Search found 2627 matches

by saltycaper
Wed May 09, 2018 11:20 pm
Forum: Investing - Theory, News & General
Topic: Professor Andrew Lo interviews John Bogle
Replies: 10
Views: 2938

Re: Professor Andrew Lo interviews John Bogle

The rigor of the excuse is lacking. Here's mine: I think he meant, "...and interestingly enough, unlike [the answer to] your question, ..."; i.e., "My answer to your question is not very interesting, but here's something interesting."
by saltycaper
Wed May 09, 2018 3:39 pm
Forum: Personal Consumer Issues
Topic: Build a retaining wall ?
Replies: 19
Views: 2795

Re: Build a retaining wall ?

Thanks for the feedback. I agree our situation is not that simple. I'm going to get a couple of landscaping companies to come out and give us some ideas along with estimates. Not a bad idea, but do your own research too. Under what circumstances are permits required? Under what circumstances are engineering drawings required? Is the landscaping company coming up with a design to deliberately skirt these requirements in order to get you a lower bid? That might be problematic, if, for instance, they want to build two small walls close together instead of one large wall without consideration for how the walls interact with one another, particularly if the consequences of wall failure are more involved than simply having to repair the wall. Be...
by saltycaper
Thu May 03, 2018 5:26 pm
Forum: Investing - Theory, News & General
Topic: Morningstar--Manager Exit Triggers Downgrade At Giant Vanguard Fund(Vanguard Short-Term Investment Grade )
Replies: 14
Views: 3400

Re: Morningstar--Manager Exit Triggers Downgrade At Giant Vanguard Fund(Vanguard Short-Term Investment Grade )

I held it for a bit as a TLH partner for the short-term corporate bond index fund, but sold recently as it had fulfilled its job. If I still held it, I would not care about this change. How badly can a team of semi-experienced Vanguard managers mess up a bond fund that holds only short-term investment-grade bonds? It's still pretty constrained. Heck, I would trust a handful of posters here, none of whom I know personally, to manage this fund.
by saltycaper
Thu May 03, 2018 4:51 pm
Forum: Personal Investments
Topic: Minimum portfolio size for individual treasury bonds
Replies: 10
Views: 1831

Re: Minimum portfolio size for individual treasury bonds

We may not be on the same page here. Both a bond fund and a bond portfolio carries risk, and the risk is probably similar. ... Then I think we're at least in the same volume, if not the same page. I wasn't sure if the OP took your point to be, avoid a ladder because there is reinvestment risk, which would be a mistake, since the bond fund also has reinvestment risk. (Bonds in bond funds mature/are sold too, they have coupons too, etc.) Whichever options wins, if either is really absolutely preferable, I don't think reinvestment risk comes into play. You can have a bullet or barbell strategy using individual issues or funds, so that doesn't really matter here. I don't use Treasury Direct, but what I would do with tiny coupons from a bond la...
by saltycaper
Thu May 03, 2018 3:23 pm
Forum: Personal Investments
Topic: What Bond Funds Do You Use Other Than Total Bond Market??
Replies: 10
Views: 2219

Re: What Bond Funds Do You Use Other Than Total Bond Market??

If by being young you have decided to hold a high stock allocation, I'd consider doing the reverse and using a Treasury bond fund, omitting corporate bonds entirely. If you must add corporate bonds though, and if you want intermediate term, the fund you mention is the fund I would use. Note it does have a 0.25% purchase fee. There's also the actively managed Vanguard Intermediate-Term Investment-Grade Fund Investor Shares (VFICX), admiral shares 50K minimum.
by saltycaper
Thu May 03, 2018 3:19 pm
Forum: Personal Investments
Topic: Minimum portfolio size for individual treasury bonds
Replies: 10
Views: 1831

Re: Minimum portfolio size for individual treasury bonds

ibhhvc wrote: Thu May 03, 2018 3:14 pm
alex_686 wrote: Thu May 03, 2018 10:23 am I assume that as you get coupons and bonds mature you will be reinvesting, not withdrawing for consumption. So you are going to face reinvestment risk, which is a part of interest rate risk.
Thanks, that's a helpful point. I hadn't thought of that.
It's a good point in that it helps you avoid making a decision based on something that should not be a factor; i.e., you face this risk in bond funds too. 20-25K is fine to use for a Treasury ladder if you want to spend the time.
by saltycaper
Wed May 02, 2018 4:53 pm
Forum: Investing - Theory, News & General
Topic: Agressive factor Investing
Replies: 44
Views: 7035

