Regarding market overvaluation, for what it's worth, from BlackRock:
"We are overweight equities in our strategic views as we estimate the overall return of stocks will be greater than fixed-income assets over the coming decade. Valuations on a long horizon do not appear stretched to us."
BlackRock link
Edit: This will be my last post for a little while at least. I want to take a long break from thinking about my investments. See everyone again in 2025...or maybe later...
Search found 4201 matches
- Mon Mar 13, 2023 10:59 am
- Forum: Personal Investments
- Topic: Moving a larger amount into the market: Market overvaluation
- Replies: 18
- Views: 1661
- Sun Mar 12, 2023 1:38 pm
- Forum: Personal Investments
- Topic: Market Timing Bond Index Investment?
- Replies: 13
- Views: 1683
Re: Market Timing Bond Index Investment?
- Sat Mar 11, 2023 1:45 pm
- Forum: Investing - Theory, News & General
- Topic: BND thought experiment
- Replies: 99
- Views: 10131
Re: BND thought experiment
Regarding stay the course…
…so I was one of those arguing against timing the bond market. Yeah, it didn’t work out too well. Nope, don’t like the taste of dem apples, no sir. If “stay the course” is a sometimes yes, sometimes no thing—if it’s more like, “stay the course, usually,” that sounds a tad silly, doesn’t it?
Maybe the “stay the course” crowd was right—they were just unlucky? (He said, weakly, and then crawled back under the bed.)
…so I was one of those arguing against timing the bond market. Yeah, it didn’t work out too well. Nope, don’t like the taste of dem apples, no sir. If “stay the course” is a sometimes yes, sometimes no thing—if it’s more like, “stay the course, usually,” that sounds a tad silly, doesn’t it?
Maybe the “stay the course” crowd was right—they were just unlucky? (He said, weakly, and then crawled back under the bed.)
- Sat Mar 11, 2023 10:22 am
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
Yeah, the "phantom income" issue. Individual TIPS have that issue. Fortunately, my Vanguard TIPS fund does not, it pays out the inflation adjustment in a whopping dividend. I have over half my TIPS money in that fund. I plan on using the TIPS fund dividend to pay all the TIPS taxes. I can always convert individual TIPS into a TIPS fund/ETF if I ever needed to. Makes sense, solves the cash flow issue. However, you still need to over fund your TIPS, if being used as an LMP, as it will lose real value each year, at about 1/3 the rate of inflation. You also need to carefully consider your TIPS fund duration, as you will essentially be selling each year, which creates a duration mismatch. Your equity side will protect you from all of ...
- Sat Mar 11, 2023 8:58 am
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
Leaving $10M in a personal brokerage account, especially in TIPS, is so silly the hypothetical scenarios beggars common sense. Why is investing in 10M TIPS especially silly? I mean, I have that, above that by some, and less than that by some in stock index funds. I certainly hope that’s not silly. Yeah, the tax drag sucks, but my TIPS will cover me nicely over the next 30 years even with high inflation, even if I don’t touch stock dividends. I am not comfortable (psychologically) taking on more stock volatility. I am curious - In an 8% inflation year, you would owe $250K in taxes on a $10M TIPS portfolio ($800K of adjustments, assuming 0% real return). How do you pay for this (liquidate TIPS, or equities) ? And how do you determine your TI...
- Fri Mar 10, 2023 3:06 pm
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
Leaving $10M in a personal brokerage account, especially in TIPS, is so silly the hypothetical scenarios beggars common sense. Why is investing in 10M TIPS especially silly? I mean, I have that, above that by some, and less than that by some in stock index funds. I certainly hope that’s not silly. Yeah, the tax drag sucks, but my TIPS will cover me nicely over the next 30 years even with high inflation, even if I don’t touch stock dividends. I am not comfortable (psychologically) taking on more stock volatility. It's not -- it's doing it in a taxable personal brokerage account that is silly. Because, as you said, the tax drag sucks. How do I get that money into a tax-free account, though? I saw you mentioned a Mega backdoor Roth above, but...
