Bogleheads.org

If you want to make a super-memorable talk that will light up the internet, then here's a topic: "Why I ditched tilting to small-cap and value equities and now use the 3-fund Boglehead portfolio" Maybe one day everyone will take the small/value tilt advice, and then that portfolio will become the new total stock market, and the debate will thus end :sharebeer In all seriousness, I would love to hear a talk that balances things you took from Mr. Bogle that influenced you in a positive way juxtaposed against a short list of things where you disagree and think Bogleheads could improve their thought process. That will naturally lend itself to small/value and international diversification based on your (excellent!) podcast content, Pa...

yes, whenever i see posts like this i always think about addition by subtraction. or Leidy Klotz's book "Subtraction" or Eric Balchunus' keynote address at Bogleheads conference 2022 in which he talked about Jack Bogle (and the Ramone's) who gave us so much more by stripping away everything that was extraneous: https://www.youtube.com/watch?v=-WWLfZlcn-o&embeds_euri=https%3A%2F%2Fboglecenter.net%2F&source_ve_path=MjM4NTE&feature=emb_title the one thing i continually see is how complicated people like to make things assuming complexity is better than simplicity. "Simplicity is the ultimate sophistication" -- Leonardo DaVinci Agreed. There's a never-ending desire to try to outsmart the system. And one thing I ...

I see the website www.maxmyinterest.com which works with 8 online saving accounts. It give the high interest rate at 5.05% at Customers Bank. It will rotate the money to the highest online interest rate every month. Has anyone use it? Is it good website to use? Thank you. I'll tell you my approach, and it will be my approach forever. There is no interest rate in the world that could get me to leave the mainstream financial institutions for a low-awareness, less-trusted website promising high returns. Why? Either (1) the difference in rates is small so not worth it relative to the difference in potential risk/headache or (2) the difference in rates is high and therefore fraud risk increases dramatically. This example falls under Rule (1) - ...

You’re right in isolation, but I think the previous user is saying compared to the primary alternative of just selling the stock and paying the taxes to buy the car, this is a risk of the covered call approach. It would also be a risk of the loan approach, too. Their response is loaded because this thread is supposed to be about writing covered calls, but they're responding to the idea of holding VTI until a lumpy purchase. Personally I'd set aside cash for planned lumpy purchases. Most definitely - setting aside cash and pre-planning big purchases is the optimal default. Life doesn't need to be this complicated, bending over to pick up every dollar. Holding volatile long duration assets like VTI for short-term purchases is usually a poor ...

Marseille07 wrote: ↑Tue Mar 28, 2023 7:47 pm

evancox10 wrote: ↑Tue Mar 28, 2023 2:38 pm I'm sorry, but the downside risk is right there in your post: what if VTI goes down but doesn't come back (edit: within the relevant time frame)?

But that's not the downside risk of writing covered calls. If you write covered calls and VTI goes down, you pocket the premium. And that's inherently better than not writing covered calls.

You’re right in isolation, but I think the previous user is saying compared to the primary alternative of just selling the stock and paying the taxes to buy the car, this is a risk of the covered call approach. It would also be a risk of the loan approach, too.

If you're going to sell the shares to pay for the car anyway, I don't see a downside on this as long as your strike price is above your cost basis. You are already taking the downside risk by having the shares in the first place. If it's VTI, a move south I'd bet will eventually come back, a bet I might not be willing to make on an individual company ticker; holding onto those shares and using the premium income instead seems logical. When you say “I don’t see a downside” what do you mean? It seems like there’s an obvious scenario where just paying cash and eating the tax bill could come out ahead of selling covered calls (specifically if the market faces further lengthy declines). And there’s another scenario where just taking a loan and ...

As for making an extra $1,500 a month, it may not be that easy. $1500 a month for someone who retired could be maybe 16 hours of work a week or 2 days a week of work. There are 4.3 weeks in a month. Doing the math, one would have to make (1500 / (16 * 4.3) = $21.8/hr.) I don't think it is that easy to find a job making $21.8/hr unless it is in their field of work and not all types of careers allow for part time employment. It is definitely easier for some than others, but I look at those same figures you calculated and don’t think it should be especially hard to do for a lot of people. Depending on your skills and interests, there could be a list hundreds of jobs long with $20/hr potential (or more) and less-than-full-time commitment. But ...

