Search found 72 matches

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: 2323

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: 3056

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: 3056

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: 11444

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: 11444

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: 4572

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: 2471

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: 5490

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: 1404

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: 2241

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: 4656

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: 14
Views: 1284

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: 2036

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: 6586

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: 231

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: 645

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: 3345

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: 515

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: 2298

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: 3206

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: 2072

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: 2072

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: 2402

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: 1299

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: 2402

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: 9830

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: 773

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: 11245

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: 11245

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: 11245

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: 3189

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: 11245

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: 11245

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: 11245

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...
by Phil DeMuth
Sun Oct 23, 2016 2:59 pm
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11245

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

Is the math more complicated than this? Margin/"Portfolio" Loan: total loan amount compounded at 1%-2% vs. Sell Stocks and Pay Cap Gains: 25% of capital gains + total value of stocks sold (foregone opportunity cost) compounded at the returns of the stock market. If your long-term portfolio...
by Phil DeMuth
Sat Oct 22, 2016 11:07 am
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11245

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

A few random comments: 1) As an investment advisor, I have been able to negotiate lower margin rates for clients by showing lower rates elsewhere. I imagine that a retail investor could do the same, provided s/he had a big account and was threatening to move it across the street. 2) The brokerages a...
by Phil DeMuth
Fri Oct 21, 2016 11:26 am
Forum: Personal Finance (Not Investing)
Topic: How to Avoid Paying Taxes if You're UHNW [Ultra High Net Worth]
Replies: 73
Views: 11245

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

Is anyone here doing this? Please share your experience. I follow the zero-dividend stock path but have not yet borrowed money against the portfolio for tax-free income. I do carry a mortgage on my house, which amounts to the same thing. Most brokerages charge a fortune for what I see as nearly risk...
by Phil DeMuth
Thu Sep 29, 2016 10:05 am
Forum: Investing - Theory, News & General
Topic: Maximizing log wealth
Replies: 4
Views: 1224

Re: Maximizing log wealth

If you know the Standard Deviation, you can optimize for GeoMean = Arithmetic Mean - ((Standard Deviation ^2)/2). This gives you a close approximation. This is a better utility function than using the Sharpe Ratio or Alpha as your criterion. But as proponent John Kelly notes, it will steer you towar...
by Phil DeMuth
Thu Sep 15, 2016 10:04 am
Forum: Investing - Theory, News & General
Topic: low volatility and interest rate risk
Replies: 4
Views: 568

Re: low volatility and interest rate risk

When I look at the price movement of intermediate-term government bonds (VGIT) over the past three years, I find that they correlate -0.95 with 10-year interest rates. This makes perfect sense: bond prices and interest rates are inversely correlated. BUT -- when I look at the price movement of low-v...
by Phil DeMuth
Sun Sep 11, 2016 10:28 am
Forum: Investing - Help with Personal Investments
Topic: zero-dividend investing in taxable account
Replies: 58
Views: 6663

Re: zero-dividend investing in taxable account

Istoomuch -- You make a good point -- overwatching can lead to overtrading. The optimal tax use of zero-dividend stocks is to only harvest losses and let winners ride until they need to be sold for consumption. Ideally, the stocks are held until death to get a step-up in basis for your heirs, who ar...
by Phil DeMuth
Sat Sep 10, 2016 10:18 am
Forum: Investing - Help with Personal Investments
Topic: zero-dividend investing in taxable account
Replies: 58
Views: 6663

Re: zero-dividend investing in taxable account

Zero-dividend investing is Bogleheadish in that it puts expenses first, but then plunges you into a world where you have to pick individual stocks because there is no index-fund equivalent you can buy. One approach is to choose companies a la Buffett: reliable businesses that have significant use fo...
by Phil DeMuth
Sun Sep 04, 2016 1:02 pm
Forum: Personal Finance (Not Investing)
Topic: Reverse Mortgage Line of Credit
Replies: 41
Views: 3770

Re: Reverse Mortgage Line of Credit

I understand that not all Reverse Mortgage Line of Credit lenders charge the same (maximum) fees. Can anyone direct me to a lender who charges (relatively) low fees? I suspect that all the "referral" sites will prefer the high-priced lenders.

