Search found 10236 matches

by vineviz
Wed Jun 16, 2021 9:33 am
Forum: Investing - Theory, News & General
Topic: My favorite authors are turning their backs on Bonds
Replies: 167
Views: 18605

Re: My favorite authors are turning their backs on Bonds

nedsaid wrote: Mon Jun 14, 2021 3:24 pm Thank you. Let me clarify. Just investing in riskier and riskier stocks does not increase returns.
If the "risks" that makes these stocks "riskier" is a systematic risk, having more of it almost certainly does increase expected returns.
by vineviz
Wed Jun 16, 2021 9:31 am
Forum: Investing - Theory, News & General
Topic: Six more ETFs from DFA (Dimensional Fund Advisors)
Replies: 92
Views: 11078

Re: Six more ETFs from DFA (Dimensional Fund Advisors)

grok87 wrote: Tue Jun 15, 2021 6:09 pm can anyone tell me, are these index etfs or actively managed etfs?
Can anyone tell me why "index" and "actively managed" are relevant descriptions for an ETF?
by vineviz
Tue Jun 15, 2021 7:42 am
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

I believe that the interest rate assumptions baked into the current bond market prices are very likely wrong by a wide margin. Even Jamie Dimon has $500M in cash which is surely a market timing situation: https://www.marketwatch.com/story/dimon-jpmorgan-is-sitting-on-about-500-million-in-cash-waiti...
by vineviz
Sat Jun 12, 2021 2:30 pm
Forum: Investing - Theory, News & General
Topic: Is market capitalization the correct metric?
Replies: 64
Views: 4679

Re: Is market capitalization the correct metric?

It is not that it is superior , it is the plumb line because the market is what is out there. It is reality, there is nothing "arbitrary" about reality. The market is what the market is. Superior. Inferior. Good. Bad. Sure. The market is the market. But the question is whether the market ...
by vineviz
Sat Jun 12, 2021 12:11 pm
Forum: Investing - Theory, News & General
Topic: Is market capitalization the correct metric?
Replies: 64
Views: 4679

Re: Is market capitalization the correct metric?

But it is not the case that cap-weighting is just some arbitrary choice, not just a matter of opinion. The Leaning Tower may have good properties, but it is the tower that leans, not the plumb line. Cap-weighting is the plumb line. The market cap weighted portfolio is indeed an "arbitrary choi...
by vineviz
Sat Jun 12, 2021 11:51 am
Forum: Investing - Theory, News & General
Topic: Is market capitalization the correct metric?
Replies: 64
Views: 4679

Re: Is market capitalization the correct metric?

There is an infinite number of ways that an index could weight its component stocks, such as by net sales, by price-to-book ratio, by the number of vowels in each company's name, etc. So how do we know that market cap provides the best basis for investor decisions? As others have pointed out you mu...
by vineviz
Sat Jun 12, 2021 11:43 am
Forum: Investing - Theory, News & General
Topic: Treasuries as your bond allocation?
Replies: 72
Views: 5308

Re: Treasuries as your bond allocation?

This would seem to imply that for a 60/40 portfolio, you'd have 60% in equities and 40% in treasuries. What is your take or the Boglehead take on this? My take is that this is probably optimal from a diversification standpoint. If bonds are less than 50% of your total portfolio, then all of them sh...
by vineviz
Sat Jun 12, 2021 5:46 am
Forum: Investing - Theory, News & General
Topic: A question about glide paths.
Replies: 43
Views: 4820

Re: A question about glide paths.

The goal is to maintain a fixed allocation on the total portfolio, which includes future savings and pensions counted as bonds. The discount rate needed to calculate the total portfolio is the appropriate bond rate to calculate the present value of future savings and pensions. If you use a conserva...
by vineviz
Fri Jun 11, 2021 3:44 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

"So let's take a step back. Bonds are special-purpose risk management tools, and different bonds have different risk management attributes at different costs, including opportunity costs. You should buy specific bonds, or sometimes perhaps bond funds, which are rationally calculated to address...
by vineviz
Fri Jun 11, 2021 3:03 pm
Forum: Investing - Theory, News & General
Topic: Are all Structured Notes Bad?
Replies: 93
Views: 6925

Re: Are all Structured Notes Bad?

