Search found 146 matches

by tpm871
Sat Jul 07, 2018 1:48 pm
Forum: Personal Consumer Issues
Topic: Going solar?
Replies: 73
Views: 8361

Re: Going solar?

I recently went solar, and spent a lot of time understanding the financial aspects. After rebates, the cost was about $21k and I estimate that it would return about $50k above and beyond this investment over the life of the panels. Some points to consider: 1. As some have mentioned, getting extra generation capacity beyond your usage may not have as favorable of a return on investment as sticking with just covering 100% of what you use. If you're mainly focused on the financial aspect as opposed to the environmental benefits, you may want to avoid getting more capacity than you use. With net metering, your generation up to 100% of your usage fully offsets the electric costs that you would have used (the generation, transmission, and other c...
by tpm871
Sat Dec 31, 2016 1:14 pm
Forum: Investing - Theory, News & General
Topic: Tax Loss Harvesting - Is it worth it?
Replies: 93
Views: 18622

Re: Tax Loss Harvesting - Is it worth it?

I did tax loss harvesting for some emerging markets shares mid-year. Besides taking the loss for tax purposes, it allowed me to shift shares from taxable to tax deferred accounts. I had wanted to shift as well, since dividends on EM tend to be less favorable tax-wise (more unqualified dividends in comparison to other investments). The main risk is that you need to wait to repurchase shares to avoid a wash sale. That can work for you or against you, depending on if there's a drop or gain in that waiting period. This past week I actually prepared for future TLH. I had some investments in small cap value in my tax deferred acount which had done well this year. I sold shares in my tax deferred account and bought an equal number of shares in my ...
by tpm871
Sat Aug 30, 2014 12:37 pm
Forum: Investing - Theory, News & General
Topic: Does anyone have 'Lazy Portfolios'?
Replies: 102
Views: 14326

Re: "Three Proofs That Total Stock Market is Efficient"

Saying that it (Total Stock Market Index Fund) is "mathematically lowest risk for highest return" is simply untrue. Not according to this study: Three Proofs That TSM Is Efficient . Best wishes. Taylor Thanks, Taylor. I'd be interested to hear whether everyone agrees with the assumptions made there. The first assumption made is that markets are perfectly efficient, and that participants always know how to act in order to maximize their probability of success. While I believe that there is a tendency towards an efficient market, I think that it's a huge stretch to assume that markets are perfectly efficient at all times or that most people are 100% rational. But this perhaps clarifies one of my own reasons for favoring S&D: I ...
by tpm871
Fri Aug 29, 2014 8:25 pm
Forum: Investing - Theory, News & General
Topic: Does anyone have 'Lazy Portfolios'?
Replies: 102
Views: 14326

Re: Does anyone have 'Lazy Portfolios'?

Actually, the 3 fund portfolio' strengths are not in its outperformance; the outperformance is incidental as a result of its structure; there are many other slice and dice index portfolios, and dare I say, actively managed funds that have "outperformed" over certain time periods. What the 3 fund get you is this: Rock bottom costs (and costs are the only thing you can control) Total Market ownership, which is mathematically the lowest-risk for highest-return investment strategy since you capture the average return of the market's collective wisdom The "historical data" behind the 3 fund portfolio simply points out what we already know based on what I wrote above. Like I said, perhaps slice and dicing might provide higher...
by tpm871
Tue May 27, 2014 12:35 am
Forum: Investing - Theory, News & General
Topic: This market is a snoozer, do you like it?
Replies: 45
Views: 6363

Re: This market is a snoozer, do you like it?

I wouldn't put 2013 in the same category as 2008. 2013 wasn't volatile since it mostly just steadily increased. 2008 was wild ride, with huge daily swings both down and up.

What I would prefer (but wouldn't necessarily be the most fun) is a market that is constantly oscillating up and down by a non-trivial amount, with slow and steady overall gains over time. Oscillation would make a "rebalancing bonus" be more likely, for those of us with a good discipline for such things. Slow gains would mean that a bubble doesn't form.
by tpm871
Tue Apr 22, 2014 11:27 pm
Forum: Investing - Theory, News & General
Topic: Bad 401K better than nothing?
Replies: 7
Views: 1139

Re: Bad 401K better than nothing?

