Search found 1442 matches

by Karamatsu
Mon Sep 25, 2023 6:14 am
Forum: Investing - Theory, News & General
Topic: Who holds individual TIPS in taxable accounts?
Replies: 30
Views: 4567

Re: Who holds individual TIPS in taxable accounts?

Yes, I have TIPS in my taxable account for the reason you outlined: no space in tax-advantaged accounts. I'm not sure what you're asking about the taxes... it's just whatever it is, right? Your effective tax rate. I mean, it's not like the tax on TIPS is more than on any other form of income. True, there is the problem of tax on phantom income from the inflation adjustments. One simple way around that is to buy shares of a low-cost TIPS fund like Schwab's SCHP. Funds pay out both the coupons and inflation adjustments as dividends each year, so you realize that income annually, and the phantom income issue disappears entirely. If for some reason you do want to hold individual TIPS (duration preferences, etc), then one strategy is to hold a p...
by Karamatsu
Tue Nov 29, 2022 4:24 am
Forum: Personal Investments
Topic: Total newb to T Bills
Replies: 12
Views: 1768

Re: Total newb to T Bills

I should have said if I miss the deadline for entering the order prior to auction date (announcement date, day before auction date) will I just have to wait until the next offering window then? If I remember correctly, the auctions are held around noon. You can place an order at TD up to some point before the action takes place. For example, right now it's about 05:20 EST and TD is still allowing people to place noncompetitive bids for the 52-week bill that will be auctioned later today. I suppose that, in normal circumstances, that means you will have a pretty fair idea of what the yield will be, but it all depends on what the competitive bidders do. But generally speaking yes, if you miss placing a bid at one auction, you have to wait un...
by Karamatsu
Tue Jun 21, 2022 9:27 pm
Forum: Investing - Theory, News & General
Topic: TIPS attractive to you?
Replies: 34
Views: 3223

Re: TIPS attractive to you?

What do others think of this? Are TIPS a good fixed income choice in uncertain inflationary times ... or not?
I suppose I view TIPS as the most reliable part of my portfolio. They anchor the fixed-income allocation in the same way that fixed-income anchors the portfolio as a whole. I don't think you can really go too far wrong with the 5Y TIPS because no matter what happens, it's just five years, so in fact I just placed an order for the Thursday auction. If rates go up later, fine. I'll just reinvest the principal when the time comes.
by Karamatsu
Tue Jun 14, 2022 7:29 pm
Forum: Investing - Theory, News & General
Topic: Why is it that so many reference the Japanese stock market crash?
Replies: 69
Views: 6012

Re: Why is it that so many reference the Japanese stock market crash?

But did they really feel that way in 89 - expectations of reasonable growth at a reasonable cost over a reasonable time? Or did it feel more like an irrational greater fool party until the music stopped? Just as in the US/global dot-com "irrational exuberance," the US/global mortgage-backed "irrational greed," and US/global [algorithmic asset we don't talk about here] "irrational virtual tulip bulb" events, people who were making money thought that "this time it's different... the situation is unique... we have a perpetual profit machine so get on board now!" And for a long time, they looked like the smart ones. Japan in those days was seen as even more powerful economically and technologically than ...
by Karamatsu
Sat Jan 29, 2022 5:06 am
Forum: Personal Investments
Topic: Schwab or Fidelity costs
Replies: 11
Views: 1653

Re: Schwab or Fidelity costs

I've been at Schwab now for about 30 years, but only went in to the physical office a few times. Still, when I did, they were always helpful, and there's no arguing with the major effect they've had on the industry, especially the lowering of fund expenses. I still remember the first person I talked to there. He recommend index funds and age-in-bonds. If I'd listened to him then, I'd be much, much better off than I am now, but some things need to be learned the hard way! In any case, great service, well-designed web site if you have a fast connection... But if in-person treatment is really what you're looking for then, kind of like buying a car, I'd suggest going to the nearest offices and take them for a "test drive." Ask questio...
by Karamatsu
Wed Jan 26, 2022 3:59 am
Forum: Personal Investments
Topic: US citizen living and working abroad - SSA contributions?
Replies: 2
Views: 564

Re: US citizen living and working abroad - SSA contributions?