Re: Agressive factor Investing

I was wondering if more experienced factor investors could chime in and help me assemble an agressive factor portfolio with the options that are at my disposal. I'm interested in what you and others think "aggressive" means in the context of factor-based investing. An aggressive portfolio is usually meant to mean a portfolio with higher risk. If you use volatility as a measure of risk, a portfolio of 100% stocks is more aggressive than a portfolio that includes fixed income. If you add leverage, that is more aggressive still. In fact, in a beta-only stock world, if you use a total market stock index fund for the stock allocation, I don't see how to increase risk/be more aggressive any other way while only taking on compensated ri...
by saltycaper
Tue May 01, 2018 3:42 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Liquidity Risk Not Worth It
Replies: 35
Views: 8814

Re: Larry Swedroe: Liquidity Risk Not Worth It

nedsaid wrote: Tue May 01, 2018 3:15 pm
My observation that bond funds that include corporates do better over time than treasury only bond funds extends over a period of many years. I was seeing this even before the 2008-2009 financial crisis.
I would hope so, but the only situation in which that should matter, even after taking risk-adjusted returns into account, is if Treasuries and corporate bonds were the only investments considered. If the portfolio contains other investments, or if it could contain other investments, then whatever conclusions are drawn by isolating Treasury bond vs. corporate bond performance don't really matter.
by saltycaper
Mon Apr 30, 2018 10:58 pm
Forum: Investing - Theory, News & General
Topic: Fixed income windfall allocation: lump sum or steadily buy?
Replies: 43
Views: 4954

Re: Fixed income windfall allocation: lump sum or steadily buy?

OK so it's recommended to move 100% into fixed income right away, just the same as equities. I just didn't know how it was addressed that if bought all at once you won't have much liquid for a while. If Treasuries are part of your fixed income allocation, they are one of the most liquid investments you can buy, (unless, maybe, if you are using TreasuryDirect or if there is some other hurdle for selling.) Spreads are tight, volume is high, and trading costs are low. If you mean you don't know how much they will be worth at some point in the future, that's due to term risk, not liquidity risk, and you can reduce your term risk simply by buying shorter-term Treasuries. If inflation risk troubles you, consider I bonds and/or TIPS. (Take care i...
by saltycaper
Mon Apr 30, 2018 1:31 pm
Forum: Investing - Theory, News & General
Topic: Fixed income windfall allocation: lump sum or steadily buy?
Replies: 43
Views: 4954

Re: Fixed income windfall allocation: lump sum or steadily buy?

But what about fixed income? I could be totally happy throwing 100% of our fixed income allocation into our chosen options right away, but what's the wisdom regarding this? If you have an asset allocation you have chosen, no wisdom is required to excuse yourself to immediately move to that asset allocation. What would need to be justified is not investing according to your asset allocation right away. The correct answer is always to move to your chosen AA right away unless there are severe tax issues, logistical issues, psychological issues that are impossible to overcome, or you want to try to time the market. But in the last case, the question is not for you ask but rather for you to answer (even if only to yourself): what is the wisdom ...
by saltycaper
Fri Apr 27, 2018 3:41 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Liquidity Risk Not Worth It
Replies: 35
Views: 8814

Re: Larry Swedroe: Liquidity Risk Not Worth It

longinvest wrote: Fri Apr 27, 2018 3:16 pm
saltycaper wrote: Fri Apr 27, 2018 2:02 pm
longinvest wrote: Fri Apr 27, 2018 1:27 pm
Let's try an out-of-sample test. Let's pick a Canadian investor willing to invest hist portfolio 50/50 into Canadian stocks and bonds.
That's not an out-of-sample test. That's just making different observations altogether.
Let's say that it would have been more appropriate to call it a counterexample to the claim that was being made.

