Bogleheads.org

Marseille07 wrote: ↑Tue Mar 21, 2023 11:22 am I personally won't go that far, but I see how it might work out just fine.

Essentially using long-term assets for near-term goals is generally inconsistent with the central concept around emergency funds, regardless if someone prefers stocks or EDV.

Emergency funds are still useless: https://earlyretirementnow.com/2021/05/26/the-emergency-fund-is-still-useless/ I’m just a blogger, pointing out what would have been a better approach historically. The prior suggestion seems fairly common justification for strategies that I tend to double-check for personal prudence. For example it's essentially included as part of my favorite rear-view-mirror investment strategy below. Generally it's difficult to debate historical success, else be labeled " naysayers ", at least until such ideas go through a 50% drawdown for an unlucky follower. Ultimately I explain these sorts of incongruent approaches as largely revolving around alternate considerations or risk preferences. https://www.bogle...

to me what strictly constitutes an emergency fund must meet at least two criteria: 1. It must be liquid and accessible 2. It must be principal-protected To me, this strongly suggests an emergency fund consists of assets like cash in a savings account, iBonds held >1 year, short-term Tbills, etc. I tend to define along similar lines. I think of an emergency fund as a type of liquidity planning. Generally the concept typically surrounds a possibility of needing near-term assets, so it becomes debatable if significant duration and marketable assets are necessarily consistent with such an objective. Topics like emergency funds may also relate with aspects of risk management, so I personally have some tendency to disagree that an entire portfol...

I tend to categorize the Keynesian beauty contest as a madness of crowds sort of phenomenon, or potential reasoning for financial crises. Considering Keynes was writing in the aftermath of 1929, and the Times quote falls under a heading including "Dangers of Viral Finance" with a preface about "myth of the rational market", I cannot say that either was likely intended to support stock market investing based on market weight. While I do invest using indexes for various reasons, I'm not sure a wisdom of the crowd concept necessarily applies to finance or economics.
https://www.nytimes.com/2023/03/18/opin ... hange.html

WilliamOfOckham wrote: ↑Fri Mar 17, 2023 2:33 pm I agree my point is not true if these are held in a Roth IRA; otherwise, the tax keeps yield less than inflation regardless of methodology.

I guess it looks like Chained CPI might be used for tax bracket adjustment, while TIPS use CPI-U, so I suppose that might give a slight preference to Roth. Of course there seem to be edge cases with taxes, such as questioning if someone that can stay in the 12% bracket with traditional account contributions would necessarily want to pay 22% tax for a Roth.

WilliamOfOckham wrote: ↑Fri Mar 17, 2023 2:18 pm My point earlier was that none of these products actually keep up with inflation. They collect tax on inflation. A win-win for Uncle Sam.

I'm not sure this is necessarily accurate for TIPS held in a tax-advantaged account. Of course tax will typically be paid at some point, but in terms of the payment not corresponding with the methodology, I cannot say that I'm following the suggestion for all considerations.
viewtopic.php?p=2371309#p2371309

Here is a press release item from 1997. Aside from the recent period, generally TIPS have ended up paying less than nominals historically. It remains to be seen what happens going forward, but here is one taxpayer justification. How Treasury Has Benefited As an issuer of the securities, Treasury is also happy with the program. We have established a program that, over the years, will cost the government and the taxpayers less than nominal debt. This will result from the government, instead of investors, taking the risk of inflation. In brief, we will receive the inflation risk premium instead of paying it. And we can bear the risk of inflation more efficiently than can any single investor, no matter how large. https://home.treasury.gov/news/...

longinvest wrote: ↑Fri Mar 17, 2023 10:35 am Can you further explain your thoughts?

Essentially government policy is likely to have more influence on inflation than choices by an individual or corporation, so unexpected inflation risk probably does not equally affect those three entities. Your own line of thought seems to run in a similar direction, although potentially for different reasons.

If inflation-indexed borrowing isn't attractive for corporations and individuals, why should it be attractive for governments? I'm not sure that individuals, corporations, and governments necessarily share similar considerations. Basically I tend to think along the lines of David Swensen's position given in Unconventional Success. It seems reasonable enough to me that the justification upthread about "reducing the cost of capital to the federal government" might be one reason to consider inflation-indexed borrowing attractive. Of course it would probably make sense to consider revisiting that position when there's a big jump in financing cost, such as exhibited by how much TIPS payments have jumped relative to their portion of ou...

