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by ogd
Fri May 22, 2015 6:03 pm
Forum: Investing - Help with Personal Investments
Topic: Single family homes Vs bonds for retired
Replies: 5
Views: 175

Re: Single family homes Vs bonds for retired

I am retired and have a good portion of retirement savings in bonds that look like they are going nowhere. I can buy a $100,000 CD or bond that yields little. I can buy a single family house that yields 10% before expenses - which I can minimize. If I get tired of the hassle I can turn it over to a...
by ogd
Fri May 22, 2015 6:00 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 47
Views: 4897

Re: Not your father's Total Bond Market Fund anymore

Undoubtedly the increase in Treasuries that Grabiner mentioned is a large part of the reason for the change. The MBS market has also changed as has the credit segment of the market. Do we need to rethink the idea that the Bar Cap Agg Index (not some fund) still adequately represents the high qualit...
by ogd
Fri May 22, 2015 2:30 pm
Forum: Investing - Theory, News & General
Topic: Silver lining for bond fund NAV declines?
Replies: 33
Views: 2599

Re: Silver lining for bond fund NAV declines?

The question is when can I expect to be able to get my principal back. Many seem to think that the average duration tells you that. My observation was that there are significant fluctuations in NAV which are for practical purposes pretty random (such as sentiment and economy related) and not compen...
by ogd
Fri May 22, 2015 2:22 pm
Forum: Investing - Theory, News & General
Topic: Silver lining for bond fund NAV declines?
Replies: 33
Views: 2599

Re: Silver lining for bond fund NAV declines?

Ogd, You don't see the error in your statement that "Its only defaults that bring down the NAV without higher yields" because you use an incomplete concept of NAV computation. A more accurate computation of NAV is that NAV = market value of assets + revenue - expenses. If there is a liqui...
by ogd
Fri May 22, 2015 12:57 am
Forum: Investing - Help with Personal Investments
Topic: Are ETFs better for tax gain harvesting?
Replies: 6
Views: 476

Re: Are ETFs better for tax gain harvesting?

See http://www.bogleheads.org/wiki/Frequent_trading_policy . I'd rather have some inconvenience for gain harvesting than being stuck with ETFs once your bracket goes up. But I admit that I haven't thought about gain harvesting much. And you can always use alternate funds that are very much alike the...
by ogd
Fri May 22, 2015 12:51 am
Forum: Investing - Theory, News & General
Topic: Silver lining for bond fund NAV declines?
Replies: 33
Views: 2599

Re: Silver lining for bond fund NAV declines?

ogd, Your statement is not true because you ignore the real world operation of funds. Funds like most things in life work on cash not yield. Funds have real expenses that must be paid. A panic induced run on a fund can cause a loss in liquidity. In matters not if the yield on remaining bonds goes u...
by ogd
Thu May 21, 2015 2:48 pm
Forum: Investing - Theory, News & General
Topic: Silver lining for bond fund NAV declines?
Replies: 33
Views: 2599

Re: Silver lining for bond fund NAV declines?

Ogd said: "It's only defaults that bring down the NAV without higher yields". I don't believe this is correct. If there is a run on a fund during a panic, they may be forced to sale assets at the depressed NAV rate. Once sold there is no yield rate increase benefit. TJSI Yes, but the outg...
by ogd
Thu May 21, 2015 2:01 pm
Forum: Investing - Theory, News & General
Topic: Silver lining for bond fund NAV declines?
Replies: 33
Views: 2599

Re: Silver lining for bond fund NAV declines?

