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Re: Diversification among Bonds?

Dandy: this is a great starter example for me to expand on how fixed income thinking is so different than stock market considerations, and how it's so entirely dependent on personal factors -- tax rate, equity allocation and availability. But to say fixed income diversification is basically a waste ...
by ogd
Wed Nov 19, 2014 5:08 pm
 
Forum: Investing - Theory, News & General
Topic: Diversification among Bonds?
Replies: 17
Views: 1492

Re: Playing interest rates on treasury bonds

This is a very advanced trade and with all due respect, the fact that you considered 1 share for 1 share as an option does not fit the level of expertise required. I would not consider this trade myself for the same reason. The proper ratio that would cancel out parallel moves in the curve (leaving ...
by ogd
Wed Nov 19, 2014 4:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: Playing interest rates on treasury bonds
Replies: 1
Views: 174

Re: Poll: Net cost of your checking account annually?

I am in the fortunate $50+ profit camp here. No fees of any kind and interest YtD is $160 and my use is actually checking , i.e. a reasonable cushion of cash between deposits and bills and not a savings account. There are too few of us in this bucket. We need more people! Some of y'all from the -$50...
by ogd
Wed Nov 19, 2014 3:40 pm
 
Forum: Personal Finance (Not Investing)
Topic: Poll: Net cost of your checking account annually?
Replies: 44
Views: 2216

Re: how to make money like a billionaire

The other way in which billionaires are different, in addition to need/ability, is that most of them are heavily invested in the economy anyway, through their primary business. Leaving aside company founders, even a hedge fund manager's salary will eventually dry up if the economy goes down and stay...
by ogd
Wed Nov 19, 2014 2:51 pm
 
Forum: Investing - Theory, News & General
Topic: how to make money like a billionaire
Replies: 105
Views: 7474

Re: Diversification among Bonds?

Would this mindset change on the verge of retirement and starting the distribution phase? How about including a tips ladder and funding the continued rolling of a tips ladder 15 years out? Well, yes, what I said above should be restricted to "diversification among nominal bonds" (the OP o...
by ogd
Wed Nov 19, 2014 2:37 pm
 
Forum: Investing - Theory, News & General
Topic: Diversification among Bonds?
Replies: 17
Views: 1492

Re: Fund placement and expenses

Total $2,200/$300,000 = 0.73% weighted average ER Total $1,400/$300,000 = 0.47% weighted average ER For example, if stocks are expected to return 7% and bonds 4%, I keep thinking that 1% of 4% is 25% and therefore I should use the high ER in my stock fund. I think this thinking is incorrect and my ...
by ogd
Wed Nov 19, 2014 1:58 pm
 
Forum: Investing - Theory, News & General
Topic: Fund placement and expenses
Replies: 7
Views: 463

Re: Diversification among Bonds?

I think the value of bond diversification is frequently over-estimated by simple (and flawed) analogy with stocks. Bonds are most definitely not stocks. First off, in fixed income we have several assets that are for all intents and purposes 100% safe: Treasuries, bank products insured by FDIC and sa...
by ogd
Wed Nov 19, 2014 1:38 pm
 
Forum: Investing - Theory, News & General
Topic: Diversification among Bonds?
Replies: 17
Views: 1492

Re: 10 Reasons why Merriman dislikes Total Stock Mkt

It won't provide much protection in a bear market, but it will reduce the long term returns for young investors. That's the "glass half empty" view. How about the "glass half full": it won't reduce long term returns much, but it does provide some protection in a down market. Sud...
by ogd
Wed Nov 19, 2014 1:17 pm
 
Forum: Investing - Theory, News & General
Topic: 10 Reasons why Merriman dislikes Total Stock Mkt
Replies: 72
Views: 5847

Re: Investing In Currency?

