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Re: Calculating Future income from Bond Fund in Retirement

Playing #Cruncher here :mrgreen: We miss you #Cruncher. How would you calculate a reasonable, conservative rate of return going forward? How does future "total return" fit into the equation? The best estimate is 5% going forward on the depreciated amount. Meaning 42.5k / year. Total return...
by ogd
Sun Mar 01, 2015 9:03 pm
 
Forum: Investing - Theory, News & General
Topic: Calculating Future income from Bond Fund in Retirement
Replies: 2
Views: 352

Re: Dividends and Market Slides

Do dividend paying stocks provide any measure of protection in a market downturn? The dividend yield is relatively low, but at least it's there. Does that provide any cushioning effect? Also, does the fact that many of the dividend paying companies tend to put them in the value category? If so, val...
by ogd
Sun Mar 01, 2015 5:28 pm
 
Forum: Investing - Theory, News & General
Topic: Dividends and Market Slides
Replies: 48
Views: 2370

Re: Dividends and Market Slides

But I've noticed that dividend enthusiasts frequently reject any kind of indexing or index fund approach. It is usually a stock-picking approach, with dividends simply being one of many considerations the stock-picker brings to his decisions. And here's I think where the dirty secret lies. The curr...
by ogd
Sun Mar 01, 2015 5:24 pm
 
Forum: Investing - Theory, News & General
Topic: Dividends and Market Slides
Replies: 48
Views: 2370

Re: Dividends and Market Slides

Yet, the claim that they fall equally as fast, in general, as non-dividend payers, seems to be false. It's true. Then, with a dividend on top of the share price, you're saying value stocks actually fall even farther and faster than growth stocks, measured by share price at least. Yes. To be precise...
by ogd
Sun Mar 01, 2015 5:16 pm
 
Forum: Investing - Theory, News & General
Topic: Dividends and Market Slides
Replies: 48
Views: 2370

Re: High Yield Corporate Bonds Have Less Interest Rate Risk?

The part about interest rate risk is likely true and there are plenty of reasons why, including inflation making it easier to pay debt or even the mathematics of yield / duration. However, since you're not in the business of running bond-only portfolios, you shouldn't consider this in isolation. The...
by ogd
Sun Mar 01, 2015 4:54 pm
 
Forum: Investing - Theory, News & General
Topic: High Yield Corporate Bonds Have Less Interest Rate Risk?
Replies: 10
Views: 488

Re: Dividends and Market Slides

Yet, the claim that they fall equally as fast, in general, as non-dividend payers, seems to be false. It's true. We invest in Vanguard to put an extra 0.50% or 0.65% of management fees in our pockets. Why turn away from a 1.95% dividend yield, even if the stocks fall as fast and as far? Because it'...
by ogd
Sun Mar 01, 2015 4:49 pm
 
Forum: Investing - Theory, News & General
Topic: Dividends and Market Slides
Replies: 48
Views: 2370

Re: Should pre-tax accounts still be prioritized here?

Yes, I think so. While the current situation is regrettable, one could later on come to regret not maxing out these savings options when they make much more income. One should never exclude leaving the current employer, but even if so there are still two other things that might improve the situation...
by ogd
Sun Mar 01, 2015 3:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should pre-tax accounts still be prioritized here?
Replies: 11
Views: 803

Re: Dividends and Market Slides

I came across this 40 point dividend info sheet on Dividend.com: http://www.dividend.com/dividend-education/40-things-every-dividend-investor-should-know/ Item #35 has a chart showing volatility of dividend paying S&P stocks vs. non-dividend paying S&P stocks (1972-2013), followed by this c...
by ogd
Sun Mar 01, 2015 2:21 pm
 
Forum: Investing - Theory, News & General
Topic: Dividends and Market Slides
Replies: 48
Views: 2370

Re: Dividends and Market Slides

In other words, if I have a business with the usual risks and I strive to pay $X a quarter from that business, it does not make the business any safer. But wouldn't an investment in the stock of said company be safer, especially if that company was not striving to make dividend payments but had ple...
by ogd
Sun Mar 01, 2015 1:25 pm
 
Forum: Investing - Theory, News & General
Topic: Dividends and Market Slides
Replies: 48
Views: 2370

Re: What is the BH consensus on international bonds?