I've fixed my post.
That may be a counter-example to the claim that investors in all countries should prefer mixing bonds issued by their government with domestic stocks and avoid domestic credit, but the claim here seems to pertain only to US Treasuries given their liquidity and perceived safety, which are attributes not necessarily shared by bonds issued by other governments.
by saltycaper
Fri Apr 27, 2018 2:02 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Liquidity Risk Not Worth It
Replies: 35
Views: 8814

Re: Larry Swedroe: Liquidity Risk Not Worth It

longinvest wrote: Fri Apr 27, 2018 1:27 pm
Let's try an out-of-sample test. Let's pick a Canadian investor willing to invest hist portfolio 50/50 into Canadian stocks and bonds.
That's not an out-of-sample test. That's just making different observations altogether.
by saltycaper
Thu Apr 26, 2018 10:08 pm
Forum: Personal Consumer Issues
Topic: Ikea Quality
Replies: 37
Views: 5284

Re: Ikea Quality

The Kallax has been indestructible in material and construction.

Generally, pieces made of pine are more fragile. I wouldn't want to move them, the wood is naturally soft and susceptible to gouging, and the finish is less resilient. I'd go with the cheaper fiberboard lines over pine even if the pine looks nicer.
by saltycaper
Thu Apr 26, 2018 3:16 pm
Forum: Personal Investments
Topic: Rising Interest and bond funds
Replies: 19
Views: 3509

Re: Rising Interest and bond funds

jeffreyalan wrote: Thu Apr 26, 2018 2:31 pm Well lets say my bond fund has a 2 year avg duration. So I am told that if I hold it thru 2 years then in general I should not have much of a principal loss. However, what if in year 1 interest rates rise 3 times? And then in year 2, interest rates rise another 3 times? Doesn't the NAV of the fund decline with each rise? So that at the end of 2 years, I am still sitting on a principal loss?
If we're talking about yields on bonds within the funds you hold, and not "interest rates" in general, which is vague, then yes.
by saltycaper
Tue Apr 24, 2018 10:40 pm
Forum: Personal Investments
Topic: Need help with Bond Funds
Replies: 6
Views: 1325

Re: Need help with Bond Funds

It's a small decision not to be stressed over and something you can change down the road if you wish. I'd use an intermediate-term Treasury fund in your portfolio. Total Bond is okay though. Your 10/10 idea also is okay.
by saltycaper
Mon Apr 02, 2018 3:40 pm
Forum: Personal Consumer Issues
Topic: $20,000 book - what to do with it
Replies: 34
Views: 7798

Re: $20,000 book - what to do with it

I wonder if a cigar humidor would also work; they're the right size, and are designed to maintain a specific level of humidity. A proper humidity level for cigars is too humid for books. While that can be controlled somewhat, a small enclosed space with even a slightly too high humidity level is probably worse than not controlling the level at all. Another problem with most desktop-sized humidors is they are typically made of wood, which off-gases, potentially harming the book. Unless you go to extremes, compared to conservation, most preservation techniques are pretty simple. An acid-free box stored in an area with the least amount of temperature change and humidity is all you really need. If there are photos or drawings inside, interleav...
by saltycaper
Mon Apr 02, 2018 3:12 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 36221
Views: 4651909

Re: U.S. stocks in freefall

if this jagged staccato decline keeps continuing thru 2018 are they still going to be bumping up interest rates 2-3 more times? When I look at Federal Reserve's objectives in conducting monetary policy I don't see anything about the "stock market" in there. https://www.federalreserve.gov/faqs/money_12848.htm It is written in the course of history: Greenspan put Y2K, really? Where is the evidence that the Fed injected funds due to "market declines" associated with "Y2K"? As for the Mexican crisis being mentioned, it's a pretty weak idea since the Fed actually raised rates throughout 1994 while stocks mostly went into a jagged decline and bonds got smashed, yet it carried on raising rates until April 1995, four ...
by saltycaper
Mon Apr 02, 2018 1:47 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 36221
Views: 4651909

Re: U.S. stocks in freefall

JoMoney wrote: Mon Apr 02, 2018 1:44 pm
F150HD wrote: Mon Apr 02, 2018 1:41 pm if this jagged staccato decline keeps continuing thru 2018 are they still going to be bumping up interest rates 2-3 more times?
When I look at Federal Reserve's objectives in conducting monetary policy I don't see anything about the "stock market" in there.
https://www.federalreserve.gov/faqs/money_12848.htm
It is written in the course of history:

Greenspan put
by saltycaper
Mon Apr 02, 2018 7:45 am
Forum: Personal Consumer Issues
Topic: $20,000 book - what to do with it
Replies: 34
Views: 7798

