Search found 1908 matches

by Erwin
Sat Feb 25, 2017 11:52 pm
Forum: Investing - Theory, News & General
Topic: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?
Replies: 32
Views: 6429

Re: ProShares S&P 500 Dividend Aristocrats ETF - thoughts?

Most Bogleheads invest in the total market and there is a good reason for that. The following article by John Norstad, although old, does an excellent job explaining why:
http://www.norstad.org/finance/total.html
by Erwin
Thu Feb 23, 2017 12:34 pm
Forum: Investing - Theory, News & General
Topic: Does anyone own gold?
Replies: 148
Views: 21548

Re: Does anyone own gold?

rgs92 wrote:A bit of the Gold ETF I think is fine as an asset that is uncorrelated with stocks or bonds, but the Permanent Portfolio is 25% in gold, and that's extreme IMHO.
Yet, no one can complain about its historical performance
by Erwin
Wed Feb 22, 2017 11:27 pm
Forum: Investing - Theory, News & General
Topic: Does anyone own gold?
Replies: 148
Views: 21548

Re: Does anyone own gold?

Does anyone own gold, and why? Evanson, a passive investment management company in NorthEran California has a long and highly positive article on gold, see.. https://www.evansonasset.com/64.htm It is a bit of a sidetrack but the article starts with a claim that is...not true. In 1913 the Federal Reserve was created to deal with price variations and booms and busts, an economic problem in part produced by variations in gold supply and demand. Its clear mandate was to maintain stable prices . They then complain that, due to inflation, the US dollar is worth less than it used to. The only way to avoid that outcome, and thus their complaint, would be for inflation to be 0%, or close to it. The Federal Reserve was not created with a clear manda...
by Erwin
Wed Feb 22, 2017 8:16 am
Forum: Investing - Theory, News & General
Topic: Does anyone own gold?
Replies: 148
Views: 21548

Does anyone own gold?

Does anyone own gold, and why?
Evanson, a passive investment management company in NorthEran California has a long and highly positive article on gold, see..
https://www.evansonasset.com/64.htm
by Erwin
Tue Feb 21, 2017 8:09 pm
Forum: Investing - Theory, News & General
Topic: Extreme Valuations, and why you should reconsider
Replies: 307
Views: 32525

Re: Extreme Valuations, and why you should reconsider

My view is that valuations matter and matter a lot. I have not heard anyone dispute that. Given that I think that no one can doubt that valuations of the US stock market are presently high relative to historical. Let us see: Major US equity indexes have risen about 250% since the March 2009 lows while cumulative US GDP growth, and that's exaggerated by accounting gimmickry, has been about 17-18% for the same period, an absurd disconnect from reality. Trailing 10 year median S&P p/e is at an all-time record high over 28:1 with equities a fair buy around 14 and good buy under 10. I could go on with more numbers but these kind of things always end badly, we just can't time when. Based on this, it seems highly prudent to assume that we eith...
by Erwin
Mon Feb 20, 2017 8:02 am
Forum: United Arab Emirates
Topic: Live off portfolio NOW (non US)
Replies: 49
Views: 16747

Re: Live off portfolio NOW (non US)

galeno wrote:Start your reading here: https://www.bogleheads.org/wiki/Outline ... _domiciles
Galeno,
Do you know how the us taxes the accummuling Irish ETFs? Does it take the 15% on dividends although they are reinvested? If yes, does ishares, vanguard adjust the cost of the etf due to the 15% loss?
by Erwin
Sun Feb 19, 2017 11:39 pm
Forum: Personal Investments
Topic: When do you need an annuity?.
Replies: 25
Views: 4280

Re: When do you need an annuity?.

Would it be fair to say that if you can turn your Ira money into a ladder of annual TIPS, say for 30 retirement years, that along with SS and whatever pensions you have, meet your annual expenses and still have a bit more in the stock market to cover the potential that you live more than 30 retirement years, then you do not need an annuity??
by Erwin
Sun Feb 19, 2017 6:58 pm
Forum: Personal Investments
Topic: When do you need an annuity?.
Replies: 25
Views: 4280

When do you need an annuity?.