LadyGeek wrote: ↑Fri Mar 17, 2023 9:08 am I'm not an expert, but federal regulations limit savings accounts to 6 transactions per month as defined by something called "Requirement D'.

I'm under the impression that what you're referring to was suspended. Those terms appear to have been removed from my account, although there is a mention here that some banks still have withdrawal limits.
https://www.forbes.com/advisor/banking/ ... ulation-d/
https://www.federalreserve.gov/supervis ... tr2106.htm

Harmanic wrote: ↑Thu Mar 16, 2023 6:35 am "Broke: The New American Dream" is not on Kanopy. If it is at your local library, you must be in one of the 10 that I listed.

Skimming got me again. It looks like Michael Covel's webpage links to Vimeo as mentioned, and his books or audiobooks around trend following have a wider distribution.

Harmanic wrote: ↑Wed Mar 15, 2023 5:11 pm

Mr.BB wrote: ↑Wed Mar 15, 2023 4:58 pm

Dolcetto wrote: ↑Wed Mar 15, 2023 2:19 pm I’m super excited to watch this tonight. Frontline, and more specifically their documentary “The Retirement Gamble,” was my introduction to retirement saving and Bogle, caused me to find this forum, and inspired me to open my Roth IRA back in 2015.

I love "The Retirement Gamble", a great eye opener for anyone. Another similar documentary was called Broke: The American Dream, which was absolutely great. Unfortunately I can't find that one anywhere.

I took a stab at it. The only place that has it is Vimeo and they want $28 to stream it. Not even any of the public libraries have copies.

Our local library happens to list it and links to Kanopy.com

kalarama wrote: ↑Wed Mar 15, 2023 1:37 pm I did a break-even calculation with buying I-bond before May 1 with current 0.4% fixed rate and 6.89% for first six months versus buying in May with a new fixed rate and new variable rate. Subsequent variable rates would be the same between the two scenarios just one month apart.

A May purchase begins paying future inflation 4 months in advance of a March purchase, so time to breakeven may depend on presumptions around future inflation to some extent. I plugged the 2008 rate into my understanding of the following, and it looked fairly similar to your number.
viewtopic.php?p=6942891#p6942891

#Cruncher wrote: ↑Tue Mar 14, 2023 8:36 pm Likewise, with today's release of the February CPI report, we know exactly the nominal redemption value of the TIPS that matures on 4/15/2023. Row 15 of the following table shows how it can have a positive nominal return even while its real return is negative.

Interesting, thanks for posting.

cmc89585 wrote: ↑Tue Mar 14, 2023 3:39 pm If I buy ibonds now, won't the fixed rate stay at the current rate of 6.89% through the life of the iBond? To me, that seems like a good rate, especially if we don't know what will be announced in May for the next year.

The current fixed rate is 0.4%, which is what lasts for the life of the I bond. The 6.89% primarily comes from past inflation and only lasts for the first 6 months. As noted by #Cruncher, the 6.89% just amounts to $0.86 for each $25 invested. Afterwards recent CPI-U inflation primarily determines future payments.

jebmke wrote: ↑Tue Mar 14, 2023 12:58 pm At the very short end, Tips become nominals, essentially. I think Kevin M had a thread section on this.

I agree that this might be what the original poster was questioning. I haven't read through the following, since it's not exactly in my current area of interest, but I'd guess maybe this gets into the question being asked here.
viewtopic.php?p=7005918#p7005918

GP813 wrote: ↑Tue Mar 14, 2023 12:16 pm I'm basically trying to figure out what a purchase before May will get for the next 12 months.

I read it wrong, and I see what you were intending. I'll agree it's currently around 5% for the first year, without the 3 month penalty if redeemed before 5 years. I'd have to look into how exactly to calculate the interest on interest part to get the decimal correct.

GP813 wrote: ↑Tue Mar 14, 2023 12:02 pm I might be using the wrong numbers and the wrong math! But I'm trying to figure out how to do it myself without relying on a blog. I believe February is (300.84) - (296.808) September = .01358 (1.36%)

So far that would be:

.004+(.0136+.0324)+(.004*.0136)+(.004*.0324) = .050184

5.02%

I'm trying to calculate this for purchases before May. You get the current .40% fixed rate, 3.24%, and we are trying to calculate the next Semiannual (1/2 year) inflation rate.