It depends:

1. If there is an employer match, then you should probably contribute to the 401k.
2. If not, and you don't have enough to max out your IRA contribution, then you should contribute to the IRA instead.
3. If there's no match, you have money beyond the IRA max, and you're going to leave the job within a few years, then it may be worth contributing to the 401k and rolling it over into an IRA when you leave.
by tpm871
Tue Apr 22, 2014 12:20 am
Forum: Investing - Theory, News & General
Topic: Total bond vs intermediate tax exempt
Replies: 12
Views: 3336

Re: Total bond vs intermediate tax exempt

TPM: unfortunately I have no history in international up until a few months ago. I will see what turns up over the next few years regarding my international holdings. You can see the past tax cost ratios at the schwab site. For example, total stock market vs total international stock market: http://www.schwab.com/public/schwab/investing/investment_help/investment_research/etf_research/etfs.html?path=%2FProspect%2FResearch%2Fetfs%2Fperformance.asp%3Fsymbol%3DVTI%26type%3DtaxAnalysis http://www.schwab.com/public/schwab/investing/investment_help/investment_research/etf_research/etfs.html?path=%2FProspect%2FResearch%2Fetfs%2Fperformance.asp%3Fsymbol%3DVXUS%26type%3DtaxAnalysis The difference isn't as huge as other funds that I've seen, but it'...
by tpm871
Mon Apr 21, 2014 12:03 am
Forum: Investing - Theory, News & General
Topic: Total bond vs intermediate tax exempt
Replies: 12
Views: 3336

Re: Total bond vs intermediate tax exempt

One other thing that you may want to think about: maybe move all of your total stock market holdings to taxable, and move as much of the total international to tax advantaged as you can. For my holdings, I found that international equities generated more dividends (and had a higher ratio of ordinary dividends too) than domestic equities. I was better off shifting more of my international equities to tax advantaged space. However, I don't have the same funds as you, so you should probably look back on your 2013 account statements to see if that would have worked better for you. I am also guessing that for you the AMT probably largely reduces or eliminates the foreign tax credit on total international taxes paid -- another reason to make the ...
by tpm871
Sun Jan 26, 2014 11:48 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Tweakers - Unite and be ashamed no more
Replies: 37
Views: 3815

Re: Portfolio Tweakers - Unite and be ashamed no more

I made a few changes, mostly influenced by interest rates. I wouldn't say that I am trying to time interest rate changes; I just think that the long term direction is up, so I made long term changes to my AA: Sold my US Intermediate Treasuries fund (which I had rather than TBM), and set up a five year CD ladder instead. I don't really see a downside, since the yields for CDs are better, there's no management fee, and there's no risk of principal loss (even if rates shoot up). Sold my REITs back in May, after reading wbern's advice. I think that REITs will struggle as interest rates increase. In replacing that position, I increased my allocation to small cap value and emerging markets. I am still value averaging into these higher allocations...
by tpm871
Sat Jan 11, 2014 2:44 am
Forum: Investing - Theory, News & General
Topic: when you reach"your number"
Replies: 84
Views: 13122

Re: when you reach"your number"

I voted "other". I guess you could sum up my answer as "worry less". I was approaching my number a few years back. I don't like changing jobs, and had been at the same job for quite a while. But being close to my number gave me the comfort level to venture out and try for a better opportunity. I got a job at a much better company (my top choice; the only one I interviewed with). No need to worry about the possibility of failure in being outside of my comfort zone, since I could always just retire early if things didn't go well. I hit my number a little over a year later, and I am still working there. The other part of "worry less" is to realize that I don't need to take as much risk in investing. I still rememb...
by tpm871
Thu Dec 26, 2013 1:16 am
Forum: Investing - Theory, News & General
Topic: Poll: "Bonds are for safety (True or False)".
Replies: 63
Views: 6505

Re: Poll: "Bonds are for safety (True or False)".

I voted false. It's hard for me to think of bonds as being safe after the bond dips that we had this year. It felt like a preview of far worse declines to come when interest rates start increasing for real. I'd complete the phrase "bonds are for..." with: 1. diversification (negative correlation with equities) 2. parking money so that it can be rebalanced into equities during stock market crashes Bonds are not safe on their own, for the reasons that others have pointed out. But they can contribute to a portfolio's stability by being a complement for even more risky things. I've shifted my bond approach with this in mind. That is, moving away from bond funds and into using bond ladders instead. I won't lose principal when interest ...
by tpm871
Sun Dec 15, 2013 11:42 pm
Forum: Investing - Theory, News & General
Topic: Check your Vanguard transactions!
Replies: 5
Views: 1993

Re: Check your Vanguard transactions!

Cosmo wrote:Was this order initially done online or via a human being?
It was done online initially.
by tpm871
Sun Dec 15, 2013 11:13 am
Forum: Investing - Theory, News & General
Topic: Check your Vanguard transactions!
Replies: 5
Views: 1993

Check your Vanguard transactions!

