Search found 631 matches

by rmelvey
Wed Jul 20, 2016 12:55 pm
Forum: Investing - Theory, News & General
Topic: Why does a massive company like Coca Cola or Johnson Johnson need money from investors?
Replies: 25
Views: 2530

Re: Why does a massive company like Coca Cola or Johnson Johnson need money from investors?

They don't need it and they don't take it. Both of those companies distribute cash to their stockholders in the form of dividends and stock buy backs.
by rmelvey
Tue Jul 12, 2016 4:10 pm
Forum: Investing - Theory, News & General
Topic: Just as hard to lose to the market as to beat it?
Replies: 53
Views: 3605

Re: Just as hard to lose to the market as to beat it?

Buy 100 different funds with 2% expense ratios. That's an easy way to underperform.

As far as selecting securities, that is a lot more difficult. Because if you could easily find what would underperform then you could earn a free lunch as a short seller. That is not very likely...
by rmelvey
Sun Jul 03, 2016 10:04 am
Forum: Investing - Help with Personal Investments
Topic: Long term investing for grandkids
Replies: 10
Views: 377

Re: Long term investing for grandkids

I think equities make sense for a perpetual time horizon, because they are a (risky) perpetuity. However, I think if you want a portfolio that will stand up to the test of time, nothing is more timeless than a Total Market index.
by rmelvey
Fri Jul 01, 2016 10:59 am
Forum: Investing - Help with Personal Investments
Topic: how to reflect paying off mortgage in AA?
Replies: 38
Views: 1703

Re: how to reflect paying off mortgage in AA?

I think including the mortgage AND the home value can make sense. Ignoring the mortgage can lead to some less than rational behavior such as borrowing at 3.5% on your mortgage and buying Treasuries at 1.5%. Outside of liquidity requirements this is a money losing trade! This example omits the value...
by rmelvey
Fri Jul 01, 2016 10:25 am
Forum: Investing - Help with Personal Investments
Topic: how to reflect paying off mortgage in AA?
Replies: 38
Views: 1703

Re: how to reflect paying off mortgage in AA?

I think including the mortgage AND the home value can make sense. Ignoring the mortgage can lead to some less than rational behavior such as borrowing at 3.5% on your mortgage and buying Treasuries at 1.5%. Outside of liquidity requirements this is a money losing trade!
by rmelvey
Thu Jun 30, 2016 4:58 pm
Forum: Investing - Help with Personal Investments
Topic: Getting rid of international funds
Replies: 83
Views: 6553

Re: Getting rid of international funds

US investors can get away with just holding US equities and CDs. It really is that simple. I wouldn't recommend the same for investor's in smaller countries.
by rmelvey
Thu Jun 30, 2016 4:12 pm
Forum: Investing - Theory, News & General
Topic: Equities = musical chairs?
Replies: 93
Views: 3774

Re: Equities = musical chairs?

Equities have no maturity date, so yes there is no guarantee that you will get all of your principal back at a certain date. They are a perpetuity. It is the stream of dividends that give them their value. If you are only spending the dividends the musical chair aspect of them goes away.
by rmelvey
Wed Jun 29, 2016 3:57 pm
Forum: Investing - Theory, News & General
Topic: I think Buffett got this wrong
Replies: 87
Views: 4878

Re: I think Buffett got this wrong

I'm sitting here trying to make a decision. Do I go with the original poster's ideas or do I go with Buffet's ideas? H-m-m-m. Allowing for the fact that past performance is no guarantee of future results, I still think I'm sticking with Warren. Can't blame anyone for going with Buffett over me. Obv...
by rmelvey
Wed Jun 29, 2016 3:32 pm
Forum: Investing - Theory, News & General
Topic: I think Buffett got this wrong
Replies: 87
Views: 4878

