There is also the issue that the S&P 500 index requires several quarters of profitability. Moderna wasn't profitable until very recently.
IVOO, the Vanguard S&P 400 (Mid Cap) ETF has not paid a capital gains distribution during the time frame that Vanguard displays on its website, so that is not a reason to avoid these segment funds.
Personally, I like the requirement for the company to be profitable. In times like this when any hyped up junk that can attract hopers and dreamers can grow a huge market cap that requirement looks like a negative, but when reality sets in, as it always does, and investors flee back to quality, the S&P 500 will likely do better.
Search found 2006 matches
- Fri Jul 23, 2021 5:41 pm
- Forum: Investing - Theory, News & General
- Topic: Moderna added to the S&P 500 index
- Replies: 10
- Views: 2551
- Thu Jul 22, 2021 4:58 pm
- Forum: Investing - Theory, News & General
- Topic: Do Indexers even need to pay attention to market valuation?
- Replies: 192
- Views: 20129
Re: Do Indexers even need to pay attention to market valuation?
Thing is, 1996 marked the beginning of the masses being introduced to the internet, a development as transformative as the railroad, the automobile, and air conditioning. Now we are working out the details, but it is far from certain that you will see the kinds of new industries and mega companies emerging with enormous growth in the next 20-30 years like we did since 1996.
Current valuations are based on the assumption of tremendous real annual earnings growth for decades to come. (As opposed to financially engineered earnings growth based on borrowing and buybacks IBM-style without sales growth.) If that doesn't happen things get interesting.
Current valuations are based on the assumption of tremendous real annual earnings growth for decades to come. (As opposed to financially engineered earnings growth based on borrowing and buybacks IBM-style without sales growth.) If that doesn't happen things get interesting.
- Mon Jul 19, 2021 7:29 pm
- Forum: Investing - Theory, News & General
- Topic: 10% drop of dividend income
- Replies: 14
- Views: 2750
Re: 10% drop of dividend income
The total cash amount of the dividends paid by the stocks in the S&P 500 dropped 3% between 2019 and 2020. They are expected, based on corporate announcements, to be 2% higher in 2021 than they were in 2019, which would represent a 5% gain over 2020. (This is based on S&P Global Intelligence data displayed by some software I use.)
The dividend yield has dropped considerably because the share prices have shot up, but the amount of dividends paid held up very well except for a short blip during the worst of the shutdowns.
The dividend yield has dropped considerably because the share prices have shot up, but the amount of dividends paid held up very well except for a short blip during the worst of the shutdowns.
- Mon Jul 19, 2021 7:22 pm
- Forum: Investing - Theory, News & General
- Topic: Revisiting Ron Barron prediction (DJIA) by 2023
- Replies: 13
- Views: 2203
Re: Revisiting Ron Barron prediction (DJIA) by 2023
Is it that "stocks are stocks" or that the cap weighted indexes are always dominated by a handful of biggest stocks that are very much like the stocks that the Dow Jones picks for its index.
Even in normal times, though you have 500 stocks in the S&P 500, you can pretty much track its behavior by following the top 50. Maybe even the top 30 and ignoring the rest.
- Mon Jul 19, 2021 2:20 pm
- Forum: Investing - Theory, News & General
- Topic: Large value VYM vs SCHD
- Replies: 15
- Views: 3929
Re: Large value VYM vs SCHD
The real answer is that SCHD follows an index that applies a value screen to the stocks it buys and only holds 100 stocks. VYM holds almost half of the total stock market, just about any stock in the total stock market index that is growing earnings slowly and pays a dividend that is slightly higher than the median.
SCHD gets rid of stocks very fast if they stop paying a dividend too. It is a much better fund and has been a very good fund since inception. I've discussed this in other threads recently.
It isn't about performance, it's about using a more complex algorithm to select stocks that considers more than whether or not they pay a dividend or are growing fast enough to be considered a growth stock.
SCHD gets rid of stocks very fast if they stop paying a dividend too. It is a much better fund and has been a very good fund since inception. I've discussed this in other threads recently.
It isn't about performance, it's about using a more complex algorithm to select stocks that considers more than whether or not they pay a dividend or are growing fast enough to be considered a growth stock.
