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Re: Muni bond fund vs taxable

hoops777: my answers are: 1) Use munis above the 25% bracket, all things considered (phaseouts, ACA, etc). Do not use after-tax yield calculators, they mislead you by completely ignoring risk (e.g. they would tell you to always prefer high yield corporates to Treasuries, and you shouldn't). 2) See l...
by ogd
Fri Apr 24, 2015 6:29 pm
 
Forum: Investing - Theory, News & General
Topic: Muni bond fund vs taxable
Replies: 6
Views: 449

Re: Companies and index funds

Investors might legitimately get mad. Then again, you could say the same about the pile of cash nintendo or apple is currently sitting on. Why aren't investors raging about that? I'd bet that some of there are (I remember hearing that in the case of Apple). But at least in the case of cash you can ...
by ogd
Fri Apr 24, 2015 1:54 pm
 
Forum: Investing - Theory, News & General
Topic: Companies and index funds
Replies: 5
Views: 282

Re: Companies and index funds

Shareholders would revolt if they attempted to do that. That's because shareholders would invest in the index if they wanted the index (and some definitely don't), and for this money they want Nintendo, be it present or future opportunities. Instead, they'd rather have money back via a buyback or di...
by ogd
Fri Apr 24, 2015 1:00 pm
 
Forum: Investing - Theory, News & General
Topic: Companies and index funds
Replies: 5
Views: 282

Re: Vanguard 500 Index Fund (VFINX) vs. ETF Version

Isn't VOO the best choice for someone who doesn't have 10k and wants to invest in the Vanguard S&P 500 index fund? Even if one did have 10k, why would they choose VFIAX over VOO? Yup, do read the Wiki posted above. I think VFIAX over VOO is an obvious choice (in an account where it's available)...
by ogd
Fri Apr 24, 2015 12:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard 500 Index Fund (VFINX) vs. ETF Version
Replies: 7
Views: 815

Re: Bonds - why invest in them right now? Can use some help.

My current portfolio allocations are currently 89% stocks and 11% bonds. My target is 80% stocks and 20% bonds. But I'm having trouble making myself buy more bonds right now. With the Fed broadcasting their intentions to raise the interest rates in the near future, I don't see the upside. Why inves...
by ogd
Fri Apr 24, 2015 12:19 am
 
Forum: Investing - Help with Personal Investments
Topic: Bonds - why invest in them right now? Can use some help...
Replies: 10
Views: 1221

Re: Should I make Roth contributions to 401k?

Much appreciated ogd . (And clever you for almost getting me to call you "god" thanks to autocorrect.) :P Roth 401(k) for People Who Contribute the Max Thanks, but it was TFB who did the explanation work (in my case, too). As for the autocorrect, that particular alternative probably has s...
by ogd
Thu Apr 23, 2015 2:28 am
 
Forum: Investing - Help with Personal Investments
Topic: Should I make Roth contributions to 401k?
Replies: 28
Views: 1895

Re: Warren Buffett on equties, treasuries, and "risk"

To all you risk deniers -- the biggest problem with the view that volatility doesn't matter is this: nothing in the market makes sense once you take that view because all pricing is based on risk, from bonds to various kinds of stocks, to the most optional of options. Here are a few examples of the ...
by ogd
Wed Apr 22, 2015 6:29 pm
 
Forum: Investing - Theory, News & General
Topic: Warren Buffett on equties, treasuries, and "risk"
Replies: 46
Views: 4087

Re: Warren Buffett on equties, treasuries, and "risk"

Dr. Bernstein says medium term bonds are too risky. That you want your safe money to be safe. And he's agreed that for large taxable accounts, taxflation makes TIPS somewhat unsuitable. Meanwhile, if you took this advice in 2010 when I first heard it and switched to short bonds you lost some 23% al...
by ogd
Wed Apr 22, 2015 6:18 pm
 
Forum: Investing - Theory, News & General
Topic: Warren Buffett on equties, treasuries, and "risk"
Replies: 46
Views: 4087

Re: International Allocation in a 401k

Am I making too big of a deal out of this and should be satisfied with the EAFE Equity index, or would you recommend adding a market cap weighting of the Mondrian Emerging Market fund? It's not worth it at those fees. 0.60% difference is quite a big obstacle and unlikely to be made up by diversific...
by ogd
Wed Apr 22, 2015 12:31 pm
 
Forum: Investing - Help with Personal Investments
Topic: International Allocation in a 401k
Replies: 37
Views: 1650

Re: Should I make Roth contributions to 401k?