- Fri Mar 10, 2023 2:14 pm
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
Why is investing in 10M TIPS especially silly? I mean, I have that, above that by some, and less than that by some in stock index funds. I certainly hope that’s not silly. Yeah, the tax drag sucks, but my TIPS will cover me nicely over the next 30 years even with high inflation, even if I don’t touch stock dividends. I am not comfortable (psychologically) taking on more stock volatility.
- Fri Mar 10, 2023 10:59 am
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
What tax bracket is this discussion about? Above there was discussion about a "37% + 3.8% NIIT = 40.8% marginal tax rate". link Well, thank goodness I'm so poor I can have an LMP TIPS ladder. ;) Plus, with Mega Back Door Roth conversions over the years, I don't know why you would have any TIPS in taxable even if you're in the tax stratosphere. The original concern/argument/debate was what if you ONLY a BIG taxable account. Which is a niche case, but obviously happens. It just doesn't happen to most of us. I’d still like to know how much you’d need in TIPS to generate $200,000 per year, in real dollars, guaranteed for 30 years, with, say, 8% inflation in the top marginal tax bracket. Versus my solution of accumulating $10M and doi...
- Fri Mar 10, 2023 10:22 am
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
- Fri Mar 10, 2023 10:16 am
- Forum: Investing - Theory, News & General
- Topic: Fixed Income instead of Equities
- Replies: 105
- Views: 9691
Re: Fixed Income instead of Equities
Yields were pretty much zero for short-term bonds and close to zero for intermediate-term bonds. Long-term still had room to fall. And short-term yields could have gone negative. There's even greater potential upside when it comes to capital appreciation if the starting yield is negative and rates go down - that's kind of the only way you make money from the investment at that point. The problem is that banks take a beating with negative yields. Check out what happened to European banks when they went negative with their Fed Funds equivalent. It wasn't pretty, and some are still suffering. The likelihood of that happening in the US was near zero since the Fed kept saying over and over and over again that they wouldn't go negative. In 2019,...
- Wed Mar 08, 2023 5:11 pm
- Forum: Investing - Theory, News & General
- Topic: Fixed Income instead of Equities
- Replies: 105
- Views: 9691
Re: Fixed Income instead of Equities
Don't fight the Fed. The fed is raising rates trying to cause a recession which in their theory will cause inflation to drop significantly. The market is upset about rising interest rates and of course a looming recession. Many folks believe we already are in a recession- regardless, the market doesn't like recessions. What does this tell you? For me, I personally have made investment adjustments to this situation.... don't fight the fed What does fighting the Fed look like here? I hear it a bit, but it does not explain anything. A few "Don't fight the Fed" examples: 1) In March 2020 when covid was quite the concern the market was dropping significantly. The Fed pumped in a tremendous amount of money to help prop up the market. I...
- Mon Feb 27, 2023 5:50 pm
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
Ahhh, so there's a level beyond winning the game I never knew about. Actually, very happy you posted this because it means I can stop obsessing over whether I'm being too conservative with so much of my money in TIPS taxable.
- Mon Feb 27, 2023 3:30 pm
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
I have both individual TIPS and the Vanguard TIPS fund, vaguely in equal amounts. Figure I can use the fund dividends to pay off the tax money owed on the individual TIPS. This way I don't have to sell anything.TN_Boy wrote: ↑Mon Feb 27, 2023 9:35 am I will say that if you had a huge number of TIPs in a taxable account, you would be looking at a possibly surprising tax bill. I have some short term TIPs in taxable, but stuff maturing the same year you buy it doesn't result in "phantom" income. Obviously if you don't require actual TIPS, by using a TIPs fund instead you will at least have income to go along with the inflation adjustment on the principal.
- Sat Feb 25, 2023 11:02 am
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
I guess I buy into the idea of having something like a TIPS ladder covering expenses for 20 years (or perhaps longer) and all other money in stocks. The expenses should include tax expenses which could be considerable depending how great inflation is, and I suppose the expenses themselves could conceivably balloon up much more than expected. So the unknowns are: -- Stock recovery time, 20 years or longer? -- Unknown taxation bleed severity based on unknown degree of future inflation -- Unexpected future expenses Someone who is playing it super-safe might say: -- Allow 30 year recovery time -- Assume reasonable worst case scenario of 5% inflation for 30 years -- Quadruple anticipated expenses Obviously, other people would say differently. Is...