Re: $20,000 book - what to do with it

Caduceus wrote: Sat Mar 31, 2018 7:50 am
But they don't seem willing to keep the book unless I sign away my rights to it by gifting it to them.
That's usually how it works. Indefinite loans are headaches for institutions--insurance, accessibility, death of the person loaning the item, etc. Most institutions do not exist to serve the needs of the donors, although many donors feel they do, and institutions sometimes play on those feelings to get more donations. But do not be deceived. Either sell it or give it away with absolutely no expectations as to what will happen to it. Unless it would be a timeless focal point of a particular institution's collecting policy, eventually it will wind up on a shelf somewhere, forgotten.
by saltycaper
Sun Apr 01, 2018 3:20 pm
Forum: Investing - Theory, News & General
Topic: International Bond dividend question
Replies: 2
Views: 798

Re: International Bond dividend question

I don't own this fund, but according to the annual report, it has not had any distributions due to realized capital gains. It does say, on page 128: For tax purposes, the fund treats its forward currency contracts as hedging the currency it receives or will receive from the bonds in which it invests. This treatment should generally have the effect of offsetting net ordinary gains and losses on the forward currency contracts with the net ordinary losses and gains, respectively, on the currency components of the bonds; however, for various reasons, including because it is generally not possible to perfectly hedge the fund’s foreign currency exposure, the fund may have excess currency gain or loss that is recognized in a year and treated as or...
by saltycaper
Sun Apr 01, 2018 12:42 pm
Forum: Investing - Theory, News & General
Topic: Unanswered: Clements Highlights 4 Questions of Much Debate
Replies: 27
Views: 4051

Re: Unanswered: Clements Highlights 4 Questions of Much Debate

Pajamas wrote: Sun Apr 01, 2018 11:49 am
iceport wrote: Sun Apr 01, 2018 8:46 am
THERE ARE MANY FINANCIAL DEBATES that shouldn’t be debates at all.
I DISAGREE VEHEMENTLY.
You're WRONG.
by saltycaper
Sat Mar 31, 2018 12:38 pm
Forum: Personal Investments
Topic: Investing Very Small Amounts Daily
Replies: 22
Views: 4886

Re: Investing Very Small Amounts Daily

Most funds have a minimum initial purchase amount, say $3,000 or $10,000, and then a separate minimum additional investment amount, oftentimes just $1. So after you make the initial purchase, it is possible to invest very small amounts frequently. I take it this is not a case where you have a large pile of money and are trickling it into the market (dollar-cost averaging or some other method), but rather a case where you get small amounts of money and are debating whether to invest them right away or save a pile until the end of the month or some other time period. I would use whatever time period is most practical to you given the sums involved. While daily investment would track market returns better, if the amounts are small in relation ...
by saltycaper
Fri Mar 30, 2018 10:21 pm
Forum: Investing - Theory, News & General
Topic: The "American companies I invest in already have international exposure" argument --- valid or not?
Replies: 139
Views: 17689

Re: The "American companies I invest in already have international exposure" argument --- valid or not?

It is true statement that people with various cognitive biases use as a justification for tilting their portfolio; however, the argument is a non sequitur. If doing business internationally was the same thing as being a foreign company, the other arguments regarding the increased risks of investing in foreign companies, often made by the same said people with cognitive biases, would be nullified. They are tripping over their own arguments.
by saltycaper
Fri Mar 30, 2018 9:17 am
Forum: Investing - Theory, News & General
Topic: Is backtesting worthless? Are there ANY insights you can get from it?
Replies: 69
Views: 8079

Re: Is backtesting worthless? Are there ANY insights you can get from it?

JustinR wrote: Fri Mar 30, 2018 4:04 am Whenever backtesting is brought up people remind us that the past performance isn't indicative of future results.
It is not worthless, not even to the people who make this claim. When someone says this, oftentimes what they really mean is backtesting is not valid for supporting any argument other than their own.
by saltycaper
Thu Mar 29, 2018 9:07 pm
Forum: Investing - Theory, News & General
Topic: Is 100% VTSAX (+ bonds) the best portfolio?
Replies: 14
Views: 3627

Re: Is 100% VTSAX (+ bonds) the best portfolio?