The problem with the calculation is indeed that it assumes the same contribution, $18000. This is only the case if you can max out either type of account; even if you do, the "invest tax savings" checkbox is a requirement to make the comparison fair. I would add that it's unlikely that the...
by ogd
Wed Apr 22, 2015 12:22 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I make Roth contributions to 401k?
Replies: 28
Views: 1895

Re: Muni Bonds vs Muni Bond Funds

Individual bonds work well when you have a lump sum set aside for a known purpose at a known future date and you cannot afford to take any principal risk. Actually, I would question even that in the context of a balanced portfolio. On the other side of the portfolio you have this chunk of assets (s...
by ogd
Wed Apr 22, 2015 12:06 pm
 
Forum: Investing - Theory, News & General
Topic: Muni Bonds vs Muni Bond Funds
Replies: 10
Views: 727

Re: Muni Bonds vs Muni Bond Funds

Rick Ferri has this to say on the subject, and he knows what he's talking about: I managed several hundred million dollars in municipal bond portfolios for many years. Not any more. My choice now is a low-cost Vanguard tax-exempt fund. The costs is very low, the fund has overnight liquidity, and the...
by ogd
Wed Apr 22, 2015 11:49 am
 
Forum: Investing - Theory, News & General
Topic: Muni Bonds vs Muni Bond Funds
Replies: 10
Views: 727

Re: What's Up With Vanguard Muni Fund Duration

The duration number is accurate, but for bonds with negative convexity (like callable munis) it's simply insufficient to describe the interest rate risk properly. The LT fund is longer term than it looks, under the bad interest rate scenarios. More on this in this thread: https://www.bogleheads.org/...
by ogd
Tue Apr 21, 2015 4:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: What's Up With Vanguard Muni Fund Duration
Replies: 5
Views: 569

Re: Basic ETF question

Can I just invest in 6 different ETF's (3 vanguard and 3 non vanguard) with proper stocks, international and bond split and leave it like that for 10-20 years? Yes, although I don't see the purpose of redundant ETFs. Vanguard and non-Vanguard ones, if same category and large enough, will behave pre...
by ogd
Mon Apr 20, 2015 6:55 pm
 
Forum: Investing - Help with Personal Investments
Topic: Basic ETF question
Replies: 3
Views: 289

Re: Temporal autocorrelation of stock/fund prices and moveme

Similarly I was asking if an analysis based solely on value as a function of time can predict, with quantified error, value at one time period knowing only the value at another time period. I'm not sure this category discussion is productive anymore, but this is technical analysis. Read the Wikiped...
by ogd
Mon Apr 20, 2015 6:50 pm
 
Forum: Investing - Theory, News & General
Topic: Temporal autocorrelation of stock/fund prices and movement
Replies: 30
Views: 1362

Re: Temporal autocorrelation of stock/fund prices and moveme

The proper name for "temporal autocorelation" is "technical analysis". I would say that far from being ignored around here, it's actually derided as the modern day numerology that it is. This is quite understandable when you look at some of the terms that are used seriously in t...
by ogd
Mon Apr 20, 2015 3:11 pm
 
Forum: Investing - Theory, News & General
Topic: Temporal autocorrelation of stock/fund prices and movement
Replies: 30
Views: 1362

Re: Temporal autocorrelation of stock/fund prices and moveme

I don't think the performance of large funds is ever really evidence against anything - when I've spoken to ETF managers, it's becomes immediately clear you're facing very different challenges creating strategies that can be scaled up .. Ah, the legend of the lone investor. "The army can't do ...
by ogd
Mon Apr 20, 2015 1:54 pm
 
Forum: Investing - Theory, News & General
Topic: Temporal autocorrelation of stock/fund prices and movement
Replies: 30
Views: 1362

Re: VTIAX or VTMGX and VEMAX

Thanks OGD. I was not aware of this backward looking point you bring up and it definitely makes sense in general if the combo sector contains nothing else but the two component sectors A and B. In this case however VTIAX contains all that is in VTMGX, all of VEMAX AND a few thousand more small cap ...
by ogd
Mon Apr 20, 2015 1:15 pm
 
Forum: Investing - Theory, News & General
Topic: VTIAX or VTMGX and VEMAX
Replies: 30
Views: 2732

Re: Bernanke's Blog: why are interest rates so low?

