Bogleheads.org

TomatoTomahto wrote: ↑Mon Mar 27, 2023 12:39 pm

Florida Orange wrote: ↑Mon Mar 27, 2023 10:59 am Don't take unnecessary chances.

Or to continue the sports metaphor, "you've won the game, the league won't register a win until time runs out, so for God's sake don't pull your goalie."

Haha! I like it. Pulling your goalie when you're ahead makes no sense whatsoever. What you want then is two goalies. Like goalies, bonds won't win the game for you but they might keep you from losing.

smitcat wrote: ↑Mon Mar 27, 2023 11:15 am To attach a link to an article:
- open the selected article
- highlight the entire line in the browser and then click 'copy'
- return to Bogle post and then click 'paste'
- link should show up in that post where you clicked

Thanks smitcat. I'll see if I can find the article I'm thinking of.

Don't take unnecessary chances. I was 90/10 during accumulation. Now I'm 50/50 because I have stopped playing the game. There is still some risk but it's mostly an abstraction. It's very unlikely that anything will happen in the capital markets that will materially affect my lifestyle. That's what it means to me, anyway.

smitcat wrote: ↑Mon Mar 27, 2023 7:54 am

Florida Orange wrote: ↑Sun Mar 26, 2023 8:26 pm

smitcat wrote: ↑Sun Mar 26, 2023 6:13 pm

Florida Orange wrote: ↑Sun Mar 26, 2023 1:47 pm I believe Florida is the only state that doesn't tax any kind of income. The other states you mentioned don't tax ordinary income but they all tax some combination of things like interest, dividends, capital gains, pensions, social security and gambling winnings.

Not really, the details are here....
https://www.investopedia.com/financial- ... e-tax.aspx

That article is about income tax in general along side other kinds of taxes like sales tax and property tax. But on the subject of income tax only, I'm pretty sure only Florida doesn't tax any kind of personal income at the state level.

Please post a link to that data.

I don't know how to post a link.

smitcat wrote: ↑Sun Mar 26, 2023 6:13 pm

Florida Orange wrote: ↑Sun Mar 26, 2023 1:47 pm I believe Florida is the only state that doesn't tax any kind of income. The other states you mentioned don't tax ordinary income but they all tax some combination of things like interest, dividends, capital gains, pensions, social security and gambling winnings.

Not really, the details are here....
https://www.investopedia.com/financial- ... e-tax.aspx

That article is about income tax in general along side other kinds of taxes like sales tax and property tax. But on the subject of income tax only, I'm pretty sure only Florida doesn't tax any kind of personal income at the state level.

I believe Florida is the only state that doesn't tax any kind of income. The other states you mentioned don't tax ordinary income but they all tax some combination of things like interest, dividends, capital gains, pensions, social security and gambling winnings.

I think that was Jack Bogle's reasoning as to why you don't need international. I'm not aware of any funds of the type you asked about, but it might be helpful to know why you don't want international.

Welcome to the forum! When I transferred money from UBS to Vanguard I was enrolled in the Vanguard Personal Advisor Service. Vanguard handled everything, they answered all my questions and the whole process was very smooth. You might want to look into that.

It has often been pointed out that if two people, both the same age with the same amount of money in year 1, retire with the same percentage withdrawal rate, but one retires in year 1 when the market is high and the other retires the next year in year 2 when the market is low, the dollar amount of their withdrawal rates will be different. I take this to mean Safe Withdrawal Rates are a rough guide and there is a lot of room for flexibility.

The above responses illustrate why the statement "Long Term Treasuries (or bonds) are risky" is incorrect. They may be risky for a particular investor, depending on that person's financial needs and goals, but they are not inherently more risky than shorter term bonds.

Most people are not Bogleheads. There are a lot of people who don't know or care how much interest they're getting. The banks find this situation quite satisfactory and they see no reason to rock the boat.

I've always thought of it as the price you pay for international diversification. About 40% of my stock is VXUS, all in taxable, and the tax consequences for me are not very significant.

This is less precise than the previous answers, but (if you don't already know) you will get higher dividend yield with international stocks than domestic stocks. I own some VXUS and my dividends from that fund are consistently 1.5X to 1.8X the dividends on my domestic (U.S.) funds.

