Search found 2274 matches

by longinvest
Thu Dec 08, 2016 8:30 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 202
Views: 18113

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

I am sure you have a solid rationale behind your '50 basis points' suggestion. Is it the same as what I just computed, or some other reasoning? Unfortunately, no I don't. It's was only a suggestion based on the difference in returns between SBBI and our synthetic returns extending the curve flatly ...
by longinvest
Thu Dec 08, 2016 7:08 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 202
Views: 18113

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

MachineGhost, Okay, I've now read it twice. :wink: So correct me if I'm wrong, but you want to calculate a total return series based on riding the yield curve and not constant maturity to determine the capital gains or losses for each year? Not really. Just imagine you're in the late 1800's. There a...
by longinvest
Thu Dec 08, 2016 6:11 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 202
Views: 18113

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

Siamond, Our Bond Fund (30-11), representing long Treasuries, suffers from estimating 30-year yields as equal to the 10-year yield, for pre-FRED years. Would it be OK to cheat a little and bump it up, let's say by a constant 50 basis points relative to the 10-year yield, and compare the results to y...
by longinvest
Thu Dec 08, 2016 5:53 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 202
Views: 18113

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

If that is not suitable, then what is the TL;DR for this thread so far? MachineGhost, I would suggest reading the first post of this thread in its entirety. I explained, in details, why we do things differently, and how we do them. As a bonus, we gain some interesting self-correcting returns proper...
by longinvest
Thu Dec 08, 2016 5:49 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 202
Views: 18113

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

Bootstrapping the Ladder ... Why do we have a different face value for each one? Why not just $50 for each? Good question. I don't know. But that's what longinvest did in the spreadsheet, so I'm assuming there was a good reason for it :) Imagine, for a moment, that the yield curve was flat and that...
by longinvest
Thu Dec 08, 2016 5:24 pm
Forum: Investing - Theory, News & General
Topic: Historical Bond Returns - Shiller: From Rates to Returns
Replies: 202
Views: 18113

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

AlohaJoe, I haven't (yet) got around to monthly returns (though looking back through this thread it looks like Kevin M and gordoni have independently done this already?) But I did make partial progress by (re-)implementing the bond fund simulator that longinvest describes. It is in python, not a spr...
by longinvest
Tue Dec 06, 2016 11:30 pm
Forum: Investing - Theory, News & General
Topic: How to model TIPS rates (and returns) pre-1997
Replies: 56
Views: 2957

Re: How to model TIPS rates (and returns) pre-1997

Siamond, Thanks for the analysis. Here's one thing I have been thinking about. It is to simply do the reverse calculation on FRED TIPS yields. In other words, extract zero-coupon TIPS yields out of them (like I did with nominal yields) and then recover the inflation expectation across maturities to ...
by longinvest
Tue Dec 06, 2016 10:37 pm
Forum: Investing - Theory, News & General
Topic: Sequence of returns risk. Using puts to hedge.
Replies: 26
Views: 1610

Re: Sequence of returns risk. Using puts to hedge.

In our wiki: https://www.bogleheads.org/wiki/Variable_percentage_withdrawal Variable percentage withdrawal (VPW) is a withdrawal method that adapts to the retiree's retirement horizon, asset allocation, and portfolio returns during retirement. It combines the best ideas of the constant-dollar, const...
by longinvest
Tue Dec 06, 2016 7:44 pm
Forum: Investing - Theory, News & General
Topic: Sequence of returns risk. Using puts to hedge.
Replies: 26
Views: 1610

Re: Sequence of returns risk. Using puts to hedge.

Just a little reminder that "sequence of returns risk" is very easy to avoid, in retirement. One can simply use a flexible withdrawal method, instead of the 4% SWR which was never meant as a withdrawal method in the first place! (SWR is a way to calculate how much one needs to retire at 6...
by longinvest
Tue Dec 06, 2016 11:11 am
Forum: Investing - Theory, News & General
Topic: How to model TIPS rates (and returns) pre-1997
Replies: 56
Views: 2957

Re: How to model TIPS rates (and returns) pre-1997

I have uploaded a new version (0.2) of the TIPS simulator spreadsheet. The links are in the following post: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=203092&p=3138674#p3132364 Here's a summary of the changes: ⋅  Use December BLS CPI numbers. ⋅  Use 2-years tra...
by longinvest
Mon Dec 05, 2016 10:51 pm
Forum: Investing - Theory, News & General
Topic: Sequence of returns risk. Using puts to hedge.
Replies: 26
Views: 1610

Re: Sequence of returns risk. Using puts to hedge.

