Search found 8291 matches

by Kevin M
Sun Apr 23, 2017 12:39 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

Kevin, you said rolling 5 year CDs could be a better choice for the above poster, <snip> Yes, "could be", given the concern about rising interest rates, which was one of the many points listed. Just wanted that poster to understand that EE bonds may not be the best choice if the concern i...
by Kevin M
Sun Apr 23, 2017 12:17 pm
Forum: Investing - Theory, News & General
Topic: How inefficient is it to hold Total Bond Index in a taxable account?
Replies: 34
Views: 3680

Re: How inefficient is it to hold Total Bond Index in a taxable account?

Say that young investor in the 28% Federal tax bracket with $100K in maturing CDs wants an AA of 60/40, but hypothetically has no retirement accounts. There is only room for $5500 to put that bond index into a new IRA account. The other $34,500 of VTBLX (Total Bond Index) would go into a taxable ac...
by Kevin M
Sun Apr 23, 2017 10:48 am
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

3. I am expecting interest rate risk from bond funds (drop in price of bonds in fund when/if interest rates rise) in the future If interest rates increase enough, you will do better with rolling 5-year CDs for 20 years, as I discussed earlier. 5. I will likely be in a lower tax bracket then (and if...
by Kevin M
Sun Apr 23, 2017 10:17 am
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

So, for example, a EE bond is essentially risk free. This is not true. What is true is that EE bonds have essentially no credit risk. But credit risk is only one dimension of fixed-income risk, the other primary dimension being term risk (term risk incorporates inflation risk if you think about it ...
by Kevin M
Sat Apr 22, 2017 8:05 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

and some of us plan to tax rate arbitrage the EEs, in my case from 35% marginal to perhaps 25% marginal in 20 years. kevin, what rates what a CD have to earn to compare to an EE for someone like me? Yes, that makes it more attractive. Assuming you start at 2.75% with marginal tax rate of 35% for th...
by Kevin M
Sat Apr 22, 2017 6:56 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

I recently bought a 7-year CD at 3%. I'd much rather take this bet than have to hold for 20 years to get 3.5%. If I can earn 4% for the remaining 13 years after the CD matures, I end up making 3.65%. Or maybe a CD will come along in less than 7 years with a rate high enough to justify paying the 1....
by Kevin M
Sat Apr 22, 2017 4:08 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

All of that may be true but that is not what liquid/illiquid means. Posters saying that EE bonds are illiquid either don't understand how they work or need to explain themselves more and not use incorrect term. To many of us, liquidity means that you can sell quickly and easily without losing money...
by Kevin M
Sat Apr 22, 2017 3:45 pm
Forum: Investing - Help with Personal Investments
Topic: Differential aggressiveness for ROTH vs 401K
Replies: 30
Views: 2083

Re: Differential aggressiveness for ROTH vs 401K

You increase your portfolio expected return by putting higher risk / higher expected return assets in Roth because you increase your after-tax risk. In other words, you are increasing your after-tax allocation to the riskier assets. You could accomplish the same thing by increasing your before-tax ...
by Kevin M
Sat Apr 22, 2017 10:25 am
Forum: Investing - Theory, News & General
Topic: Visualizing the devastating impact of fees
Replies: 54
Views: 4606

Re: Visualizing the devastating impact of fees

I believe the standard way to calculate after-cost return [R] is this formula (the same as adjusting [for] inflation): R = (1+r) / (1+c) -1 [where r is gross return before fee and c is the fee] This can't be right, Kevin. Consider the case where r, the gross return, is 0% and c, the fee, is 2%. You...
by Kevin M
Fri Apr 21, 2017 8:05 pm
Forum: Investing - Help with Personal Investments
Topic: Differential aggressiveness for ROTH vs 401K
Replies: 30
Views: 2083

Re: Differential aggressiveness for ROTH vs 401K

Kevin, I think I disagree with you for the following reason. When you talk about risk you need to include the concept of long term vs short term risk. I agree that short term risk is high for equities but long term risk is still fairly low. I am talking about long-term risk, or risk over whatever t...
by Kevin M
Fri Apr 21, 2017 4:47 pm
Forum: Investing - Help with Personal Investments
Topic: Differential aggressiveness for ROTH vs 401K
Replies: 30
Views: 2083

Re: Differential aggressiveness for ROTH vs 401K

Hi Kevin, thanks for that link, because I was reading https://www.bogleheads.org/wiki/Tax-efficient_fund_placement If all else is equal (and it often isn't, because you may have different options in your 401(k) and your Roth IRA), it is slightly better to have the fund with the highest expected ret...
by Kevin M
Fri Apr 21, 2017 2:34 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

