Search found 4089 matches

by Elysium
Sat Mar 16, 2024 7:48 pm
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27388

Re: Dot.Com Era/AI Era?

I will leave one major data point for all to consider - the difference in collective market cap/value between S&P 500 top 10 and rest of the index is now at the widest point ever in history baring peak dot com in 1999. We are closer to peak dot com with AI hype than this being 1994. So we have another year or so to capitalize on the AI bubble? :D Where? I don't know if there are any companies no one has unearthed that is/will continue to grow in price appreciation. It looks pretty saturated to me, out of the Mag 7 stocks, two of them TSLA and AAPL are already not doing well this year, then it has now reduced to Mag 5, all of those are struggling to continue the up trend. Then there are the chip companies and suppliers, AMD, SMCI, ASML,...
by Elysium
Sat Mar 16, 2024 6:38 pm
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27388

Re: Dot.Com Era/AI Era?

I think many folks in this thread are missing the point on how close the dot com hype and AI hype are. I say that because even the skeptics of AI seems to be saying dot com was something else, those guys had no plans, no profits, and this time is different. I beg to differ. Having worked in the industry during the dot com period, I can say that, it wasn't all hype. Just as today AI's hype which is very much an idea, the dot com era was also driven by the idea that eCommerce will take over all commerce. Did that happen, eventually, but not in the scale we thought where companies like WalMart and Target went out of business, but some did like Sears. The thinking then was there would be nothing but eCommerce, just like we think AI will be ever...
by Elysium
Sat Mar 16, 2024 6:18 pm
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27388

Re: Dot.Com Era/AI Era?

anoop wrote: Thu Mar 14, 2024 12:53 am I want to add one more thing if not already discussed. Deep Blue from IBM beat Garry Kasparov in 1997. Watson from IBM won Jeopardy back in 2011. Watson was supposed to take over the medical profession. What happened?
Just a few years later the average laptop running chess engines became nearly impossible to beat by anyone. It wasn't even news to anyone. They accomplished a ELO rating that surpassed the highest rated human by a clear 100 points at least. As for Watson, they kept it hidden as a prized possession, not even letting IBM employees across the company to gain access or understanding of it, for fear of leaking IP, then failed miserably at making adoption a reality.
by Elysium
Sat Mar 16, 2024 6:07 pm
Forum: Investing - Theory, News & General
Topic: Morningstar's ratings for international stock funds are misleading
Replies: 28
Views: 2391

Re: Morningstar's ratings for international stock funds are misleading

I don't think those funds invest in US stocks because they predict US stock market will outperform other stock markets. Similar strategy does not work well for their US stock funds. FDGFX (Fidelity® Dividend Growth Fund) underperformed and is given 2 star rating because it invests roughly 15% of its assets in international stocks. If they think US stock market will be more profitable, the fund will be 100% US stocks. They are not predicting US vs another ex-US region then betting x% in this or that, instead they are picking individual companies that pass their filter, wherever they may be domiciled within an established percentage. It could be based on number of factors including sector, region, currency, valuation, business model, so on.....
by Elysium
Thu Mar 14, 2024 12:54 pm
Forum: Personal Investments
Topic: FBGRX
Replies: 9
Views: 576

Re: FBGRX

DireStraits wrote: Thu Mar 14, 2024 12:45 pm Any reason to NOT hold https://fundresearch.fidelity.com/mutua ... /316389303 in a Roth IRA? Overall, the performance looks great.
Yes, it's going to get cut in half when the current bubble pops. The outsized gains you see is in the rearview mirror, what's likely to happen if you chase that is you get a 50% hair cut, with recovery taking a decade or more longer.
by Elysium
Tue Mar 12, 2024 4:39 pm
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27388

Re: Dot.Com Era/AI Era?

This thread has me now strongly convinced AI is indeed a bubble!! This has all the elements of an asset bubble where a large number of investors are willing to bet on something just based on a promise, much like the dot com bubble. The big difference people use to justify now vs then are some of these companies do have profits and strong advantages, where as many dot coms didn't. So what .. nothing has fundamentally changed for any of these companies, except now added the key phrase "AI" in front of them. For instance, Microsoft is still selling software by subscriptions, their main cash cows being Office 365 and Azure, NVDA is still selling their chips, now the story being they're used for AI, that's it. Obviously people come out...
by Elysium
Mon Mar 11, 2024 5:14 pm
Forum: Investing - Theory, News & General
Topic: Emerging markets flat
Replies: 57
Views: 4319