So, if a fund's duration is 5 years and rates rise 1%, the fund could be expected to lose 5% NAV, however the yield would go up 1%, for a -4% total return, right? A 1% higher total return from the yield, yes, so -4% + the existing yield. Bear in mind that a fund with a lot premium bonds, say 3% dis...
by ogd
Mon Apr 20, 2015 1:53 am
 
Forum: Investing - Theory, News & General
Topic: Bernanke's Blog: why are interest rates so low?
Replies: 52
Views: 6847

Re: Temporal autocorrelation of stock/fund prices and moveme

The proper name for "temporal autocorelation" is "technical analysis". I would say that far from being ignored around here, it's actually derided as the modern day numerology that it is. This is quite understandable when you look at some of the terms that are used seriously in th...
by ogd
Mon Apr 20, 2015 12:24 am
 
Forum: Investing - Theory, News & General
Topic: Temporal autocorrelation of stock/fund prices and movement
Replies: 30
Views: 1362

Re: Bernanke's Blog: why are interest rates so low?

Can anyone explain how, as a previous poster mentioned, rates increased from 2003-2007 but most bond fund NAV's rose in value? Was it because the rate changes turned out to be much less/slower than expected? The post above was about Total Bond Market. Unfortunately, that's not necessarily a good ex...
by ogd
Mon Apr 20, 2015 12:11 am
 
Forum: Investing - Theory, News & General
Topic: Bernanke's Blog: why are interest rates so low?
Replies: 52
Views: 6847

Re: VTIAX or VTMGX and VEMAX

If, over the last 15 years, VTIAX has had a 1.59% lower pretax return vs an 80-20 mix of VTMGX and VEMAX it does not seem unreasonable to believe that market pricing for International Larger caps is much more efficient than smaller caps so you may not necessarily be getting adequate return for the ...
by ogd
Sun Apr 19, 2015 11:45 pm
 
Forum: Investing - Theory, News & General
Topic: VTIAX or VTMGX and VEMAX
Replies: 30
Views: 2732

Re: DQOTD: Municipal Bond Fund Downside

Is the short-answer action-step to venture no further than IT with all callable bonds? Should that be my takeaway? I wouldn't say LT munis are to be avoided necessarily, because you do get paid for the extra exposure, but you should be aware of what you're getting into. This is "what's not to ...
by ogd
Fri Apr 17, 2015 10:52 am
 
Forum: Investing - Theory, News & General
Topic: DQOTD: Municipal Bond Fund Downside
Replies: 19
Views: 1949

Re: Proof vinyl has higher music ceiling than mp3?

MP3 encoding starts with a low pass filter which cuts the maximum frequency to 16 Khz. If you can hear above 16 KHz (=> age less then 45), then either an analog recording or a CD may sound better, if you like the high frequency sounds that you hear. It's only 16 kHz for the low bitrate modes. LAME ...
by ogd
Thu Apr 16, 2015 7:20 pm
 
Forum: Personal Consumer Issues
Topic: Proof vinyl has higher music ceiling than mp3?
Replies: 36
Views: 2518

Re: Do index funds (and other mutual funds) have a dark side

This seems like it would be adequately addressed within the existing framework of shareholder protections. It also seems impossible to address by regulation of common ownership because it's not limited to competitors at all. Right now, if you're a shareholder of United and believe that the board is ...
by ogd
Thu Apr 16, 2015 2:01 pm
 
Forum: Investing - Theory, News & General
Topic: Do index funds (and other mutual funds) have a dark side?
Replies: 14
Views: 2090