Just a little reminder that "sequence of returns risk" is very easy to avoid, in retirement. One can simply use a flexible withdrawal method, instead of the 4% SWR which was never meant as a withdrawal method in the first place! (SWR is a way to calculate how much one needs to retire at 65...
by longinvest
Mon Dec 05, 2016 10:07 pm
Forum: Investing - Theory, News & General
Topic: How to model TIPS rates (and returns) pre-1997
Replies: 56
Views: 2957

Re: How to model TIPS rates (and returns) pre-1997

Just to simplify my question, let's assume for the moment that interest is paid and inflation adjustments occur once per year instead of twice. Suppose I buy a TIPS at $100 and it pays a coupon of 2%. In year 1, inflation is 5%. Is the interest payment in year 1 100*.02 = $2 or is it $100 * 1.05 *....
by longinvest
Mon Dec 05, 2016 9:24 am
Forum: Investing - Theory, News & General
Topic: What was your Asset Allocation before and after retirement?
Replies: 91
Views: 8027

Re: What was your Asset Allocation before and after retirement?

Comforting for a guy at 50/50. No. The problem is using SWR as a withdrawal method (!!!), when we know that no reasonable retiree would keep taking out an inflation-indexed withdrawal out of a melting portfolio during a severe bear market . Just imagine! You retire at age 65 in year 1966 with a $1,...
by longinvest
Mon Dec 05, 2016 7:23 am
Forum: Investing - Theory, News & General
Topic: Forget the 4% safe withdrawal rule -- use RMDs instead.
Replies: 46
Views: 5423

Re: Forget the 4% safe withdrawal rule -- use RMDs instead.

Here's a more realistic VPW backtest, starting in one of the worst historical retirement start years (1966): https://www.bogleheads.org/w/images/6/65/VPW.jpg (Source: wiki: Variable percentage withdrawal ) Note how when combined with Social Security (inflation-indexed) and a pension (fixed nominal),...
by longinvest
Mon Dec 05, 2016 7:16 am
Forum: Investing - Theory, News & General
Topic: Forget the 4% safe withdrawal rule -- use RMDs instead.
Replies: 46
Views: 5423

Re: Forget the 4% safe withdrawal rule -- use RMDs instead.

AlohaJoe, About your data: https://monosnap.com/file/qnLIWa0gkjbEou1hGSXsFiKAmDiLAw.png ⋅  What is the asset allocation of the portfolio that you backtested? ⋅  What are the start age and last withdrawal age? ⋅  What data set are you using? (Historical? Which country? W...
by longinvest
Sat Dec 03, 2016 12:45 pm
Forum: Investing - Theory, News & General
Topic: Forget the 4% safe withdrawal rule -- use RMDs instead.
Replies: 46
Views: 5423

Re: Forget the 4% safe withdrawal rule -- use RMDs instead.

Here's a really nice calculator for RMD. At 70-1/2, spouse <10 years younger, initial withdrawal is 3.6%. At age 73, it is 4%. Play with the Rate of Return slide and watch the chart at the bottom chance shape. https://www.dinkytown.net/java/RetireDistrib.html Paul, Where do you find a constant annu...
by longinvest
Fri Dec 02, 2016 9:17 pm
Forum: Investing - Theory, News & General
Topic: Forget the 4% safe withdrawal rule -- use RMDs instead.
Replies: 46
Views: 5423

Re: Forget the 4% safe withdrawal rule -- use RMDs instead.

You might want to search this site for "variable withdrawal rate" for some related research. Look for a very long thread. Rodc, I think you meant "Variable Percentage Withdrawal" (VPW). Here are the links: ⋅  Wiki page: Variable percentage withdrawal ⋅  Forum...
by longinvest
Thu Dec 01, 2016 1:41 pm
Forum: Investing - Help with Personal Investments
Topic: Aren't rising rates good for bond funds?
Replies: 14
Views: 1132

Re: Aren't rising rates good for bond funds?