Re: Emerging markets flat

I was aware of the disaster-hedging potential of bonds – having got out quite a few years earlier .. So I regarded the negative TIPS yield as the cost of hedging (either a major downturn, or something inflationary). But when I considered what you were paying, having 30-40% in these assets – on top of rates already being close to zero – I think holding them for that reason would've been pure speculation. It wouldn't have been 'investing'. If there was a Put Option with that kind of upside to downside, I don't think you'd touch it with a bargepole. Gold was something I didn't mind holding, though. I think it made more sense than paying to hold TIPS. I don't know. You do make a compelling case by looking at it that way, and you aren't alone, ...
by Elysium
Mon Mar 11, 2024 9:01 am
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

Buy TIPS if you want guarantee. Yeah, about that ... 1) do TIPS at a negative yield guarantee that? Does holding a TIPs fund guarantee you will never do that? 2) does the basket of goods that comprise the TIPs calculation match your basket? 3) is there no rate risk and potential to sell at NAV loss if you are not holding an individual bond to maturity (similar to a TBM fund)? 4) can deflation not take back the previous inflation adjustments? So I agree while perhaps TIPs are more assured to outperform inflation, guarantees are pretty difficult to come by. #1 - it is obvious, real rates promised is what you get after inflation, if negative real was promised you get that. If you don't like and you have better alternatives then go for it. Bac...
by Elysium
Mon Mar 11, 2024 8:51 am
Forum: Investing - Theory, News & General
Topic: The amount of leverage NVDA has on the S&P500 is humbling
Replies: 6
Views: 1089

Re: The amount of leverage NVDA has on the S&P500 is humbling

Nothing surprising there. This happened in 1996-1999 Tech run. During times like this, it is difficult to be invested in anything but S&P 500/Large Growth/Tech. The downside is equally painful as when the bubble burst, which it will at some point as the steam goes out of the high expectations rally, there will be a lot of folks claiming it was so obvious, why didn't we see this coming, so on.. It's always the history of market manias. The hard part is no one can say if this is truly a mania or simply a run up followed by some plateauing. The best thing anyone can do is to follow an investment plan, re-balance, de-risk, do anything that is needed to sleep well at night.
by Elysium
Sun Mar 10, 2024 10:26 pm
Forum: Investing - Theory, News & General
Topic: Emerging markets flat
Replies: 57
Views: 4319

Re: Emerging markets flat

A couple of exchanges here indicate it was obvious, almost sure thing, bonds were going down because fed indicated they were going to raise rates, they were hovering close to zero, at an all time historical low, inflation was high, etc. They are right in hindsight. What is missing here is the other many possibilities even when all of those were true. For instance, there was a mini banking crisis that we all forgot that started with silicon valley bank in July 2022 after short term rates went up. Imagine this became a wider contagion, no one actually knew or can claim to know, just like the sub-prime crisis, how these banks are leveraged. What if it took down many banks and we went into a full fledged recession, leading to massive job losses...
by Elysium
Sat Mar 09, 2024 7:56 pm
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

Thank you for all the replies so far! I suppose that my ulterior motive question here is "Am I irrational to plan that BND funds lose to inflation over the long term?" My personal shift to I Bonds is predicated on the above pessimistic assumption, and I've been pondering if I've been unreasonable in it. Definitely it sounds like people aren't invessting in BND funds expecting to lose money in real terms, and my pessimistic assumption is probably really rare. It looks like over a long enough time horizon it HAS averaged out to beat inflation, but returns alao have extended periods of what looks like treading water real performance. I THINK this means that my ultra pessimistic, negative real forecast is a real outlier and perhaps v...
by Elysium
Sat Mar 09, 2024 7:43 pm
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

The question was about expectations: shouldn't nominal bonds be expected to provide real returns and also to outperform the returns from similar-duration TIPS? Of course nominal bonds come with the risk of falling short. I would say that when TIPS were first issued (which after all was relatively recently), there may have been some pricing inefficiencies that resulted in bond pricing that might not have been entirely rational, but since then the market seems to have the various types of bonds figured out. Nominal bonds give nominal returns, not real returns. There can be different expectations, but there is no such thing market gives other than what current yields indicate at any point in time. There is an expected built in future inflatio...
by Elysium
Sat Mar 09, 2024 7:38 pm
Forum: Personal Investments
Topic: Sharing why we went with Vanguard PAS
Replies: 69
Views: 6688

Re: Sharing why we went with Vanguard PAS

Finally, we have several more ETF’s in both equities and fixed income customized for us beyond the “standard” Vanguard Total Stock Market and Vanguard Total Bond ETF’s after considerable discussions with our PAS Advisor. Why Vanguard beyond lower fees? I feel over years our portfolio may get tweaked as Vanguard’s extensive market research recommends such as a lower or higher allocation to international markets in both stocks and bonds. We interviewed a number of financial advisors to manage our funds but ultimately felt that passive investing undergirded by Vanguard’s extensive market research was the way for us. Let me guess, this extensive market research beyond standard Total Stock and Total Bond yielded in your portfolio getting divvie...
by Elysium
Sat Mar 09, 2024 12:27 pm
Forum: Investing - Theory, News & General
Topic: Can we expect TBM funds to outperform inflation?
Replies: 62
Views: 5113

Re: Can we expect TBM funds to outperform inflation?