Re: DQOTD: Municipal Bond Fund Downside

Do you have a link that dumbs-down and explains negative convexity? Might as well try that while I'm thinking about it. Seem to recall it was LT yields rising in less than a linear fashion. The wiki has a reasonable description: http://www.bogleheads.org/wiki/Bonds:_advanced_topics#Convexity . Not ...
by ogd
Thu Apr 16, 2015 11:27 am
 
Forum: Investing - Theory, News & General
Topic: DQOTD: Municipal Bond Fund Downside
Replies: 19
Views: 1949

Re: DQOTD: Municipal Bond Fund Downside

Two problems with the above: 1) TBM is not the same risk as VWITX; moreover the risk discrepancy will vary over time. Comparing the two is like picking VBIIX over TBM based on yield: a judgment call we shouldn't be making. 2) VWLTX really is longer than duration would suggest. This is because of its...
by ogd
Thu Apr 16, 2015 12:49 am
 
Forum: Investing - Theory, News & General
Topic: DQOTD: Municipal Bond Fund Downside
Replies: 19
Views: 1949

Re: yea or nay to 5 years CDs

Yea. Two observations: 1) You can get slightly higher rates, see http://depositaccounts.com , at the cost of a little complexity with an extra account. On the other hand, it diversifies the banks so if Ally gives you trouble breaking a CD, you've got another option. And there's nothing wrong with re...
by ogd
Thu Apr 16, 2015 12:21 am
 
Forum: Investing - Help with Personal Investments
Topic: yea or nay to 5 years CDs
Replies: 21
Views: 2432

Re: Parking money in a tax free muni bond fund?

Forgot to answer this one: My crystal ball is cloudy yours is clear? The way things are going rates could drop to 1.6% or 1.5% 1o year T note now I didn't offer that as I am not expecting it but if it happened the return would be far more than 2.5%. Again this is tax free so there is a multiplier fa...
by ogd
Wed Apr 15, 2015 6:11 pm
 
Forum: Investing - Help with Personal Investments
Topic: Parking money in a tax free muni bond fund?
Replies: 14
Views: 1402

Re: Parking money in a tax free muni bond fund?

But they are taxable and far lower interest and I know higher interest means more risk The CDs are considerably higher interest than comparable market instruments, almost 1% higher. It's a truly free lunch and you should take it. By contrast, high yield munis, like you say, come with higher risk. I...
by ogd
Wed Apr 15, 2015 6:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Parking money in a tax free muni bond fund?
Replies: 14
Views: 1402

Re: Does the daily re-balancing undermine asset allocation?

Very interesting that Life Strategy used to use actively managed funds. These are now considered safe for bogleheads? With LifeStrategy and Target Retirement, what is the very long term risk that Vanguard will deviate away a more or less three index fund portfolio? I guess no one can be sure but I ...
by ogd
Wed Apr 15, 2015 5:34 pm
 
Forum: Investing - Theory, News & General
Topic: Does the daily re-balancing undermine asset allocation?
Replies: 13
Views: 1318

Re: Parking money in a tax free muni bond fund?

I don't want any CDs as I don't want to tie up money for any specific term and get 1% or 1.5% if that's even possible. Oh brother. CDs with early withdrawal option and 1% savings accounts (which you can find online) are among the very few instruments that fit this description while paying above 0.1...
by ogd
Wed Apr 15, 2015 5:24 pm
 
Forum: Investing - Help with Personal Investments
Topic: Parking money in a tax free muni bond fund?
Replies: 14
Views: 1402

Re: This retiree is a bit confused

I was referring to the Trinity Study when I was talking about 'risk' (of failure and running out of money of the portfolio) and 'psychology' is when you intentionally forgive return without truely gaining any increase in successrate. Nothing wrong with that, if it works for your life, but I persona...
by ogd
Wed Apr 15, 2015 4:55 pm
 
Forum: Investing - Theory, News & General
Topic: This retiree is a bit confused
Replies: 21
Views: 3416

