Search found 2124 matches

by AnEngineer
Sat Mar 25, 2023 7:10 am
Forum: Personal Finance (Not Investing)
Topic: Double first mortgage payment?
Replies: 26
Views: 2779

Re: Double first mortgage payment?

With current rates, paying off your mortgage early is likely to be higher after-tax returns than investing, so any tricks that get you there are probably not bad advice. I agree, but this doesn't do that. Instead as the extra payments accumulate you basically bank future payments, but the principle doesn't decrease ahead of schedule. This method does the paying early, but with the same number of dollars and the mortgage actually exists for the same amount of time, unless you tell your mortgage company to apply some of those payments to the principal at some point. This is because when you send money to your mortgage lender they might as well stuff it in their pocket until it comes time that a payment was due and then they suddenly remember...
by AnEngineer
Wed Mar 22, 2023 9:59 pm
Forum: Personal Finance (Not Investing)
Topic: Overcontribution to HSA due to mid-year job switch
Replies: 8
Views: 630

Re: Overcontribution to HSA due to mid-year job switch

I did call my HSA custodian and talked to two people. Both of them were fairly unhelpful (one of them telling me that since I was under the $7300 limit that there was no problem, and I had to explain that the limit was pro-rata by month). In any case, I have the form for removal of excess contributions filled out. The only part that I'm still confused about is the tax impact of this. I expected that by removing these excess contributions, I would realize more income for 2022 and thus my tax liability would go up. However, unless FreeTaxUSA did something to take this into account from the get-go, it seemed like my tax liability stayed the same even when I answered that I would remove the $696 from my HSA. Should my current tax liability not...
by AnEngineer
Tue Mar 21, 2023 7:26 am
Forum: Personal Finance (Not Investing)
Topic: Mortgage points question
Replies: 6
Views: 500

Re: Mortgage points question

scsiguru wrote: Tue Mar 21, 2023 7:17 am I'm currently working with a lender to get a conventional loan on a home my wife and I just purchased. He gave me a couple of scenarios - one with points and one without. I calculated the break even period and it would be around 5 years. I'm thinking that with interest rates now over 6% for a 30 year loan that the chance I'll refinance in the next 5 years is pretty high. I haven't applied for a loan in years so any suggestions are appreciated.
Consider not just the breakeven point, but also how it compares to other alternatives, i.e. investments, that you would use the money for instead of points.
by AnEngineer
Mon Mar 20, 2023 3:42 pm
Forum: Personal Finance (Not Investing)
Topic: When to drop full coverage insurance
Replies: 49
Views: 4562

Re: When to drop full coverage insurance

I disagree with not carrying the comprehensive and collision coverage; I found it, in practical experience, to be penny wise and pound foolish. At one time, I thought of saving $340 per year in insurance premiums by increasing my auto deductible to $5,000 instead of the normal $1,000. Guess what ... after about two years, I was involved in an at-fault collision, and the repairs to my car came to about $5,600 (fortunately a minor fender bender, but the front of the car needed some body work). I did pay it out of pocket, but it stung. I went back to paying $340 extra per year but carrying lower deductible. But how much would you save by dropping it completely? Not even interested in finding out, sorry ! Okay. Then I'll just highlight that th...
by AnEngineer
Mon Mar 20, 2023 12:49 pm
Forum: Personal Finance (Not Investing)
Topic: When to drop full coverage insurance
Replies: 49
Views: 4562

Re: When to drop full coverage insurance

lakpr wrote: Mon Feb 06, 2023 8:00 pm I disagree with not carrying the comprehensive and collision coverage; I found it, in practical experience, to be penny wise and pound foolish. At one time, I thought of saving $340 per year in insurance premiums by increasing my auto deductible to $5,000 instead of the normal $1,000. Guess what ... after about two years, I was involved in an at-fault collision, and the repairs to my car came to about $5,600 (fortunately a minor fender bender, but the front of the car needed some body work). I did pay it out of pocket, but it stung. I went back to paying $340 extra per year but carrying lower deductible.
But how much would you save by dropping it completely?
by AnEngineer
Wed Mar 15, 2023 6:34 pm
Forum: Personal Finance (Not Investing)
Topic: Sharing college costs with children
Replies: 107
Views: 8529