Re: I think Buffett got this wrong

Run your data for 30 year treasuries. If you get the same result than something with your analysis is probably off. When bond prices drop their expected return goes up. That is a mathematical fact. Buffett is making a similar comparison with equities. Keep in mind that equities have a duration of ar...
by rmelvey
Wed Jun 29, 2016 3:15 pm
Forum: Investing - Theory, News & General
Topic: I think Buffett got this wrong
Replies: 87
Views: 4878

Re: I think Buffett got this wrong

While this might not be exactly what Buffet is referring to, volatility is the friend of an accumulator and the enemy of someone in distribution mode. They are two sides of the same coin.
by rmelvey
Wed Jun 22, 2016 10:14 am
Forum: Investing - Help with Personal Investments
Topic: 100k+ with 2 year window, how to invest?
Replies: 16
Views: 969

Re: 100k+ with 2 year window, how to invest?

Personally, I would do 80% bonds and 20% stocks. Yes, there is a risk of losing money but it is a very conservative allocation. I am not a fan of cash except for month to month living expenses. CDs are good too, but I don't like the lack of liquidity for taxable accounts. They make more sense for me...
by rmelvey
Tue Jun 21, 2016 8:02 pm
Forum: Investing - Theory, News & General
Topic: Buying the style box in columns, not rows
Replies: 7
Views: 628

Re: Buying the style box in columns, not rows

A major reason to bucket by rows instead of columns is due to bid/ask spreads. If you are an active trader you want to stick mostly with large cap stocks due to lower costs of trading. While not important to a buy and hold boglehead, this factor is very important for other investors.
by rmelvey
Tue Jun 21, 2016 2:21 pm
Forum: Investing - Theory, News & General
Topic: Pfau: Why Bond Funds Don't Belong in Retirement Portfolios
Replies: 138
Views: 17918

Re: Pfau: Why Bond Funds Don't Belong in Retirement Portfolios

This just replaces higher yielding parts of TBM (corporates and GNMAs) with a SPIA. Such a change is consistent with the findings by Pfau in the article referenced at the start of this thread. I would guess this change reduces both market risk and longevity risk, with no increase in inflation risk....
by rmelvey
Tue Jun 21, 2016 11:05 am
Forum: Investing - Theory, News & General
Topic: Dividend and Buyback Yields, S&P 500, 1982-2015
Replies: 86
Views: 5076

Re: Dividend and Buyback Yields, S&P 500, 1982-2015

Technically the buy back yield is part of the dividend per share growth rate. So, even if earnings never grew again, the dividend per share would grow at the rate of the buy back yield.

I found the chart encouraging. Thanks for posting! 8-)
by rmelvey
Fri Jun 17, 2016 10:10 am
Forum: Investing - Theory, News & General
Topic: What's the ideal safe retirement net worth target?
Replies: 162
Views: 16610

Re: What's the ideal safe retirement net worth target?

Of course it all depends on expenses, but if retiring at 60 I would say that $2M is a good target. You can live an above average life style with limited risk of running out of money.
by rmelvey
Thu Jun 16, 2016 4:44 pm
Forum: Investing - Theory, News & General
Topic: Bogle says "You don't need bonds ?"
Replies: 68
Views: 8270

Re: Bogle says "You don't need bonds ?"

Why stop at 100% stocks. Why not 110% (or any other number > 100%) by borrowing to invest in equities? By going to 100%, you have already posited that you have the intestinal fortitude of steel, so why not even higher? *this post brought to you tongue-in-cheek, but I don't think it is a straw man's...
by rmelvey
Wed Jun 15, 2016 9:24 am
Forum: Investing - Theory, News & General
Topic: How do we know that some with 100% stocks will act differently than someone with 50% stocks in a bear market?
Replies: 41
Views: 2208

Re: How do we know that some with 100% stocks will act differently than someone with 50% stocks in a bear market?