Last Monday, I put in an order through Vanguard to buy a $10k CD. On Friday, I got a call from Vanguard saying that I didn't have the funds available to cover the transaction. I took a look at my account, and to my surprise there was a huge error: my account was debited more than $93k to buy that $10k CD . Vanguard brokerage corrected the problem after I pointed it out. The broker said that he's never seen anything like it. It wasn't that I had somehow entered the wrong amount when I put in the order. The transaction history clearly shows that I bought a $10k CD but the cost was over $93k. I am really glad that the error was so high, so that it didn't succeed. If it was a small error, I may have missed it. But from now on, I am going to pay...
by tpm871
Fri Nov 15, 2013 12:15 am
Forum: Investing - Theory, News & General
Topic: cash vs bond question
Replies: 18
Views: 3032

Re: cash vs bond question

I had part of my bond allocation in a treasury bond fund, and I was annoyed by the dip around mid-year associated with Fed tappering concerns. At first, I thought that I'd reinvest in individual treasury bonds to avoid future dips like that. That would avoid both the risk of losing principal when interest rates rise, as well as being lower cost than a fund (no management fee). If you hold individual bonds to maturity, the return that you get is purely just the interest. In thinking about it that way, it's clear that CDs are actually a better deal than Treasurys. CDs have consistently higher interest rates and are equivalent to Treasurys in terms of credit risk (i.e., because of FDIC insurance, assuming that you don't exceed insurance limits...
by tpm871
Sun Nov 10, 2013 10:00 pm
Forum: Investing - Theory, News & General
Topic: How many funds do you have in your portfolio?
Replies: 167
Views: 15253

Re: How many funds do you have in your portfolio?

I'm in the slice & dice camp. I have: US Equity Total stock market Large value Small blend Small value International Equity European index Pacific Rim index Emerging markets index International small index International real estate Bonds CD ladder TIPs / I bonds Municipal bond fund I'd point out that this can be lower cost (e.g., the ERs for individual international funds are lower than the total international fund at Vanguard) and more diversified (i.e., less concentrated in large cap) than the three fund portfolio, but it depends on your allocations. I have no problem staying the course, although that doesn't mean that I don't occasionally reevaluate the long term prospects of each fund in relation to the portfolio. For example, this ...
by tpm871
Sat Nov 09, 2013 12:51 am
Forum: Investing - Theory, News & General
Topic: Behavioral Finance: Personality Type Determines Pay
Replies: 4
Views: 1397

Re: Behavioral Finance: Personality Type Determines Pay

It would be interesting to know the distribution of Bogleheads across those types, and whether there are any trends. For example:

Are there many artisian and idealist Bogleheads?
(My guess is no)

Are guardians more likely to favor the three fund approach, and rationals more likely to favor slice & dice?
(My guess is yes)
by tpm871
Sun Oct 13, 2013 10:25 am
Forum: Investing - Theory, News & General
Topic: The problem with a 3 fund portfolio
Replies: 65
Views: 13040

Re: The problem with a 3 fund portfolio

I do not believe any 3-fund portfolio advocate believes it is the only way. I think many advocates believe that for the amount of mental energy invested in managing finances it delivers on a solid promise: you get the market return cost effectively for very little effort spent around investing choices. The OP was claiming that the 3-fund portfolio was too simple. You propose a variation of slice-and-dice, I agree it has potential to out perform. I'm not understanding the SPECIFIC mechanism that the primary target audience of a 3-fund portfolio would use to select how much additional risk to take (small cap) or how to divide up the countries/regions into funds and get the MARKET return for similarly little effort. It is a possibility with a...
by tpm871
Sun Oct 13, 2013 3:17 am
Forum: Investing - Theory, News & General
Topic: The problem with a 3 fund portfolio
Replies: 65
Views: 13040

Re: The problem with a 3 fund portfolio

I agree with the OP, although I'd say that slice & dice isn't for everyone. If you don't want to spend a bit more time, don't have the risk tolerance to rebalance when it feels uncomfortable, and/or selling to rebalance puts you at a tax disadvantage (e.g., not much room in tax deferred space, not much capital losses to offset gains, high tax bracket) then the three fund approach may be better for you. Your points seem to be ones for a more active style of portfolio setup/investing (not non-index, but just more active choices and discipline of portfolio maintenance) not an answer to the 3-fund portfolio having a problem or being too simple as raised by the OP. I agree, there is POTENTIAL to over perform if you spend the time setting yo...
by tpm871
Sun Oct 13, 2013 2:44 am
Forum: Investing - Theory, News & General
Topic: The problem with a 3 fund portfolio
Replies: 65
Views: 13040

