Search found 351 matches

by hudson4351
Wed Nov 29, 2023 3:21 pm
Forum: Investing - Theory, News & General
Topic: ZIRP question [Zero interest-rate policy]
Replies: 8
Views: 1283

ZIRP question [Zero interest-rate policy]

I have a general question about interest rates. First, some context for my question: Whenever the Fed lowers interest rates, the market responds very positively, and whenever the Fed raises interest rates, the market responds very negatively. The market has been predicting that every interest rate increase the Fed has made since lowering them to 0% in 2020 would be the last, and is currently predicting that interest rates will be cut in 2024. My question is: if the market had its way, would interest rates be perpetually 0%? Would this really benefit companies in the long run? I realize that being able to borrow money essentially for free dramatically lowers the bar for what's considered to be a "good enough" idea to get funded, bu...
by hudson4351
Thu Oct 05, 2023 2:34 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

The other effect is the expected change in interest rates. If the yield curve is inverted, then investors expect bond yields to fall. If that happens in the next month, then bonds will yield more than money-market funds in that month even if current SEC yields on money-market funds are higher. (This is only an expectation; bond yields might not drop in the next month, but they are just as likely to drop twice as much as investors' expectations, in which case bond funds will yield much more than money-market funds.) Regarding the following paragraph (included in the quote above): This is the first link I found when I searched for yield curve: https://www.ustreasuryyieldcurve.com/ Is this the correct yield curve to be looking at even though ...
by hudson4351
Sun Sep 24, 2023 7:34 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

You are missing the known effect of bonds at a discount. If new 5-year bonds from a particular issuer are yielding 4%, and VWIUX holds a bond that is 5 years from maturity and is paying only 2% of its value as a dividend, that bond must be currently trading at a discount. If yields don't change, this bond will earn 4% next year, paying 2% as a dividend and having its price increase by 2%. And whether yields change or not, both the discount bond and the new bond will earn 4% over five years as a combination of price appreciation and dividends. This is the reason to use the SEC yield for comparison. The other effect is the expected change in interest rates. If the yield curve is inverted, then investors expect bond yields to fall. If that ha...
by hudson4351
Tue Sep 19, 2023 12:44 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

Another calculation I looked at was the following: monthly dividend from VWUIX as a percentage of total invested VS monthly dividend from VMFXX as a percentage of total invested This comparison was done during a month in which no contributions were made to either fund balance. In my case the numbers were 0.22% for VWIUX vs 0.43% for VMFXX. It seems to me that my money invested in VMFXX is currently paying almost double the percentage monthly dividend than that invested in VWIUX, which again makes me think that I'm better off putting money intended to my bond allocation into VMFXX instead until the monthly dividend from VWUIX as a percentage of total invested exceeds that of VMFXX. Am I missing something here? I know that the income return ...
by hudson4351
Sun Sep 17, 2023 8:54 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

Another calculation I looked at was the following: monthly dividend from VWUIX as a percentage of total invested VS monthly dividend from VMFXX as a percentage of total invested This comparison was done during a month in which no contributions were made to either fund balance. In my case the numbers were 0.22% for VWIUX vs 0.43% for VMFXX. It seems to me that my money invested in VMFXX is currently paying almost double the percentage monthly dividend than that invested in VWIUX, which again makes me think that I'm better off putting money intended to my bond allocation into VMFXX instead until the monthly dividend from VWUIX as a percentage of total invested exceeds that of VMFXX. Am I missing something here? I know that the income return o...
by hudson4351
Sun Sep 17, 2023 8:39 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

Another thing I noticed is that the historical price of VWIUX (and probably other bond funds; VWIUX was the only one I checked) varies within a relatively tight range: $12-$15/share from 2001-present. The price doesn't increase over long periods of time, as do the share prices of stock index funds, although Vanguard does break down the total return into its capital and income components. My question is: is this behavior fundamental to bond funds, or is it just a consequence of the interest rate environment and/or other factors during that time? Should one expect to have much of the gains from a bond fund be due to appreciation in share price? This is normal behavior for a high-quality bond fund. If a bond doesn't default, its price at issu...
by hudson4351
Tue Sep 12, 2023 12:44 pm
Forum: Personal Investments
Topic: more mutual fund vs ETF questions
Replies: 46
Views: 3426

