Search found 2063 matches

by longinvest
Wed Aug 24, 2016 4:57 pm
Forum: Investing - Theory, News & General
Topic: Help explain: bond prices and interest rate link
Replies: 14
Views: 664

Re: Help explain: bond prices and interest rate link

Also, you should much prefer to be in a fixed income security with less term risk when rates increased, and then switch into the security with more term risk after that. Maybe difficult to do, but since we're talking about what you should want ... Something along these lines can be done with a CD w...
by longinvest
Wed Aug 24, 2016 4:35 pm
Forum: Investing - Theory, News & General
Topic: Help explain: bond prices and interest rate link
Replies: 14
Views: 664

Re: Help explain: bond prices and interest rate link

nisiprius wrote:In short, if you hold Vanguard Total Bond Market Index Fund and you plan to be holding it for more than six years, you should want interest rates to rise.

+1 :thumbsup
by longinvest
Wed Aug 24, 2016 4:18 pm
Forum: Investing - Theory, News & General
Topic: UK TIPS track record - what can we learn?
Replies: 18
Views: 899

Re: UK TIPS track record - what can we learn?

longinvestwrote: Just for perspective, let's compare how stocks did relative to bonds, in the high-inflation era of the 1970s. Here's both our nominal 10 to 2-year government bond fund* and the S&P 500** fighting inflation**. This time, I've selected the worst possible starting year (1973): Ima...
by longinvest
Wed Aug 24, 2016 7:27 am
Forum: Investing - Theory, News & General
Topic: UK TIPS track record - what can we learn?
Replies: 18
Views: 899

Re: UK TIPS track record - what can we learn?

They would have outperformed conventional gilts in the 1970s because inflation was way above expectations. By contrast since, generally, they would have underperformed-- inflation has pretty consistently been below forecast. We now have had the lowest interest rates ever in British *history* (going...
by longinvest
Tue Aug 23, 2016 11:28 pm
Forum: Investing - Theory, News & General
Topic: UK TIPS track record - what can we learn?
Replies: 18
Views: 899

Re: UK TIPS track record - what can we learn?

Just for perspective, let's compare how stocks did relative to bonds, in the high-inflation era of the 1970s. Here's both our nominal 10 to 2-year government bond fund * and the S&P 500 ** fighting inflation **. This time, I've selected the worst possible starting year (1973): http://i67.tinypic...
by longinvest
Tue Aug 23, 2016 10:50 pm
Forum: Investing - Theory, News & General
Topic: UK TIPS track record - what can we learn?
Replies: 18
Views: 899

Re: UK TIPS track record - what can we learn?

- Looking at UK asset returns since 1899: even inflation-linked bonds have underperformed inflation over the past decade. A decade of underperformance seems like a long time, if you were a retiree counting on them to line up. 2.5% vs. 3.0% is a 20% difference. [...] -The decade-by-decade returns in...
by longinvest
Tue Aug 23, 2016 7:36 pm
Forum: Investing - Theory, News & General
Topic: UK TIPS track record - what can we learn?
Replies: 18
Views: 899

Re: UK TIPS track record - what can we learn?

During the high inflation years of the 1970s, a nominal bond portfolio of intermediate duration didn't do great, but didn't do too bad, either. Most of the scary charts illustrate the synthetic returns of a constant-maturity long-term bond. So, one has to be careful, when interpreting charts. True,...
by longinvest
Tue Aug 23, 2016 7:24 pm
Forum: Investing - Theory, News & General
Topic: UK TIPS track record - what can we learn?
Replies: 18
Views: 899

Re: UK TIPS track record - what can we learn?

Here's how an intermediate US government (nominal) bond fund has done against inflation in the 1970s era: http://i65.tinypic.com/bgycyh.png The bond fund's return are based on FRED's yields. The fund works like a bond ladder, except that it sells its bonds 1 year before maturity. It has 9 rungs. Eve...
by longinvest
Tue Aug 23, 2016 6:55 pm
Forum: Investing - Theory, News & General
Topic: UK TIPS track record - what can we learn?
Replies: 18
Views: 899

Re: UK TIPS track record - what can we learn?

Jalbert, During the high inflation years of the 1970s, a nominal bond portfolio of intermediate duration didn't do great, but didn't do too bad, either. Most of the scary charts illustrate the synthetic returns of a constant-maturity long-term bond. So, one has to be careful, when interpreting charts.
by longinvest
Tue Aug 23, 2016 6:16 pm
Forum: Investing - Theory, News & General
Topic: UK TIPS track record - what can we learn?
Replies: 18
Views: 899

Re: UK TIPS track record - what can we learn?

