Search found 87 matches

by Phil DeMuth
Sun Apr 30, 2017 11:30 am
Forum: Investing - Theory, News & General
Topic: Question for quants, math geeks - reducing volatility in my costs?
Replies: 14
Views: 799

Re: Question for quants, math geeks - reducing volatility in my costs?

"With four parameters I can fit an elephant, and with five I can make him wiggle his trunk." - John von Neumann
by Phil DeMuth
Wed Apr 26, 2017 11:07 am
Forum: Personal Finance (Not Investing)
Topic: Los Angeles house buying
Replies: 32
Views: 2920

Re: Los Angeles house buying

FWIW, I was astonished how little housing prices went down in LA in 2008. I was ready to pounce and move up in the world and I did my calculations and waited and watched but never got the big dip I was planning on. The banks never foreclosed to the extent that I thought they would -- they just carri...
by Phil DeMuth
Tue Apr 25, 2017 10:29 am
Forum: Personal Finance (Not Investing)
Topic: Any regrets living a frugal life for high income/high networth individuals?
Replies: 170
Views: 18723

Re: Any regrets living a frugal life for high income/high networth individuals?

When value investor Ben Graham got wiped out during the Great Depression, he kicked himself because he felt his extravagant lifestyle had been a contributing factor. He realized that living significantly below his means was simply taking the "margin of safety" idea he employed investing in...
by Phil DeMuth
Thu Apr 20, 2017 9:59 am
Forum: Personal Finance (Not Investing)
Topic: Can I afford private school for my kids?
Replies: 67
Views: 5091

Re: Can I afford private school for my kids?

I have not read through all the posts but that won't stop me, so here goes: This question cannot be answered except in the context of a lifetime financial plan. You need to work out your retirement first and work backwards, not start with your salary and see if you can squeeze out the tuition this y...
by Phil DeMuth
Thu Apr 20, 2017 9:39 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe says "Goodbye."
Replies: 336
Views: 35000

Re: Larry Swedroe says "Goodby."

But wait -- if you stop posting where am I going to get my ideas from???

Thank you for your service. I read every one of your posts and learned everything I could.

Appreciatively,

Phil
by Phil DeMuth
Fri Apr 14, 2017 11:06 am
Forum: Investing - Theory, News & General
Topic: Delaying SS (or not) and the tax torpedo
Replies: 41
Views: 4403

Re: Delaying SS (or not) and the tax torpedo

House Blend wrote: This is the situation for my 84yo mother. Her RMDs have not grown much at all over the past several years, and in fact have occasionally dipped. When you adjust for inflation (which is what matters relative to tax bracket locations), her RMDs probably show negative real growth . I...
by Phil DeMuth
Wed Apr 12, 2017 1:59 pm
Forum: Personal Finance (Not Investing)
Topic: tax strategy for side income
Replies: 6
Views: 630

Re: tax strategy for side income

If you don't need the money for living expenses, after putting the max in your qualified plan of choice, you could put the rest in a defined benefit plan. These are far more flexible that usually thought. The key is to find a low-fee actuary.
by Phil DeMuth
Wed Apr 12, 2017 9:48 am
Forum: Investing - Theory, News & General
Topic: Delaying SS (or not) and the tax torpedo
Replies: 41
Views: 4403

Re: Delaying SS (or not) and the tax torpedo

One thing to keep in mind is not only the SS and RMDs that start at 70 1/2 but also the fact that the RMDs increase over time as a % of IRA assets. This means owners of large IRAs can experience tax bracket creep later in retirement. This should be modeled if possible. Even though future tax rates a...
by Phil DeMuth
Sat Apr 08, 2017 6:39 pm
Forum: Investing - Theory, News & General
Topic: Part 2 of the series on alternative sources, this one on alternative lending
Replies: 16
Views: 1560

Re: Part 2 of the series on alternative sources, this one on alternative lending

Larry --

Great article, thanks!

I've heard that some ETFs have applied to get into this space. If so, they would be creating a market in these loans and the illiquidity would go away. Do you think this is likely to happen? My guess is not anytime soon or BAM wouldn't be jumping in.

Thanks,

Phil
by Phil DeMuth
Sat Apr 08, 2017 10:09 am
Forum: Investing - Theory, News & General
Topic: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?
Replies: 15
Views: 1688

Re: Use Debt Instead Of Cash/Fixed Income In Asset Allocation?

