Search found 56 matches

by burma7734
Sun Nov 03, 2013 10:39 pm
Forum: Personal Investments
Topic: 32 y.o. Investor Looking to Add Fund to Taxable Acct
Replies: 9
Views: 1429

Re: 32 y.o. Investor Looking to Add Fund to Taxable Acct

Bob's not my name wrote:
burma7734 wrote:The key is estimating an average (not marginal) tax rate at withdrawal - I am using 20%. So I count a $1 in taxable as equivalent to pre-tax $1.20
That's 16.7%.
Correct... my mistake. Should be $1.25 equivalent to $1 with a 20% average tax rate assumption.
by burma7734
Sun Nov 03, 2013 5:17 pm
Forum: Personal Investments
Topic: 32 y.o. Investor Looking to Add Fund to Taxable Acct
Replies: 9
Views: 1429

Re: 32 y.o. Investor Looking to Add Fund to Taxable Acct

I think your idea to add the Extended index is sound - maybe something like VEXAX. I keep track of my "stock style" through a spreadsheet with the weighted totals of the Morningstar 3x3 style categories. Market weight for large caps is about 72% of US stock now - my target is 62%, since I want to tilt slightly to small/mid caps. But you might be far off - if your small/mid is (10% small + 4% REIT)/44% total US, maybe you are around 68% of your US stock in large caps? If you don't want to do the calculations by hand, the Morningstar X-ray would help you determine how much of the Extended index you need to achieve market weighted or you target tilted allocation. If possible, it would be slightly more tax efficient to put the Extende...
by burma7734
Sun Nov 03, 2013 4:13 pm
Forum: Personal Investments
Topic: Three-Fund Portfolio - VBTLX vs. VBILX
Replies: 11
Views: 3716

Re: Three-Fund Portfolio - VBTLX vs. VBILX

The fund names might cause you to think incorrectly about thier holdings. If you look a the average duration of each, you will see that VBTLX is at 5.5 years while VBILX is at 6.5 years. While Total Bond has a mix of long, medium, and short term bonds, on average it has a lower duration (i.e. less interest rate risk) than Intermediate Bond.

I would not let a trading mistake alter my strategy. As you said, the cost to trade into the one you intended is zero.
by burma7734
Mon Oct 14, 2013 9:50 pm
Forum: Personal Finance (Not Investing)
Topic: Quicken and Vanguard - Download Problem
Replies: 219
Views: 30753

Re: Quicken and Vanguard - Download Problem

Seems to be fixed now.
by burma7734
Sun Sep 29, 2013 8:18 pm
Forum: Personal Finance (Not Investing)
Topic: Quicken and Vanguard - Download Problem
Replies: 219
Views: 30753

Re: Quicken and Vanguard - Download Problem

I have been having this problem too the last couple weeks. My One Step Update returns and OL-293 error for Vanguard. Thanks for the link to the known issues page. Hopefully fixed soon.
by burma7734
Mon Sep 09, 2013 7:40 pm
Forum: Investing - Theory, News & General
Topic: Hypothetical: Why not I-Bonds instead of TBM?
Replies: 8
Views: 1780

Re: Hypothetical: Why not I-Bonds instead of TBM?

AndroAsc wrote:Do we have any historical data if I-Bonds beats TBM over a long period, say 20 years... or vice versa?
Check back in 2018 after I-bonds have been around for 20 years.

$10k of I-bonds in from the first issue in Nov 1998 would be worth $23,576 now

$10k put into VBTIX at the same time with dividends reinvested would be worth $22,110 now
by burma7734
Mon Sep 09, 2013 7:12 pm
Forum: Personal Investments
Topic: What to put in my backdoor Roth IRA...
Replies: 3
Views: 423

Re: What to put in my backdoor Roth IRA...

You have a low cost, market weighted equity portfolio. You do already own market weighted REIT and Small-Value stocks in VTSMX. But if you want to use the Roth to "tilt" your portfolio, I think adding a small-value tilt (like VBR) might be a good way to go.
by burma7734
Thu Sep 05, 2013 2:52 pm
Forum: Personal Investments
Topic: Vanguard Reit
Replies: 21
Views: 2796

Re: Vanguard Reit

REITs are equities. The only reason to hold it is if you want to "tilt" your equity holdings to overweight the market cap REIT weight. If you already hold a broad equity fund, like Total Stock Market, it already contains the same companies as your REIT fund.