I see cart blanche arguments against structured products being made continuously by individuals who have the background, expertise and interest in managing multiple options contracts over long periods of time. Unfortunately, this represents a sliver of retail investors, most of whom don't have the ...
by vineviz
Fri Jun 11, 2021 2:47 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

So generally for help in financial planning, I think people are well-advised to post their circumstances and questions, add information as reasonably requested, and then carefully consider what may be a range of different insights and suggestions. So after all this back and forth we are right back ...
by vineviz
Fri Jun 11, 2021 2:13 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

Oh no, those are quite different concepts, although people sometimes try to explain some observed behavior with reference to more than one. You're mistaken. Loss aversion and risk aversion simply describe the shape of the utility function. I mean, my general thesis is these are often complex proble...
by vineviz
Fri Jun 11, 2021 1:20 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

To be precise, I am noting that real world families do not have a simple relationship between marginal dollars spent and utility over time, such as transferring dollars, even in real terms, between one period and another period can make a significant difference in utility. All you're describing is ...
by vineviz
Fri Jun 11, 2021 1:05 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

Would a TIPS fund be a reasonable choice here? No A TIPS fund does not deliver a cash flow matched to when you want to spend the money. The idea of the ladder is that the ladder is completely consumed by each bond being spent as it matures. Since you know the inflation indexed value you will have a...
by vineviz
Fri Jun 11, 2021 6:30 am
Forum: Personal Finance (Not Investing)
Topic: Why ibonds?
Replies: 109
Views: 10289

Re: Why ibonds?

It was almost enough for me, too, when I was first thinking about them - thankfully, I went and did it ten or so years ago and haven't had to do it since. I guess everyone has their own cutoff points, but having to get a signature one time and log into an account once a year has been worth it to me...
by vineviz
Fri Jun 11, 2021 6:26 am
Forum: Non-US Investing
Topic: Bond part of portfolio in inflation linked bond ETF
Replies: 3
Views: 923

Re: Bond part of portfolio in inflation linked bond ETF

2. Second option is a global inflation-linked bond ETF, e.g. Xtrackers Global Inflation-Linked Bond UCITS ETF 1C EUR hedged (ISIN LU0290357929). On the positive side, the risk is diversified to more countries outside the EU, but the ETF duration is over 12 years, which exceeds my time-horizon of 10...
by vineviz
Fri Jun 11, 2021 12:42 am
Forum: Investing - Theory, News & General
Topic: “Bogleheads’ Guide To Investing” Portfolios - 50% in TIPS?
Replies: 62
Views: 9254

Re: “Bogleheads’ Guide To Investing” Portfolios - 50% in TIPS?

If we're going to be pedantic, the correct spelling of Treasurys is the spelling I just used. Words that end in "y" and are preceded with a constant will take the "-ies" ending to make it plural. The exception is proper nouns will take an "s", i.e. "the Murphys&qu...
by vineviz
Fri Jun 11, 2021 12:29 am
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

If you agree we can use probability and find a shorter duration than your age based calculation, please just agree. I've consistently said that estimating the investment horizon directly based on expected cash flows (including the use of probability weighting) can result in a more accurate estimate...
by vineviz
Fri Jun 11, 2021 12:22 am
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

Would a TIPS fund be a reasonable choice here? No A TIPS fund does not deliver a cash flow matched to when you want to spend the money. The idea of the ladder is that the ladder is completely consumed by each bond being spent as it matures. Since you know the inflation indexed value you will have a...
by vineviz
Thu Jun 10, 2021 6:56 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

This is a clear example of why we might rationally reduce duration from what you suggest, and that effort to duration match is limited by the degree to which we can predict future expenses. No, this is a clear example of EXACTLY how duration matching works in practice and EXACTLY how I describe it ...
by vineviz
Thu Jun 10, 2021 5:53 pm
Forum: Investing - Theory, News & General
Topic: “Bogleheads’ Guide To Investing” Portfolios - 50% in TIPS?
Replies: 62
Views: 9254