No.

Not unless they are TIPS bonds, bought and held to maturity.

Nominal bonds can and do lose to inflation. There is an implicit expectation built in with higher rates, although that is not guarantee if inflation spikes up more than expected during your holding period.

Buy TIPS if you want guarantee.
by Elysium
Sat Mar 09, 2024 11:13 am
Forum: Investing - Theory, News & General
Topic: Why is Vanguard so bullish on international exposure in their all-in-one funds?
Replies: 77
Views: 6557

Re: Why is Vanguard so bullish on international exposure in their all-in-one funds?

OP, this is a great question. I also noticed how high the international allocation is in Vanguard, Fidelity and most of these all in one funds. It has always annoyed me. I do my own custom allocation with a 3 fund style portfolio to avoid excess international allocation. How can anybody honestly expect USA's economy to underperform the rest of the world? We can't get into geo-politics or capitalism vs socialism on this forum, but here is my summary of how the main categories of intl investing look to me. Note I've made some SWEEPING generalizations here: Japan -> shrinking population, low growth outlook, lots of debt Europe -> high unemployment, high debt, low growth outlook, tons of regulation, Germany has their act together but other EU ...
by Elysium
Sat Mar 09, 2024 10:57 am
Forum: Investing - Theory, News & General
Topic: Why is Vanguard so bullish on international exposure in their all-in-one funds?
Replies: 77
Views: 6557

Re: Why is Vanguard so bullish on international exposure in their all-in-one funds?

OP, this is a great question. I also noticed how high the international allocation is in Vanguard, Fidelity and most of these all in one funds. It has always annoyed me. I do my own custom allocation with a 3 fund style portfolio to avoid excess international allocation. How can anybody honestly expect USA's economy to underperform the rest of the world? We can't get into geo-politics or capitalism vs socialism on this forum, but here is my summary of how the main categories of intl investing look to me. Note I've made some SWEEPING generalizations here: Japan -> shrinking population, low growth outlook, lots of debt Europe -> high unemployment, high debt, low growth outlook, tons of regulation, Germany has their act together but other EU ...
by Elysium
Sat Mar 09, 2024 10:54 am
Forum: Investing - Theory, News & General
Topic: Why is Vanguard so bullish on international exposure in their all-in-one funds?
Replies: 77
Views: 6557

Re: Why is Vanguard so bullish on international exposure in their all-in-one funds?

OP, The simple answer is that Vanguard performance chased! That may sound shocking to many, but they did. There was a period of outperformance for Intl from 2003-2007, there was talk of USD losing it's dominance, Euro becoming more stronger, and it did gain a lot during that time. It was at the end of this timeframe then Vanguard went on to increase their Intl allocation to 40% in the TR funds from the 20%-25% they originally held (in line with Jack Bogle and the Bogleheads recommendation). They did use a paper they published to make up an excuse for this performance chasing. We see many examples of this "approved" performance chasing, so long as it is backed by a paper that shows merits of approach then you performance chase into...
by Elysium
Wed Mar 06, 2024 5:28 pm
Forum: Investing - Theory, News & General
Topic: Emerging Markets Stocks have been a complete disaster
Replies: 170
Views: 15837

Re: Emerging Markets Stocks have been a complete disaster

Nathan Drake wrote: Mon Mar 04, 2024 11:40 am Peak pessimism in EM makes me feel good about my large allocation going forward
You must've been feeling pretty good for a long time :D given how long Intl/EM has looked cheap without gaining, they are always on every forecasters top list, yet no light at end of that tunnel.

In all seriousness, I hope they do well, because it is sort of getting very boring with just US Tech/Growth the only story going on for over a decade plus now.
by Elysium
Wed Mar 06, 2024 5:17 pm
Forum: Personal Investments
Topic: Are factors dead?
Replies: 84
Views: 10770

Re: Are factors dead?