REIT has been highly correlated to the overall stock market, so it is not good counterbalance.
by burma7734
Wed Sep 04, 2013 11:03 am
Forum: Personal Investments
Topic: Question about volatile stock funds and allocation
Replies: 9
Views: 1082

Re: Question about volatile stock funds and allocation

Back to the OP question... Does anyone else adjust their allocation based on having more volatile stocks? Yes, as you add volatility in one asset you would want to counterbalance that with a less volatile asset to keep the your portfolio beta constant. The more precise way to do this would be to calculate beta for your portfolio, with and without your Precious Metals allocation. You would then adjust the bond weighting so that the beta is the same for both. Or, Vanguard's access to Financial Engines does the beta calculation for you. I do not plan on changing my savings rate (since I am maxing everything out already). You can always save more! If "maxing everything" means 401k+IRA, then look to I-Bonds, then EE Bonds, then taxable...
by burma7734
Tue Sep 03, 2013 11:03 pm
Forum: Personal Investments
Topic: Question about volatile stock funds and allocation
Replies: 9
Views: 1082

Re: Question about volatile stock funds and allocation

I think you mean to INCREASE your bond allocation to account for higher risk stocks, which is fine. However, what probably matters more if you are early in your wealth accumulation is your savings rate rather than a few points here or there on stock allocation.

If you feel better about your portfolio risk and are driven to save more by increasing the bond allocation, then that would make a real difference.
by burma7734
Tue Sep 03, 2013 10:16 pm
Forum: Personal Investments
Topic: Tilting to value/small
Replies: 25
Views: 3774

Re: Tilting to value/small

I do employ a tilt toward small and medium stocks. I think using the Morningstar style box is the easiest way to explain.

If you look at VTSAX you see the style box as, below which would be the market cap weighted US Stock Market:
23 25 24
6 6 7
3 3 3

I want my mid and small holdings to be more than their market cap weighting, so my target style is:
21 21 21
6 8 9
5 5 5

That gives me 37% small and cap stock, vs market weight of 28%.

It is quite easy to find your actual style using the Morningstar Xray, or a simple spreadsheet as I use. I have VIEIX available in my 401k, which I use to overweight the small/mid stock for my whole portfolio.
by burma7734
Fri Aug 30, 2013 2:57 pm
Forum: Personal Investments
Topic: Buying more I-Bonds
Replies: 11
Views: 1247

Re: Buying more I-Bonds

So that leaves the inflation portion. Right now it's 1.18% like you said. If you wait till the last two weeks of October, you can calculate what the rate for the 11/1/2013 issue will be (folks on here will do it for you, there is usually a post) and you can decide then whether it's better to buy during the last few weeks of October or in November at the new rate.
We are talking about a few tenths of point on the CPI factor for six months on a $8k investment.... that is only about $20 one way or the other. Surely not worth fretting about.
by burma7734
Fri Aug 30, 2013 2:46 pm
Forum: Personal Investments
Topic: Buying more I-Bonds
Replies: 11
Views: 1247

Re: Buying more I-Bonds

I guess what you are really asking is if the fixed rate on I-Bonds might be greater than the current zero after November. The current yield is, as you noted, 0% fixed + 1.18% CPI. If you bought today, or in November your CPI factor will eventually be the same.

I am not sure how Treasury decides on the fixed factor. I do know you lose two months interest by waiting till November = 0.2%.
by burma7734
Wed Aug 21, 2013 10:54 pm
Forum: Personal Investments
Topic: Max out 401k: Traditional-Roth mix
Replies: 7
Views: 1076