- Mon Jul 19, 2021 2:16 pm
- Forum: Investing - Theory, News & General
- Topic: CD evaluation criteria
- Replies: 6
- Views: 807
Re: CD evaluation criteria
I have been a CD investor for decades going back to the late 1980s. This is the first time in my life I have held off from rolling over my CDs as they mature. The premium these CDs are paying over savings account rates are just too small to make it worthwhile to tie up my money. Just a little over a year ago I was still able to find CDs paying 1.88%. During the worst of the years after the Financial Crisis when the Fed held rates at the zero bound like now by being patient and paying attention I was able to find five year credit union CDs paying 2%, 2.25%, 2.50% and even, at PenFed, 3%. Unless you really believe that rates are going to go negative in the US (i.e. the bank will charge you to hold your money) the cost of waiting for the Fed t...
- Mon Jul 19, 2021 2:05 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
Those huge European drug companies are more at risk as they make most of their money from the US, where unlike elsewhere they are allowed to charge huge sums. There is more agreement on controlling drug prices now than on breaking up monopolies. And as counterpoint, those huge US internet companies are more at risk as they make a lot of their money from outside the US, and there is agreement on altering the tax landscape in a way that will crimp their future earnings: Fair Taxation of the Digital Economy , and Digital Services Tax: Why the World is Watching Doesn't that just reinforce the idea that an investment in the US indexes is an investment in the rest of the world so the only benefit of investing in VXUS is the currency hedge? Taxes...
- Sun Jul 18, 2021 7:53 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
If any monopolization legislation were to pass, which is very unlikely in the current, endless state of US gridlock, companies would just be broken up and stockholders would get shares in all the pieces which would keep making money. It would not be a huge hit.
Those huge European drug companies are more at risk as they make most of their money from the US, where unlike elsewhere they are allowed to charge huge sums. There is more agreement on controlling drug prices now than on breaking up monopolies.
Those huge European drug companies are more at risk as they make most of their money from the US, where unlike elsewhere they are allowed to charge huge sums. There is more agreement on controlling drug prices now than on breaking up monopolies.
- Sun Jul 18, 2021 7:08 pm
- Forum: Investing - Theory, News & General
- Topic: What would happen if a person owned the Total Market and pull out their profit each year putting it in a saving account.
- Replies: 53
- Views: 7099
Re: What would happen if a person owned the Total Market and pull out their profit each year putting it in a saving acco
That is precisely what people are telling retirees to do for the income they need to live on. The problems arise when the market has gone down a lot and there isn't enough dividend income to supply that needed income. At times like this, when the market has made obscene gains in just one year, if you can take out long term gains without pushing yourself into another tax bracket and raising your Medicare costs, it isn't a stupid idea at all. But again, it depends on your individual situation. Tax drag isn't a big problem for people who are in the lowest tax bracket who don't pay capital gains or dividend taxes. It isn't really a big deal for people in the lower brackets, especially people who are retired. But most people posting here have so...
- Sun Jul 18, 2021 7:04 pm
- Forum: Investing - Theory, News & General
- Topic: PBS FRONTLINE: The Power of the Fed
- Replies: 54
- Views: 8524
Re: Stocks as Safe Haven
There don't necessarily have to be buyers for every seller, either. Some things, including the contents of quite a few bond ETFs may not be liquid, meaning that they don't always have buyers. Then people get stuck in investments. If that happens, people hearing the news and holding other similar assets tend to rush for the exits which is where you get crashes.
- Sun Jul 18, 2021 6:59 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
Why are you more interested in individual stock analysis rather than the overall market? Are you investing in individual stocks? The future is not knowable. It's why forward P/E measures are fairly worthless. You can project earnings growth rates but you are not a fortune teller. The truth is that the top 10 stocks that dominated one decade tend to underperform the market the next decade. This has been pretty persistent throughout market periods. Investors overpay for growth until that growth fails to meet expectations despite these companies continuing to be "good". I am interested in individual stocks because when I buy a fund or ETF I am buying shares in those individual stocks, weighted according to the way the index is const...
- Sun Jul 18, 2021 2:57 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
There are numerous companies that could arguably have earnings "well behind their prices". In aggregate, the S&P 500 has nearly the same P/E ratios, and on some other metrics it's even worse than the 2000 bubble. So it's not as far off as you think. Many of the companies you are referring to were not reflected in an index, just like SPACs aren't today. Cyclicals, as represented by value stocks, are nowhere near the top of their cycle. They are within historical levels. The problem again with looking at growth rates is the same problem faced in the Tech Bubble - growth is backwards looking. If you feel they are the safest place to place your money, then the market has priced this in, and you will collect lower returns for taki...
