Search found 501 matches

by ThrustVectoring
Tue Oct 23, 2018 2:26 pm
Forum: Investing - Theory, News & General
Topic: Do you take advantage of "volatility" in your investing strategy?
Replies: 11
Views: 928

Re: Do you take advantage of "volatility" in your investing strategy?

I once thought rebalancing was an approach that gave one a leg up in the use of market volatility. Then I was educated that holding without rebalancing actually produced better long-term gains. I do not rebalance now, or at least it is not in my plans to do so. I do consider tax rates to be volatil...
by ThrustVectoring
Tue Oct 23, 2018 12:54 pm
Forum: Investing - Theory, News & General
Topic: "Investing versus debt pay-off?"
Replies: 31
Views: 1607

Re: "Investing versus debt pay-off?"

The duration of the debt is highly important for this. Fixed-rate debt is equivalent to shorting a bond and buying a call option that costs the par value to exercise to close out the position. The cost of the call option is the spread between the treasury rate and the interest rate you're paying. Sh...
by ThrustVectoring
Tue Oct 23, 2018 12:42 pm
Forum: Investing - Theory, News & General
Topic: What's Your Fixed Income Strategy?
Replies: 40
Views: 2604

Re: What's Your Fixed Income Strategy?

Years to retirement or already in retirement?(how many years in?) - near start of accumulation phase, <10 years of annual expenses saved so not even thinking about putting up a retirement date. Fixed income allocation as part of total allocation (Equity/Fixed Income) - 100% equity plus cash emergen...
by ThrustVectoring
Mon Oct 22, 2018 1:59 pm
Forum: Investing - Theory, News & General
Topic: Understanding Rebalancing, Annual vs on New Cash Inputs
Replies: 3
Views: 357

Re: Understanding Rebalancing, Annual vs on New Cash Inputs

Rebalancing with regular deposits seems like a logical thing to do. You are naturally buying the most depressed assets. Eventually the portfolio will become large enough that new cash probably won’t keep up with rebalancing needs and you will have to do a combination of both new money and annual ad...
by ThrustVectoring
Fri Oct 19, 2018 12:05 pm
Forum: Investing - Theory, News & General
Topic: Thoughts on consumer staples funds?
Replies: 9
Views: 551

Re: Thoughts on consumer staples funds?

If you want to reduce risk and expected return, why not just own less stocks? Or if you really insist on stocks while still wanting to turn some knobs for better or worse, some kind of defensive / low beta / low volatility-oriented fund rather than a specific sector? A smaller stock allocation is d...
by ThrustVectoring
Thu Oct 18, 2018 12:49 pm
Forum: Investing - Theory, News & General
Topic: 8-week t-bill debuts tomorrow 10/16
Replies: 3
Views: 1037

Re: 8-week t-bill debuts tomorrow 10/16

That's a nice small bonus to folks putting cash into a short-term treasury bill ladder. You can pick up a tiny bit more yield and convenience when turning a pile of cash into staggered 3mo or 6mo bills - for buying the 3mo bill in two months, you can pick up a single 2mo bill instead of chaining tog...
by ThrustVectoring
Thu Oct 11, 2018 11:59 am
Forum: Investing - Theory, News & General
Topic: Diversifying with a zero-correlation, zero-return volatile asset
Replies: 66
Views: 3552

Re: Diversifying with a zero-correlation, zero-return volatile asset

The correct allocation to an uncorrelated volatile asset with a return at or below the risk-free rate is zero. If your measure of "diversification" says that adding noise to a return stream helps you, your measurement is wrong . I have a good enough understanding to explain the signal and informatio...
by ThrustVectoring
Tue Oct 09, 2018 4:35 pm
Forum: Investing - Theory, News & General
Topic: Short Term Bond yield over 3%
Replies: 74
Views: 10334

Re: Short Term Bond yield over 3%

OP, Please explain to me why folks are paying off the fixed-rate low-interest mortgage when the interest rate is going up. At the rate of interest rate increases, cash in the money market fund may pay a higher interest rate than their mortgages in the future. KlangFool People don't really realize t...
by ThrustVectoring
Mon Oct 08, 2018 6:36 pm
Forum: Investing - Theory, News & General
Topic: Life insurance theory
Replies: 11
Views: 1021