Re: Max out 401k: Traditional-Roth mix

I am in a similar situation and weighed this decision a few months back. I went with a "split the baby in half" tax diversification answer. 30% of my 401k contribution is now going in to r401k. About 50% of my total investment portfolio is taxable, and I didn't want it to shift much from that. So with the 30% r401k contribution, I have about $11k/yr going into Roth accounts (r401k+rIRA) and $12k/yr as t401k. When viewed as tax adjusted, I am putting slightly more into the Roth side than Traditional. One thing I noticed with my 401K account at Fidelity, you can choose the assets that get the Roth money vs Traditional. So this would follow traditional tax efficiency rules. Bonds (really the stable value fund) are in my t401k and SP5...
by burma7734
Tue Jul 02, 2013 11:49 pm
Forum: Investing - Theory, News & General
Topic: 401k T or Roth & dependence with tax bracket
Replies: 9
Views: 1055

Re: 401k T or Roth & dependence with tax bracket

I decided to "tax diversify" and contribute my 401k to both Trad and Roth. I max my annual 401ka and IRA (backdoor roth) contribution. I have been putting 30% 401k contribution as Roth. My assumptions: 1) Tax rates might be higher in the future than today 2) Most of my retirement assets are taxable (t401k+pension >> rIRA) 3) Ability to tax manage distributions might give me a lower average tax rate 4) The r401k contribution lets me contribute slightly more each year 5) Tax changes might result loss of backdoor roth I would go higher with the r401k portion, but I get bit by CA state tax on that contribution that I might not have to pay if I move before retiring. I have both stock and bonds in my 401k. I allocate the roth money to t...
by burma7734
Sun Jun 09, 2013 7:39 pm
Forum: Investing - Theory, News & General
Topic: yet another Tactical tilt recipe
Replies: 44
Views: 4665

Re: yet another Tactical tilt recipe

I spent some time looking at the Shiller "theory" and playing around with backtest data. The problem I was having valuation derisking is that the market can stay overvalued for a long period time and you might give up a lot of gain by just cutting back when prices got high. Working through historical data, this sort of "trimming too soon" hurts long term returns and then always the question of when to get back in. So I looked for a simple indicator that indicates long term secular market trends. I don't believe in all the technical indicator BS, but using an inflection point (change in slope from +/-) in the 360 day moving average helps show when the market has clearly changed course. Naturally it lags changes by a few m...
by burma7734
Fri Jun 07, 2013 8:22 pm
Forum: Investing - Theory, News & General
Topic: yet another Tactical tilt recipe
Replies: 44
Views: 4665

Re: yet another Tactical tilt recipe

I took a little time this week to backtest this tactical tilt strategy using the dataset from Shiller's website. I used the data from 1960 forward to compare a fixed 60% stock 40% bond strategy to one where the stock might range from 25-75% based on the PE10 and momentum. As I tested the idea as I posted it. The strategy was: 1) If PE10 is between 12-22, do nothing (fixed at stock 60%, bonds 40%) [this is the case about 50% of the time] 2) If PE10 exceeds 22, reduce stock exposure 3) If PE10 is under 12, increase stock exposure 4) Never go outside the range of 25-75% stocks I was pleased to find this simple strategy met my goals: - Variability of return was reduced 5% - Average annual return improved 0.3 points - These improvements were mad...
by burma7734
Fri Jun 07, 2013 4:54 pm
Forum: Investing - Theory, News & General
Topic: What's the right allocation to international bonds?
Replies: 39
Views: 5258

Re: What's the right allocation to international bonds?

In other words, international stock markets can diverge from the US more than developed country international bond markets can. Counterargument (not checked): recent correlation has been about 0.9 ie very limited gains from developed country international diversification.
I don't see the data to support this. Please elucidate.

From the asset correlations I see, US Bond:International bonds 0.0-0.3 depending the time period, with US Stocks:International stocks is 0.9 over recent time periods.

