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Vanguard American ETF (VTI) PE ratio - 18.46
Vanguard International ETF (VXUS) PE ratio - 11.48

America is about 50% more expensive compared to international. That's kind of staggering.

This thread is yet another great example of the folly of timing the market

A few months ago I committed to a 60/40 Stock/Bond portfolio. I realized while bonds haven't had their day in the sun for a while they still had a purpose, and no one can see the future to know whether they will continue to underperform. Since I have 35+ years until I retire I'm been dca-ing into EDV. Today was a big eye opener because while the markets crashed bonds went up. And the longest bonds went up the hardest. EDV is up 4.5%. A ton of people I know are stressed and worried and very in the red, meanwhile my portfolio is in the green. I can't imagine a more extreme event like the 2008 financial crisis or great depression. I'm fully convinced of bonds now and will never stop the 60/40 portfolio. Just realize that there could be days w...

I will say that the 60/40 makes way more sense when you time horizon invest. A young person in their teens or early 20s investing in bonds would invest in extended long term treasuries like EDV. And LTT, let alone extended LTT, have performed pretty well. Even better than international stocks. Are you sure EDV performed very well? https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageTy...

I will say that the 60/40 makes way more sense when you time horizon invest. A young person in their teens or early 20s investing in bonds would invest in extended long term treasuries like EDV. And LTT, let alone extended LTT, have performed pretty well. Even better than international stocks.

How safe are the money market funds which are NOT FDIC insured? I don't think they are insured at all. I'm starting to wonder if I should keep my rainy day emergency fund in something like a short term bond etf like BSV Because then there's no fear until America defaults right? I am engaged in a long running professional debate on which is safer. Obviously we are talking about above 250k. I think money markets are. They have to hold a large slug of short term Treasuries. Note, that if professionals are constantly debating this subject you can assume that the differences are minor and nuanced. Well FDIC only have $128 billion for insurance. Thats only enough for 512,000 fully maxed accounts. Or 2 million if everyone only has around $60,000....

A few months ago I committed to a 60/40 Stock/Bond portfolio. I realized while bonds haven't had their day in the sun for a while they still had a purpose, and no one can see the future to know whether they will continue to underperform. Since I have 35+ years until I retire I'm been dca-ing into EDV.

Today was a big eye opener because while the markets crashed bonds went up. And the longest bonds went up the hardest. EDV is up 4.5%. A ton of people I know are stressed and worried and very in the red, meanwhile my portfolio is in the green. I can't imagine a more extreme event like the 2008 financial crisis or great depression.

I'm fully convinced of bonds now and will never stop the 60/40 portfolio.

investor2018 wrote: ↑Fri Mar 10, 2023 1:10 pm How safe are the money market funds which are NOT FDIC insured?

I don't think they are insured at all. I'm starting to wonder if I should keep my rainy day emergency fund in something like a short term bond etf like BSV

Because then there's no fear until America defaults right?

It's true that the emerging market has underperformed recently compared to the international developed market. But international in total has underperformed America and we still advise holding it.

Simply put, no one can know the future. We could be on the cusp of a huge bull run with the emerging market. America could be about to enter a Japan style lost decade. We don't know. Therefore we hold everything. Hold FTIHX and just chill. Buying the haystack for the needle.

Also fun fact, over 85% of the human race lives in the emerging market. That is a biiiiiiig haystack.

My 401k is a Vanguard target date fund and my roth ira is VNQ. After that its half cash and half VT/EDV because I like the idea of my emergency fund slowly growing overtime

That was my point in saying that the potential benefit beyond a Japan ('80s, not '40s) scenario isn't worth considering. America has had a pretty good record recently for outperforming the world but we are still only 4.25% of it. I have 30-35 years until I retire and for me personally, it kinda feels a little conceited to imagine a future where the other 96% of the world doesn't make a significant impact compared to us. Even if that's true, why do you think that would result in an outperformance of ex-US equities compared to VTI? Especially on a risk-adjusted basis. Is your belief is that U.S., over the long term, will always outperform international, and therefore there is no need to own the latter? No, it is not. My belief is that the re...