Re: Life insurance theory

What is the connection between cash value life insurance and farmland? Two reasons they could be connected are to pay the estate taxes and to buy out the other heirs. Pretty much the same issues as business succession planning. This wouldn't apply in all cases but could in some. For inheritance pla...
by ThrustVectoring
Mon Oct 08, 2018 12:57 pm
Forum: Investing - Theory, News & General
Topic: Inflation and stocks and bonds
Replies: 14
Views: 746

Re: Inflation and stocks and bonds

At a fundamental level, aggregate prices are simply the ratio between "how much stuff we make" and "how much money is trying to buy the stuff we make". So there's two sources of inflation: the central bank making too much money, or the real economy making not enough stuff. If it's central bank misde...
by ThrustVectoring
Mon Oct 08, 2018 12:18 pm
Forum: Investing - Theory, News & General
Topic: Market decline in 2019 ?
Replies: 73
Views: 6490

Re: Market decline in 2019 ?

I put 100% of the money that I can afford to never see again into equities, and I sleep well at night. A market decline in 2019 just means that I get to purchase stocks cheaper :twisted:
by ThrustVectoring
Fri Oct 05, 2018 5:39 pm
Forum: Investing - Theory, News & General
Topic: Allan Roth doesn't like single premium annuities
Replies: 198
Views: 10497

Re: Alan Roth doesn't like single premium annuities

Single premium annuities have one very good feature for retirees: 100% of the funds get spent towards retirement, and nothing gets left behind for heirs. This means that it inherently requires a smaller cash outlay to fund living expenses. SPIAs aren't the ideal mechanism over the long run, though, ...
by ThrustVectoring
Fri Oct 05, 2018 11:48 am
Forum: Investing - Theory, News & General
Topic: bond index and rising interest rates
Replies: 17
Views: 2043

Re: bond index and rising interest rates

It depends on the duration (that is, price sensitivity to interest rate changes). And how long you hold the bond fund. If you hold the bond fund longer than its duration, a rise in interest rate helps you. A 1% interest rate rise with a duration of 5 years will reduce the principal immediately by 5...
by ThrustVectoring
Thu Oct 04, 2018 5:48 pm
Forum: Investing - Theory, News & General
Topic: bond index and rising interest rates
Replies: 17
Views: 2043

Re: bond index and rising interest rates

It depends on the duration (that is, price sensitivity to interest rate changes). And how long you hold the bond fund. If you hold the bond fund longer than its duration, a rise in interest rate helps you. A 1% interest rate rise with a duration of 5 years will reduce the principal immediately by 5%...
by ThrustVectoring
Thu Oct 04, 2018 1:03 pm
Forum: Investing - Theory, News & General
Topic: Real Estate investing - leveraging with a "BULLET" loan
Replies: 17
Views: 1287

Re: Real Estate investing - leveraging with a "BULLET" loan

There's relatively little point being invested in bonds while taking out a mortgage for additional leverage. It's maybe useful if you get a thirty-year fixed rate mortgage like in the US and capture the option value. When interest rates fall you can refinance, and when interest rates rise you can ex...
by ThrustVectoring
Wed Oct 03, 2018 12:40 am
Forum: Investing - Theory, News & General
Topic: Why won't the US markets average 0-2% (or 10-20%) real returns for a few decades?
Replies: 20
Views: 2806

Re: Why won't the US markets average 0-2% (or 10-20%) real returns for a few decades?

That's true. Are you planning for negative outcomes to the tune of a CAGR of -30% over the next 40 years, and if not why not? The correct plan for equities doing that badly involves hoarding guns, ammunition, and canned food. Possibly also figuring out how to do DIY sustenance farming and buying ru...
by ThrustVectoring
Tue Oct 02, 2018 4:53 pm
Forum: Investing - Theory, News & General
Topic: Is an emergency fund just about market timing?
Replies: 103
Views: 5635

Re: Is an emergency fund just about market timing?