Re: Sharing college costs with children

I'm surprised by all these comments about "skin in the game." If your child fails or barely passes their first year, then you can re-evaluate paying for an expensive school and have them transfer somewhere else. Otherwise if you can afford to pay for their school why wouldn't you? One read could be that it's from parents who can not comfortably fund an expensive education who are trying to get around the principal-agent problem where under some conditions the student decides and the parent pays. Since the student isn't paying there's no (or at least a different) cost benefit analysis. If I pay the same no matter what, why wouldn't I pick the one that might be 10% better (that's 2x the price)? If 'skin in the game' means that the ...
by AnEngineer
Wed Mar 15, 2023 6:01 pm
Forum: Personal Finance (Not Investing)
Topic: Sharing college costs with children
Replies: 107
Views: 8529

Re: Sharing college costs with children

I'm surprised by all these comments about "skin in the game." If your child fails or barely passes their first year, then you can re-evaluate paying for an expensive school and have them transfer somewhere else. Otherwise if you can afford to pay for their school why wouldn't you? One read could be that it's from parents who can not comfortably fund an expensive education who are trying to get around the principal-agent problem where under some conditions the student decides and the parent pays. Since the student isn't paying there's no (or at least a different) cost benefit analysis. If I pay the same no matter what, why wouldn't I pick the one that might be 10% better (that's 2x the price)? If 'skin in the game' means that the ...
by AnEngineer
Mon Mar 13, 2023 1:57 pm
Forum: Personal Finance (Not Investing)
Topic: Sharing college costs with children
Replies: 107
Views: 8529

Re: Sharing college costs with children

jazzcat73 wrote: Sat Mar 11, 2023 2:33 pm I have two high school age kids. Both are strong students with a reasonable shot at top schools. We will not qualify for any need based aid. We could afford to put the through school from employment cash flow and/or savings in taxable. However, I want to create an incentive for them to take the cost of education seriously, including considering the excellent in-state schools where we live and applying for merit based and other scholarships.
Give/promise them a fixed amount of money no matter what they do for college. Then they directly benefit from any cost savings and are heavily incentivized to weight the benefits of spending more. Or was the point for you to save money?
by AnEngineer
Sat Mar 11, 2023 7:26 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

We're talking about guarantees, so that means a theoretical counterexample removes the guarantee. But they don't even need to be as extreme as you think. Let's talk about an initial 1% rate and then a 2.5% increase just before the end (as I suggested earlier) for a 10 year average duration fund over 20 years. 1% over 20 years yields 1.01^20=1.22x starting value if you reinvest interest. 2.5% increase changes value to (1.01^10)/(1.035^10)=0.783x value before drop or 0.956x starting value, meaning you lost money at the end of 20 years. Do you disagree with this math? No, I do not disagree with the math. I will concede that, with a given starting date, it is possible for a large enough increase in interest rates just before the end of 2D to t...
by AnEngineer
Sat Mar 11, 2023 6:59 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

For my proposed portfolio and scenario, AnEngineer is correct to point out that “subsidizing” a bond bucket with a cash bucket for 2X duration is not guaranteed to work, because on the very last day I CAN lose my shirt, albeit from a higher starting point than my original investment given the accumulated interest. I appreciate you trying to figure out how to reconcile the perspectives. My final calculation, though, is relative to the original investment amount. Florida Orange is correct that if you knew the interest rates ahead of time, you could find a date at which your bond fund would recover. However, that doesn't translate into a guarantee because the date depends on the interest rates that you'll see. I think you're getting go the ri...
by AnEngineer
Sat Mar 11, 2023 6:48 am
Forum: Personal Finance (Not Investing)
Topic: HSA Overcontribution and tax form 5329
Replies: 8
Views: 730

Re: HSA Overcontribution and tax form 5329

Weathering wrote: Fri Mar 10, 2023 10:04 pm Did you have a prior year in which you contributed under the HSA limit?
I believe your tax software will ask you that question and allow you to designate the over contribution this year toward the previous year.
I've never heard of this being allowed. Do you have a source on this?
by AnEngineer
Fri Mar 10, 2023 8:03 pm
Forum: Personal Finance (Not Investing)
Topic: HSA Overcontribution and tax form 5329
Replies: 8
Views: 730