From Chapter 7 - Barclays indices: Barclays Inflation-linked Index [...] The index has been constructed to mirror as closely as possible the rules of the conventional gilt index. An average life of 20 years was used up until 1990, and 15 years thereafter. [...] and Barclays Gilt Index The Gilt Index...
by longinvest
Mon Aug 22, 2016 1:19 pm
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 112
Views: 6145

Re: Are there other reasons besides volatility to avoid 100% equities?

As far as we know, historically intermediate government bonds had very few and very small negative returns, as well as very short (1-2 year) drawdowns, in nominal terms. What happened, historically, is that they trailed the CPI index. The question is: How should we interpret the CPI index, when look...
by longinvest
Mon Aug 22, 2016 10:38 am
Forum: Investing - Theory, News & General
Topic: AI Traders?
Replies: 10
Views: 925

Re: AI Traders?

It's well documented that human traders don't beat the market That's not true. Some do. They have to; it's a mathematical certainty! What we know is that all market participants, in the aggregate, get the market's return, before fees. It must be so: they are the market! The thing is that an index i...
by longinvest
Mon Aug 22, 2016 8:51 am
Forum: Investing - Theory, News & General
Topic: Are there other reasons besides volatility to avoid 100% equities?
Replies: 112
Views: 6145

Re: Are there other reasons besides volatility to avoid 100% equities?

There are no doubt periods were stock returns were very bad. But there were also periods of very bad bond returns, and those periods too are real world results. If you think Japan in the 1940s is too extreme to be a valid example, there are plenty of others. Indeed. If we look at the two countries ...
by longinvest
Mon Aug 22, 2016 6:29 am
Forum: Investing - Theory, News & General
Topic: Is BNDX (total international bond) and its utilization in target date funds terrible?
Replies: 79
Views: 5235

Re: Is BNDX (total international bond) and its utilization in target date funds terrible?

Anyway, speaking to the broader idea: if you have a 10-year bond yielding 1.6% (the YtM), what's the average total return you can expect in one year? Something in the ballpark of 1.6%, right? The "average"? Why should I care about that? A portfolio will experience the return whatever it i...
by longinvest
Mon Aug 22, 2016 12:23 am
Forum: Investing - Theory, News & General
Topic: Is BNDX (total international bond) and its utilization in target date funds terrible?
Replies: 79
Views: 5235

Re: Is BNDX (total international bond) and its utilization in target date funds terrible?

I explained (what I understand of) how it works for a single bond over a single month. A bond fund is just a collection of bonds, and a number of years are simply a collection of months. So, my explanation should be sufficient to understand how BNDX works. As for whatever Vanguard expects about futu...
by longinvest
Sun Aug 21, 2016 10:49 pm
Forum: Investing - Theory, News & General
Topic: Is BNDX (total international bond) and its utilization in target date funds terrible?
Replies: 79
Views: 5235

Re: Is BNDX (total international bond) and its utilization in target date funds terrible?

Can anybody explain to me exactly how the hedge return works and how it is that Vanguard says the expected return of a hedged bond should equal a domestic bond ? Lack_ey, Here's how I understand the hedging of currency as done in BNDX. At the beginning of a month BNDX buys currency contracts such t...
by longinvest
Sun Aug 21, 2016 8:45 pm
Forum: Investing - Help with Personal Investments
Topic: CD vs Short Term Inv Grade Bond
Replies: 12
Views: 1520

Re: CD vs Short Term Inv Grade Bond

Should I be comparing 3.5% return vs Ally's 1.7% or just the 1.53% yield? My answer would be: none of the above. I would not base my choice of investment on future return predictions. I would base it on my needs and preferences given the specific characteristic of a CD versus a short-term bond fund...
by longinvest
Sun Aug 21, 2016 8:37 pm
Forum: Investing - Help with Personal Investments
Topic: CD vs Short Term Inv Grade Bond
Replies: 12
Views: 1520

Re: CD vs Short Term Inv Grade Bond

The 3.5% return is due to interest rates dropping. If you hold a bond fund with SEC yield of 1.53%, you will get roughly the 1.53% if interest rates stay the same. If interest rates drop, you will get a little more. If interest rates rise, you will get less. This is false. If the yield curve stays ...
by longinvest
Sat Aug 20, 2016 2:40 pm
Forum: Forum Issues and Administration
Topic: Improving the Bogleheads forum
Replies: 86
Views: 5848

Re: Improving the Bogleheads forum

miles monroe wrote:automatically get rid of +1.