If you want to "invest in currency" -- or let's call it "currency exposure" -- what you want is an asset that actually returns something. Otherwise, you have money earning zero expected *nominal* return, but with high volatility. From a risk efficiency perspective, this is very b...
by ogd
Wed Nov 19, 2014 1:07 pm
 
Forum: Investing - Help with Personal Investments
Topic: Investing In Currency?
Replies: 32
Views: 1776

Re: California Long Term Tax Exempt Fund - VCITX

For the stated purpose, I would say no. This fund is much longer than it looks from duration alone. It's a rather arcane discussion, but I can give you a short version: some of the bonds in the fund are callable , and likely to get called soon. Because of that, they are considered relatively short d...
by ogd
Tue Nov 18, 2014 6:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: California Long Term Tax Exempt Fund - VCITX
Replies: 1
Views: 364

Re: CA int municipal bond fund vs. Vanguard int muni fund

Ilan, I might go against the grain here, but I'd recommend that you stay where you are or even move in the direction of more diversification, not less. Like you, I'm in a high tax bracket with a large chunk of bonds in taxable. My own determination on how to do this is to hold no more than 50% of to...
by ogd
Tue Nov 18, 2014 2:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: CA int municipal bond fund vs. Vanguard int muni fund
Replies: 32
Views: 2115

Re: Investing in Bonds (VBMFX) now?

Thank you for your reply, what is your onion on Vbmfx total market bond duration 5.6 verse vbilx intermediate bond fund duration at 6.5 vbilx seems to have done better, but I was think of going with the total bond with a lower duration rate in case interest rates rise Thank you Either is fine. VBIL...
by ogd
Tue Nov 18, 2014 1:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: Investing in Bonds (VBMFX) now?
Replies: 8
Views: 1585

Re: Gold And Silver As A Currency Hedge?

Remove the word gold after mining. Mining is dangerous, Coal Baron Indicted For Role In Mine Disaster, so should we stop all mining? Let's not get political, this is about investing. Yes, but we do not have huge vaults of coal sitting around doing nothing. If we did, and we still mined, I'd feel th...
by ogd
Mon Nov 17, 2014 9:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: Gold And Silver As A Currency Hedge?
Replies: 125
Views: 8759

Re: Investing in Bonds (VBMFX) now?

I am at 100% stock with some longer term investment money , not retirement money. I want to move to a 80/20 , 20% bond, should I invest now in the VBMFX bond fund ? if interest rise any time soon ? or should I just put it in some shorter term bonds Yes, you should if 80/20 is your plan going forwar...
by ogd
Mon Nov 17, 2014 7:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: Investing in Bonds (VBMFX) now?
Replies: 8
Views: 1585

Re: Why I Like Index Funds

One purported minus of index funds is that since they are capitalization-weighted, they buy more of the stocks that are popular and have gone up a lot in value. In that sense, they chase winners. This does seem to be a form of running with the crowd. Several counterpoints: 1) The funds do not actua...
by ogd
Mon Nov 17, 2014 7:16 pm
 
Forum: Investing - Theory, News & General
Topic: Why I Like Index Funds
Replies: 26
Views: 3692

Re: Gold And Silver As A Currency Hedge?

"Horses" were "transportation" for 10,000 years. Until they weren't, and they won't be ever again. They are now "entertainment". Just because something was among the few viable currencies in the dark ages of humanity, when one couldn't count on any particular society to...
by ogd
Mon Nov 17, 2014 6:04 pm
 
Forum: Investing - Help with Personal Investments
Topic: Gold And Silver As A Currency Hedge?
Replies: 125
Views: 8759

Re: Why I Like Index Funds

Could you now list the reasons to not be in an index fund? A more balanced approach to discussing index funds is necessary to see the whole picture. Basically, complete and impartial data is always appreciated. You are well suited to give newbies a complete picture. Here is the only negative: 1) An...
by ogd
Mon Nov 17, 2014 5:47 pm
 
Forum: Investing - Theory, News & General
Topic: Why I Like Index Funds
Replies: 26
Views: 3692