The problem is that the NAV of bond funds fluctuates significantly for various reasons, and some of these reasons are not directly related to increases or decreases in the income provided by the bonds in the fund. For example, take a look at the CA muni bond fund VCADX. Its NAV fluctuated by 3% ove...
by ogd
Thu May 21, 2015 12:40 pm
Forum: Investing - Help with Personal Investments
Topic: Bond Funds in Rising Interest Rate Environment
Replies: 11
Views: 696

Re: Bond Funds in Rising Interest Rate Environment

Only if it is a defined maturity fund. If you buy a bond fund that rolls its bonds to keep duration roughly constant, then you will be hurt if interest rates rise sharply just before you plan on pulling the money out. By contrast, a defined maturity fund that matures when you want to get the money ...
by ogd
Thu May 21, 2015 12:33 pm
Forum: Investing - Theory, News & General
Topic: Not your father's Total Bond Market Fund anymore
Replies: 47
Views: 4897

Re: Not your father's Total Bond Market Fund anymore

In other news, Vanguard Total International Index has underperformed the category average in the last few years despite the cost advantage because it has emerging markets. Whereas in most fund families emerging is split into a separate category. I predict that there'll be a period when small stocks ...
by ogd
Thu May 21, 2015 12:23 pm
Forum: Investing - Help with Personal Investments
Topic: Bond Funds in Rising Interest Rate Environment
Replies: 11
Views: 696

Re: Bond Funds in Rising Interest Rate Environment

From the reading I have done, it would seem that the value of a bond fund would decrease as interest rates rise. As interest rates continue to rise, the fund would continuously have bonds maturing that would then be reinvested in higher rate bonds. After the initial dip it would seem that bond fund...
by ogd
Thu May 21, 2015 1:48 am
Forum: Investing - Theory, News & General
Topic: suitability of Vanguard Target retirement funds
Replies: 9
Views: 1086

Re: suitability of Vanguard Target retirement funds

While I'm not surprised that Target Retirement distributes capital gains every now and then, there are a couple of mitigating factors. 1) Like HurdyGurdy says, the bond fund has been distributing gains. These are actually GOOD for you, because the alternative would be to keep premium bonds in the fu...
by ogd
Thu May 21, 2015 1:29 am
Forum: Investing - Theory, News & General
Topic: Silver lining for bond fund NAV declines?
Replies: 33
Views: 2599

Re: Silver lining for bond fund NAV declines?

Latestarter: "income return" is not the yield that goes up when NAVs go down. That would be the SEC yield, or its equivalent for individual bonds, YtM. This, in a simplified view, is composed of coupons ("income return") and a certain amount of capital return. The latter is a fun...
by ogd
Wed May 20, 2015 4:30 pm
Forum: Investing - Theory, News & General
Topic: Stocks and Bonds and Cash Rebalancing
Replies: 2
Views: 270

Re: Stocks and Bonds and Cash Rebalancing

The cash deals you have at 2-3% are very likely to beat market bonds. Safe bonds have low yields worldwide,and the market also values the term difference between short and long bonds quite richly. Since you're getting this difference for free (short term with yields more typical of long bonds), you ...
by ogd
Wed May 20, 2015 2:56 am
Forum: Investing - Help with Personal Investments
Topic: I Think I Blundered On My Munis (??)
Replies: 13
Views: 1795

Re: I Think I Blundered On My Munis (??)

A bit of a headache at tax time, but again it should be reasonable with Vanguard's help. Can you explain on this? I'm a bit dense tonight. Before 2012, brokers were not required to track cost basis. So when you finally sold (say, in a couple of different transactions), you were on your own trying t...
by ogd
Wed May 20, 2015 2:48 am
Forum: Investing - Help with Personal Investments
Topic: Should I sell my company's stock and exchange it for an SP500 index fund?
Replies: 60
Views: 3454

Re: Should I sell my company's stock and exchange it for an SP500 index fund?

For people who are saying "this is stock picking criteria" -- it seems to not make sense that the sell-sell-sell advice will be the same regardless of whether I work for a company like DIS, AAPL, and WFC or if I work at Zynga or Radioshack. I think it's irrational to think of every compan...
by ogd
Tue May 19, 2015 5:27 pm
Forum: Investing - Help with Personal Investments
Topic: I Think I Blundered On My Munis (??)
Replies: 13
Views: 1795

Re: I Think I Blundered On My Munis (??)