So if you spend 54K/year in retirement at 23x, that is 1.24M. For a 25 year payout from 46 -> 70, tipsladder.com says you can buy 54K of inflation adjusted income for 1.133M. So at age 70, you will have about $110K left. Assuming you are able to obtain a reverse mortgage and purchase an SPIA as you describe, it looks like it might work. But it is cutting it awfully close. No way I would take that chance myself, but I have a spouse and kids so my risk tolerance is different than yours. If you are willing to live that close to the edge, go for it! Wrench Very good framing, and what that method of calculation will really underscore is value of not bringing income to $0. If instead of thinking about age 46-70 as $0 income years, the OP were ab...

junior wrote: ↑Fri Mar 24, 2023 1:39 pm So you are projecting social security will pay the same 30 years from now as it would today?

Also I don't understand how you can buy a annuity with a reverse mortgage. The reverse mortgage gives a stream of income not a lump sum of money to buy an annuity.

Lump sum distribution is typically one of the options available on a reverse mortgage, in which case I’m not aware of any restriction against buying an annuity with the proceeds. Not sure if that’s actually a favorable option in OPs case versus just taking the actual monthly payout option on the reverse mortgage, though.

My understanding is usually the short duration bond are consider safer than longer duration bond (for high quality bond, muni, treasury etc). Does this axiom still apply when yield curve is inverted? If my goal for my bond allocation is principal safety. Is short term treasury/muni a good options? "Safer" is of course always a relative term based on the investor's goals. So regardless of the shape of the yield curve, a short, intermediate, or long duration fixed income option could be "safer" for different investors. In general, long-term bonds are heavy on a risk called "price risk" which manifests in the risk of big losses of capital in the short-term if interest rates rise. Conversely, short-term bonds are ...

I always love when I meet up with someone from Europe and they just are in disbelief about how insane the pervasiveness of tipping culture is here. It’s like they walked into something that boggles their mind. And I have to say I agree with them - needless complexity because businesses realized they could use behavioral psychology to extract more cash at the till.

I mostly add tips now for only complex orders, special requests, or places I frequent where I like the staff.

What if crises (plural) disproportionately affect non-US then? You aren't preparing for one crisis only, and the whole point has been that if you spread your bet then you will face multiple smaller crises that, on aggregate, amount to the same damage as one concentrated bet. At least this should be your default expectation; believing US will get hit harder means you are making certain assumptions in the future. You have seemingly talked yourself into a fringe and bizarre view of diversification here. Extract yourself from the US/nonUS debate for a moment. Imagine someone tells you they only invest in companies that begin with the letter "A" because by doing so, they protect themselves from the many disasters that may befall compa...

A venture capitalist who is investing time and effort looking for promising firms is providing a service to investors for which they get to charge fees. They can also seek to earn a return by investing their own capital. Whether through fees or through investing their own capital, the risk they take necessarily involves idiosyncratic risk that they can't diversify away. So they have to demand excess returns from the firms they invest in to cover that risk. But we should expect that this excess return will be absorbed by the venture capitalist's fees and profits. None of it needs to flow through to retail investors who are not doing any of the work and can remain broadly diversified in the overall market. Venture capital is just an asset cl...

Apathizer wrote: ↑Sun Mar 19, 2023 4:56 pm But no matter how favorable to investors it might be, there might be some unpredictable event that disproportionately affects the US more than all or most other countries. This might seem unlikely, and it might, but reality is mostly random. I doubt there's a major risk investing only in the US, but it's still riskier than investing globally.

That's why I've taken path B But I do understand people who don't worry about it much. I don't agree and wouldn't recommend it, but I understand it.

Index funds with hundreds (or more) stocks tend to average all that out. I don't think they really do. For a while, VTI has yielded under 2%. US companies aren't paying out a large share of their earnings as dividends. So being too laser-focus on dividends while ignoring all other forms of corporate earnings is too myopic IMO. A 3.25% withdrawal or so is considered virtually perpetual, meaning the principal after 30 years would be expected to be maintained in all historical cases. Dividends are FAR below that historical perpetual rate. And it makes sense - dividends aren't linked to shareholder retirement planning. They are decided upon for a multitide of unrelated reasons, and therefore not the best available yardstick. Again, no issue wi...