Thanks, lack_ey. As I read more on this forum about allocations to bonds, I'm starting to wonder if a stable, steadier fund like the Short-Term Bond Index might be a much more effective way to control term risks than adding complexity by diversifying debt holdings across global markets. I wouldn't ...
by ogd
Sun Mar 01, 2015 1:13 pm
 
Forum: Investing - Theory, News & General
Topic: What is the BH consensus on international bonds?
Replies: 50
Views: 3333

Re: A European with only EUR investments - big mistake?

Is it worth taking currency risk USD-EUR just in order to be exposed (e.g. through an S&P 500 fund) to these truly amazing US companies without a comparable European equivalent? Yes, I think so. The historical view from the US, at least, is that taking currency risk in equities has been justifi...
by ogd
Sun Mar 01, 2015 1:06 pm
 
Forum: Investing - Help with Personal Investments
Topic: A European with only EUR investments - big mistake?
Replies: 5
Views: 377

Re: Dividends and Market Slides

If you reinvest dividends you will purchase more shares in a down market. This may accelerate the compounding effect. Dividend paying stocks have historically trounced non-dividend paying stocks in total return. This is even more pronounced in stocks that have a history of annual dividend increases...
by ogd
Sun Mar 01, 2015 12:52 pm
 
Forum: Investing - Theory, News & General
Topic: Dividends and Market Slides
Replies: 48
Views: 2370

Re: Bond Funds vs Individual Bonds

I understand the opportunistic money lost when the interest rates rise (when holding Individual bonds to maturity). But I have seen NAV of bond funds drop even without a interest rate change, eg, Bill Gross transition caused a steep drop in one of the pimco funds or some market rumor causing big mo...
by ogd
Sat Feb 28, 2015 7:41 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds vs Individual Bonds
Replies: 11
Views: 663

Re: Bond Funds vs Individual Bonds

I was just reading an answer to a bond question. They stated with interest rates being low, it made more sense to them to buy individual bonds (municipals) and hold them to maturity. This way the rise in interest rates didn't hurt them, if they held the bond to maturity. They didn't mention the mec...
by ogd
Sat Feb 28, 2015 4:50 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds vs Individual Bonds
Replies: 11
Views: 663

Re: Holding bond funds to average duration

I am confused by your post in general and this point in particular. I can't see how one can have a constant duration and not trade. (With the expectation for variable bonds, which of course have an duration of less than 1) The duration of a portfolio is approximately the average maturity of the fix...
by ogd
Fri Feb 27, 2015 2:11 pm
 
Forum: Investing - Theory, News & General
Topic: Holding bond funds to average duration
Replies: 20
Views: 1440

Re: Holding bond funds to average duration

Most portfolio manage to a index. If you invest in a long term bond fund the manager will try to keep the duration at around 7. They can't hold a bond to maturity. Once a bond gets to be about 5 years to maturity they need to sell it to buy a new 10 year bond. And of course people are always pullin...
by ogd
Fri Feb 27, 2015 12:54 pm
 
Forum: Investing - Theory, News & General
Topic: Holding bond funds to average duration
Replies: 20
Views: 1440

Re: Holding bond funds to average duration

At end of year 6, the principal is now $75,000 but yield is now 7%, for $5250 in annual interest, which is much higher than the initial 2% on $100,000 ($2000) So you're now making more money (ROI) on the $75000 than originally, but for $25,000 less principal.... It's in the right ballpark. Note tha...
by ogd
Thu Feb 26, 2015 8:30 pm
 
Forum: Investing - Theory, News & General
Topic: Holding bond funds to average duration
Replies: 20
Views: 1440

Re: Does 3-funds offer higher returns or lower risk?