Yes, unless you are working for a company or government agency that is paying FICA taxes, Social Security will record zero contributions, and zero income, for the time when you're abroad. You might want to look into whether there is a totalization agreement with Korea, though. The US still won't recognize your income but you may at least get credit for having worked during that time. I'm not sure what benefits that brings, but I guess there must be something.
by Karamatsu
Sat Jan 22, 2022 5:58 am
Forum: Personal Investments
Topic: Foreign I Bond Equivalents
Replies: 11
Views: 1332

Re: Foreign I Bond Equivalents

I believe government of most developed countries issue inflated protected bonds, Japan has one too. There is a Japanese inflation-linked bond. It's more like a TIPS than an I-Bond, so there are no restrictions on when you can sell, but the current rate is less than 0.5%, so not quite what the OP is looking for unless you're making a play on the exchange rate. The big problem with any foreign inflation-indexed bond, versus the I-Bond, is that foreign bonds won't get any kind of special tax treatment from the IRS. Even if you found one where the interest accumulated to principal (as with I-Bonds), avoiding any coupon payments, the IRS would tax you on the phantom income. If inflation-indexing isn't important, and you're just looking for 7% r...
by Karamatsu
Thu Jan 13, 2022 2:17 am
Forum: Investing - Theory, News & General
Topic: Japanese stock fundamentals were superior to US stocks this decade
Replies: 167
Views: 12286

Re: Japanese stock fundamentals were superior to US stocks this decade

For those of us who are not economists, could you explain what the above sentence means? Sorry about that. Friedman was a libertarian who argued (successfully, as it turned out, in the US) for the Gordon Gecko idea that businesses have no other responsibility but to grow profits. Before that, the generally prevailing notion was that businesses also had responsibilities (though you must keep in mind limitations of the times) to society, to workers, to the environment, etc. Friedman considered such ideas "subversive," and wanted everyone focused on profits alone. He had enormous influence on US economic policy in the 70's and 80's. It was one of Friedman's students (Michael Jensen) who later pushed for the idea that executives shou...
by Karamatsu
Wed Jan 12, 2022 5:31 am
Forum: Investing - Theory, News & General
Topic: Japanese stock fundamentals were superior to US stocks this decade
Replies: 167
Views: 12286

Re: Japanese stock fundamentals were superior to US stocks this decade

Japanese corporations have a bad reputation when it comes to corporate governance and maximizing shareholder value. They’re under leveraged, tend to avoid restructuring and reducing headcount, and are apt to reinvest profits in low return activities rather than buying back shares at a discount. There are lots of exceptions so it's difficult to generalize, but I think that, compared to public companies in the US, the emphasis at most Japanese public companies leans more toward growing their business -- producing goods, providing services, skimming profits from import/export -- than in becoming vehicles for financial speculation. This may explain why value-oriented investors like Buffett are selecting individual firms -- because the underlyi...
by Karamatsu
Fri Dec 31, 2021 3:13 am
Forum: Investing - Theory, News & General
Topic: Index and underying country and bubbles
Replies: 6
Views: 746

Re: Index and underying country and bubbles

1. What criteria would qualify your country's index to buy and hold? I don't invest in individual country index funds, but instead have positions in VEA and SCHF, both of which hold Japanese stocks at market weight (about 21%), and in general I see no reason to deviate from that because the value of shares, and therefore indirectly, this or that Japan index, is determined by supply and demand among active market participants, so it seems like a reasonable allocation and a very low cost. Looked at from the perspective of an investment in a Japan fund, the criterion would simply be that of all the money in all the world that is invested in developed ex-US, 21% of it chose to be invested in Japan, so that's good enough for me. You could go fu...
by Karamatsu
Wed Dec 29, 2021 4:53 pm
Forum: Investing - Theory, News & General
Topic: Do automatically reinvested dividends have favorable purchase terms?
Replies: 25
Views: 3138

Re: Do automatically reinvested dividends have favorable purchase terms?

If you have your brokerage set to automatically reinvest dividends, do those purchases get any favorable terms compared to if you make the purchases manually? It's pretty much just the way you thought. Once the dividends arrive they're pooled into a single order so all customers get the same price at the same time. Whether this is advantageous or not probably depends on market conditions, but since brokers have a choice of where to send orders, and there is competition for that, I imagine they get good terms. Where it gets really interesting is at places like Schwab or Vanguard, when handling reinvestment of dividends in ETFs that they themselves administer, and especially so when doing it for their own customers, so the whole process is j...
by Karamatsu
Wed Dec 29, 2021 4:20 am
Forum: Personal Investments
Topic: Portfolio review for next life phase (US Expat)
Replies: 12
Views: 1255

Re: Portfolio review for next life phase (US Expat)

At a glance, IAGG appears to be hedged to USD. If that's the case, it may not provide the protection against adverse EUR/USD exchange rate changes that the topic author is looking for.
Yes, you're right. Sorry about that. The language in the summary description I read was vague enough that I interpreted it as unhedged, but the prospectus is clear that they're aiming to replicate the performance of a hedged index.
by Karamatsu
Tue Dec 28, 2021 2:58 am
Forum: Personal Investments
Topic: Portfolio review for next life phase (US Expat)
Replies: 12
Views: 1255