Re: HSA Overcontribution and tax form 5329

dorster wrote: Fri Mar 10, 2023 12:30 pm Apparently the "Excess Contribution Removal" can't happen through Fidelity but needs to happen through her workplace HSA (and specifically her 2022 workplace HSA).
You can remove excess contributions after a rollover to Fidelity and there are scenarios where you have to because you moved the entire balance. It's more complicated and you have to get some of the numbers for them to calculate earnings though.
by AnEngineer
Fri Mar 10, 2023 8:00 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

I guess in some purely theoretical sense there's no guarantee, but even at a much lower starting interest rate it would take an impossibly large increase in rates at the last minute to wipe out almost 20 years worth of interest payments. Remember, it's not the price per share, it's the total value of your investment. If you've been reinvesting the dividends, you have a lot more shares. If you haven't, you've taken a lot of money out. We're talking about guarantees, so that means a theoretical counterexample removes the guarantee. But they don't even need to be as extreme as you think. Let's talk about an initial 1% rate and then a 2.5% increase just before the end (as I suggested earlier) for a 10 year average duration fund over 20 years. ...
by AnEngineer
Fri Mar 10, 2023 10:09 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

A question a lot of people have, and I think maybe what you're asking is, what would happen if, hypothetically, interest rates kept rising forever? Would the share price of a bond fund keep dropping forever? The answer is no. As the money is reinvested at continuously higher rates the share price will first come up to its original level and then go even higher. There is a delay, of course, but it will happen. I'll take this a little out of order. I'm not asking a question. We're disagreeing about whether or not a bond fund is guaranteed to not lose money over specified period of time. I suspect the issue might be that you are not stating your actual belief precisely, but I'll set that aside. What would make you change your mind and accept ...
by AnEngineer
Thu Mar 09, 2023 8:57 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Kinetic Currency wrote: Thu Mar 09, 2023 7:33 pm IMO CletusCaddy perfectly summarized the crux of the matter. While I desperately hope that Florida Orange is right, I'm not sure that AnEngineer is wrong. This is not a beauty contest or Lincoln-Douglas debate. Facts should prevail here and I'm shocked that average investors are piling billions of dollars into bond funds without a clear expectation about the return of principal within a set duration of time.
+1 to CletusCaddy praise here.

Just because there's no guarantee of return of principal doesn't mean that it isn't most likely to happen. It can be a good investment without it being risk free.

And most of what Florida Orange is saying is correct, so depending on what your hope is about you may not need any desperation. :)
by AnEngineer
Thu Mar 09, 2023 12:48 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

A question a lot of people have, and I think maybe what you're asking is, what would happen if, hypothetically, interest rates kept rising forever? Would the share price of a bond fund keep dropping forever? The answer is no. As the money is reinvested at continuously higher rates the share price will first come up to its original level and then go even higher. There is a delay, of course, but it will happen. I'll take this a little out of order. I'm not asking a question. We're disagreeing about whether or not a bond fund is guaranteed to not lose money over specified period of time. I suspect the issue might be that you are not stating your actual belief precisely, but I'll set that aside. What would make you change your mind and accept ...
by AnEngineer
Thu Mar 09, 2023 6:42 am
Forum: Personal Finance (Not Investing)
Topic: HSA Overcontribution and tax form 5329
Replies: 8
Views: 730

Re: HSA Overcontribution and tax form 5329

1. Filing form 5329 for excess contributions (and schedule 2) which I believe would result in her paying tax on the $40 (22% marginal rate would be about $8) plus a 6% penalty (about $2) so maybe $10 total. 2. Call Fidelity to see if they'll issue a 1099-SA for the excess contribution. I suspect Dimensional has much worse customer service than Fidelity. I assume I would incur the same tax liability. Does anyone have experience filing form 5329 and schedule 2? Is it as easy as it seems? Thanks in advance Paying tax on the excess contribution is not an option. Since it was through payroll, that amount won't be on W2 and needs to be added. Then the option is to wither withdraw excess and pay tax on associated earnings (if any) in the tax year...
by AnEngineer
Wed Mar 08, 2023 7:51 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

