Search found 523 matches

by ThrustVectoring
Mon Nov 12, 2018 7:04 pm
Forum: Investing - Theory, News & General
Topic: Feedback on "auto pilot" strategy
Replies: 6
Views: 732

Re: Feedback on "auto pilot" strategy

M1 Finance does exactly this already. If you want 60% VTI / 40% VXUS, and you have $500 in each and want to invest another $1000, M1 Finance will correctly buy $700 of VTI and $300 of VXUS, and will purchase partial shares to keep you fully invested. Probably better to use existing off-the-shelf too...
by ThrustVectoring
Mon Nov 12, 2018 1:49 pm
Forum: Investing - Theory, News & General
Topic: Treasury term premium estimate: negative in most of 2017, now 2018 too (NY Fed Adrian, Crump, Moench model)
Replies: 50
Views: 5502

Re: Treasury term premium estimate: negative in most of 2017, now 2018 too (NY Fed Adrian, Crump, Moench model)

Curious that Agency 10's at par are yielding 4% today, very much in line with these averages. Agencies have an additional risk that you may not be taking into account. A lot of these are mortgage backed securities, which sell an embedded call option via refinancing in falling rate environments. Als...
by ThrustVectoring
Sun Nov 11, 2018 2:20 pm
Forum: Investing - Theory, News & General
Topic: SWAN ETF - 10% Leaps / 90% Treasuries
Replies: 24
Views: 1844

Re: SWAN ETF - 10% Leaps / 90% Treasuries

Are there any tax benefits to a strategy like this in an ETF wrapper vs. doing it myself? If I have to roll LEAP contracts myself that's quite the tax drag. Yeah, the tax drag definitely makes the fund the wrong way to go. If you have the cash on hand required to not need the leverage of the call o...
by ThrustVectoring
Tue Nov 06, 2018 10:44 pm
Forum: Investing - Theory, News & General
Topic: Exceed Treasury Direct purchase limit? Answer inside!
Replies: 11
Views: 1203

Re: Exceed Treasury Direct purchase limit? Answer inside!

jacoavlu wrote:
Tue Nov 06, 2018 10:17 pm
lol I thought I was coming in to read about someone purchasing like a trillion dollars in T bills
The actual limit for non-competitive bids for T bills and the like is a mere five million dollars. Thought it was that limit being exceeded as well, lol.
by ThrustVectoring
Mon Nov 05, 2018 8:19 pm
Forum: Investing - Theory, News & General
Topic: Investments with zero yield
Replies: 41
Views: 3429

Re: Investments with zero yield

You can invest in S&P 500 futures in lieu of the underlying. You'll get the expected future dividends over the quarter as capital gains instead. The downside is that you cannot defer realizing capital gains, and they're taxed at 60% long-term / 40% short-term capital gains. So unless you have a bunc...
by ThrustVectoring
Mon Nov 05, 2018 2:00 pm
Forum: Investing - Theory, News & General
Topic: Duration matching with TIPS funds instead of buying individual TIPs
Replies: 16
Views: 1221

Re: Duration matching with TIPS funds instead of buying individual TIPs

If you just take the TIPS coupons in cash and reinvest at money market rates, the yield slippage will be probably be less than the trading costs of the TIPS funds. Coupons are at like 1% per year, the spread between cash and 10-year rates is like 1%, you hold the cash an average of 5 years or so, ov...
by ThrustVectoring
Mon Nov 05, 2018 1:39 pm
Forum: Investing - Theory, News & General
Topic: Corp. high-yield bonds better than international for diversification?
Replies: 16
Views: 1285

Re: Corp. high-yield bonds better than international for diversification?

I see it as a tactical asset if you can time the downturns. Conversely on the upswings you have to keep an eye on the yield spreads over A corporates (I think Merrill Lynch and others publish measures based on that). Because when they get too compressed, you are taking on risk without compensatory ...
by ThrustVectoring
Mon Nov 05, 2018 4:43 am
Forum: Investing - Theory, News & General
Topic: Corp. high-yield bonds better than international for diversification?
Replies: 16
Views: 1285

Re: Corp. high-yield bonds better than international for diversification?

