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

For reference, I used Market Timer's numbers from a few posts above. Those numbers are problematic for this argument. Back in 2004 a 20 year Treasury was in fact yielding 5%, so it was able to support 5% margin interest through the period. But we're not in Kansas anymore. Maybe you can point to som...
by ogd
Thu Jul 24, 2014 11:17 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 135
Views: 6228

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

Rob Bertram wrote:For reference, I used Market Timer's numbers from a few posts above.

Those numbers are problematic for this argument. Back in 2004 a 20 year Treasury was in fact yielding 5%, so it was able to support 5% margin interest through the period. But we're not in Kansas anymore.
by ogd
Thu Jul 24, 2014 7:05 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 135
Views: 6228

Re: Dividend Growth Investing vs Index Funds

But if you can identify undervalued and overvalued stocks, you should be able identify them in any category. What's the big deal about dividends? Is there supposed to something that makes it easier to pick dividend stocks than any other kind? Here's my take on it: dividend growth investing makes it...
by ogd
Thu Jul 24, 2014 5:05 pm
 
Forum: Investing - Theory, News & General
Topic: Dividend Growth Investing vs Index Funds
Replies: 14
Views: 1075

Re: Dividend Growth Investing vs Index Funds

Why is the VIG investor paying "double the dividend taxes" of the VTI investor? VIG has an SEC yield of 2% and VTI yields 1.82%. The VIG yield is only about 10% higher than the VTI yield. The guy says his stock picked portfolio has about a 3.5% yield and this is a "tremendous advanta...
by ogd
Thu Jul 24, 2014 4:57 pm
 
Forum: Investing - Theory, News & General
Topic: Dividend Growth Investing vs Index Funds
Replies: 14
Views: 1075

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

Rob: good luck with the plan, but I still don't understand how you'll handle a rise in interest rates across the board to a flat 5% or so, which will lead to permanent losses to the leveraged bond position. "Permanent" because of the margin rate increasing accordingly, which never lets th...
by ogd
Thu Jul 24, 2014 11:56 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 135
Views: 6228

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

Rob: good luck with the plan, but I still don't understand how you'll handle a rise in interest rates across the board to a flat 5% or so, which will lead to permanent losses to the leveraged bond position. "Permanent" because of the margin rate increasing accordingly, which never lets the...
by ogd
Thu Jul 24, 2014 10:30 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 135
Views: 6228

Re: Susie Orman says buy individual Munis instead of Bond fu

I think it's well established that when it comes to investing Suze Orman doesn't quite know what she's talking about. She's not massively wrong, but wrong nonetheless. Her expertise is getting you out of a hole and she should leave the hill climbing to others (or her audience should).
by ogd
Thu Jul 24, 2014 10:24 am
 
Forum: Investing - Theory, News & General
Topic: Susie Orman says buy individual Munis instead of Bond funds
Replies: 15
Views: 2802

Re: Dividend Growth Investing vs Index Funds

In a nutshell: * An index investor wouldn't pick VIG, we'd pick VTI (total stock market etf) at 0.05% fees. That's $250 not $650. * I haven't poked around enough to figure out if this is all taxable, but if so he's paying double the dividend taxes each year. That's an extra $1750. This is massively ...
by ogd
Thu Jul 24, 2014 10:22 am
 
Forum: Investing - Theory, News & General
Topic: Dividend Growth Investing vs Index Funds
Replies: 14
Views: 1075

Re: Evaluating Vanguard CFP Recommendations

Yeah, frankly I'm a bit disappointed and a little concerned. I did discuss our situation and exposure to taxes and it doesn't seem like there was much thought to the plan presented. Longtimelurkers suggestion to just buy Life Strategy Mod growth is looking better and better. I'll at least save the ...
by ogd
Wed Jul 23, 2014 4:13 am
 
Forum: Investing - Help with Personal Investments
Topic: Evaluating Vanguard CFP Recommendations
Replies: 23
Views: 1732

Re: Pay down (not off) mortgage?

letsgobobby: in that case, if there is no chance of the school district decision being reversed (again) and tax arbitrage is not enough to eat up the difference, then I guess it makes sense to pay off. Such a sweet rate, though, wasn't it.
by ogd
Tue Jul 22, 2014 4:16 am
 
Forum: Investing - Help with Personal Investments
Topic: Pay down (not off) mortgage?
Replies: 53
Views: 4784