You may believe that, but it likely is false (unless your asset level is so high that return is irrelevant). A more volatile investment is most likely riskier with respect to some risk measures you care about. I wouldn't say that return is irrelevant, but if a disaster befell the high volatility components of my portfolio I would still be alright. Hence, to me, even extreme volatility in that part of my portfolio is not a risk. Unpredictability doesn't have to be risky. It's only risky if the result could be worse than you can tolerate. Being able to bear high risk does not turn a high risk investment into a low risk investment. It is just saying that you can absorb the risk. Volatility is an objective characteristic of the investment. Ris...

bertilak wrote: ↑Thu Mar 23, 2023 6:16 pm Got a quick summary to, perhaps, save me 48 min 38 sec of time?

Look for a summary of The Psychology of Money by Morgan Housel.

LilyFleur wrote: ↑Thu Mar 23, 2023 3:14 pm I worked with someone (who earned a great deal more money than I did) who had taken the fourth option and sold everything in 2008-2009. She said she and her husband would never be able to afford to retire. I took the third action as I was no longer working and was not contributing new money. It worked out quite well and I was able to retire early, with a modest lifestyle.

So I am not investing with new money since I am retired. I don't anticipate being out of stocks/stock index funds in my lifetime. I especially want to not sell my SCHB and SCHD in my brokerage account as under current tax law my heirs will receive it at the stepped-up cost basis upon my death.

I did the same. A modest lifestyle has many advantages.

The question "At what point would you stop investing in stocks?" can be interpreted in two ways: (1) When you would stop buying (new) stocks and stock funds? (2) When you would you sell all your (existing) stocks and stock funds? The answer to interpretation-1 depends on one's glide path and the distinction one makes between the assets one holds for himself and the assets one holds for his heirs and charities. The answer to interpreation-2 is usually "never." A notable exception is when you are in such dare circumstances that you need to sell all your remaining assets to buy food. Victoria I was thinking the same thing. When stocks go up too much I sell some and move the money into bonds. Other than that, I just let it ...

S_Track wrote: ↑Thu Mar 23, 2023 1:27 pm Curious, when you are under PAS, can you log in yo your account and make changes or does everything have to be done by the advisor?

When you're enrolled in the PAS only your advisor can make changes to your account.

Northern Flicker wrote: ↑Thu Mar 23, 2023 12:13 pm You may believe that, but it likely is false (unless your asset level is so high that return is irrelevant). A more volatile investment is most likely riskier with respect to some risk measures you care about.

I wouldn't say that return is irrelevant, but if a disaster befell the high volatility components of my portfolio I would still be alright. Hence, to me, even extreme volatility in that part of my portfolio is not a risk. Unpredictability doesn't have to be risky. It's only risky if the result could be worse than you can tolerate.

So a number of you go with an advisory service but then decide to override their recommendations - what's the point? Just DIY it yourself. Nothing wrong with getting some professional advice. Advisors advise, but it's your money; you can do whatever you want with it. But it is something you can easily duplicate and save the 0.2% or whatever per year. Besides the fact that the reasoning for wanting less international is usually dubious (ex. performance chasing). I agree that the reason for wanting less international is usually something dubious like performance chasing. But not everybody can easily duplicate the advisor's advice. My advisor came up with a very good plan for me. At the time I was less knowledgeable about investing than I am ...

Volatility is only risky to the extent that it matters to the investor. I have some high volatility assets. The volatility doesn't bother me at all because it's not a risk to my financial well being. Volatility is a dimension of risk. CAPM and multifactor models make this clear. I think most investors view volatility as a risk, but the degree may depend on personal circumstances. If I was in retirement a highly volatile portfolio would also be highly risky, but as an saver with a couple decades to go before retirement I don't view price volatility as such a big risk Right. The most important dimension of risk is the impact of the potential outcomes. In other words, the effect it could have on the investor. If a person bets ten cents on som...

So a number of you go with an advisory service but then decide to override their recommendations - what's the point? Just DIY it yourself. Nothing wrong with getting some professional advice. Advisors advise, but it's your money; you can do whatever you want with it. But it is something you can easily duplicate and save the 0.2% or whatever per year. Besides the fact that the reasoning for wanting less international is usually dubious (ex. performance chasing). I agree that the reason for wanting less international is usually something dubious like performance chasing. But not everybody can easily duplicate the advisor's advice. My advisor came up with a very good plan for me. At the time I was less knowledgeable about investing than I am ...

exodusing wrote: ↑Thu Mar 23, 2023 6:56 am I wonder about how effective marketing is on me. I use ad blockers, mute ads on TV and don't follow any "influencers".

Those are all very good practices. But advertising is everywhere. You can't exist in the world without being exposed to a lot of it.