I see it as a tactical asset if you can time the downturns. Conversely on the upswings you have to keep an eye on the yield spreads over A corporates (I think Merrill Lynch and others publish measures based on that). Because when they get too compressed, you are taking on risk without compensatory ...
by ThrustVectoring
Sun Nov 04, 2018 3:20 pm
Forum: Investing - Theory, News & General
Topic: Corp. high-yield bonds better than international for diversification?
Replies: 16
Views: 1285

Re: Corp. high-yield bonds better than international for diversification?

I am not a fan of sub investment grade investing but it's worth going back and looking at William Bernstein's article on same= when to do it. I was against it, and we had some threads here , but in early 2009 a number of investors here did invest in HY bond funds, and make a killing. Brave stuff. I...
by ThrustVectoring
Sun Nov 04, 2018 3:15 pm
Forum: Investing - Theory, News & General
Topic: Risk-based factor explanations: How can factors be non-diversifiable risk?
Replies: 8
Views: 773

Re: Risk-based factor explanations: How can factors be non-diversifiable risk?

For one thing, implementing the zero-market-correlation Value portfolio requires shorting stocks and using leverage. Lots of investors are unwilling or unable to do these things, which allows the price distortion to persist. Bet-against-beta is the best factor for this. Active investors who want mor...
by ThrustVectoring
Sat Nov 03, 2018 8:10 pm
Forum: Personal Consumer Issues
Topic: Engineering school
Replies: 66
Views: 4828

Re: Engineering school

#1 US News and World report as best undergraduate engineering program https://www.usnews.com/best-colleges/rankings/engineering-overall Also see: https://www.commonapp.org/school/rose-hulman-institute-technology. The US News ranking is somewhat rigged - it's a narrower category than it first looks ...
by ThrustVectoring
Fri Nov 02, 2018 1:39 pm
Forum: Personal Consumer Issues
Topic: Engineering school
Replies: 66
Views: 4828

Re: Engineering school

Rose-Hulman Institute of Technology is an absolutely fantastic school. The biggest downsides are expenses and a heavy workload, but you'll get a best-in-class education there. Oh, also, it's an engineering-only school and has the gender ratio you'd expect (roughly 3 men for every woman), so if you'r...
by ThrustVectoring
Fri Nov 02, 2018 1:01 pm
Forum: Investing - Theory, News & General
Topic: Why I'm 100% stocks
Replies: 149
Views: 17097

Re: Why I'm 100% stocks

Academic studies of retirement options suggest that individual investors massively underannuitize. Is this true even after accounting for social security and annuities’ fees? Annuities are much more efficient than investments for funding retirement. This is because your investments get left behind ...
by ThrustVectoring
Fri Nov 02, 2018 12:39 pm
Forum: Investing - Theory, News & General
Topic: An extreme example of inflation and a mortgage
Replies: 37
Views: 3180

Re: An extreme example of inflation and a mortgage

Owning your house is one inflation hedge. Fixed interest rate debt is another. Perhaps those with paid off houses should have a bit more TIPS in the portfolio than those without. Or you could short long-term treasury futures and buy the refinancing option via a protective call option. It's equivale...
by ThrustVectoring
Thu Nov 01, 2018 12:54 pm
Forum: Investing - Theory, News & General
Topic: Why I'm 100% stocks
Replies: 149
Views: 17097

Re: Why I'm 100% stocks

Why stop at 100%? You can get 10x the exposure by just buying Dec 2020 at the money SPY calls. May as well go heavy. What happens if the market drops 50%? The above seems more like a short term punt. I was being rather sarcastic... but still the point is 100% is pretty arbitrary. If OP doesn't beli...
by ThrustVectoring
Thu Nov 01, 2018 12:42 pm
Forum: Investing - Theory, News & General
Topic: An extreme example of inflation and a mortgage
Replies: 37
Views: 3180