In today's NYT. Strategies to make your money last before you go.
https://www.nytimes.com/2017/02/18/your ... tcore-ipad
Nobody can predict how long they will live, but there are sound financial strategies for increasing the odds of a successful retirement plan.
------

My question is: it is hard to let go of money to purchase an annuity, at least to me. So, is there any rule that one can apply to decide whether you need to get an annuity, and which one, immediate or deferred? I suppose that if you have enough savings you do not have to consider an annuity. Is that correct?
by Erwin
Sat Feb 18, 2017 3:37 am
Forum: Investing - Theory, News & General
Topic: What are your thoughts on the "Golden Butterfly" portfolio?
Replies: 383
Views: 66193

Re: What are your thoughts on the "Golden Butterfly" portfolio?

Hail Bogleheads, I don't post much, but follow these boards very closely, and was quite intrigued to read of the "Golden Butterfly" portfolio mentioned by @Tyler9000 in this thread: https://www.bogleheads.org/forum/viewtopic.php?t=171019#p2811808 (Original description and analysis of the portfolio on portoliocharts.com here: https://portfoliocharts.com/portfolio/golden-butterfly/) I'd be curious to know your collective thoughts. I think its great. I don't use it personally, but I'm following a somewhat similar concept. I'm reminded of a central point made by Meb Faber in his book Global asset allocation: A Survey of the World's Top asset Allocation Strategies, which is that there are a lot of great portfolios out there that will ...
by Erwin
Sat Feb 18, 2017 12:52 am
Forum: Personal Finance (Not Investing)
Topic: "With $15 Left in the Bank, a Baby Boomer Makes Peace With Less" -- A cautionary tale
Replies: 37
Views: 7106

Re: "With $15 Left in the Bank, a Baby Boomer Makes Peace With Less" -- A cautionary tale

My parents, holocaust survivors, fearful of running out of money, although they worked hard and accumulated plenty, lived an extremely simple life, never allowed themselves any luxuries, died leaving their two sons most of their wealth. Does that make sense?
There is nothing wrong with being a big spender if that is what you enjoy and you can afford it.
by Erwin
Wed Feb 15, 2017 9:07 pm
Forum: Personal Investments
Topic: Advice Please - Am I Doing This Right or Do I Need an Advisor Like All My Friends?
Replies: 20
Views: 3868

Re: Advice Please - Am I Doing This Right or Do I Need an Adviser Like All My Friends?

Simplify your life. Among all the funds you list, look for those that best resemble the popular three fund portfolio (google it), then decide the split between them, mainly based on risk, and you have a portfolio that you can keep forever. Anything more complicated is unnecessary.
by Erwin
Wed Feb 15, 2017 9:01 pm
Forum: Personal Investments
Topic: Why own individual stocks?
Replies: 103
Views: 14625

Re: Why own individual stocks?

I've heard people like to use them to brag at cocktail parties. For what it's worth, I've been to a lot of cocktail parties and I've never heard anyone talk about individual stocks at one. People at cocktail parties are usually normal, decent humans and talk about their kids or the latest movie or their last holiday. Those sound nice. I'm glad it's like nothing I've described. The point I was really trying to make is that people who invest in stocks think they've made money holding their little "darlings" forgetting that they only make money when they sell (and get rid of their darlings). cheesepep: have you thought of running a mutual fund? I mean if you can beat the market continuously without fail (you sound very confident) th...
by Erwin
Wed Feb 08, 2017 9:29 am
Forum: Personal Consumer Issues
Topic: WSJ Digital Subscription - a bargain!
Replies: 152
Views: 60973

Re: WSJ Digital Subscription - a bargain!

I just subscribed to the digital version of the WSJ through an agency, Daily Subscription Agency (http://dailysubscription.com/). I paid $139.99 for two years, an absolute bargain. Since I was very fearful that it may be a fraud, I used my PayPal, which supposedly protects me. About 12 hours later I got the details on how to log in, and believe it or not, the place seems to be 100% legit. I am very happy since the regular subscription is so much more expensive. How can it be? Thanks for the tip - let us know if anything goes wrong, I think I may try this in a couple of months! It has been a few days since the start. The login and password in the instructions were a bunch of letters and numbers that I will not remember. Thus, I changed them...
by Erwin
Mon Feb 06, 2017 8:34 pm
Forum: Personal Consumer Issues
Topic: WSJ Digital Subscription - a bargain!
Replies: 152
Views: 60973

Re: WSJ Digital Subscription - a bargain!