So you're saying that if I but a 5 year bond fund today then I'm guaranteed to have not lost money at the 10 year mark, even if interest rates tank just before the 10 year mark? Not exactly. A bond fund is like a ladder of individual bonds. During the time you own the bonds the price will fluctuate but when each bond reaches maturity you get get back what you paid for it. So if you have a ten year ladder with one bond maturing each year, at the end of ten years you will have gotten 100% of your principal back. If, as the money comes in, you reinvest it, either in new bonds or something else, then the money is still at risk (unless it's a risk free investment). A bond fund will get back all of the money it invested in individual bonds, and ...
by AnEngineer
Wed Mar 08, 2023 10:32 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Yes, my point is that there is nonzero risk. (Note: nonzero does not mean the risk is large.) If you want funds at a particular time then a constant duration bond fund is not giving you any special guarantee like you were claiming. If I want to spend the money in year X I don't care that the fund will recover in year Y. But if year X and year Y are the same or almost the same then you don't have a problem. If you can wait at least twice the duration of the bond fund then you only have two unknown variables. One is you might not be able to pinpoint the exact date on which you will spend the money. That leads to the second unknown which is that you only know that you will not have less money than you started with. You might have more but you...
by AnEngineer
Wed Mar 08, 2023 10:19 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Yes, my point is that there is nonzero risk. (Note: nonzero does not mean the risk is large.) If you want funds at a particular time then a constant duration bond fund is not giving you any special guarantee like you were claiming. If I want to spend the money in year X I don't care that the fund will recover in year Y. But if year X and year Y are the same or almost the same then you don't have a problem. If you can wait at least twice the duration of the bond fund then you only have two unknown variables. One is you might not be able to pinpoint the exact date on which you will spend the money. That leads to the second unknown which is that you only know that you will not have less money than you started with. You might have more but you...
by AnEngineer
Wed Mar 08, 2023 8:14 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Counterexample: buy a 5 year average duration bond fund at 1% interest. At 10 years minus 1 day you're up to about 1.1x what you started but interest rates jump 2.5%, losing about 2.5x5=12.5%, leaving you with about 0.97x what you started with at 10 years. Assuming that's a one time change in interest rates, in five years you'll be back to where you "started". I put started in quotes because in this example the relevant start date is the day before the interest rate changed. Don't make the mistake of anchoring bias. Recovery of share price in a bond fund means recovery relative to the price just before the interest rate change, not relative to the date you first invested in the fund. The counterexample refutes your claim that I c...
by AnEngineer
Wed Mar 08, 2023 6:13 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Counterexample: buy a 5 year average duration bond fund at 1% interest. At 10 years minus 1 day you're up to about 1.1x what you started but interest rates jump 2.5%, losing about 2.5x5=12.5%, leaving you with about 0.97x what you started with at 10 years. Assuming that's a one time change in interest rates, in five years you'll be back to where you "started". I put started in quotes because in this example the relevant start date is the day before the interest rate changed. Don't make the mistake of anchoring bias. Recovery of share price in a bond fund means recovery relative to the price just before the interest rate change, not relative to the date you first invested in the fund. The counterexample refutes your claim that I c...
by AnEngineer
Tue Mar 07, 2023 9:29 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

It may recover, but you don't know when, only that it will happen sometime. Whatever date you predict could have interest rates move by x% the day before and since your bond fund has constant duration you're always exposed to interest rate risk. The twice duration calculation you refer to assumes no further interest rate changes, but we don't know whether that will hold. The duration of the fund tells you how long it will take for prices to recover assuming a one time change in interest rates. Roughly twice the duration is the formula assuming continuously rising rates. Right, if you assume particular interest rate profiles, you know the recovery date. But you don't know that ahead of time. Those two cases you highlight differ by a factor ...
by AnEngineer
Tue Mar 07, 2023 7:51 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