Re: An extreme example of inflation and a mortgage

strongboy2005 wrote:
Thu Nov 01, 2018 12:17 pm
Does this also work with a 15 year mortgage?
Yes, but your gains are less pronounced because the mortgage has a lower effective duration. There's a reason why you pay less in interest with those loan terms - the bank is taking on less interest rate risk, and so can offer the product more cheaply.
by ThrustVectoring
Wed Oct 31, 2018 12:16 pm
Forum: Investing - Theory, News & General
Topic: Why I'm 100% stocks
Replies: 149
Views: 17097

Re: Why I'm 100% stocks

4. There are portfolios that can get you 80% of the expected return of 100% stocks for less than 50% of the expected risk (measured by standard deviation). Rephrasing the math, why take double the risk for an extra 25% return? That's illogical, in my opinion. For some example portfolios of this com...
by ThrustVectoring
Tue Oct 30, 2018 5:05 pm
Forum: Investing - Theory, News & General
Topic: Why I'm 100% stocks
Replies: 149
Views: 17097

Re: Why I'm 100% stocks

4. There are portfolios that can get you 80% of the expected return of 100% stocks for less than 50% of the expected risk (measured by standard deviation). Rephrasing the math, why take double the risk for an extra 25% return? That's illogical, in my opinion. For some example portfolios of this com...
by ThrustVectoring
Tue Oct 30, 2018 4:51 pm
Forum: Investing - Theory, News & General
Topic: How to calculate the effect of rate hikes on bond funds
Replies: 4
Views: 534

Re: How to calculate the effect of rate hikes on bond funds

How do you calculate the effect of rate hikes on a bond portfolio in regards to duration and other relevant metrics? You multiply the rate hike by the duration of the bond or bond fund. So if rates go up a tenth of a percent, and your bond fund has a duration of 10 years, then you lose 1% of the bo...
by ThrustVectoring
Mon Oct 29, 2018 4:58 pm
Forum: Investing - Theory, News & General
Topic: ETF provider State Street unintentionally promotes traditional index funds
Replies: 38
Views: 2705

Re: ETF provider State Street unintentionally promotes traditional index funds

The game was reasonably fun, though the scores seemed unnecessarily inflated. To be honest, for a passive investor, is there ever any good reason to buy ETFs? I can't think of a single reason off the top of my head. Definitely. For ETFs, trading costs tend to be born by the folks who buy and sell t...
by ThrustVectoring
Mon Oct 29, 2018 12:32 pm
Forum: Investing - Theory, News & General
Topic: Emergency Fund as Part of Bond Portfolio? What fund to use?
Replies: 4
Views: 686

Re: Emergency Fund as Part of Bond Portfolio? What fund to use?

You don't need an emergency fund per se. You need an emergency plan . Some components of this plan can be the 1-month or so credit card float, a HELOC, taking a margin loan against your taxable portfolio's equity value, selling equities, or just keeping aside some cash in a high-yield savings or rew...
by ThrustVectoring
Thu Oct 25, 2018 12:18 pm
Forum: Investing - Theory, News & General
Topic: Retirement bonds, aka SeLFIES
Replies: 77
Views: 9737

Re: Retirement bonds, aka SeLFIES

Not sure I follow why these bonds should be so much cheaper than other fixed income investments with similar credit risk. Real rates are low in France right now. Unless the govt is subsidizing the yield of these bonds, when the 20-years of payout cash flows are discounted back to a present value us...
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: 15
Views: 1731

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: 1968

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: 89
Views: 8516

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: 4
Views: 503

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: 586

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: 6
Views: 1653

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: 3648

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: 10559

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: 1050

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: 779

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: 6628

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: 10830

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: 2076

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: 2076

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: 1307

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: 2830

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: 5697

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: 2830

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: 5697

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: 794

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: 3479

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: 1456

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: 4573

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: 640

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: 2742

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: 2553

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: 2742

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: 29
Views: 3159

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 ...