A lot of the 100% stock advocates are too focused on the behavioral aspect. Sometimes you HAVE to sell, even if you know it is at depressed prices. If you lose your job and need to dip into your portfolio during a recession then you will be happy to have the bonds.
by rmelvey
Tue Jun 14, 2016 4:31 pm
Forum: Investing - Theory, News & General
Topic: Why am I so intrigued with the All Weather Portfolio
Replies: 6
Views: 1367

Re: Why am I so intrigued with the All Weather Portfolio

All Weather Portfolios typically have a larger than normal allocation to commodities/gold. Dramatic rate increases are usually spurred by inflationary pressures, where the commodities gold position would skyrocket mitigating the capital loss from the long bonds. Holding a large position in long dura...
by rmelvey
Mon Jun 13, 2016 4:52 pm
Forum: Investing - Help with Personal Investments
Topic: Choosing a bond fund and expanding international exposure
Replies: 14
Views: 1236

Re: Choosing a bond fund and expanding international exposure

All, I've done a good deal more reading on asset allocation, so I'd like to bounce this proposed allocation off of you good folks: 40% domestic equity blend (VTI) 15% small cap blend (VB) 20% ex-US blend (VXUS) 10% EM blend (VVO) 15% BND Admittedly, this is a good deal more complicated than the thr...
by rmelvey
Mon Jun 13, 2016 3:49 pm
Forum: Investing - Help with Personal Investments
Topic: I need some help to understand why I should invest in bonds at such a young age
Replies: 235
Views: 13259

Re: I need some help to understand why I should invest in bonds at such a young age

I have about 2 years of emergency fund which I do not count in my AA but maybe I should. This happens way too often on these "100%" stock threads. We usually find out towards the end that no one is actually proposing 100% stock, but a mixture of stocks and cash. Cash is just short duratio...
by rmelvey
Mon Jun 13, 2016 2:07 pm
Forum: Investing - Help with Personal Investments
Topic: I need some help to understand why I should invest in bonds at such a young age
Replies: 235
Views: 13259

Re: I need some help to understand why I should invest in bonds at such a young age

hmmm I am 13% in the Total Bond and now this thread makes me want to go 100% stock. I am 31 years old. I agree with what Kevin M laid out, there's no practical difference between 87/13 and 100/0 if the market drops 50% you'd lose 43.5% instead of 50%. Is that really going to make the difference bet...
by rmelvey
Mon Jun 13, 2016 12:58 pm
Forum: Investing - Theory, News & General
Topic: What is the lower bound for 10 year government bond yields?
Replies: 19
Views: 1468

Re: What is the lower bound for 10 year government bond yields?

The floor is the cost of hoarding physical bank notes. I suspect this should limit negative rates to around -0.75%. If governments did away with physical currency than there would be no limit to how negative they could go :twisted:
by rmelvey
Mon Jun 13, 2016 8:31 am
Forum: Personal Finance (Not Investing)
Topic: Live the Good Life Today vs Save For a Better Life Tomorrow
Replies: 84
Views: 7487

Re: Live the Good Life Today vs Save For a Better Life Tomorrow

You are assuming that the paycheck to paycheck person gets to consume more in their life. That may be true in the example you laid out, but I personally invest so that I can consume more in the future. You can also buy a SPIA when you retire in order to die penniless but consume the most amount.
by rmelvey
Thu Jun 09, 2016 1:32 pm
Forum: Investing - Help with Personal Investments
Topic: I need some help to understand why I should invest in bonds at such a young age
Replies: 235
Views: 13259

Re: I need some help to understand why I should invest in bonds at such a young age

You never truly know what your time horizon is. Stuff happens. I am 25 and hold 25% in bonds. Then again, I also don't keep a separate cash emergency fund. My portfolio is built to handle both short term and long term needs. Some people hold a lot of stock and a lot of cash/CDs and say they are 100%...
by rmelvey
Wed Jun 08, 2016 3:44 pm
Forum: Investing - Help with Personal Investments
Topic: Total Bond vs Intermediate Treasuries?
Replies: 22
Views: 2288

Re: Total Bond vs Intermediate Treasuries?

Treasuries look really good historically due to the declining inflation rate. If inflation has small surprises to the upside you could see credit outperform.