It's instructive to look at the history of what we've been told about the oldest of all factors, the size factor. It was described by Rolf Banz in a 1980 paper calling it the "small firm effect." In 1981, Dimensional Fund Advisors (DFA) launched their first fund, DFSCX, currently named the "DFA US Micro Cap Portfolio," on the strength of it. So that was the start of "factor investing." More than forty years later, the average return of DFSCX from 1982 to the present has been 11.23%, compared to 11.45% for the Vanguard 500 Index Fund. […] The best you can say is that a DFSCX investor willing to wait forty years would not have suffered any harm relative to an S&P 500 investor. Excellent post. One minor quibb...
by Elysium
Sun Mar 03, 2024 11:04 am
Forum: Investing - Theory, News & General
Topic: Emerging Markets Stocks have been a complete disaster
Replies: 170
Views: 15837

Re: Emerging Markets Stocks have been a complete disaster

He often writes articles like this, but he often wrongfully paints a picture. The reality is that EM stocks are very volatile and they go though some periods when all of the excess returns are given away in a series of years of upheaval. If you happen to pick a period like that then they look like a complete disaster, although they are not. In fact, they are better than Developed international investing, both from diversification benefits and returns perspective. See here comparison between Vanguard EM index fund, DFA EM value fund, Total Intl index fund, and 500 Index fund, since 1999. This is the earliest period for DFEVX. If you go back to 1995 when VEIEX first became available then the picture is different, as there was a two year perio...
by Elysium
Sun Mar 03, 2024 10:34 am
Forum: Investing - Theory, News & General
Topic: Are We in a Stock Market Bubble? (Ray Dalio)
Replies: 132
Views: 15394

Re: Are We in a Stock Market Bubble? (Ray Dalio)

the stature of then Fed chair Alan Greenspan... or Warren Buffett They don't know either, especially Greenspan. Not sure why everyone still thinks he was brilliant, the guy seems to have missed everything from bubbles to the roots of the Great Recession. He didn't miss anything, see the examples I quoted above, he specifically called out in address to congress the systemic risks posed by Government funded mortgage giants Fan/Fred, many years before they almost brought the system down in sub prime crisis. His hands were tied by the lawmakers/politicians who always wants easy money policy to keep the public happy. Both the exec branch and congress wanted easy housing policy back then to boost the "American dream" of home ownership ...
by Elysium
Sun Mar 03, 2024 8:15 am
Forum: Investing - Theory, News & General
Topic: Are We in a Stock Market Bubble? (Ray Dalio)
Replies: 132
Views: 15394

Re: Are We in a Stock Market Bubble? (Ray Dalio)

Yes, but even THOSE two were too soon... Greenspan said that in 1996, and the market more than doubled from there. Buying and holding from 1996, and completely ignoring Greenspan still made you rich with great returns. And Buffet first talked about derivatives being "weapons of financial mass destruction" in 2002, but they didn't hit us until 2008-2009. He did mention derivatives again in his 2008 letter, which was indeed timely, but technically, completely ignoring Buffet and just buying and holding through 2008-2009, as many of us here did, one still got rich (not all - there was panic even on Bogleheads during that time, but there were still plenty of steady voices then) Even the smartest of financial gurus like Greenspan or B...
by Elysium
Sat Mar 02, 2024 7:19 pm
Forum: Investing - Theory, News & General
Topic: Are We in a Stock Market Bubble? (Ray Dalio)
Replies: 132
Views: 15394

Re: Are We in a Stock Market Bubble? (Ray Dalio)

As to the original post on Dalio's prediction - I say all opinions are interesting to read and all voices make a market. Do some voices have more weight that others, perhaps, but is Dalio that voice? I say Meh, don't care to worry too much about a professional money manager/hedge fund boss with mixed record. Now, if someone the stature of then Fed chair Alan Greenspan in today's world makes a "irrational exuberance" or Warren Buffett with "weapons of financial mass destruction" comment then I would pay attention. This may not be 1999 or 2007, although this may be 1994, and that means we need to keep paying attention to see if this becomes either of the other two. Bottomline, we should not react to all voices all the time...
by Elysium
Sat Mar 02, 2024 7:13 pm
Forum: Investing - Theory, News & General
Topic: Are We in a Stock Market Bubble? (Ray Dalio)
Replies: 132
Views: 15394

Re: Are We in a Stock Market Bubble? (Ray Dalio)

I do have a portfolio of individual stocks within my retirement portfolio and I cannot help but notice the Nedsaid's Magnificent Two: Microsoft and Applied Materials. Both have just been on fire and I have decided not to rebalance these two stocks or to rebalance my portfolio in general. I am just going to enjoy a rising stock market. One reason that my investment performance has been a little disappointing in recent years was that I aggressively rebalanced my portfolio once it started hitting new highs again in July 2013 and continued this strategy until Covid hit in 2020. I harvested a lot of gains. Over time, I sold about 30% of my Microsoft shares and 2/3 of my Applied Materials shares which in retrospect was a mistake, perhaps a big m...
by Elysium
Sat Mar 02, 2024 6:48 pm
Forum: Personal Investments
Topic: Market Timing = Always Bad?
Replies: 35
Views: 4103

Re: Market Timing = Always Bad?