-1 :wink:
by longinvest
Fri Aug 19, 2016 9:19 pm
Forum: Investing - Theory, News & General
Topic: Is BNDX (total international bond) and its utilization in target date funds terrible?
Replies: 79
Views: 5235

Re: Is BNDX (total international bond) and its utilization in target date funds terrible?

In my opinion TIPS are largely a new asset class that provides 20 years of history at best. Investors may have some uncertainly because no one is exactly sure how TIPS will perform in various interest rate environments. For many years, during a long period of declining interest rates (and consideri...
by longinvest
Fri Aug 19, 2016 7:08 pm
Forum: Investing - Help with Personal Investments
Topic: What does a Boglehead do if we experience inflation
Replies: 30
Views: 2863

Re: What does a Boglehead do if we experience inflation

One useful measure of the inflation risk of a fixed-income instrument is the duration (the average number of years in the future, weighting by present discounted value, that you will receive payouts from it). This tells us, roughly, how much less you would get back in real terms if the inflation ra...
by longinvest
Fri Aug 19, 2016 1:51 pm
Forum: Investing - Theory, News & General
Topic: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]
Replies: 332
Views: 35263

Re: [Book: Living off Your Money, by M. McClung (Prime Harvesting)]

AlohaJoe, It would be quite interesting to see the portfolio and withdrawal trajectory of 30/70, 40/60, and maybe 50/50 (stocks/bonds) constant AA portfolios vs Prime Harvesting in both nominal and inflation-adjusted term, and look at the result with the eye of a retiree who sees nominal numbers on ...
by longinvest
Tue Aug 16, 2016 9:44 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

Wait a minute! These R2/RMSE numbers measure the difference in annual returns; they don't measure the closeness of the growth shapes! This can be misleading. Just think about looking at two charts of stock returns, one using annual returns December 31 to December 31, and another using annual returns...
by longinvest
Tue Aug 16, 2016 5:10 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

Siamond, Thanks for all the work. The R2 and RMSE numbers don't look good for the cheat returns, even though the telltale looks quite good (specially that movements are amplified by starting the x axis at 0.2 instead of 0). Bond fund (30-11) with no cheating adjustments has better numbers, even in t...
by longinvest
Tue Aug 16, 2016 1:59 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

Let's look at a few statistical metrics when comparing to SBBI LTGB: 1926-1953: R2=0.40 RMSE=3.54 1954-2015: R2=0.94 RMSE=2.95 1972-2015: R2=0.94 RMSE=3.19 I am not entirely sure the outcome is 'good enough' for inclusion in the Simba spreadsheet for the years 1926-1953, to be honest. Which obvious...
by longinvest
Tue Aug 16, 2016 10:39 am
Forum: Investing - Help with Personal Investments
Topic: How often do you adjust your AA to account for your age?
Replies: 29
Views: 2129

Re: How often do you adjust your AA to account for your age?

ponyboy wrote:When people say they have an AA of 60/40, 50/50...or sometimes 60/30/10..

What is first in this? Is the format always US/Bonds, US/Foreign, or is it just simply Stocks/Bonds? if its 3 is it US/Foreign/Bonds, stocks/bonds/cash?

The informal convention is stocks/bonds.
by longinvest
Tue Aug 16, 2016 7:43 am
Forum: Investing - Help with Personal Investments
Topic: How often do you adjust your AA to account for your age?
Replies: 29
Views: 2129

Re: How often do you adjust your AA to account for your age?

I don't adjust my AA.

I‘ve chosen a fixed 50/50 (with half the stocks in international) lifelong AA. It works during accumulation and during retirement. It doesn't take too much or too little risk.