It may recover, but you don't know when, only that it will happen sometime. Whatever date you predict could have interest rates move by x% the day before and since your bond fund has constant duration you're always exposed to interest rate risk. The twice duration calculation you refer to assumes no further interest rate changes, but we don't know whether that will hold. The duration of the fund tells you how long it will take for prices to recover assuming a one time change in interest rates. Roughly twice the duration is the formula assuming continuously rising rates. Right, if you assume particular interest rate profiles, you know the recovery date. But you don't know that ahead of time. Those two cases you highlight differ by a factor ...
by AnEngineer
Tue Mar 07, 2023 7:32 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Yes, I understand. But the fund consists of individual bonds that eventually reach maturity. But the fund never does, it's always buying new bonds. Unless you're talking about something like iShares' iBonds which are funds that end. The fund is always buying new bonds at whatever the current interest rate is. Meanwhile, eventually all the the existing bonds will reach maturity and the principal will be repaid. Thus price per share must eventually return to it's starting (or pre interest rate change) amount. Even if we assume an infinite series of consecutive interest rate increases, the net asset value of the fund must recover. If you knew what the future changes in the interest rate would be you could calculate the date precisely. Otherwi...
by AnEngineer
Tue Mar 07, 2023 6:47 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Actually, there is. It can be calculated for any hypothetical series of interest rate increases. When the bonds reach maturity they will be redeemed for par value. This has the effect of "forcing" price recovery. This fact will eventually override any series of interest rate increases. We're talking about bond funds, not individual bonds. Yes, I understand. But the fund consists of individual bonds that eventually reach maturity. But the fund never does, it's always buying new bonds. Unless you're talking about something like iShares' iBonds which are funds that end. The fund is always buying new bonds at whatever the current interest rate is. Meanwhile, eventually all the the existing bonds will reach maturity and the principal ...
by AnEngineer
Tue Mar 07, 2023 12:58 pm
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Florida Orange wrote: Tue Mar 07, 2023 12:51 pm
AnEngineer wrote: Tue Mar 07, 2023 11:12 am
Florida Orange wrote: Tue Mar 07, 2023 8:08 am
AnEngineer wrote: Tue Mar 07, 2023 7:59 am Yes, but there's no specific point in the future where you are guaranteed to have recovered.
Actually, there is. It can be calculated for any hypothetical series of interest rate increases. When the bonds reach maturity they will be redeemed for par value. This has the effect of "forcing" price recovery. This fact will eventually override any series of interest rate increases.
We're talking about bond funds, not individual bonds.
Yes, I understand. But the fund consists of individual bonds that eventually reach maturity.
But the fund never does, it's always buying new bonds. Unless you're talking about something like iShares' iBonds which are funds that end.
by AnEngineer
Tue Mar 07, 2023 11:12 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Florida Orange wrote: Tue Mar 07, 2023 8:08 am
AnEngineer wrote: Tue Mar 07, 2023 7:59 am Yes, but there's no specific point in the future where you are guaranteed to have recovered.
Actually, there is. It can be calculated for any hypothetical series of interest rate increases. When the bonds reach maturity they will be redeemed for par value. This has the effect of "forcing" price recovery. This fact will eventually override any series of interest rate increases.
We're talking about bond funds, not individual bonds.
by AnEngineer
Tue Mar 07, 2023 7:59 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Florida Orange wrote: Tue Mar 07, 2023 7:56 am
AnEngineer wrote: Tue Mar 07, 2023 7:37 am This is not true. With a bond fund there is no guarantee as there can always be a subsequent interest rate change right before you want to get out that drops the price.
There can always be another interest rate change but, depending on the direction of the change, that means that the NAV will recover in more or less time than it would have without that change. Even with constantly increasing rates the fund will eventually recover.
Yes, but there's no specific point in the future where you are guaranteed to have recovered.
by AnEngineer
Tue Mar 07, 2023 7:37 am
Forum: Investing - Theory, News & General
Topic: Duration matched bucket strategy’s excellent adventure?
Replies: 67
Views: 4978

Re: Duration matched bucket strategy’s excellent adventure?

Kinetic Currency wrote: Tue Mar 07, 2023 6:52 amSo if you own an 8 year duration bond fund, if interest rates rise and the NAV drops, you can be assured that the total return will recover within 8 years (assuming no default risk).
This is not true. With a bond fund there is no guarantee as there can always be a subsequent interest rate change right before you want to get out that drops the price.
by AnEngineer
Mon Mar 06, 2023 3:53 pm
Forum: Investing - Theory, News & General
Topic: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"
Replies: 172
Views: 21794

Re: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"

I don't see how a pension would be able to foster any sort of confidence in being able to meet its obligations if it were 90% stocks and 10% short-term treasuries unless it were quite overfunded. If the net present value of the pension liabilities were close to the value of such a portfolio, the pension would have big swings of being overfunded and underfunded as an effect of the volatility of the equity portfolio. The pension will make use of bonds to smooth out the variance in its funding ratio (ratio of portfolio value to net present value of liabilities). The purpose of longer term bonds is to match the duration of the bonds to the duration of liabilities to neutralize interest rate risk, not to exacerbate it. In fact, a pension that w...
by AnEngineer
Sun Mar 05, 2023 7:07 pm
Forum: Investing - Theory, News & General
Topic: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"
Replies: 172
Views: 21794