I wrote "in a continuously increasing yield scenario" when I said 2 times duration. Yes you did, and you were right. My apologies. But I'm the one who benefitted because I learned something today. You already knew that! :) I guess I just had to see it with my own eyes. I would have guesse...
by longinvest
Thu Dec 01, 2016 1:20 pm
Forum: Investing - Help with Personal Investments
Topic: Aren't rising rates good for bond funds?
Replies: 14
Views: 1132

Re: Aren't rising rates good for bond funds?

But if rates are "rising" meaning continually going up, no, that's not good for the returns of bonds or their funds, because they're continually taking capital losses. White Coat Investor, Not really. If I remember correctly, the investor will be in as good as a position as if rates had n...
by longinvest
Thu Dec 01, 2016 12:51 pm
Forum: Investing - Help with Personal Investments
Topic: Aren't rising rates good for bond funds?
Replies: 14
Views: 1132

Re: Aren't rising rates good for bond funds?

But if rates are "rising" meaning continually going up, no, that's not good for the returns of bonds or their funds, because they're continually taking capital losses. White Coat Investor, Not really. If I remember correctly, the investor will be in as good as a position as if rates had n...
by longinvest
Thu Dec 01, 2016 7:13 am
Forum: Investing - Help with Personal Investments
Topic: The new normal: 2%, 3%?
Replies: 72
Views: 4288

Re: The new normal: 2%, 3%?

Put "VPW" in the search box and stop worrying. For planning, 25 times generous residual expenses above lifelong non-portfolio base income (such as Social Security and pension) is good enough.
by longinvest
Wed Nov 30, 2016 4:57 pm
Forum: Investing - Theory, News & General
Topic: How to model TIPS rates (and returns) pre-1997
Replies: 56
Views: 2957

Re: How to model TIPS rates (and returns) pre-1997

As promised a couple of weeks ago, I've developed a TIPS fund simulator to test various approaches for reconstructing synthetic TIPS returns. Here are links to three versions of the spreadsheet, for those interested to play with it: ⋅  Online: BogleheadsTIPSSimulator (Google Sheets). &sdot...
by longinvest
Wed Nov 30, 2016 1:32 pm
Forum: Investing - Theory, News & General
Topic: Commodities for the Long Run
Replies: 17
Views: 1194

Re: Commodities for the Long Run

For anyone interested in commodities, here's some interesting reading: The Great Commodities Debate Rick Ferri and Larry Swedroe battle it out with their opposing views on using commodities in a well diversified portfolio ⋅  The Great Commodities Debate - Part I | ETF.com ⋅  The ...
by longinvest
Wed Nov 30, 2016 1:27 pm
Forum: Investing - Theory, News & General
Topic: Commodities for the Long Run
Replies: 17
Views: 1194

Re: Commodities for the Long Run

I remember a few years ago there was a lot more excitement around commodities in portfolios. In the appendix they show the benefit of adding a 10% allocation to commodities. I wonder if we'll see commodities come back in favor with more posts on Bogleheads someday? AlohaJoe, You're a little late to...
by longinvest
Wed Nov 30, 2016 7:19 am
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 69
Views: 6847

Re: Three fund portfolio for retirement

...there's just no point pursuing this discussion... longinvest, I'm following this exchange closely. Would you please at least reply to Bob's latest question? ...Someone with a million dollar portfolio would almost certainly have a relatively large SS benefit. So if $40,000 is the targeted floor i...
by longinvest
Wed Nov 30, 2016 12:38 am
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 69
Views: 6847

Re: Three fund portfolio for retirement

Bob,

As I said, there's just no point pursuing this discussion.