It's simple and good enough for me.
by longinvest
Mon Aug 15, 2016 4:01 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

Then I ran a test of the new 30-11 model (version 1.12), with a telltale against SBBI LTGB (which are defined as 20 years maturity). Hm, the results aren't fully convincing. I also included the 30-2 model in there, just out of curiosity. https://lh3.googleusercontent.com/BGnAQ-nEtJHKUFbTsa42AxABtuN...
by longinvest
Sun Aug 14, 2016 8:24 am
Forum: Investing - Theory, News & General
Topic: The annuity puzzle, and a suggestion
Replies: 108
Views: 6785

Re: The annuity puzzle, and a suggestion

As a more concrete example: longinvest continually tells people that if they use VPW they need to buy an annuity to cover their minimum spending needs. Imagine you ignore that advice and put your entire life savings into a VPW withdrawal scheme: it is possible that there is a sequence of returns wh...
by longinvest
Sat Aug 13, 2016 3:38 pm
Forum: Investing - Theory, News & General
Topic: Bogle & Buffett on International Investing
Replies: 82
Views: 6876

Re: Bogle & Buffett on International Investing

I think people who scoff at bonds (or foreign stocks for that matter) misunderstand the point of diversification. The reason to diversify is not to increase your return, or even to lower your risk; it's to insure yourself against the unforeseeable.
-- Jason Zweig
by longinvest
Sat Aug 13, 2016 6:41 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

massive grunching here, can't you just assume that you rolled the 10 year bond perpetually? i.e. just use the 10 year rate at the start and the end of the period? depends what you want the output for............. if it's actuarial for an insurance company then it needs to be very precise with tons ...
by longinvest
Fri Aug 12, 2016 5:18 pm
Forum: Investing - Help with Personal Investments
Topic: SWR for mother-in-law living in another country?
Replies: 5
Views: 445

Re: SWR for mother-in-law living in another country?

What advice would you give for the initial setting of a safe withdrawal rate (SWR) for a single woman, 73 years old, living in Chile, and with no plans to live in the U.S.? I help manage her finances. Her age and her location make me uncertain how to adjust the standard starting SWR of 4% for someo...
by longinvest
Fri Aug 12, 2016 8:48 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

Here are the visual comparisons with VUSTX (using Simba's spreadsheet returns) in the 1987-2016 period.

Growth chart:

Image

TellTale chart (against VUSTX):

Image
by longinvest
Fri Aug 12, 2016 7:51 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

OK. In a new version (1.12), I've improved the approximation for 20-year yields (1986-1993) and for 30-year yields for (2003-2006). The 20-year improvement was already in use in version 1.9, but I forgot to reuse it in version 1.11. As for 30-year yields, they were approximated too naively in both 1...
by longinvest
Fri Aug 12, 2016 5:38 am
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

For example, "Bond Fund (30 to 11-year)" C6 (=$Shiller.E14/100) and L6 (= $Shiller.F14/100) are colored yellow, but V6 (=L6) and AF6 (=V6) are gray. Columns V and AF should be yellow. LadyGeek, We have a different interpretation for colors. I know, it's my fault for not making mine explic...
by longinvest
Thu Aug 11, 2016 9:59 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

Just to put a little more contrast, here's the same growth chart where I added the (10 to 2-year) fund:

Image
by longinvest
Thu Aug 11, 2016 9:51 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

What's your opinion on the accuracy of the pre-1954 data when the best we have is 10-year returns and we're assuming it's flat up to 30? I've shown what using 10-year yields and assuming it's flat up to 30 looks like, compared to using longer yields (when available) in the comparison growth chart: ...
by longinvest
Thu Aug 11, 2016 9:32 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

Can you explain what is meant by "bootstrap period"? Is there is a formula that should be modified for a "bootstrap"? No bootstrap dates are indicated on any of the worksheets. I'm using the LibreOffice Calc version. LadyGeek, The bootstrap period corresponds to the cells colore...
by longinvest
Thu Aug 11, 2016 9:17 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

Recently, I realized that I had mistakenly removed bond fund (30 to 11-year), in version 1.10, as it was used in Simba's spreadsheet for long-term treasuries (LTT) returns from 1972 to 1986, inclusively. (Siamond: For some reason, Simba's spreadsheet seems to include incorrect LTT returns from 1954 ...
by longinvest
Thu Aug 11, 2016 8:48 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 168
Views: 13659

Re: Historical Bond Returns - Shiller: From Rates to Returns

I have uploaded version 1.11 of the spreadsheet. It is available online and to download from the links in the first post: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=179425#p2717165 Changes: ⋅  Added bond fund (30 to 11-year), using a flat yield curve for pre-FRED years. As u...
by longinvest
Wed Aug 10, 2016 3:03 pm
Forum: Investing - Theory, News & General
Topic: A costly mistake made by both investors and advisors
Replies: 240
Views: 17384

Re: A costly mistake made by both investors and advisors

My thinking is probably colored by the fact that I am hoping to be able to retire by 40. I don't include Social Security in my planning whatsoever as I assume it will either be gone or means-tested by the time I am eligible. Living past 100 with 50+ years of medical advances doesn't seem like pure ...
by longinvest
Wed Aug 10, 2016 1:29 pm
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 191
Views: 25990

Re: Delay Social Security to age 70 and Spend more money at 62

MIpreRetirey wrote:I'm still looking at this. I couldn't believe not beating inflation. TIPS then ('72-'81) did worse yet.

