portfolio. It seems this also requires the assumption that agents are homogeneous. Heterogeneity in risk aversion would lead to...
by market timer
Thu Jul 03, 2014 8:14 pm
 
Forum: Investing - Theory, News & General
Topic: Why is the market portfolio a tangency portfolio?
Replies: 35
Views: 1098

Re: Why is the market portfolio a tangency portfolio?

It is then an assumption, hypothesis, corollary to EMH that says the Tangent Portfolio must be the Market Portfolio. The Tangency Portfolio is not merely called the Market Portfolio. It seems this also requires the assumption that agents are homogeneous. Heterogeneity in risk aversion would lead to...
by market timer
Thu Jul 03, 2014 7:35 pm
 
Forum: Investing - Theory, News & General
Topic: Why is the market portfolio a tangency portfolio?
Replies: 35
Views: 1098

Re: Why is the market portfolio a tangency portfolio?

I think the most convincing proof was given by the 18th century economist Pangloss, who started with the premise that we live in the best of all possible worlds.
by market timer
Thu Jul 03, 2014 11:22 am
 
Forum: Investing - Theory, News & General
Topic: Why is the market portfolio a tangency portfolio?
Replies: 35
Views: 1098

Re: POLL: Mortgage as a negative bond

"Mortgage as a negative bond" doesn't mean this. Well then, just what does it mean? I've read this entire thread and I didn't see a definition, but it sure seems like people are talking about different things. Perhaps something along the lines of this: You consider the present value of yo...
by market timer
Tue Jul 01, 2014 8:56 am
 
Forum: Personal Finance (Not Investing)
Topic: POLL: Mortgage as a negative bond
Replies: 89
Views: 2901

Re: How do you afford to travel?

One thing not yet mention is going where the dollar is strong. I figure that overall there will be a rotation of countries with weak currency. Eventually, maybe even the Euro will weaken significantly more and we'll go on holiday there extensively. I'm not sure why people are so concerned about thi...
by market timer
Tue Jul 01, 2014 12:30 am
 
Forum: Personal Consumer Issues
Topic: How do you afford to travel?
Replies: 68
Views: 6174

Re: POLL: Mortgage as a negative bond

This question will become far more relevant if interest rates move significantly higher. People who otherwise might have prepaid their mortgage aggressively would be advised to pay the minimum and invest the difference in bonds for a risk-free profit. Those of us who consolidated student loans at su...
by market timer
Mon Jun 30, 2014 11:18 pm
 
Forum: Personal Finance (Not Investing)
Topic: POLL: Mortgage as a negative bond
Replies: 89
Views: 2901

Re: Loan Payoff Strategy, Which to Pay Off First

Actually after thinking about this more maybe putting in a larger down payment is not the way to go. So the loan on the primary house would be at 4.35% for a 1.2m balance loan. Only interest on 1m of that is deductible. I'm not sure of the calculations but will just try to explain what I'm thinking...
by market timer
Sun Jun 29, 2014 1:41 am
 
Forum: Investing - Help with Personal Investments
Topic: Loan Payoff Strategy, Which to Pay Off First
Replies: 29
Views: 1711

Re: A challenge to "risk free" pre-payment of Mortgages

As for how to value the put option, get a quote for PMI. For the typical homeowner with some equity, the more relevant option is the prepayment option. If interest rates fall, the borrower can refinance or just pay off the mortgage. That means the true cost of the mortgage is not simply the after-ta...
by market timer
Sat Jun 28, 2014 9:18 am
 
Forum: Investing - Theory, News & General
Topic: A challenge to "risk free" pre-payment of Mortgages
Replies: 17
Views: 1012

Re: Student loans- paid ahead status, pro-rating payments

gvsucavie03 wrote:Can you select which loan (bachelors or masters) you can pay additional payments to online?

My servicer allows this, provided the BA and MA loans have not been consolidated together.
by market timer
Thu Jun 26, 2014 8:37 pm
 
Forum: Personal Finance (Not Investing)
Topic: Student loans- paid ahead status, pro-rating payments
Replies: 15
Views: 850

Re: Student loans- paid ahead status, pro-rating payments

I've found it's better to try to make these payments online rather than dealing with a person--less chance of error. My student loan servicer allows me to select where my payment is applied. When I've prepaid loans selectively, it's been treated as yours, paid in advance. This reduces my required mo...
by market timer
Thu Jun 26, 2014 8:25 pm
 
Forum: Personal Finance (Not Investing)
Topic: Student loans- paid ahead status, pro-rating payments
Replies: 15
Views: 850

Re: SWR for 14 years

StarbuxInvestor wrote:Say you are going to retire at 56. At 70 you will take SS and pension which more than covers your expenses. What would you think a reasonable SWR would be for the 14 years between 56 and 70?