Best regards,

longinvest
by longinvest
Wed Nov 30, 2016 12:12 am
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 69
Views: 6847

Re: Three fund portfolio for retirement

Bob, I think that you misunderstood my post. Let me just copy a crucial part: But for the typical Bogleheads member, I don't think that Bodie's ratio of TIPS within a portfolio is warranted. I think that it would be OK for an investor to realistically* estimate the worst-case scenario for a chosen p...
by longinvest
Tue Nov 29, 2016 10:40 pm
Forum: Investing - Theory, News & General
Topic: Paul Merriman challenges John Bogle
Replies: 156
Views: 11902

Re: Paul Merriman challenges John Bogle

staythecourse wrote:Oh... 79% vs. 89%. Thanks for the correction. Either one is a disaster.


But one ended up 50% lower than the other. I would say it was riskier. Wouldn't you?
by longinvest
Tue Nov 29, 2016 10:26 pm
Forum: Investing - Theory, News & General
Topic: Three fund portfolio for retirement
Replies: 69
Views: 6847

Re: Three fund portfolio for retirement

Bob, I've read Zvi Bodie's Risk Less and Prosper book. He is a big promoter of safety-first investing. But, I think that the idea of completely securing the minimal income floor with risk-less securities is the most expensive approach to funding retirement. Some investors (small savers) probably can...
by longinvest
Tue Nov 29, 2016 9:37 pm
Forum: Investing - Theory, News & General
Topic: Paul Merriman challenges John Bogle
Replies: 156
Views: 11902

Re: Paul Merriman challenges John Bogle

Where did you find your proof? By that I just mean that it meets all the criteria that Swedroe suggests. If indeed a factor does have all of those characteristics I think a reasonable person would agree that the evidence is pretty convincing. I think those who don't buy into factors is because they...
by longinvest
Tue Nov 29, 2016 9:28 pm
Forum: Investing - Theory, News & General
Topic: Paul Merriman challenges John Bogle
Replies: 156
Views: 11902

Re: Paul Merriman challenges John Bogle

...the problem with all of the factor and tilt stuff is that it's really in a grey area as to whether it's even there. If it is there, the long-term benefits are not anywhere near as big or as certain as someone like Merriman suggests. And, the benefits in the past have been so "bursty." ...
by longinvest
Tue Nov 29, 2016 4:32 pm
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 2757

Re: "Sequence of returns risk"

This post by Skjoldur explains the difference between "sequence of returns" risk and "market returns" risk: https://www.bogleheads.org/forum/viewtopic.php?f=2&t=190721&start=50#p2900256 Maybe I can help illustrate the difference between what longinvest refers to as 'marke...
by longinvest
Tue Nov 29, 2016 2:25 pm
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 2757

Re: "Sequence of returns risk"

EDIT: I imagined that the fixed percentage removed is applied to the current size of fund. If, as lack_ey put it, your percentage depends on the fund's initial size, then it's a fixed amount withdrawal, so order does matter. Many Bogleheads know by now (given past forum debates) that taking a fixed...
by longinvest
Mon Nov 28, 2016 3:11 pm
Forum: Investing - Theory, News & General
Topic: Spreadsheet for backtesting (includes TrevH's data)
Replies: 886
Views: 500462

Re: Spreadsheet for backtesting (includes TrevH's data)

Siamond, Adding international (global ex-US, un hedged) bonds could useful, too. It would allow for studying the impact of currency fluctuations (or hedging, depending on one's view) on returns. Yes, I pondered about that too, but believe it or not (!), I am trying to keep things reasonably simple.....
by longinvest
Mon Nov 28, 2016 2:01 pm
Forum: Investing - Theory, News & General
Topic: Spreadsheet for backtesting (includes TrevH's data)
Replies: 886
Views: 500462

Re: Spreadsheet for backtesting (includes TrevH's data)

International (global ex-US, USD-hedged) bonds would be more useful to have than Global (unhedged) bonds. Siamond, Adding international (global ex-US, un hedged) bonds could useful, too. It would allow for studying the impact of currency fluctuations (or hedging, depending on one's view) on returns.
by longinvest
Mon Nov 28, 2016 12:58 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

Well a favorite tool of mine uses historical perspective. ... VPW. :happy Even though I like VPW and its backtesting spreadsheet a lot, I expect the future to be different from the past. What the mathematics of VPW provide is the elimination of premature portfolio depletion risk. Because VPW mathem...
by longinvest
Mon Nov 28, 2016 12:14 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