Re: Vanguard vs IB for investment and IRA

The benefits of Vanguard IMHO are two-fold: 1) Access to the Admiral mutual funds. The comparison page of funds vs ETFs is here: http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds . Some people (like me) like the mutual funds much more than ETFs even as we understand and sometimes use the latter. 2...
by ogd
Mon Nov 17, 2014 1:17 am
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard vs IB for investment and IRA [Interactive Brokers]
Replies: 15
Views: 1697

Re: Explain purpose of bonds in low yields

Since interest rates are currently at rock bottom, bonds bought now have no price upside right? Like bonds purchased now could never really attain capital gains long term because lower yield bonds can't really occur or am I misunderstanding? This is beside the point, really. Bonds give you almost t...
by ogd
Mon Nov 17, 2014 1:03 am
 
Forum: Investing - Help with Personal Investments
Topic: Explain purpose of bonds in low yields
Replies: 10
Views: 789

Re: Guggenheim BulletShares High Yield Corporate ETFs

Ogd, You may be right, but checking in Morningstar, the average credit quality of BSJJ, HYG, and VWEHX (Vanguard High Yield Corporate fund) are the same, "B". Does that help you understand the risk? I am far from being an expert, but if Vanguard is considered a careful fund, then BSJJ can...
by ogd
Sat Nov 15, 2014 2:53 pm
 
Forum: Investing - Help with Personal Investments
Topic: Guggenheim BulletShares High Yield Corporate ETFs
Replies: 14
Views: 1113

Re: Guggenheim BulletShares High Yield Corporate ETFs

Sorry, but you are looking at the wrong ETF. The 2019 High Yield Corporate ETF is BSJJ, and had a SEC yield of 5.38%. Further, these instruments are specifically designed to be kept to maturity, so I do not see any point in discussing the impact of selling earlier. Ah, you are right. My bad. Howeve...
by ogd
Sat Nov 15, 2014 2:11 pm
 
Forum: Investing - Help with Personal Investments
Topic: Guggenheim BulletShares High Yield Corporate ETFs
Replies: 14
Views: 1113

Re: Guggenheim BulletShares High Yield Corporate ETFs

It's much simpler than that. BSCJ (the 2019 fund) pays 2.02% SEC yield and it will not make a penny more than that by 2019. It has considerable credit risk. It still has interest rate risk, in that if rates rise greatly in, say, 2016, you will not be able to take advantage of them. Only cash has no ...
by ogd
Sat Nov 15, 2014 12:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: Guggenheim BulletShares High Yield Corporate ETFs
Replies: 14
Views: 1113

Re: Why Not 100% Treasuries if your Risk is on the Equity Si

I think Bill Bernstein agrees with my definition. While higher treasury duration helps in "flight to quality" scenarios, it hurts if stocks tank due to a sharp increase in interest rates. Term risk is a form of risk. Like other risks, sometimes it helps but it can also hurt. Yes, but unli...
by ogd
Sat Nov 15, 2014 12:32 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why Not 100% Treasuries if your Risk is on the Equity Side?
Replies: 40
Views: 3577

Re: For the next year or so, why shouldn't we be in all-cas

So tell me what I got wrong, and right, with this iteration. And grateful thanks for your responses. What you got right is you can't be certain what will perform best going forward. This is always the case. What you got wrong is thinking that you can act productively based on vague misgivings about...
by ogd
Fri Nov 14, 2014 7:27 pm
 
Forum: Investing - Theory, News & General
Topic: For the next year or so, why shouldn't we be in all-cash?
Replies: 54
Views: 6668

Re: Donating appreciated securities

As to 3): you mean whatever the price is two days hence, I sell and buy at the same time, rather than having it sit in cash for the intervening two days. So whether the market goes up or down it doesn't matter - I take zero extra risk by being out of the market. If so then that makes me feel much b...
by ogd
Fri Nov 14, 2014 7:14 pm
 
Forum: Personal Finance (Not Investing)
Topic: Donating appreciated securities
Replies: 6
Views: 590