- Sun Jul 18, 2021 12:02 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
The earnings growth of the tech stocks of the 1990s was way, way behind their prices. Remember the whole idea that you could value a company just on "eyeballs?" Boring old consumer staples companies that actually had sales and profits were not anywhere near as overvalued and they did a lot better for investors over the next 15 years. The situation now is close to the opposite. Your tech stocks' earnings (and we must include Amazon and Google no matter what GICS calls them) are growing at a rapid pace. So while their P/Es are high, so are their growth rates. But everything else--all those boring consumer companies ate priced as if their earnings will soar for years when they never have. Cyclicals are all at the tops of their cycles...
- Sun Jul 18, 2021 9:55 am
- Forum: Personal Investments
- Topic: Investing for future income
- Replies: 24
- Views: 3196
Re: Investing for future income
Yet another reason to develop entrepreneurial skills is that fiftysomethings are targeted for lay-offs, somebody, probably consultants and the business schools are telling the corporations to do this. This has been standard procedure for decades. When I went to work for MegaCorp in 1980, the department's grizzled elder, who was all of 44 years old, told me that engineers had always been fired as soon as they had worked for a company long enough that their salaries had risen and their pensions were becoming a significant expense to the company. As he explained, we were always replaced with youngsters fresh out of school who were assumed to have fresher skills and who were paid salaries that were half of what the more senior employees had ac...
- Sat Jul 17, 2021 5:06 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
<snip> Unhedged ex-US is a dollar hedge. And it is diversification . The literal, textbook definition of diversification. I would never say it wasn't diversification. But we can differ on whether extreme diversification--6,000 stocks that each make up less than .01% of an index--is good for our portfolios. I've tilted away from the stocks dominating the US indexes for the past year or so and have thus missed out on immense gains, which though they may be fleeting, might not be. If the US stock market were to drop 25% and stay that way we'd be pretty much where we were at the beginning of 2020 which was still a huge gain on the past decades. If VXUS were to drop 25%, it would put the price back to where it was at the start of last year. If ...
- Sat Jul 17, 2021 3:49 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
When dismissing international stocks as something only providing a dollar hedge, isn't this article missing that there are a lot of things other than exchange rate that can uniquely affect US companies? For example, if US budget deficits eventually forces a tax hike for US companies. If immigration results in a shortage of qualified labor in the US. If trade-wars make manufacturing in US unviable. If there is social unrest in the US. If there is a housing crash in the US. Any such event will surely affect US companies much more than international companies, and owning international stocks should serve as a hedge against many such factors. Not just relative dollar strength. What makes you think that the companies dominating the US indexes a...
- Sat Jul 17, 2021 3:26 pm
- Forum: Personal Investments
- Topic: Investing for future income
- Replies: 24
- Views: 3196
Re: Investing for future income
In one of Mr. Bogle's earlier books, "Bogle On Mutual Funds" , he offered several model portfolios based on the age/stage an investor was in. He seemed to think that focus on some amount of portfolio income was worth considering in a late stage/distribution phase of a portfolio, but not so much in the early accumulation phase. https://i.postimg.cc/BZjHNMhM/accum.png I didn't clip it, but he also had a "Transition Phase" which was essentially moving from the above model portfolio to the one pictured below: https://i.postimg.cc/VvvShLBJ/bogleonmutual.png I don't remember where I read it, but I recall reading or hearing Mr. Bogle discuss his idea behind starting the first Growth/Value Index Funds as there might be good rea...
- Sat Jul 17, 2021 2:07 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
When dismissing international stocks as something only providing a dollar hedge, isn't this article missing that there are a lot of things other than exchange rate that can uniquely affect US companies? For example, if US budget deficits eventually forces a tax hike for US companies. If immigration results in a shortage of qualified labor in the US. If trade-wars make manufacturing in US unviable. If there is social unrest in the US. If there is a housing crash in the US. Any such event will surely affect US companies much more than international companies, and owning international stocks should serve as a hedge against many such factors. Not just relative dollar strength. What makes you think that the companies dominating the US indexes a...
- Sat Jul 17, 2021 1:54 pm
- Forum: Personal Investments
- Topic: Investing for future income
- Replies: 24
- Views: 3196
Re: Investing for future income
But yes, people are naive about the problems that arise and what it takes to succeed. But problems are also opportunities and opportunities are the stuff upon which business is built. As you noted, even well run businesses can fail, the world changes and one can feel the ground shifting under their feet. No guarantees but if you do certain things, the odds of success are greatly improved. You also don't have to succeed forever, either. If you have 10 or 15 years of success you can bank enough--and invest that money--enough to get you through the rest of your life. In fact, what I have also observed is where people get into a lot of trouble with smaller businesses is when they get too ambitious and expand, which often takes them outside of ...