I pay full price (I think) for my NYT digital subscription, $20/month, but cannot see anything wrong with getting the best possible deal on the WSJ, if it is legit. That to me is the American way.
by Erwin
Mon Feb 06, 2017 2:09 pm
Forum: Personal Consumer Issues
Topic: WSJ Digital Subscription - a bargain!
Replies: 152
Views: 60973

WSJ Digital Subscription - a bargain!

I just subscribed to the digital version of the WSJ through an agency, Daily Subscription Agency (http://dailysubscription.com/). I paid $139.99 for two years, an absolute bargain. Since I was very fearful that it may be a fraud, I used my PayPal, which supposedly protects me. About 12 hours later I got the details on how to log in, and believe it or not, the place seems to be 100% legit. I am very happy since the regular subscription is so much more expensive. How can it be?
by Erwin
Sun Feb 05, 2017 2:28 pm
Forum: Personal Finance (Not Investing)
Topic: Quicken's future direction - a cause for concern
Replies: 516
Views: 99583

Re: Quicken's future direction - a cause for concern

Can you not use Quicken for perpetuity if you enter the data manually?
by Erwin
Sun Feb 05, 2017 7:57 am
Forum: Personal Finance (Not Investing)
Topic: Do you account for likely life expectancy in retirement?
Replies: 63
Views: 7625

Re: Do you account for likely life expectancy in retirement?

I come from a family of people that did not reach 80. When came time to consider when to begin SS benefits, I did not think twice about starting at 62. Further, my portfolio is most likely more conservative than most at my age, simply because I do not expect that my retirement would last 30 years.
by Erwin
Sun Feb 05, 2017 7:31 am
Forum: Investing - Theory, News & General
Topic: Why go with an 80% stock / 20% bond portfolio?
Replies: 436
Views: 81331

Re: Why go with an 80% stock / 20% bond portfolio?

I assume that you want a higher allocation of equities because you expect better performance than bonds. However, have you given any thought that there is a decent possibility that the price you pay in higher volatility will not yield the fruits you expect. You may need the money at the wrong time, or even worse, if you believe Bogle, Swedroe, and other smart investors, the long term performance of equities, specially US, will be nothing to write home about it.
by Erwin
Sun Feb 05, 2017 2:33 am
Forum: Investing - Theory, News & General
Topic: Should retirees build a reserve for RMDs?
Replies: 16
Views: 3787

Re: Should retirees build a reserve for RMDs?

... Why a TIPS ladder with positive real yields will not do it? It is the most common LDI strategy tool. A TIPS ladder, that is a portfolio of TIPS with different maturities, will have its market value fluctuate just the same as if it were held through a financial intermediary like a fund. If you're talking about a non-rolling ladder , that is one with a systematically and deliberately decreasing duration, those behave differently than rolling ladders , which are what most funds are, but still the portfolio's value fluctuates every day, and if its owner is to manage it well the underlying holdings need to be marked to market periodically. The OP's question was about setting money aside, now or over time, before starting to take distributio...
by Erwin
Sun Feb 05, 2017 1:32 am
Forum: Investing - Theory, News & General
Topic: Why go with an 80% stock / 20% bond portfolio?
Replies: 436
Views: 81331

Re: Why go with an 80% stock / 20% bond portfolio?

For me, and I assume for most, the goal of investing is not to make money but to fulfill whatever needs and desires one has. Following this logic, the issue is not whatever one can withstand this or that volatility, but rather how much risk one should take to meet the goals, and that should define the allocation.
by Erwin
Sun Feb 05, 2017 12:50 am
Forum: Investing - Theory, News & General
Topic: Should retirees build a reserve for RMDs?
Replies: 16
Views: 3787

Re: Should retirees build a reserve for RMDs?