Many thanks --

Phil
by Phil DeMuth
Thu Aug 25, 2016 10:36 am
Forum: Investing - Theory, News & General
Topic: Zweig: Three New ETF ideas that actually make sense
Replies: 14
Views: 2426

Re: Zweig: Three New ETF ideas that actually make sense

I set up the global market portfolio several years ago as a "Folio" anyone can buy with one click at Folio Investing. I *think* this was the first investable offering of the global market portfolio.

https://www.folioinvesting.com/folioinv ... l%20Market
by Phil DeMuth
Thu Aug 18, 2016 9:53 am
Forum: Investing - Theory, News & General
Topic: The annuity puzzle, and a suggestion
Replies: 108
Views: 8257

Re: The annuity puzzle, and a suggestion

It looks like most state guaranty associations provide backup coverage up to $250,000. Would an annuity from a low-rated insurer in the pool be worse than one from a high-rated insurer? After all, if the pool fails, then the high-rated insurer is failing, too, so paying for higher credit quality has...
by Phil DeMuth
Wed Aug 17, 2016 10:32 am
Forum: Investing - Theory, News & General
Topic: Who trades on momentum, and thus who's on the other side
Replies: 22
Views: 1945

Re: Who trades on momentum, and thus who's on the other side

Looking at the State Guaranty Association liability limits, most states offer something in the range of $250,000 "guarantee." So if you targeted your coverage to this amount from a low-rated insurer (or perhaps two policies, one for self and one for spouse), would you be "safe" o...
by Phil DeMuth
Tue Aug 16, 2016 9:54 am
Forum: Investing - Theory, News & General
Topic: The annuity puzzle, and a suggestion
Replies: 108
Views: 8257

Re: The annuity puzzle, and a suggestion

The free rider/moral hazard embedded in the state guaranty association presents price-sensitive Bogleheads with an opportunity, if they are daring enough to take it. To quote from my favorite book ( The Overtaxed Investor , by me, naturally): "If your insurer fails, what then? Your state's guar...
by Phil DeMuth
Thu Aug 11, 2016 8:29 pm
Forum: Investing - Theory, News & General
Topic: Tax drag reported by Morningstar for index funds is high
Replies: 19
Views: 2370

Re: Tax drag reported by Morningstar for index funds is high

And after the Personal Exemption Phaseout and Pease limitations kick in the highest qualified dividend (and cap gains) rate actually goes from 23.8% to 25%. Which is a great approximation of what M* actually got:

2.06% dividend yield X 25% top taxpayer rate = 51.5%

Does this solve it?
by Phil DeMuth
Thu Aug 11, 2016 2:54 pm
Forum: Investing - Theory, News & General
Topic: Tax drag reported by Morningstar for index funds is high
Replies: 19
Views: 2370

Re: Tax drag reported by Morningstar for index funds is high

I think Clear and Simple is correct: there's something screwy going on with the M* Tax Drag calculation. Consider: VOO, Vanguard's S&P 500 Index Fund ETF. Yield = 2.06% At the 15% qualified dividend rate, that would account for .31% tax drag. But M* shows a tax drag of 0.51%! And VOO is an ETF, ...
by Phil DeMuth
Fri Jul 29, 2016 10:47 am
Forum: Investing - Theory, News & General
Topic: The Value of Low Volatility
Replies: 65
Views: 6759

Re: The Value of Low Volatility

Larry - I was recently at a tax conference having lunch with a bunch of accountants, all BAM alliance members. These guys speak of you in reverential tones. They told me that whenever the chips are down, all their clients want to know is, "What does Larry say?" and that settles the matter....

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