Re: To Tilt or Not to Tilt - Rick Ferri's Latest

The market isn't us stocks. It is all stocks. You are making a bet that US stocks are a better investment than foreign ones. As you say there are reasons to make those bets. But they are still bets against the global market. Not really, because there is a little cousin of relativity theory at work ...
by ogd
Mon Jul 21, 2014 1:22 pm
 
Forum: Investing - Theory, News & General
Topic: To Tilt or Not to Tilt - Rick Ferri's Latest
Replies: 72
Views: 6548

Re: incorporating bonds into our portfolio

I think the SSgA fund is a fine choice for the entirety of the bond allocation. Don't overthink this (re: using multiple funds), on the tax advantaged bond side your tweaks will make very little difference.
by ogd
Mon Jul 21, 2014 1:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: incorporating bonds into our portfolio
Replies: 6
Views: 739

Re: Pay down (not off) mortgage?

letsgobobby: the way I see it, it's not as simple as comparing rates. Imagine this: if the big one hits leading to loss of market & house values, and your job, you can sell fixed income investments to make monthly payments. Whereas, past mortgage prepayments will buy you no mercy. Liquidity matt...
by ogd
Mon Jul 21, 2014 1:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pay down (not off) mortgage?
Replies: 53
Views: 4784

Re: Take the plunge on long term treasuries vs. market timin

Toby: long-term Treasuries are significantly cheaper / higher yielding, which means the market is fully aware of the sensitivity and it's rewarding you handsomely for taking that term risk. A risk which, in turn, is quite positive for you at your high equity allocation since it balances out some of ...
by ogd
Mon Jul 21, 2014 12:22 pm
 
Forum: Investing - Help with Personal Investments
Topic: Take the plunge on long term treasuries vs. market timing?
Replies: 5
Views: 527

Re: Options/guidance for a lazy person to be fit

sorry ogd, I disagree. Jogging will do it. I've jogged over 30 years now. Started originally to lose weight, which came off rapidly, then got hooked on the buzz I got from it. I've been able to keep the weight off all these years by doing so. At your age, 10 years less than mine, get a stress test,...
by ogd
Fri Jul 18, 2014 8:02 am
 
Forum: Personal Consumer Issues
Topic: Options/guidance for a lazy person to be fit
Replies: 79
Views: 5322

Re: Expense Ratio Fee Index Fund vs ETF

See http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds . One reason for the discrepancy is that the mutual fund incurs management and trading expenses on the parent company, whereas the ETF is managed by the brokerage (often for a fee) and trading costs are borne by the investor through bid/ask spr...
by ogd
Fri Jul 18, 2014 3:45 am
 
Forum: Investing - Theory, News & General
Topic: Expense Ratio Fee Index Fund vs ETF
Replies: 5
Views: 561

Re: Options/guidance for a lazy person to be fit

Jerry: I have two big tips for losing that amount of weight when motivation is the big issue: 1) Find something to do at the gym while you burn calories. You can read a book on the bike or watch something on the other machines, like a sports game or Netflix on a tablet or smartphone. Then you can ev...
by ogd
Fri Jul 18, 2014 3:35 am
 
Forum: Personal Consumer Issues
Topic: Options/guidance for a lazy person to be fit
Replies: 79
Views: 5322

Re: recent brokered CD fluctuation

Also, for comparison, according to Samuel Lee (M*), the duration of a current 5-year CD is at most, 1.7 years, by his calculations. This is for direct CDs with an early withdrawal option, not brokered CDs. For the latter, duration is about 4.75 years. in_reality: the brokered CD market is very illi...
by ogd
Fri Jul 18, 2014 3:23 am
 
Forum: Investing - Theory, News & General
Topic: recent brokered CD fluctuation
Replies: 13
Views: 874

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

But the same applies to margin accounts. Let's say that you keep fixed income (cash, bonds, CDs, whatever) in a regular (unleveraged) account. And you also buy equities on margin in a leveraged account. You have X in fixed income investments, Y in equities, and Z in bond-like debt. X + Y - Z = X + ...
by ogd
Thu Jul 17, 2014 1:33 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 135
Views: 6228

Re: ETF Liquidity for the long term

Ironsides: the liquidity of an ETF depends much more on the liquidity on the underlying shares than the desirability / volume of the ETF itself. For the reasons that in_reality elaborated on.