Re: The problem with a 3 fund portfolio

4. Market weight isn't a guarantee that it's the best weighting. Just because Europe is X% and Asia is Y% of the world market doesn't mean that's automatically best for you. What is the best weighing for me, then? I don't really care about either, since I live in the US. Where would I come up with X and Y? Why would I want to ignore the possibility of seismic shifts in the distribution of global wealth, and insist that Europe has to be 20% despite all the indicators that the market is looking at? The 40% fixed income in my portfolio represents my risk tolerance, but what is Y%? My Asia tolerance? I wasn't suggesting that the goal is to somehow find an optimal X% Europe and Y% Asia. My point is that just because total international has Euro...
by tpm871
Sat Oct 12, 2013 4:36 pm
Forum: Investing - Theory, News & General
Topic: The problem with a 3 fund portfolio
Replies: 65
Views: 13040

Re: The problem with a 3 fund portfolio

I agree with the OP, although I'd say that slice & dice isn't for everyone. If you don't want to spend a bit more time, don't have the risk tolerance to rebalance when it feels uncomfortable, and/or selling to rebalance puts you at a tax disadvantage (e.g., not much room in tax deferred space, not much capital losses to offset gains, high tax bracket) then the three fund approach may be better for you. With that said, I think I'm better off splitting among Europe, Pacific Rim, and Emerging Markets rather than just Total International. Here's some things to consider: 1. Fees are actually a little lower if you invest in Europe and Pacific Rim separately: 0.16 ER for VXUS vs. only 0.12 ER for VGK and VPL. 2. As the OP suggested, investing ...
by tpm871
Tue Jun 04, 2013 11:32 pm
Forum: Investing - Theory, News & General
Topic: Controlling emotions
Replies: 37
Views: 4029

Re: Controlling emotions

Here's what I do:

1. Whenever I look at my total portfolio amount, I record what the DJIA was at the time.
2. I don't look at the total again until the DJIA is higher than the last time I looked.

So essentially, I get positive reenforcement every time I look, since the total is nearly always higher when the DJIA is higher. I avoid negative reenforcement during the down times by not knowing what the total is.

However, I do also regularly look at individual allocations relative to my annual plan to determine when to make adjustments, based on rebalance bands (while at the same time being careful not to look at the overall total). That way I can buy when things drop, without having to dwell on how much I just "lost".
by tpm871
Sun May 26, 2013 12:52 pm
Forum: Investing - Theory, News & General
Topic: How Would Mr. Bogle Calculate Expected REIT Returns?
Replies: 122
Views: 30553

Re: How Would Mr. Bogle Calculate Expected REIT Returns?

To test my understanding, let me see if I can explain the underlying forces at work: REITs represent physical assets that generate dividends (e.g., from rents on properties). The total dollar value of dividends paid out to all shareholders does not grow very rapidly. Since 90% of the profits are distributed to shareholders, there isn't a large amount of reinvestment by the REIT itself to grow its physical assets in order to grow future dividends. The total dollar value of dividends across all shareholders will tend to increase with inflation as rents increase, but isn't at all tied to the price of the REIT shares. So, if the total dollar value of dividends paid out to all shareholders doesn't grow much, the yield per share will go down as a...
by tpm871
Sun Apr 28, 2013 11:53 am
Forum: Investing - Theory, News & General
Topic: Stay the course and market timing mix strategy
Replies: 32
Views: 3045

Re: Stay the course and market timing mix strategy

How is contributing to the cash fund during the months when the three real funds are within 10% of targets "investing in the best value"? I don't see how cash is the best value, and this would mean hoarding investable money in cash; i.e. timing. It would seem like the better plan would be to contribute according to the original AA to all three plans and keep them chugging along. I do like the idea of having a slush fund in cash that can be used to get an underperforming fund back up to target. No plan is always optimal. You are right that at times putting the money in cash is worse than investing in a fund, especially when there is momentum in the market. If the market always goes higher and never dips, this wouldn't do as well a...
by tpm871
Sun Apr 28, 2013 10:50 am
Forum: Investing - Theory, News & General
Topic: Stay the course and market timing mix strategy
Replies: 32
Views: 3045

Re: Stay the course and market timing mix strategy

How about the following instead: 1. Have a "four fund" approach instead, using uninvested cash as your other "fund". For example: 45% total stock market 30% total international stock market 25% total bond market 0% cash 2. Look at your actual allocation percentages each month. If any of the non-cash funds are more than, say 10%, below its target allocation, contribute your $2,000 to the fund that is furthest below its target. For example, if total bond market is only 22.5%, it's 10% below its target of 25%. If you have any money in your cash allocation, use up to $1,000 from your cash allocation (i.e., $1,000 or as much as you have) to contribute to that fund as well. 3. For any month that none of your non-cash funds are...
by tpm871
Sun Jan 27, 2013 2:22 pm
Forum: Investing - Theory, News & General
Topic: John Bogle: “Invest, and don’t peek”
Replies: 24
Views: 5408

Re: John Bogle: “Invest, and don’t peek”

I do peek, but in a very controlled way. I look at my investments twice per month, to see in any of my rebalancing bands have been triggered. I only make adjustments according to those triggers.