There was a good discussion of this on the Personal Investing board:

viewtopic.php?t=201734

Unfortunately it got locked down for administrative review last November. Still waiting for the review!
by Phil DeMuth
Thu Apr 06, 2017 11:12 am
Forum: Investing - Theory, News & General
Topic: Alts:new sources of risk/return improve portfolio efficiency
Replies: 119
Views: 7705

Re: Alts:new sources of risk/return improve portfolio efficiency

I was wondering if I already had exposure to this space via Berkshire Hathaway. Answer: no, unfortunately. Correlation the between BRK and SSRIX for the past three years is 0.07. Correlations to other reinsurers are also very low: Swiss RE -0.07 Hannover 0.06 Munich RE 0.18 The highest relevant corr...
by Phil DeMuth
Wed Apr 05, 2017 10:00 am
Forum: Personal Finance (Not Investing)
Topic: High Income earners, whats your Tax Strategy?
Replies: 113
Views: 10300

Re: High Income earners, whats your Tax Strategy?

I recommend a diversified portfolio of zero-dividend stocks for taxable accounts. Research shows that zero-dividend stocks underperform the indexes pre-tax but outperform post-tax. This is un-Bogleheadish in that it is a tilt towards stockpicking, but very Bogleheadish in that it is research-based a...
by Phil DeMuth
Sun Apr 02, 2017 11:50 am
Forum: Personal Finance (Not Investing)
Topic: Advice Needed: Enough to Retire, but the Tax Bill is a shock
Replies: 58
Views: 7962

Re: Advice Needed: Enough to Retire, but the Tax Bill is a shock

One other point is that it is desirable to use asset location to cut your taxes. Specifically, you want to move growth assets (stocks) into your taxable account and Roth and slow growth assets (bonds) into your qualified accounts. At your allocation, that would be something like 100% stocks in taxab...
by Phil DeMuth
Fri Mar 31, 2017 10:39 am
Forum: Personal Finance (Not Investing)
Topic: Using irrevocable trust to optimize home purchase in HCOL area
Replies: 23
Views: 1281

Re: Using irrevocable trust to optimize home purchase in HCOL area

1. Did you see the article in yesterday's NYT about the sweet spot for schools vs. price in suburban Boston? https://www.nytimes.com/interactive/2017/03/30/upshot/good-schools-affordable-homes-suburban-sweet-spots.html 2. How many physicians in Boston with malpractice insurance lost their homes due ...
by Phil DeMuth
Mon Mar 27, 2017 10:38 am
Forum: Personal Finance (Not Investing)
Topic: Custodial ROTH a good idea?
Replies: 7
Views: 640

Re: Custodial ROTH a good idea?

A custodial Roth is not a good idea, it's a GREAT idea. Imagine letting that money compound tax-free for 60 years and you see how it puts your kids way ahead of the curve. Add to it every year they work, all through high school, etc. Consider investing it very aggressively -- like 100% S&P 500 o...
by Phil DeMuth
Sat Mar 11, 2017 10:52 am
Forum: Investing - Theory, News & General
Topic: Refining the failure rate, when it fails matters, not just how often
Replies: 20
Views: 2441

Re: Refining the failure rate, when it fails matters, not just how often

My guess: the highest Sharpe ratio (in the sense of return/risk) portfolio wins, not the highest Geometric Mean portfolio. This could be an important lesson in target practice for anyone who might retire one day.
by Phil DeMuth
Fri Mar 10, 2017 4:26 pm
Forum: Investing - Theory, News & General
Topic: Reasons to Deviate from the Global Market Portfolio
Replies: 31
Views: 3143

Re: Reasons to Deviate from the Global Market Portfolio

One more thought: in many cases, what you are trying to do is not deviate from the global market portfolio but re-establish the global market portfolio from the deviations created by your inherent outsized investments in your house, your human capital, etc.
by Phil DeMuth
Fri Mar 10, 2017 10:37 am
Forum: Investing - Theory, News & General
Topic: Reasons to Deviate from the Global Market Portfolio
Replies: 31
Views: 3143

Re: Reasons to Deviate from the Global Market Portfolio

Risk tolerance and ability: The risk tolerance and ability could be lower or higher than that of the average invested money. Thus a tilt towards securities with lower (e.g. cash or bonds) or higher (e.g. stocks) risk and expected return is appropriate. In theory, rather than distort the market port...
by Phil DeMuth
Wed Mar 08, 2017 1:25 pm
Forum: Personal Finance (Not Investing)
Topic: How to make it easier for spouse upon death
Replies: 91
Views: 11770

Re: How to make it easier for spouse upon death

Hi Taylor -- Bogleheads tend to be fee-conscious do-it-yourselfers, so if the surviving spouse is not a committed Boglehead the financial services industry will find and exploit the weak spot and end up with an even bigger pie to carve up thanks to our efforts. The best answer is to get the spouse a...
by Phil DeMuth
Wed Mar 08, 2017 10:47 am
Forum: Personal Finance (Not Investing)
Topic: How to make it easier for spouse upon death
Replies: 91
Views: 11770