The point is VT prepares for the "know nothing" case (definition of which is unclear also) to the extent the market participants are able to. It's pointless to get into the specifics of what WW3 might look like. The point is, there will be winners and losers, and VT holds both. VTI doesn't. Why would one want to have any equities in a WW3 or other doomsday type scenario? Most everything would get clobbered. There are various other reasons to have international that don't involve doomsday. That was my point in saying that the potential benefit beyond a Japan ('80s, not '40s) scenario isn't worth considering. America has had a pretty good record recently for outperforming the world but we are still only 4.25% of it. I have 30-35 ye...

The post I replied to implied that there would be a "winning team" (which itself isn't clear) and that the U.S. might not be on the "winning team." You can't be seriously suggesting that your shares in a U.S.-based mutual fund or ETF, regardless of what holdings it might have, would survive either a "mutually assured destruction"-type nuclear war, or a transition to a hostile government with a completely different economic system? The point is VT prepares for the "know nothing" case (definition of which is unclear also) to the extent the market participants are able to. It's pointless to get into the specifics of what WW3 might look like. The point is, there will be winners and losers, and VT holds b...

Is there a reason Vangaurd prefers this random mix of bonds? I thought they'd just suggest a total bond fund or time horizon, so younger investors buying longer term bonds. But this mix of long/intermediate/short confuses me.

Also whats the point of international bonds if they are hedged anyways?

galawdawg wrote: ↑Sun Feb 12, 2023 7:21 am Meh. I don't market time so I don't pile out or pile back into. Two-fund portfolio at 75/25 for me and I stay the course, through thick and thin.

Same but 60/40 and EDV. Its tempting to go for shorter term bonds until the rate hikes end but don't want to time the market and mess up.

30 and currently all in on VT. I'm debating moving to a 60/40 portfolio by adding bonds though. Ignoring that asset class completely is starting to make me a little anxious. The bond market is $119 trillion. That is one big haystack that I've been ignoring. And while stocks have outperformed the last decade, there have been periods of time where bonds have done much better than stocks. The performance is cyclical and by owning both you don't miss out. That's the entire philosophy of owning the haystack for the needle, and the reason I market weight international and it applies to bonds too. I also don't like the idea of having to rebalance and selling my equity to get more of my retirement into bonds as I get closer to retirement, I'd rathe...

I hold VNQ in my roth ira to avoid its high taxtion. Like someone else said their performance mimics small cap value and corporate bonds. Based on this its logical that they are going to underperform the market (which is dominated by large cap growth) currently but will out perform during a recession or when the market goes sideways. This is the reason I hold something besides just the total market, so that I have something doing well when the market doesn't. The same reason somone would hold a small cap value etf, for factor investing. That being said reits are way better positioned now than 2008 based on their debt structure. While the index is much lower, the actual performance of the fundamentals of the companies has been surprisingly s...

As someone investing into the far future (30+ years) I feel like its common sense international will eventually outperform. I mean, 85% of the human race lives in the emerging markets alone. America is only 4% of the world. I can't imagine us the rest of the world doesn't catch up even with us already being ahead.

I'm really excited to see how this plays out. Especially as someone holding VT lol

gavinsiu wrote: ↑Fri Jan 20, 2023 5:58 pm

Kookaburra wrote: ↑Fri Jan 20, 2023 3:00 pm
But would interest rates really stay low for 29 years?

It could, just look at Japan.