JustinR wrote: Thu Mar 29, 2018 5:15 pm
Is a 2-fund portfolio actually the best thing to do?
It is not hard to find portfolios that have outperformed, if that is your definition of "best." So, no.
by saltycaper
Thu Mar 29, 2018 9:00 pm
Forum: Personal Investments
Topic: Wash sale question- are ITOT and VTI Substantially Identical?
Replies: 78
Views: 17107

Re: Wash sale question- are ITOT and VTI Substantially Identical?

To me, the ER, index, fund company, and number of holdings are not relevant. If most of the weighted holdings overlap, the funds are substantially identical. Further, if I was in a position to audit someone, and they tried to argue otherwise, I'd take that as an indication they might be lax in their interpretation of other aspects of the tax code, and I would generally be irritated by their attempt to skirt the intent of the rules. Time to bring the hammer down.
by saltycaper
Thu Mar 29, 2018 1:59 pm
Forum: Personal Investments
Topic: Other than simplicity/convenience, what's the case to be made for a total bond portfolio?
Replies: 14
Views: 2327

Re: Other than simplicity/convenience, what's the case to be made for a total bond portfolio?

nisiprius wrote: Thu Mar 29, 2018 1:43 pm
saltycaper wrote: Thu Mar 29, 2018 1:36 pm...they have equity-like risk...
Just to be clear: it is "equity-like" (stock-like) in that their performance is related to the company's business success or problems, and they are likely to go down at the same time equities (stocks) go down. But they have perhaps a fifth as much of that risk as stocks do. In 2008-2009, stocks went down -50%, corporate bonds went down about -10%.
I'm not sure you can quantify it that way. There can be other risk premia that counter-balance the performance or exacerbate it and obscure the calculation--term risk in this case.

The mistake in any event is to analyze one component of the portfolio (bonds) rather than the overall portfolio.
by saltycaper
Thu Mar 29, 2018 1:36 pm
Forum: Personal Investments
Topic: Other than simplicity/convenience, what's the case to be made for a total bond portfolio?
Replies: 14
Views: 2327

Re: Other than simplicity/convenience, what's the case to be made for a total bond portfolio?

In so doing, I am skirting the simplicity of only holding something like BND. Other than making my portfolio a bit more complicated, is there any downside to my approach? I understand there's a bit more risk...but that's intentional on my part to get higher yield. I do not think simplicity has anything to do with preferring Total Bond over another bond fund. It is no more simple to own Total Bond than to own some other bond fund. The main reason some investors avoid corporate bonds is because they have equity-like risk. When examining their overall portfolio, some investors prefer to take equity-like risk with equities and keep their bonds free of that type of risk. Total Bond includes corporate bonds, so those investors would not use it.
by saltycaper
Thu Mar 29, 2018 1:00 pm
Forum: Investing - Theory, News & General
Topic: Vanguard in the WSJ today
Replies: 57
Views: 10771

Re: Vanguard in the WSJ today

I do not have a WSJ subscription, but I was still able to read the article on wsj.com:

Is Vanguard’s Success a Problem? Some Customers Think So
by saltycaper
Wed Mar 28, 2018 3:26 pm
Forum: US Chapters
Topic: A lot of heavy hitters this morning
Replies: 244
Views: 34875

Re: A lot of heavy hitters this morning

davidsorensen32 wrote: Wed Mar 28, 2018 3:17 pm Don’t feel demoralized. Look at it this way - if husband and wife work for even just 20 years and just save normally, they would save

Husband 401(k) = 18,500
Husband match = 6,000
Wife 401(k) = 18,500
Wife match = 6,000
2x Backdoor Roth = 11,000
529 = 6,000 (say only $500 per month)
HSA = 6,900

Total = $73,000

Save for 20 years = $1.4M without any appreciation. As you can see it’s very doable. Throw in some market appreciation and you should easily cross $2.5-$3M. Not exactly bill gates style rich but enough for FI in 20 years for most of us.
Geez. Don't kick a man when he's already down. :D
by saltycaper
Wed Mar 28, 2018 3:21 pm
Forum: Personal Investments
Topic: Questions on TIPS
Replies: 25
Views: 3428