- Fri Feb 24, 2023 11:33 am
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
The real point here is that if you accept the premise that fixed-income is primarily for "safety", (and that stocks outperform bonds, long-term) there really is little reason to hold more than 20X in bonds, unless you are concerned that in the future, equities may require even longer than 20 years to permanently achieve a previous high water mark. I don't know if I should be concerned that equities might take longer to recover than they ever have in the past. There seem to be different perspectives on this. Maybe you can eliminate the lion's share of stock risk by hanging onto them long enough. Maybe not; maybe stocks are indeed risky in the long term, as Kevin wrote above. If it was established orthodoxy, with people like Bogle,...
- Thu Feb 23, 2023 11:01 am
- Forum: Investing - Theory, News & General
- Topic: Liability Matching Portfolio? Really?
- Replies: 528
- Views: 55073
Re: Liability Matching Portfolio? Really?
Leesbro63 -- Sounds like we might be in a similar boat, so for what's it worth, here's how I think about your LMP riddle: First, I recognize that stocks have never required more than 20 years to "permanently" regain a previous high (1901 and 1929 being the extremes) This tells me, there is little historical reason to hold more than 20 years in Fixed Income. (e.g. if you believe stocks ultimately out-perform bonds) So in your case, if you have 50X available, your "logical" AA would be 20X in Fixed, 30X in stocks... or said differently, 60/40 stocks/bonds.... Next, season your fixed income to taste... For example, When Kevin/#cruncher are helping everyone on this forum maximize their CD's..., do that (because CD's sometim...
- Thu Feb 02, 2023 1:07 pm
- Forum: Investing - Theory, News & General
- Topic: What are you up YTD? [Year To Date]
- Replies: 5250
- Views: 906915
Re: What are you up YTD? [Year To Date]
From another source it says he thinks "the S&P 500 could surge by over 10% to around 4,500 points". Linklivesoft wrote: ↑Thu Feb 02, 2023 11:04 amHe has to be right since stocks have already rallied 10% in 2023! Hindsight is 20/20.Robot Monster wrote: ↑Thu Feb 02, 2023 10:57 am Happy to see that: "Jeremy Siegel sees stocks rallying 10%-15% in 2023 as lower rates outweigh a mild recession" link
I hope he's right! Will sure help many people's beloved YTD figures.
- Thu Feb 02, 2023 10:57 am
- Forum: Investing - Theory, News & General
- Topic: What are you up YTD? [Year To Date]
- Replies: 5250
- Views: 906915
Re: What are you up YTD? [Year To Date]
Happy to see that: "Jeremy Siegel sees stocks rallying 10%-15% in 2023 as lower rates outweigh a mild recession" link
I hope he's right! Will sure help many people's beloved YTD figures.
I hope he's right! Will sure help many people's beloved YTD figures.
- Thu Dec 29, 2022 9:42 am
- Forum: Investing - Theory, News & General
- Topic: Treasury Inflation Protected Securities (TIPS) - The Pain
- Replies: 16
- Views: 3920
Re: Treasury Inflation Protected Securities (TIPS) - The Pain
I'm in the same boat. I bought some long-term TIPS when the yields on them were negative. It has not been psychologically pleasant, but my plan remains the same: hold to maturity.
- Thu Dec 29, 2022 9:37 am
- Forum: Investing - Theory, News & General
- Topic: Why Not TIPS Market-Time?
- Replies: 22
- Views: 2600
Re: Why Not TIPS Market-Time?
There was some interesting thoughts about timing TIPS by Bill Bernstein: The biggest risk to holding off on TIPS purchases with deeply negative rates was that the Fed *wouldn't* respond with tightening once inflation appeared. Which, yet again, is a Pascal's Wager: if you think they will tighten and you're wrong, you don't collect the term premium with either TIPS or plain vanillas. The cost of that mistake is finite, but not that large, just the term premium. If you think they won't and you're wrong, ie, they do tighten, then, depending your perspective, you miss the opportunity to lay in your bond ladder--either nominal or TIPS--at a far more attractive price. Which, ex-post, is what in fact occurred. To this day, Paul Volcker is revered ...