Northern Flicker wrote: ↑Wed Mar 22, 2023 10:37 pm

Florida Orange wrote: ↑Wed Mar 22, 2023 9:05 pm

Northern Flicker wrote: ↑Tue Mar 21, 2023 10:44 pm The lower return is an outcome, not a measure of risk. Emerging markets are riskier than developed markets, but the diversification effect for total int'l makes it unclear if a total int'l equity index fund is riskier overall than a developed markets equity index fund.

Volatility is not the same as risk.

Volatility is one measure of risk. It is not the only one, and not the only important one, but it is an important one.

Volatility is only risky to the extent that it matters to the investor. I have some high volatility assets. The volatility doesn't bother me at all because it's not a risk to my financial well being.

There is a lot of evidence that some of the most effective marketing is the marketing that you don't think works on you. The only thing more effective may be marketing that you don't realize is marketing. Can you provide examples? If you're a dedicated Coke drinker who never drinks Pepsi, every time you see a Pepsi ad it reinforces your allegiance to Coke. You may even feel proud that the advertising doesn't work on you. Also, product placement can be very effective because you probably don't recognize it as advertising so there's no sales resistance. There is some information that suggests, although this is contentious, that the alcohol industry wants people to think alcohol is addictive. It gives people who drink more than they should an...

I think a lot of people would be better off with a mix of short, intermediate and long term bonds. Short term where you need to protect the principal and long term where you want the higher interest and can tolerate some price volatility. By going all intermediate term you don't get the full benefit of either short term or long term bonds.

secondopinion wrote: ↑Wed Mar 22, 2023 3:11 pm

rockstar wrote: ↑Wed Mar 22, 2023 2:59 pm Takes some time to figure out what makes you happy versus what marketing tells you will make you happy. That’s been my experience.

Right. Marketing is lost on me; they would do themselves a favor by having all the details and the price upfront. I have a better gauge of my own happiness then they do.

There is a lot of evidence that some of the most effective marketing is the marketing that you don't think works on you. The only thing more effective may be marketing that you don't realize is marketing.

Charles Joseph wrote: ↑Tue Mar 21, 2023 8:15 am That is great. A keeper. Thanks. I'm "reading" (listening on Audible) the book for the fourth time. Took three times to finally sink in. Some are thicker than others.

Maybe we should add another one: Don't outsmart yourself.

If you just stick with your asset allocation, wouldn't you be doing that anyway?

The lower return is an outcome, not a measure of risk. Emerging markets are riskier than developed markets, but the diversification effect for total int'l makes it unclear if a total int'l equity index fund is riskier overall than a developed markets equity index fund. Volatility is not the same as risk. With low volatility assets the risk is that you won't make as much as you could have with higher volatility assets. That's why young people who are just starting out in investing are advised not to have a bond heavy asset allocation. There is too great a risk that they won't make as much as they could have in the more volatile stock market. The risk that matters is the risk for the investor, and that's different for different people depend...

As long as you know what the percentages should be, the math should be pretty easy.

burritoLover wrote: ↑Wed Mar 22, 2023 3:04 pm So a number of you go with an advisory service but then decide to override their recommendations - what's the point? Just DIY it yourself.

Nothing wrong with getting some professional advice. Advisors advise, but it's your money; you can do whatever you want with it.

Allan Roth wrote: ↑Tue Mar 21, 2023 1:45 pm

Florida Orange wrote: ↑Sun Mar 19, 2023 1:15 pm I am no longer enrolled in the Vanguard Personal Advisor Service but I was a few years ago. For my stocks, my advisor recommended 60% U.S., 40% International. I discussed with her the possibility of making significant changes to those percentages as well as other aspects of the plan and she was fine with it. I got the impression she would let me do anything I wanted within reason. When I asked, just out of curiosity, about some fairly extreme asset allocations, she told me it was a bad idea, but she didn't say I couldn't do it.

In the end, after much discussion, I accepted her plan in toto and I've stuck with it ever since.

Roughly how long ago did you open the PAS account and get that 60/40 advice? Thanks.

Early 2019

Michael Lewis made essentially the same point in his book Liar's Poker. He says in the stock market, what everybody is thinking is "I wonder what everybody else is thinking".

I am no longer enrolled in the Vanguard Personal Advisor Service but I was a few years ago. For my stocks, my advisor recommended 60% U.S., 40% International. I discussed with her the possibility of making significant changes to those percentages as well as other aspects of the plan and she was fine with it. I got the impression she would let me do anything I wanted within reason. When I asked, just out of curiosity, about some fairly extreme asset allocations, she told me it was a bad idea, but she didn't say I couldn't do it.