Re: more mutual fund vs ETF questions

Is the average investor who makes 1-2 contributions/month toward some long-term goal really going to get ahead by using ETFs so they can carefully time each of those monthly contributions? If not, then what subset of Vanguard customers stand to benefit from the flexibility of their ETFs? It’s not about carefully timing your monthly contributions or leveraged ETFs etc. Say you want to do tax-loss harvesting because the price of an ETF is down 2% and you have a 2% short term loss. With an ETF you can sell at that price and buy the alternative investment at that moment. Whether it’s 9:32am or 1:59 or 3:59 With a mutual fund you cannot. You just ask for the exchange or sale and you get the end of day price. Maybe by the end of the day there is...
by hudson4351
Tue Sep 12, 2023 12:43 pm
Forum: Personal Investments
Topic: more mutual fund vs ETF questions
Replies: 46
Views: 3426

Re: more mutual fund vs ETF questions

Artsdoctor wrote: Tue Sep 12, 2023 11:15 am Mutual funds and ETFs both have their pros and cons.
I understand that. My question is who specifically benefits from the advantages of the ETF? As I said in my post above, it isn't really clear to me.
Artsdoctor wrote: Tue Sep 12, 2023 11:15 am The performances of the mutual fund and ETF versions are going to be very similar, as is the tax efficiency. For performance, you'll have to factor in the vagaries of an ETF's market price, NAV, bid/ask spread but you're still going to have similar results.
For VTIAX vs VXUS, why does portfolio visualizer report that VTIAX outperforms VXUS for a single lump sum $10,000 investment when the VXUS ER is 4 bps lower?
by hudson4351
Tue Sep 12, 2023 10:24 am
Forum: Personal Investments
Topic: more mutual fund vs ETF questions
Replies: 46
Views: 3426

more mutual fund vs ETF questions

I've already read the Investing FAQ section regarding mutual funds [1] vs ETFs and the ETFs vs mutual funds page [2] as well as several multi-page forum discussions on the topic but still have questions I have been unable to find answers to: 1. VTIAX has an ER of 0.11% and VXUS has an ER of 0.07%. Based on this I would expect VXUS to outperform VTIAX in any given year by about $40 per $10,000 invested/year, yet this link shows that VTIAX slightly outperformed VXUS over the period shown: https://www.portfoliovisualizer.com/fund-performance#analysisResults EDIT: correct link: https://www.portfoliovisualizer.com/fund-performance?s=y&symbol=VTIAX&symbols=VXUS Why? 2. Vanguard has started sending me emails regarding converting my mutual ...
by hudson4351
Tue Aug 29, 2023 1:09 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

Regarding the bolded portion of your quote - are the expected and variability of return figures that are explicitly published for individual bond funds, or can you only look at the historical returns? This gets into portfolio design and trying to lay some expectation on future performance based on history, on estimates people believe in for some reason, and so on. The first commandment in that area is "Don't expect the expected return." which means that the possible average value of a statistical distribution is not a reliable promise of actual performance. In using history to estimate expected return one must be conscious of putting a margin of statistical error around that estimate and be highly conscious of how unpredictable a...
by hudson4351
Mon Aug 28, 2023 2:24 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

The yield of a bond fund includes distributions, but the two numbers will be slightly different depending on the changing values of the underlying holdings. The yield includes price appreciation/depreciation, so just because the SEC yield is 3.0%, you will not necessarily receive 3.0% in dividends. The total return of the fund should be similar to the SEC yield over the timeframe of the duration of the fund, barring significant changes in interest rates towards the end of that time period. I thought SEC yield was only measuring dividends paid out per share and was not factoring in the price appreciation/depreciation of the shares themselves. Is that not correct? SEC yield is based on yield to maturity (or yield to call for bonds likely to ...
by hudson4351
Mon Aug 28, 2023 1:34 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