If shares of the companies included in VOO aka S&P 500 become illiquid, all bets are off.
by ogd
Thu Jul 17, 2014 8:47 am
 
Forum: Investing - Theory, News & General
Topic: ETF Liquidity for the long term
Replies: 12
Views: 914

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

Doing that with bonds right now is fairly foolish. Say after tax your mortgage rate is 3%? You are getting 2.5% *at most* on safe US Treasuries. Negative carry spread => Do Not Do. Yes VT -- except that, like I was pointing out above, with the way mortgages are structured over here Treasuries are a...
by ogd
Thu Jul 17, 2014 8:44 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 135
Views: 6228

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

No matter how you put it, borrowing to invest in bonds, whether separately or the bond portion of a balanced fund, is counterproductive. In fact, leveraging while you hold any bonds at all doesn't make sense. With one hand you are getting paid 1.5% -ish for five year Treasuries, with the other you a...
by ogd
Thu Jul 17, 2014 4:33 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 135
Views: 6228

Re: Help me understand bond funds

bs010101: it goes like this: the fund will take an immediate drop in value of about 2.7%. However, it will start making higher yields immediately and compensate for the loss in a relatively short time. This is why you see the relatively smooth ride through interest rate changes. You should ignore th...
by ogd
Wed Jul 16, 2014 9:50 am
 
Forum: Investing - Theory, News & General
Topic: Help me understand bond funds
Replies: 5
Views: 820

Re: Thoughts on 100% stock allocation for 33 year old

My thought was that one could protect against all the relevant scenarios by holding TIPs rather than nominal treasuries. TIPs will do a bit worse during a deflationary crash, but not much. Investors would (currently) lose the expected ~2% inflation adjustment. TIPs are also likely to be less liquid...
by ogd
Tue Jul 15, 2014 10:42 am
 
Forum: Investing - Help with Personal Investments
Topic: Thoughts on 100% stock allocation for 33 year old
Replies: 85
Views: 6149

Re: In a crash, will you re-balance to maintain your target

I think next time I will. Last time I didn't because things were starting to look too blurry and I wanted a floor under that mess. What I did do was max the 401k at the beginning of 2009, all into stocks, which was of course the most rewarding money I ever put in the market. So I wasn't a complete c...
by ogd
Mon Jul 14, 2014 11:31 pm
 
Forum: Investing - Theory, News & General
Topic: In a crash, will you re-balance to maintain your target AA?
Replies: 64
Views: 4122

Re: New Investor - Looking To Play and Need Advice

What are we looking to do? Put as much as we can every month into an investment plan earning 15% return annually. That's our goal. Is that even possible? I hate to be the bearer of bad news, but 15% is impossible to get reliably. If you could do that, you'd be way ahead of professional investors an...
by ogd
Mon Jul 14, 2014 11:04 pm
 
Forum: Investing - Help with Personal Investments
Topic: New Investor - Looking To Play and Need Advice
Replies: 7
Views: 927

Re: Thoughts on 100% stock allocation for 33 year old

Just to expand on ogd's comment, investors who care about a written guarantee should not only buy bonds, but inflation adjusted bonds. Nominal bonds have and will experience losses that are as deep and are likely to last longer than those experienced by equities. berntson: thanks for the undeserved...
by ogd
Mon Jul 14, 2014 9:33 pm
 
Forum: Investing - Help with Personal Investments
Topic: Thoughts on 100% stock allocation for 33 year old
Replies: 85
Views: 6149

Re: Does anyone expect tilts to *under*perform?

This does not surprise me. Virtually all discussions of any asset class here are on a risk adjusted basis. Since I can dial in virtually any level of risk adjusted performance without going outside cheap TSM, cheap TBM, perhaps cheap MM, I do not rc even need to ask how an asset does nominally. Dit...
by ogd
Mon Jul 14, 2014 1:33 pm
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: Thoughts on 100% stock allocation for 33 year old

I'm 30 and my husband is 36 and we have 95% in stocks. We have both invested nearly 100% in equities since we started investing (separately) about 12 years ago. We both bought more - as much as we could - during the crash in 08-09. I've never even considered adding bonds until recently, with the ma...
by ogd
Mon Jul 14, 2014 1:16 pm
 
Forum: Investing - Help with Personal Investments
Topic: Thoughts on 100% stock allocation for 33 year old
Replies: 85
Views: 6149

Re: How do bond ETFs work wrt. rising interest rates?