Re: How to make it easier for spouse upon death

I am concerned that many Bogleheads severely underestimate the power of the financial services industry to appropriate their money after they are no longer around to defend it. You have been gone two years. Your wife is at a cocktail party, where everyone is raving about a smartly-dressed and handso...
by Phil DeMuth
Thu Mar 02, 2017 11:01 am
Forum: Personal Finance (Not Investing)
Topic: What Car Should I Buy My Daughter as a Graduation Present
Replies: 81
Views: 5247

Re: What Car Should I Buy My Daughter as a Graduation Present

Just one thought -- about 20% of a car's value supposedly comes from the entertainment system, which is obsolete 9 months before the new models hit the showroom floors. Even then, they are buggy with layers of incomprehensible menus. Ergo, I would screen for car's offering Apple or Android Carplay, ...
by Phil DeMuth
Wed Mar 01, 2017 10:02 am
Forum: Personal Finance (Not Investing)
Topic: Best Way to Give Our Son a Down Payment
Replies: 18
Views: 2584

Re: Best Way to Give Our Son a Down Payment

I second the emotion on donating appreciated shares of AAPL stock, which he then sells and recognizes the gain at this lower LTCG rate.
by Phil DeMuth
Sun Feb 26, 2017 12:45 pm
Forum: Investing - Theory, News & General
Topic: Buffett Annual Letter 2016 [Jack Bogle is a hero]
Replies: 69
Views: 5705

Re: Buffett Annual Letter 2016 [Jack Bogle is a hero]

It is too bad Buffett did not use the occasion to recommend Jack Bogle for the Presidential Medal of Freedom. Buffett himself got one (plus a presidential necktie) from Obama in what was regarded at the time as a quid pro quo for Buffett's backing Obama's tax increases. Bogle is far more deserving i...
by Phil DeMuth
Mon Feb 20, 2017 11:54 am
Forum: Investing - Help with Personal Investments
Topic: What is a smart tax strategy?
Replies: 13
Views: 1435

Re: What is a smart tax strategy?

The question is: will you be suffering from bracket creep in retirement due to escalating RMDs? If so, it may be desirable to do Roth conversions between now and age 70. Depending on your retirement income requirements, it might even be desirable to do tax-GAIN harvesting while you are in a lower br...
by Phil DeMuth
Fri Feb 17, 2017 11:43 am
Forum: Investing - Theory, News & General
Topic: Charlie Munger's Comments on Index Funds versus "Stock Picking"
Replies: 12
Views: 2357

Re: Charlie Munger's Comments on Index Funds versus "Stock Picking"

Attending the Daily Journal annual meeting with Munger is a high point of my year. Munger and Buffett are in the interesting position of being outspoken critics of efficient market theory but proponents of the S&P 500 Index fund. Bogle reconciles this by saying it is not about efficient market t...
by Phil DeMuth
Fri Feb 17, 2017 11:27 am
Forum: Investing - Theory, News & General
Topic: 2016 Relative Tax Efficiency
Replies: 43
Views: 5186

Re: 2016 Relative Tax Efficiency

Ethelred -- Kitces says yes: "In an AMT environment, the primary planning opportunity is actually to manage income around the AMT “bump zone” – that span of income where the AMT exemption is phased out, temporarily boosting AMT rates (and capital gains rates!) by an extra 7%." and "no...
by Phil DeMuth
Sun Feb 05, 2017 12:15 pm
Forum: Personal Finance (Not Investing)
Topic: Roth IRA for teen
Replies: 26
Views: 2506

Re: Roth IRA for teen

Do this. Vanguard doesn't want your business, but Schwab does.
by Phil DeMuth
Sat Feb 04, 2017 1:54 pm
Forum: Investing - Theory, News & General
Topic: Tax Deferred Annuities. Larry, Rick and everyone else: is there any real role for them?
Replies: 29
Views: 2095

Re: Tax Deferred Annuities. Larry, Rick and everyone else: is there any real role for them?

Perhaps the best way to invest in variable annuities is to buy stock in the insurance companies that sell them. At least that way you are on the winning side of the transaction.
by Phil DeMuth
Sat Jan 28, 2017 12:09 pm
Forum: Personal Finance (Not Investing)
Topic: Anyone moved to another state for lower cost of living?
Replies: 56
Views: 6997

Re: Anyone moved to another state for lower cost of living?