The yield of a bond fund includes distributions, but the two numbers will be slightly different depending on the changing values of the underlying holdings. The yield includes price appreciation/depreciation, so just because the SEC yield is 3.0%, you will not necessarily receive 3.0% in dividends. The total return of the fund should be similar to the SEC yield over the timeframe of the duration of the fund, barring significant changes in interest rates towards the end of that time period. I thought SEC yield was only measuring dividends paid out per share and was not factoring in the price appreciation/depreciation of the shares themselves. Is that not correct? SEC yield is based on yield to maturity (or yield to call for bonds likely to ...
by hudson4351
Mon Aug 28, 2023 1:24 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

Geologist wrote: Sun Aug 27, 2023 3:59 pm Bond funds accrue interest every day from every bond. This is not related to when they receive coupon payment, if the bond even pays coupons. (So, for example, the fund is accruing interest every day from zero-coupon bonds if it holds those.) At the end of the month, it pays a dividend based on the total accrued interest (again, how much it actually received in “cash” is not relevant). This is all part of accrual accounting, which is what funds use (you may work on a cash basis, but they don’t).
So this accrual of interest and distribution of monthly dividends is just bookkeeping within the brokerage and is unrelated to when the brokerage receives cash from the bond issuers?
by hudson4351
Sun Aug 27, 2023 2:16 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

I thought SEC yield was only measuring dividends paid out per share and was not factoring in the price appreciation/depreciation of the shares themselves. Is that not correct? Don't I receive the same in dividends each month regardless of what price I bought my bond fund's shares at? Here's an another way to think about it: How can Treasury bills have a yield if there are no coupon payments? And how would you calculate the NAV of a bond fund that held only Treasury bills? Maybe I have a fundamental misunderstanding in how bonds and/or bond funds work. My understanding is the following: 1. I buy shares of a bond fund at a particular NAV price 2. I get paid a monthly dividend which is simply my share of the coupon payments of the bonds held ...
by hudson4351
Sun Aug 27, 2023 12:03 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

There are tax-free money market funds. Why are income taxes a concern for your bond fund but not for your money market fund? Bond funds are collections of bonds. If the bond fund holds a bond yielding 4% for 7 years, it will yield 4% for 7 years, regardless of what happens to market interest rates. Consider the difference between a T-bills maturing in 4 weeks and a note maturing in 7 years. After 4 weeks passes, you are at the mercy of the market for what yield you might earn on your T-bills principal, but your 7 year bond still earns the same yield . But the bond fund is continuosly buying new bonds, right? So it is adding LOWER rate bonds to the fund, which means you do not get the "4%" (which you would with an individual bond)...
by hudson4351
Thu Aug 24, 2023 12:52 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

The SEC yield is 3.48% and the yield to maturity is 3.5%. VMFXX has a 7-day SEC yield of 5.27%. It seems like I'm better off just putting new bond investment money into VMFXX until the yield on VWIUX rises to exceed (1-marginal_tax_rate)*VMFXX_yield. Am I missing something here? There are two questions here: duration and taxes. Tax-wise, why did you invest in VWIUX in the first place? There are other money market funds that have similar taxation. Can you elaborate on this? VWIUX is a bond fund, not a money market fund. I invested it it because I wanted one bond fund for my portfolio and given that VWIUX is free from federal income tax, it generally gives me a higher after-tax return than VBLTX (total bond market index). VMFXX is a money ma...
by hudson4351
Thu Aug 24, 2023 12:46 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

I use VWIUX as my only bond fund and have some questions: The SEC yield is 3.48% and the yield to maturity is 3.5%. VMFXX has a 7-day SEC yield of 5.27%. It seems like I'm better off just putting new bond investment money into VMFXX until the yield on VWIUX rises to exceed (1-marginal_tax_rate)*VMFXX_yield. Am I missing something here? My understanding is that regardless of the price at which you buy into a bond fund, you receive the same monthly dividend calculated from the yield to maturity. The share price only becomes relevant if you want to sell your shares in the fund, at which point you could realize either a gain or a loss depending on what price you bought and sold at. Bond funds tend to realize most of their gains from dividends ...
by hudson4351
Wed Aug 23, 2023 6:43 pm
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