Re: Buffett in 2018: A 60/40 portfolio is “absurd”

I don't believe volatility is risk (it might be a risk, depending on the circumstance)... Example of when volatility isn't risk: security is guaranteed to double in 10 years but goes through large price changes between now and then (i.e. volatility). If I don't need the money before 10 years , this is risk free. I don't know of an investment that works this way, but it illustrates how volatility and risk are different. "I don't know of an investment that works this way." Not if you insist on doubling in ten years (i.e. 7.177% CAGR). However, I am pretty sure there have been times when you could buy a 20-year Treasury STRIP with a yield of 3.53% or more. Such an investment would work exactly that way--guaranteed to double in twent...
by AnEngineer
Sun Mar 05, 2023 4:08 pm
Forum: Investing - Theory, News & General
Topic: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"
Replies: 172
Views: 21794

Re: Buffett in 2018: A 60/40 portfolio is “absurd”

I don't believe volatility is risk (it might be a risk, depending on the circumstance)... Example of when volatility isn't risk: security is guaranteed to double in 10 years but goes through large price changes between now and then (i.e. volatility). If I don't need the money before 10 years , this is risk free. I don't know of an investment that works this way, but it illustrates how volatility and risk are different. The example works as long as the "if" statement holds true. Volatility is risk if you will or might need the money. It is not the only risk. There are lots of different kinds of risks. Well, the point of the example was to show a case when volatility isn't even a risk, proving that it cannot be synonymous with risk...
by AnEngineer
Sun Mar 05, 2023 7:59 am
Forum: Investing - Theory, News & General
Topic: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"
Replies: 172
Views: 21794

Re: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"

ramram22 wrote: Sun Mar 05, 2023 12:13 am To those of you who lost a lot of money in bonds in 2022, has your view or behavior changed at all? Do you think the 60/40 dogma ever be vanquished from the investing world?
I don't know if I've lost a lot of money in bonds (as I was leaned shorter term and towards I bonds), but my view has not changed. Before the rate increases, long term bonds looked unattractive: low rates and the risk of price decreases if rates rise. Now rates have risen and things look better not worse for bonds. Anyone rethinking bond allocations should have done it in the past, not now.
by AnEngineer
Sun Mar 05, 2023 7:03 am
Forum: Investing - Theory, News & General
Topic: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"
Replies: 172
Views: 21794

Re: Buffett in 2018: A 60/40 portfolio is “absurd”

He has a history of saying things like “volatility isn’t risk”. Well if that’s what you believe then of course your conclusion would be to invest in a 100% equity portfolio or thereabouts. But of course, just saying that volatility isn’t risk doesn’t make it so. Are you saying volatility is synonymous with risk? Was his statement in response to that idea? I don't believe volatility is risk (it might be a risk, depending on the circumstance) and I'm not 100% equities or thereabouts, so I don't agree with your reasoning here. Example of when volatility isn't risk: security is guaranteed to double in 10 years but goes through large price changes between now and then (i.e. volatility). If I don't need the money before 10 years, this is risk fr...
by AnEngineer
Sun Mar 05, 2023 6:55 am
Forum: Investing - Theory, News & General
Topic: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"
Replies: 172
Views: 21794

Re: Buffett in 2018: A 60/40 portfolio is "absurd" and "foolish"

Who is he talking about? Pension funds and young people. Not people in or near retirement.

When is he saying it? When bond yields are 2%, which is a much different comparison point than a lot of the time, including now.

Under those constraints, pretty reasonable statement IMO.
by AnEngineer
Tue Feb 28, 2023 7:39 am
Forum: Investing - Theory, News & General
Topic: RSUs, ESPPs, and wash sales
Replies: 5
Views: 587

Re: RSUs, ESPPs, and wash sales

rasputin wrote: Mon Feb 27, 2023 9:35 pm I get my bonus in the form of Restricted Stock Units. As is common right now, the stock is down so selling meaning potentially incurring a loss and the potential of a wash sale.
Down compared to when? Your cost basis is the price when they vest, not when granted. It sounds like they vest inside a trading window and you're selling almost immediately, which means you should have little if any gain or loss.
by AnEngineer
Mon Feb 27, 2023 12:26 pm
Forum: Personal Finance (Not Investing)
Topic: HSA reimbursements income in fututre years?
Replies: 9
Views: 872