Thanks all for the replies so far. Feel free to chime in if you have added ideas. Yes, I guess re-balancing the AA makes the most sense, rather than thinking of it like what should I sell when type problem. On a related note, what time frame do some of you retirees use for re-balancing? Once or twice a year? I have a 60/40 portfolio as well, and rebalance via bands when the major asset allocation—stocks/bonds—are out by 5%, which in this case is about 62.5/37.5. I also rebalance the assets that are a smaller portion of my portfolio with bands of 25%. I’ve been following this method satisfactorily since Larry Swedroe published it in one of his earlier books. That's not the Swedroe method. He prescribed a 5/25 rule, where an asset class goes...
by Elysium
Thu Feb 29, 2024 11:04 am
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27388

Re: Dot.Com Era/AI Era?

You probably won't find many posts here talking up NVDA because...this is Bogleheads. I am talking about BH discussion, which is happening now for NVDA/AI after the last year run up, that didn't happen in Dec 2022. BH in many ways represent general public sentiment spill over after something that already occurred. We get a lot of new posters after something happened, which is a good indication the time to invest in those things are probably late, or if the talk is negative as in case of many bond threads today then the time is right for them. I was just answering Elysium's question on why NVDA spiked in 2023, and no doubt it is because of generative AI hype and the specific time frame they mentioned was when ChatGPT was released. To me non...
by Elysium
Thu Feb 29, 2024 7:41 am
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27388

Re: Dot.Com Era/AI Era?

I am still wondering why no one thought NVDA was this great company that will grow into the sky, just a year+ back. In Sept 2022 it traded for $121, and again in Dec 2022 it traded for $160. Why? this information that this company is so great was not known then?? what groundbreaking thing happened in AI between Jan 1 2023 and now? Still waiting for that answer. It was known. My friend has been invested in AI for a long time and gave me a tip in 2020. Personally I wrote a report on neural networks in college. Elon Musk had been talking about AI applications in self-driving for a long time, and Tesla developed a chip with NVIDIA in 2019. I bought NVDA in late 2022 after trying a few generative AI applications (DALL·E related, not ChatGPT). T...
by Elysium
Wed Feb 28, 2024 5:26 pm
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27388

Re: Dot.Com Era/AI Era?

I am still wondering why no one thought NVDA was this great company that will grow into the sky, just a year+ back. In Sept 2022 it traded for $121, and again in Dec 2022 it traded for $160.

Why? this information that this company is so great was not known then?? what groundbreaking thing happened in AI between Jan 1 2023 and now?

Still waiting for that answer.
by Elysium
Wed Feb 28, 2024 5:13 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

Extreme events don't matter until they do and long term plans can be disrupted in ways that cannot recover. I have seen investors of means have to make very painful choices because they did not fully understand the interelationships of their assets and they got squeezed. We do not live forever. Making mistakes in understanding the degree of volatility you want to accept can be a big problem. For example, you wanted that sports car <or insert whatever else you want here> when you were still able to enjoy it but now you have second thoughts because your portfolio took a huge zag. And you could argue that the investor should have kept multiple buckets based on expected timeframe of consumption but at a certain point I asked myself - is all th...
by Elysium
Mon Feb 26, 2024 1:34 pm
Forum: Investing - Theory, News & General
Topic: Dot.Com Era/AI Era?
Replies: 302
Views: 27388

Re: Dot.Com Era/AI Era?

For background, I was a very young and inexperienced investor during the dot.com era. I made a ton of money and promptly watched it fade away in short order. I was young too and have similar experience, and like most people who dug deeper and deeper (until you woke up the Balrog, a nod to Tolkien), had a net loss. I remember hearing this....in the late 90s up to 2000 +, so I feel like I've seen this movie before. Yup, it's that movie plot, but different too, as many have chimed in another thread. More recently, in the first year of the pandemic, even some posters here were proclaiming things were "different this time" and some pulled all their investments out of equities. We see now how all of that worked out. Yup. We saw that mo...
by Elysium
Sat Feb 24, 2024 8:28 am
Forum: Personal Investments
Topic: Heavy Value Tilt Away from Mag 7 stocks
Replies: 221
Views: 13738

Re: Heavy Value Tilt Away from Mag 7 stocks

A large percentage of my portfolio is now tilted away from the Magnificent 7 stocks. Over the last year or so, I've been reducing the weight of these tech and growth stocks and increasing value stocks in my portfolio. I believe that the stocks that make up the Magnificent 7 (AAPL, MSFT, NVDA, AMZN, GOOGL, TSLA, META) are overvalued and will eventually underperform the market. This is a life changing, risky, and bold decision to stay the course with a heavy value tilt even as NVDA explodes higher in price. I have a very strong belief that value will be back and a regression to the mean will occur at some point. This year TSLA, GOOGL, and AAPL are underperforming the S&P 500. NVDA has been carrying the US market higher. I have decided to...
by Elysium
Sat Feb 24, 2024 8:00 am
Forum: Personal Finance (Not Investing)
Topic: Federal taxes due > $2,000
Replies: 25
Views: 3321