If you use 0.0136 for the semiannual inflation rate, then you just need to plug in a fixed rate. Let's say that they match the fixed rate from 2008 at 0.70% then the math is:
[0.0070 + (2 x 0.0136) + (0.0070 x 0.0136)] = 3.43%

Is this the formula for calculating a purchase before the May fixed rate reset with what we know so far? I tend to simplify along the following lines from Tipswatch. Doubling the half year inflation number and adding the fixed rate is close enough for my own estimated purposes. The actual math is listed at Treasury Direct. The 0.0324 in the example is the previous half-yesar inflation rate, and it's basically a given the next will be lower. The 0.0040 in the example is the previous fixed rate, which I'd expect to be a bit higher. I'm not sure of your listed math, since both those numbers seem to show up. https://tipswatch.com/tracking-inflation-and-i-bonds/ https://www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/#:~:tex...

HomerJ wrote: ↑Mon Mar 13, 2023 12:38 pm The actual predictions made back in those years do not fit that line at all...

While my understanding of statistics is likely limited compared to Carl T. Bergstom and Jevin D. West, I agree that it's probably rather safe to say that labeling future out of sample data as a prediction meets the emphasis of their book. Here is a prior thread on the reference.
viewtopic.php?t=320775

Inflation has nothing to do with it. I don't know what inflation will be in the future when I purchase a bond, and you don't either. Your preference is for yields to fall when there is inflation? You have repeatedly made the claim that bond investors want rates to fall. It makes absolutely no sense that any institution or individual would prefer a lower rate of return on their portfolio, given the same set of economic conditions. Pension funds and insurance companies were not rejoicing in the 2010s when the yield on the 30yr fell from 4% to 1.50%. Retirement savers aren't looking at 5% yields on t-bills today and wishing the Fed would cut back to 0% so they can realize a NAV gain. I'm sorry but you will not convince me that earning a lower...

No rational saver would prefer buying BND at 4% yield over 14% yield At some level, increasing yields may suggest elements of increasing risk to a nominal bond lender. As an example, both unemployment and interest rates generally increased across the 1970s, although the actual graphs consist of spikes and dips across time. It may not necessarily be unreasonable for a lender to prefer a 4% yield with expectations of limited inflation compared to receiving a higher rate in an environment with higher inflation. As a saver, I cannot say that I'd necessarily prefer an environment with BND offering a 14% yield, since such an interest rate environment probably isn't consistent with the sort of considerations that personally allow me to save. Of c...

John Bogle often recommended buy and hold investing. It might be reasonable to describe the Adaptive Asset Allocation Policies link from Mr. Sharpe's website as a buy and hold style of investment strategy. Does he have any thoughts around why contrarian, or constant-mix, strategy or products are often recommended for retail investors? Part of my agreement with John Bogle was in relation to his comments around buy and hold investing, so I'd be interested in any thoughts Mr. Sharpe might have on the subject. https://web.stanford.edu/~wfsharpe/aaap/index.html As an example of typical recommendations, the Bogleheads Investment Philosophy includes five references to rebalancing. The webpage suggests the approach "will help you to stay the c...

I’m looking for a simple action plan. But maybe that’s not possible and I just have to accept a “close enough” solution. The last post seemed to suggest holding a 2X cash position to match the bond fund duration may do the job (20% cash?). I’ll have to figure out what that means for my portfolio’s longevity. Many retirement planning scenarios focus on 30 years. While there seems to be an error in the percentages from the first post, it looks like the intent is to place at least 32 years of payments into cash and bonds. That suggests there may be many simple plans that would solve various typical planning scenarios. Of course you might also be planning for a significantly longer timeline. From a theoretical perspective, a mix of cash and a ...