Re: Questions on TIPS

I don't know but should think that if auction demand shifted issuance would also shift, but we don't know how those decisions, about how much of what security to issue when, are made. Surely it must at least in part be based on cost of funds. Indeed. Though I imagine it could be viciously deconstructed, I'll nevertheless offer this anecdote of one supposed request for more TIPS, from a 2009 WSJ article, "U.S., in Nod to China, to Sell More TIPS": The Treasury Department, responding to growing demand from China and other investors, will boost the sale of inflation-protected bonds that hold their value as consumer prices rise. “We continue to hear growing demand for the product,” Treasury Deputy Assistant Secretary for Federal Fina...
by saltycaper
Wed Mar 28, 2018 3:00 pm
Forum: US Chapters
Topic: A lot of heavy hitters this morning
Replies: 244
Views: 34875

Re: A lot of heavy hitters this morning

I associate "heavy hitter" with the posters who display superior investment knowledge, take an objective and logical approach to assessing information, and have the ability to communicate clearly and concisely, not someone who just has a lot of money. (I would not take advice from someone just because they had a lot of money. Some of them earned their money by providing bad investment advice.) When you feel disconnected from people asking question, maybe consider that what usually matters more to a silent reader is not the person asking the questions but rather the person providing the answers.
by saltycaper
Wed Mar 28, 2018 2:41 pm
Forum: Personal Investments
Topic: Target or multi fund?
Replies: 15
Views: 1411

Re: Target or multi fund?

eyemgh wrote: Wed Mar 28, 2018 1:48 pm I haven't read that other discussion beyond the question, but that's my exact question. Thanks!

Basically I'm asking if there's a substantial advantage to what Thrifty PhD is outlining.
If, based on what Thrifty wrote, you see a potential advantage to the multi-fund approach, then the multi-fund approach is probably disadvantageous.
by saltycaper
Fri Mar 23, 2018 4:24 pm
Forum: Investing - Theory, News & General
Topic: How know whether stock is international?
Replies: 16
Views: 2199

Re: How know whether stock is international?

There are many large transnational corporations these days. It depends, I'm afraid, on what you mean by international. People seem to be surprised when stocks whose corporate headquarters are domiciled elsewhere are included in a US stock market fund when they're listed in the US. They're in the US stock market. Market /= headquarters domicile /= majority of revenue /= majority of earnings. We live in the world. Best to make the most of it. PJW While I agree with your sentiment entirely, where a company is located with regard to its headquarters still seems to be the primary factor in determining whether a company will be found in a Total US Stock Market Index fund or not. I think that is what the OP was asking--how to determine whether a ...
by saltycaper
Fri Mar 23, 2018 3:30 pm
Forum: Investing - Theory, News & General
Topic: How know whether stock is international?
Replies: 16
Views: 2199

Re: How know whether stock is international?

Yellowhammer wrote: Fri Mar 23, 2018 1:29 pm How do you know whether a stock is an international stock? For example Rio Tinto plc (RIO) is an Australian-British multinational but it seems to be traded on the NYSE. Is it an international stock?
RIO is a probably an ADR. It is an "international" (ex-US) stock because the company is based outside of the US.
by saltycaper
Fri Mar 23, 2018 3:15 pm
Forum: Personal Finance (Not Investing)
Topic: Do I need title insurance?
Replies: 62
Views: 9492

Re: Do I need title insurance?

lived in three homes (still in #3) and I presumed that the need for title insurance - including new ones for re-fi - were mandatory, never questioned it It is mandatory if you get a mortgage. This must be by state, because, even with a mortgage, we have always been asked by our RE attorney IF we wanted title insurance. And yes, we purchased it. There is a difference between a buyer's policy and a lender's policy. you must buy a policy for your lender. Your policy is optional. Just a note on the 85% "commission" for the attorney or closing company: the reason the underwriter gets such a small cut is because they take almost no risk and don't do any work. The searcher takes all the risk onto their own E&O insurance for a bad se...
by saltycaper
Fri Mar 23, 2018 2:41 pm
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3895
Views: 2424353

Re: [US vs. International allocation in a Three-fund portfolio]

Saltycaper, on your interpretation, the strategy is inconsistent because it doesn’t define a single “perfect” set of allocations, bond funds cannot serve to moderate equity risk unless they contain zero corporate bonds, the strategy fails because it is possible for investors to implement it poorly. This is a heterodox perspective -- you have an eccentric viewpoint that rejects the common understanding of the purpose and value of the components of the three fund portfolio. Are you interested in helping to develop the three-fund portfolio? If so, I think a useful constructive step would be for you to constructing persuasive rational arguments supporting your claims. Perhaps you have good ideas for improving this strategy, but we won’t know t...
by saltycaper
Fri Mar 23, 2018 1:25 pm
Forum: Personal Investments
Topic: Affect of Rising Interest Rates on Vanguard Total Bond Index
Replies: 43
Views: 10773