Example. A TSM quarterly dividend is reinvested and we TLH the next day. If part of the TLH is to also sell the dividend just received, then we don't have any replacement shares purchased within 30-days, so no wash sale issue. Unfortunately, the above doesn't work for TE funds because of the below:...
by ogd
Tue May 19, 2015 3:54 pm
Forum: Investing - Help with Personal Investments
Topic: Should I sell my company's stock and exchange it for an SP500 index fund?
Replies: 60
Views: 3454

Re: Should I sell my company's stock and exchange it for an SP500 index fund?

You should absolutely sell. Diversification is the only free lunch in the market -- you get to reduce risk while receiving the same risk-adjusted returns as you did before. It diminishes after the first N companies, but at 50% stocks in a single company the risk reduction effect is strong and very m...
by ogd
Tue May 19, 2015 3:30 pm
Forum: Investing - Help with Personal Investments
Topic: Performance of portfolios during 2008 crash
Replies: 18
Views: 1893

Re: Performance of portfolios during 2008 crash

Hi all, Please do not use the LifeStrategy funds for arguments about asset allocation returns before fall 2011. The funds contained a market-timing fund (Vanguard Asset Allocation), which performed horribly. If it makes you feel better, the funds were AFAIK viewed with suspicion over here back then ...
by ogd
Tue May 19, 2015 3:22 pm
Forum: Investing - Help with Personal Investments
Topic: Keeping long term bonds
Replies: 4
Views: 431

Re: Keeping long term bonds

One bond pays 5.82% and matures at the end of 2029. It’s currently worth $24,000. The second bond pays 5.85% and matures in August 2024. It’s currently worth $23,000. What is the yield to maturity (YtM) on these bonds? If face value was exactly $20K (which may or may not the case), the yields would...
by ogd
Tue May 19, 2015 3:14 pm
Forum: Investing - Help with Personal Investments
Topic: I Think I Blundered On My Munis (??)
Replies: 13
Views: 1795

Re: I Think I Blundered On My Munis (??)

It's not the worst blunder I can think of. In fact, I've done it myself and at a far worse time -- before 2012 and the advent of mandatory cost basis tracking rules. These days, those little tax lots and wash sales are still a pest, but Vanguard will do most of the work for you. The second blunder i...
by ogd
Tue May 19, 2015 2:08 pm
Forum: Investing - Help with Personal Investments
Topic: Question for muni investors
Replies: 6
Views: 626

Re: Question for muni investors

* guaranteed return of principal at a known yield ... * no participation in rising yields ... * yield not guaranteed I think the points above arise from an incomplete (or overly simplified) view of the behavior of bonds with respect to market yields. In reality, the prices and yields of even indivi...
by ogd
Tue May 19, 2015 1:25 pm
Forum: Investing - Theory, News & General
Topic: criteria for picking an active fund
Replies: 22
Views: 1458

Re: criteria for picking an active fund

2) The screen I used is for initial fund selection not used to eliminate funds that I already have. The killer rule is not all that relevant after the fact. I misunderstood then. I thought it was a rule to eliminate "dogs" from the sled team a.k.a. portfolio. I read the Morningstar findin...
by ogd
Mon May 18, 2015 10:59 pm
Forum: Investing - Help with Personal Investments
Topic: What do I do with my muni bond fund interest?
Replies: 9
Views: 819

Re: What do I do with my muni bond fund interest?

Hi all. Currently, I have a substantial sum of money in the New York Long Term Tax Exempt Muni Bond fund (VNYUX). For the past three years, I've been rolling the interest over into the New York Tax Exempt Money Market fund (VYFXX) with the expectation of reinvesting back into the Long Term fund whe...
by ogd
Mon May 18, 2015 7:34 pm
Forum: Investing - Theory, News & General
Topic: Money Market Expense Ratios
Replies: 8
Views: 790