7% is doable.
by market timer
Thu Jun 26, 2014 7:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: SWR for 14 years
Replies: 17
Views: 1402

Re: Merton: 401(k) retirement plans face crisis

A couple points on TIPS and inflation: 1. Growth in personal expenditures is not the same as inflation. A good example of this is health insurance. We consume more health care as we age, therefore we should see our own health care expenses rising faster than inflation throughout our life--not just d...
by market timer
Thu Jun 26, 2014 7:10 pm
 
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 16791

Re: How do you afford to travel?

If both spouses have jobs with some travel, business trips can be combined with personal travel. That's how I got to visit Italy--my wife had a conference there.
by market timer
Thu Jun 26, 2014 11:05 am
 
Forum: Personal Consumer Issues
Topic: How do you afford to travel?
Replies: 68
Views: 6174

Re: Merton: 401(k) retirement plans face crisis

...an investment that is risk-free from an asset value standpoint may be very risky in income terms. What does this mean? Why can't you just cash in 4% (or whatever the SWR is) per year? Cash is the clearest example. If you retired in 2007 with $1mn in cash, you might have been earning 6% in a high...
by market timer
Wed Jun 25, 2014 9:54 pm
 
Forum: Investing - Theory, News & General
Topic: Merton: 401(k) retirement plans face crisis
Replies: 188
Views: 16791

Re: Location does matter when measuring asset allocation

To calculate the location-adjusted AA, what tax rate would one use for a taxable IRA from which one must take RMDs in a couple years? I have figured out what my taxes will likely be based on total income (RMDs, Social Security, Dividends, Interest, etc.) and total tax rate (Federal plus State) are ...
by market timer
Tue Jun 24, 2014 10:38 am
 
Forum: Investing - Theory, News & General
Topic: Location does matter when measuring asset allocation
Replies: 45
Views: 2977

Re: LMP at age 50 (help with TIPS Ladder)

How much income are you looking to generate from your annuity after age 80? Presumably, by delaying SS until age 70, you'll have enough monthly income to meet the necessities. I think a very conservative, TIPS-based LMP makes the most sense for people with modest portfolios, where most of the antici...
by market timer
Mon Jun 23, 2014 11:11 pm
 
Forum: Investing - Help with Personal Investments
Topic: LMP at age 50 (help with TIPS Ladder)
Replies: 26
Views: 1566

Re: Liability Matching Portfolio? Really?

Liabilities would be a mutually exclusive variable operating to the beat of its own drum. This is the key point: The volatility of liabilities is correlated with the volatility of certain types of assets. In particular, as real interest rates decline, the present value of your future liabilities in...
by market timer
Mon Jun 23, 2014 10:31 pm
 
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio? Really?
Replies: 71
Views: 6887

Re: Liability Matching Portfolio? Really?

So, in summary, my opinion is the most conservative of retirement investors, but still logical, investors implements a best-guess at a MVP of about 30% equities (though more recent guesses have this figure closer to 40%). Going to a full-blow TIPS/CDs/SPIA up to a LMP which will be the entire amoun...
by market timer
Mon Jun 23, 2014 11:08 am
 
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio? Really?
Replies: 71
Views: 6887

Re: Location does matter when measuring asset allocation

And again, I can agree in principle that there should be some adjustment but no one can say with any precision what my adjustment should be, and I am very sure it is much closer to 0% than 30%. It's probably something like 5% on the low end and 10% max over my lifetime, considering all possibilitie...
by market timer
Sun Jun 22, 2014 10:22 am
 
Forum: Investing - Theory, News & General
Topic: Location does matter when measuring asset allocation
Replies: 45
Views: 2977

Re: Location does matter when measuring asset allocation

Location matters because we are not indifferent between $1 in a Roth and $1 in a traditional IRA. The Roth dollar is more valuable, and should be weighted as such.
by market timer
Fri Jun 20, 2014 5:09 am
 
Forum: Investing - Theory, News & General
Topic: Location does matter when measuring asset allocation
Replies: 45
Views: 2977
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