Yes, bond ETFs are affected and will take temporary capital losses if interest rates do rise. Actually, the proper term is "bond yields" because "rates" usually refers to overnight Fed rates, which are presently stuck at zero. But bond yields are not at zero and in fact they anti...
by ogd
Mon Jul 14, 2014 1:10 pm
 
Forum: Investing - Theory, News & General
Topic: How do bond ETFs work wrt. rising interest rates?
Replies: 2
Views: 542

Re: Thoughts on 100% stock allocation for 33 year old

These 100% stocks threads are getting exasperating. Listen, there are two HUGE reasons other than psychology (itself not to be underestimated) to have some bonds: 1) you might need the money during a crash. As in, you get fired or get ill, both for the long term. The forced sale will be devastating ...
by ogd
Mon Jul 14, 2014 3:48 am
 
Forum: Investing - Help with Personal Investments
Topic: Thoughts on 100% stock allocation for 33 year old
Replies: 85
Views: 6149

Re: Does anyone expect tilts to *under*perform?

I mildly expect small to underperform going forward, if only because it's so richly valued. Not betting against it per se, but I did remove the last of a tilt I had for historical reasons (401k shape + outperformance). I am neutral on value because it's become such a thing. Would definitely not bet ...
by ogd
Sun Jul 13, 2014 6:49 pm
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: Brokered CD's vs Bonds

If you aren't going to sell, why do you care if their NAV fluctuates? Their value at maturity does not change, so how are non-brokered CDs better? Because if the interest rate rises significantly I may wish to sell. If I "sell" (break the CD) a non-brokered CD I just pay the EWP. If I sel...
by ogd
Sun Jul 13, 2014 11:27 am
 
Forum: Investing - Theory, News & General
Topic: Brokered CD's vs Bonds
Replies: 24
Views: 2649

Re: AAPL

Fundamentally you miss the point that mich doesn't want to sell the stock now, so you're recommendation is not in-line with the request. I'm not missing that point, it's why I said "or continue holding for tax reasons". I also think selling is best. I consider myself free torrecommend som...
by ogd
Sat Jul 12, 2014 4:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: AAPL
Replies: 156
Views: 34126

Re: AAPL

Sell the stock now or continue holding for tax reasons if he must, no option transaction. Then the rewards for risk are clear and you don't have to wonder whether that $9.70 was a good price. Which mich_bogle is probably in no position to determine compared to his Wall Street counterparts.
by ogd
Sat Jul 12, 2014 3:18 pm
 
Forum: Investing - Help with Personal Investments
Topic: AAPL
Replies: 156
Views: 34126

Re: AAPL

Yes, I too meant the stock is the risky asset. The problem is, once the stock hits the strike price you are left with a risky asset with no reward. When I sit on risky assets, I demand to be paid. And you ado get paid, no question about it. The advantage of the covered call is the $9.70. The questio...
by ogd
Sat Jul 12, 2014 2:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: AAPL
Replies: 156
Views: 34126

Re: AAPL

Again, for mich, or anyone, willing to hold the stock long term, regardless if it goes down, perhaps rather significantly, or not, and also willing to sell it at $100 if they are 'called' away, a covered call is the exact trade for this, whilst taking in a decent premium of $9.7 per contract, or $9...
by ogd
Sat Jul 12, 2014 1:48 pm
 
Forum: Investing - Help with Personal Investments
Topic: AAPL
Replies: 156
Views: 34126

Re: Dividend And Interest Distributions

Nerdicus: the simple answer to your question is that dividends reinvested would not go to waste if NAV depreciates, but they would lessen the blow commensurately. For example, if over a period the underlying assets pay 5% but depreciate 20%, the NAV of the fund only depreciates about 15%. So you're ...
by ogd
Fri Jul 11, 2014 12:18 am
 
Forum: Investing - Help with Personal Investments
Topic: Dividend And Interest Distributions
Replies: 15
Views: 1291

Re: AAPL

The delta will be very very close, and yes the seller ACCEPTS the fact that there is an opportunity cost and also downside risk, but in the end, by expiration, the stock above $100, they sell for $109.70. Stock below $100, they get the $9.7 TODAY and still hold the underlying, which the seller is p...
by ogd
Wed Jul 09, 2014 12:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: AAPL
Replies: 156
Views: 34126

Re: AAPL

As the stock significantly increases beyond $100, the likelihood of being called away is actually very high (one does not need to wait for expiration). In fact, can execute the transaction themselves, namely by selling the stock and buying the call back! This is a good purpose of covered calls, whe...
by ogd
Wed Jul 09, 2014 12:26 pm
 
Forum: Investing - Help with Personal Investments
Topic: AAPL
Replies: 156
Views: 34126

Re: Is Market on "Wrong Side of History"?