New here and I have a question. I have recently moved to Vanguard after leaving USAA. Embarrassed that it took me this long to grow a brain. I currently am diversified in 4 Admiral Index Stocks. VTSAX, VTIAX, VBTLX, & VTABX. I also have some individual equities that are basically the "Hous...
by ogd
Thu Feb 26, 2015 7:26 pm
 
Forum: Investing - Theory, News & General
Topic: Does 3-funds offer higher returns or lower risk?
Replies: 33
Views: 3498

Re: International increase in Target Retirement & LifeStrate

And maybe they upped international bond because U.S. bond interest rates have been too low. I hope that's not the reason, and I hope the reason for upping international equity was not from expectations or forecasting. Ahem . Have you looked at the yields lately, of international bonds vs Treasuries...
by ogd
Thu Feb 26, 2015 7:19 pm
 
Forum: Investing - Theory, News & General
Topic: International increase in Target Retirement & LifeStrategy
Replies: 121
Views: 8239

Re: Why Bonds With 20 Year Horizon?

Diversifying across asset classes may provide better risk-adjusted returns. That may be true but if you believe that a stock will beat a bond over a 20 year period with 100% confidence, you have no reason to hold the bond. All that matters is the total return at the end. It doesn't matter if the st...
by ogd
Thu Feb 26, 2015 7:11 pm
 
Forum: Investing - Theory, News & General
Topic: Why Bonds With 20 Year Horizon?
Replies: 26
Views: 1999

Re: Holding bond funds to average duration

thanks for the replies. So it sounds like the rule of thumb is "be prepared to hold a bond fund until its average duration from the time of purchase, and if rates rise you will likely break even, possibly make a small profit, or if rates move again near the end of the period, have a small loss...
by ogd
Thu Feb 26, 2015 6:58 pm
 
Forum: Investing - Theory, News & General
Topic: Holding bond funds to average duration
Replies: 20
Views: 1440

Re: Holding bond funds to average duration

If you hold a bond fund to its average duration, regardless of rate changes, you should at least break even on your initial investment (correct?) No, this isn't quite right. A better statement would be that one would have to hold for the duration after the last change in interest rates. But this is...
by ogd
Thu Feb 26, 2015 5:34 pm
 
Forum: Investing - Theory, News & General
Topic: Holding bond funds to average duration
Replies: 20
Views: 1440

Re: International increase in Target Retirement & LifeStrate

Eeek. I don't quite like this and would much prefer it if Vanguard stopped mucking with the funds on a regular basis. This is a ding to my willingness to recommend LifeStrategy in particular in the future. For those accusing VG of market timing -- bear in mind that while the foreign stock increase m...
by ogd
Thu Feb 26, 2015 2:47 pm
 
Forum: Investing - Theory, News & General
Topic: International increase in Target Retirement & LifeStrategy
Replies: 121
Views: 8239

Re: Long Bond ETF Tax

For taxable bonds, accumulating capital gains on bonds bought at par is not an advantage (not to mention impossible over the long term). I don't understand your point. If you buy a taxable bond at par and sell it before maturity at a market premium you convert future interest payments taxed as ordi...
by ogd
Thu Feb 26, 2015 2:32 pm
 
Forum: Investing - Theory, News & General
Topic: Long Bond ETF Tax
Replies: 10
Views: 693

Re: Long Bond ETF Tax

It could well be that a 30-year Treasury after say 10 years has a higher yield than the current 20-year Treasury, in which case the former 30-year bond is worth more and would result in capital gains taxation upon sale. If you hold the bonds yourself, you don't have to sell unless you want to. In t...
by ogd
Thu Feb 26, 2015 2:09 pm
 
Forum: Investing - Theory, News & General
Topic: Long Bond ETF Tax
Replies: 10
Views: 693

Re: Transfer Vanguard MF to ETF equivalents?