This strikes me as yet another symptom of a bull market. An E fund is for the fact that life is full of uncertainty, including personal, local, and national/global black swans. Yes, all the increase in "I'm all in on equities, having cash is stupid" posts are making me wonder if these are Joseph Ke...
by ThrustVectoring
Tue Oct 02, 2018 2:45 pm
Forum: Investing - Theory, News & General
Topic: Why won't the US markets average 0-2% (or 10-20%) real returns for a few decades?
Replies: 20
Views: 2806

Re: Why won't the US markets average 0-2% (or 10-20%) real returns for a few decades?

I'm not way too concerned about overall real growth of equity markets. I'm happy guaranteeing myself average returns, whatever they may be. If they're good, then great, I and my retirement cohort get to enjoy the fruits of a strong economy. If they're not so good, then we have to tighten our belts. ...
by ThrustVectoring
Tue Oct 02, 2018 12:12 pm
Forum: Investing - Theory, News & General
Topic: Is an emergency fund just about market timing?
Replies: 103
Views: 5635

Re: Is an emergency fund just about market timing?

I posted the following (other than I'm fixing a typo) in another thread 5-6 months ago. It still represents my view. After a certain point, it becomes less important to have a designated emergency fund than to have an emergency plan. In my case, I have some cash which I suppose works like an emerge...
by ThrustVectoring
Tue Oct 02, 2018 12:06 pm
Forum: Investing - Theory, News & General
Topic: Thoughts on investing for dividends? Website DRIP?
Replies: 7
Views: 782

Re: Thoughts on investing for dividends? Website DRIP?

Dividends don't matter, what matters it total return. Dividends and capital gains both contribute to total return, but capital gains is taxed later when you sell while dividends are taxed immediately as income. Overall, the psychological gains of your investments putting cash into your accounts isn'...
by ThrustVectoring
Sun Sep 30, 2018 4:18 am
Forum: Investing - Theory, News & General
Topic: “Worth-It to Break CD” APY: Help with calculation
Replies: 14
Views: 3456

Re: “Worth-It to Break CD” APY: Help with calculation

In super straightforward math terms, there's two basic factors: the amount of money you'd get back cashing now, and the net present value of receiving the full value of the CD at maturity. The NPV is simply a matter of time to maturity and discount rate. For discount rate, you should use whatever th...
by ThrustVectoring
Fri Sep 28, 2018 5:25 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing theory
Replies: 15
Views: 1440

Re: Rebalancing theory

IMHO the ideal rebalancing rule is something like what M1 Finance uses for its automatic balancing. That is, you use free cash flow entering the account to buy underweighted securities, and sell off overweighted securities first. So if your desired asset allocation is 60% VTI and 40% VXUS, and the r...
by ThrustVectoring
Fri Sep 28, 2018 3:22 pm
Forum: Investing - Help with Personal Investments
Topic: Warren Buffet Portfolio Critique
Replies: 56
Views: 4528

Re: Warren Buffet Portfolio Critique

I’ve posted here that a wealthy guy told me he advises “two years’ expenses in cash and the rest in the S&P 500”. It’s what he does, he says. Here’s that discussion: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=247287 It's a really solid strategy. Two years of cash buffer is plenty to figu...
by ThrustVectoring
Fri Sep 28, 2018 3:14 pm
Forum: Investing - Theory, News & General
Topic: What part of yield curve had largest decline in 08/09 crisis?
Replies: 4
Views: 626

Re: What part of yield curve had largest decline in 08/09 crisis?

Leverage isn't an issue, excessive leverage is. And it's really difficult in general to understand how much leverage is too much and manage risks intelligently. 100% stocks is definitely under the risk limits, so "don't use leverage on stocks" is a very reasonable risk mitigation strategy that Bogle...
by ThrustVectoring
Wed Sep 26, 2018 3:55 pm
Forum: Investing - Theory, News & General
Topic: Is high inflation a good thing while working?
Replies: 40
Views: 2706

Re: Is high inflation a good thing while working?