Re: Pick a bond fund for me

The other thing is in the bond market we have perfectly safe assets like Treasuries and bank products. So one could have their fixed income entirely in one asset (say, Treasuries of 12.5 years duration) and do just fine, whereas doing this in the stock market would be a very bad idea. Again, agreed...
by ogd
Fri Nov 14, 2014 6:05 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pick a bond fund for me
Replies: 14
Views: 1028

Re: Question about a Vanguard study I read (DCA vs LSI)

The caption is indeed wrong, the rest of the article makes this clear. The "subtracted from" should read "minus" or "after subtracting". It's possible that an editor changed the language before publishing for stylistic reasons, without realizing that it implied a sign r...
by ogd
Fri Nov 14, 2014 3:14 pm
 
Forum: Investing - Theory, News & General
Topic: Question about a Vanguard study I read (DCA vs LSI)
Replies: 3
Views: 614

Re: Donating appreciated securities

1) There is a small advantage in making the donation before the dividend. Instead of being paid to you as income, the dividend will "appear" as part of your deduction. This is implicit: stocks and funds have a slightly higher price before the dividend is paid, because everyone is pricing i...
by ogd
Fri Nov 14, 2014 1:37 pm
 
Forum: Personal Finance (Not Investing)
Topic: Donating appreciated securities
Replies: 6
Views: 590

Re: Pick a bond fund for me

That is an extremely important comment. So if we consider bonds to have risks of duration, default, and inflation, off hand, what are the incentives to incorporate exposure to each of these as opposed to avoiding all of those exposures by owning only short TIPS? How is this different from deciding ...
by ogd
Fri Nov 14, 2014 1:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pick a bond fund for me
Replies: 14
Views: 1028

Re: Why Not 100% Treasuries if your Risk is on the Equity Si

Remember that treasuries are not risk-free. Longer-term treasuries carry duration risk. Short-term treasuries are considered risk-free, but can of course still lag behind inflation. So when people talk about taking risk on the equity side, they usually man keeping your bonds both short and high qua...
by ogd
Fri Nov 14, 2014 1:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why Not 100% Treasuries if your Risk is on the Equity Side?
Replies: 40
Views: 3577

Re: Pick a bond fund for me

To the entire bond market. Thought that was implied, but apparently it was a stupid question. Thanks for the answer anyway. "Exposure" is often used to talk about "risk exposure", in which case one is justified in asking which risk exactly. "Coverage" would be a less a...
by ogd
Fri Nov 14, 2014 12:58 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pick a bond fund for me
Replies: 14
Views: 1028

Re: Vanguard ETF vs. Mutual Fund when expenses equal

I find Vanguard ETF's a lot more convenient for monthly rebalancing, and also are good for knowing that I am always getting Admiral expense ratios. For example, with most of the Vanguard mutual funds, after you sell, you need to wait 60 days before you can buy again. Wow! You are the only person wh...
by ogd
Fri Nov 14, 2014 12:52 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard ETF vs. Mutual Fund when expenses equal
Replies: 27
Views: 1671

Re: Dollar Cost Averaging For The Long Term

I am wondering the same thing because I am half in cash and don't know if dollar cost averaging for 12 months is the best plan. We are at a market all time high. Yikes. All long term perspectives are much appreciated. "All time high" is the natural state of the market. Inflation, producti...
by ogd
Thu Nov 13, 2014 9:39 pm
 
Forum: Investing - Theory, News & General
Topic: Dollar Cost Averaging For The Long Term
Replies: 6
Views: 857

Re: Check my logic on Capital Gains, Losses, Dividends, etc.

Now here is where I am trying to get clever: VEA dropped this year, so can I tax loss harvest the VEA now, reinvest in say the Europe and Pacific ETFs in appropriate proportions, and take the loss against my income? Then, next year, tax gain harvest (assuming I have adequate space) back into VEA an...
by ogd
Thu Nov 13, 2014 9:31 pm
 
Forum: Investing - Help with Personal Investments
Topic: Check my logic on Capital Gains, Losses, Dividends, etc.
Replies: 4
Views: 265

Re: Is buying organic worth it financially in the long term?