I think the writer is on the wrong side of history, and sadly the large amount of investors sitting on the sidelines. It would be far more worrying if there were none of those. Why would that be a good thing, no one left to buy?
by ogd
Wed Jul 09, 2014 12:06 pm
 
Forum: Investing - Theory, News & General
Topic: Is Market on "Wrong Side of History"?
Replies: 22
Views: 2693

Re: Which is the best Brazilian ETF?

Interestingly enough, Brazil is way up today, a wonder considering the nationwide depression (of the mental kind) and the increase chance for protests. Go figure.
by ogd
Wed Jul 09, 2014 12:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Which is the best Brazilian ETF?
Replies: 4
Views: 354

Re: Market Timing with the PE10

This is called tactical asset allocation. The category of funds attempting to do this (using complex computer models and math PhD's) have generally failed at it, including Vanguard's own which was failing spectacularly in the years before it was dismantled. Surely it can't be as simple as looking at...
by ogd
Wed Jul 09, 2014 12:01 pm
 
Forum: Investing - Theory, News & General
Topic: Market Timing with the PE10
Replies: 18
Views: 2251

Re: AAPL

For others curious about this strategy, I just executed a covered call sale. I was able to get $970 this way. If AAPL goes above $100 anytime in the next year, then I will automatically sell the stock -- which I would have done anyway. I've been researching them, and as best I can tell they are kin...
by ogd
Wed Jul 09, 2014 11:43 am
 
Forum: Investing - Help with Personal Investments
Topic: AAPL
Replies: 156
Views: 34126

Re: The Risk of Short-term Bond Funds

The "bonds are for safety" mantra can be understood in two ways: Narrow: I add bonds to my portfolio to have a portion with very low volatility. Holistic: I add bonds to my portfolio to reduce its volatility. A lot of the discussion above is occuring under the first interpretation, for som...
by ogd
Tue Jul 08, 2014 11:05 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10145

Re: isolation of risk in equities vs. Roth tax efficiency

In line with what Rob said above, the "Roth tax efficiency" is an illusion, the higher growth being entirely driven by the extra risk taken on the Roth side (i.e. volatility not diminished by the government's share). The real reason to prefer equities in Roth is RMDs: a pre-tax IRA may sur...
by ogd
Tue Jul 08, 2014 10:55 pm
 
Forum: Investing - Help with Personal Investments
Topic: isolation of risk in equities vs. Roth tax efficiency
Replies: 6
Views: 894

Re: Stick with Vanguard or take Fidelity "special deal"?

I tried to insert a screen shot of the relevant page but don't seem to know how to do that. But if you log on to your Vanguard account, go to "performance," and view month by month as a table, and then choose "1 year", you will get a table which gives you the last the present mo...
by ogd
Thu Jul 03, 2014 5:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: Stick with Vanguard or take Fidelity "special deal"?
Replies: 50
Views: 3061

Re: International stock allocation: currency risk

If currency risk was good on its own, they would have recommended market weights, but as it is it seems that it stops working for you at about 40% and above that your efficiency is heading back down, as the volatility from currencies exceeds the diversification benefits. The paper doesn't argue tha...
by ogd
Wed Jul 02, 2014 6:00 pm
 
Forum: Investing - Theory, News & General
Topic: International stock allocation: currency risk
Replies: 29
Views: 1319

Re: How risky is https: over public wi-fi?

Technically speaking, nothing is visible to the attacker. Browser might be showing URL, but as a protocol, URL is not in plain text. HTTPS starts with negotiating connection with the server first. Validating/accepting server certificates happens first. After that actual communication starts. All we...
by ogd
Wed Jul 02, 2014 5:53 pm
 
Forum: Personal Consumer Issues
Topic: How risky is https: over public wi-fi?
Replies: 15
Views: 2326

Re: International stock allocation: currency risk

Here is the quote from Larry's article: --- Finally, we need to discuss one reason for having a low allocation to international stocks: the currency risk it entails—a risk for which there is no risk premium. However, this isn’t a good reason, because currency risk is actually a two-way, not a one-w...
by ogd
Wed Jul 02, 2014 3:30 pm
 
Forum: Investing - Theory, News & General
Topic: International stock allocation: currency risk
Replies: 29
Views: 1319
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