What makes it impossible to move back to SoCal is housing prices, which have the potential to leave you in the dust. If you ever want to get back here (and why would you, really?) the only way back in would be to buy a home during the next bust (if there is one) and rent it out until you return (whi...
by Phil DeMuth
Sun Jan 22, 2017 11:01 am
Forum: Investing - Theory, News & General
Topic: Useful articles/books for understanding fixed allocation vs glidepath?
Replies: 1
Views: 237

Re: Useful articles/books for understanding fixed allocation vs glidepath?

With every year longer you live, your nest egg has one year less that it has to support you. If you do nothing, this means that your portfolio is getting "safer" every year. This does not mean much year to year but over a 5-year period it starts to add up. You can "spend" this lo...
by Phil DeMuth
Sat Dec 24, 2016 11:04 am
Forum: Personal Finance (Not Investing)
Topic: Personal finance for the resident physician and beyond
Replies: 4
Views: 671

Re: Personal finance for the resident physician and beyond

I can't imagine that there's anything to present that you haven't already seen in the White Coat Investor. Dahle is a national treasure as far as physicians are concerned. #1 Financial Mistake: upgrading to a doctor wife. Not for nothing does Harlequin publish six new "Harlequin Medical Romance...
by Phil DeMuth
Mon Dec 12, 2016 11:15 am
Forum: Personal Finance (Not Investing)
Topic: Any reason for retirees NOT to Roth convert?
Replies: 24
Views: 3378

Re: Any reason for retirees NOT to Roth convert?

I would put this project on hold until we see what the post-Trump tax horizon looks like.

If the new analysis shows bracket creep from, say, the 25% to 33% brackets, then it usually makes sense to pay more taxes at 25% and less at 33%.
by Phil DeMuth
Mon Dec 12, 2016 11:10 am
Forum: Personal Finance (Not Investing)
Topic: Gift for a huge fan of Warren and Charlie?
Replies: 5
Views: 529

Re: Gift for a huge fan of Warren and Charlie?

A box of See's candies, of course.
by Phil DeMuth
Sun Dec 11, 2016 12:37 pm
Forum: Personal Finance (Not Investing)
Topic: Retirement planning implications for eventual death of spouse
Replies: 27
Views: 2347

Re: Retirement planning implications for eventual death of spouse

Another big vote for ESPlanner software. There's a bit of a learning curve and some work to enter your data and get it trued up, but once done you are in modeling heaven. It effortlessly combines all these variables and their interactions and shows you the implications for a surviving spouse to the ...
by Phil DeMuth
Fri Dec 09, 2016 10:59 am
Forum: Personal Finance (Not Investing)
Topic: What Can One Do To Decrease Dividend Taxes?
Replies: 27
Views: 3281

Re: What Can One Do To Decrease Dividend Taxes?

The top rate on dividends and LT cap gains in CA is indeed 33% (the calculations offered above are wrong. The 33% takes into account the deduction but this is offset by Pease and PEP.) To avoid the dividend tax, invest in a diversified portfolio of zero-dividend stocks, starting with Berkshire Hatha...
by Phil DeMuth
Thu Dec 01, 2016 11:17 am
Forum: Investing - Theory, News & General
Topic: Warren Buffett Books
Replies: 22
Views: 2124

Re: Warren Buffett Books

Agree with huntertheory that The Essays of Warren Buffett is an excellent resource for non-pros and easier to follow that reading all his letters in sequence. I would put it as a third essential book along with Lowenstein and Snowball.
by Phil DeMuth
Wed Nov 30, 2016 12:24 pm
Forum: Investing - Theory, News & General
Topic: Warren Buffett Books
Replies: 22
Views: 2124

Re: Warren Buffett Books

If you want to learn about Buffett, Lowenstein's book is the single best source. Snowball is mediocre IMHO due to Schroeder but is essential in spite of her because so much of it was dictated by Buffett and so it contains a treasury of engrossing and original material. If you want to invest like Buf...
by Phil DeMuth
Tue Nov 22, 2016 10:43 am
Forum: Investing - Theory, News & General
Topic: Viewing BRK.B as a Means to Hold "Tax-Deferred" Equity in Taxable Account
Replies: 23
Views: 2491

Re: Viewing BRK.B as a Means to Hold "Tax-Deferred" Equity in Taxable Account

As Warren is fond of pointing out, BRK has lost half its value on three occasions over the course of its storied history. While it has been pretty much the perfect investment, there is a lot to be said for diversifying it with other zero-dividend stocks.
by Phil DeMuth
Mon Nov 21, 2016 11:05 am
Forum: Personal Finance (Not Investing)
Topic: Renting in L.A. - good school district
Replies: 16
Views: 1328