Re: Bogleheads’ Guide To Investing - Sample Portfolios

How hard is it to say "All Treasury issues, except I Bonds, currently have negative real rates"? It’s not a question of being “hard”. It’s a question of understanding that words mean what people accept them to mean, and people accept the word “Treasuries” to refer specifically to marketab...
by vineviz
Thu Jun 10, 2021 5:47 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

If I thought I was going to need something in 14 years yesterday, and today I find out I need it in 11 years, then I needed that exact same thing in 11 years and 1 day yesterday. If yesterday you thought there was a 100% probability that your investment horizon was 14 years and today you think ther...
by vineviz
Thu Jun 10, 2021 2:51 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

What if we ensure vs longevity not by duration matching to age 95 but by taking on an age based annuity at age 80? This is a plausible scenario that could have better portfolio characteristics. The desired duration is now 11.4 years, which is oddly similar to what I suggested earlier in the thread....
by vineviz
Thu Jun 10, 2021 2:44 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

Sure, we're almost there already. Assume "need" in this cases means you need it for a life-saving surgery. If you choose a bond duration of 10 years, you might not have enough money to save your life in the event you need that money to pay for the life-saving surgery in 5 years. You’re no...
by vineviz
Thu Jun 10, 2021 2:20 pm
Forum: Investing - Theory, News & General
Topic: Why so many funds in one account
Replies: 48
Views: 3257

Re: Why so many funds in one account

Hello - I have a question that I'm simply curious about. I recently moved all my accounts away from my advisor and placed them in Fidelity (3 fund approach). As I was selling out of the funds and moving them into Fidelity index funds I noticed a theme, each account (Roth, Rollover, general brokerag...
by vineviz
Thu Jun 10, 2021 1:37 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

So, these are not equivalent assumptions: (1) I will need this money back in X years; (2) There is a 1/3rd chance I will need this money back in X years, but also a 1/3rd chance I will need it back much sooner than X years, and a 1/3rd chance I will need it back much later than X years. If you're t...
by vineviz
Thu Jun 10, 2021 1:20 pm
Forum: Investing - Theory, News & General
Topic: The current annuity factor
Replies: 176
Views: 19581

Re: The current annuity factor

vineviz wrote: When the duration of your bond holdings is matched to your investment time horizon you are immunized against needing to CARE about whether interest rates rise or fall, because your return from those bonds is locked in no matter what happens. This is true in nominal terms but not in r...
by vineviz
Thu Jun 10, 2021 8:57 am
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

As I have noted before, this is an example of how people should think in terms of probability distributions, and not substitute point estimates, as doing that assumes away important risks. Thinking "in terms of probability distributions" is not incompatible with using point estimates in y...
by vineviz
Thu Jun 10, 2021 8:43 am
Forum: Investing - Theory, News & General
Topic: First 20% of bonds in long-term Treasuries
Replies: 1144
Views: 105319

Re: First 20% of bonds in long-term Treasuries

I recall a Boglehead saying Harry Browne of the permanent portfolio suggested buying 30 year treasury bonds, then after 10 years sell them and buy fresh 30's. That matches your attitude of not being too precise and exact with bond duration, ballpark is fine. Sure, though it woul'd arguably be easie...
by vineviz
Thu Jun 10, 2021 8:39 am
Forum: Investing - Theory, News & General
Topic: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
Replies: 94
Views: 12813

Re: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?

Well, no. I am saying you can consider buying specific bonds if they address your risk management needs at an acceptable cost. So, whether you should buy a specific bond at a specific time is rationally not just a function of the risk management benefits you expect, but also of the cost of that bon...
by vineviz
Thu Jun 10, 2021 7:15 am
Forum: Investing - Theory, News & General
Topic: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
Replies: 94
Views: 12813

Re: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?

There is one more feature. The loss of value of a bond from rising rates dissipates gradually over time as time marches forward toward the maturity date of the bond. This is true for bonds held directly by an investor and true for bonds held by a bond fund. I think there is an important nuance here...
by vineviz
Thu Jun 10, 2021 7:13 am
Forum: Investing - Theory, News & General
Topic: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
Replies: 94
Views: 12813

Re: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?