Maybe you are saying that correlations over the past 10 years are abnormal, but would be greatful for any data to support this.
by burma7734
Sun Jun 02, 2013 8:41 pm
Forum: Investing - Theory, News & General
Topic: yet another Tactical tilt recipe
Replies: 44
Views: 4665

Re: yet another Tactical tilt recipe

Thanks for all the comments. Would like to add a few of my own: 1) A am not trying to "beat the market" as the funds and quants are trying to do. I can rebalance with no transaction cost or taxable gains within my 401k and IRA. I am trying to reduce volatility for my risk assets in the extreme market conditions. 2) Working back through the ShillerPE10 data, I did find that the "do nothing" range might should be 12-22. This would mean a fixed stock allocation about 50% of the time and +/- stock tilt each about 25% of the time. 3) Will try to improve my rudimentary backtest test week and post the results. Would be greatful for some help from some backtesting experts. Seems the Simba data only gives annual returns, so might...
by burma7734
Sat Jun 01, 2013 5:19 pm
Forum: Investing - Theory, News & General
Topic: 3-fund vs 4-fund approach (reason for a REIT fund)
Replies: 22
Views: 2910

Re: 3-fund vs 4-fund approach (reason for a REIT fund)

You already own some REITS, about 3% of your Total Stock Market fund. So the question is if you want to add complexity and "tilt" toward higher REIT holding. REITS are subset of the stock asset class. And, REIT returns generally follow the Total Stock Market (0.7-0.9 correlation for the last 10 years)

Personally, I sold my REIT fund for the sake of simplicity and returning to more of a market weighted TSM approach. I think some of the same "market undervalues REITs" arguments could be made for small growth companies - many of them are privately held. So, you could drive yourself mad with stock subclass tilts.
by burma7734
Sat Jun 01, 2013 2:11 pm
Forum: Investing - Theory, News & General
Topic: What's the right allocation to international bonds?
Replies: 39
Views: 5258

Re: What's the right allocation to international bonds?

I have 35% of my stocks in international holdings and currently 12% of my bonds. I have been holding some Roth IRA money to put into the new VTABX, which would bring me to 25% of bonds as international. Will you rebalance that 25% in international bonds as they go up and down? If so, how often or after how much variation? Yes, I would rebalance this position just like all the rest. I built myself a nifty little spreadsheet I use to track and rebalance. My rebalance threshold is 3% of my total portfolio (e.g. $3k for $100k portfolio). I calculate the target $ holding of each of four classes (domestic + international for each stocks and bonds). If one of the classes is out by more than the threshold, the cell flashes red and tells me to reba...
by burma7734
Sat Jun 01, 2013 12:50 pm
Forum: Investing - Theory, News & General
Topic: What's the right allocation to international bonds?
Replies: 39
Views: 5258

Re: What's the right allocation to international bonds?

Is there any evidence that investment quality foreign bond interest rates don't rise and fall in tandem with US bonds? Several people have asked that question. Does anyone know the answer? Here is a source that shows the correlation between International Bonds and US Bonds at 0.3, 0.0, 0.3 for 1, 3, and 10 year timeframes. So, there is a slight positive correlation, but it is a weak one suggesting addition of International bonds provides diversification benefits. Some seem to be saying "I don't need international bonds because I have internationals stocks." That makes no sense to me. You wouldn't say that of US holdings. Stocks and bond serve different functions in a portfolio, regardless of the base country. The same source show...
by burma7734
Sat Jun 01, 2013 9:36 am
Forum: Investing - Theory, News & General
Topic: yet another Tactical tilt recipe
Replies: 44
Views: 4665

Re: yet another Tactical tilt recipe

Yes, If PE10 were below 12, I would still tilt toward stocks.

I wrestled with the idea of some sort of stock/bond comparison (like E/P yield vs AA). But I am attempting to use my recipe to set only my risk asset allocation, regardless of relative performance of bonds. Factors like TIPS real yield, or investment grade bond yield vs EE bonds would be used to make bond purchase decisions, but not to set my overall risk asset allocation.
by burma7734
Fri May 31, 2013 8:43 pm
Forum: Investing - Theory, News & General
Topic: Where Do Savings Bonds Fit Into Your Order Of Investing?
Replies: 36
Views: 4032

Re: Where Do Savings Bonds Fit Into Your Order Of Investing?