Re: bond fund help

I use VWIUX as my only bond fund and have some questions: The SEC yield is 3.48% and the yield to maturity is 3.5%. VMFXX has a 7-day SEC yield of 5.27%. It seems like I'm better off just putting new bond investment money into VMFXX until the yield on VWIUX rises to exceed (1-marginal_tax_rate)*VMFXX_yield. Am I missing something here? My understanding is that regardless of the price at which you buy into a bond fund, you receive the same monthly dividend calculated from the yield to maturity. The share price only becomes relevant if you want to sell your shares in the fund, at which point you could realize either a gain or a loss depending on what price you bought and sold at. Bond funds tend to realize most of their gains from dividends ...
by hudson4351
Wed Aug 23, 2023 10:52 am
Forum: Personal Investments
Topic: bond fund help
Replies: 55
Views: 6691

bond fund help

I use VWIUX as my only bond fund and have some questions: The SEC yield is 3.48% and the yield to maturity is 3.5%. VMFXX has a 7-day SEC yield of 5.27%. It seems like I'm better off just putting new bond investment money into VMFXX until the yield on VWIUX rises to exceed (1-marginal_tax_rate)*VMFXX_yield. Am I missing something here? My understanding is that regardless of the price at which you buy into a bond fund, you receive the same monthly dividend calculated from the yield to maturity. The share price only becomes relevant if you want to sell your shares in the fund, at which point you could realize either a gain or a loss depending on what price you bought and sold at. Bond funds tend to realize most of their gains from dividends r...
by hudson4351
Fri Aug 18, 2023 2:03 pm
Forum: Personal Investments
Topic: bond allocation questions
Replies: 12
Views: 1274

Re: bond allocation questions

UpperNwGuy wrote: Thu Aug 17, 2023 5:22 pm I was 60/40 for many years but have gradually transitioned to 75/25. I won't go any lower than 25% bonds.
Are you retired or still in the accumulation phase? What made you change from 60/40 to 75/25, and what makes you not go any lower than 25% bonds?
by hudson4351
Fri Aug 18, 2023 2:03 pm
Forum: Personal Investments
Topic: bond allocation questions
Replies: 12
Views: 1274

Re: bond allocation questions

invest2bfree wrote: Thu Aug 17, 2023 4:35 pm You need to ask yourself can you safely handle a 50% draw down and not flinch.
Do you mean at any point during my investment lifetime, or specifically nearing (and in) retirement?
by hudson4351
Thu Aug 17, 2023 4:10 pm
Forum: Personal Investments
Topic: bond allocation questions
Replies: 12
Views: 1274

bond allocation questions

I started investing shortly before the GFC and am now convinced I don't need bonds to prevent myself from panic selling during a bear market. Bonds are 10% of my overall portfolio and invested entirely in VWUIX (down from about 30% originally when I was less sure of how I would react during bear markets) and going forward I would like to base my portfolio's bond percentage on something a little more methodical than simply "age in bonds". I'd like to take full advantage of equities' higher expected returns but also recognize that bonds can outperform stocks for periods of time. Here are a few questions I have: 1. What is the longest length of time bonds of medium duration (VWIUX, VBLTX, etc.), have outperformed a stock index? 2. Is...
by hudson4351
Mon Mar 27, 2023 10:57 am
Forum: Personal Investments
Topic: VUSXX vs VMFXX questions
Replies: 16
Views: 2595

VUSXX vs VMFXX questions

I've been reading discussions on the forums related to these two funds and have two questions that I haven't been able to find answers to: 1. If I live in a state with no income tax, is there any reason to prefer one of these funds over the other? 2. Is one of these funds technically safer than the other? For reference, here is the description of VUSXX: This fund at a minimum invests 80% of the assets in debt issued directly by the government in the form of Treasury bills and in repurchase agreements fully collateralized by U.S. Treasury securities. As a government money market fund, this fund is required to invest at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized so...
by hudson4351
Wed Feb 01, 2023 5:04 pm
Forum: Personal Finance (Not Investing)
Topic: Form 1116 question
Replies: 7
Views: 950