- Sat Jul 17, 2021 1:37 pm
- Forum: Investing - Theory, News & General
- Topic: VXUS: A Dollar Hedge, Not A Value Investment
- Replies: 63
- Views: 9764
Re: VXUS: A Dollar Hedge, Not A Value Investment
"Tech" today is not what it was in the 1990s. The Dot Com bubble was mostly about companies earning no money selling hopes and dreams. But what is dominating the S&P 500 today is virtual-monopolies that have global sales in the high billions that, if they are not very profitable are not profitable because they are using their money from sales to buy up or build out more and more global businesses (as is the case with Amazon) or to diversify what they are selling like Google, Microsoft, and Amazon which are splitting up the world's data hosting with their cloud services. The sheer size of the sales numbers of Amazon, Apple, and Google dwarfs those of any company the international indexes can offer. A look at the top holdings in...
- Sat Jul 17, 2021 12:25 pm
- Forum: Personal Investments
- Topic: Investing for future income
- Replies: 24
- Views: 3196
Re: Investing for future income
There is the saying that when you are in business, you are in trouble and when you are out of business, you are out of trouble. There is a lot of truth in that saying. Not to dissuade people from going into business or from investing in Real Estate, you need to go in with eyes wide open. All the money I have, which is far more than I need to live a good life, comes from independent businesses started by myself, my partner, and my grandfather. We all loved what we did, were very good at it, and feel very sorry for people who have to punch the clock every day working at something that mostly bores them and contending with office politics and decisions made by distant billionaires who can ruin their careers with one stroke of the pen. The iss...
- Sat Jul 17, 2021 11:30 am
- Forum: Personal Investments
- Topic: Investing for future income
- Replies: 24
- Views: 3196
Re: Investing for future income
Having said all of this, there are folks out there who seem to be born to be landlords. It can be a successful endeavor but in the final analysis, it is a business, a business that needs to be managed. Some folks are good at it and others are not. We are looking at a class-based issue here, though Americans hate to talk about class. We have known a lot of people in the building trades in our small-town dominated region and they all have invested their money in real estate and done quite well. It is a tradition in the cultures they come from, their older relatives have owned rental property, and they know enough about buildings to be able to do most of the maintenance themselves. More to the point,they know the area very well having lived t...
- Sat Jul 17, 2021 11:18 am
- Forum: Investing - Theory, News & General
- Topic: Ultra-Short Bond Funds: Know Where You're Parking Your Money
- Replies: 6
- Views: 1884
Re: Ultra-Short Bond Funds: Know Where You're Parking Your Money
This emphasizes how important it is to investigate how a fund or ETF selects both bonds and stocks before investing in it. Vanguard is extremely reticent about the indexes its various funds and ETFs follow. Since many of them are custom indexes commissioned by Vanguard for that specific fund or ETF and used by no other institution, they can vary very greatly in how they carry out the mission implicit in the name of the associated fund or ETF. After putting some time into reading the documents supplied by index companies (where available, and they aren't always) I have come to realize that all these companies are doing covert stock picking with the proliferation of customized indexes. Most investors just look at the ETF title (High Yield, Va...
- Sat Jul 17, 2021 10:56 am
- Forum: Personal Investments
- Topic: Investing for future income
- Replies: 24
- Views: 3196
Re: Investing for future income
Many people here have very strong opinions on this topic, but a case can be made for investing with a dividend-oriented slant. The challenge is that it isn't as easy to do it properly as it is to just buy the total stock market. You have to know something about the individual stocks you are investing in and understand valuation because most dividend paying stocks are slower growers than the companies that push up the S&P 500 index price (which is what people mean when they talk about The Market). Personally, I like investing in solid companies with long consistent histories of growth, priced at prices that make sense for that rate of growth, operating in business niches that have reasonable prospects for the future. I am willing to give...
- Tue Jul 13, 2021 5:30 pm
- Forum: Investing - Theory, News & General
- Topic: Inflation for the month and year at highest rate in 13 years
- Replies: 164
- Views: 19380
Re: Inflation for the month and year at highest rate in 13 years
Are you contemplating any changes in your allocation based on recent inflation. Would continued inflation change your allocations ? No. Core CPI ex-“pandemic affected services” was +0.31% in April, +0.28% in May, +0.22% in June. The trend is declining, not increasing. No. My portfolio is 80% equities. Nothing to change there. The 20% in Stable Value I might shift some to Treasuries or Tips, but that's not really a change - my FI positioning is always subject to yields (but don't take that as an assertion of expertise. I barely know what I'm trying to do when it comes to bonds.) Yup. The automotive industry is driving just about all of inflation right now. It would appear you don't do your family's food shopping. Or eat at locally owned res...