Also, I don't always look at the total. When things are down, looking at the total can be depressing. Instead, I only look at the total once per year, or when the Dow is higher than the last time that I saw the total. It gives positive reenforcement when things are going well, without the negative reenforcement when things are going poorly.
by tpm871
Sun Jan 27, 2013 2:05 pm
Forum: Investing - Theory, News & General
Topic: Market "melt up" and the Airplane Game
Replies: 71
Views: 8869

Re: Market "melt up" and the Airplane Game

Yeah, I saw this quote in an article this morning:
Mechling, 47, a married market researcher with no kids from Portland, Ore., admits that the fear of missing out on gains has given her a new sense of urgency to get invested. With the market near a new high, "it's definitely safe to invest now," she says.
http://www.usatoday.com/story/money/mar ... t/1861789/

That's totally illogical, and makes me want to sell everything now (but I won't, since I stay the course).
by tpm871
Thu Jan 03, 2013 12:20 am
Forum: Investing - Theory, News & General
Topic: What was your 2012 return?
Replies: 275
Views: 30645

Re: What was your 2012 return?

BigFoot48 wrote:Chart of most of the returns provided so far where AA was given and understandable and a specific return provided. The one above 20% return was thrown out to make the chart larger - sorry about that!
Image
What I find interesting about this chart is that I can find my point (63% stock, 12.69% return) and see the points that had a better return than me while taking no greater risk (where risk is defined as "higher percentage in stocks"). I see that four portfolios had this better risk adjusted return (i.e., were above and to the left of my point). I'll have to look back to see what I can learn from what they posted.
by tpm871
Tue Jan 01, 2013 4:01 pm
Forum: Investing - Theory, News & General
Topic: What was your 2012 return?
Replies: 275
Views: 30645

Re: What was your 2012 return?

12.69% XIRR

My dates are slightly off, since I only had a start total written down from 12/23/11 (return is for 12/23/11 - 1/1/13).

I have a slice & dice portfolio, with current allocations of:

27% U.S. Equity
25% International Equity
11% Alternative (mostly REITs)
28% Bonds
9% Cash
by tpm871
Sat Sep 15, 2012 7:40 pm
Forum: Investing - Theory, News & General
Topic: Comparison of small-cap value ETFs
Replies: 69
Views: 27594

Re: Comparison of small-cap value ETFs

IJS also tracks S&P 600 Value:

S&P Small-Cap 600 Value (IJS)
Unadjusted expense ratio: 0.29%
Average market cap: $940M, 5% mid-cap, 58% small-cap, 37% micro-cap
P/E: 16.45
P/B: 1.34
Turnover Ratio: 30%
12 month yield: 1.59%

In comparison, VIOV has a 70% turnover and 0.99% yield. My guess is that VIOV trades more aggressively to keep up with changes to its benchmark composition, which is why it is a bit more micro-cap. But the higher turnover may have hidden costs (e.g., less tax efficiency).

VTWV is even more aggressive, with 101% turnover, and tracks even closer to its benchmark as a result.
by tpm871
Sun May 06, 2012 10:16 am
Forum: Personal Finance (Not Investing)
Topic: Re: What stops you from retiring today?
Replies: 100
Views: 10997

Re: What stops you from retiring today?

For me, it's mainly uncertainty. I'm not even close to a "normal" retirement age, so there's (hopefully) a lot of years left. The distant future is uncertain, so early retirement seems (financially) scary. Factors to consider: Health care costs -- currently increase well above the rate of inflation Medicare -- may not exist later, due to health care costs and other factors Health insurance -- cost may be radically higher in the future Social security -- may not exist later, due to an increasing ratio of retirees versus contributors Investment returns -- who knows what will happen Life expectancy -- I may live longer; risk of outliving my savings Inflation -- my savings may become worth a lot less relative to what I need to spend S...
by tpm871
Sun Apr 29, 2012 11:44 pm
Forum: Investing - Theory, News & General
Topic: Value averaging rate of return
Replies: 59
Views: 4163