Noobvestor wrote:1) 401K up to the match
2) Roth IRA up to the max
3) 401K up to the max (assuming reasonable fund options - maybe not if 5%-load, 2% fee, but maybe)
4) I Bonds
5) EE Bonds (assuming you treat them as a potentially 20-year investment for the doubling)
6) Stocks & Municipal Bond Fund @ Vanguard
me too

I might stop funding EE bonds if Total Bond Market yield rises above the EE 3.5% + 1% risk premium.
by burma7734
Fri May 31, 2013 7:44 pm
Forum: Investing - Theory, News & General
Topic: yet another Tactical tilt recipe
Replies: 44
Views: 4665

yet another Tactical tilt recipe

I have read through several excellent threads 1 2 and thier linked references in an attempt to create a asset allocation "tilting" strategy {cough **market timing** cough}. But please indulge me. There is evidence for the persistence of extreme PE10 and momentum correlations to backtested returns {which means nothing going forward}. However, I would like to incorporate tilts for Shiller PE10 and momentum into an objective recipe for risk asset allocation, with the main goal of reducing volatility {realizing this might also reduce return}. I know many of you of the fixed allocation mindset won't like this. But as Bogleheaded as I have tried to be, I have found myself adjusting my "fixed" stock allocation downward as the m...
by burma7734
Fri May 10, 2013 11:35 pm
Forum: Investing - Theory, News & General
Topic: Do you adjust your AA based on valuations?
Replies: 94
Views: 9708

Re: Do you adjust your AA based on valuations?

I will never understand why folks use valuations. Vanguard itself did a paper that looked at a whole bunch of valuations as a forward predictor and the best of the lot was the heralded PE10 which gave a correlation of 0.41. That means using PE10 would have only predicted the direction of the market 41% of the time. Basically, you could have just flipped a coin and had better odds of being correct, i.e. 50%. That is TERRIBLE!! Here is the Vanguard paper While PE10 has a 0.43 R^2 correlation to 10 year real returns, it is incorrect to say that is a "coin flip". A random event like a coin flip would have a 0 correlation (much like many of the other valuation indicators cited in the article). As the paper notes, nothing has a good co...
by burma7734
Wed May 01, 2013 2:41 pm
Forum: Personal Investments
Topic: I bond composite rate for May, 1.18%
Replies: 6
Views: 1712

Re: I bond composite rate for May, 1.18%

I already maxed both the I bond ($10K + $5K tax return) and the EE ($10k) in April. I think they are two of the "least worst" fixed income options now, as long as you have a 20 year time horizon.

Even if inflation starts to pick up in a few years, it is surprising how much return spread you would need from another investment to beat the deal on EE bonds. I posted some back of the envelope calculations a while back. You would need rate of 4.5% five years from now to break even with the EE. I don't think I will look back in 20 years and think the EE purchase was my worst decision.
by burma7734
Tue Apr 02, 2013 11:13 pm
Forum: Personal Investments
Topic: EE bonds - new rates?
Replies: 8
Views: 1502

Re: EE bonds - new rates?

So I went ahead and bought my $10k of EE bonds for the year, since there is no reason to expect the May rates will be anything significantly better and could well be worse. 3.5% semi-tax advantaged seems like one of the "least worst" bond options today, after maxing my Ibonds.
by burma7734
Tue Apr 02, 2013 11:26 am
Forum: Investing - Theory, News & General
Topic: Roth 401(k) versus 401(k) for high income investors?
Replies: 44
Views: 5547

Re: Roth 401(k) versus 401(k) for high income investors?

I wrestled with this too and ultimately decided to split my 401k contribution - 30% to Roth 401k - just for some additional tax diversification. The Roth 401k assets are in Total Stock Market.
by burma7734
Tue Apr 02, 2013 9:26 am
Forum: Personal Investments
Topic: EE bonds - new rates?
Replies: 8
Views: 1502

Re: EE bonds - new rates?

Thanks, interesting comments. I sort of assumed the 20 year doubling was somehow "sacred" but I guess that is naive.

Since I would be purchasing to achieve the 20 yr, 3.5% return, maybe I should go ahead and lock in now.
by burma7734
Mon Apr 01, 2013 11:22 pm
Forum: Personal Investments
Topic: Need to buy some bonds
Replies: 3
Views: 840

Re: Need to buy some bonds

For your first $10k, I think Ibonds are a one of the "least worst" bond options today. I put $10k in Ibonds this year, then going to put my next $10k in EE bonds.
by burma7734
Mon Apr 01, 2013 11:15 pm
Forum: Personal Investments
Topic: EE bonds - new rates?
Replies: 8
Views: 1502

EE bonds - new rates?