This would be true if ... Thanks for the follow up - appreciate the detailed thoughts. I'm with you on the put option example and the diversification across a large pool of companies is what I was referencing in my last paragraph of the initial comment. But there's still just something about it I'm having trouble shaking from my head. Another example might be venture capital, investing in some of the smallest operations out there right now. With the skewed return profile they have - despite investing in potentially hundreds of companies to diversify idiosyncratic risk - I presume they still seek a return on capital in excess of what the S&P500 is expected to return. And wouldn't the reason for that, at least in part, be the size of the...

It could literally be almost anything or things anywhere, hence global diversification makes sense. Not sure how broadly my generalization below holds true, but one thing I'm seeing is a couple different starting points that are actually both understandable. From earlier thread comments, it is probably obvious where I fall as a 40% non-US investor. Starting Point A: The US economy is giant, diversified, heavily influences other economies, and has a system in place that promotes profitable growth for the investor class. Therefore, I do not need to add international stocks to have a strong investment plan for my retirement. Starting Point B: The global stock market is the true investable market portfolio. Therefore, any significant deviation...

A dividend is a withdrawal from a company's NAV. I believe, even if imperfect, the dividend payers are better at determining what is safe than I am. Seems like your approach works well for you, which is the most important thing. Especially because withdrawing only dividends is a reasonably conversative strategy with current yields on a balanced portfolio. One big reason it has no appeal to me is that corporate directors selecting dividend payouts have different motivations completely unrelated to an individual's retirement income needs or strategy. Some keep them to zero or very low because they believe in their own capital projects. Some keep them artificially low because they prize consistency of dividend payout over maximizing dividend ...

The idea that small firms for example should pay a premium does not come from basic economics. If it is empirically true, then that would be a puzzle for which someone has to come up with a more narrow and specific theoretical justification. I assume that, on average, smaller companies have higher cost of capital than their well-entrenched industry leading counterparts. Like McDonalds probably gets better rates on it's corporate bonds than Jim Bob's Regional Burger Chain. So wouldn't it follow that in order to make an equity investment in Jim Bob's Regional Burger Chain, you would demand a higher expected return for similar reasons? Otherwise you could invest in the safer McDonalds operation. Whether or not that higher expected return prov...

In an earlier job, we used to often have people come in who were supposed "innovation experts" and what they would generally do is look backward at historical successful products (like the iPhone) and then proceed to explain all the factors that led to its success, with the stateed or unstated implication that it should have been obviously knowable ahead of time because factors X, Y, and Z of a successful innovation were in place. Then if I asked them to name some little known products today that will have this level of success in 5 years, you get silence or awkward answers that can't be verified. I feel similarly about these types of explorations of financial history. It's not that there aren't valuable lessons to be learned that...

College choice usually comes out to be the biggest driver of overall expenses and affordability. What factors should parents weigh when considering the potential ROI of less expensive in-state universities vs. more expensive private universities? This will likely influence a lot of downstream college saving decisions especially amount of funding required.

2. You're mixing up cause and outcome. Yes, tech was a big driver; but it wasn't like I proactively picked tech in 2009. It just so happened that tech came out very performant. 3. Again, mixing up cause and outcome. High valuations occur *after* the investors decide to pour money into the market, relative to the company earnings, and vice versa. So then, is 10X European valuation really cheap? We don't know, because if investors decided that the European market isn't where they want to put their $, then valuations won't go higher. US being 20X is irrelevant to the European valuations of 10X. Neither case is mixing up cause and outcome, and I'm feeling like we're arguing past each other to an extent that agreement isn't possible. If you til...

I'm not sure exactly what to make of this, but find it interesting. After the 2022 elections, there were posts across the various Boglehead and personal finance boards where people were extremely nervous about treasury bills/bonds and asking if bank accounts were a safer place for their holdings in the event of a debt ceiling fiasco. Now that we have issues a mere three months later with the banking sector, I'm seeing on those exact same forums a fair number of the exact opposite question: are treasury bills/bonds safer than bank holdings? I sometimes think paying too much attention can be to the detriment of investors. Someone who 1) made appropriate use of FDIC limits and 2) invested their additional fixed income holdings in US treasuries...