Over the past year we have all witnessed the correlation of stocks with bonds which challenged the assumption of bonds acting as diversifiers within a portfolio (see HFEA discussions). The idea was basically debatable as rear view mirror investing before 2022, although I personally consider the following as the pinnacle. https://www.bogleheads.org/forum/viewtopic.php?p=5251290#p5251290 So this brings me to my question. Is it possible to design a bucket strategy where the cash bucket is INTENTIONALLY set to match the duration of the bond bucket? For example, a $4 million portfolio could be divided into to $2.4 million (60%) stocks, $1.6 million (30%) intermediate treasury bonds, and $400,000 (10%) cash such that bucket one would represent a...

I tend to agree with all your points…… So where did your subjective analysis cause you to land at this moment? Are you sticking with 100% Total bond, or are you doing something different? Our personal finance includes considerable property debt, and my focus is on liquidity. Basically I don't consider duration beyond short-term reasonable for our current situation and choices, regardless of the yield curve. Now that market yields exceed savings bond rates, it's clear that I'm potentially choosing trade-offs, while 2020-2021 the main consideration largely revolved around either keeping or eliminating liquidity. David Swensen's position from Unconventional Success probably comes closest to my thinking. I'd summarize the fixed income portion ...

I tend to agree with something like Knightian Uncertainty, or future market price ambiguity, so I generally consider liquidity and preserving future purchasing power as potentially separate targets. Historically there have simply been times that markets have exchanged a considerable reduction in value for liquidity, so personally I don't care to place myself in such a situation where it might be necessary to rely upon a marketable asset for near-term concerns. I think of liquidity as distinct from targeting future value of marketable assets after inflation and taxes. Generally I try to avoid market timing positions, and I cannot say that both targets can necessarily be satisfied across an indefinite future by the same asset within the recen...

you've got direct indexing products, not just for individuals but also for institutions like pension funds. Just spitballing, I would guess everything together would be about 25%, but the best guess I could find was an estimate at 37%. I can't find the article again, but they basically reviewed trades after index changes were announced and tried to "gross up" the total assets tied to the index that would have been making those trades. One wonders if their estimate might have been exaggerated by traders trying to front-run index change transactions. This appears to be the latest copy of the working paper The Passive-Ownership Share Is Double What You Think It Is by Alex Chinco and Marco Sammon. https://www.alexchinco.com/double-wh...

2) Is there another better way to look at this? Personal situation might offer an alternate position to view the planning. If someone has a significant portion of tax advantaged accounts and plans on using a good portion of TIPS, I suppose using real dollars might make sense. The main reason I mention this is simply that using real values is fairly reasonable for planning around individual TIPS held to maturity in tax advantaged accounts, at least the situation is conceptually simpler than some other scenarios. Of course when using real value it's still necessary to get other assets on the same page, such as estimating future value of nominal bonds and stocks. Essentially I'm merely referring to the following situation around estimating TI...

Elysium wrote: ↑Wed Mar 01, 2023 10:22 am I don't understand why people on this forum pay so much attention to this failed stock picker.

I'll take a wild guess that at least part of the interest may relate with investment thoughts from someone having a top ten personal wealth in the world. The charity lunches have went for millions. These are free.

It looks like there was some international and factor discussion on the prior thread.
viewtopic.php?p=6901756#p6901756

Nominal value of TIPS can potentially decline during deflation. Along those lines, I tend to think there may be practical reasons why relative TIPS value may decline during a deflationary recession. The historical rate spikes you mentioned also exhibited declines in the breakeven rate during those deflationary recessions, and I would not expect that sort of relationship to hold during an inflationary event. There was disagreement about what amounts to lower TIPS valuation in the following thread. For my own purposes I tend to think in terms of TIPS yield for valuing the investment, but for nominal bond holders the breakeven rate is probably more relevant if the plan is to try to move from nominals to TIPS during a deflationary recession. I ...

When was the last "normal" recession? 1990? Of course every recession is unique but we also need to remind ourselves that not every recession needs to look like a disaster movie like the last couple we've seen. I tend to read the original post as effectively suggesting a structural event. Labeling current levels a bear market rally implies a lower ultimate bottom in the future. Personally my own knowledge does not have clear reasons to support either suggestion at this time. I don't consider the 2000 comparison very compelling for the current situation, yet I try to plan for being okay regardless of how stock prices change. This group at Goldman Sachs offered one of the better outlooks on the 2020 decline, in my opinion. At least...