Re: Federal taxes due > $2,000

What's wrong with owing taxes, just plan for it and pay it at the time of filing. Make sure you pass the rules to avoid a penalty, by either giving 100% of last year or 90% of this year, so on... whether you owe it weekly, monthly, or annually, it's all the same, you always owe taxes on something, you can't prepay it, and shouldn't.
by Elysium
Fri Feb 23, 2024 1:43 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

Bringing your point of view back to the topic of the thread, I assume you'd have 100% in stocks for a 30y holding period, and none of the MVO charts McQ is sharing have any relevance to you. That doesn't mean your portfolio would be 100% stocks, because you might plan on taking portfolio withdrawals for shorter-term spending needs. No, I never meant to imply that we should go 100% stocks if we had 30 years. I knew somehow it will be get connected to that sentiment (stocks for the long run, et al). I was never 100% stocks even when I was young and just starting out, always held bonds, and always will. What I meant was locking up funds in bonds with significant price volatility for 30 years may become similar to investing in equities, at whi...
by Elysium
Fri Feb 23, 2024 1:20 pm
Forum: Personal Finance (Not Investing)
Topic: High Salary (>$500,000) careers
Replies: 244
Views: 28589

Re: High Salary (>$500,000) careers

I manage Architects who reach around this comp. What kind of architects? I don’t want to get too specific. Technology area senior Architects. So not the old-fashioned kind of architects? You know, the ones who design buildings. :wink: Designing software is like designing a building. The architect role does similar things, you have to have a blue print for the software, plan the foundation, the wiring, the plumbing, use patterns, reuse where possible, use building blocks. I always tell my peers this one profession where we don't have consequences to our "building" falling apart unlike architects designing a building. If software falls apart which it frequently does, then we just re-build it and no one falls under it. These days we...
by Elysium
Thu Feb 22, 2024 9:09 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

I'm wondering about something ... by taking a chance for a higher reward you also take a chance of a larger loss. If you bought the 30-year TIPS sold at auction today, let's assume (skip all that CPI doesn't match my rate stuff) we agree that you are as guaranteed as you can be to get a 2.2% real return. If instead you park your money in equity for the next 30 years, I think we might agree that you have a chance of earning a real return of less than 2.2% and, perhaps, even less than zero. How big do you think that chance is? And how big would that chance have to be before you'd opt for the TIPS? Extremely low! Number please ... 1% chance of earning less than 2.2% real? Or perhaps 5%? How about zero? a global diversified portfolio would lik...
by Elysium
Thu Feb 22, 2024 8:58 pm
Forum: Personal Investments
Topic: Diversification means always having to say you’re sorry.
Replies: 62
Views: 7109

Re: Diversification means always having to say you’re sorry.

unwitting_gulag wrote: Thu Feb 22, 2024 7:59 pm So, let's ask ourselves this: if generation after generation, a particular sector, despite massive tribulations and falls, generally ends up leading... well then, would it make sense to overweight that sector, not to chase performance, but all of the time?

...

Few of us, presumably, disagree with that, broadly. But what if... one of those three funds, consistently over the long term, trounces the other two?
Neither of those are likely, not impossible but unlikely. Cycles shift, sectors go out of favor, industries change lead, no one can connect innovation to Tech only forever. But it doesn't matter when you are diversified, you get everything.
by Elysium
Thu Feb 22, 2024 7:46 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

I'm wondering about something ... by taking a chance for a higher reward you also take a chance of a larger loss. If you bought the 30-year TIPS sold at auction today, let's assume (skip all that CPI doesn't match my rate stuff) we agree that you are as guaranteed as you can be to get a 2.2% real return. If instead you park your money in equity for the next 30 years, I think we might agree that you have a chance of earning a real return of less than 2.2% and, perhaps, even less than zero. How big do you think that chance is? And how big would that chance have to be before you'd opt for the TIPS? Extremely low! Nikkei 1989 is the extreme example of a a bubble that was larger than anything else, and Japan index for next 30 years is an exampl...
by Elysium
Thu Feb 22, 2024 7:34 pm
Forum: Personal Investments
Topic: Need help to retire in 5 years.
Replies: 28
Views: 4701

Re: Need help to retire in 5 years.