... If you're really unsure about it, just take the amount you would have put into cash into VISPX or directly into TIPS . At least then your cash won't be losing 1-3% each year while you're waiting for RMDs. It is not at all clear that Vanguard's Inflation-Protected Securities Fund , VIPSX , with its average real duration, looked up just now, of 7.9 years, is an appropriate choice to preserve value over the next three (2017 to 2020) to six (three years beyond that) years. The fund is protected against inflation, but should not be expected to return anything closely resembling CPI-U each and every year. Over the past 52 weeks alone its fluctuation has been 7.05%. It is in no way suitable as a short-term investment. An equivalent portfolio ...
by Erwin
Sat Feb 04, 2017 3:00 pm
Forum: Investing - Theory, News & General
Topic: Ratio: Pain of Loss v. Happiness of Equal Size Gain
Replies: 22
Views: 2465

Re: Ratio: Pain of Loss v. Happiness of Equal Size Gain

I am retired, and my view is that if I were to make another $1m, it would not change my life style, but if I were to lose $1m, it would really make a difference. Therefore, I am extremely careful not to take too much risk!
by Erwin
Fri Feb 03, 2017 8:45 am
Forum: Personal Investments
Topic: Protecting a sizable amount of capital for 10 years.
Replies: 16
Views: 3060

Re: Protecting a sizable amount of capital for 10 years.

"Protect capital in the safest possible way" would indicate to me an investment in which the principal is guaranteed safe in the absence of complete societal collapse, such as FDIC-insured CDs, savings accounts, money market accounts or bonds issued and backed by the Federal government. I would not expect to get much return over inflation if any. The TIPS would qualify, but an equity fund would not. You are absolutely right on stocks. My thought is that I cannot be completely close to some risk since the TIPS real yield is so small that after tax the ladder will most likely yield less than inflation. In your original post you said the amount was "all tax protected" which I interpreted as meaning this amount is all in ta...
by Erwin
Thu Feb 02, 2017 1:55 am
Forum: Personal Investments
Topic: Protecting a sizable amount of capital for 10 years.
Replies: 16
Views: 3060

Re: Protecting a sizable amount of capital for 10 years.

Pajamas wrote:"Protect capital in the safest possible way" would indicate to me an investment in which the principal is guaranteed safe in the absence of complete societal collapse, such as FDIC-insured CDs, savings accounts, money market accounts or bonds issued and backed by the Federal government. I would not expect to get much return over inflation if any.

The TIPS would qualify, but an equity fund would not.
You are absolutely right on stocks. My thought is that I cannot be completely close to some risk since the TIPS real yield is so small that after tax the ladder will most likely yield less than inflation.
by Erwin
Wed Feb 01, 2017 10:56 pm
Forum: Personal Investments
Topic: Protecting a sizable amount of capital for 10 years.
Replies: 16
Views: 3060

Protecting a sizable amount of capital for 10 years.

I wrote a while back about a goal to protect capital not needed until year 10 in the safest possible way. After much review and consultation I am leaning in the direction of splitting the funds, a very sizable amount (all tax protected), into two parts: A. 80% in a 5 years TIPS ladder from year 5 to 10. Only in year 5, real yield currently becomes positive. B. 20% in a global equity fund, most likely VT. I am still struggling with the TIPS ladder because of the very tiny real yield, and knowing that interest rates are gong up, but I cannot come up with any other completely safe solution. So my question is whether I should place the money in a ultra short term government bond fund for the next 12 months waiting for better yields. What is the...
by Erwin
Wed Feb 01, 2017 4:21 am
Forum: Non-US Investing
Topic: TIPS for European Investors [Inflation Linked Bonds]
Replies: 12
Views: 2006

Re: TIPS for European Investors

TIPS are great to cover future expenses since they protect against inflation. If you are retired or have a liability that you need to take care in the future, fine, but otherwise, i would diversify. Further, in today's environment TIPS only begin giving real yield at year 5, meaning, if you buy TIPS from 0 to 4 years you are not covering inflation, and even at 5 years or beyond, once you pay taxes, you may still not cover inflation. If you have appetite for a bit of risk and insist on bonds, buy emerging markets bonds or short term high yield bonds via an ETF.
by Erwin
Tue Jan 31, 2017 9:28 am
Forum: Personal Investments
Topic: Portfolio Advice for 50yr horizon with $3M
Replies: 11
Views: 2378