This has been my hesitancy for buying bonds during the accumulation phase. If this was pre-2008 I'd consider EDV or BLV (extended long and long bond etfs from Vanguard) since my retirement horizon is 30+ years out. But not post financial crisis

Is credit rating for a bond considered idiosyncratic or unsystematic risk? Meaning a risk that isn't guaranteed like beta/market or alpha/factor? Phrased another way, is the increased default risk of a bond something that will be rewarded the same way as duration? Would "junk" bonds of the same duration (and so same inflation/interest rate risk) return more? Obviously within the context of holding an index and not picking and choosing individual bonds. As to the relevancy of this question with regards to this thread, if America does default and takes a credit hit, would that change anything? Would the increased risk from them no longer being AAA bonds (default is now considered a genuine abit small risk) result in more return beca...

From an investing standpoint, what happens to bond holders if a nation does default? Just delayed payments and a shake up on supply and demand effecting prices?

I've listened to a lot of "experts" on news programs saying we might be moving away from this decade of 0% interest rates. Specifically going back to holding rates above the inflatiom rate.

This would be welcome news and would hopefully quiet the "bonds are dead" crowd lol

Dividends are irrelevant and always have been. You have to look at total returns which includes dividends. If your dividend etf grew 3% and had a 3% price increase for a combined 6%, and then a normal total market like VTI returned 9%, you have more wealth in the total market to sell off. Of course the key here is that you said "market downturn". It's true that when the market struggles for extended periods of time then other factors do well. Whether its long term bonds, the value factor, or REITs (which mimic small value and corporate bonds). There is a case to tilt away from the market for downturns. But dividends are a case of correlation vs causation. They aren't good because they give dividend income, they just happen to do s...

The three fund portfolio is not perfect. Nothing is. Its still overwhelmingly positive but I think we do a disservice to not analyze its shortcomings. The first one seems to be its sensitivity to inflation, which can be solved by allocating more of your bond portion late in life to tips. But the key is this idea that we might need inflation protection. The second is when the global market stagnates for extended periods of time. There have been many times when equity's performance is flat or negative for many years, even globally. And this is why some people like Ben Felix recommend factor investing. Where the portfolio is tilted toward the value factor which continues to perform well even during stagnant times. Also just remembered there is...

That being said, we just need to see how long this downturn lasts. It might be that eveything is back to normal in a year or two. Which if thats the case, there might not be any reason to stray from the 3 fund portfolio as long as you have a big enough rainy day fund prepared for retirement. But why take the risk it doesn't work out that way? I really think a lot of what is happening here is people got used to the idea that "normal" means inflation is mostly below expectations. But sometimes the "normal" for long periods is inflation is mostly above expectations. Well we need to break the issue of "inflation" into short and long term. Ibonds and tips might be great inflation protection assests but they are pre...

I think the key to this discussion is to analyze what we mean by "the 3 fund failed". Obviously stocks and bonds fell sharply, but the major point is that they suddenly became all strongly correlated. So the big question is, is there anything that currently is inversely correlated to stocks and bonds? I know of nothing, hell even gold fell. I think the only thing that performed well was ibonds and tips. The problem might be that the 3 fund portfolio doesn't have any built in inflation protection. That being said, we just need to see how long this downturn lasts. It might be that eveything is back to normal in a year or two. Which if thats the case, there might not be any reason to stray from the 3 fund portfolio as long as you hav...

steve r wrote: ↑Mon Jan 16, 2023 6:53 pm

Logan Roy wrote: ↑Mon Jan 16, 2023 4:09 pm I think you may have established all of this without my being aware of it. Asness: There is no Size Effect. https://www.google.com/

Current paper on No Size Effect
https://www.aqr.com/Research-Archive/Pe ... ly-Edition

Five years earlier he wrote that size did matter if you control your "junk."
https://papers.ssrn.com/sol3/papers.cfm ... id=2553889

Which he address in the current paper as meaning size does not work "alone."

I saw this when Ben Felix mentioned it! What I find interesting is that the value only seems to apply to small cap, especially when mid cap and large cap value funds exist.

For me personally I've learned that the market can go sideways for extended periods of time. Upwards of a decade even if you hold the global market. Because of that some "tilt" is required. Now that can be bonds, but also some subset of the market. I think the most well known tilt is small cap value which will continue to give returns even while the market goes sideways.