I calculated 8% avg return and still investing 120k a year and max out IRA. I got 2.2 million before taxes and inflation. This is with 7 years instead of 5. Both my IRA and personal account were started in my early 30's (not ideal) Im a son of immigrant parents that believed in saving the old fashioned way, My IRA will be in the 400k range by 62 and SS as well. Hopefully I did the math correct and the 8% avg return seems more on the conservative side. It's definitely possible. But you got to tell us what is expected SS and at what age. Instead of using a 4% straight withdrawal, you can use a bridge to SS then, which means you split the portfolio into two at age 55, set aside an inflation adjusted bridge to SS for a few years, leave the oth...
by Elysium
Thu Feb 22, 2024 6:43 pm
Forum: Personal Investments
Topic: Diversification means always having to say you’re sorry.
Replies: 62
Views: 7109

Re: Diversification means always having to say you’re sorry.

https://ofdollarsanddata.com/the-downsides-of-diversification/ Brian Portnoy said it best when he wrote, “Diversification means always having to say you’re sorry.” And it’s so true. You have to get used to saying sorry to yourself for owning some underperforming asset class. The significant surge in the Magnificent 7 over the past year has made it challenging for people who diversify their asset allocation. Given the unpredictable nature of the market, I believe it's time to rebalance towards safer assets. Have you ever regretted not investing more in stocks when considering underperforming assets? :confused I have an experimental stock picking portfolio that I started in Oct 2022 with the first individual stock pick in many years and it w...
by Elysium
Thu Feb 22, 2024 5:52 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

Logically, then, the criterion alternative to 60/40 stocks/BND is: -60% stocks -30% long term Treasuries -10% T-bills. That portfolio would have produced $144,900 over 1992-2023, at the slight cost of an extra 14 bp in standard deviation relative to the BND mix. $20K extra return on $10,000, 14 bp over the 11.10% SD of the BND mix. I believe that maximizes my utility. Could you have done better with short term Treasuries and/ or short TIPS substituting for T-bills? Sort of, maybe, maybe not. Swapping T-bills for VGSH and such, and replacing short Treasuries with STIP for 2011 forward, leads to a very slight loss of wealth--$143,900—but also a reduction in SD to the BND level, 11.09%, no 14 bp penalty. But, no cash—just low-loss short Treas...
by Elysium
Thu Feb 22, 2024 5:34 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

First, this all may be true for you, but that doesn't mean it's true for all of us. I have no problem at all with the volatility of my 2047 TIPS (longest in my ladder), as I am 99.999% sure that I won't need to sell it before maturity. I have plenty of short-term Treasuries to handle short-term unexpected "life happens" events. I am sure you'll disagree with this completely, but what I am saying is the volatility of 30 year TIPS is not the problem for me personally, but that if I am going to lock up money for that long and have to endure the volatility then I will lock it up in something with equal volatility but better returns, i.e., equities. Obviously, it may sound crazy since there is no guarantee with equities, but over 30 y...
by Elysium
Thu Feb 22, 2024 5:27 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

To be clear, I'm not suggesting someone with a 30 year horizon put the entirety of their fixed income portion into a 30 year TIPS. Someone who targets an expense in 30 years likely has similar targets for each year leading up to that point, and any rung of that ladder could be tapped in case of an emergency that exceeds their emergency fund. I agree that exactly balancing interest rate risk with reinvestment risk isn't for all investors, but surely some amount of matching makes sense - I do not think long-term bonds should be avoided by default. I personally think LMP is overrated. I just don't need so much safety when I already have SS, it's a duration matching tool by design. Most people already have the rungs set for them by SS, how muc...
by Elysium
Thu Feb 22, 2024 11:20 am
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

We have roundtripped to vineviz's thread first 20% in Bonds You backtest an era of falling rates this is what you get. That doesn’t make it a good plan for the future. To be fair, this thread is predicated on backtesting, while vineviz's arguments were based on duration matching which doesn't depend on any prevailing interest rate environment or historical performance. And I do think people are incorrectly focused on short term performance/volatility (as Kevin M has pointed out) when what really matters is the performance/volatility over the investment horizon. If you need the money 30 years from now, a 30 year TIPS is as riskless as you can get, with a 30 year nominal Treasury being close (IMHO). Bond ladders and barbells make a lot of se...
by Elysium
Wed Feb 21, 2024 6:25 pm
Forum: Investing - Theory, News & General
Topic: Why own bond funds with corporate holdings?
Replies: 54
Views: 4574

Re: Why own bond funds with corporate holdings?

sycamore wrote: Wed Feb 21, 2024 5:07 pm
Elysium wrote: Wed Feb 21, 2024 12:20 pm ...the now infamous thread from 2008 on "I am throwing in the towel" (or something similar sounding)...
Was it I can't believe I am thinking this [Panic and Survival 2008-09]?