I suppose it is possible they could loose a bit but history says they generally go up, while stocks crater and credit sensitive bonds loose out. BlueEars, If there's something we should all learn from 2008, it's that " history says ... " is a pretty bad assumption to make. Math is more re...
by longinvest
Mon Nov 28, 2016 11:36 am
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

Just to put things into perspective: According to PortfolioVisualizer , $10,000 invested in a total-market TIPS index ETF (TIP) in January 2007 dropped to $10,421 from a top of $11,815, a 12% drop , whereas $10,000 invested in a total-market U.S. Stock index ETF (VTI) in January 2007 dropped to $5,...
by longinvest
Mon Nov 28, 2016 8:20 am
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

Just to put things into perspective: According to PortfolioVisualizer , $10,000 invested in a total-market TIPS index ETF (TIP) in January 2007 dropped to $10,421 from a top of $11,815, a 12% drop , whereas $10,000 invested in a total-market U.S. Stock index ETF (VTI) in January 2007 dropped to $5,4...
by longinvest
Mon Nov 28, 2016 7:14 am
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

What 2008 exposed was that a TIPS fund (or ladder) carried interest rate risk. Yields on TIPS shot up, reducing their market value. While viewing the interest rate movement as being the fundamental thing that establishes a bond's price is useful when seeing how interest rates moved, and translating...
by longinvest
Sat Nov 26, 2016 2:38 pm
Forum: Investing - Theory, News & General
Topic: Spreadsheet for backtesting (includes TrevH's data)
Replies: 886
Views: 500462

Re: Spreadsheet for backtesting (includes TrevH's data)

Removing global bonds because the data can't be verified is one thing, but I would not assume nobody uses them. I get lots of questions about them and they are called for in a few popular portfolios. Personally, I think there's a lot of value in keeping them around. Provided the data is sound, if c...
by longinvest
Sat Nov 26, 2016 1:07 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

But i still think it is correct to talk about TIPS having deflation risk because... 1) Not all investors care only about real returns. Some investors care about nominal returns. Some investors are trying to match (i.e. defease) nominal liabilities- a fixed rate mortgage for example. They can invest...
by longinvest
Sat Nov 26, 2016 12:26 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

longinvest, My point was just that most funds do not hold bonds to maturity. This thread is addressed at a TIPS fund . Using bonds held to maturity is apples to oranges or maybe at the short end Mandarins to Californians. If you want inflation protection no matter what use 4 week T-bills. Easy to b...
by longinvest
Sat Nov 26, 2016 12:07 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

nedsaid wrote:A third thing that has smashed my deflation scenario is the fact that Black Friday was an absolute blowout.


:happy
by longinvest
Sat Nov 26, 2016 11:58 am
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

I was simply comparing a normal rolling bond ladder to a normal index fund. "Normal" index funds don't hold bonds to maturity. If it's a 1-x fund the return is probably close to a 0-x ladder as you said. If x is long or the fund is a 3-x or a 5-x fund the difference gets bigger. The diffe...
by longinvest
Sat Nov 26, 2016 11:54 am
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

A TIPS held to maturity will never deliver less than its promised payments in CPI-adjusted dollars, The point I was trying to make was that most funds do not hold bonds to maturity. Doc, You cut my paragraph, stripping it from its full meaning. Here's the complete paragraph: TIPS have no inflation ...
by longinvest
Sat Nov 26, 2016 11:37 am
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

And what about say a 3-10 ladder compared with Vanguard Inflation-Protected Securities? I was simply comparing a normal rolling bond ladder to a normal index fund or ETF of similar duration as used by a typical Boglehead (TIP, VTIP, etc.). Your example is starting to try get an edge based on the yi...
by longinvest
Sat Nov 26, 2016 11:30 am
Forum: Investing - Theory, News & General
Topic: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation
Replies: 69
Views: 3595

Re: Vanguard Short Term TIPs fund: Risk vs. Reward and deflation

grok87 wrote:For TIPS i'm not so sure. I think the ladder is better. It let's you control deflation risk by only buying newly issued tips at auction or secondary market tips that have low inflation factors (and hence low deflation risk.


Grok,

TIPS have no deflation risk.

Go to advanced search