I would definitely purchase TIPS long before EE bonds. I see no upside to holding TIPS in a taxable account. There is nothing worse than paying tax on phantom income for the inflation adjustment, the only way you realize the income is to completely liquidate the TIPS holding which sort of defeats t...
by Kevin M
Fri Apr 21, 2017 1:21 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

I always looked at EE bonds as a saving vehicle not as in investment. Young people could allocate a percentage of their pay to EE bonds and a few years later cash them in to buy a car, the down payment on a house, or to help pay for college. This makes no sense with EE bonds being issued currently....
by Kevin M
Fri Apr 21, 2017 1:10 pm
Forum: Investing - Help with Personal Investments
Topic: Differential aggressiveness for ROTH vs 401K
Replies: 30
Views: 2083

Re: Differential aggressiveness for ROTH vs 401K

Ill be doing what I think you are alluding to. Put your growth-iest bets into your Roth. Why not? It all tax free. Because you are not adjusting your AA for after-tax return and risk. If you do so, it doesn't matter where you put your "growth-iest" bets. You increase your portfolio expect...
by Kevin M
Fri Apr 21, 2017 1:02 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

There has yet to be a 15-year period where stocks have lost money, but it's not impossible for it to happen in the future. Based on data in our Simba backtest spreadsheet, US stocks had a cumulative real return of -5% over the 17-year period 1965-1981 (inclusive). Of course that high-inflation peri...
by Kevin M
Fri Apr 21, 2017 11:52 am
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

I recently bought a 7-year CD at 3%. I'd much rather take this bet than have to hold for 20 years to get 3.5%. If I can earn 4% for the remaining 13 years after the CD matures, I end up making 3.65%. Or maybe a CD will come along in less than 7 years with a rate high enough to justify paying the 1....
by Kevin M
Fri Apr 21, 2017 11:43 am
Forum: Investing - Theory, News & General
Topic: How inefficient is it to hold Total Bond Index in a taxable account?
Replies: 34
Views: 3680

Re: How inefficient is it to hold Total Bond Index in a taxable account?

SEC yield includes changes in price which is more relevant to a short term investor who is banking on capital gains as part of his return. Distribution yield is just the return from interest payments. The latter dominates total return for long term investors. Most bogleheads are long-term investors...
by Kevin M
Fri Apr 21, 2017 11:18 am
Forum: Investing - Theory, News & General
Topic: Visualizing the devastating impact of fees
Replies: 54
Views: 4606

Re: Visualizing the devastating impact of fees

... In fact, what an investment provider gets as a fraction of what you would otherwise have had depends only on their fees, not returns. Looked at more precisely, the provider gets a fraction equal to 1–(1+c)^(–T) of what would otherwise be my wealth, given fee c and time horizon T. Is the relatio...
by Kevin M
Thu Apr 20, 2017 8:27 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

There has yet to be a 15-year period where stocks have lost money, but it's not impossible for it to happen in the future. Based on data in our Simba backtest spreadsheet, US stocks had a cumulative real return of -5% over the 17-year period 1965-1981 (inclusive). Of course that high-inflation peri...
by Kevin M
Thu Apr 20, 2017 8:11 pm
Forum: Investing - Theory, News & General
Topic: Visualizing the devastating impact of fees
Replies: 54
Views: 4606

Re: Visualizing the devastating impact of fees

This result (FV) does not change if you change the rate of return; changing the rate of return changes the amount you start with (PV) to get to $250K. Kevin I put a concrete $ amount on the Y-axis simply to provide an anchor point to help someone understand the significance of returns lost. It has ...
by Kevin M
Thu Apr 20, 2017 8:02 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Visualizer - How to add stable value fund?
Replies: 5
Views: 413

Re: Portfolio Visualizer - How to add stable value fund?