Re: Money Market Expense Ratios

Vanguard's money markets start at 16bp's but that still seems high when their index funds charge 5bp's. You can really see where the brokerages and banks make their money. 1. Trading 2. Margin starting at 8% 3. Money market funds Vanguard is presently eating all the expenses for the MM funds so tha...
by ogd
Mon May 18, 2015 2:45 pm
Forum: Investing - Theory, News & General
Topic: criteria for picking an active fund
Replies: 22
Views: 1458

Re: criteria for picking an active fund

3) Picking the highest performer has proven not to work. But eliminating the poorest performance over multiple time frames is a different storey. I call this my "dog killer". Doc, this sounds more like a "performance killer" to me. You must have heard about the "behavioral ...
by ogd
Mon May 18, 2015 2:36 pm
Forum: Investing - Theory, News & General
Topic: Bonds - Picking up Nickels in Front of a Steamroller?
Replies: 50
Views: 4892

Re: Bonds - Picking up Nickels in Front of a Steamroller?

As Graham taught his business students at Columbia School of Business, corporate debt is senior to common stock in the capital structure of a company. In the event of a liquidation (bankruptcy) it carries some better guarantees that those given to common stock holders. By being senior to the common...
by ogd
Sun May 17, 2015 9:07 pm
Forum: Investing - Help with Personal Investments
Topic: My experience with stock options - selling vertical spreads
Replies: 9
Views: 651

Re: My experience with stock options - selling vertical spreads

Yes. Stop this nonsense and focus on making & saving money.

Take another look at how that $25K got into your account. I bet it's from something you're actually good at. And don't feel too bad about it -- nobody with a first and last name is particularly good at trading options.
by ogd
Sun May 17, 2015 7:26 pm
Forum: Investing - Theory, News & General
Topic: What's so great about simplicity?
Replies: 103
Views: 7037

Re: What's so great about simplicity?

Really interesting and helpful -- thank you. For those who are committed to simplicity but evolved to the position, did you sell off funds and absorb the tax hit to get to newfound simplicity? Any thoughts on the extent to which taking a tax hit to gain simplicity is worth it? I realize it depends ...
by ogd
Sun May 17, 2015 7:16 pm
Forum: Investing - Theory, News & General
Topic: Paying zero fees on a hand picked stock portfolio
Replies: 65
Views: 3741

Re: Paying zero fees on a hand picked stock portfolio

However, I've been considering creating my own portfolio in a taxable account using a discount brokerage ($4.95 per trade) and purchasing stocks at $5,000 a pop overtime as I accumulate. I'll reiterate what backpacker said above about expenses in practice, adding that in the last 10 years VTSAX was...
by ogd
Sun May 17, 2015 7:05 pm
Forum: Investing - Theory, News & General
Topic: What's so great about simplicity?
Replies: 103
Views: 7037

Re: What's so great about simplicity?

In addition to the great points above, particularly the one about avoiding the endless tweaks that an 8-fund portfolio affords, which somehow tend to be in the wrong direction for most investors, let me also give the tax angle if it applies: 1) Tracking tax lots for 8 funds means more opportunities ...
by ogd
Sun May 17, 2015 4:19 pm
Forum: Investing - Theory, News & General
Topic: Individual treasuries vs treasury funds vs CDs: Effects of interest rate changes
Replies: 5
Views: 829

Re: Individual treasuries vs treasury funds vs CDs: Effects of interest rate changes

1. Interest rates do not fluctuate, remaining at 2% over the entire 5-year period. Same return. 3. Interest rates double to 4% immediately after the purchase of the investments and then stay constant over the rest of the 5-year period. Same return. The market value of all three instruments dips ini...
by ogd
Sat May 16, 2015 7:33 pm
Forum: Investing - Theory, News & General
Topic: New York Times article on bonds--what does this mean?
Replies: 4
Views: 1327

Re: New York Times article on bonds--what does this mean?