In the end, after much discussion, I accepted her plan in toto and I've stuck with it ever since.

Charles Joseph wrote: ↑Mon Mar 13, 2023 6:50 pm

getmoneygetpaid wrote: ↑Mon Mar 13, 2023 9:52 am One of my index funds dropped a bit this morning (apparently heavy in finance, presumably related to SVB news)

Why not just invest in the total market?

If you went Total Stock/Total Bond, 50/50, and you're in it for the long haul, whether interest rates go up or down, it's always good for half your investments. I'm thinking of calling it The Zen Portfolio.

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...

dknightd wrote: ↑Wed Mar 08, 2023 8:36 am

dcabler wrote: ↑Wed Mar 08, 2023 5:40 am

Take a look: viewtopic.php?p=6869837#p6869837

cheers.

That is an interesting concept. But I do not like it. Instead of selling long term bonds first, I'd prefer to sell what ever is doing better this year. This year it has been short term cash like things. Let the long term things hopefully catch up in the long term . . .

I feel the same way.

Where are you getting those numbers from? If you care about the value at year 20 and interest rates increase 2.5% at 19.99 years, the you're looking at a price drop of 2.5%x10=25%. If your interest rate started at 20% then you're in the red at year 20. I know that's an approximation, but to first order youre looking at about a 3% loss. You don't have time to make up for the loss. If the specific number didn't show a loss, just increase the interest rate jump or decrease the initial rate until it does. You're only looking at the share price the day after the change in interest rates compared to the share price the day before the change. But you've been getting interest all along (in this example, 20 years). If you include that, it's not a l...

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 ...

stocknoob4111 wrote: ↑Thu Mar 09, 2023 10:24 am

Florida Orange wrote: ↑Thu Mar 09, 2023 10:21 am I think they're right for the wrong reason. If you're living on dividends you have a very low withdrawal rate which eliminates sequence of returns risk.

They stated that they have a close to 4% dividend yield due to International investing so it would amount to a 4% WR which would be about the same as most conservative retirees are targeting.

They also stated that US investors would have to "figure something out" since they get an under 2% yield, which is inaccurate since US investors would just take their 1.5% dividend and then withdraw the additional 2.5% from their assets to arrive at 4% and it would be exactly the same.

I agree. I think their point was that by living on dividends you never sell shares.

It looks like there is very little difference between VTES and the Vanguard Limited Term Tax Exempt bond fund except that limited term pays a little more interest and it's actively managed. My understanding is that bond funds often benefit from active management although I don't have enough expertise to be sure that's true. Still, it's probably not a bad fund with short term interest rates being what they are right now.

I think they're right for the wrong reason. If you're living on dividends you have a very low withdrawal rate which eliminates sequence of returns risk.

I'm not confused. What you describe in the second paragraph about reinvesting money is exactly what a bond fund does. The fund may have had bonds mature, but new ones have been purchased, so you're always exposed to interest rate risk. With a bond fund there is no pull to maturity (at the fund level) because you never approach it, it's always exactly the same time away as new bonds are constantly being purchased. Not really. The pull to maturity applies to bond funds as well. The price per share of the bond fund reflects the market value of the bonds held by the fund at that time. As they approach maturity they approach face value. Additionally, as the bonds are redeemed they are reinvested in new, higher interest bonds. That also helps th...

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 ...

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...

Beensabu wrote: ↑Wed Mar 08, 2023 10:10 am

Florida Orange wrote: ↑Wed Mar 08, 2023 4:48 am Most long term bond funds that I've seen have a duration of about six or seven years.

Those are intermediate-term bond funds, like BND.

For long-term bond funds, average duration is usually around 16-18 years, like VGLT.

For ultra long-term bond funds, average duration is around 25 years or so, like EDV.

I'll take your word for it although I think the point I was making to Marseille07, that the duration of long term bond funds is not too long to make the funds useful to anybody, is still valid.

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...

Huge risk. Inflation, default, opportunity cost. So in twenty years i break even in nominal dollars, losing money to inflation and then having to pay taxes on those make-believe returns. As was specified in a previous post, we are excluding those risks. The discussion is about how the duration formula applies to nominal price recovery absent other types of risks. Then why did you even say something was no risk if you excluded them all? It makes no sense to make that statement. No risk under the terms specified. We eliminate certain risks in order to isolate the issue under discussion. For example, you could say that bonds are risky because the world could blow up or the government could confiscate all your assets or you could die, but that...

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...