When does the Treasury typically announce the new bond rates? With the current 0.20% on EE Bond through April 30, I assume it can't hurt to wait to see the new rates before investing my $10k.

Is there anything that correlates to the EE rates?

I am aware the fixed rate becomes meaningless if you hold 20 year for the 2x, ~3.5% return.
by burma7734
Thu Mar 21, 2013 11:47 am
Forum: Personal Investments
Topic: Buy Munis inside my Roth IRA?
Replies: 9
Views: 1942

Re: Buy Munis inside my Roth IRA?

Can't see that it makes any sense in a Roth account. You are paying a premium tax free status but not taking advantage of it.
If you have filled up your tax-advantaged accounts with tax-inefficient assets (taxable bonds, REITs, commodities, etc), and you still need bonds to meet your desired stock/bond asset allocation, you might consider placing municipal bonds (or a mutual fund thereof) in your taxable account.
http://www.bogleheads.org/wiki/Municipal_Bonds
by burma7734
Tue Mar 05, 2013 12:46 am
Forum: Investing - Theory, News & General
Topic: Percent allocation to TIPS?
Replies: 25
Views: 6817

Re: Percent allocation to TIPS?

I am 0% TIPS, but been buying I-bonds at the annual limit the past three years. So they are about 26% of my bonds.

For your first $10k (+$5k with tax return) per year, it seems I-bonds at 1.67% yield are the clearly better choice now than negative yield on TIPS for new money. Or am I missing something?
by burma7734
Mon Mar 04, 2013 12:41 pm
Forum: Personal Investments
Topic: bond portfolio optimization - stable value fund?
Replies: 5
Views: 857

Re: bond portfolio optimization - stable value fund?

Thanks to both. I was just looking for a little affirmation of my choice of this stable value fund, as they don't seem to be talked about very much. With a current net yield at 3.5%, it seems to be a good place for safe money.
by burma7734
Sun Mar 03, 2013 9:59 pm
Forum: Personal Investments
Topic: bond portfolio optimization - stable value fund?
Replies: 5
Views: 857

bond portfolio optimization - stable value fund?

Thanks to Boglehead advise that I have been building a fixed income portfolio. I (36 yrs old) have a 30% non-stock allocation for my portfolio, but having trouble finding worthwhile assets in this environment. So my non-stock assets are: 26% I-bonds (already did the 10K + 5K tax refund this year) 14% FNMIX (in 401k) 60% Pimco Low Volatility Fund (in 401k @ Fidelity) I am thinking to add to this $10k of EE Bonds (roughly 6% of the portfolio) for their 3.5% 20 year return. I know Swedroe has suggest some caution about stable value funds, but he concedes they might be the right choice in some retirement plans. The Low Volatility fund in my plan has a 0.16% ER and has 1, 3, 5, 10 yr returns all in 3-4% range. Realizing it is not risk free, fund...
by burma7734
Wed Jan 30, 2013 11:54 am
Forum: Personal Finance (Not Investing)
Topic: Nickeling and diming out of the HSA
Replies: 29
Views: 2607

Re: Nickeling and diming out of the HSA

I agree. Move your money to a new custodian if you don't like the fees. My employer has Fidelity as custodian so I can access all their funds commission free.... Looks like Vanguard is another option too.

https://personal.vanguard.com/us/whatwe ... lthsavings
by burma7734
Wed Jan 30, 2013 10:34 am
Forum: Personal Finance (Not Investing)
Topic: Nickeling and diming out of the HSA
Replies: 29
Views: 2607

Re: Nickeling and diming out of the HSA

I have a new HSA, but was just planning to use it sort of as another IRA. Put my max in each year and pay my current expenses out of pocket. I did not appreciate sort of retroactive reimbursement you proposed, till I just answered my own question by reading the wiki http://www.bogleheads.org/wiki/HSA I had assumed you could only pay current year expenses with HSA. So, as I understand you would accumulate your medical expense records till retirement, then use them to justify tax free withdrawals from the HSA. I keep track of medical expenses with a Quicken category. I guess I should start scanning receipts as supporting documents too. To the OP.... I guess you could look at paying your current "nickle and dime" expenses as a sort o...
by burma7734
Sun Jan 13, 2013 10:09 pm
Forum: Investing - Theory, News & General
Topic: REITS as a separate asset class?
Replies: 49
Views: 17089

Re: REITS as a separate asset class?