As far as your uncompelling reasons: 1. I don't think believing in US superiority means you know the future. Say you bet on the Kansas City Chiefs before the Super Bowl doesn't mean you knew the winners ahead of time. 2. Past performance is important. And being US-only is not a bet on sectors so I'm not sure why you're discussing them in the same context. 3. Valuations might play a role but they're difficult to evaluate accurately. I only look at them when they're very high or very low (which is of course subjective since 45X is high for US equities but Nikkei has hit 80X). As usual with these debates, they will end with agreement to disagree and each invest in our own way, as it should be. But a few responses to continue the discussion. 1...

Random Walker wrote: ↑Thu Mar 16, 2023 11:30 am What if John Bogle had been born in Japan?

Dave

I'm guessing investors would still be paying much higher fees since we wouldn't have Vanguard!!

Of course there's also the "US is better than everyone else" argument but I find that very uncompelling and how would it not be the very definition of home country bias? Home country bias is different than thinking US is better than everyone else. A Chinese investor might think US is better than everyone else. A US investor may think Japan is better than everyone else. I'd be curious why you find it very uncompelling, though. I think that's being a little pedantic. Of course my unstated assumption there is that the vast majority of Bogleheads making the claim of US superiority are US-based individuals. I don't think we need to qualify every comment with every possible scenario. Yes, of course, the China-based individual is displa...

The funny part of the entire "pile on to the one dissenting opinion" of this thread is I didn't even disagree with his premise (check my sig and my post) it's 2023 International isn't even a continuous topic, we all know international is a good way to diversify. Specifics on EM is another story. It pretty much always boils down to a group of people (the satisficers) for whom an S&P500/TSM fund is "good enough for me" vs. the optimizers who think there's enough value in the diversification to go through the small effort to add it and deal with the tracking error when it occurs. Of course there's also the "US is better than everyone else" argument but I find that very uncompelling and how would it not be the...

brad.clarkston wrote: ↑Thu Mar 16, 2023 8:39 am That was not a personal attack, overzealous moderation possibly, but ether way it was a my personal opinion which seems not to be allowed anymore. Your more than welcome to have any opinion you want on that video just do not expect everyone to share it.

I’ve been on the other side of this too and understand what you’re saying - your intention wasn’t to attack him. Since no one can know your intentions on an online forum, it needs to be assumed by moderators that a comment totally unrelated to the video content of international diversification that also is negative in nature about the person making the video is a personal attack. I’m sure it didn’t feel good for Ben to read that, even though he responded gracefully.

Even if you believe the US has some particular set of advantages that give it more economic growth potential, that only gets you halfway there. Stock performance is also based on current prices. So the US has to perform better than international not by some absolute production measure but by a relative measure to its current valuation in order to outperform.

This is also true of individual stocks. Apple could outsell a smaller phone company by 10x in terms of phones and still have worse stock performance than the smaller company if the market expected Apple to sell 20x more phones.

Ed 2 wrote: ↑Wed Mar 15, 2023 6:01 pm Reality will be that if you are a truly long term investor that you just ignore the noise and keep investing . It is up to you how to invest and what to believe in. But what do I know , right?

A couple of immortal legends nicely pulled together in one video. While one is no longer here to comment on any particular situation, I feel secure in knowing his remarks would be unchanged.

https://www.youtube.com/watch?v=wWmPDmBTBDM

The two concepts that have always resonated the most with me, both referenced in the video, are that I can’t know ahead of time which geographic entities will perform best and the past isn’t a good yardstick for future relative performance.

I consider my non-US diversification a simple extension of “buying the haystack” and can’t think of a logical reason why other countries aren’t in the haystack. It’s one thing to say you think it’s not a major deal - that may well be true when ranking the important things in investing. But personal indifference isn’t really a great argument that the benefit isn’t there.

Yes I'm not sure why some focus so heavily on YouTube as a medium.... Is his YouTube channel monetized? I checked it out. There are ads, and he has more than enough subscribers to monetize. "Pat, I'd like to solve the puzzle." So nothing monetized is credible? Parts of this thread are giving me the same vibes that Larry Swedroe and Wade Pfau receive (or received in Larry’s case, since it became unbearable). In this thread one personal attack had to be removed, another poster referred to Ben as “biased”, and now there’s this somewhat backhanded comment about monetization of YouTube driving his work. Why shouldn’t he earn a little money for it? It’s probably a small amount relative to his successful industry career. Really frustrat...