Re: Form 1116 question

The foreign tax credit is NOT a credit for foreign taxes despite the name. The Foreign Tax Credit is a credit for US taxes that you have paid on the income from that fund that had foreign taxes paid. Got it? So, if you have no US tax liability on that income from VTIAX, then you are not eligible for the foreign tax credit. Furthermore, it is a nonrefundable tax credit. This is all so that you do not get double-taxed on that foreign income, but you should get single-taxed. So if I'm understanding this correctly: 1. US investors must pay taxes to foreign countries on dividends paid by companies headquartered in that country (even though the US investors may not have any citizenship, residence, etc. in that country) 2. For an index fund such ...
by hudson4351
Wed Feb 01, 2023 4:49 pm
Forum: Personal Finance (Not Investing)
Topic: Help calculating Foreign Tax Credit (Form 1116)
Replies: 16
Views: 1324

Re: Help calculating Foreign Tax Credit (Form 1116)

Based on the Vanguard document linked above, I should be able to multiply 0.0594 (Column 3 - Foreign tax paid) by my 1099-DIV "Total ordinary dividends (box 1a)" value to get "Foreign tax paid (box 7)". Yet if I do this, the value I obtain differs from "Foreign tax paid (Box 7)" by 6%. This seems too large to be a rounding error and is more likely due to an error I am making. You are mixing up the Column 2 and 3 instructions. Column 2 says "the amount of Box 1a," but Column 3 says "Ordinary Cash Dividends paid to you by the Fund." Box 1a includes the foreign taxes that you pay, and cash dividends don't. Since VTIAX paid 5.94% of cash dividends as taxes, your number is 5.94% too high (6% wit...
by hudson4351
Wed Aug 03, 2022 5:00 pm
Forum: Personal Investments
Topic: Where to park 100k emergency fund.
Replies: 57
Views: 9953

Re: Where to park 100k emergency fund.

1 month treasuries are currently yielding 2.22% and they are exempt from state income tax. It would make sense to put at least some of your emergency fund into those. If you have a Vanguard brokerage account, the settlement fund (VMFXX) is currently yielding 1.84% and rising daily. Why LendingClub when there are other online FDIC insured HYSA that pay more right now (My Banking Direct at 2.2% and BrioDirect at 2.15%). Do you have to pay taxes on money withdrawn from the Vanguard brokerage settlement account? Not on the withdrawals but on the monthly dividend. It is very similar to a savings account for tax purposes. If I put money into the settlement fund (VMFXX) then make a withdrawal, am I locked out of making any further contributions t...
by hudson4351
Wed Aug 03, 2022 12:41 pm
Forum: Investing - Theory, News & General
Topic: Why do ETFs typically have lower ER than the equivalent mutual fund?
Replies: 3
Views: 440

Re: Why do ETFs typically have lower ER than the equivalent mutual fund?

David Jay wrote: Wed Aug 03, 2022 12:39 pm ETFs move much of the account management cost to the brokerage house.
But in the case of Vanguard, isn't the brokerage house and the fund's managing company the same?
by hudson4351
Wed Aug 03, 2022 11:24 am
Forum: Personal Investments
Topic: Where to park 100k emergency fund.
Replies: 57
Views: 9953

Re: Where to park 100k emergency fund.

I'm seeing suggestions on here to park your wad of dough into VMFXX. I checked and it's Yielding 0.16% so far this year. Am I reading that right? And if so, you'd only be earning 0.05% after the 0.11% expense ratio. If that's correct, I'd hold off and park it in a HYSA that is currently close to 2% with zero expense ratios. If VMFXX sky rockets past the HYSA's at some point, then I might be game. And I don't mean to sound like a nosey jerk, but what expense(s) in your life could possibly result in a 100K six month emergency fund? The current yield of Vanguard money market fund is currently 1.84%, net after all expenses are deducted. The rate will move up fairly quickly compared to all HYSA in the current environment. Why would the rate of ...
by hudson4351
Wed Aug 03, 2022 11:14 am
Forum: Personal Investments
Topic: Where to park 100k emergency fund.
Replies: 57
Views: 9953

Re: Where to park 100k emergency fund.