It depends on the cause of the inflation. Prices are, after all, the relationship between two relatively independent quantities: how much stuff society makes, and how much money there is to buy the stuff. So an increase in prices means some combination of a decrease in real GDP and an increase in no...
by ThrustVectoring
Wed Sep 26, 2018 3:49 pm
Forum: Investing - Theory, News & General
Topic: Equities as a hedge against inflation
Replies: 36
Views: 2495

Re: Equities as a hedge against inflation

I'd be interested in the distinction between stocks performance under moderate inflation (0-4%) vs. high inflation (>5%). My understanding is that stocks are a great inflation hedge when inflation is modest (when you don't care) and is not so good when you have high inflation (aka the 70's type of ...
by ThrustVectoring
Wed Sep 26, 2018 12:17 pm
Forum: Investing - Theory, News & General
Topic: Is high inflation a good thing while working?
Replies: 40
Views: 2706

Re: Is high inflation a good thing while working?

So, yes: by and large, common sense applies. Inflation is bad for creditors and good for debtors. It isn't automatically bad for everybody. Hyperinflation, true hyperinflation as in Venezuela, means the financial system is collapsing and that is bad for everyone. That's the big takeaway, IMHO. High...
by ThrustVectoring
Wed Sep 26, 2018 12:11 pm
Forum: Investing - Theory, News & General
Topic: Tail Risk Protection
Replies: 28
Views: 2951

Re: Tail Risk Protection

The Boglehead way of tail risk protection: Rick Ferri uses a lower % of more volatile equities (small cap value equity fund/ETF) and more bonds vs a higher % of less volatile equities (TSM) and less bonds (TBM). E.g. 40% SCV + 60% TBM vs 60% TSM + 40% TBM. That's the opposite of what I'd expect to ...
by ThrustVectoring
Wed Sep 26, 2018 12:05 pm
Forum: Investing - Theory, News & General
Topic: Social Security and Asset Allocation
Replies: 50
Views: 4957

Re: Social Security and Asset Allocation

Rather than trying to turn your Social Security Benefit into part of your bond allocation, I think that it is more useful to consider that the income you receive from SS will reduce the cash flow that your financial assets need to generate. After that you can determine the best asset allocation for...
by ThrustVectoring
Wed Sep 26, 2018 1:04 am
Forum: Investing - Help with Personal Investments
Topic: JP Morgan Structured Investments - What am I missing?
Replies: 20
Views: 1469

Re: JP Morgan Structured Investments - What am I missing?

But if you want more equity exposure and don't have a better way to get it, or the downside protection lets you sleep better at night, it could be a reasonable product. S&P 500 index call options are a better way to get it. Two-month out at-the-money call option (290 strike, 11/16 expiry) currently...
by ThrustVectoring
Wed Sep 26, 2018 12:41 am
Forum: Investing - Help with Personal Investments
Topic: SIL - 25x vs firecalc
Replies: 39
Views: 4170

Re: SIL - 25x vs firecalc

How's her health? And what would she get in social security if she delays it to later? If she's generally healthy, delaying SS is likely the best way she can invest her spare cash. And given her financial skills and habits, I suspect it'd be the best way to ensure she has money at an older age. The...
by ThrustVectoring
Tue Sep 25, 2018 5:54 pm
Forum: Investing - Theory, News & General
Topic: Hyperinflation and holding foreign stocks/bonds
Replies: 28
Views: 2062

Re: Hyperinflation and holding foreign stocks/bonds

OP, The only protection against hyperinflation is physical gold. There is no guarantee that foreign stocks/bonds may not be facing the same hyperinflation as the home country. KlangFool You may want to check with William Bernstein on that. See his book "Deep Risk", page 19. "Perversely, gold does b...
by ThrustVectoring
Tue Sep 25, 2018 5:38 pm
Forum: Investing - Help with Personal Investments
Topic: SIL - 25x vs firecalc
Replies: 39
Views: 4170

Re: SIL - 25x vs firecalc

How's her health? And what would she get in social security if she delays it to later? If she's generally healthy, delaying SS is likely the best way she can invest her spare cash. And given her financial skills and habits, I suspect it'd be the best way to ensure she has money at an older age. The ...
by ThrustVectoring
Tue Sep 25, 2018 5:26 pm
Forum: Investing - Help with Personal Investments
Topic: Should I sell or rent my house?
Replies: 22
Views: 1887

Re: Should I sell or rent my house?