Re: Value averaging rate of return

I still wanted to hear about this from tpm871 or the OP or anyone else. @tpm871 How can you tell when stocks are oversold? How can you tell when stocks are overbought? What is the mean that they revert back to? I don't think you can be too sure of these things. Yes, you can't know the exact values or timing of any of these in advance. You can't know when the market is at its minimum or maximum. But you can react when there are sudden sharp changes to the downside or upside, which frequently represents an over reaction. VA is a way to systematically take action in response to changes like this. You don't know what the mean is; VA just works under the assumption that the sharp change will eventually reverse in your favor. Some recent example...
by tpm871
Sun Apr 29, 2012 9:09 am
Forum: Investing - Theory, News & General
Topic: Value averaging rate of return
Replies: 59
Views: 4163

Re: Value averaging rate of return

tpm871 -- Many thanks for your explanation. Could you give an example(s) of band triggers? Is this similar to rebalancing bands? For example, let's say that your threshold for buying/selling is 4% below/above your target. If your target value for this month is $10,000, you would not do anything if the actual value of your investment was between $9,600 and $10,400. I use a similar approach as Opportunistic Rebalancing to determine how much to sell/buy: You rebalance back to half of your threshold. This is used to keep you from overcorrecting. Let's say that your investment rises to $10,500 this month. You'd rebalance back to $10,200 (i.e., 2% above your target), selling $300. See this article on opportunistic rebalancing: http://www.tdainst...
by tpm871
Sun Apr 29, 2012 12:11 am
Forum: Investing - Theory, News & General
Topic: Value averaging rate of return
Replies: 59
Views: 4163

Re: Value averaging rate of return

I've been doing value averaging for about five years. The approach looks to take advantage of the following tendencies of the market (and human behavior): 1. Markets occasionally become oversold. 2. Markets occasionally become overbought. 3. Markets have a tendency revert back to the mean. The oversold part is handled as a buying opportunity in VA. The more the market goes down, the more you will buy. You'll generally buy even more shares than DCA during a dip, because the amount you buy is determined by how much the market has dropped. Reverting to the mean here means that the market may go back up within a relatively short time -- you'll sometimes make a quick profit this way. The overbought part is handled as a selling opportunity in VA....
by tpm871
Tue Feb 07, 2012 12:11 am
Forum: Investing - Theory, News & General
Topic: Value averaging and MYR -A safer approach to margin?
Replies: 39
Views: 5288

Re: Value averaging and MYR -A safer approach to margin?

Reading the book Value Averaging, by Edleson, one would think the buying would be primarily at market dips and one would be reducing leverage as the market rises. If JCW is employing leverage, after fully funding retirement accounts, this may be an appropriate strategy. I've been doing value averaging for almost five years. In the past, I've thought about doing something like what you're suggesting: only using leverage when you've "run out of money" to cover buying to your target value during dips; immediately paying off leverage as money becomes available (e.g., selling some shares when above your target). I think you could describe it as a "safer approach to margin", since it means that you use leverage when it is &qu...
by tpm871
Sun Feb 05, 2012 1:28 pm
Forum: Investing - Theory, News & General
Topic: [Poll]Which is better: Lumpsum or DCA?
Replies: 63
Views: 4209

Re: [Poll]Which is better: Lumpsum or DCA?

Here's a similar question:

You intend to contribute $17,000 to your 401(k) for the year. Is it better to make equal contributions throughout the year with each paycheck ("DCA") or to contribute most of the first several paychecks of the year until you reach $17,000 ("lumpsum"). Assume that you could afford to do either, and that your company matching contributions are the same either way.
by tpm871
Sun Feb 05, 2012 7:44 am
Forum: Investing - Theory, News & General
Topic: [Poll]Which is better: Lumpsum or DCA?
Replies: 63
Views: 4209

Re: [Poll]Which is better: Lumpsum or DCA?

DCA is probably better in this example, since Boris would miss 30 years worth of returns. His money would lose value due to inflation, and he would likely buy at higher prices. But of course there's always an exception -- Boris may have done better in investing in Japan, if he had waited until right after the sharp decline that happened 20 years ago.

Personally, I wouldn't do either. I'd invest regularly by the amounts needed to maintain my AA, selling some shares when my allocation exceeds my bands and buying lots of shares when there's a sharp decline.
by tpm871
Sat Feb 04, 2012 8:43 pm
Forum: Investing - Theory, News & General
Topic: St. Petersburg Paradox
Replies: 26
Views: 2689

Re: St. Petersburg Paradox

Here's the wikipedia page:

http://en.wikipedia.org/wiki/St_Petersburg_Paradox

Yes, one of the things to consider is that the "house" would run out of money if you were lucky enough. But for this poll, let's assume that never happens.