- Fri Oct 14, 2022 1:19 pm
- Forum: Personal Investments
- Topic: TIPS vs TIPS fund?
- Replies: 99
- Views: 13061
Re: TIPS vs TIPS fund?
It seems there is the implication in this thread by some that the only way to eliminate interest rate risk is by buying an individual TIPS and holding to maturity, but my understanding from vineviz is that you can eliminate interest rate risk with bond funds , and this is via duration matching by making sure your investment horizon exactly matches the average duration of your bond funds; do this and you should be indifferent to changes to rates. So, if, for example, you're withdrawing at a constant rate over a period of 30 years, your investment horizon is 15 years, which means you want your bond funds to match that and have an average duration of 15 years. You might do this with a combination of a long-term TIPS fund like LTPZ, and an int...
- Tue Oct 11, 2022 2:39 pm
- Forum: Personal Investments
- Topic: Ways To Stay The Course?
- Replies: 69
- Views: 8769
Re: Ways To Stay The Course?
Practically speaking, all I need to do is not click "sell". It's so easy, a caveman could do it.
Psychologically...I need to stop obsessing over stuff. Like, obsessing over the idea that maybe it would have been smarter to have timed the bond market when rates were negative, as one forum member recently suggested. Perhaps I need a break from all of finance, and concentrate on other things.
Psychologically...I need to stop obsessing over stuff. Like, obsessing over the idea that maybe it would have been smarter to have timed the bond market when rates were negative, as one forum member recently suggested. Perhaps I need a break from all of finance, and concentrate on other things.
- Tue Oct 11, 2022 10:57 am
- Forum: Investing - Theory, News & General
- Topic: Market capitalization of TIPS / Sudden Popularity
- Replies: 178
- Views: 15909
Re: Market capitalization of TIPS / Sudden Popularity
Can someone please help me understand something Mr. Bernstein said? Having trouble with the idea of "collecting the term premium". The biggest risk to holding off on TIPS purchases with deeply negative rates was that the Fed *wouldn't* respond with tightening once inflation appeared. Which, yet again, is a Pascal's Wager: if you think they will tighten and you're wrong, you don't collect the term premium with either TIPS or plain vanillas. The cost of that mistake is finite, but not that large, just the term premium. My way of thinking about it is, the biggest risk to holding off on a TIPS purchase is if inflation expectations go higher, and yields cut more negative e.g.: Let's say you hold off on buying a 30Y TIPS that offers a -...
- Mon Oct 10, 2022 12:22 pm
- Forum: Investing - Theory, News & General
- Topic: Market capitalization of TIPS / Sudden Popularity
- Replies: 178
- Views: 15909
Re: Market capitalization of TIPS / Sudden Popularity
It may have been a speculative bet, but when interest rates are hovering around 1% or less, there's not a lot more downside to be had. In fact I think most of us would argue that negative interest rates were they to occur would be small. On the other hand interest rates can go quite high in the positive direction. This was a speculative bet to move to short-term bonds or short term MYGAs or cash back in 2020 and even a little earlier. But a speculative bet based on on vastly asymmetric outcomes, making the bet much in your favor. That's a very interesting perspective regarding negative yields, and coupled with other comments made about these (Bill Bernstein, tipswatcher) if yields ever do again descend into negative territory, we'll have t...
- Mon Oct 10, 2022 11:18 am
- Forum: Investing - Theory, News & General
- Topic: Market capitalization of TIPS / Sudden Popularity
- Replies: 178
- Views: 15909
Re: Market capitalization of TIPS / Sudden Popularity
And I agree, it's obvious, that if you make different decisions over time about desirable duration, based on changes in the market not just changes in your own needs, you could make wrong decisions. If sticking with one duration (or match liabilities out to a specific date) one can justify it to oneself more simply: 'I stayed the course'. Still, I believed it clear that relatively long duration in the last several years was a bad idea and acted accordingly. Now I think it's relatively better idea and I'm gradually extending my duration, with TIPS. It's hard to argue against what you did since it played out so well. I found an old post from 2020 that argued what you did was a speculative bet, and perhaps that's what it was, and your bet han...