Re: Portfolio Advice for 50yr horizon with $3M

I am retired and unfortunately when I was your age there was no internet or bogleheads, so did not have access to the sort of advice you can get now.
I have been migrating slowly to simplicity with a portfolio of very few funds that I feel very comfortable. I doubt that age may have made a different except for the ratio of risky versus risky assets.
The risky side is a global equity ETF, like VT or ACWI.
The no risky side is a ladder of individual TIPS starting on the year where real yields are positive, now 5 years forward. The ladder would then be 5 to 10 years rolling over the ladder as the first bond expires.
Good luck
by Erwin
Sat Jan 28, 2017 8:09 am
Forum: Investing - Theory, News & General
Topic: Reasons to Deviate from the Global Market Portfolio
Replies: 36
Views: 6105

Re: Reasons to Deviate from the Global Market Portfolio

There are many articles that discuss the topic, and at least a book, Global Asset Allocation, by Mabene Faber, which I highly recommend.
In essence one can just invest in the global market, plus cash (or leveraging) to calibrate personal risk tolerance/requirements.
by Erwin
Sun Jan 22, 2017 10:50 pm
Forum: Investing - Theory, News & General
Topic: Hypo: What would you do if you were SURE of impending deline in markets
Replies: 62
Views: 7503

Re: Hypo: What would you do if you were SURE of impending deline in markets

I know that it is not a matter of if, but when. And that is true at all times for some markets. Given that, from the very start I build a global equity portfolio hoping to soften the blow.
by Erwin
Sat Jan 21, 2017 9:10 pm
Forum: Non-US Investing
Topic: U.S. brokerages and retiring abroad
Replies: 47
Views: 8772

Re: U.S. brokerages and retiring abroad

I hold a Fidelity account and live overseas. I opened the account many years ago when I lived in LA and since I moved overseas, with the full knowledge of Fidelity since they have my address, I faced out all mutual funds and only deal with ETFs. Since I am a passive investor and only hold indexes, this has really not bothered me. Erwin - The information you gave about pre-existing Fidelity accounts might be helpful to my wife and me. Did Fidelity, once they knew you lived outside the U.S., require you to sell the mutual funds you were invested in, or did you choose to do this for other reasons? No, they explicitly stated that I could hold my mutual funds, reinvest dividends, etc., but I could not add more money into them. And once I sell, ...
by Erwin
Sat Jan 21, 2017 1:27 pm
Forum: Non-US Investing
Topic: U.S. brokerages and retiring abroad
Replies: 47
Views: 8772

Re: U.S. brokerages and retiring abroad

I hold a Fidelity account and live overseas. I opened the account many years ago when I lived in LA and since I moved overseas, with the full knowledge of Fidelity since they have my address, I faced out all mutual funds and only deal with ETFs. Since I am a passive investor and only hold indexes, this has really not bothered me.
by Erwin
Mon Jan 16, 2017 9:55 pm
Forum: Investing - Theory, News & General
Topic: Why not put it all in TIPS?
Replies: 87
Views: 8608

Re: Why not put it all in TIPS?

I think that if you have acquired enough (the meaning of enough is very personal), my absolutely right strategy is capital preservation ("stop playing, if you have already won the game").
Given that, a portfolio holding 80% in a TIPS ladder (if the funds are tax protected, and if not in a TIPS fund) plus 20% in a simple global equity fund, like VT or ACWI, would be the way I would go. Given the small real yield that TIPS offer to day, they basically provide inflation protection, so the small equity allocation may help pay taxes so that the capital protection is truly after taxes.
by Erwin
Fri Jan 13, 2017 3:17 pm
Forum: Investing - Theory, News & General
Topic: institutional herding in corporate bonds and liquidity issues-beware ETFs in this space
Replies: 59
Views: 5602

Re: institutional herding in corporate bonds and liquidity issues-beware ETFs in this space

That is the reason that it is better to own an ETF that holds a basket of maturity defined corporate bonds, like the iShares iBonds series. They are held to maturity.
by Erwin
Thu Jan 12, 2017 7:54 pm
Forum: Personal Investments
Topic: How would a preservation of capital portfolio look like?
Replies: 8
Views: 1844

Re: How would a preservation of capital portfolio look like?