If you create an account you can upload any data series you want, even a fake one. So the OP should download the SVF historical data and then upload it to PV. Nice to know. I typically work in the opposite direction, and download the data from PV to a spreadsheet, then I can do my own analysis. It ...
by Kevin M
Thu Apr 20, 2017 7:58 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

There has yet to be a 15-year period where stocks have lost money, but it's not impossible for it to happen in the future. Based on data in our Simba backtest spreadsheet, US stocks had a cumulative real return of -5% over the 17-year period 1965-1981 (inclusive). Of course that high-inflation peri...
by Kevin M
Thu Apr 20, 2017 7:38 pm
Forum: Investing - Theory, News & General
Topic: I don't understand the case for EE bonds
Replies: 136
Views: 6284

Re: I don't understand the case for EE bonds

I recently bought a 7-year CD at 3%. I'd much rather take this bet than have to hold for 20 years to get 3.5%. If I can earn 4% for the remaining 13 years after the CD matures, I end up making 3.65%. Or maybe a CD will come along in less than 7 years with a rate high enough to justify paying the 1.5...
by Kevin M
Thu Apr 20, 2017 7:21 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Visualizer - How to add stable value fund?
Replies: 5
Views: 413

Re: Portfolio Visualizer - How to add stable value fund?

No.

The only phony ticker I know you can add is CASHX for cash.

Kevin
by Kevin M
Thu Apr 20, 2017 6:30 pm
Forum: Investing - Theory, News & General
Topic: How inefficient is it to hold Total Bond Index in a taxable account?
Replies: 34
Views: 3680

Re: How inefficient is it to hold Total Bond Index in a taxable account?

I go by the assumption I learned from forum member grabiner, which is that muni bonds have about the same taxable-equivalent return as taxable bonds at a federal marginal tax rate of 25%. Going by this assumption, you are better off with muni bonds on a risk-adjusted basis in the 28% tax bracket. If...
by Kevin M
Thu Apr 20, 2017 6:19 pm
Forum: Investing - Help with Personal Investments
Topic: Differential aggressiveness for ROTH vs 401K
Replies: 30
Views: 2083

Re: Differential aggressiveness for ROTH vs 401K

With Roth as a small sliver of your portfolio, it does not matter. That is my situation. If your Roth is a large portion of your portfolio, then you should think about after-tax risk and return, since that's what you eat. If you think in after-tax terms, then the risk and expected return are differe...
by Kevin M
Thu Apr 20, 2017 6:11 pm
Forum: Investing - Theory, News & General
Topic: Visualizing the devastating impact of fees
Replies: 54
Views: 4606

Re: Visualizing the devastating impact of fees

Here's the way I worked the problem. I use spreadsheet PV and FV functions, but for the simple case of a lump sum investment at the beginning of the period, we can use the simple TVM equation: FV = PV * (1+r)^N In the chart, we're given FV=250,000 (at 0% cost) and N = 40. So first we need a PV value...
by Kevin M
Thu Apr 20, 2017 3:52 pm
Forum: Investing - Theory, News & General
Topic: Visualizing the devastating impact of fees
Replies: 54
Views: 4606

Re: Visualizing the devastating impact of fees

So, yeah, if the growth rate is 0, of course you are giving away part of your principal to the advisor. But most of us in that situation, after 2 or 3 years, would wake up and do something--change to a different advisor, different investment, put the money in CDs.... The likelihood of this example ...
by Kevin M
Thu Apr 20, 2017 3:44 pm
Forum: Investing - Theory, News & General
Topic: Visualizing the devastating impact of fees
Replies: 54
Views: 4606

Re: Visualizing the devastating impact of fees

It is a nice chart. The intuitive way to understand this is that the impact of fees compounds, so with annual investments more of your money is subject to fees for less time, and the fees have less impact on final value. You're are absolutely right, thanks! I edited my original post to state that t...
by Kevin M
Thu Apr 20, 2017 3:30 pm
Forum: Investing - Theory, News & General
Topic: Visualizing the devastating impact of fees
Replies: 54
Views: 4606

Re: Visualizing the devastating impact of fees

It's tough to come up with concise labels to describe this, please make any suggestions you think might make it clearer! First, you should say something to the effect that it is based on a $250,000 lump sum invested at the beginning. I didn't get the impression that it was anything like $250K inves...
by Kevin M
Thu Apr 20, 2017 2:48 pm
Forum: Investing - Theory, News & General
Topic: Visualizing the devastating impact of fees
Replies: 54
Views: 4606

Re: Visualizing the devastating impact of fees

It is a nice chart. This shows what happens to the investment returns, regardless of your savings rate. No matter how much you contribute, at 2% in fees they will keep half of your returns. I don't think this is quite right, assuming I'm understanding what you mean. Working with the following number...
by Kevin M
Thu Apr 20, 2017 12:08 pm
Forum: Personal Finance (Not Investing)
Topic: HRBlock software: improper handling of 5329 waiver of penalty
Replies: 3
Views: 363

Re: HRBlock software: improper handling of 5329 waiver of penalty

I am not sure that filing a 1040X is a good idea. You will have two versions of the same thing in the system. Hopefully, someone who has more experience with this issue will step in. I think I would contact the IRS about the original submission before sending the 1040X. Puzzling comment. This is ex...
by Kevin M
Tue Apr 18, 2017 9:14 pm
Forum: Investing - Help with Personal Investments
Topic: Why would anyone want to buy bond funds?
Replies: 92
Views: 8752

Re: Why would anyone want to buy bond funds?