If you have a Total International fund like VTIAX, you already have some exposure to international REITs at about 3% of that fund.

Without belaboring the semantics, the point I have been trying to make is that REIT holdings are already part of the holdings of many funds including Total Market funds like VTIAX and VTSAX at the market weighting (roughly 3%). REITs are a group within the total stock market (not something outside of the stock market).

It is certainly a valid strategy to overweight holdings in the 118 US REITS stocks if one chooses to do so. Just with the realization that you might already have some exposure to the REIT stocks in your portfolio already.
by burma7734
Sun Jan 13, 2013 11:04 am
Forum: Investing - Theory, News & General
Topic: REITS as a separate asset class?
Replies: 49
Views: 17089

Re: REITS as a separate asset class?

1) correlation should not define an asset class
2) Why compare a US REIT index to 23 country developed market index? I could pull out several baskets of US stocks that have low correlation to this index, but that does not mean they are a unique asset class.

REIT is not unique from the total equity market. Every one of the 111 stocks held in REIT (VNQ/VGSLX) are also holding of Total US Market (VTI/VTSAX). They constitute about 3% of the holdings of the total market funds. Therefore REIT is a sector or portion of the total equity market, not an asset class unique from equities as people often talk about them.
by burma7734
Sat Jan 12, 2013 9:44 pm
Forum: Investing - Theory, News & General
Topic: REITS as a separate asset class?
Replies: 49
Views: 17089

Re: REITS as a separate asset class?

Remember most real estate investment is not traded on the stock market. Therefore the amount of REITs you see in TSM is much less than the true weight in TM (Total Market). That is the essence of the argument to overweight the REIT sector. Since total equity capitalization of REITs is only fractionally representative of the total market, so one might "tilt" their equity holdings as summarized by this article from Rick Ferri. It just seems misleading to talk about REIT as an "asset class" rather than an sector of the equity market. I think it is important for investors to realize buying a fund like the REIT Index is not exposure to some new asset class that is not covered in the Total Market, but a strategic decision to ...
by burma7734
Sat Jan 12, 2013 1:15 pm
Forum: Investing - Theory, News & General
Topic: REITS as a separate asset class?
Replies: 49
Views: 17089

Re: REITS as a separate asset class?

Thanks for the Swedroe article. Sure, REIT can be a good sector for tactical asset allocation, as could utility stocks, or consumer discretionary. It just does not seem they should be regarded as a separate asset class. I thought I was purchasing something different in VNQ that was not covered by the Total Market, but in fact is just buying more of a specific subset of stocks. I don't follow the claim that REIT is loosely (0.4 Larry sites) correlated to SP 500. Data from Assetcorrelation shows 0.87 correlation to Large Caps over the 2 yr and 5 yr period. At 10 year chart on morningstar shows similar correlation. I have seen some argue that "historically" there was less correlation, but it seems we are living in more correlated wor...
by burma7734
Sat Jan 12, 2013 12:28 pm
Forum: Personal Finance (Not Investing)
Topic: Calculator for Roth vs traditional 401(k) contributions?
Replies: 1
Views: 2317

Re: Calculator for Roth vs traditional 401(k) contributions?

I went through a similar evaluation for myself recently

http://www.bogleheads.org/forum/viewtop ... 1&t=108423

I found this site to be very helpful with the case for an against a calculating your needed tax spread for either case to bring benefit

http://thefinancebuff.com/case-against-roth-401k.html

http://thefinancebuff.com/roth-401k-for ... e-max.html
by burma7734
Sat Jan 12, 2013 1:08 am
Forum: Investing - Theory, News & General
Topic: REITS as a separate asset class?
Replies: 49
Views: 17089

Re: REITS as a separate asset class?