Please clarify. Do in laws want to preserve capital after inflation and after tax? Or are they concerned only with preserving the nominal value of the investment after taxes? Are they willing to accept short- or medium-term volatility as long as capital is preserved over the next X years? Or must there be no losses in any time frame? How much if at all, do they care about real (I.e., after inflation) growth? Are they willing to fund 529 accounts now, or will everything be held in a taxable account in in-laws' name? Sorry, excellent question. Their idea is to attempt to preserve the real value after tax and under their name. Their wishes are stated in their will. All the funds are held in a regular, not tax protected account. With respect t...
by Erwin
Thu Jan 12, 2017 2:30 pm
Forum: Personal Investments
Topic: How would a preservation of capital portfolio look like?
Replies: 8
Views: 1844

How would a preservation of capital portfolio look like?

As a result of the sale of substantial real estate property (in the seven figures), my in laws, who are already in their 80s are asking for help in developing a portfolio that can preserve capital after tax (25%). Most likely these funds will never be spent by the in laws, but rather, per their wishes, they will be used to fund the college education of a number of grand children, the first about 10 years from now. Any suggestions?
by Erwin
Thu Jan 12, 2017 1:29 pm
Forum: Personal Consumer Issues
Topic: downhill skiing
Replies: 32
Views: 3644

Re: downhill skiing

I am 68, ski every year. I just spent a small fortune upgrading my ski equipment, including a very light Columbia Titanium jacket. In 10 days I will spend 1 week skiing in Maribel, France.
by Erwin
Thu Jan 12, 2017 6:59 am
Forum: Investing - Theory, News & General
Topic: Burton Malkiel says "Don't Buy Bonds"
Replies: 48
Views: 11730

Re: Burton Malkiel says "Don't Buy Bonds"

A challenge is we do not really know how TIPS would have done. We do know that TIPS can have negative real yield. We do not know how far negative the rates might go. I certainly hope they would have done better than nominal bonds, and I expect they would have, but I do not know that to be true and we certainly know there is no guarantee they will have positive rates when the time comes we want to buy some. But all you can do is diversify and hope for the best! And worst case for TIPS should be better than worst case for stocks! No guarantees on anything. I have always said that asset classes have no obligation to meet investor expectations. Markets will do what markets do. What I will say is that TIPS would very likely do better than nomin...
by Erwin
Thu Jan 12, 2017 12:02 am
Forum: Investing - Theory, News & General
Topic: Burton Malkiel says "Don't Buy Bonds"
Replies: 48
Views: 11730

Re: Burton Malkiel says "Don't Buy Bonds"

A challenge is we do not really know how TIPS would have done. We do know that TIPS can have negative real yield. We do not know how far negative the rates might go. I certainly hope they would have done better than nominal bonds, and I expect they would have, but I do not know that to be true and we certainly know there is no guarantee they will have positive rates when the time comes we want to buy some. But all you can do is diversify and hope for the best! And worst case for TIPS should be better than worst case for stocks! No guarantees on anything. I have always said that asset classes have no obligation to meet investor expectations. Markets will do what markets do. What I will say is that TIPS would very likely do better than nomin...
by Erwin
Wed Jan 11, 2017 1:15 am
Forum: Investing - Theory, News & General
Topic: Burton Malkiel says "Don't Buy Bonds"
Replies: 48
Views: 11730

Re: Burton Malkiel says "Don't Buy Bonds"

I am prety sure that we are in for a long term of pitiful bond performance, most likely in the years. If I were in the accumulation phase I would take Malkier's advice seriuosly. But I am retired and the other options (besides bonds) are not better. To protect myself I have implemented a liability driven investment (LDI) strategy by locking annual sums using TIPS to fund my expected expenses (wife and I). This is a painful strategy since you give up potential return for insurance, but I am happy with my decision, I sleep well at night.
by Erwin
Sun Jan 01, 2017 9:49 pm
Forum: Personal Investments
Topic: Vanguard Intermediate Corporate Bond VCIT Correction
Replies: 10
Views: 2291