The article contains several implicit exaggerations that are better suited for investment tabloids (of which there are many): Ten-year Bund yields have multiplied by 16 times, to a high of 0.80 percent on May 7 from 0.05 percent on April 17. I can't decide between several ways to poke fun at that se...
by ogd
Sat May 16, 2015 2:14 pm
Forum: Investing - Help with Personal Investments
Topic: comparing Stable Value to Bond funds
Replies: 4
Views: 519

Re: comparing Stable Value to Bond funds

Right now, my SV fund pays at about 2%. If I compare this to the SEC yield of Total bond (VBTLX) at 1.96% and average duration of 5.6 years, it would seem that there is no yield to be gained by switching my holdings from SV to VBTLX, and i would be taking on additional interest rate risk should I n...
by ogd
Sat May 16, 2015 12:37 pm
Forum: Investing - Theory, News & General
Topic: Bonds - Picking up Nickels in Front of a Steamroller?
Replies: 50
Views: 4892

Re: Bonds - Picking up Nickels in Front of a Steamroller?

As is often the case with investing bumper-stickers, this one grossly overstates the case. 1) The Steamroller: buy intermediate bonds and your worst period will look like what they would call on CNBC "a week of profit-taking" in stocks, i.e. noticeable only relative to their normal low vol...
by ogd
Sat May 16, 2015 12:18 pm
Forum: Investing - Help with Personal Investments
Topic: Bonds, Average Duration, and NAV - and Confusion
Replies: 9
Views: 920

Re: Bonds, Average Duration, and NAV - and Confusion

The "point of indifference" is that place in time where the value of the VBTLX at an NAV of 10.86 with the original yield is equal to the VBTLX of 10.25 with the newer/higher yield (approximately $1115 in the example above). Is this correct? This assumes that all dividends are reinvested,...
by ogd
Fri May 15, 2015 1:39 pm
Forum: Investing - Help with Personal Investments
Topic: Bonds, Average Duration, and NAV - and Confusion
Replies: 9
Views: 920

Re: Bonds, Average Duration, and NAV - and Confusion

The duration of VBTLX is 5.63 years, not 7.8 years. The "point of indifference" math means that you expect to earn the current SEC yield (compounded) after 5.63 years, no matter what happens with yields in the short term (this is considerably better than 0%). So this means $1000 becoming $...
by ogd
Thu May 14, 2015 8:39 pm
Forum: Investing - Theory, News & General
Topic: Why is Vanguard's Web Site So Bad?
Replies: 64
Views: 4958

Re: Why is Vanguard's Web Site So Bad?

It's not so much the website that's bad, it's the emails. The explanation for this one is simple: they batch multiple updates of multiple kinds in a single email, without adding links for each fund. So the links below to "fund prospectus" and "fund reports" have an element of &qu...
by ogd
Thu May 14, 2015 8:28 pm
Forum: Investing - Help with Personal Investments
Topic: I'm getting strong impulses to put some money into VGHCX
Replies: 10
Views: 1102

Re: I'm getting strong impulses to put some money into VGHCX

You left price out of the equation. Healthcare might grow wonderfully, but if the price you pay today is too high, it will underperform nonetheless. Your thesis should be "I believe the healthcare sector is underpriced for its growth prospects". That doesn't sound nearly as surefire, does ...
by ogd
Wed May 13, 2015 4:41 pm
Forum: Investing - Help with Personal Investments
Topic: Bond funds in taxable account and overall portfolio assessment
Replies: 4
Views: 389

Re: Bond funds in taxable account and overall portfolio assessment

Which one gives the highest after-tax yield for her personal situation? The Vanguard High Yield Corporate Fund VWEAX, of course. It is also (probably) the wrong answer, as is customary with after-tax yield calculators. Who are we to steamroll over the risk difference between the NY fund and the Tre...
by ogd
Wed May 13, 2015 4:02 pm
Forum: Investing - Help with Personal Investments
Topic: Bond funds in taxable account and overall portfolio assessment
Replies: 4
Views: 389

Re: Bond funds in taxable account and overall portfolio assessment

Unless I'm missing something, that means she has to hold 17% of her bond allocation in a taxable account. At the moment that 17% in the taxable account is invested in the total bond fund. Are there better options for allocating this money? If her tax bracket is above 25%, she should probably invest...
by ogd
Wed May 13, 2015 3:57 pm
Forum: Investing - Help with Personal Investments
Topic: Corporate bond defined maturity funds
Replies: 26
Views: 1425