Personally I hold REITs, but they mostly mimic small cap value and corporate bonds. And I only hold them in my roth ira.

I'm going to focus on the part about never having a credit card before. Are you employed with "good" W-2 income? Are you a student? Fidelity's credit card is offered by Elan Financial. Since you are an existing Fidelity customer you can try and see what happens, especially if you have good W-2 income. If you don't have good income you might be advised to go with a starter or secured card instead. I'm sure there's a lot of searching you can do on the internet to gauge what your chances of approval are. I admit I can live rather frugally but is it really that unusual to not use a credit card? I'm employed with a job but I've never had a reason to use anything other than my bank account checking for bills and groceries and the rando...

Hey everyone, going to start building up credit by using a Visa credit card and wondering if there is any advice on the best one to use. I don't plan to use it any differently from my normal checking account i.e. I'm going to be be responsible and not buy what I can't afford.

I use Fidelity for my brockerage, Roth IRA, HSA, and emergency fund, would their card be a good choice? I'm kind of leaning towards it because of the great customer service I usually get and since I already have everything else there. Its a simple 2% back on all purchases and no caps or fees.

AlphaLess wrote: ↑Sat Mar 19, 2022 10:28 am

Kevin M wrote: ↑Wed Mar 16, 2022 3:57 pm

dkturner wrote: ↑Wed Mar 16, 2022 1:57 pm Currently 7 year Treasury Notes have a higher yield than 10 year Treasury Notes too. This frequently happens when the yield curve is flattening.

Here is a chart of yields today and at the beginning of the year, from treasury.gov:



Kevin

If you are buying a portfolio of long-term treasuries, 20 is the sweet spot right now.

Why buy 50% 10Y + 50% 30Y, when you can buy 100% 20Y.

What if your time horizon is closer to 30? Shouldn't you still go for 30 over 20?

Backtesting various assets is just shocking. Large cap growth stocks have returned such an absurd amount. International, value, small cap, reits, bonds of all types, nothing comes close to the returns the S&P has given this last decade.

I'm getting Japanese pre-lost decade vibes. This prosperity is just so lopsided.

Well, taking it as a hypothetical since I don’t know whether we’ll face deflation soon, and I tend to think not, in deflation, among other things, asset prices decline. In the Great Depression, people who were not overleveraged and could hold onto their assets did better than those who had a lot of costly debt. So one thing you could think about is limiting your debtload (that’s good in almost all weather) or selling highly appreciated assets if you really thought deflation was near and had something to do with the sales proceeds. You could also work on your health and employability or whatever your source of income may be. You could strengthen your social connections since that’s a big help too in times of strife. I sort of came to this c...

I see a lot of discussion with regards to inflation. Lots of great threads on tips and ibonds and the long term performance of equity with regards to inflation.

But what about the opposite i.e. deflation? I know its rare, the most serious American example being the great depression, but Japan's been stuck in a three decade battle against deflation. This seems like a potentially very serious and dangerous problem that, since I'm decades away from retirement and the future is unknown, could happen.

Knowing this, should I be preparing for this possiblity? By saying, holding long term bonds? Or is just diversifying globally enough? Unless I missed it this question isn't in the wiki either.

A Japanese economic question? Am I crazy? Jokes aside I've been researching deflation recently. I know the central bank can lower rates or use qualitative easing to promote inflation, and vice versa for deflation, but why didn't this work for Japan? Is there a consensus or some theories?

If it's only 2.7%, doesn't this mean we could possibly live off the dividends of our retirement investments? The total world stock index's dividend yield is pretty close to that

I'm sorry, I've read multiple articles and the wiki but for some reason I'm struggling to understand the specifics of how Roth IRA's are taxed after inheritance. I know I won't have to pay any taxes on it or have required minimum distributions, but will my children have to pay taxes on it or have RMDs?

Assuming I've already been investing past the 5 year requirement.