Re: DQOTD: Municipal Bond Fund Downside

VWITX (VG Intermediate Tax Exempt) is yielding 2.98%, Dur 4.7, thanks in part to Merideth Whitney. http://www.forbes.com/sites/steveforbes/2013/06/04/meredith-whitney-on-the-future-of-muni-bonds/ VBMFX (VG Total Bond Market Fund) is yielding 2.35%, Dur 5.5, (albeit with lower risk) What am I missin...
by ogd
Wed Apr 15, 2015 3:26 pm
 
Forum: Investing - Theory, News & General
Topic: DQOTD: Municipal Bond Fund Downside
Replies: 19
Views: 1949

Re: DQOTD: Municipal Bond Fund Downside

Agreed with lack_ey above -- do NOT buy munis in your current tax bracket. They're a bad deal for you, or at best even. Use taxable bonds instead. Where is the cut off in the 25% tax bracket, generally speaking? Or is simply having a 25% marginal rate enough to justify munis over TBM? Don't quite u...
by ogd
Wed Apr 15, 2015 3:16 pm
 
Forum: Investing - Theory, News & General
Topic: DQOTD: Municipal Bond Fund Downside
Replies: 19
Views: 1949

Re: Combing Vanguard funds to purchase individual stocks

Prague: I'm pretty sure you can call Vanguard to combine brokerage accounts, without time out of the market (in-kind transfer between them). Within a single account (or a single MF account / brokerage), you can buy exchange traded products (stocks, ETFs) with no time out of the market. Buy, and the ...
by ogd
Wed Apr 15, 2015 1:32 pm
 
Forum: Investing - Theory, News & General
Topic: Combing Vanguard funds to purchase individual stocks
Replies: 18
Views: 977

Re: Does the daily re-balancing undermine asset allocation?

The problem was probably the LifeStrategy fund itself, rather than rebalancing. Back then the fund included an active market-timing fund, Vanguard Asset Allocation, which performed very poorly in the crisis, consistently doing the wrong thing at the wrong time. This fund is gone, but unfortunately i...
by ogd
Wed Apr 15, 2015 11:28 am
 
Forum: Investing - Theory, News & General
Topic: Does the daily re-balancing undermine asset allocation?
Replies: 13
Views: 1318

Re: How does a retired person mitigate a Bond Bubble?

The experts have been warning us about bonds for about 7 years now. Some day, they may be right. In the mean time, they've given up a lot of yield. Largely because they've been expecting interest rates to rise during that time, no? Interest rates will have to rise some day. I can't see the Fed lowe...
by ogd
Tue Apr 14, 2015 6:03 pm
 
Forum: Investing - Theory, News & General
Topic: How does a retired person mitigate a Bond Bubble?
Replies: 46
Views: 5726

Re: Index Bonds - Tax Placement Question

However, in reading the guide several times, it seems to also suggest that funds with high turnover rates (FSITX - 85%; FLTMX - 39%) are not tax efficient. I understand that turnover rates with bond index funds are not the same as its equity equivalents. This does not apply to bonds so don't worry ...
by ogd
Tue Apr 14, 2015 5:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: Index Bonds - Tax Placement Question
Replies: 2
Views: 290

Re: Investing 150k in the short term

Use bank products. I'd split it between a 1% saving account and 5 year CDs with early withdrawal options. Look at it this way: when the market wants safety, they have to make do with 0.02% for instant money, up to 1.34% for 5 year money. If they accept this, it must be the case that there is nothing...
by ogd
Tue Apr 14, 2015 5:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: Investing 150k in the short term
Replies: 7
Views: 749

Re: This retiree is a bit confused

Statistically speaking you are overwheight in bonds anyway since over 30% bonds you don't gain security This is false. The risk steadily diminishes until 75% or so bonds. Maybe you are confusing that bend in the efficient frontier with the upper regions. Everything over 30% bonds falls rathe into t...
by ogd
Tue Apr 14, 2015 5:12 pm
 
Forum: Investing - Theory, News & General
Topic: This retiree is a bit confused
Replies: 21
Views: 3416

Re: DQOTD: Municipal Bond Fund Downside

I see that now. With the posts I've received so far, it started to register, Divs & CG in our tax bracket. I used a few tax equivalent calculators online and see that I basically breakeven after taxes in our tax bracket (mostly 15%). We might as well just go with TBM vs an equiv muni (e.g. inte...
by ogd
Tue Apr 14, 2015 4:50 pm
 