TIPS did not exist. Neither did I-Bonds. You're probably using synthetic TIPS returns. :wink:
by longinvest
Wed Aug 10, 2016 11:48 am
Forum: Investing - Theory, News & General
Topic: Delay Social Security to age 70 and Spend more money at 62
Replies: 191
Views: 25990

Re: Delay Social Security to age 70 and Spend more money at 62

MIpreRetirey wrote:Edit: Here's assets class 15% TSM, 85% BND 1972 thru 1981:


So, one would have had his base income lag inflation by 2.5% for 7 years (still preserving 84% of its purchase power), only to ge back in full when SS kicked in, during one of the worst inflation run ups of history? I'll take that deal!
by longinvest
Wed Aug 10, 2016 11:32 am
Forum: Investing - Theory, News & General
Topic: A costly mistake made by both investors and advisors
Replies: 240
Views: 17384

Re: A costly mistake made by both investors and advisors

longinvest As we entered 2000 the 10 year Treasury was yielding more than 6.5%, today it's about 5% less. Not all else is equal, and of course there was no guarantee that the future turned out well. Think about how it looked for Japanese investor. If a strategy should work it should work everywhere...
by longinvest
Wed Aug 10, 2016 9:52 am
Forum: Investing - Help with Personal Investments
Topic: Are bonds necessary for young investors?
Replies: 58
Views: 3209

Re: "Why Buy Bonds?"

Jason wrote a wonderful article about bonds for MONEY magazine in December 1999 at a stock market high (a terrible bear market began in 2000). His advice is as true today as it was then. This is the link: WHY BUY BONDS? Thank you, Taylor. From the linked article: I think people who scoff at bonds (...
by longinvest
Wed Aug 10, 2016 9:40 am
Forum: Investing - Theory, News & General
Topic: A costly mistake made by both investors and advisors
Replies: 240
Views: 17384

Re: A costly mistake made by both investors and advisors

I am just of the camp that "Nobody knows enough" to make predictions at all[...] [...] How does one plan to live off their investments without making any predictions at all? [...] [...] It's actually quite simple to plan to live off our investments without using predictions about future m...
by longinvest
Wed Aug 10, 2016 8:43 am
Forum: Investing - Theory, News & General
Topic: A costly mistake made by both investors and advisors
Replies: 240
Views: 17384

Re: A costly mistake made by both investors and advisors

I am just of the camp that "Nobody knows enough" to make predictions at all, and he thinks it's possible to derive a useful "expected" return that people can take action on. Not trying to prolong this, but I'm genuinely confused. How does one plan to live off their investments w...
by longinvest
Mon Aug 08, 2016 9:12 am
Forum: Personal Finance (Not Investing)
Topic: "4% Rule" ...is broken? [argumentative]
Replies: 150
Views: 8580

Re: Conflict of Interest

AlohaJoe,

You seem to have missed the post I made just above yours, about how to use a flexible withdrawal method during retirement.

Good luck!
by longinvest
Mon Aug 08, 2016 8:05 am
Forum: Investing - Theory, News & General
Topic: VWR and back of envelope discomfort
Replies: 7
Views: 565

Re: VWR and back of envelope discomfort

4nursebee, If I understand correctly, you simulated a constant 5% withdrawal. I personally much prefer an increasing withdrawal percentage based on my age and my asset allocation, because I don't want to still be taking only 5% out of my portfolio at age 90! Here's what would have happened to an age...
by longinvest
Sun Aug 07, 2016 9:05 pm
Forum: Personal Finance (Not Investing)
Topic: "4% Rule" ...is broken? [argumentative]
Replies: 150
Views: 8580

Re: "4% Rule" ...is broken? [argumentative]

The 4% SWR is a planning rule of thumb useful to answer the question "How much do I need to retire?", not an actual withdrawal method. Extracting a fixed inflation-adjusted amount from a portfolio of stocks and bonds during retirement is a terrible withdrawal model, as it exposes a retiree...

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