There were a few metrics that said we were in a bubble. The warren buffet index as well as a run by large cap growth stocks

The reit index is down 25% but the companies within it are having record setting FFOs. Its actually surprising how well they are performing considering how disastrous rising interest rates are supposed to be to real estate. REITs give me exposure to real estate that I could never hope to achieve by myself. Owning apartments and housing but also commercial, warehouses, cell towers, storage, hospitals, hotels, farms, lumber and mining, its actually crazy how diversified the reit index is. Sure its not being the market right now, but nothing is. The market is mostly large cap growth stocks which have been on a bull run for the better part of this decade. Small and Value and International are down way past the mean. Once this recession is over ...

No 100%

I know is a long video but I highly, highly suggest you watch this video where Warren Buffett talks about the difficulty of stocks and picking winners.

https://www.youtube.com/watch?v=mS02egHLGlg

Skip to 4:35

If you look at the top 20 companies that led the world in each decade, the following decade almost every single one of those won't be on the list. The best company to invest in right now is most likely the small company you don't even know exists right now.

If you want to invest in the long term like 30 years, I highly suggest you just buy everything (VT)

I'm lucky enough to have a credit union that pays an 2.25% APY for checking up to $15,000. When I start a family I'd like a money market fund to hold some more at a higher rate

VNQI has really struggled to provide a good return and honestly VNQ is already fairly diversified globally

These periods where the market stalls for a long time are exactly why I tilt a little. For me its real estate in my roth ira.

I'm the opposite. I'm doing daily dollar cost averaging and its tempting to buy early when the markets suddenly go down

Inflation creates economic hardships. Things cost more so consumers spend less as they tighten their budgets. This leads to less profits for companies and can make struggling companies go under or just higher unemployment as they tighten their budgets by firing less valuable employees. Interests rates rising usually follows inflation which causes less people to take out loans which slows economic activity even more. Especially in sectors like the housing market that rely on cheap loans. This of course effects those companies in those sectors. So overall, stock is investing in companies and companies are going to struggle, people will pull their investments out of stock and invest in safer assets like cash or bonds or commodities and then re...

sailaway wrote: ↑Sat Dec 17, 2022 1:07 pm No. The deductible is not the only criteria. If your work offers an FSA (vs a limited FSA), the plan is 99% sure not HSA eligible.

Unfortunate but I'll count my blessings that I have such a low deductible. I guess to be financially responsible I should save up the maximum amount I can be charged under my plan for the year and hold it in a secure investment like a money market fund? Maybe even two or three years worth considering how good the rates are now. I do have an emergency fund but I see this as separate, where that would help pay for rent and living expenses and this is for unforeseen medical emergencies.

So I got a new job recently and they offer an FSA but not an HSA. I'd like to open my own, preferably through Fidelity, and under the "do I qualify" section it shows what the deductible needs to be in order to qualify. My individual ductable isn't high enough to qualify but the family deductible is.

Does that mean once I get married I can open an HSA under this healthcare plan?

This is exactly why people take inflation so seriously because outside of t bills and ibonds everything falls. Heck even gold is down and its supposed to be the final frontier of panicking investors.

Now I will say that for those of us doing dollar cost averaging, and haven't retired yet, we LOVE stocks being down because we can buy the tip.

Also reits like VNQ are down but because of how well they do with inflation their FFOs are setting records. Implying great long term growth for dollar cost averaging again.

I feel like the Bogleheads method of "living below your means" is probably the most philosophical aspect of what we follow. Not giving into instant gratification and instead being content with less. This translates into waiting for things to go on sale, making food at home more often, and not buying the yearly newest thing like phone or car models. Or saving up for big purchases instead of going into debt.

Would I say my life experience is less because I'm holding back and restraining my desires? I don't think so. Its a weird paradox because I'm clearly missing out on some fun experiences, but it didn't make my life worse because I didn't indulge.

Being a Boglehead feels like understanding and embracing contentment.