I'm seeing suggestions on here to park your wad of dough into VMFXX. I checked and it's Yielding 0.16% so far this year. Am I reading that right? And if so, you'd only be earning 0.05% after the 0.11% expense ratio. If that's correct, I'd hold off and park it in a HYSA that is currently close to 2% with zero expense ratios. If VMFXX sky rockets past the HYSA's at some point, then I might be game. And I don't mean to sound like a nosey jerk, but what expense(s) in your life could possibly result in a 100K six month emergency fund? The current yield of Vanguard money market fund is currently 1.84%, net after all expenses are deducted. The rate will move up fairly quickly compared to all HYSA in the current environment. Why would the rate of ...
by hudson4351
Wed Aug 03, 2022 11:01 am
Forum: Investing - Theory, News & General
Topic: Why do ETFs typically have lower ER than the equivalent mutual fund?
Replies: 3
Views: 440

Why do ETFs typically have lower ER than the equivalent mutual fund?

I was reading the wiki article about ETFs vs mutual funds: https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds and it says: ETFs generally have the lowest ERs available to small investors. Mutual fund expenses can be somewhat higher, with the exception of Vanguard Admiral funds which are the same, or slightly higher, than their ETFs. Why is that the case, i.e. why do ETFs typically have lower ER's than their equivalent mutual fund? It seems like this would be good information to add to the wiki. As an example, the ETF version of Vanguard Total International Stock Index Admiral has a lower expense ratio than the equivalent mutual fund (0.07% for the ETF vs 0.11% for the mutual fund). I only recently learned this and am now trying to decide ...
by hudson4351
Mon Aug 01, 2022 12:24 pm
Forum: Personal Investments
Topic: Where to park 100k emergency fund.
Replies: 57
Views: 9953

Re: Where to park 100k emergency fund.

At the very least, you should use a better bank. Sofi the best overall bank at the moment. They pay 1.8%. I am in the process of doing this: 1) Put 6 months of cash in Sofi, 1.8% 2) Stack the rest with 6 month+ treasuries, 2.6%+ (without state tax) Do you have to pay taxes Btw, is 100K your 6 month emergency fund? Or some bigger cash bucket? If the former, then just go with Sofi And if you haven't put money in i-bonds yet, you should put 10K into i-bonds after you have 1 year of emergency fund in a bank + treasuries. 100k is my 6 month emergency cash. I have another 100k in another bank which is in a checking account. I was thinking about SOFI(1.8%APY) and LendingClub(2.07%APY) Discover bank seems okay but has limited ATM choices. I have b...
by hudson4351
Mon Jul 04, 2022 11:11 am
Forum: Personal Investments
Topic: qualified dividends on Vanguard's monthly/quarterly statements?
Replies: 9
Views: 1325

Re: qualified dividends on Vanguard's monthly/quarterly statements?

rkhusky wrote: Sun Jun 26, 2022 3:05 pm
lazynovice wrote: Sun Jun 26, 2022 11:44 am
rkhusky wrote: Sat Jun 25, 2022 7:02 pm At least Vanguard gives estimates before the end of the year. I don’t think other brokerages do that.
If you look at Vanguard’s current estimates through May in the link above and how much they vary from 2021 actuals, I’d be reluctant to rely on them mid-year. I use 2021 actual percentages for all funds including Vanguard.
I only use the December estimates. During the rest of the year I use the prior year values.
As a related question, is the dividend payout per share for any given fund announced in advance of the payout date?
by hudson4351
Sat Jun 25, 2022 5:35 pm
Forum: Personal Investments
Topic: qualified dividends on Vanguard's monthly/quarterly statements?
Replies: 9
Views: 1325

Re: qualified dividends on Vanguard's monthly/quarterly statements?