So when should one get into bonds assuming rates are going up? A) Don't assume rates are going up. They don't need to and might not. B) One should "get into bonds" whenever they help the investor achieve their financial goals. This will not depend on guessing about what might happen to ra...
by vineviz
Thu Jun 10, 2021 7:12 am
Forum: Personal Consumer Issues
Topic: Allstate Dwelling Protection - Grossly Underestimated
Replies: 11
Views: 1375

Re: Allstate Dwelling Protection - Grossly Underestimated

Building costs per square foot are very localized and much is dependent upon the home and the materials used. I totally agree with this. But my issue is that Allstate does in fact track local build costs and their computers should have done a better job at estimating this. In my case, nothing in th...
by vineviz
Thu Jun 10, 2021 7:05 am
Forum: Investing - Theory, News & General
Topic: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
Replies: 94
Views: 12813

Re: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?

There is one more feature. The loss of value of a bond from rising rates dissipates gradually over time as time marches forward toward the maturity date of the bond. This is true for bonds held directly by an investor and true for bonds held by a bond fund. I think there is an important nuance here...
by vineviz
Thu Jun 10, 2021 7:03 am
Forum: Investing - Theory, News & General
Topic: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?
Replies: 94
Views: 12813

Re: Assuming inflation increases and rates climb (or are expected to) will bond funds appreciate in value?

So when should one get into bonds assuming rates are going up? A) Don't assume rates are going up. They don't need to and might not. B) One should "get into bonds" whenever they help the investor achieve their financial goals. This will not depend on guessing about what might happen to ra...
by vineviz
Thu Jun 10, 2021 6:57 am
Forum: Investing - Theory, News & General
Topic: “Bogleheads’ Guide To Investing” Portfolios - 50% in TIPS?
Replies: 62
Views: 9254

Re: Bogleheads’ Guide To Investing - Sample Portfolios

I'm just being factual on a forum that prides itself on providing correct information. The statements that were made were factually incorrect and needed clarification. "Silly" is providing incorrect information if you know better. Nothing silly about saying that all Treasuries except I Bo...
by vineviz
Thu Jun 10, 2021 6:45 am
Forum: Investing - Theory, News & General
Topic: The current annuity factor
Replies: 176
Views: 19581

Re: The current annuity factor

I understand your answer about why SWR studies haven't used LT bonds, but I confess I would feel more comfortable if there was at least historical SWR studies (or even monte carlo simulations) showing that LT bonds really did, across a variety of interest rate environments, perform better than shor...
by vineviz
Thu Jun 10, 2021 6:33 am
Forum: Investing - Theory, News & General
Topic: First 20% of bonds in long-term Treasuries
Replies: 1144
Views: 105319

Re: First 20% of bonds in long-term Treasuries

So if you are 49 and you are planning to retire at 65 for a retirement that will last until you are 95, your bond portfolio duration would be ((95-49)+(65-49))/2 = 31 Yep, that sounds about right. These are pretty interesting results. Maybe the duration of most retirement investors' bond portfolios...
by vineviz
Thu Jun 10, 2021 6:04 am
Forum: Investing - Theory, News & General
Topic: The current annuity factor
Replies: 176
Views: 19581

Re: The current annuity factor

How can living off dividends and interest be risky, but living off dividends and interest PLUS RMD's be a viable option? I did not think people viewed living off dividends and interest as particularly risky, at least not in terms of portfolio survival. But the withdrawal rate tends to be low and va...
by vineviz
Wed Jun 09, 2021 5:30 pm
Forum: Investing - Theory, News & General
Topic: A question about glide paths.
Replies: 43
Views: 4820

Re: A question about glide paths.

The glide path used by target date funds is a generalized approximation: it works well on average, but you can manage your own glide path simply (IMHO) and easily with two numbers: 1) Your target retirement savings; 2) Your retirement asset allocation. Let's say you expect to retire in 10 years wit...
by vineviz
Wed Jun 09, 2021 4:57 pm
Forum: Investing - Theory, News & General
Topic: A question about glide paths.
Replies: 43
Views: 4820

Re: A question about glide paths.