- Tue Jul 13, 2021 2:31 pm
- Forum: Investing - Theory, News & General
- Topic: Vanguard buys Just Invest.....
- Replies: 75
- Views: 10796
Re: Vanguard buys justinvest.....
Their focus since we lost Bogle has become growing AUM no matter what the impact on current customers. Since the details of how their top execs are paid are secret we can only speculate as to why this shift has occurred. But a rational mind could assume that their pay is somehow tied to AUM growth and ways of generating more fees.Chris K Jones wrote: ↑Tue Jul 13, 2021 1:46 pm I would think this is bad news. It generates concern that they are losing their focus. I hope I am wrong.
- Mon Jul 12, 2021 3:02 pm
- Forum: Investing - Theory, News & General
- Topic: Any rule of thumb for realizing taxable capital gains / estimating tax drag?
- Replies: 16
- Views: 1573
Re: Any rule of thumb for realizing taxable capital gains / estimating tax drag?
Alternatively, if you are sitting on huge gains after a ridiculous surge in the S&P 500 that bears little relationship to the state of the economy, and would like to rebalance into fixed income so that your stock investment stays at your chosen allocation, take the profit and pay the tax.
How would you feel if that $100 turned into $75,000 and took 7 years to get back to where it is now? Wouldn't you wish you had paid the tax and kept most of that profit?
How would you feel if that $100 turned into $75,000 and took 7 years to get back to where it is now? Wouldn't you wish you had paid the tax and kept most of that profit?
- Sat Jul 10, 2021 1:52 pm
- Forum: Investing - Theory, News & General
- Topic: Simple strategies for reducing inflation risk by Vanguard
- Replies: 31
- Views: 5424
Re: Simple strategies for reducing inflation risk by Vanguard
REITs can be useful, if they own commercial property that is likely to hold value and where renters sign contracts that include automatic inflation adjustments. Some triple net REITs do this. But indexes are a clumsy way to invest in REITs because there are a hodgepodge of unrelated businesses that operate under a REIT business structure: Document storage. Cell towers. Data centers. Storage units. Some outsource management and can be poorly run. I own a number of carefully selected REITs with excellent histories and solid management but would not touch VNQ. The REITs that appeal to me have much smaller market caps than what dominates cap weighted VNQ, which is trendy cell tower and data center companies. Real estate is never generic. Proper...
- Sat Jul 10, 2021 1:36 pm
- Forum: Investing - Theory, News & General
- Topic: Vanguard Funds (Posted PE ratio on their website)
- Replies: 2
- Views: 541
Re: Vanguard Funds (Posted PE ratio on their website)
Vanguard does not explain on its customer facing sites how it calculates any of the valuation metrics for its funds. For that matter, it tells us precious little about the principles it uses to populate its funds save what indexes they follow. It can take some time-consuming research to learn the details. I have deeply researched several of the indexes their funds use and it can be eye opening, as the titles of the funds and the actual constituent stocks on the index don't always match the way you would expect them to. For P/E ratios and ROEs etc, I wonder if they are cap weighted or average. Tables showing things like country breakdown for international funds don't appear to be cap weighted. But who knows? Vanguard's attitude to customers ...
- Fri Jul 09, 2021 11:24 am
- Forum: Investing - Theory, News & General
- Topic: Do you ever feel like you know too much?
- Replies: 63
- Views: 6843
Re: Do you ever feel like you know too much?
A whole lot of posters here seem to confuse accepting an ideology with understanding it. There are people here who are very knowledgeable about why they buy index funds and how they set their allocation, but just as many who seem to go by rules of thumb which are pretty much aphorisms. "Buy index funds" which can be all kinds of style index funds, some of them highly questionable. "Set allocation Bonds = age-10." "Withdraw 4% a year and you are safe." or "Withdraw 3% a year now." The uninformed Boglehead investor will most likely do better than the uniformed investor who buys what the broker sells him. But the minute you stop relying on other people's advice and start digging in to learning about the ...
- Fri Jul 09, 2021 11:08 am
- Forum: Investing - Theory, News & General
- Topic: Just moved from 65% stocks to 75% stocks
- Replies: 56
- Views: 6804
Re: Just moved from 65% stocks to 75% stocks
The scenario could get interesting when your bonds fall significantly too in a case where the crash of the stock market is precipitated by the Fed losing control of rates when it becomes clear that inflation has become significant. Bond funds do crash and a flight to cash, hard assets, and crypto could upend the assumption that if people are selling stock they are buying bonds (pushing up their prices.).