Ben Felix wrote: ↑Wed Mar 15, 2023 4:29 pm

brad.clarkston wrote: ↑Wed Mar 15, 2023 3:28 pm [Inappropriate comment remoived. Moderator Pops1860]

He's right but didn't make a compelling anything.

I don't really like to hear my voice, but thanks for the feedback otherwise.

Ben, you’re the man. Best personal finance content available and the most humble personality. You can sense the passion and intellectual curiosity as a reader and listener. Love how you’ve branched out the content to related areas as well.

The CFA article correctly identifies the two components of interest rate risk as price risk and reinvestment risk , and I think it's more clear to stick to this usage than the colloquial (but potentially misleading) habit of referring to "price risk" as "interest rate risk" Thread is a bit old, but curious on your POV related to price vs. reinvestment risk ... I've been putting into practice your advocated fixed income strategy of neutralizing price risk and reinvestment risk by matching duration to investment horizon. However, I can't help but notice that many respected Boglehead thought leaders like Bernstein, Swedroe, etc. have a seemingly strong bias against price risk and toward loading up on reinvestment risk (i.e...

nisiprius wrote: ↑Sun Mar 12, 2023 6:27 pm

9-5 Suited wrote: ↑Sun Mar 12, 2023 6:26 pm...the toxic fake asset class that shall not be named on this forum...

It's been pointed out that what is prohibited is not naming the asset class, but discussions of investment strategies based on them. See section 4c:

Thanks for the clarification. It is nicely grouped together in that list.

After Silvergate went down, this was one of the last remaining banks that provided USD liquidity in the ecosystem of the toxic fake asset class that shall not be named on this forum. That is a fundamentally flawed business model in so many ways, so I’m glad to see decisive action. I don’t have any reason to believe this means the actions will go any further than this for the moment.

Should investors consider volatility to be the primary measure of risk when constructing financial portfolios?

mrmass wrote: ↑Thu Mar 02, 2023 1:33 pm To me, if your W2 shows 1M or more.

It's not really up for much debate that this answer is wrong. Millionare has a commonly accepted definition related to net worth, not income. If you have $5M in a Vanguard account (and less than $4M of debt) but never earned more than $250K per year, you're a millionaire. If you disagree, you're creating your own definition of a word that is used by no one else.

Is this retirement number calculation 1 person $1.1M correct? Retirement Number Calculation: 1 person. 45,000 annual expenses in retirement. 8,333 medical 250,000 / 30 years = 8,333. 8,333 long term care 250,000 / 30 years = 8,333. = 61,666. 74,000 buffer 20% 61,666 * 1.2 = 73,999. - 33,500 social security. = 40,500. 1.1M SWR 4% 40,500 / .04 = 1,012,500. Yes, in broad strokes you did it correctly. Estimate all-in expenses, subtract social security and other outside income sources, and then ensure the residual annual expense can be met by your desired rate of withdrawal (4% in your example). A few thoughts: - Rather than use an arbitrary buffer of 20%, another way to think of it is that you have a balance of $28,166 to cover after Social Se...

You will need to pay taxes on the frequent-flyer miles bonus from bank account. Citi assigns a value for each mile for what it's worth last year. It is tax evasion if you do not report the value of those frequent miles. What is your basis for these unequivocal assertions ? The responses from this thread is restrained from what it could be. That's absurd. I related an experience and asked a simple question. All this hostility, and essentially accusing me of the crime of tax evasion, is uncalled for. I believe in paying my taxes. I think you came across differently than you intended because of your description of "infuriating" phone calls and "demanding" to talk to a supervisor about a situation where the community is inf...

aristotelian wrote: ↑Thu Feb 02, 2023 2:41 pm -Despite high inflation and TIPS offering "inflation protection," TIPS went down -12% (-13.5% max drawdown) due to devaluation from rising interest rates, compared to -15% annual and 19.7% max drawdown for 10Y Treasury.

This isn’t exactly an oddity, but it did provide a learning opportunity for people on how TIPS work in a practical sense. They protect against inflation over the life of the bond (held to maturity), but are subject short-term fluctuation due to real interest rate changes. The short term performance is slightly better though, resulting I assume from the high inflation adjustments that nominal bonds of similar duration don’t benefit from.