The process (which is more appropriately called conversion ) does not alter the cost basis of the shares in any way. Normally we think of this as a good thing :mrgreen: In fact, if you've got a complicated tax situation it complicates it slightly more, as you now have to change all your calculations...
by ogd
Wed Feb 25, 2015 3:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Transfer Vanguard MF to ETF equivalents?
Replies: 5
Views: 315

Re: Picking a Vanguard fund

The ER and asset allocation of a fund are better indicators of future returns than are past returns. For index funds that track the same index, choose the one with the lower ER. Could you explain this further? Why is ER and asset allocation a better indicator than past returns of a fund that's been...
by ogd
Tue Feb 24, 2015 8:56 pm
 
Forum: Investing - Help with Personal Investments
Topic: Picking a Vanguard fund
Replies: 7
Views: 804

Re: Vanguard Wellesley Income Fund Admiral Shares (VWIAX)

This fund has enjoyed a 10.08% return since 1970 despite being over 60% bonds with an expense ratio of .25%. Is there any reason why the lazy investor wouldn't simply invest in this one "balanced" fund and call it good? It has better since inception returns than most other Vanguard select...
by ogd
Tue Feb 24, 2015 8:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard Wellesley Income Fund Admiral Shares (VWIAX)
Replies: 5
Views: 531

Re: Moving to Cash?

No, a "bundle" would be even better. Thank you! Which begs the question now, then why not go 7-10 yr, if I'll end up using the EWP anyway? From what I've seen, you don't get much more in direct CDs for 7 or 10 years, and the EWP's tend to be higher. But you could do that, yes. I also keep...
by ogd
Tue Feb 24, 2015 8:03 pm
 
Forum: Investing - Theory, News & General
Topic: Moving to Cash?
Replies: 24
Views: 1953

Re: Should I invest in Investor class or ETF?

There is a rule-of-thumb and it is this: If you have to ask, then use the mutual fund. Can someone elaborate on this rule-of-thumb? I'm curious. Read http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds#Trading_mechanics for example, and in general count how many of the ETF advantages vs Vanguard fu...
by ogd
Tue Feb 24, 2015 6:39 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I invest in Investor class or ETF?
Replies: 5
Views: 298

Re: Moving to Cash?

And it does feel like I'm somewhat buying insurance against a rise in rates by doing this, Just remember that the thing protecting you from higher rates is the early withdrawal option, nothing else. If you keep the CDs when higher rates are available you slowly bleed the same amount that bonds woul...
by ogd
Tue Feb 24, 2015 6:37 pm
 
Forum: Investing - Theory, News & General
Topic: Moving to Cash?
Replies: 24
Views: 1953

Re: Should I invest in Investor class or ETF?

Should I invest in Investor class or ETF first before I have enough money to invest in Admiral class in taxable account? Is there a break even point, rule of thumb or formula to calculate this? The er of many etfs is the same as Admiral. But since you cannot in-kind transfer etf to Admiral, you hav...
by ogd
Tue Feb 24, 2015 6:23 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I invest in Investor class or ETF?
Replies: 5
Views: 298

Re: Moving from Mutual funds to ETF's, WellsTrade?

I think you are right that WellsTrade won't let me buy with pending MF cash. I have 3 funds I'm dealing with in one account, the other 4 accounts at Wells are all ETF's. I don't recall the Fund tickers but they are the same as VTI (total stock market), BND (total bond) and VXUS (international). Hmm...
by ogd
Tue Feb 24, 2015 4:07 pm
 
Forum: Investing - Theory, News & General
Topic: Moving from Mutual funds to ETF's, WellsTrade?
Replies: 7
Views: 365

Re: Why Bonds With 20 Year Horizon?

In addition to the diminishing returns from the last 20% or so of stocks, the reasons that have me holding and recommending bonds even for long horizons are: 1) The horizon is not guaranteed. You could be facing extended unemployment or a big personal emergency at the very moment the market crashes;...
by ogd
Tue Feb 24, 2015 1:51 pm
 
Forum: Investing - Theory, News & General
Topic: Why Bonds With 20 Year Horizon?
Replies: 26
Views: 1999

Re: Moving from Mutual funds to ETF's, WellsTrade?