Re: Portfolio review for next life phase (US Expat)

Along those lines, iShares does have a selection of US-domiciled international bond funds, the most attractive of which seems to be IAGG , a total non-US bond fund with an ER of 0.08%, that would perfectly complement the OP's existing AGG position. They do have others that are limited to government bonds, but with rates so low right now you may end up losing money after paying expenses. As far as what to do... I think I would definitely aim to simplify those selections unless there are big tax consequences for doing so. There's a general rule of thumb that anything less that 5% of your portfolio is pretty much meaningless: win or lose it's not going to move the value of your total portfolio much. So what you could do is eliminated everythin...
by Karamatsu
Sun Dec 26, 2021 5:28 pm
Forum: Personal Investments
Topic: Cost Basis -- Purchase Date
Replies: 2
Views: 443

Re: Cost Basis -- Purchase Date

I think what I would do is just try entering "various" and see if the broker accepts that. Or they might have some other convention, like leaving the purchase date blank, in which case a note to their customer support might be the best thing.
by Karamatsu
Thu Dec 23, 2021 7:18 pm
Forum: Personal Investments
Topic: Anyone just hold cash instead of bonds?
Replies: 29
Views: 4058

Re: Anyone just hold cash instead of bonds?

I have a large cash position Same here. I view cash as a perfectly liquid 0% government bond. Although I still have a significant allocation to treasury bonds and treasury bond funds, with the current yields the opportunity cost of buying new bonds (or fund shares) seems higher than the potential return, so for the moment am just letting the cash accumulate. If there is a crash and equities drop below my target allocation, I'll be able to quickly take advantage of that (like in March 2020) or if bond yields recover, I'll be happy to move the cash into treasuries at that time. In the meantime cash is also uncorrelated with equities, so contributes to that goal in the overall portfolio. Of course, I'm still buying as much as I can in I-Bonds...
by Karamatsu
Mon Dec 20, 2021 10:49 pm
Forum: Personal Investments
Topic: How to invest in the Turkish stock exchanges?
Replies: 12
Views: 2119

Re: How to invest in the Turkish stock exchanges?

I can't vouch for their accuracy, but this page TopForeignStocks has a listing of Turkish ADRs and ordinaries that trade OTC in the US. You should be able to trade them there, though with OTC be aware that that there are a lot of "barely legal" stocks/scams, and liquidity is often a big issue, so pricing can be even more disconnected with reality than usual. Also they aren't subject to the same reporting rules so... you're going out on a limb. For direct access to the BIST? I'm not sure. If you know what you want, a large broker like Schwab or (shudder) a full-service shop could probably place orders for you, but probably not online. You'd have to talk to them, which means significant fees, but you know... they like fees, so I ima...
by Karamatsu
Fri Dec 17, 2021 6:10 am
Forum: Personal Investments
Topic: How the heck do I sell stocks (to buy something else)?
Replies: 4
Views: 1149

Re: How the heck do I sell stocks (to buy something else)?

Given the timing, splitting the sales half in December and half in January seems like it would be an excellent strategy. Since the IRS will want you to pay estimated tax during 2022 on the January sale, there's probably no advantage in waiting, so I'd probably sell enough to cover both the down payment and your best estimate of the tax on the capital gains. Of course there is a chance that you could profit by waiting on the sales to pay taxes, but there's no way to know.

As far as which lots to sell, the most beneficial order is usually (1) short-term losses, (2) long-term losses, (3) long-term gains, (4) short-term gains, but there can be nuances.
by Karamatsu
Sun Dec 12, 2021 7:03 pm
Forum: Personal Investments
Topic: How Are People Mitigating All Our Investment Records Are Stored Electronically
Replies: 15
Views: 1857

Re: How Are People Mitigating All Our Investment Records Are Stored Electronically

I have paper records going back to the beginning of my first investments as an adult in the 80's, and those records have saved me multiple times, especially in disputes with the IRS. Electronic copies, stored on my systems, might be OK, but I don't trust electronic documents stored at bank or brokerage accounts. Even Schwab only has 10 years of statements available, and some Japanese brokers and banks only have the most recent six months. You're expected to download them or lose them forever. Also over the years I've had backup disks go bad, backup tapes go bad, computers fried in electrical storms, damaged in earthquakes... all kinds of stuff. Paper has never failed. Of course, it could. There are fires, obviously, and I don't go so far as...
by Karamatsu
Fri Dec 10, 2021 5:42 pm
Forum: Personal Investments
Topic: ST Treasuries price going down
Replies: 14
Views: 1894