I think some of those vintage threads are worth reading especially for those who didn't live through it.
Yes, that, and there is Plan B thread, one as recent as 2020: Plan B
by Elysium
Wed Feb 21, 2024 6:18 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

Agreed. Current yields are the best predictor, by a mile. But I to not think people were expecting this, even a few on this thread. Many argued bond convexity and negative yields. oh yeah, bond convexity .. LOL I remember those. I am guilty as charged when it comes to negative rates, mainly by looking at what was happening in rest of the developed world, major European countries where rates bottomed then stayed like that for years. Coming to think of it, why we still haven't broken the economy with such rapid rate increases is still a conundrum (to borrow a phrase from a former Fed chair). Anyhow, in my case I looked at 1% rates and said to myself, if this is the best I can buy because I was afraid of economy tanking seriously then I will ...
by Elysium
Wed Feb 21, 2024 3:56 pm
Forum: Investing - Theory, News & General
Topic: Can you do better than BND?
Replies: 278
Views: 35045

Re: Can you do better than BND?

This is true, of course. But it is hard to make up for a 20+ percent decline in bond prices when yields are 4 percent. If rates remain the same going forward (at 4 percent) it will take 5+ years to recover. But yes, bonds are a better buy than when yields were much lower. But that of course is not the right way to look at it, i.e., recovery from, because there is nothing you are recovery from. When you bought a 5 year duration bond fund yielding 1% at that time, you were clearly planning on getting 1% return on it over 5 years, there is no false advertising there at all. Current bond yields are the best predictor of future returns. Therefore, when rates went from 1% to 4%, you are still going to get the same, the 15% drop in price is compe...
by Elysium
Wed Feb 21, 2024 12:34 pm
Forum: Investing - Theory, News & General
Topic: Why own bond funds with corporate holdings?
Replies: 54
Views: 4574

Re: Why own bond funds with corporate holdings?

Thanks for some very insightful comments. I’m sure many here will disagree, but deciding on the details of fixed income allocation can be much more difficult than equity (where US vs. Int’l is almost the only pertinent question, and even that seems to have a simple answer to me as well (but that’s a different topic)). It seems like corporate isn’t quite as bad as I originally believed, at least in backtests, but treasuries still remain my preferred approach. Of course they can disagree all they want, but the facts are the facts, as I pointed in times of crisis they do take a hit compared to treasuries, and then you have to live with it. The difference is some are experienced enough to handle it, but a whole lot of members here sometimes ar...
by Elysium
Wed Feb 21, 2024 12:20 pm
Forum: Investing - Theory, News & General
Topic: Why own bond funds with corporate holdings?
Replies: 54
Views: 4574

Re: Why own bond funds with corporate holdings?

I still somewhat disagree with the framing like “not there when you want it most” etc. Indeed corporate bonds may have been -7% while treasuries were +2.7%, but the yields would have also changed, so as the fund starts turning over into new bonds, your corporate fund will be paying higher coupons than treasuries. One can spend those new, higher coupons “when they need them most”, and thus not have to sell as many shares to produce income. Most boglehead investors should be making withdrawals around 3-5% of their portfolio, so the bond portion still having 93% of its value may be unsatisfying to look at, but should not present a material risk to retirement safety. Much like a 10-20% drawdown in stocks should not immediately cause the retire...
by Elysium
Wed Feb 21, 2024 11:26 am
Forum: Investing - Theory, News & General
Topic: Agency Bonds, any reason to avoid?
Replies: 16
Views: 1271

Re: Agency Bonds, any reason to avoid?

No reason not to own them. In fact, there is a case for them to collect a few basis points extra over treasuries for almost same amount of risk, they'll never default anyway since there is implicit guarantee of U.S Govt. Vanguard GNMA fund which has been in existence for a long time has one of the best risk/reward ratios out of all the bond funds. That said I won't go out and seek them separately, but as part of a core bond package would like to have them included.
by Elysium
Tue Feb 20, 2024 5:59 pm
Forum: Investing - Theory, News & General
Topic: Why own bond funds with corporate holdings?
Replies: 54
Views: 4574

Re: Why own bond funds with corporate holdings?

My conclusion is that the fewer treasuries there are in a bond fund, the less diversification benefit you get. Am I missing something? OP to answer your original question then, yes you get less diversification when you move away from treasuries. However, as I showed above inspecting monthly data during extreme conditions is how you determine which bond is a good diversifier for what. Ideally you want the highest quality bonds as you hold them for protection against market turmoil in unknown crisis - such as the Covid-19 Pandemic and the 2008 GFC. The fact market recovered shouldn't be a consideration at all, how different investments behaved during the crisis and did the supposedly safe investments provided safety then is what should be lo...