The mortgage interest rate would make me want to rent it out, all else equal. It's really a question of how much risk you are comfortable taking on in the local real estate market, and whether or not you are personally comfortable being a landlord (or hiring someone to manage the property for you).
by ThrustVectoring
Tue Sep 25, 2018 5:18 pm
Forum: Investing - Theory, News & General
Topic: Other Portfolios that aren't 3 fund
Replies: 31
Views: 3331

Re: Other Portfolios that aren't 3 fund

My two fund portfolio: 60% VTI, 40% VXUS IMO owning bonds when you're further than 10 years away from retirement is basically pointless. You give up too much in returns. The difference in expected CAGR implies that over a longer timeframe, it's less and less likely that adding bonds will make you wi...
by ThrustVectoring
Tue Sep 25, 2018 5:13 pm
Forum: Investing - Theory, News & General
Topic: Hyperinflation and holding foreign stocks/bonds
Replies: 28
Views: 2062

Re: Hyperinflation and holding foreign stocks/bonds

The best hedge is to owe money*. * to be precise, long term money at fixed interest rates. 80% of mortgages in the UK were at a floating rate (it's now less than 50%, apparently) and interest rates tend to track inflation. Wouldn't shorting long-term treasury futures do the same thing? You'd lose t...
by ThrustVectoring
Mon Sep 24, 2018 5:18 am
Forum: Investing - Theory, News & General
Topic: Are unleveraged real estate returns more comparable to stock market returns or just a notch above inflation?
Replies: 70
Views: 3952

Re: Are unleveraged real estate returns more comparable to stock market returns or just a notch above inflation?

(Vancouver I have to invent entirely new narratives to explain those prices especially re say Seattle (similar city with much better job opportunities, but say 60% of the housing prices of Vancouver?). It comes down to Chinese monetary and fiscal policy, I think). Yeah, Chinese policy is absolutely...
by ThrustVectoring
Mon Sep 24, 2018 5:03 am
Forum: Investing - Theory, News & General
Topic: Learning How to Value Invest
Replies: 15
Views: 1481

Re: Learning How to Value Invest

When you say “value investing” do you mean stock-picking? This is what Buffet does. I don’t think the average intelligent investor learns to value invest as much as he does trick himself into believing he will do better as a successful value investor than he would as a total market investor. A bet ...
by ThrustVectoring
Sun Sep 23, 2018 1:58 am
Forum: Investing - Theory, News & General
Topic: Buying Put Options on the S&P 500
Replies: 22
Views: 2131

Re: Buying Put Options on the S&P 500

OP - Traders buy put options. Traders consider that insurance if the short term trade does not work out. Long term buy/hold investors usually don't buy put options. There is no need for a long term investor to do it - because a long term investor is never trying to time the market. A long term inve...
by ThrustVectoring
Fri Sep 21, 2018 4:06 pm
Forum: Investing - Theory, News & General
Topic: For those who use a 2 year cash(like) buffer, how do you know when to use it?
Replies: 67
Views: 5576

Re: For those who use a 2 year cash(like) buffer, how do you know when to use it?

During accumulation: cash buffers are used when the inevitable life stuff happens. So if there's a market correction and you become unemployed, instead of selling stocks at the bottom, you use the cash buffer. During decumulation: fixed income is used to preserve equity value at a level that support...
by ThrustVectoring
Thu Sep 20, 2018 2:59 pm
Forum: Investing - Theory, News & General
Topic: Equity allocation for Flagship clients?
Replies: 47
Views: 3957

Re: Equity allocation for Flagship clients?

I'm 80 stocks/20 bonds. This article suggests 100% stocks: https://www.nytimes.com/2016/02/13/your-money/how-much-of-your-nest-egg-to-put-into-stocks-all-of-it.html That's a great article, I particularly liked the "percentage chance of outperformance" which goes up over time (to roughly 95% at 20 y...
by ThrustVectoring
Thu Sep 20, 2018 2:10 pm
Forum: Investing - Theory, News & General
Topic: Are unleveraged real estate returns more comparable to stock market returns or just a notch above inflation?
Replies: 70
Views: 3952

Re: Are unleveraged real estate returns more comparable to stock market returns or just a notch above inflation?