Re: ST Treasuries price going down

You have to watch your expectations there, but just remember that when the price goes down, the fund is able to buy more bonds at the higher yield, so over time this is a positive thing. In simulations based on real data, the time it took to break even didn't depend so much on the duration of the bonds as how long it took bond yields (or equivalently, prices) to stabilize (though obviously duration matters, too). If yields rise slowly over a long period, then it will take a long time before the increasing yield brings you back to the break even point. If yield rise sharply then stabilize, things can turn around much faster. Prices have a long way to go right now, though. If you're making 0.6x% now then your average maturity must be about tw...
by Karamatsu
Thu Dec 09, 2021 6:22 pm
Forum: Investing - Theory, News & General
Topic: Could millennial trends threaten stock market performance over the coming decades?
Replies: 54
Views: 5661

Re: Could millennial trends threaten stock market performance over the coming decades?

So when I try to evaluate all this from a first principles perspective Yes indeed. You've captured the outlines of the situation quite well. In the end, most of what drives share prices isn't fundamentals like earnings or technicals like momentum. It's demand. Shares are a commodity, like pork bellies. Prices go up when there's more money looking to buy than there is to sell, prices fall when there's more money looking to sell than to buy. If there were major shifts in demand for shares, then of course that would affect share prices. So the first question is whether there will be such a shift, and if so, in what direction. The trouble is that we can't know that now. When I was at university we used to ridicule the 40-somethings who would g...
by Karamatsu
Fri Dec 03, 2021 6:21 pm
Forum: Personal Investments
Topic: US expats - government annuity in Hong Kong
Replies: 9
Views: 1324

Re: US expats - government annuity in Hong Kong

Since you have a tax accountant that you trust and who is familiar with international issues, you should probably ask him/her to investigate this because there are lots of landmines hidden in the tax code that are specifically designed to explode when an expat (or other investor in foreign assets) wanders by. There's also no one-size-fits-all answer because even in normal situations, much depends on the text of bilateral tax treaties. And then, HK isn't really a "normal" situation these days, given the moves in Washington to sanction the PRC and eliminate special treatment for HK over well-known issues. So, much better to have an expert review the code and the treaty and look up special regulations that may exist, or be in the wor...
by Karamatsu
Sun Nov 28, 2021 3:13 pm
Forum: Investing - Theory, News & General
Topic: non-intuitive but simple math: the sensitivity of asset allocation
Replies: 20
Views: 1998

Re: non-intuitive but simple math: the sensitivity of asset allocation

I find that as balances grow, small percentage drops in stocks "feel" worse due to the absolute dollar amount, even though percentage asset allocation (and thus "risk") may not have changed materially. This is important and quite real. Percentages tend to mislead. If you reframe a loss as "How many years did I work in order to save up that much money?" or "How many years would have I have to work and save to make up the loss?" It becomes much more real, and clarifies, at least for me, how the way we talk about these things can seduce people into taking far more risk than they're really able to handle or absorb. This goes 10X when people are in actual retirement, for whom the seemingly easy decision t...
by Karamatsu
Sat Nov 27, 2021 5:05 pm
Forum: Investing - Theory, News & General
Topic: annual reports
Replies: 12
Views: 774

Re: annual reports

With individual companies and some off-the-wall things (especially closed-end funds), the reports can be very interesting, even wild, full of aspirations/excuses and strategy (the early section), followed by the facts (the numbers and, crucially, the notes). But with large, mainstream index funds... they're kind of boring. I mean, they follow an index, so as long as they follow the index, the share price is what it is. No doubt there is accounting strategy involved in running a profitable fund just as there is strategy in running any profitable business, but somehow they just doesn't grab me the way a company trying to survive by offering goods and services does. But now that you mention it, they do have all my money, so it would be neglige...
by Karamatsu
Thu Nov 25, 2021 1:25 am
Forum: Investing - Theory, News & General
Topic: Why will international stocks "mean revert" and begin beating domestic stocks?
Replies: 77
Views: 8918

Re: Why will international stocks "mean revert" and begin beating domestic stocks?

The researchers at vanguard have been that saying for at least a decade.
So, no different from any other financial prognosticators, including those who predicted US outperformance over the same period. The stopped clock is eventually right, after which the financial media will promote the soothsayers as possessors of almost mystical insight, and it will all make sense in hindsight.