- Fri Jul 09, 2021 11:00 am
- Forum: Investing - Theory, News & General
- Topic: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
- Replies: 95
- Views: 21717
Re: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
I do wonder how much the FED's buying spree affects the accuracy of the "efficient market hypothesis": The FED is buying insane amounts of bonds. There is no "real" market when it's govt subsidized. e.x. Our college debt crises is partially because the debt is backstopped by govt. On the other hand, maybe we are confused. Isn't the fed buying bonds the reason for the low interest rates. So when they stop buying, there will in fact be repercussions, but it is literally what we have been discussing (rising interest rates!). So trying to account for the FED buying bonds and distorting the "market" would literally just mean accounting for interest rates being low and able to rise at any time. The Fed's buying has ...
- Thu Jul 08, 2021 1:14 pm
- Forum: Investing - Theory, News & General
- Topic: Just moved from 65% stocks to 75% stocks
- Replies: 56
- Views: 6804
Re: Just moved from 65% stocks to 75% stocks
It also matters what the balance is in your account. Percentages are all fine and dandy, but the amounts matter, too. If your total portfolio was $100,000 that 5% extra draw down meant you had 5,000 less dollars it could matter a whole lot more than if you had $10 million in your portfolio. Say you started with $100,000 at 75/25, with $75,000 in stock that 50% draw down leaves you with $37,500 in stock and your $25,000 in fixed income for a total of $62,500. If you were at 65/35, you'd start with 65,000 in stock and that 50% draw down would leave you with $32,500 in stock and $35,000 in fixed income for a total of $67,500. If you lost your job and were long term unemployed you would have to draw on that portfolio for money to pay your mortg...
- Thu Jul 08, 2021 12:27 pm
- Forum: Investing - Theory, News & General
- Topic: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
- Replies: 95
- Views: 21717
Re: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
With the Fed buying immense amounts of bonds based on considerations very different from what the future may hold, is it still valid to consider bond prices a good gauge of what the Market expects going forward? I have read that the Treasury now holds about 30% of all mortgage bonds. The amount of treasury debt they have bought doubled from what it had ever been as a result of the pandemic. The Fed also bought up billions of dollars of corporate debt during the pandemic. This is very different from a market where buyers and sellers set prices by bidding at auction. Also, the argument that bonds approach face value as they approach maturity is soothing, except that many of the bonds held in large bond funds have very long maturities. Almost ...
- Thu Jul 08, 2021 11:50 am
- Forum: Investing - Theory, News & General
- Topic: How to prepare for a forced early retirement?
- Replies: 86
- Views: 8875
Re: How to prepare for a forced early retirement?
There are another couple issues that derail dental careers:
1. Changes in eyesight. I had one dentist who had to retire in his 50s because he just couldn't see well enough even with various fancy adaptive eyeglasses. Think how tiny the spaces dentists work in are. If they don't get it right they can really harm patients.
2. My second wonderful dentist had to retire due to severe back problems, likely exacerbated by leaning over patients for 30 years.
- Wed Jul 07, 2021 7:45 am
- Forum: Investing - Theory, News & General
- Topic: The first time in my investing life I'm "fearful"
- Replies: 130
- Views: 21496
Re: The first time in my investing life I'm "fearful"
Cash and bonds are not suitable for long time wealth preservation any more. What could be the alternatives except stocks? High Yield Bonds, Preferred Shares? But they still have high volatility. And when these are not suitable alternatives, what about shifting into more conservative stocks, e.g. sell half of your stocks and put it into a high dividend index, so your AA would be still 90/10, but the stocks part would be 45 stocks / 45 high dividend stocks. Maybe this AA makes you sleep better, because dividend stocks doesn't have high valuations. A high dividend index right now is far from a conservative investment because income-seeking investors have bid up the prices of all the quality dividend stocks over the past five+ years. As a resu...
- Tue Jul 06, 2021 1:13 pm
- Forum: Investing - Theory, News & General
- Topic: The first time in my investing life I'm "fearful"
- Replies: 130
- Views: 21496
Re: The first time in my investing life I'm "fearful"
Another voice here supporting the idea that when you have enough, preservation becomes far more important than hoping the market will give you even more. The latter is greedy. Many people giving you advice are young with years more to grow their nest eggs. Others are old and profited mightily by staying in the market as interest rates slowly receded from double digits and stocks profited from the popularization of computer use. The future may look very different from those fat decades. Back testing is reassuring but largely irrelevant. Nothing terrible happens if you reduce your risk dramatically when you have enough. I did this over the last seven years, and yes, I missed out on some big gains, but I still have more money (counting large g...