Please go back and review my replies from the beginning. My intent was simply to argue against a couple of ways you characterized down stock markets. I said nothing at all about the argument you want to keep repeating, and indeed, I have repeatedly said that of course it's true. Fair enough. You wa...
by Kevin M
Tue Apr 18, 2017 8:25 pm
Forum: Investing - Theory, News & General
Topic: From the short end of the yield curve
Replies: 9
Views: 754

Re: From the short end of the yield curve

The article can be found here: Chinese Corporate Debt Signals Alarm . It is the same article as this web article: Investors Pile Into Risky Chinese Debt . <snip> The article is mostly about credit spreads in chinese bonds, anyway. The article is entirely about credit spreads, and related aspects, o...
by Kevin M
Tue Apr 18, 2017 7:47 pm
Forum: Investing - Theory, News & General
Topic: How big a problem is the zero lower bound on interest rates?
Replies: 1
Views: 318

How big a problem is the zero lower bound on interest rates?

How big a problem is the zero lower bound on interest rates? | Brookings Institution If inflation is too low or unemployment too high, the Fed normally responds by pushing down short-term interest rates to boost spending. However, the scope for rate cuts is limited by the fact that interest rates c...
by Kevin M
Tue Apr 18, 2017 5:42 pm
Forum: Investing - Theory, News & General
Topic: Proxies for IBond and Cash in Portfolio Visualizer
Replies: 4
Views: 286

Re: Proxies for IBond and Cash in Portfolio Visualizer

PV also has no way to model direct CDs, and more than 50% of my portfolio is in direct CDs. You have to build your own spreadsheet to model things like this.

Kevin
by Kevin M
Tue Apr 18, 2017 5:39 pm
Forum: Investing - Theory, News & General
Topic: Proxies for IBond and Cash in Portfolio Visualizer
Replies: 4
Views: 286

Re: Proxies for IBond and Cash in Portfolio Visualizer

I Bonds would be hard, because your composite rate depends on your fixed rate, which depends on when you bought the I Bond. I Bonds you bought years ago with fixed rates of 1-3% are earning more than an I Bond you buy today with a fixed rate of 0%. Not only that, but your composite rate will change ...
by Kevin M
Tue Apr 18, 2017 5:32 pm
Forum: Investing - Theory, News & General
Topic: Proxies for IBond and Cash in Portfolio Visualizer
Replies: 4
Views: 286

Re: Proxies for IBond and Cash in Portfolio Visualizer

CASHX works for cash. Don't know that there's one for i bonds.
by Kevin M
Tue Apr 18, 2017 5:04 pm
Forum: Investing - Theory, News & General
Topic: From the short end of the yield curve
Replies: 9
Views: 754

Re: From the short end of the yield curve

Are these publications linking the Chinese debt situation to the US Treasury yield curve, or is that your extension? And what timeframe are we discussing? Some much more obvious recent impacts on Treasury rates are the election in November and the Fed rate increases. The former had a much larger imp...
by Kevin M
Tue Apr 18, 2017 4:31 pm
Forum: Investing - Help with Personal Investments
Topic: Why would anyone want to buy bond funds?
Replies: 92
Views: 8752

Re: Why would anyone want to buy bond funds?

So what? I never said otherwise, so why do you keep wanting to argue against a strawman? So what? Arguing against a strawman? I am the one trying to make this point, the topic in question can't be a strawman. It's a strawman argument when you keep repeating it in response to my replies, in which I ...
by Kevin M
Tue Apr 18, 2017 3:22 pm
Forum: Personal Finance (Not Investing)
Topic: "Vanguard's free RMD Service: Sign up before you turn 70½"
Replies: 23
Views: 2400

Re: "Vanguard's free RMD Service: Sign up before you turn 70½"

Yes, since the 50% penalty was included with payment for the total return, a 1040X requesting a refund of the penalty and including a corrected 5329 is a good idea. OK, this is what I'm doing. So as not to further hijack this thread, I posted more details in a separate thread: HRBlock software: imp...
by Kevin M
Tue Apr 18, 2017 3:20 pm
Forum: Personal Finance (Not Investing)
Topic: HRBlock software: improper handling of 5329 waiver of penalty
Replies: 3
Views: 363