I voted $100, because it seems like playing would have a good entertainment value. It's a potential black swan event, and $100 wouldn't bankrupt me. But in real life, I don't play the lottery and I have a pretty solid investment strategy that I follow consistently.

I am surprised that some people wouldn't play at all, since you're guaranteed to at least break even when paying $1.
by tpm871
Sat Feb 04, 2012 12:12 pm
Forum: Investing - Theory, News & General
Topic: St. Petersburg Paradox
Replies: 26
Views: 2689

St. Petersburg Paradox

A recent WSJ article mentions the St. Petersburg Paradox while discussing the possibility of investing in the Facebook IPO: http://online.wsj.com/article/SB10001424052970204662204577200862677176998.html?mod=WSJ_PersonalFinance_PF4 Wikipedia describes the St. Petersburg Paradox as: Consider the following game of chance: you pay a fixed fee to enter and then a fair coin is tossed repeatedly until a tail appears, ending the game. The pot starts at 1 dollar and is doubled every time a head appears. You win whatever is in the pot after the game ends. Thus you win 1 dollar if a tail appears on the first toss, 2 dollars if a head appears on the first toss and a tail on the second, 4 dollars if a head appears on the first two tosses and a tail on t...
by tpm871
Sun Jan 29, 2012 11:53 pm
Forum: Investing - Theory, News & General
Topic: Any reason to have different allocation in ROTH?
Replies: 16
Views: 1855

Re: Any reason to have different allocation in ROTH?

I put the higher expected return funds in my Roth IRA, due to the fact that no taxes will ever be owed. Given a choice of having my biggest gains in my Roth IRA or my Trad IRA, I'd pay fewer taxes if my Roth IRA has the bigger gains.

I have had these in my Roth IRA:
1. REITs
2. Emerging Markets
3. Small Value
4. International Small Cap

But recently I've considered adding a Treasury bond fund, since it would provide rebalancing benefits to these (these funds are a bit too correlated in their movements).
by tpm871
Sat Jan 21, 2012 8:23 am
Forum: Investing - Theory, News & General
Topic: POLL: At what net-worth does an individual become wealthy?
Replies: 78
Views: 9694

Re: POLL: At what net-worth does an individual become wealth

Like others wrote, I think of it in terms of being able to quit your job and live comfortably on a fairly low annual withdrawal rate. I conservatively pick a 2.3% annual withdrawal rate. I read a study somewhere that concluded that this rate is highly likely to be "infinitely sustainable" wrt likely inflation and market swings -- even if I'd live forever, I wouldn't be likely to run out of money.

But the huge unknown -- the thing that makes it really difficult to determine that "quit my job" amount -- is future health care costs. Health care costs increase at an unsustainable pace, and will always make me question whether I have enough to retire.
by tpm871
Mon Jan 02, 2012 1:27 am
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3895
Views: 2424226

Re: The Three Fund Portfolio

In terms of fees, you'd be better off with a mix of Vanguard Europe, Pacific Rim, and Emerging Markets fund rather than ISM. Europe and Pacific (which comprise most of ISM) have an ER of 0.14, whereas ISM has an ER of 0.20. There's also better rebalancing opportunities with having them separate, and taxes associated with rebalancing can be avoided by only selling shares held in tax deferred accounts. The downside though is no Canada stocks... and a little bit more complexity. I think a Treasury Bond Fund is better than TBM, since it is less correlated with equities (e.g., since TBM holds corporate bonds). I don't think the logic of "owning the whole market" makes as much sense for bonds as it does for stocks; for example, I don't ...
by tpm871
Mon Jan 02, 2012 12:31 am
Forum: Investing - Theory, News & General
Topic: credit, debit, or cash?
Replies: 54
Views: 4257

Re: credit, debit, or cash?

wjwhitney wrote:Credit for all the reasons mentioned.

My question: What is "other"?
I put "other" up there just in case. The only others that come to mind are bitcoins and PayPal, both of which I'm only vaguely familiar with.

But I'm curious about who voted "other" above.
by tpm871
Sun Jan 01, 2012 12:06 pm
Forum: Investing - Theory, News & General
Topic: credit, debit, or cash?
Replies: 54
Views: 4257

credit, debit, or cash?