Gun to my head if I had to choose only treasuries or only credit I would choose Treasuries, but I sleep better owning both through TBM!
by rmelvey
Wed Jun 08, 2016 12:56 pm
Forum: Personal Finance (Not Investing)
Topic: Are Rentals As Bad As Some Make Them Out To Be?
Replies: 66
Views: 5574

Re: Are Rentals As Bad As Some Make Them Out To Be?

If you can rent a place out for $800 a month that you purchased for $75K then you are in a good position to make money. Are you sure about those numbers?
by rmelvey
Wed Jun 08, 2016 12:45 pm
Forum: Personal Finance (Not Investing)
Topic: Any NYC Bogleheads here?
Replies: 2
Views: 303

Re: Any NYC Bogleheads here?

I'm 25 and live in Manhattan (Chinatown). #1 thing to save yourself financially in the city is to contribute as much as possible to the 401k because taxes here are so high!
by rmelvey
Wed Jun 08, 2016 8:28 am
Forum: Investing - Help with Personal Investments
Topic: Opinion on 35% International / 65% Domestic?
Replies: 17
Views: 1241

Re: Opinion on 35% International / 65% Domestic?

I'm 1/3 international and 2/3 domestic. This split feels right for me.
by rmelvey
Wed Jun 08, 2016 8:14 am
Forum: Investing - Theory, News & General
Topic: Unnecessary risk for the sake of unnecessary diversification
Replies: 54
Views: 3801

Re: Unnecessary risk for the sake of unnecessary diversification

Even if you want to minimize risk, 0% equities is not the way to do it.

20% stocks and 80% bonds is less risky than 100% bonds because you get some inflation protection.
by rmelvey
Tue Jun 07, 2016 8:44 pm
Forum: Investing - Theory, News & General
Topic: Int'l Bonds - "A Key Asset Class Most Investors Completely Ignore"
Replies: 76
Views: 5919

Re: Int'l Bonds - "A Key Asset Class Most Investors Completely Ignore"

I don't see a good reason to allocate money away from US bonds to hedged foreign bonds. The Vanguard International bond fund is yielding less than half that of a similar duration US government bond fund, the currency is hedged, so there is no benefit to investors from a rise in foreign currency aga...
by rmelvey
Fri Jun 03, 2016 4:46 pm
Forum: Investing - Help with Personal Investments
Topic: Asset Allocation Advice - Challenge CFP Recommended Allocation?
Replies: 19
Views: 1346

Re: Asset Allocation Advice - Challenge CFP Recommended Allocation?

Almost all of the securities in her allocation are already reflected in the three fund portfolio. So while her solution has more funds, I would argue that it is more concentrated (due to value and reit tilts). If all of this is going to be in one account I think a vanguard retirement/lifecycle fund ...
by rmelvey
Fri Jun 03, 2016 9:50 am
Forum: Investing - Theory, News & General
Topic: Protecting wealth in automation world
Replies: 12
Views: 1554

Re: Protecting wealth in automation world

Automation enriches society in aggregate, but the capitalists take a larger share of the growing pie than the laborers. Automation also results in lower costs, which is deflationary. The best way to benefit from automation is to be long a stock/bond portfolio and try to learn skills that are hard fo...
by rmelvey
Sun May 29, 2016 6:20 am
Forum: Personal Finance (Not Investing)
Topic: What % of salary should be allocated to rent for college grad?
Replies: 13
Views: 1132

Re: What % of salary should be allocated to rent for college grad?

What city are you working in? I'm in the NYC area and spending less than $2000 per month requires roommates. I have done the roommate thing for awhile now but am about to start spending closer to 30% of my income on rent to live on my own. Some areas are tougher than others.
by rmelvey
Sun May 29, 2016 5:27 am
Forum: Investing - Help with Personal Investments
Topic: Bonds in Taxable if Taxable Needs the Safety?
Replies: 17
Views: 1742

Re: Bonds in Taxable if Taxable Needs the Safety?