- Mon Oct 10, 2022 10:44 am
- Forum: Investing - Theory, News & General
- Topic: REITs - Where is the benefit again?
- Replies: 125
- Views: 19844
Re: REITs - Where is the benefit again?
YTD returns for VGSLX Vanguard Real Estate Index -31.68%, price $109.73. In my opinion, it's time to buy, and I am. Hi Ivygirl- Your posts are always readable and interesting, often very thought provoking, like your recent one about money, values and love. Were you able to max out your Roth IRA after all? Are you putting your REIT in your Roth or taxable? You’d mentioned having a goal of maxing your tax advantaged space but that may have changed since then. Thanks for kind words. With this recent buy of VGSLX I believe I am on track to maxing out my Roth (my Roth is 100% VGSLX REIT index). I still remember one of your posts about REITs... Real estate is like bones to the body economic. Always being created and destroyed, always swapping ou...
- Sun Oct 09, 2022 7:46 pm
- Forum: Investing - Theory, News & General
- Topic: Market capitalization of TIPS / Sudden Popularity
- Replies: 178
- Views: 15909
Re: Market capitalization of TIPS / Sudden Popularity
Yeah, I was one of those people who bought 30 year TIPS in 2020 and 2021 with the idea it was better not to time the bond market. Well, I guess the thinking at the time was, who knows how negative yields would get, and what kind of inflation the Fed would tolerate; maybe if inflation just hit 3-4%, the Fed might have lived with it. I mean, I did get the go ahead on my TIPS purchases by a very knowledgeable forum member. Was told how futile it is to attempt market timing with bonds, and to stick to the fundamentals: buy bonds whose duration most closely matches your investment horizon.
- Sun Oct 09, 2022 7:07 pm
- Forum: Investing - Theory, News & General
- Topic: How old will you be when your longest dated TIPS matures?
- Replies: 11
- Views: 1420
Re: How old will you be when your longest dated TIPS matures?
My TIPS ladder extends almost thirty years, and 30 years is, of course, the longest dates TIPS. (I might have gone longer if they offered them.) So, basically they last mature when I'm 76. My overall average duration is about 13 years; I have a large chunk in the Vanguard TIPS fund. All my TIPS are in taxable. Thanks Robot Monster! Will you roll some of your TIPS as you get older to maintain a 30 year ladder? How will you choose the date for your very last TIPS to mature? I am trying to sort this out myself and hope to gain insight from other's thoughts. Thanks again! I could conceivably look to buy TIPS that mature somewhere between 2055-2060. I've got at least a couple of years to think about it. Haven't really mapped out a strategy yet....
- Sun Oct 09, 2022 6:55 pm
- Forum: Investing - Theory, News & General
- Topic: 3 Reasons International Investing Hasn't Paid Off.
- Replies: 185
- Views: 17821
Re: 3 Reasons International Investing Hasn't Paid Off.
Actually, counterintuitive as it might seem, Chinese VIE structure provides for some very meaningful diversification, according to the latest recent research. Just made that up, obviously.AlwaysLearningMore wrote: ↑Sun Oct 09, 2022 6:46 pm ...Plus, it would be interesting to know just how much of that 8.82% is held in VIE structures, and not actual ownership in the underlying business.
- Sun Oct 09, 2022 6:44 pm
- Forum: Investing - Theory, News & General
- Topic: How old will you be when your longest dated TIPS matures?
- Replies: 11
- Views: 1420
Re: How old will you be when your longest dated TIPS matures?
My TIPS ladder extends almost thirty years, and 30 years is, of course, the longest dates TIPS. (I might have gone longer if they offered them.) So, basically they last mature when I'm 76. My overall average duration is about 13 years; I have a large chunk in the Vanguard TIPS fund. All my TIPS are in taxable.
- Sun Oct 09, 2022 3:50 pm
- Forum: Investing - Theory, News & General
- Topic: What are you up YTD? [Year To Date]
- Replies: 5250
- Views: 906915
Re: This year's stock market - how much have we lost?