But really the useful thing in the Vanguard paper is how they reason about the problem, not necessarily the predictions. Too much weird, unexpected stuff still happens in the world to make market predictions reliable.
by Karamatsu
Wed Nov 24, 2021 9:36 pm
Forum: Investing - Theory, News & General
Topic: Why will international stocks "mean revert" and begin beating domestic stocks?
Replies: 77
Views: 8918

Re: Why will international stocks "mean revert" and begin beating domestic stocks?

Some of the researchers at Vanguard seem to think that international equities are likely to outperform over the next decade. Predictions are, of course, just predictions, but you can at least check out their reasoning: A Tale of Two Decades.
by Karamatsu
Wed Nov 24, 2021 5:29 am
Forum: Investing - Theory, News & General
Topic: i want to write up software to backtest options
Replies: 1
Views: 450

Re: i want to write up software to backtest options

(1) Yes, you'd use one year's worth daily market prices for whatever issue you are modeling. The most basic notion of volatility is the standard deviation of that series. There are lots of adjustments that people make, though, so you might want to consult a good text. (2) Probably what you'd want to use is the annualized interest rate on a T-Bill/Note that matures at the same time that your option would expire. That is, if your going to model something that expires in three months, use the three-month T-Bill, but if it's a three-year LEAPS then it seems like the three-year T-Note would be a better choice. Well, unless there's a standard that everybody always uses. Dunno! (3) Do you mean the Black-Scholes function? If desperate you could wri...
by Karamatsu
Sun Nov 21, 2021 7:05 pm
Forum: Personal Investments
Topic: I am getting enticed into stock picking again
Replies: 38
Views: 3601

Re: I am getting enticed into stock picking again

It is interesting, though, isn't it? Just watching one's own psychology.
by Karamatsu
Sat Nov 20, 2021 3:28 pm
Forum: Personal Investments
Topic: Do you plan differently if you're planning to retire abroad?
Replies: 3
Views: 910

Re: Do you plan differently if you're planning to retire abroad?

I was thinking this morning about one angle that may benefit from some early preparation for expats is estate planning. Some countries don't recognize married couples as co-owners of assets. They have to be owned by an individual, and if the asset owner dies, even a spouse can be liable for inheritance taxes (usually with a threshold, but it's there). In places like that, it can probably be beneficial to arrange things so that half of the assets are owned by one partner and half by the other, POD the other partner. That way there's less likelihood of exceeding the threshold. US law is weird about this too, if one partner is not a US citizen. Every country has it unique tax quirks, and they tend to be very inflexible, so again, good to at le...
by Karamatsu
Sat Nov 20, 2021 2:22 am
Forum: Personal Investments
Topic: Do you plan differently if you're planning to retire abroad?
Replies: 3
Views: 910

Re: Do you plan differently if you're planning to retire abroad?

All else equal I think you are right and there is no difference in investing strategy. If you know which country, or countries, are most likely, though, it can be useful to investigate things like the health care insurance scheme, any restrictions on owning property, how investments (especially offshore, meaning in the US) are taxed (especially if they will tax realized gains in US tax-advantaged accounts), whether there's a tax treaty, whether there are restrictions on offshore accounts, etc. Things like that are good to know and could conceivably impact, for example, where you put different types of investments. But since you're not 100% sure, it's probably best to just plan for US rules. Of course the other big thing is the exchange rate...
by Karamatsu
Mon Nov 15, 2021 6:16 pm
Forum: Investing - Theory, News & General
Topic: Why International lags US?
Replies: 240
Views: 14704

Re: Why International lags US?

This paper at Vanguard presents a data-driven description: A Tale of Two Decades for US and Non-US Equity: Past is Rarely Prologue . As has been mentioned earlier, they assess that valuations were the major driver. That's a bit of a tautology, but they model valuations as a combination of macro factors including 10-year trailing inflation, 10-year nominal yields, 3-year trailing GDP growth, and 3-month equity volatility. Whether this is kind of analysis is causal or just a "Price of Butter in Dhaka" phenomenon is left to the reader. In addition to valuations, they estimate that US equities got a smaller boost from corporate earnings and foreign exchange rates (stronger dollar after about 2010). Important, though, for people constr...
by Karamatsu
Wed Nov 10, 2021 4:16 am
Forum: Personal Investments
Topic: No dividend etf
Replies: 30
Views: 7465