Maybe I am wrong, but I just don't see the benefit. Yes but the process of contributing to the 401k reduces my taxable income. So it's different that value came from contributions vs. appreciation. I think the portfolio values are only the same if you exclude the tax deduction related savings from ...
by rmelvey
Sat May 28, 2016 11:26 pm
Forum: Investing - Help with Personal Investments
Topic: Bonds in Taxable if Taxable Needs the Safety?
Replies: 17
Views: 1742

Re: Bonds in Taxable if Taxable Needs the Safety?

If I put this money into equities I could face a double whammy during a bear market because my taxable portfolio and income would drop at the same time. However, if I held my cash/bonds in taxable I could draw down on that to max out my accounts If bonds are in the 401(k) and stocks in taxable when...
by rmelvey
Sat May 28, 2016 11:11 pm
Forum: Investing - Help with Personal Investments
Topic: Bonds in Taxable if Taxable Needs the Safety?
Replies: 17
Views: 1742

Re: Bonds in Taxable if Taxable Needs the Safety?

If I put this money into equities I could face a double whammy during a bear market because my taxable portfolio and income would drop at the same time. However, if I held my cash/bonds in taxable I could draw down on that to max out my accounts If bonds are in the 401(k) and stocks in taxable when...
by rmelvey
Sat May 28, 2016 11:00 pm
Forum: Investing - Help with Personal Investments
Topic: Bonds in Taxable if Taxable Needs the Safety?
Replies: 17
Views: 1742

Bonds in Taxable if Taxable Needs the Safety?

The standard advice to put bonds in tax deferred makes sense to me from a tax perspective, but could personal circumstances override that? I am maxing out my 401k, Roth, and HSA accounts. Maxing out the 401k is especially important to me because I live in NYC which has some of the highest tax rates ...
by rmelvey
Wed May 25, 2016 8:17 pm
Forum: Investing - Theory, News & General
Topic: This Bull Seems to be Getting Pretty Long In the Tooth
Replies: 76
Views: 7226

Re: This Bull Seems to be Getting Pretty Long In the Tooth

One of my favorite features of stockcharts.com is that if you use the ":" character you can view one stock price divided by another. The following chart shows Vanguard Total Stock Market divided by the 30 Year Treasury Fund TLT. Both equities and long term treasury bonds are long duration ...
by rmelvey
Wed May 25, 2016 8:00 pm
Forum: Investing - Theory, News & General
Topic: Self Employed 911 fund & short vs longer term investments
Replies: 5
Views: 350

Re: Self Employed 911 fund & short vs longer term investments

I think doing different buckets for different things gets REALLY confusing. You can easily fall into the trap of "mental accounting" which is bad. It is much easier to develop an overall asset allocation that meets both your long term and short term goals. So when you get new money it gets...
by rmelvey
Mon May 23, 2016 1:13 pm
Forum: Investing - Theory, News & General
Topic: Bernstein says emergency fund part of your "asset allocation?"
Replies: 62
Views: 5520

Re: Bernstein says emergency fund part of your "asset allocation?"

There are pros and cons to both. I like keeping it as part of my AA because when I save up for short term liquidity events in taxable, I can go heavier into equities in my retirement account. This means that I maintain a constant risk profile even while taking care of all of the small bumps along th...
by rmelvey
Sun May 22, 2016 7:51 am
Forum: Investing - Theory, News & General
Topic: safe alternative to stock market
Replies: 62
Views: 6480

Re: safe alternative to stock market

Go to ETF replay and plug in 80% SPY (S&P 500) and 20% IEI (intermediate treasuries), and then compare it with 100% IEI. Adding a little bit of stocks actually reduces the volatility of the portfolio. This portfolio did lose 5% in the crisis, but I think taking a little bit of volatility risk i...
by rmelvey
Fri May 20, 2016 7:06 am
Forum: Investing - Theory, News & General
Topic: Burton Malkiel: "I think [commodities] should be in every portfolio."
Replies: 35
Views: 2979

Re: Burton Malkiel: "I think [commodities] should be in every portfolio."