Re: Affect of Rising Interest Rates on Vanguard Total Bond Index

Bear in mind the difference between nominal and real returns, and that only real returns matter... Any discussion on bonds and interest rate is incomplete without considering underlying inflation. While those charts above seem impressive they are missing a critical piece of information which is the inflation graph. Sure you may lose and gain back nominal dollar amounts without realizing what's going on in the background. Interest rates rarely rise in a bubble and are almost always correlate with higher inflation. So no this would not be a bull market for bonds or even stocks. Inflation is a drag on most asset classes. You can hope to get lucky with TIPS or commodities maybe. I agree. The graphs are interesting as a mathematical exercise, b...
by saltycaper
Fri Mar 23, 2018 1:01 pm
Forum: Personal Investments
Topic: Questions on TIPS
Replies: 25
Views: 3428

Re: Questions on TIPS

I have the impression that in practice this premium is minimal. I don't have a set of data. We should also be sure to make apples to apples comparisons regarding credit quality and interest rate risk (duration). That comparison may not be completely straightforward. There may be other anomalies in risk, such as liquidity risk. An alternative way is to ask the question from the point of view of the US Treasury: Is it more cost effective for them to issue nominal or inflation-indexed debt. I believe it was originally thought that the inflation-indexed debt would be cheaper over time, for the reason I mentioned, once the liquidity issues lessened, and that was part of the reason TIPS were issued in the first place, in addition to perhaps prov...
by saltycaper
Fri Mar 23, 2018 12:48 pm
Forum: Personal Investments
Topic: Questions on TIPS
Replies: 25
Views: 3428

Re: Questions on TIPS

MtnBiker wrote: Fri Mar 23, 2018 12:28 pm
I would think that if inflation is "normal" (as expected), then nominal bonds and TIPS - both of which have expected inflation priced in - would perform equally.

It is true that in recent years inflation has been below prior expectations, in which case nominal bonds have outpaced TIPS. Whether this continues in the future is unknown.
All else equal, which it isn't, TIPS should underperform if inflation is as expected. The reason would be that nominal bond holders should demand a premium for unexpected inflation. If inflation is as expected, they collect that premium. TIPS holders do not demand that premium because they are not exposed to expected or unexpected inflation.
by saltycaper
Wed Mar 21, 2018 11:11 am
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3895
Views: 2424353

Re: The Three-Fund Portfolio

LadyGeek wrote: Wed Mar 21, 2018 9:13 am FYI - I split a discussion started by saltycaper into a stand-alone thread. There were enough posts to merit a separate discussion.

See: [US vs. International allocation in a Three-fund portfolio]
I did not start a discussion on US vs. International. The discussion is about whether the Three-Fund Portfolio is an internally consistent investment philosophy that provides answers to commonly asked investor questions, including how to allocate the bond portion of the portfolio in addition to how to allocate the equity portion. The comments are entirely relevant to this thread.
by saltycaper
Wed Mar 21, 2018 7:32 am
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3895
Views: 2424353

Re: The Three-Fund Portfolio

UpperNwGuy wrote: Wed Mar 21, 2018 6:58 am
Do you consider the risks of US stocks and international stocks to be the same for a US investor? If not, how would you adjust for those risks?
I don't think the risks are the same, but that doesn't mean an adjustment is needed, just as other slices of the equity market have different risks for which adjustments are not necessarily needed. But if an adjustment is required or permitted, the way to make those adjustments should be part of the investment philosophy rather than violations of the philosophy.
by saltycaper
Tue Mar 20, 2018 11:11 pm
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3895
Views: 2424353

Re: The Three-Fund Portfolio

PhilosophyAndrew: I think only one ex-US allocation is permissible if the investment philosophy is based in part on not attempting to beat the market and not trying to pull the levers of various risk factors on the equity side of the portfolio. That allocation is the global market-cap weighted allocation, however it may be defined. To recommend otherwise is to have an inconsistency that repeatedly shows up on the forum, either when others explicitly point it out like I am trying to do now, or when a newcomer wonders what their international allocation should be, and they look to the benefits and fundamental concepts behind the three-fund portfolio, and they can't find an answer. Maybe this will be better addressed in the upcoming book. Once...
by saltycaper
Tue Mar 20, 2018 4:03 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Don’t Count Out Commodities
Replies: 51
Views: 10421