I find the simpler method that you’ve described in this current thread to be way more appealing and easy to understand. Any thoughts on the potential downfalls of this method vs the more “sophisticated” approach? The simple method just produces a slightly more aggressive allocation during the glide...
by vineviz
Wed Jun 09, 2021 4:44 pm
Forum: Investing - Theory, News & General
Topic: A question about glide paths.
Replies: 43
Views: 4820

Re: A question about glide paths.

Also, the simple formula above is not discounting the dollar allocation to stocks--i.e $60 in stocks at retirement is equivalent to less than $60 in stocks today. So the correct allocation to stocks would be less than $60 today--a lot less if there are many years left to retirement. It's true that ...
by vineviz
Wed Jun 09, 2021 10:13 am
Forum: Investing - Theory, News & General
Topic: A question about glide paths.
Replies: 43
Views: 4820

Re: A question about glide paths.

I find the simpler method that you’ve described in this current thread to be way more appealing and easy to understand. Any thoughts on the potential downfalls of this method vs the more “sophisticated” approach? The simple method just produces a slightly more aggressive allocation during the glide...
by vineviz
Wed Jun 09, 2021 7:54 am
Forum: Investing - Theory, News & General
Topic: A question about glide paths.
Replies: 43
Views: 4820

Re: A question about glide paths.

If I understand the basic idea here, you’d suggest 100% stocks up until the time you reach a portfolio value exceeding the estimated stock portion of your target amount. Is this right? (Not disputing, just trying to understand.) Yes, that's the basic idea. There are some refinements someone could a...
by vineviz
Wed Jun 09, 2021 6:05 am
Forum: Investing - Theory, News & General
Topic: A question about glide paths.
Replies: 43
Views: 4820

Re: A question about glide paths.

For instance, if over the 7 years of recovery the unlucky investor glides from a 70/30 allocation to a 60/40 allocation then it looks as if they miss out on some of the opportunity through the 7 year period by tilting more and more each year toward bonds. I see that some Bogleheads model various sc...
by vineviz
Tue Jun 08, 2021 8:11 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

So the risk should be considered before you buy that bond (the alternative being a bond fund that will allow you to diversify over multiple yields), not after you bought the bond Interest rate risk isn't dependent on the level of yields, just on the match (or lack thereof) between the duration of y...
by vineviz
Tue Jun 08, 2021 8:03 pm
Forum: Investing - Theory, News & General
Topic: The current annuity factor
Replies: 176
Views: 19581

Re: The current annuity factor

Are you saying that someone (for example) with a 70/30 portfolio 10 years from retirement should have all the fixed income in LT treasuries or LT TIPs? Split 50-50 between nominal and TIPs? Any combination of LT nominal Treasuries and LT TIPS would strike me as entirely defensible. But I think you ...
by vineviz
Tue Jun 08, 2021 7:48 pm
Forum: Investing - Theory, News & General
Topic: How many here follow Bogle's "no international" theory?
Replies: 757
Views: 47419

Re: How many here follow Bogle's "no international" theory?

That's because it's not about home-country bias, it's about the unique position Americans find themselves in that the cheapest, most efficient way to invest is in US companies through either the S&P 500 or Total Stock Market Index Fund. This statement is textbook defense of home bias justified ...
by vineviz
Tue Jun 08, 2021 3:31 pm
Forum: Investing - Theory, News & General
Topic: Alternatives to LTT? Min correlation with TM + dividends
Replies: 9
Views: 988

Re: Alternatives to LTT? Min correlation with TM + dividends

Hi all, Right now I use Long Term Treasuries as 50% of my fixed income part of portfolio. There are few interesting threads about current market and LTT. I'm struggling to find an alternative which has min correlation with stocks (VTI let's say) but still pays some dividends/distribution - so stuff...
by vineviz
Tue Jun 08, 2021 1:43 pm
Forum: Investing - Theory, News & General
Topic: Long Bonds in retirement - curiosity...
Replies: 143
Views: 13172

Re: Long Bonds in retirement - curiosity...

"Withdrawing in proportion to what AA? " would be my response to what you suggest - that is not known in advance for anyone that uses probability modelling and has a diverse set of potential outcomes. It doesn't matter WHAT the AA is at any particular point in time in this context: all th...