Re: VANGUARD LONG-TERM CORPORATE BOND VCLT

The duration of this fund is a bit over 13 years, are you committed to hold this fund for that long? For each 1% increase in interest rates, this fund with lose about 13% in value. Eventually, and because of increased dividends, it will return the initial yield. If you want to add corporate to the mix, because you feel that BND does not have sufficient, as some claim, like Bogle himself, add an intermediate term corporate bond fund like VCIT, which has half the duration. But no matter what, as interest rates claim, there is the potential of long times of poor performance, as you already have seen in the second part of 2016. There have been many discussions on which bond funds to hold in these tough times. I suggest that you go back and revi...
by Erwin
Fri Dec 30, 2016 10:29 pm
Forum: Investing - Theory, News & General
Topic: 100% TIPS and 0% in Nominal Bonds?
Replies: 168
Views: 15476

Re: 100% TIPS and 0% in Nominal Bonds?

abuss368 wrote:Bogleheads,

In my opinion, if 100% allocation to TIPS was a wise investment strategy, I would expect Vanguard investment experts to recommend this approach in research and also structure the Target and LifeStrategy funds with this allocation.
DFA does in their retirement funds. There was a long and excellent discussion on the subject a few weeks back. Go to....
viewtopic.php?t=204183
by Erwin
Fri Dec 30, 2016 3:03 pm
Forum: Investing - Theory, News & General
Topic: 100% TIPS and 0% in Nominal Bonds?
Replies: 168
Views: 15476

Re: 100% TIPS and 0% in Nominal Bonds?

ogd - while all of your points appear quite accurate and useful in the broader discussion, they are irrelevant to the scenario that I described (i.e. held to maturity without concern for lost opportunity). Firechief: I am disputing the very framing you described, specifically the "without concern for lost opportunity". I don't understand how anybody here could have no concern for making more money from their fixed income had they not signed themselves to a 20 year contract. We invest to make money, don't we? Against your steel resolve, imagine: 1) that every year there is a small but nonzero probability that a great investment instrument will become available to you, along the lines of the G fund let's say, that clearly beats you...
by Erwin
Fri Dec 30, 2016 2:01 pm
Forum: Investing - Theory, News & General
Topic: Are International Markets overdue for great gains?
Replies: 43
Views: 5176

Re: Are International Markets overdue for great gains?

If you believe that valuations are important, currently the US market PE10 is very high relative to history while international stocks are just the opposite, specially emerging markets. This would indicate that international markets are due for higher performance than US markets, which have been shining for years. How long will it take? That is the big question.
The best way is to not try to guess the market, but to invest globally, as mentioned in an earlier post, via an ETF like VT or ACWI. And if you feel strongly about international, add to it a small amount (tilt) via an ETF like VXUS. My preference is emerging markets. VT is my major equity investment, but I also own a bit of IEMG, an emerging markets ETF.
by Erwin
Fri Dec 30, 2016 12:17 pm
Forum: Investing - Theory, News & General
Topic: 100% TIPS and 0% in Nominal Bonds?
Replies: 168
Views: 15476

Re: 100% TIPS and 0% in Nominal Bonds?

Doc wrote:
Erwin wrote:Who cares a drop before maturity!
I suggest that you look at a bond ladder differently. Always keep them to maturity and either use to meet obligations (like in retirement) or continues the ladder by buying the year after the end of it.
I would suggest that most of the 52 distinct TIPS mutual fund and their thousand (millions?) of investors do not hold bonds to maturity.

There is nothing wrong with having a Liability Matching Portfolio (LMP) using TIPS if that is what fits your needs but I do not belive that the LMP model is the norm.
I see no reason to buy a TIPS fund if you wish to own TIPS. In my view, a ladder, whether in retirement or not is the best way to go.
by Erwin
Fri Dec 30, 2016 12:14 pm
Forum: Investing - Theory, News & General
Topic: 100% TIPS and 0% in Nominal Bonds?
Replies: 168
Views: 15476

Re: 100% TIPS and 0% in Nominal Bonds?