Almost certainly not, "financially". However as with all questions related to health and enjoyment, it might well be worth it. Consider these health questions, for example: * Would you accept a week of sickness / food poisoning for $X? * If you had a limp, would you forego surgery that fix...
by ogd
Thu Nov 13, 2014 7:35 pm
 
Forum: Personal Consumer Issues
Topic: Is buying organic worth it financially in the long term?
Replies: 124
Views: 5363

Re: Why would a European bother holding bonds in this climat

ogd, I have to ask - and I mean no offense, I'm just trying to understand - is looking at a bond's yield to maturity simply the equivalent of looking at the average P/E ratio of a stock ETF? How is it different, in the sense that both the yield to maturity and the P/E are measures of value? And whe...
by ogd
Thu Nov 13, 2014 12:23 pm
 
Forum: Investing - Theory, News & General
Topic: Why would a European bother holding bonds in this climate?
Replies: 18
Views: 1493

Re: Why would a European bother holding bonds in this climat

I should mention that to all of the above there is an exception for funds -- if the yield curve is steep (long maturities paying much more), the fund can extract through its dynamics extra return for free, that is without "borrowing" from the future. Details in this thread and links therei...
by ogd
Wed Nov 12, 2014 2:46 pm
 
Forum: Investing - Theory, News & General
Topic: Why would a European bother holding bonds in this climate?
Replies: 18
Views: 1493

Re: Why would a European bother holding bonds in this climat

Secondly, while I do get what you're saying to an extent, SYBC's stats tell me that if I had 10k in the fund on 1st January, it would now be worth 10,706 if I sold my shares right now - correct or incorrect? I mean, it says in black and white that the fund performance this year to date is 7.06%. Th...
by ogd
Wed Nov 12, 2014 2:43 pm
 
Forum: Investing - Theory, News & General
Topic: Why would a European bother holding bonds in this climate?
Replies: 18
Views: 1493

Re: Why would a European bother holding bonds in this climat

A couple of quibbles: Dividend yield is the coupon/share price. Which would be 7.5/113.7656 or 6.64% Thanks, I'd skipped over this detail. The point still stands at 10x the difference between the two yields. Not really, both dividend yield and YtM are forward looking, in that they only depend on th...
by ogd
Wed Nov 12, 2014 2:35 pm
 
Forum: Investing - Theory, News & General
Topic: Why would a European bother holding bonds in this climate?
Replies: 18
Views: 1493

Re: Should I avoid buying Vanguard ETFs?

marloweusa: short version of why ETFs have more favorable tax treatment is that their shares are created and destroyed in-kind, from underlying securities. When shares are destroyed, the ETF can hand over those shares with the lowest capital gains to the entity engaging in share destruction, without...
by ogd
Wed Nov 12, 2014 1:55 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I avoid buying Vanguard ETFs?
Replies: 12
Views: 1526

Re: Why would a European bother holding bonds in this climat

DXB: yield to maturity is The Truth (TM). It's what your share money are actually buying. In the US the SEC mandates that every fund disclose this figure as "SEC yield" so that proper comparisons between funds can be made, where dividend comparisons could be grossly misleading (as had been...
by ogd
Wed Nov 12, 2014 1:03 pm
 
Forum: Investing - Theory, News & General
Topic: Why would a European bother holding bonds in this climate?
Replies: 18
Views: 1493

Re: Should I avoid buying Vanguard ETFs?

In practice, it seems that ETF trading is more than enough to get rid of capital gains. It should be no surprise that ETF shares are traded much more frequently, ETF shareholders (not all, but many) are trading-happy by virtue of self selection. Ask your buddy to show you examples of stock ETFs that...
by ogd
Wed Nov 12, 2014 12:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I avoid buying Vanguard ETFs?
Replies: 12
Views: 1526

Re: Why are people so down on bonds?