I heard that the returns are roughly comparable to a mix of cash and long-term real bonds, and maybe a DIY premium (that is, "buying a job"). So the long-term returns aren't all that great. If you're good at using cash purchases to find and make good deals, there's significant opportunity to generat...
by ThrustVectoring
Thu Sep 20, 2018 2:43 am
Forum: Investing - Theory, News & General
Topic: Age in Bonds - Still Recommended?
Replies: 152
Views: 11788

Re: Age in Bonds - Still Recommended?

I guess I'm the only one on this forum who doesn't care about AA. I keep 10 years worth of annual expenses in bonds, CDs, money market, and savings, and the rest is in stock regardless of the %. TravelforFun That's roughly my plan too. Age based percentage is only really a thing because you can't g...
by ThrustVectoring
Wed Sep 19, 2018 3:15 pm
Forum: Investing - Theory, News & General
Topic: Why should bond duration = investment horizon?
Replies: 45
Views: 2576

Re: Why should bond duration = investment horizon?

... I happen to agree with you, but we are in the distinct minority here. I agree it's the minority, and I fully understand the reasoning. I disagree with the conclusion because it makes assumptions about the individual's financial circumstances each and every year for the next many years. Nobody l...
by ThrustVectoring
Wed Sep 19, 2018 2:50 pm
Forum: Investing - Theory, News & General
Topic: Are TIPS yields good yet?
Replies: 15
Views: 1515

Re: Are TIPS yields good yet?

Any positive real yield is nice, it means that TIPS does what it's supposed to - preserve purchasing power over the next 5-10 years risk-free. If you need to do anything else, you probably shouldn't be picking up TIPS.
by ThrustVectoring
Wed Sep 19, 2018 2:36 pm
Forum: Investing - Theory, News & General
Topic: Why should bond duration = investment horizon?
Replies: 45
Views: 2576

Re: Why should bond duration = investment horizon?

an investor who is still saving for a retirement that is still 25+ years away should certainly not be holding short-term bonds in their investment portfolio. That investor should probably not be holding any bonds. The higher CAGR of equity investments over long enough timeframes dwarfs the short-te...
by ThrustVectoring
Tue Sep 18, 2018 10:48 pm
Forum: Investing - Theory, News & General
Topic: Bonds. Why? (vs. cds)
Replies: 59
Views: 4658

Re: Bonds. Why? (vs. cds)

CD's are bonds and have the same interest rate risk as other bonds. They're basically bonds. If they're marketable they're far closer to bonds. Non-marketable bonds will generally have an early withdrawal penalty instead of "sell them on the secondary market" for getting cash out of them early. So ...
by ThrustVectoring
Tue Sep 18, 2018 10:47 pm
Forum: Investing - Theory, News & General
Topic: Other investment opportunities besides the stock market
Replies: 25
Views: 1991

Re: Other investment opportunities besides the stock market

Generally speaking, if someone offers you an investment opportunity, the best course of action is to politely decline. There's a lot of snakes out there, and it only takes one to lose a large chunk of money that you cannot afford to. If you want non-public investments, figure out what's involved and...
by ThrustVectoring
Tue Sep 18, 2018 9:27 pm
Forum: Investing - Theory, News & General
Topic: Equity allocation for Flagship clients?
Replies: 47
Views: 3957

Re: Equity allocation for Flagship clients?

Absolute asset levels don't matter particularly much, IMO. What matters is the assets-to-expenses ratio, and possibly your ability to cut spending in down markets. If your assets-to-expenses ratio is at 25 (that is, the 4% rule applies), then you can't afford to take significantly more risk than th...
by ThrustVectoring
Tue Sep 18, 2018 5:41 am
Forum: Investing - Theory, News & General
Topic: Equity in house / Do you use it?
Replies: 56
Views: 3514

Re: Equity in house / Do you use it?

If we ever need long term care the home equity can be used to pay for this either through something like a home equity loan or by selling the house. If you'd owe capital gains taxes on it, it's better to do the loan and let your heirs get a step up in basis. You can do the same in your taxable equi...