Re: Renting in L.A. - good school district

There are a number of good public schools K-6, but after that they thin out very quickly. If you go to Great Schools and find a good HS there is almost always a good elementary school and middle school that feeds it, so start with HS. Manhattan Beach would be the gold standard, albeit very expensive...
by Phil DeMuth
Sat Nov 19, 2016 11:20 am
Forum: Investing - Theory, News & General
Topic: Viewing BRK.B as a Means to Hold "Tax-Deferred" Equity in Taxable Account
Replies: 23
Views: 2491

Re: Viewing BRK.B as a Means to Hold "Tax-Deferred" Equity in Taxable Account

In California, high earning taxpayers pay 33% on capital gains taxes and dividends. This is a non-trivial amount, greatly exceeding the expense ratios even of hedge funds, let alone index funds. For a no-tax state, it tops out at 25% after Obamacare, Pease and PEP. Is the Boglehead philosophy to buy...
by Phil DeMuth
Fri Nov 18, 2016 12:09 pm
Forum: Personal Finance (Not Investing)
Topic: Tax bomb at 70 1/2
Replies: 71
Views: 9977

Re: Tax bomb at 70 1/2

1) If marginal tax rates fall, this will be less of a problem. 2) The issue is not only what happens at 70 1/2 but also the fact that the RMDs ramp up significantly over time. This is why long-range planning is important. It highlights the importance of asset location. To the extent possible, it is ...
by Phil DeMuth
Tue Nov 08, 2016 10:28 am
Forum: Investing - Theory, News & General
Topic: Advice for no capital gain tax countries
Replies: 6
Views: 821

Re: Advice for no capital gain tax countries

Dividends and capital gains represent a significant drag on investment performance. Placing them in qualified accounts postpones the taxes, but at the price of turning them into taxable income at (possibly higher) marginal rates later. Even municipal bonds typically pay lower interest rates in consi...
by Phil DeMuth
Mon Nov 07, 2016 12:03 pm
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11390

Re: How to Avoid Paying Taxes if You're UHNW

There seem to be three ways to borrow against your portfolio: 1) Ordinary "Reg T" Margin (each ticker taken individually perhaps 50% loan-to-value) 2) Portfolio "T.I.M.S." Margin (each ticket considered in relation to the portfolio as a whole, perhaps 85% - 92% loan-to-value or e...
by Phil DeMuth
Mon Oct 31, 2016 5:33 pm
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11390

Re: How to Avoid Paying Taxes if You're UHNW

Hicabob -- Mutual funds are even worse, because they have to distribute all the capital gains (even if you didn't buy or sell a share all year), while ETF's can swap out their appreciated shares in the course of trading without recognizing capital gains at all. This is a completely unfair tax advant...
by Phil DeMuth
Mon Oct 31, 2016 5:00 pm
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11390

Re: How to Avoid Paying Taxes if You're UHNW

By law ETFs much pass through their dividend income every year. A zero-distribution diversified ETF is the holy grail of tax-efficient investing.
by Phil DeMuth
Sun Oct 30, 2016 11:17 am
Forum: Investing - Theory, News & General
Topic: "Jack Bogle and the Presidential Medal of Freedom"
Replies: 24
Views: 3248

Re: "Jack Bogle and the Presidential Medal of Freedom"

Amen to this! To quote Allan Roth: "The weighted average annual expense ratio of index funds last year was 0.23 percent for equity funds, and 0.18 percent for bond funds. This compares to the active funds showing 0.92% and 0.66%, respectively. Multiplying the lower fees by the assets results in...
by Phil DeMuth
Fri Oct 28, 2016 5:24 pm
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11390

Re: How to Avoid Paying Taxes if You're UHNW

A few more considerations: 1) While initially conceived as a tax optimization strategy for the ultra high net worth, this is also valid as a retirement drawdown and estate preservation strategy for everyone else, independent of its tax benefits. 2) Over a retirement of 35-years, the loan balance can...
by Phil DeMuth
Wed Oct 26, 2016 4:50 pm
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11390

Re: How to Avoid Paying Taxes if You're UHNW

A few remarks after playing with this on a spreadsheet. Some may strike you as obvious, some as contentious, but here are my tentative impressions: 1) The largest benefit of this strategy is the leveraged long-term returns to your principal. If you sell assets and pay capital gains taxes, you are ea...
by Phil DeMuth
Mon Oct 24, 2016 11:01 am
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11390

Re: How to Avoid Paying Taxes if You're UHNW

More random thoughts: It looks like there is a difference between portfolio "T.I.M.S." margin and ordinary "Reg T" margin. Portfolio margin can result in higher margin limits depending on how the performance of the underlying securities might offset each other as they zig and zag...

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