My wife and I previously lived in Batavia, Illinois and moved to Ohio for career opportunities. We are now retired and we would be happier living in Batavia or one of it's sister communities of Geneva or St. Charles. Moving there would also get us closer to our grandchildren who live in the Madison, Wisconsin area. Another plus is that currently Illinois does not tax Social Security income or withdrawals from 401Ks or IRAs which would result in some material savings. Our Ohio community has very high property taxes and they are also high in Illinois so that would likely be a wash. Our hesitation is that we keep reading that Illinois is nearly bankrupt with a massive problem with underfunded pension obligations and we are not sure how that m...

They’ve got a great low cost fund lineup for factor investors. I still use IVLU because it’s close enough and not worth switching to me. But I shifted all my international SCV to AVDV at what I found to be a very reasonable 0.36% ER. It was previously hard to find actual ISCV funds that were low cost, also. The value funds cost a lot and the small cheap funds had more of a blend exposure than value.

That's more like shifting your savings to different vehicles rather than reducing savings, so it seems fine to me. Perhaps just a few general notes of caution based on your comments, but I think 'CoastFIRE' style plans can be a good balance of living for the now while being responsible for the future. 1. Be careful not to use your current expenses in today's dollars and a nominal future portfolio to create the 25x projection. For example if you spend $100,000 per year right now, and you project yourself to have $2.5M two decades from now, that would be a major error to consider that 25x spending. So make sure your future projections for returns and asset values are in *real* dollars, or conversely inflate your spending by an assumed rate of...

Marseille07 wrote: ↑Tue Jan 24, 2023 5:30 pm This is what other posters and I discussed somewhere ...

Nice! Interesting finding (and I have a global portfolio, so was just the messenger on his comments there). I've also been in the camp of not changing any of my planning or assumptions based on this paper, for similar reasons to what you and Karsten shared.

99! Amazing! Happy birthday Taylor, and thank you.

Marseille07 wrote: ↑Tue Jan 24, 2023 5:13 pm Well, I think the SWR could actually be higher (at least on a historical data basis) if you include some amount of ex-US because when we say "3.8% SWR (0% failure)" we're talking about 1966~1995, and Japan's rise helped ex-US during that period.

True, assuming there isn't then another period where the global portfolio would have pushed the SWR below the lowest observed in a US-only portfolio backtest. No idea which way it would turn out.

But overall, I was most struck by how dismissive he was of the methodology and it's implications on withdrawal planning.

A few years from 40 and I'm FIRE but spouse still working (so I suppose a contested bit of terminology if I'm FIRE or a stay-at-home-husband, but we have the resources so I count it). We have ~30% in fixed income. About half of the fixed income is in long-term bonds to match our long-term time horizon (per guidance from Vineviz). Those long-term fixed income assets are primarily in TIPS via LTPZ, since inflation over decades can absolutely wreck long-term nominal bonds. We do have some long-term nominals, but not a lot. Over a long time horizon, a long-term TIPS bond is as close to the risk free rate as you can get. For the shorter-term fixed income, which often ends up being the primary source of any needed withdrawals above spouse's incom...

Carlos @triplmath: I’m curious as to why are you comfortable with only using US data for US investors? Do you think it’s realistic to assume US outperformance to persist this century? Karsten Jeske: It's not about outperformance. It's about lack of diversification. Is Karsten answering the question the way it was intended? Unless he argues lacking diversification results in a *higher* SWR... He linked to and referenced this older work from his website, where he argues that international diversification isn't very useful due to problematic correlation patterns during downturns. Is that a possible derailing comment on the Bogleheads forum? :twisted: https://earlyretirementnow.com/2017/08/23/how-useful-is-international-diversification/

Found Karsten Jeske / Big ERN's Twitter reaction to this topic buried in his Twitter replies - was glad to see he acknowledged it. Always interesting to see the perspectives of different respected voices intersecting. Exchange below: Carlos @triplmath: What are your thoughts on this paper? It calculates SWR of ~2.7% based on world data. I have an issue with the methodology but wanted to get your take. Karsten Jeske: Useless unless you believe that we will have a repeat of WW1 and WW2, wiping out an entire continent's economy and asset markets. What's your issue with the methodology? Carlos @triplmath: My issue is that, if I understand it correctly, they are randomly selecting a decade of returns from one country and sequencing these back-to...