What results have you gotten when calculating personal inflation? Honestly, I only occasionally check my yearly spending. I haven't attempted to check where my yearly expenses ended up in 2021 and 2022. I had a rough idea about our yearly spending previously. It had been steady enough that, aside from occasional splurges, I didn't have a clear reason to expect our fixed living expense increases necessarily exceeded CPI-U. We had wedding and honeymoon expenses across the last two years, which surely increased our total spending, regardless of other considerations. I tend to draw a hard line between the concepts of inflation and budgeting. Our discretionary budget has included a fair amount of slack, due to limiting fixed costs. Some of our ...

jco wrote: ↑Thu Feb 23, 2023 8:38 am Gotcha. Is there a reason that I'm not seeing T-bills of longer duration?

New issues will follow the auction schedule. I only have a Vanguard account, and my understanding is that other brokers similarly limit new bills to a shorter range compared to say Treasury Direct. Once the other auctions get closer, I'd expect them to show up. At least that's how it generally works at Vanguard, where I think auctions can only be selected after the announcement. The auction schedule is available below. Some auctions happen more often than others, for example I think the one year bill is auctioned roughly once a month.
https://www.treasurydirect.gov/auctions ... ns-happen/

After a rough period, are Bonds still the "go to" for your safe % of your portfolio? I didn't subscribe to a line of thinking that might label bonds as "safe" before or after 2022, since that approach may not appear consistent with personal objectives. I tend to label bond funds as a type of risk assets, so I expected their value could fall in a rising rate environment, or the reverse. I view bonds as contracts that have a future maturity date, which shortens over time, especially in a low rate environment with limited coupon payments. I'm not sure why it would be "safe", for my considerations, to fund near-term expenses through longer-term assets that are subject to market price variation. That may be appropr...

No bear market has ended without Fed cutting rates. I'd be willing to suggest that recessions have historically been accompanied by falling federal funds rates. Presuming this is intended to refer to stock bear markets, clearly the statement is not accurate. The first period I checked was the 1987 decline, and it looks like the federal funds rate generally increased across that event. https://fred.stlouisfed.org/series/FEDFUNDS https://www.goldmansachs.com/insights/pages/gs-research/bear-repair-the-bumpy-road-to-recovery/report.pdf this is following the same path as the 2000-2003 bear. While Jeremy Grantham has basically endorsed this position, I'm personally reluctant to use a word with identical as a synonym to compare the events, since ...

secondopinion wrote: ↑Tue Feb 21, 2023 12:43 pm The best hedge against a bad bear market is having no debt.

I'd think an offsetting financial position may depend on what exactly someone intends to accomplish. Current market rates happen to be higher than leading fixed rate mortgages during quantitative easing, and local or national housing prices appear to have increased at a greater rate the past few years. At this point I cannot say using debt to turn some living costs into normal payments was necessarily detrimental. It's always possible part of a financial system could break in the future, but generally unexpected inflation may tend to be more advantageous to fixed rate borrowing than marketable lending.

Svensk Anga wrote: ↑Tue Feb 21, 2023 9:52 am If the oft-predicted Fed-induced recession materializes, interest rates are liable to collapse in short order, depending on how severe it is.

This sort of depends on which interest rates are considered, and the severity of the event. Generally TIPS may have declining nominal value in deflation. A severe deflationary recession could result in lower nominal rates, while higher real rates remains possible. For example the 2008 and 2020 recessions included limited-time TIPS rates spikes, according to FRED charts.
https://fred.stlouisfed.org/graph/?g=10jHA

muel87 wrote: ↑Mon Feb 20, 2023 3:30 pm Thought I might be missing some hidden cost.

I tend to consider the following a reasonable overview of ETF expenses.
https://www.schwab.com/learn/story/etfs ... eally-cost

barrybonds282 wrote: ↑Sun Feb 19, 2023 4:23 pm I would like to be able to invest in bonds without going through the bond "market" and bond "funds".