Re: HSA reimbursements income in fututre years?

secondcor521 wrote: Mon Feb 27, 2023 9:01 am If so, then in 2035, you may not use *any* of the expenses you used to itemize in 2022 (not just the $3,897 above the 7.5% of AGI).
Do you have a source specifically on the amounts below 7.5%? There was a previous discussion about that and I remember concluding that you arguably could use that for HSA withdrawals as you didn't actually deduct those dollars. May be too aggressive for me to actually do though.
by AnEngineer
Sun Feb 26, 2023 6:01 pm
Forum: Investing - Theory, News & General
Topic: Investigative Report: Using TLH and Avoiding Wash Sales to Save Taxes
Replies: 59
Views: 5637

Re: Investigative Report: Using TLH and Avoiding Wash Sales to Save Taxes

It seems blatantly obvious to me that tax-loss harvesting as most often advocated here — using "practically identical" replacement assets — works directly against the intent of the law, but 99% of those commenting on the topic here either fail to see it that way, or won't admit to it. It's like a major taboo to even suggest it. Another alternative is that folks just don't give any heed to the intent of the law, only what the law is and what is moral. Well, I'm no lawyer. But in my estimation, there are some laws for which intent is completely irrelevant when it comes to interpretation and enforcement. A no-turn-on-red sign is a great example. It's literally written in black and white. And it doesn't much matter whether the sign w...
by AnEngineer
Sun Feb 26, 2023 4:52 pm
Forum: Personal Finance (Not Investing)
Topic: HSA: Use now or reimburse later?
Replies: 20
Views: 1304

Re: HSA: Use now or reimburse later?

Hello, I'm seeking advice on the optimal HSA strategy, assuming you max out all retirements accounts. I've read that the best strategy is to pay medical expenses out of pocket, keep the receipts, and then reimburse yourself later after the account has time to grow. After reimbursing yourself the initial amount, you'll pay income tax on the earnings when you withdraw (for non-medical expenses after age 65). The other option is to use the HSA to pay for qualified medical expenses as they arise, and invest the money you saved from not paying out of pocket into a taxable account. Then when you withdraw, you only pay capital gains tax on the earnings, rather than income tax. I understand that returns in the taxable account will be lower due to ...
by AnEngineer
Sat Feb 25, 2023 7:28 pm
Forum: Personal Consumer Issues
Topic: Podcast that might interest Bogleheads.
Replies: 22
Views: 3265

Re: Podcast that might interest Bogleheads.

protagonist wrote: Wed Feb 22, 2023 11:22 am I think the main value of this podcast is for those who seek to hone their critical thinking skills and make them more media-savvy, regardless of their level of interest in the specific books covered. It is excellent for that. (You probably know me well enough via my posts to know by now that I am a die-hard skeptic.)
Sadly I found the podcast lacking in the critical thinking department. They may have some points, but they don't present their case well.
by AnEngineer
Sat Feb 25, 2023 6:34 pm
Forum: Investing - Theory, News & General
Topic: Fidelity Auto Roll TBills
Replies: 23
Views: 2637

Re: Fidelity Auto Roll TBills

Lyrrad wrote: Sat Feb 25, 2023 11:09 am
If one doesn't have margin, one may want to avoid keeping auto-roll bills in the same account as other investments since the funds become unavailable between auction and settlement.
+1

With auto roll there's a period where you kind of have both bills before the settlement of the first and your cash balance goes negative, preventing you from executing other trades.
by AnEngineer
Sat Feb 25, 2023 9:28 am
Forum: Investing - Theory, News & General
Topic: Fidelity Auto Roll TBills
Replies: 23
Views: 2637

Re: Fidelity Auto Roll TBills

I've been buying Tbills at Vanguard, but I also have a Fidelity account. If I select auto roll for Tbills on Fidelity, does the matured money skip my settlement account and go straight to a newly issued Tbill? I'm trying to minimize state taxes. Looking back on the Tbills I purchased at Vanguard, a 2-month Tbill (CUSIP 912796XV6) matured on September 13, 2022, and I had purchased another 2-month Tbill (CUSIP 912796YP8) that had an auction on September 8 and settled on September 13. If I had used auto roll at Fidelity, would the matured 912796XV6 Tbill have gone straight to the purchase of the 912796YP8 Tbill, skipping my settlement account? Or would the matured 912796XV6 Tbill have sat in my settlement account before going into the purchas...
by AnEngineer
Sat Feb 25, 2023 7:13 am
Forum: Personal Investments
Topic: ESPP management strategies?
Replies: 12
Views: 1131

Re: ESPP management strategies?