ETFs have a three day settlement period, and mutual funds only one day at every broker I know of. This means you can sell mutual funds and buy ETFs at the same time, despite not having the cash to cover the ETF purchase until a day later. You could technically do the sale two days later even, but th...
by ogd
Tue Feb 24, 2015 1:41 pm
 
Forum: Investing - Theory, News & General
Topic: Moving from Mutual funds to ETF's, WellsTrade?
Replies: 7
Views: 365

Re: A case for long term government bonds

Novice question here. Can anyone explain why has so much money gone into long term bonds despite the Fed expressing its intent to tighten? Since 12/31/13, the 10 year rate dropped from 3% down to 1.67% earlier this month and the 30 year dropped to 2.25%. Who is buying all these low-yielding long te...
by ogd
Tue Feb 24, 2015 1:19 pm
 
Forum: Investing - Theory, News & General
Topic: A case for long term government bonds
Replies: 40
Views: 3098

Re: REIT Allocation and Bond Fund Types Help !

If you own a home (which is definitely good for taxes and might change your bracket, if you have a mortgage), then there is even less reason to invest in REIT. I used to (in a taxable account), but the home investment now fulfills that role, in fact more real estate than I'd be comfortable with fro...
by ogd
Tue Feb 24, 2015 12:52 pm
 
Forum: Investing - Help with Personal Investments
Topic: REIT Allocation and Bond Fund Types Help !
Replies: 12
Views: 1285

Re: International Bonds

Going forward the return you should expect from this fund is in the neighborhood of 0.29% / year (0.37% for Admiral). This is worse than a 1% savings account (not CD) in any tax bracket, although of course the differences are still very small compared to other factors (like potentially that tax pla...
by ogd
Tue Feb 24, 2015 12:42 pm
 
Forum: Investing - Help with Personal Investments
Topic: International Bonds
Replies: 13
Views: 719

Re: International Bonds

When I consider the after tax return on the fed tax exempt fund and the fact that its liquid it would serve me better than a cd locked for any period of time. This fund is my dry powder fund with easy access should opportunity arise. I dont expect too muck return from this fund its just better than...
by ogd
Tue Feb 24, 2015 12:22 pm
 
Forum: Investing - Help with Personal Investments
Topic: International Bonds
Replies: 13
Views: 719

Re: REIT Allocation and Bond Fund Types Help !

GSC: you're welcome. You can read more about tax measures in http://www.bogleheads.org/wiki/Tax_basics Your tax bracket is high enough now that I'd consider a Traditional IRA rather than a Roth IRA. You can use the tax savings to augment your contribution to the taxable account. Also, since you pres...
by ogd
Tue Feb 24, 2015 12:15 pm
 
Forum: Investing - Help with Personal Investments
Topic: REIT Allocation and Bond Fund Types Help !
Replies: 12
Views: 1285

Re: International Bonds

Im trying to get an understanding of how Bogleheads feel about International Bonds. If its supposed to be about 10% for diversification purposes does it really make a difference. Im heavy into Intermed Term California Muni Bonds 88% of fixed income. I have a 12% allocation to Short Term Fed Tax Exe...
by ogd
Tue Feb 24, 2015 1:29 am
 
Forum: Investing - Help with Personal Investments
Topic: International Bonds
Replies: 13
Views: 719

Re: REIT Allocation and Bond Fund Types Help !