I read that the worst 20 year period is from 1961 - 1981, -2% a year adjusted for inflation. Source: NYT linkLeesbro63 wrote: ↑Sun Oct 09, 2022 3:32 pm1929 to beyond 1949. Also 1966-1986 (probably) if you adjust for inflation.toddthebod wrote: ↑Sun Oct 09, 2022 11:40 amShow me a 20 year stretch where equities were down.Fremdon Ferndock wrote: ↑Sun Oct 09, 2022 9:51 amGee, if only I could live off my cash for 20-50 years. No problem.toddthebod wrote: ↑Sat Oct 08, 2022 4:44 pmWhy would you have money you needed in the short term invested in equities? (Or a bond fund with a 7+ year duration for that matter, to preempt that rebuttal.)Fremdon Ferndock wrote: ↑Sat Oct 08, 2022 4:36 pm
Obviously, you're not speaking for everyone. Some of us are paying bills with our shrinking stocks and the shrinking dollars they are worth.
- Sun Oct 09, 2022 11:22 am
- Forum: Investing - Theory, News & General
- Topic: Bond Funds vs Actual Bonds/Fixed Income
- Replies: 7
- Views: 1119
Re: Bond Funds vs Actual Bonds/Fixed Income
I own individual bonds in my Vanguard account, and it shows price, and the price affects my overall balance. In other words, I see it all.Doctor Rhythm wrote: ↑Sun Oct 09, 2022 11:03 am Remember that individual bonds fluctuate in price as well. You just don’t see it until you try to sell them.
- Sun Oct 09, 2022 10:43 am
- Forum: Investing - Theory, News & General
- Topic: What if the basic premise of Boglehead philosophy fails?
- Replies: 159
- Views: 15989
Re: What if the basic premise of Boglehead philosophy fails?
Joe Davis, chief economist for Vanguard, said it will be a good thing if rates are higher, that it should improve the outlook for stocks over the long term. Full quote below. “Diversification doesn’t protect you from all losses all of the time, but over the long run, if you hold stocks and bonds, diversification works,” he said. “Rising bond yields mean that you will be receiving more income from your bond funds in a few years, and that’s a very good thing.”...Mr. Davis of Vanguard put it this way: “This is a transition, and transitions are painful,” he said. “But near-zero interest rates weren’t sustainable. It will be a good thing if rates are higher. That should improve the outlook for stocks and bonds over the long term, once we get thr...
- Sun Oct 09, 2022 9:07 am
- Forum: Investing - Theory, News & General
- Topic: Worst. Bond. Market. Ever.
- Replies: 73
- Views: 11926
- Sat Oct 08, 2022 3:14 pm
- Forum: Investing - Theory, News & General
- Topic: What are you up YTD? [Year To Date]
- Replies: 5250
- Views: 906915
Re: This year's stock market - how much have we lost?
"You don't lose money until you sell". Yep. Remember that thread? Good times.
- Sat Oct 08, 2022 10:11 am
- Forum: Investing - Theory, News & General
- Topic: What are you guys doing during this Downturn?
- Replies: 77
- Views: 5961
Re: What are you guys doing during this Downturn?
- Fri Oct 07, 2022 2:35 pm
- Forum: Investing - Theory, News & General
- Topic: Worst. Bond. Market. Ever.
- Replies: 73
- Views: 11926
Re: Worst. Bond. Market. Ever.
SInce BND is a 7-8 year duration - shouldn't the Bonds being bought today (this year and future) in the fund help it recover in the future - BND getting a harsh smackdown = stronger yield going forward. Depending on an investor's time horizon, this could be a very good thing. In other words, even though "Worst. Bond. Market. Ever." sounds like the most terrible thing to happen to all bond investors, this is not in fact the case. There are three different types of bond investors, and each will fare differently. 1. Investors whose investment horizon is less than the average duration of their bonds. These are the investors getting pummeled by Nightmare on Bond Street. 2. Investors whose investment horizon is greater than the average...
- Fri Oct 07, 2022 12:16 pm
- Forum: Personal Investments
- Topic: Cash saved up for son's college - invest in TIPS?
- Replies: 62
- Views: 4605
Re: Cash saved up for son's college - invest in TIPS?