I forgot about demand notes, like Toyota IncomeDriver Notes. The companies I looked at were offering nothing I'd consider based on the terms I remember. They're floating rate, so possibly not exactly what you're talking about, yet I suppose maybe there are some similarities to this criteria. These seemed unattractive to me from a lender's perspective, but here is one thread that showed up on a search.
viewtopic.php?t=340088

Why invest in tradeable bonds where the principal goes down when normally a bond should offer stability of principal and regular interest payments? If rates fall, immediate value may rise. Current price of marketable bonds can potentially increase or decrease. Some bond strategies are clearly based around market rates potentially decreasing. Why must I go through a broker to get a bond? It's possible to buy marketable Treasury bonds or savings bonds at Treasury Direct, but some people choose to buy marketable bonds from brokers to make it easier to sell before maturity. Why can't companies just set up a website where they offer bonds that don't change in value and the only risk to your principal and interest payments is the company going b...

The yield curve actually inverted in June/July, so there was more time. I'm not seeing any inversions until late October at the earliest: I tend to think of 6 months to one year as the general nominal peak recently. Here is one year compared to 10 years. It looks like these rates happened to cross around July for this comparison. https://fred.stlouisfed.org/graph/?g=10a1I By the way, the last few times the yield curve inverted was back in mid-2019/early-2020. All those times fit the pattern of the 10-year prices going up during from the start to the end of the inversion: It's somewhat subjective if someone necessarily wants to include that point in time as relevant to current considerations, since inflation probably wasn't a primary concer...

WoodSpinner wrote: ↑Wed Feb 15, 2023 8:38 am Can you tell me more about the inflation drag mentioned above? Not sure I understand this concept….

Some comparisons of taxable, Traditional, and Roth depend on assumptions. While I do not always agree with simplifying assumptions from various perspectives, I expect the following is probably correct within the given context.
viewtopic.php?p=2371309#p2371309

I presume you are referring to quotes from various authors, along the lines of the gem links from the following. https://www.bogleheads.org/wiki/Taylor_Larimore%27s_Investment_Gems One action that I adopted from reading the forum is tax loss harvesting, which I think of as a way to emotionally downplay early taxable investment price declines. I also have started thinking of my assets more as a single or whole source of funds, rather than separate buckets to meet various interests. I don't remember any specific threads that exactly led in those directions, but both were clearly influenced by reading the forum. For the past couple decades I've worked for private consulting businesses, and since a significant portion of our income relies on th...

bsteiner wrote: ↑Fri Feb 10, 2023 3:03 pm Occasionally when their incomes are comparable:

To get a lower floor for the medical expense deduction if one spouse has large medical expenses.

This was the reason I wanted to look at how things might work out for filing separately. We had been using IRS Free File before getting married. It looked like our combined AGI put us outside being able to use Free File for a joint return, so I figured I'd start by seeing what the option we used last year indicated for filing separately.

I considered this, until software clued me into reviewing IRA contribution limits for spouses that have lived together at any time during the year.

OverseasBH wrote: ↑Fri Feb 10, 2023 11:56 am Been doing this for years, always seems to work out, within a very short time frame time, of no more than a week after I have made the decision.

This year and 2020 are the only times I've taken losses. Generally I'm not sure how to personally optimize a point in time to take a loss. All I really know is that my 2020 exchange was below current prices. I figure if prices happen to go lower, I'll just reconsider another exchange in the future. I'm historically pretty awful at guessing market bottoms, and I remember 2020 prices going up while JP Morgan and some others were making headlines suggesting additional declines.

I already decided but have been sitting on this sale for 3 straight trading days now, waiting for a down day. I never TLH on an up day. VEMAX has risen the last two days, so here I am still awaiting a down day like hopefully today to make the exchange and take the tax loss for these really old shares. I really have no idea where this year winds up, so I have even less confidence around the next week, day, or hours being up or down. I keep VEMAX in tax-advantaged, but I decided to just take losses on VTMGX at the start of the year, since I had new IRA space. Essentially I don't see the point in choosing an up or down day, because I can't say what tomorrow brings. Personally my tendency as a passive investor is just to make a decision, regar...

Honestly as a mutual fund holder, I usually decide what I'm going to do outside trading hours for convenience. The only times I remember deciding to trade during the day was during 2020 price declines. I think there were a few times that I heard prices were falling, so I checked in to see where the equivalent ETF stood, in order to put in a buy before close. My impression is that US exchange prices can still move, regardless if it's a foreign fund, based on past ETF pricing. My opinion would be to decide now if you want to sell, or see where where the ETF stands near close to decide. It looks like VWO is the ETF for VEMAX.