Forum: Investing - Theory, News & General
Topic: DQOTD: Municipal Bond Fund Downside
Replies: 19
Views: 1949

Re: DQOTD: Municipal Bond Fund Downside

Agreed with lack_ey above -- do NOT buy munis in your current tax bracket. They're a bad deal for you, or at best even. Use taxable bonds instead.
by ogd
Tue Apr 14, 2015 3:02 pm
 
Forum: Investing - Theory, News & General
Topic: DQOTD: Municipal Bond Fund Downside
Replies: 19
Views: 1949

Re: FDIC Insured Emerging Market Currency Indexed CD? Would

Gosh, this is a bad deal all around. The baseline should not be zero, but the 2% + CDs you can find in the market. Compared to these, this "CD" has gains limited to the basket appreciation above 10% (good luck, with some of those currencies), and losses for anything else, up to -10% from f...
by ogd
Tue Apr 14, 2015 3:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: FDIC Insured Emerging Market Currency Indexed CD? Would u?
Replies: 5
Views: 561

Re: would "flight to safety" go to bonds after all?

A question OGD.. if the fund is 5 years in duration and is yielding 2%, a 20% loss in NAV (no defaults) would seem to be caused by a 4% increase in rates. Why would that cause the fund to yield 6.8% instead of 6%? Two things: 1) The duration formula is only accurate for small changes in yield. The ...
by ogd
Tue Apr 14, 2015 1:55 pm
 
Forum: Investing - Theory, News & General
Topic: would "flight to safety" go to bonds after all?
Replies: 32
Views: 2562

Re: would "flight to safety" go to bonds after all?

That's very patient of you, great sage .. Well I admit I'm not an expert on the bond market at all - but I read people who probably should be .. Thanks, but I'm no great sage -- it's just that some of the things you said needed reality checks. It's worth remembering that the people you read have si...
by ogd
Tue Apr 14, 2015 1:37 pm
 
Forum: Investing - Theory, News & General
Topic: would "flight to safety" go to bonds after all?
Replies: 32
Views: 2562

Re: Future income on 100,000 bond fund

hoops: I cannot answer your question in terms of income, but I can answer it in terms of yield and I can [try to] tell you why the difference doesn't matter. Bonds return their yield in two ways: coupons and capital returns. The distribution between these two can be quite extreme: you can have premi...
by ogd
Tue Apr 14, 2015 1:12 pm
 
Forum: Investing - Theory, News & General
Topic: Future income on 100,000 bond fund
Replies: 16
Views: 2582

Re: Accumulating/Capiltalizing EU domiciled ETFs?

Bump... How about something easier, does anyone know of ANY solid accumulating/capiltalizing ETFs that are worth a look? Even an issuer to focus on would be useful. Most seem to be distributing eg: ALL of Vanguards UCITS etfs. edit: I'm an Australian citizen living in Qatar. Try the iShares funds I...
by ogd
Tue Apr 14, 2015 12:21 pm
 
Forum: Investing - Help with Personal Investments
Topic: Accumulating/Capiltalizing EU domiciled ETFs?
Replies: 12
Views: 649

Re: Low fees vs. tax deferred bond allocations

I would do the switch and use munis, provided you have low-cost stock funds to use in that tax-advantaged space. Here's the rationale: the 0.5% extra fees are just about eating up a 25% tax saving on bonds yielding about 2%. The 25% level is special because it's roughly equal to the implied tax disc...
by ogd
Tue Apr 14, 2015 12:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Low fees vs. tax deferred bond allocations
Replies: 10
Views: 691

Re: would "flight to safety" go to bonds after all?

Individual bonds, certainly .. But a bond fund, holding bonds up to 30 years duration, and you may be waiting a long time to work off a 20% loss of capital Maynard: here are some quick facts for you: * For an intermediate fund currently yielding 2% to lose 20% without bond defaults, its yield has t...
by ogd
Tue Apr 14, 2015 1:15 am
 
Forum: Investing - Theory, News & General
Topic: would "flight to safety" go to bonds after all?
Replies: 32
Views: 2562
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