The "sleep well at night" point regarding bonds makes little sense to me. Is investing in bonds actually just a psychological tool to help one stay the course? If so, this is even less a reason to invest in bonds if one is 5+ years from needing the spending the portfolio money. There are ...
by ogd
Wed Nov 12, 2014 11:41 am
 
Forum: Investing - Theory, News & General
Topic: Why are people so down on bonds?
Replies: 39
Views: 5933

Re: For the next year or so, why shouldn't we be in all-cas

I posted this in another thread today, which seemed to have silenced it. This is what you're so afraid of: Between 2003 and 2007, five year yields rose from 2.08% to 5.16%. The return of Total Bond Market vs cash looked like this: http://i.imgur.com/C9EWX0T.jpg The Prime Money Market fund, in green,...
by ogd
Mon Nov 10, 2014 8:23 pm
 
Forum: Investing - Theory, News & General
Topic: For the next year or so, why shouldn't we be in all-cash?
Replies: 54
Views: 6668

Re: Why do HY Savings and CD rates dominate short-term bonds

IMHO, the answers are, in order of importance: 1) The market has no access to bank products to "regulate" them FDIC insurance is a free gift to small investors Banks are trying to attract customers who they hope will stay long term There is an arbitrage opportunity, but selling Treasuries...
by ogd
Mon Nov 10, 2014 4:29 pm
 
Forum: Investing - Theory, News & General
Topic: Why do HY Savings and CD rates dominate short-term bonds?
Replies: 26
Views: 3017

Re: Bond selection in a taxable account

Ganacel: yes. I wouldn't even call bond switching "a thing". If anything, it's stocks that are unusual in that the value of capital gains tax deferral is so great that it really makes sense to plan long term. For bonds with the vast majority of return delivered at non-deferrable income tax...
by ogd
Mon Nov 10, 2014 4:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond selection in a taxable account
Replies: 8
Views: 1029

Re: Bond selection in a taxable account

shilla: I would not get any munis then. Even the 25% bracket is on the low end for brackets in which I'd consider munis; more importantly, you don't actually need to prepare for the higher tax bracket in advance, because when it comes to bonds it's easy to switch, they don't have much in the way of ...
by ogd
Mon Nov 10, 2014 2:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond selection in a taxable account
Replies: 8
Views: 1029

Re: Why are people so down on bonds?

OGD raised an excellent point, what really kills bonds is higher rates of inflation not so much interest rate increases. It also depends on if you are reinvesting the dividends or drawing on them to live on. Thanks for the nice words, nedsaid. I thought it was important to put in perspective what k...
by ogd
Sun Nov 09, 2014 11:17 pm
 
Forum: Investing - Theory, News & General
Topic: Why are people so down on bonds?
Replies: 39
Views: 5933

Re: Is Roth 401k better even if future tax bracket is lower?

ogd, I think your answer comes closest to answering my question, so thank you for your reply. My Roth IRA and work 401k are both maxed out and the fact is that I would not/do not invest any $$ saved in current taxes from my 401k (at least not for now). You're welcome. It's your choice to spend the ...
by ogd
Sun Nov 09, 2014 8:58 pm
 
Forum: Investing - Help with Personal Investments
Topic: Is Roth 401k better even if future tax bracket is lower?
Replies: 26
Views: 2824

Re: Is Roth 401k better even if future tax bracket is lower?

I do understand tax deferred vs. tax free. Say I do invest ROTH instead of traditional....all of the growth of the ROTH is tax free. Either way, I am investing the same amount - either ROTH or traditional in those retirement accounts. Sure I pay my taxes now with the traditional, but that is minisc...
by ogd
Sun Nov 09, 2014 8:41 pm
 
Forum: Investing - Help with Personal Investments
Topic: Is Roth 401k better even if future tax bracket is lower?
Replies: 26
Views: 2824
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