Hi and welcome to the forum! In the future, please post fund names not just symbols. You should keep an eye your tax bracket, I think it's 25% + California, which is probably 9.30% or maybe 8%. The gist of this is -- tax optimization and diversification are the only free lunches in investing and the...
by ogd
Mon Feb 23, 2015 6:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: REIT Allocation and Bond Fund Types Help !
Replies: 12
Views: 1285

Re: Brokerage + Mutual Fund Re-balance procedure

Yes I've looked into this after @retiredjg brought up a similar point earlier. I'm OK with investing in the Investor shares if possible since the cost is pretty insignificant. For both our Roth's, the international bond fund will have to be an ETF until each our accounts hits $75K...could be a few ...
by ogd
Mon Feb 23, 2015 12:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: Brokerage + Mutual Fund Re-balance procedure
Replies: 16
Views: 922

Re: T. Rowe Price Bond Index (PBDIX) and Vanguard Bond VBTLX

Without even claiming to be "enhanced", VG total bond market fund was a prime example for market timing errors not that long ago, so... we have to be careful of the glass-house thing. Wasn't aware of that. What was Total Bond doing? It was a sampling error not a market timing error. The f...
by ogd
Sun Feb 22, 2015 10:18 pm
 
Forum: Investing - Help with Personal Investments
Topic: T. Rowe Price Bond Index (PBDIX) and Vanguard Bond VBTLX
Replies: 21
Views: 987

Re: New to 401K- how to incorporate into existing 3 fund por

Ah, that certainly simplifies things. Then what I would do is a variant of #2 -- use the stock funds in the 401k because they are the cheapest. I'll still give a method because the relative sizes of the accounts will change. Background: http://www.bogleheads.org/wiki/Approximating_total_stock_market...
by ogd
Sun Feb 22, 2015 10:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: New to 401K- how to incorporate into existing 3 fund portfol
Replies: 4
Views: 383

Re: Only 2 Funds Needed - Wellington & Wellesley?

The third Wellington and Wellesley thread today? Ouch. Maybe we need a wiki. Here's my reply from the other two: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=159066&newpost=2387776#p2387776 A lot more is needed -- foreign stocks, not being at the whims of a single manager philosophy...
by ogd
Sun Feb 22, 2015 9:45 pm
 
Forum: Investing - Help with Personal Investments
Topic: Only 2 Funds Needed - Wellington & Wellesley?
Replies: 7
Views: 1276

Re: Brokerage + Mutual Fund Re-balance procedure

CRC301: before going into details, have you calculated the absolute dollar amounts that your use of ETFs is saving you? It might be surprisingly little and not worth doing the ETF settlement dance. See for example the calculation at the end of http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds#Vang...
by ogd
Sun Feb 22, 2015 7:13 pm
 
Forum: Investing - Help with Personal Investments
Topic: Brokerage + Mutual Fund Re-balance procedure
Replies: 16
Views: 922

Re: the Wellington group

but I believe most of us no matter how much we should disregard past performance we by human nature still look at funds previous 1-5-15 and since inception returns JD: do remember that in investing human nature is a negative not a positive. Its cost to investors, even those who are otherwise conser...
by ogd
Sun Feb 22, 2015 6:54 pm
 
Forum: Investing - Theory, News & General
Topic: the Wellington group
Replies: 8
Views: 1419

Re: New to 401K- how to incorporate into existing 3 fund por

It's an interesting situation. The conventional wisdom is to have all bonds in your 401k, but you have the problem that the higher expenses of PIMCO are eating almost all of your tax savings, although it's borderline. Consider: the expense advantage from using the stock index funds in 401k and Total...
by ogd
Sun Feb 22, 2015 6:44 pm
 
Forum: Investing - Help with Personal Investments
Topic: New to 401K- how to incorporate into existing 3 fund portfol
Replies: 4
Views: 383

Re: Buying ETF using Mutual Fund conversion

Why would you want to do that? VTI is free to trade at Vanguard and the bid/ask spreads so tiny that it's not worth picking up the phone. And elsewhere you can't convert MF to ETF.

Also, make sure to read all of http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds , including the Vanguard section.
by ogd
Sun Feb 22, 2015 6:20 pm
 
Forum: Investing - Help with Personal Investments
Topic: Buying ETF using Mutual Fund conversion
Replies: 4
Views: 295
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