HRBlock software: improper handling of 5329 waiver of penalty

We used HRBlock tax software to complete my mom's 2015 tax return, and she had neglected to take her (relatively small) RMD in 2015. The tax software informs you that you must pay the 50% penalty, and attach a letter of explanation, which is what we did. In another thread (on the Vanguard RMD servic...
by Kevin M
Tue Apr 18, 2017 1:43 pm
Forum: Investing - Theory, News & General
Topic: Bill Sharpe's preferred portfolio
Replies: 19
Views: 4134

Re: Bill Sharpe's preferred portfolio

Note: For the bond indexes, I used the market-value numbers rather than the par-value numbers. Hmmm, thinking about it, I wonder if Par Value wouldn't be a better number to use. Especially since the bonds aren't going to be sold now at their market values, but rather held long-term until maturity a...
by Kevin M
Tue Apr 18, 2017 1:36 pm
Forum: Personal Finance (Not Investing)
Topic: Did anything surprise you in your 2016 taxes?
Replies: 82
Views: 6155

Re: Did anything surprise you in your 2016 taxes?

Good thread subject! Here's mine. I almost forgot to include the interest from some I Bonds my wife sold, since the 1099 from TreasuryDirect got downloaded into a different folder than her other 1099s. I realized the oversight when reviewing our CA return, and not seeing any subtractions from income...
by Kevin M
Tue Apr 18, 2017 12:42 pm
Forum: Investing - Theory, News & General
Topic: From the short end of the yield curve
Replies: 9
Views: 754

Re: From the short end of the yield curve

I don't find the article with a Google search, and your comments don't clarify what you think the article has to do with a flattening US yield curve. Care to elaborate?

Kevin
by Kevin M
Tue Apr 18, 2017 11:58 am
Forum: Personal Finance (Not Investing)
Topic: "Vanguard's free RMD Service: Sign up before you turn 70½"
Replies: 23
Views: 2400

Re: "Vanguard's free RMD Service: Sign up before you turn 70½"

Kevin, I would try a phone call in a couple weeks after the filing rush is over, and see if you can talk to an RMD specialist if they have one. OK, I'll suggest this to my mom. I assume they cashed the check, which would at least indicate they received the waiver request? If you don't mind I would ...
by Kevin M
Tue Apr 18, 2017 11:38 am
Forum: Investing - Help with Personal Investments
Topic: Why would anyone want to buy bond funds?
Replies: 92
Views: 8752

Re: Why would anyone want to buy bond funds?

For the comparison to bonds and cash, yes, but that has nothing to do with the observation that you were underwater for more than 10 years with stocks in real terms. Yes, but it has to do with my point that those that were more aggressive during the long haul can "afford to lose more" in ...
by Kevin M
Tue Apr 18, 2017 10:58 am
Forum: Personal Finance (Not Investing)
Topic: "Vanguard's free RMD Service: Sign up before you turn 70½"
Replies: 23
Views: 2400

Re: "Vanguard's free RMD Service: Sign up before you turn 70½"

Kevin, the 5329 Part IX for excess accumulations is only 4 lines, but not at all intuitive when completing it. When a waiver request is being made, the amount of the late RMD for which the waiver is being requested is subtracted from the amount delinquent so the last line 55 should show 0 as the ad...
by Kevin M
Mon Apr 17, 2017 4:31 pm
Forum: Personal Finance (Not Investing)
Topic: "Vanguard's free RMD Service: Sign up before you turn 70½"
Replies: 23
Views: 2400

Re: "Vanguard's free RMD Service: Sign up before you turn 70½"

The IRS will usually waive the penalty if the late RMD is first removed and a 5329 filed to request the penalty be waived due to reasonable cause. The IRS has been accepting just about any reason including "I forgot and it will not happen again". My mom did not take her RMD in 2015, filed...
by Kevin M
Mon Apr 17, 2017 4:13 pm
Forum: Investing - Help with Personal Investments
Topic: Why would anyone want to buy bond funds?
Replies: 92
Views: 8752

Re: Why would anyone want to buy bond funds?

Fine, but what I shared was in response to what I quoted you as saying, about the longest multi-year down period being the 4-year period 1929-1932. I'm pointing out that looking at it this way is flawed. If you measure in real terms, the drawdown period until recovery for US stocks lasted more than...

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