IMO Owning gold directly through GLD makes more sense than tilting towards the producers. Producers are still part of the equity index and get hit with the waves of selling just like any other stock does during a panic. However, I only think gold makes sense if you have very long duration bonds (ala...
by rmelvey
Thu May 19, 2016 3:12 pm
Forum: Investing - Help with Personal Investments
Topic: Why Vanguard added Int'l Bonds to the Target funds?
Replies: 23
Views: 2572

Re: Why Vanguard added Int'l Bonds to the Target funds?

Let's say a 1 year Japanese bond is yielding 1% (in Yen) and 1 year Treasury bond is Yielding 2% (in Dollars). There is no free lunch in choosing to buy the dollar bond over the Yen bond because the cost of hedging makes the bonds yield exactly the same amount if you hedge everything back to dollar...
by rmelvey
Thu May 19, 2016 1:48 pm
Forum: Investing - Help with Personal Investments
Topic: Why Vanguard added Int'l Bonds to the Target funds?
Replies: 23
Views: 2572

Re: Why Vanguard added Int'l Bonds to the Target funds?

thank you. I confess in my ignorance that I thought we were saying about the same thing? Ie the product of the interest rate and the forward currency rate is going to equal the product of the currency exchange (now) and the interest rate (in that other currency)? Covered Interest Parity? Maybe I ju...
by rmelvey
Wed May 18, 2016 8:37 am
Forum: Investing - Help with Personal Investments
Topic: Why Vanguard added Int'l Bonds to the Target funds?
Replies: 23
Views: 2572

Re: Why Vanguard added Int'l Bonds to the Target funds?

I see that a lot of people do not like having these in their portfolio, I don't know why specifically. What makes the international stocks "Ok" to be added, while the bonds are not (I know the difference between stocks and bonds, just not sure why people are OK with intl stocks but not in...
by rmelvey
Wed May 18, 2016 7:58 am
Forum: Investing - Theory, News & General
Topic: safe alternative to stock market
Replies: 62
Views: 6480

Re: safe alternative to stock market

Go to ETF replay and plug in 80% SPY (S&P 500) and 20% IEI (intermediate treasuries), and then compare it with 100% IEI. Adding a little bit of stocks actually reduces the volatility of the portfolio. This portfolio did lose 5% in the crisis, but I think taking a little bit of volatility risk is...
by rmelvey
Tue May 17, 2016 6:45 am
Forum: Personal Finance (Not Investing)
Topic: Destination, Not Journey?
Replies: 20
Views: 2393

Re: Destination, Not Journey?

I can sympathize. Right now I have a roommate to help save money so that I can invest more. But I really don't NEED a roommate. The idea of spending double on rent makes me feel guilty because I could be saving so much more. The thing is, roommates drive me crazy. There comes a time in your life whe...
by rmelvey
Sun May 15, 2016 1:43 pm
Forum: Personal Finance (Not Investing)
Topic: Rich But Middle Class
Replies: 233
Views: 22601

Re: Rich But Middle Class

This is not even close to middle class :?

You can do anything you want but not everything you want.
by rmelvey
Sat May 14, 2016 8:41 am
Forum: Personal Finance (Not Investing)
Topic: Renting vs owning
Replies: 141
Views: 15405

Re: Renting vs owning

One of my favorite things about renting is that I can adjust my largest expense (housing) depending on my income. Lately my income has gone up a lot, so at the end of my lease I can start looking for a nicer place if I want. Similarly, if I lost my job or had to take a much lower paying job, I could...
by rmelvey
Fri May 13, 2016 10:32 am
Forum: Personal Finance (Not Investing)
Topic: Mango prepaid card - 4.8% (effective) APY
Replies: 514
Views: 282718

Re: Mango prepaid card - 4.8% (effective) APY

Anyone here just eat the fee for simplicity and take a lower implied interest rate? Thinking of just leaving a years worth of fee expense in the debit card account...

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