Re: Larry Swedroe: Don’t Count Out Commodities

larryswedroe wrote: Mon Mar 19, 2018 6:17 pm Salty
FWIW, one way to judge the ability to hedge is correlations. Correlation of TIPS and inflation obviously highly correlated.
Monthly correlation of Bloomberg Commodity Total Return index to CPI was 0.243 while to one month bills was 0.128
Larry
Thank you, Larry. While I haven't been one to wave a "#1 Swedroe Fan" foam finger in the air, I learned a lot from your interactions with other forum members and miss your contributions.
by saltycaper
Tue Mar 20, 2018 3:07 pm
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3895
Views: 2424353

Re: The Three-Fund Portfolio

Saltycaper, how specifically does the three fund portfolio "encourages" market-timing of the sort you describe? I'm not following your logic. If ones does not wish to use a specific bond fund in a three fund portfolio, one may choose not to do so. Of course, not all bond funds are suitable for inclusion in the portfolio. But how does this reflect badly on the portfolio itself or constitute an inconsistency in the conception of the portfolio? Here too I'm confused by what you are saying. Finally, your final sentence is confusing. If you believe that the portfolio design "encourages" investors to make bad choices and you believe that the portfolio design is "internally inconsistent," then, you are judging the po...
by saltycaper
Tue Mar 20, 2018 1:26 pm
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3895
Views: 2424353

[US vs. International allocation in a Three-fund portfolio]

[Split into a separate thread from: The Three-Fund Portfolio --admin LadyGeek] I don't know how many members use this portfolio, but Taylor has done a compelling job demonstrating how it aligns with the Boglehead investing philosophy; I consider it a representation of that philosophy par excellence. I think the three-fund portfolio is a failure with regard to representing Boglehead philosophy (at least "par excellence") as it allows and even encourages the investor to attempt to beat the market by tweaking the US to ex-US stock ratio. You can find ex-post justifications for the "correct" ratio based on whether US or ex-US outperformed, which is very much at odds with the general philosophy espoused. A lesser internal in...
by saltycaper
Tue Mar 20, 2018 1:10 pm
Forum: Investing - Theory, News & General
Topic: Allan Roth: Boosting Returns With Rebalancing
Replies: 11
Views: 2836

Re: Allan Roth: Boosting Returns With Rebalancing

Taking more risk may or may not boost returns. Market timing may or may not boost returns.
by saltycaper
Mon Mar 19, 2018 4:09 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Don’t Count Out Commodities
Replies: 51
Views: 10421

Re: Larry Swedroe: Don’t Count Out Commodities

I appreciate Larrys article and the discussion. One thing I'm missing is an intuitive explanation of why commodities would hedge better than TIPS (or: respond stronger to inflation). Is it because commodities are raw products and sold at a multiple to consumers? TIPS are as good a "hedge" as any. Don't believe me? Don't have to. Even Larry Swedroe once said so, back in 2012, calling them, "The only good inflation hedge": How to hedge against inflation (hint: forget gold) It is a multi-page article. Commodities are on page 3. Doesn't it say there that short-term nominal bonds are a better hedge than commodities? That's interesting. I can probably dig up an article where Larry says short-term nominal bonds are not a good ...
by saltycaper
Mon Mar 19, 2018 1:53 pm
Forum: Investing - Theory, News & General
Topic: Incredibly sleazy Northwestern Mutual cold caller
Replies: 78
Views: 13904

Re: Incredibly sleazy Northwestern Mutual cold caller

Pacman wrote: Mon Mar 19, 2018 10:32 am If I had a company where I needed salespeople, I would hire this person.
I was thinking the same thing.
by saltycaper
Sat Mar 17, 2018 4:38 pm
Forum: Investing - Theory, News & General
Topic: Vanguard New Factor Funds Portfolio Statistics
Replies: 276
Views: 55304

Re: "TRYING TO BEAT THE MARKET"

Taylor Larimore wrote: Sat Mar 17, 2018 4:07 pm

I put this Boglehead post in another thread. It belongs here:
Actually, the quote has nothing to do with this thread, which otherwise has been excellent. Let's try not to derail it.