You can find the 5-year TIPS yield here,
https://www.bloomberg.com/markets/rates ... t-bonds/us
https://www.bloomberg.com/markets/rates ... t-bonds/us
- Fri Oct 07, 2022 10:15 am
- Forum: Investing - Theory, News & General
- Topic: How unusual is the current downturn? Actually pretty common.
- Replies: 94
- Views: 16873
Re: How unusual is the current downturn? Actually pretty common.
I think bond investors should take comfort in bond math, that, if they have a time horizon that surpasses the average duration of their bonds, a rise in yields is good for them, that a spike in yields is ugly in the short-term, beneficial in the long-run.
The graph is from a nisiprius post linkComparison: black, no rise; green, 2% rise in rates; red, 4% rise in rates.
X axis is years
Y axis is dollars
The rate increase in the graph is a steady increase over the first two years and then no further increases. Obviously, this graph would look very different if you used historical data, since rates don't change like this.
- Fri Oct 07, 2022 9:46 am
- Forum: Investing - Theory, News & General
- Topic: 3 Reasons International Investing Hasn't Paid Off.
- Replies: 185
- Views: 17821
Re: 3 Reasons International Investing Hasn't Paid Off.
Good article. One thing that I am interested and a bit concerned about - the US Dollar has appreciated by about 40% compared to the other world currencies in the past decade, and by 18% in the past year alone. Does past evidence show that this outperformance (and the resulting outperformance of US vs. ex-US) will continue, or are we more likely to see a regression to the mean and a better ex-US performance in the future? The Economist's Big Mac Index is based on: "...the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries." https://www.economist....
- Thu Oct 06, 2022 11:04 am
- Forum: Investing - Theory, News & General
- Topic: 3 Reasons International Investing Hasn't Paid Off.
- Replies: 185
- Views: 17821
Re: 3 Reasons International Investing Hasn't Paid Off.
Given that many have discomfort about currency risk, am surprised currency hedged international is not more popular, e.g. Franklin FTSE Japan Hedged ETF is vastly less popular than Franklin FTSE Japan ETF, $24.09 million total net assets vs $811.02 million.
- Thu Oct 06, 2022 9:43 am
- Forum: Investing - Theory, News & General
- Topic: 3 Reasons International Investing Hasn't Paid Off.
- Replies: 185
- Views: 17821
Re: 3 Reasons International Investing Hasn't Paid Off.
Great point. This combined with the stalling out of democracies in EM (see above) may continue to cause international to lag the more pure democracy & efficient US market. The EM & Japan exposure in VXUS is almost 50%. I think looking at returns US vs International is not the best way to look at diversification. Democracy vs. autocracy is the better way to look at diversification as you are comparing markets playing by the same rules. If people have an aversion to EM & Japan, they might consider something like Vanguard FTSE Europe ETF, or that coupled with Franklin FTSE Canada ETF and maybe Franklin FTSE Australia ETF (but that one only has $24.62 million in total net assets, which is small enough that you run the risk of it cl...
- Wed Oct 05, 2022 7:16 pm
- Forum: Investing - Theory, News & General
- Topic: 3 Reasons International Investing Hasn't Paid Off.
- Replies: 185
- Views: 17821
Re: 3 Reasons International Investing Hasn't Paid Off.
This is slightly dated info from 2017, but...Logan Roy wrote: ↑Wed Oct 05, 2022 6:49 pm I've not fully battle-tested this premise yet, but my experience with large-cap (usually very global) businesses is it doesn't tend to make a great deal of difference where they're listed. e.g. The UK's FTSE100 index has about as much (revenue) exposure to the US economy as it does the UK's.
Revenue from US
MSCI USA Index -- 63%
MSCI Europe Index -- 20%
MSCI Japan Index -- 14%
MSCI Emerging Markets Index -- 8%
link
- Wed Oct 05, 2022 4:45 pm
- Forum: Investing - Theory, News & General
- Topic: Morgan Stanley's Crystal Ball
- Replies: 18
- Views: 2282
Re: Morgan Stanley's Crystal Ball
I think the idea is that even though Vanguard Mega Cap Growth (and QQQ) outperformed Total Stock Market in the past decade, this (perhaps) won't continue?Beensabu wrote: ↑Wed Oct 05, 2022 3:20 pmThat doesn't work. A Total US Stock index fund is that formula.Robot Monster wrote: ↑Wed Oct 05, 2022 2:38 pm "The formula that worked well for investors over the past decade was US growth, mega cap, but to bet that formula will continue to beat a Total US Stock index fund is a bad bet."