Re: No dividend etf

You should be able to buy a "synthetic ETF". In Japan I think these are structured as ETNs, almost all of them managed by Nomura. Many are focused on commodities, but if all goes well, some will approximate the total return of an equity index, but without paying dividends, something they're able to avoid by not owning any of the shares. That caveat about "if all goes well" is important, though, since ETN shares are essentially just promises, so if the institutions involved were ever unable to keep those promises, retail investors probably wouldn't have much recourse. The ETNs are also more expensive than ETFs actually owning the underlying index assets, which seems odd, but I guess that's the premium people pay for tax ...
by Karamatsu
Tue Nov 09, 2021 11:58 pm
Forum: Personal Investments
Topic: No dividend etf
Replies: 30
Views: 7465

Re: No dividend etf

I sympathize with what you're trying to do. In Japan the tax rate on dividends and capital gains is the same and there is no notion of "qualified" dividends, so distributions mean being taxed now, even if we don't need the cash, rather than later, when we'd be able to take profits as needed. But of course, what people are saying is true: although there are many stocks that don't distribute dividends right now , there's no guarantee that they will continue that in the future. You really wouldn't want them to, beyond a certain point. Companies with more cash than they know what to do with tend to do stupid, self-serving things, like buying yachts or private aircraft for the executives, or forking out money for the naming rights on a...
by Karamatsu
Mon Nov 08, 2021 11:21 pm
Forum: Investing - Theory, News & General
Topic: Is there a proven stock market predictor?
Replies: 93
Views: 6985

Re: Is there a proven stock market predictor?

Is there such a thing as a proven stock market predictor?
The only one with a historically proven track record is hindsight.
by Karamatsu
Sun Nov 07, 2021 9:29 pm
Forum: Investing - Theory, News & General
Topic: Active china exposure
Replies: 17
Views: 2027

Re: Active china exposure

Because markets are only as efficient as its active participants and the average Chinese investor in the Chinese market is not as skilled, it's easier for good professionals to beat the market (over the US market). I don't see how that follows. If the market is dominated by gamblers then it's Chinese gambling rules that will prevail and determine share prices, not the rules of US-trained active managers. The equity markets in different countries all have different characteristics: different traders, different valuation conventions, different behaviors, different purposes. The Chinese market is pretty much just a casino. It plays no significant role in either corporate finance or in the real economy, so the rules that make a good stock pick...
by Karamatsu
Sat Nov 06, 2021 9:55 pm
Forum: Investing - Theory, News & General
Topic: Active china exposure
Replies: 17
Views: 2027

Re: Active china exposure

It looks like marketing fluff. Why do you (not their advertising) think that a preponderance of retail investors would give active managers an advantage? Has that advantage materialized for other active-managed China-focused funds? Or in any case, there are lots of China funds to choose from. RAYC has the highest expenses but the shortest track record, so doesn't seem very attractive to me, but of course I haven't read their marketing materials, so this is just a first impression. If they have some special ability, we'll know in 5-10 years.
by Karamatsu
Tue Nov 02, 2021 6:05 pm
Forum: Investing - Theory, News & General
Topic: Schwab ETF dividend reinvestment in Schwab account-how long?
Replies: 14
Views: 3544

Re: Schwab ETF dividend reinvestment in Schwab account-how long?

So I did (ask them). They wrote back, "Once your dividend payment arrives in your account, Schwab will use the fund to purchase underlying stocks the next trading day, around 10am Eastern Time. The cost basis will be the same for each customer, to ensure best execution."

It would be interesting to learn more about how this all works under the hood.
by Karamatsu
Mon Nov 01, 2021 6:18 pm
Forum: Personal Investments
Topic: Corporate Bonds?
Replies: 34
Views: 4110

Re: Corporate Bonds?

Those are excellent points. Thanks to Valuethinker (good to see you again) and sgr000. Since time and experience have made me more of a conservative investor, I still use age-in-bonds. But then what happens is that I look at the overall portfolio return and say, "This isn't exactly stellar return." Still, rather than increase equities, my biases then push me to add corporate investment grade (say, 10% of the portfolio, from the bond side) in order to improve the return a bit. A correlation coefficient of 0.30 or thereabouts doesn't seem like a big deal when everything else except gold and treasuries is even higher. But playing with that correlation I found I could achieve virtually the same results (rolling 3-year returns, Sharpe,...
by Karamatsu
Sun Oct 31, 2021 8:27 pm
Forum: Personal Investments
Topic: Corporate Bonds?
Replies: 34
Views: 4110

Re: Corporate Bonds?