I wanted to kick this old thread back up because I learned a valuable lesson today. I had been under the mistaken impression that holding a REIT index (VNQ) gave me exposure to an asset class that was not captured by the Total market index. However, as I have read several threads here and the wiki articles, I now understand that VNQ is just a sector of the total market index. I struggle to see why REITs are treated as a separate assert class in most asset allocation strategies, rather than just an equity sector. By owning the Total US market index (VTSAX), I have a market weighted 3.5% exposure to real estate equity holdings. What is the logic in overweighting this sector by 5 to 10x its market weighting? Why not do the same for utility sto...
by burma7734
Fri Jan 11, 2013 1:35 pm
Forum: Personal Investments
Topic: S&P500 Index vs. Total Stock Market Index
Replies: 9
Views: 2293

Re: S&P500 Index vs. Total Stock Market Index

The Extended Market fund is the completion fund for the SP 500 to give you mid and small caps and exposure to the total US equity market.

http://www.bogleheads.org/wiki/Extended ... Index_Fund

80% SP 500 + 20% Extended Market = US Total Market

This is what I have in my 401k since I don't have a total market index fund
by burma7734
Mon Jan 07, 2013 11:18 pm
Forum: Personal Investments
Topic: 401(k): Roth or Traditional?
Replies: 8
Views: 2448

Re: 401(k): Roth or Traditional?

The question of roth versus traditional comes down to one thing, and that has to do with what do you believe about the future. If you think you will be in a higher tax bracket later, roth the 401k, otherwise go the traditional route. No, it is more complicated than that. As I noted above, there is break even spread (around 8% with my situation and assumptions). If I think my future taxes will be less than 8% lower, then the r401K is slightly advantageous. And it is not just comparing marginal tax brackets... you need to compare your expected average tax rate on your 401k withdrawal compared your current marginal rate for t401k deduction. If you are not maxing your 401k and IRA, the case against the r401k is much stronger, regardless of wha...
by burma7734
Mon Jan 07, 2013 7:03 pm
Forum: Personal Investments
Topic: EE Bonds - break even scenarios
Replies: 15
Views: 2456

EE Bonds - break even scenarios

I will max out my primary investment choices: 401k, rIRA (backdoor), I-bonds ($10k + $5k tax return) this year, and expect to have another $10k to invest in the bond side of my portfolio. I have 18% of my bonds in Emerging (FNMIX) for a little yield chasing, but don't want to push that any higher. I have read several thread in these forums and found this website discussing EE Bonds. http://www.longtermreturns.com/2012/12/ee-bonds-versus-other-long-term-bonds.html So, it got me to thinking, under what future scenarios would the guaranteed 3.8% 20 yr return on EE Bonds be a bad choice. I ran some rough numbers comparing 20 year future scenarios for taxable (CD) or muni investment to see what sort of rising rate environment would it take to br...
by burma7734
Mon Jan 07, 2013 6:33 pm
Forum: Personal Investments
Topic: 401(k): Roth or Traditional?
Replies: 8
Views: 2448

Re: 401(k): Roth or Traditional?

This discussion has got me to really look at my decision about r401k vs t401k. I realize my original idea for maxing r401k contribution that "saving more is good" is not a complete picture. I found this article particularly helpful for my situation, where I am maxing 401k and backdoor roth http://thefinancebuff.com/roth-401k-for-people-who-contribute-max.html Working through the math at 28% Fed + 9% California marginal rates and 20 years to withdrawl, I would need my average tax rate on the withdrawl to be about 8% lower than current to reach a break even comparing r401k vs t401k+taxable. So then comes the crystal ball gazing... do I think my tax rate will be at least 8% lower on this money in 20 years vs today. There are a lot of...
by burma7734
Sun Jan 06, 2013 10:41 pm
Forum: Personal Investments
Topic: 401(k): Roth or Traditional?
Replies: 8
Views: 2448

Re: 401(k): Roth or Traditional?

I am putting my 401k contributions into Roth since it was offered by my employer last year. I max out my 401k and Roth (backdoor) contributions each year, so for me, I am saving more by contributing to the Roth.

Similar to the OP, I hope to retire early and can use either rIRA or r401k principle contributions tax free before 59.5 penalty free.