- Wed Oct 05, 2022 2:38 pm
- Forum: Investing - Theory, News & General
- Topic: Morgan Stanley's Crystal Ball
- Replies: 18
- Views: 2282
Re: Morgan Stanley's Crystal Ball
I would rephrase it, as well. Taking inspiration from Bogle's statement below*, how about:
"The formula that worked well for investors over the past decade was US growth, mega cap, but to bet that formula will continue to beat a Total US Stock index fund is a bad bet."
*Bogle from 2017: “The three largest countries in the international index [EAFE] are Great Britain, Japan and France, and to bet those countries will do better than the U.S. in the long run is a bad bet.” -- Jack Bogle link
- Tue Oct 04, 2022 2:03 pm
- Forum: Personal Investments
- Topic: Are total bond market investors a sitting duck?
- Replies: 118
- Views: 16701
Re: Are total bond market investors a sitting duck?
There are three different types of Total Bond Market investors, and each will fare differently. 1. Investors whose investment horizon is less than the average duration of their bond fund. These are, perhaps, the sitting duck bond investors. They will be hurt if yields increase. 2. Investors whose investment horizon is greater than the average duration of their bond fund. These investors cheer yields increasing. 3. Investors whose investment horizon matches than the average duration of their bond fund. These investors will be indifferent to yield changes. Not sure how this advice is true as the investors time horizon is shortening while the bond fund is constant. If I am say 7 years from retirement and the duration of BND is a constant 6.7,...
- Tue Oct 04, 2022 1:57 pm
- Forum: Personal Investments
- Topic: Are total bond market investors a sitting duck?
- Replies: 118
- Views: 16701
Re: Are total bond market investors a sitting duck?
Schwab has been of the opinion that "while there is room for bond yields to move higher as the Fed tightens policy, we continue to believe that the faster and more forceful the Fed is in hiking rates, the deeper the inversion of the yield curve." Schwab linkDesertInvestor wrote: ↑Tue Oct 04, 2022 1:19 pm The alternative is directly owning short treasuries (or brokered CDs), protecting the value of your investment and rolling them over to new short treasuries as rates rise every 3 months. Can always go back to total bond market at later date. You'll lose if rates go down, but given economic strength that is highly unlikely right now. Total bond market is up a bit today though.
- Tue Oct 04, 2022 1:32 pm
- Forum: Investing - Theory, News & General
- Topic: If things are so bad, how come the market is up 900 points today?
- Replies: 141
- Views: 15445
Re: If things are so bad, how come the market is up 900 points today?
Is this becoming the grand reopening of the "soaring" thread?
- Tue Oct 04, 2022 12:13 pm
- Forum: Investing - Theory, News & General
- Topic: If things are so bad, how come the market is up 900 points today?
- Replies: 141
- Views: 15445
Re: If things are so bad, how come the market is up 900 points today?
No cat?! What heresy is this??TightButAggressive wrote: ↑Tue Oct 04, 2022 12:05 pm ...the real trick IMHO is to understand there is no cat. Once you accept that, then you can go back to simplicity in investing.
- Tue Oct 04, 2022 12:09 pm
- Forum: Personal Investments
- Topic: VTINX - 72 and scared
- Replies: 72
- Views: 10138
Re: VTINX - 72 and scared
Higher rates are good for long-term bond investors. https://imgur.com/z3CisBj.png This comes from a post by Nisiprius. x-axis is years *** Joe Davis, chief economist for Vanguard, said long-term buy-and-hold investors who own stocks and bonds through low-cost index funds are likely to prosper if they can stand the stress and hang on during this turmoil, and even keep adding to their investments through a regular plan. “Diversification doesn’t protect you from all losses all of the time, but over the long run, if you hold stocks and bonds, diversification works,” he said. “Rising bond yields mean that you will be receiving more income from your bond funds in a few years, and that’s a very good thing.”...Mr. Davis of Vanguard put it this way:...