Thoughts on corporate bonds? eg. Apple, T Mobile, etc.? As others have mentioned, it's hard to be a player in the market for individual corporate bonds because of their complexity, high costs, and concentrated risk, but a low-cost fund holding a diversified set of investment-grade bonds can be a good thing. I don't think I would make it more than around 30% of your bond holdings, though, with the rest in treasuries. High-yield debt comes with big risks that aren't visible right now because rates are so low, but historically the default rate on CCC-C-rated debt is 47%. On B-rated debt it's more like 4%, but during systemic downturns like we had in 1999-2001 or 2008-2009, the default rate for B-rated debt was almost 14%. Many high-yield bond...
by Karamatsu
Sun Oct 31, 2021 5:51 am
Forum: Investing - Theory, News & General
Topic: Schwab ETF dividend reinvestment in Schwab account-how long?
Replies: 14
Views: 3544

Re: Schwab ETF dividend reinvestment in Schwab account-how long?

These same questions apply equally to all brokerages, not just to Schwab.
Maybe. But the OP is asking about Schwab, and since these are funds in question owned and operated by Schwab, there could be some nuances that wouldn't apply to broker that doesn't operate the fund in question. Regardless, the best way to get a definitive answer is just to ask them.
by Karamatsu
Fri Oct 29, 2021 8:54 pm
Forum: Investing - Theory, News & General
Topic: Schwab ETF dividend reinvestment in Schwab account-how long?
Replies: 14
Views: 3544

Re: Schwab ETF dividend reinvestment in Schwab account-how long?

What price were your new shares purchased at? You can find that on the History page. Obviously the purchases will be automated, coming as they would on the same day for all Schwab customers, so the question of how they would do it is kind of interesting. Do they combine all reinvestment orders into one and execute that at a random time? Or do they break them down into multiple blocks based on volume (to avoid a huge spike in the bid), then execute each block independently? Since they have to deal with fractional shares, it seems like they'd want to combine orders somehow, but I guess when it is all automated, that's not necessarily true. Good question for them!
by Karamatsu
Fri Oct 29, 2021 8:31 pm
Forum: Investing - Theory, News & General
Topic: How To Think About Corporate Bonds
Replies: 24
Views: 2629

Re: How To Think About Corporate Bonds

As far as in what scenario I might anticipate corporate bonds outperforming a mix of stocks and treasuries, I would say a scenario starting with highly overvalued but fundamentally sound businesses. Think Japan 1989. Were there ever mass bankruptcies of Japanese corporations? No, but the stocks got decimated because they were bid up too high. We might be at a similar point now and see bad stock returns but viable corporate credit. Although the scenario you're imagining seems possible, it's important in any discussion of corporate bonds to point out that many Japanese companies did default on their debt and so were technically bankrupt. The reason you didn't see vast numbers of firms closing their doors was that banks held the majority of t...
by Karamatsu
Wed Oct 27, 2021 7:45 pm
Forum: Investing - Theory, News & General
Topic: Schwab ETF dividend reinvestment in Schwab account-how long?
Replies: 14
Views: 3544

Re: Schwab ETF dividend reinvestment in Schwab account-how long?

Comparing the cost of reinvested shares with the price action on the day from Yahoo, I can't really see any pattern to the prices I've received on reinvested dividends. Sometimes it looks like I got the closing price, other times it was more mid-day. Maybe they randomize it so that nobody can front-run the reinvestment process? I find that the Schwab people are usually very good about answering questions, so it might be interesting to ask them. Anyway it works like a charm. You can turn reinvestment on and off any time by going to the Positions screen. There will be a column that says whether a given issues is reinvested or not ("yes" or "no"). If you click on that you can choose to change the setting for that stock. Wha...
by Karamatsu
Wed Oct 27, 2021 7:28 pm
Forum: Investing - Theory, News & General
Topic: A Long-Term Experiment with PFIC Stocks
Replies: 7
Views: 1368

Re: A Long-Term Experiment with PFIC Stocks

Oddly I was looking at that very thing, the "net operating loss" question, last night. My bedtime reading! But it all gets very murky because of the language (do human beings have "operating losses?") and references to the tax code, but it's good to keep in mind as a possibility should such a thing happen. If you do speak to a competent tax accountant and find out anything, please let me know! Information about handling Form 8621 is very difficult to come by.