- Sun Jul 04, 2021 10:58 am
- Forum: Investing - Theory, News & General
- Topic: Vanguard Website Mutual Fund List Change
- Replies: 31
- Views: 4493
Re: Vanguard Mutual Fund List Change
Unless I am missing something, they eliminated the option to view the Stock Attributes of the various funds and ETFs. This includes the handful of valuation metrics they report. Eliminating that makes it a tedious job to compare funds and ETFs using these valuation metrics.
- Sat Jul 03, 2021 11:55 am
- Forum: Investing - Theory, News & General
- Topic: Which ETF is most overweight in FANMAG stocks?
- Replies: 40
- Views: 6151
Re: Which ETF is most overweight in FANMAG stocks?
If you really wanted to overweight a handful of stocks like that, wouldn't it make more sense to buy total stock market and then a very small allocation to buying the individual FANMAG stocks? There is no magic in owning them via an ETF and you are then going to be paying an expense ratio every year you own them. If you buy them as individual stocks you pay nothing to hold them and if you change your mind you can sell them without disturbing the rest of your investment.
Mind you, those stocks make up a good chunk of the performance of Total Stock Market already.
Mind you, those stocks make up a good chunk of the performance of Total Stock Market already.
- Fri Jul 02, 2021 12:07 pm
- Forum: Investing - Theory, News & General
- Topic: Did dividend stock funds provide "downside protection" in 2020?
- Replies: 237
- Views: 20250
Re: Did dividend stock funds provide "downside protection" in 2020?
This could be testable. It leads to a prediction that dividend stock funds will consistently outperform broad market funds in (say) five-year periods starting from the bottom of a crash. Can you suggest a dividend stock fund with a value screen that existed in 9/30/2002 and 2/28/2008? I won't show the chart but the Vanguard Equity-Income fund, VEIPX, performed almost identically to Total Stock over the five years following those two crashes. Without peeking at their actual record, can you name as many as possible funds that meet your description of "dividend stock funds with value screens" that existed in 9/30/2002? Vanguard Dividend Growth Fund vs Vanguard 500 Index Fund Investor Shares https://i.ibb.co/GTFPBsC/VDIGX.jpg Source:...
- Thu Jul 01, 2021 4:11 pm
- Forum: Investing - Theory, News & General
- Topic: SEC's "investment quiz"
- Replies: 25
- Views: 2384
Re: SEC's "investment quiz"
10 out of 10 but very easy questions.
- Thu Jul 01, 2021 4:07 pm
- Forum: Investing - Theory, News & General
- Topic: Did dividend stock funds provide "downside protection" in 2020?
- Replies: 237
- Views: 20250
Re: Did dividend stock funds provide "downside protection" in 2020?
In this case, I question whether your use of total return is the best comparison. There isn't anything else to compare. Total return is total return. There isn't anything else. If dividend funds are paying stable dividend streams while the company is losing money, those payments must be coming out of seed corn, <emphsis mine> there is no other place for them to come. If a dividend stock fund and a total stock market fund have the same total return, then they will be equally successful or equally unsuccessful at providing an increasing stream of income. A dollar of income from dividends doesn't pay the bills any better or any worse or any differently than a dollar of income from sale of fund shares. If dividend-paying stocks... the right ki...
- Thu Jul 01, 2021 4:00 pm
- Forum: Investing - Theory, News & General
- Topic: Stocks vs. Index Funds
- Replies: 27
- Views: 2551
Re: Stocks vs. Index Funds
The S&P's value is being almost entirely driven by a small number of mostly tech stocks. If your stocks are in different sectors especially more defensive ones, they won't do as well when those tech stocks surge. By the same token, though, they may do better on days when the tech stocks fall. My individual stocks are mostly defensive and they zig when the market sags in both directions. They don't rise as much on up days and don't fall as much on down days. That's why they are considered "defensive." I know why I bought them and they have been doing exactly what I hoped they would do all year. So comparing them to the S&P is irrelevant. Yahoo portfolios shows you how your portfolio compares to the S&P 500, Dow, and Rus...
- Wed Jun 30, 2021 1:42 pm
- Forum: Investing - Theory, News & General
- Topic: Did dividend stock funds provide "downside protection" in 2020?
- Replies: 237
- Views: 20250
Re: Did dividend stock funds provide "downside protection" in 2020?