I could care less about "volatility" in TIPS prices. I buy them to recoup my full purchasing power when they mature. Who gives a hoot about what they are worth in the interim? If I want risk/reward I put the next dollar in equities. If I want money to pay the rent 5, 10, 15, 20, 25, 30 years in the future, I buy TIPS. :sharebeer I am a long term investor too and I have actually added to my TIPS a bit. But I count on bonds to be stable and I was quite surprised to see TIPS fall by 10% or more during the financial crisis while nominal treasuries surged! I was very surprised by this. Lesson learned. A person in retirement might have a different view about bond volatility than you do. A 10% drop in a bond portfolio would at the very ...
by Erwin
Fri Dec 30, 2016 11:05 am
Forum: Personal Finance (Not Investing)
Topic: Multi Millionaire with no credit rating
Replies: 52
Views: 8077

Re: Multi Millionaire with no credit rating

A few months ago I was refused a PenFed Visa credit Card twice. I thought that it was absurd given my financial situation, but I understood the reason. I pay in cash or using my Fidelity debit card. But when I travel, I feel that I may be a bit more protected using a regular CC. So, I wrote to the CEO of PenFed and told him what my savings were and that I was willing to send him my latest Fidelity report. A few weeks later, PenFed did send me a "thank you note" with the Visa approval, and that without asking for the Fidelity report.
by Erwin
Fri Dec 30, 2016 1:34 am
Forum: Investing - Theory, News & General
Topic: 100% TIPS and 0% in Nominal Bonds?
Replies: 168
Views: 15476

Re: 100% TIPS and 0% in Nominal Bonds?

Doc wrote:
abuss368 wrote:Also TIPS did not hold value in the financial crisis. This has been attributed to Lehman Brothers. Do you have liquidity concerns in terms of TIPS?
YES

Our Treasury ladder was 100% TIPS in spring of '08. Our 100% perfectly safe, governmentt backed, inflation protected asset lost some 20% which we had to realize while rebalaning. Will the same thing loccur in the next Lehman?
Who cares a drop before maturity!
I suggest that you look at a bond ladder differently. Always keep them to maturity and either use to meet obligations (like in retirement) or continues the ladder by buying the year after the end of it.
by Erwin
Fri Dec 30, 2016 12:19 am
Forum: Investing - Theory, News & General
Topic: 100% TIPS and 0% in Nominal Bonds?
Replies: 168
Views: 15476

Re: 100% TIPS and 0% in Nominal Bonds?

jalbert wrote:
I could care less about "volatility" in TIPS prices.... If I want money to pay the rent 5, 10, 15, 20, 25, 30 years in the future, I buy TIPS.
CPI-E is the inflation rate calculated by the US govt for the average retiree. TIPs are indexed to CPI-U. Housing has a higher weighting in CPI-E than it does in CPI-U, and housing is just one product sector in either measure. There is no guarantee that TIPs will keep pace with US housing prices.
How different are they?
Can you produce historical data comparing both inflation indicators?
Is there a better option?
by Erwin
Wed Dec 28, 2016 2:55 am
Forum: Personal Investments
Topic: Reducing US equity allocation, increasing EMs
Replies: 7
Views: 1493

Re: Reducing US equity allocation, increasing EMs

MossySF wrote:My opinion is that it's ok to make a tactical allocation change. Just don't go overboard and do it in steps.
Why? Is your advise based on technical reasons?
by Erwin
Wed Dec 28, 2016 2:36 am
Forum: Personal Investments
Topic: Reducing US equity allocation, increasing EMs
Replies: 7
Views: 1493

Re: Reducing US equity allocation, increasing EMs

I own plenty of EM, but I don't know what it will do in 2017. You shouldn't jump in to EM just because you find it cheap right now. It can get even cheaper and if you don't have conviction, you will make a behavioral mistake. Buy EM because you think it's a good long-term investment. I now own about 9% in EMs and a bit over 50% in US, VT allocation, and think that EMs deserve a bit more while the US a bit less. How much, I do not know, but I have seen figures like 40/40/20 US/DW ex US/EM. My basis is PE10, and indicator that has proven effective in the past to assess long term performance. As of 9.2016 (http://www.starcapital.de/research/stockmarketvaluation), the PE10 of EMs was 14.4, while the US was 25.5, and the World was 20. To me, ev...