Can you avoid the fee by transferring the shares?
by AnEngineer
Sat Feb 25, 2023 6:48 am
Forum: Personal Finance (Not Investing)
Topic: Wash sale on Schwab 1099 after TLH liquidation of position
Replies: 8
Views: 661

Re: Wash sale on Schwab 1099 after TLH liquidation of position

Joe Public wrote: Thu Feb 23, 2023 10:36 pmMy understanding was that wash sales do not occur if an entire position in a security is sold.
To address the source of the original confusion: Some people say this, but I see nothing in the law to support it. As a practical matter, the net tax impact is as if there is no wash sale if everything is in taxable accounts as you discovered. I prefer to call this an irrelevant wash sale.
by AnEngineer
Fri Feb 24, 2023 4:05 pm
Forum: Personal Finance (Not Investing)
Topic: Likely wash sale not on Fidelity tax documents [wash sales in IRAs]
Replies: 30
Views: 2258

Re: Likely wash sale not on Fidelity tax documents

This is my first year ever tax loss harvesting. I sold a lot of VTI and VXUS on 10/10/22 for a large recorded loss, and reinvested in different ETF's. Later I noticed that in my Roth and in my IRA I had forgotten to turn off dividend reinvesting, and so dividends from both VXUS and VTI reinvested on 9/22 and 9/28, respectively. The amounts of the dividends are 193.76 and 93.65 for VXUS, and 753.26 for VTI, if that matters. This all happened at Fidelity. This is also my first year with Fidelity. Nowhere on my tax docs do I see a wash sale recorded. Wouldn't they have picked this up? 1. Since they didn't, does that mean somehow I'm wrong? I'd like to understand why. 2. If I'm not wrong, will the IRS pick this up on their own, since Fidelity ...
by AnEngineer
Fri Feb 24, 2023 1:13 pm
Forum: Personal Finance (Not Investing)
Topic: ESPP Buy/Sell and wash sale
Replies: 7
Views: 463

Re: ESPP Buy/Sell and wash sale

ajf3007m wrote: Fri Feb 24, 2023 1:00 pm
erp wrote: Fri Feb 24, 2023 10:39 am It doesn't sound like you will have a wash sale since you've already sold all your "replacement shares" and won't buy any more within 30 days.
Thats how i was reading it last night when I picked a few articles to go through. I no longer have the "replacement shares"
Unfortunately applying logic and the idea of so-called replacement shares doesn't align with what the law says. Some disagree with my take, but it's practically moot in this case because the tax implications at the end of the day are the same when all involved shares are sold (and everything is in taxable accounts). The only question for this case is whether to report it as a wash sale or not.
by AnEngineer
Fri Feb 24, 2023 11:04 am
Forum: Personal Finance (Not Investing)
Topic: RSU Wash Sales Rules
Replies: 10
Views: 547

Re: RSU Wash Sales Rules

mrb09 wrote: Fri Feb 24, 2023 11:01 am I don't think a distribution before the sale triggers a disallowed wash sale (that's a buy-buy-sell) I think a distribution less than 30 days after a sale will trigger it (buy-sell-buy).
This is incorrect. A wash sale is triggered by a buy/acquisition within 30 days before or after a sale at a loss.
by AnEngineer
Fri Feb 24, 2023 11:03 am
Forum: Personal Finance (Not Investing)
Topic: RSU Wash Sales Rules
Replies: 10
Views: 547

Re: RSU Wash Sales Rules

The form 1099-B has blank for the column "1g Wash Sale Loss Disallowed". The cost basis (1e) is also listed as 0. However the supplemental has the correct cost basis and column titled "Wash Sale Loss Disallowed" is given as 0. I am also concerned that even if I file taxes correcting the wash sale, Fidelity will not adjust my cost basis correctly for the new vest with the disallowed amount when I sell it in the future. [BTW, thank you for the responses and help] This looks like your basis is not reported to the IRS, you'll have to adjust this to make the wash sale make sense (or any sale for that matter). Fidelity will probably give you supplemental info that's correct, but not the actual 1099. That's par for the course.