I am concerned about bad actors who promote dividend paying stocks. Slimeballs like Burton Malkiel? Shysters like Jeremy Siegel? I don't know what work you are referring too so I can't say - but I think I know where you are going. So I am going to point to Warren Buffett. People say he is a big proponent of dividends. That Berkshire has never paid a dividend suggests that he is not. Here is an NPR interview where Malkiel of Random Walk Down Wall Street fame speaks about dividend investing. It's titled "The importance of dividend producing stocks." He was a Princeton professor, extremely distinguished, and also the man who came up with the idea of index funds. https://www.rebalance360.com/cri/the-importance-of-dividend-producing-s...
- Tue Jun 29, 2021 4:34 pm
- Forum: Investing - Theory, News & General
- Topic: Did dividend stock funds provide "downside protection" in 2020?
- Replies: 237
- Views: 20250
- Tue Jun 29, 2021 1:44 pm
- Forum: Investing - Theory, News & General
- Topic: Did dividend stock funds provide "downside protection" in 2020?
- Replies: 237
- Views: 20250
Re: Did dividend stock funds provide "downside protection" in 2020?
Investors with value-sensitive dividend portfolios did just fine. SCHD is a cap weighted dividend index that applies a value screen. And I included it in the initial posting in this thread. And it did not show any downside protection in 2020. A closer look: Source https://imgur.com/2T145eT.png 1) Would you regard a 20% drawdown in 2020 as "doing just fine?" 2) Would you describe falling slightly farther than Total Stock did in 2020 as "doing just fine?" Or are you willing to say something like: "Do not rely on dividend stock funds to provide downside protection, not even value-sensitive dividend stock funds. Invest in them anyway because of other good qualities that they have." When the market falls swiftly EV...
- Tue Jun 29, 2021 10:45 am
- Forum: Investing - Theory, News & General
- Topic: Aging population
- Replies: 30
- Views: 4276
Re: Aging population
Alzheimer's. IMO it will be a very big driver in the future. That being said once someone goes in memory care I would estimate the lifespan is less than 5 years. It was 8 years for my sister in law. It is a lifestyle problem (what we eat how and how we don't take care of ourselves). Are you a researcher? Can you link to something you published on your research with this dramatic conclusion? All the research I have read indicates a multitude of factors. So your research that came to the conclusion that it's only a "lifestyle problem" should clearly be in the news. People want to believe it is a lifestyle problem because it makes them feel safe if they live a compulsively "healthy" lifestyle. But it isn't. Many different,...
- Tue Jun 29, 2021 8:56 am
- Forum: Investing - Theory, News & General
- Topic: Did dividend stock funds provide "downside protection" in 2020?
- Replies: 237
- Views: 20250
Re: Did dividend stock funds provide "downside protection" in 2020?
This is not entirely fair. The market dip in 2020 was extremely brief and the market, aka the S&P 500, recovered almost entirely because a handful of tech stocks took off at the same time that governments poured money into the accounts of everyone but those very well off. A couple of those funds were available in 2007. They did not offer downside protection in 2008/2009 either: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2012&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDev...
- Mon Jun 28, 2021 12:46 pm
- Forum: Investing - Theory, News & General
- Topic: Why are you invested (mainly) in US stocks when all long term forecasts are in favour of ex-US?
- Replies: 221
- Views: 22241
Re: Why are you invested (mainly) in US stocks when all long term forecasts are in favour of ex-US?
I am a fond believer in the adage, attributed to John Maynard Keynes, "When the facts change, I change my mind - what do you do, sir?" I can see someone potentially using this quote to justify not staying the course. Well, yes. Staying a course only makes sense if your course was set properly. Otherwise you steer into rocks. Way too many people set their course just because someone authoritative-sounding told them what to do, without understanding the reasons way. Sailors don't set their course based on what someone told them. They study sailing before setting forth, and then rely on charts--but always keeping in mind that the chart may be out of date and that vigilance and paying attention to subtle indicators they have learned ...
- Mon Jun 28, 2021 12:25 pm
- Forum: Investing - Theory, News & General
- Topic: Why are you invested (mainly) in US stocks when all long term forecasts are in favour of ex-US?
- Replies: 221
- Views: 22241
Re: Why are you invested (mainly) in US stocks when all long term forecasts are in favour of ex-US?
The reason I am mostly (though not totally) invested in US stocks is that I have looked at the major holdings of international funds and on the whole have not seen companies that are capable of significant earnings growth. The US market is dominated by companies serving--and dominating--global markets, including the Tech and Communications giants (FAANGS) that provide something like 30% of the returns of the US stock market. International is dominated by food, regional financials (Banks, insurers), extractive industries, and old economy companies. There are a sprinkling of tech companies, but most ex-US tech is in China and questionably accessible to US investors. That makes me feel confident that I am getting the benefit of a global econo...