You frequently hear the "get out of debt" experts saying that people should live on cash rather than credit cards. But I suspect that more Bogleheads use credit cards than cash. I think there are two main types of credit card people (most Bogleheads being the second type, I'm guessing): 1. Those who may not be in control of their finances, who spend money that they don't yet have on things that they may not really need. They pay lots of interest and fees. 2. Those who are in very good control of their finances, who take advantage of cash back rewards and deferred payment to save money on the things that they would buy anyway. They don't pay any interest or fees. It always seemed to me that using debit cards re-enforced the tendenc...
by tpm871
Sat Dec 31, 2011 11:53 am
Forum: Investing - Theory, News & General
Topic: Funny...
Replies: 26
Views: 2310

Re: Funny...

I have about a 30% allocation to bonds (mix of Treasuys, TIPs, and munis), but I don't think of it as outperforming in the long run. Instead, I like that they are inversely correlated with equities, providing rebalancing opportunities when the market takes a dive. That worked well for me back in Nov 2008.

The fact that bonds did well this year is just a nice bonus, but not my reason for holding bonds.
by tpm871
Sun Dec 11, 2011 10:47 pm
Forum: Investing - Theory, News & General
Topic: Coming shortage of equity investors
Replies: 21
Views: 3054

Re: Coming shortage of equity investors

If it does happen, those of us in stocks will probably be collecting some really nice dividends.
by tpm871
Sun Dec 11, 2011 8:35 am
Forum: Investing - Theory, News & General
Topic: Am I on the right track???
Replies: 2
Views: 489

Re: Am I on the right track???

Looks fairly good. A few suggestions: 1. Think about what kind of tax style account you're using for each. REITs, bonds, TIPS should go in tax deferred accounts. But you should use your Roth IRA for the higher expected return assets of these, since you won't pay any taxes on future returns. So I'd put the REITs in the Roth IRA. 2. I prefer a Treasury Bond fund to TBM. You asked where the overlap was -- TBM have corporate bonds and other investments that are more correlated with the return of equities. It's better to have treasuries, which do better while equities take a dive. 3. I prefer Total Stock Market to S&P 500. The return of both is similar, but the actual cost of ownership of TSM is lower due to less turnover and avoiding "...
by tpm871
Sat Dec 03, 2011 7:37 am
Forum: Investing - Theory, News & General
Topic: Rick's Rules for Lump Sum Investing
Replies: 215
Views: 19395

Re: Rick's Rules for Lump Sum Investing

I was in exactly the situation you describe earlier this year: I had changed jobs and rolled over my 401(k) into my IRA. In doing so, about 20% of my portfolio was liquidated in order to make the transfer. I handled it differently than you suggested, and here's how it went: * I sold equity assets gradually in my 401(k) during April and May, thinking that I prefer to control the selling myself rather than have everything sold on some random day when the transfer will be initiated. That turned out to be lucky timing, since I ended up selling during the market peak of the year. * I had about 60% of this account in TBM, which I held onto longer. But one day in early May, I got nervous about things like QE2 coming to an end, and I sold all of it...
by tpm871
Sun Nov 20, 2011 9:20 am
Forum: Investing - Theory, News & General
Topic: - New investor here - Willing to help out with a quick Q ??
Replies: 64
Views: 5264

Re: - New investor here - Willing to help out with a quick Q

I'd suggest thinking about investing differently. Most people tend to think about investing kind of like playing the lottery: "If only I pick the right number [investment] at the right time, I'll do very well." In doing so, you're betting on only one possible future (e.g., a bull market for stocks). I think the key to rational investing is to consider the possibilities of all possible futures, and have a mix of investments that do well under different circumstances. One example of this is the Harry Brown Permanent Portfolio. While I don't personally invest in this particular approach, I agree with its philosophy: invest in assets that each do well under different conditions . The portfolio consists of 25% stocks, 25% gold, 25% bon...
by tpm871
Sun Nov 13, 2011 10:02 pm
Forum: Investing - Theory, News & General
Topic: Is there any agreement on what money is?
Replies: 62
Views: 5476

Re: Is there any agreement on what money is?

"Bitcoins" would have been an interesting option.

http://en.wikipedia.org/wiki/Bitcoin
by tpm871
Sun Nov 13, 2011 12:51 pm
Forum: Investing - Theory, News & General
Topic: Questions on Value Averaging
Replies: 12
Views: 4045

Re: Questions on Value Averaging

Interesting, I've read about opportunistic rebalancing before but never formally incorporated into my investment strategy. What tolerance band do you use? 20%? I'm doing something a bit different here too. My thought was that different asset classes have different levels of volatility, so the bands for each should be different to best catch their local minimums and maximums. For example, emerging markets needs wider bands than intermediate term treasuries. I also thought that it makes sense to have different upper and lower bands, since advances and declines may behave differently. So what I ended up doing was measuring all of the advances and declines for the past decade, and using the median advance and decline to set the band size for e...