Re: Corporate bond defined maturity funds

The interest rate rises from 2% to 4.62% as I outlined above. The mix of bonds would be what a typical intermediate bond fund might hold. The point of the question is to see if there is an advantage in holding an individual bond vs. an open ended mutual fund when the investor has a specific need da...
by ogd
Tue May 12, 2015 10:20 pm
Forum: Investing - Theory, News & General
Topic: How does rebalancing impact bond duration?
Replies: 9
Views: 788

Re: How does rebalancing impact bond duration?

Yes, duration as measure of interest rate risk will be mostly unaffected. You can change denominators and come up with some interesting measures that rebalancing would affect, like recovery time (lower) or risk per original amount (higher vs future rate increases), but they wouldn't be duration. In ...
by ogd
Tue May 12, 2015 9:56 pm
Forum: Investing - Help with Personal Investments
Topic: Corporate bond defined maturity funds
Replies: 26
Views: 1425

Re: Corporate bond defined maturity funds

Thanks for the info. Do you know of an article or website that illustrates these principles as well as you have? I've read countless books and articles over the years but they don't dig as far below the surface as I'd like. I can't say I can think of anything off the bat, if you've read entire book...
by ogd
Tue May 12, 2015 6:13 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing question
Replies: 11
Views: 876

Re: Rebalancing question

I would need a to purchase an ETF (if I needed to buy stocks) instead of a mutual fund in the tax-advantaged account since the mutual fund would probably have a minimum purchase and an ETF would probably not correct? I would say don't bother with rebalancing until you hit the $3k minimum (which may...
by ogd
Tue May 12, 2015 4:27 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing question
Replies: 11
Views: 876

Re: Rebalancing question

You would sell bonds and buy stocks in the retirement account (you'd empty the taxable account of bonds, if any, first). This would result in stocks in tax-advantaged, which does not fit your tax separation policy but it does fit your target allocation; the two cannot be reconciled but the allocatio...
by ogd
Tue May 12, 2015 4:13 pm
Forum: Investing - Help with Personal Investments
Topic: Corporate bond defined maturity funds
Replies: 26
Views: 1425

Re: Corporate bond defined maturity funds

P.S: one other thing I meant to say is that the reason it's not IMHO worth targetting future expenses with fixed income alone in whatever way (even CDs) is the stock allocation, which may contribute an unknown amount towards those expenses, or require an unknown amount for rebalancing. Both unknowns...
by ogd
Tue May 12, 2015 4:05 pm
Forum: Investing - Help with Personal Investments
Topic: Corporate bond defined maturity funds
Replies: 26
Views: 1425

Re: Corporate bond defined maturity funds

As far as open-ended fund vs. defined maturity, it seems to me by your own explanation that if you have a need date for the principal, the defined maturity fund is superior. In your example, it does take a number of years for the open-ended fund to recover principal, and that recovery may very well...
by ogd
Tue May 12, 2015 2:15 pm
Forum: Investing - Help with Personal Investments
Topic: Corporate bond defined maturity funds
Replies: 26
Views: 1425

Re: Corporate bond defined maturity funds

LMK5: there are two basic misunderstandings about bonds that I'm guessing are making you much too wary of bond funds. These are not uncommon (so don't feel too bad), but at the same time they are "bond 101" and one really should get this right before venturing into anything like individual...
by ogd
Tue May 12, 2015 12:56 pm
Forum: Investing - Help with Personal Investments
Topic: Corporate bond defined maturity funds
Replies: 26
Views: 1425

Re: Corporate bond defined maturity funds

I have kids going to college in the next 2-5 years. I am seriously thinking of putting a good percentage of my fixed income assets in a defined maturity fund to help fund this. Two things I am concerned about is low volume on some of these funds and premium to NAV. The Guggenheim fund you site does...

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