Meanwhile I gather from your screen name that you have your eye on New Zealand? Beautiful country, but I have no idea what the tax system is like! You'd think the US would give such firm allies a break on some of this tax stuff, but I guess not.
by Karamatsu
Tue Oct 26, 2021 7:53 pm
Forum: Investing - Theory, News & General
Topic: A Long-Term Experiment with PFIC Stocks
Replies: 7
Views: 1368

Re: A Long-Term Experiment with PFIC Stocks

Yes, in the absence of deductions or credits (specifically foreign tax credits) to reduce the burden, the PFIC mark-to-market phantom income would be taxed by the US as ordinary income, and you'd start moving toward the more unpleasant situation, though never really reaching that upper bound because at least some of your deduction would, by rights, be allocated pro-rata to the PFIC income. I just included the worst-case scenario as an example of how bad things could get in the limit. But there are corner cases. As you saw in the numbers, exchange-rate fluctuations can take a real bite. Depending on individual circumstances, big fluctuations in the market price of the stock could either be a wash or a disaster. Say a stock price starts the y...
by Karamatsu
Tue Oct 26, 2021 2:12 am
Forum: Investing - Theory, News & General
Topic: A Long-Term Experiment with PFIC Stocks
Replies: 7
Views: 1368

Re: A Long-Term Experiment with PFIC Stocks

Yes, I certainly have to agree about the IRS, even though I tried not to be too harsh because I know they're incredibly overworked and, at the end of the day, are just implementing rules that other bright people in Congress came up with.

But government gripes aside, I was surprised to find that it really wasn't as bad as I'd feared, and the NISA result plus (now) the availability of a fund to replace individual stocks seems to offer a useful path forward.
by Karamatsu
Tue Oct 26, 2021 1:58 am
Forum: Investing - Theory, News & General
Topic: A Long-Term Experiment with PFIC Stocks
Replies: 7
Views: 1368

A Long-Term Experiment with PFIC Stocks

TL;DR: Looking at the results of an 11-year experiment it seems that, depending on circumstances, PFIC taxation isn’t necessarily the horror it’s usually made out to be. But you have to be careful because details make all the difference. Expatriate US citizens face a blatantly hostile taxation regime when attempting to invest for the future. Sometimes host countries impose egregious rules of their own, but the worst source of abuse usually comes from the US, through discriminatory regulations apparently derived from the idea that the only reason an American would live overseas is to avoid taxes. Those who’ve been on the receiving end of this know what I mean, so no need to revisit it here. Long story short, over the past 11 years I’ve been ...
by Karamatsu
Mon Oct 25, 2021 7:32 am
Forum: Personal Investments
Topic: TIPS
Replies: 4
Views: 907

Re: TIPS

what percentage of fixed are you allocating to TIPS ETF/Funds?
Just as others have said (shout out to dbr... it's been long time!), my aim for fixed-income is to have half in intermediate treasuries (SCHR) and half in inflation-indexed government bonds. The latter is mostly SCHP but I've also been accumulating I-Bonds over the years. I don't know what's going to happen with rates and inflation, so this mix seems like a good "all weather" approach.
by Karamatsu
Mon Oct 25, 2021 7:18 am
Forum: Investing - Theory, News & General
Topic: The FED tapering in November to finish by 1Q2022. Will you change your 3-Fund Strategy?
Replies: 46
Views: 6167

Re: The FED tapering in November to finish by 1Q2021. Will you change your 3-Fund Strategy?

What are you planning to do?
I won't be changing anything in response to the tapering-off. In fact I'm looking forward to bond yields getting back to normal. I imagine the three-fund portfolio has been well-tested through inflationary periods, but if you're concerned, you might consider at least allocating some of that five-year cash reserve to I-Bonds.
by Karamatsu
Tue Oct 19, 2021 7:55 pm
Forum: Investing - Theory, News & General
Topic: Past returns vs future returns
Replies: 36
Views: 4883

Re: Past returns vs future returns

The blind DCA does have a huge attraction that I won't ever kick myself in the future for not being clairvoyant. Downside is to have to live with poor or negative returns that all other indexers are also getting (and most active funds, I bet). Oh, sorry. I misunderstood what you were asking. If the question is one of entering the market, then the desire to DCA just means that your asset allocation is too aggressive. Since the AA should be designed to produce acceptable results no matter what the markets do (within some expected distribution, of course -- there are always "unknown unknowns"), then as long as today's market conditions fall within that distribution, you should be confident about investing all of your capital right n...
by Karamatsu
Mon Oct 18, 2021 10:30 pm
Forum: Investing - Theory, News & General
Topic: Past returns vs future returns
Replies: 36
Views: 4883

Re: Past returns vs future returns

I share your uncertainty about the future but alas have no real insights other than rebalancing because (of course) we have no way of knowing what's going to happen or how the various forces will interact. Generally I agree with the "What do you know that the market doesn't?" sentiment, but of course it is true that, for example, someone in their 20's can afford to just let things ride while someone in their 70's cannot. I suppose people who can't afford to let the market do its thing might want to consider hedging, either directly or via one of the leveraged ETF/CEF offerings, but I have no recommendations there. There is the larger question, though, of X, Y, and (100-(X+Y)). If we think the historical record is reliable, it's ea...