You can only get estimates of what percentage of the dividends will qualify. Something about the brokerage doesn't know themselves until they tally up and the smoke clears, and the smoke doesn't clear until somewhere around January after the tax year. So, we work with the estimates. You might want to work with a somewhat lesser number to be safe. And... don't overlook that YOU have to hold on to the shares issuing those dividends, for 61 days within the holding period for their corresponding distributions to qualify, regardless of what Vanguard declares as qualified. Thanks for the explanation. I didn't realize the qualified/non-qualified status of dividends wasn't known as soon as they were paid. It looks like your information is also exp...
by hudson4351
Sat Jun 25, 2022 10:42 am
Forum: Personal Investments
Topic: qualified dividends on Vanguard's monthly/quarterly statements?
Replies: 9
Views: 1325

qualified dividends on Vanguard's monthly/quarterly statements?

Do Vanguard's monthly brokerage statements that correspond to the end of a quarter list the breakdown of qualified/non-qualified dividends anywhere or do I have to wait until I receive my 1099-DIV to get that information? I'm looking at one my end-of-quarter monthly statements now and while I see the quarterly dividend payouts listed, I don't see anything that breaks them down into qualified vs. non-qualified as would be done on a 1099-DIV.
by hudson4351
Sun Apr 24, 2022 8:09 pm
Forum: Personal Finance (Not Investing)
Topic: Form 1116 question
Replies: 7
Views: 950

Re: Form 1116 question

grabiner wrote: Sat Apr 23, 2022 10:00 pm Here's a "big picture" view:

You are entitled to a credit on your US tax which is the lesser of the amount you paid in foreign tax, or the US tax on the same income.

Thus, if your US tax is 10% of your total income, your credit is limited to 10% of your foreign taxable income. Most of Form 1116 is devoted to determining how much of your taxable income is foreign.

(If you live in one state and earn income in another, there is a similar process to claim credit for tax paid to both states on the same income.)
Thanks, this makes sense. What is the "big picture" view of why some are required to "adjust" (i.e. reduce) foreign source qualified dividends when working through the form?
by hudson4351
Wed Apr 20, 2022 12:43 pm
Forum: Personal Finance (Not Investing)
Topic: Form 1116 question
Replies: 7
Views: 950

Form 1116 question

As a part of filing my taxes I had to complete Form 1116 because I hold VTIAX, which pays foreign dividends and apparently withholds foreign tax (Box 7 on the 1099-DIV).

Form 1116 asks me to complete what to me seems like a very convoluted set of arithmetic operations to ultimately determine whether or not I can claim the foreign tax withheld from VTIAX as a credit on my income taxes. Although the math itself is simple, I'm having a hard time grasping the "big picture" of the calculations.

Why should an investor not be able to claim a credit for the taxes they already paid?

What is the purpose of reducing qualified dividends if certain criteria are met, as outlined in the instructions?
by hudson4351
Tue Apr 12, 2022 7:28 pm
Forum: Personal Finance (Not Investing)
Topic: Help calculating Foreign Tax Credit (Form 1116)
Replies: 16
Views: 1324

Re: Help calculating Foreign Tax Credit (Form 1116)

You are thinking somewhat incorrectly about this. Foreign Tax is only paid on Foreign Source Dividends. Some of the dividends paid by your VTIAX are NOT foreign-source so were kept out of the hands of the foreign tax authorities. Column 1 of that Vanguard document has a number you will need to use in your calculation. I see what you're saying and I see the mistake in my prior post. But then I should be able to take my 1099-DIV "Total ordinary dividends (box 1a)" value * 90.342852 (Column 1 - Foreign source income as a % of Box 1a) * 0.0594 (Column 3 - Foreign tax paid) and get "Foreign tax paid (Box 7)" on my 1099-DIV, correct? Because when I do that the number I obtain is 4% lower than what is reported in Box 7. Or sho...
by hudson4351
Tue Apr 12, 2022 7:04 pm
Forum: Personal Finance (Not Investing)
Topic: Help calculating Foreign Tax Credit (Form 1116)
Replies: 16
Views: 1324

Help calculating Foreign Tax Credit (Form 1116)

I am having trouble reconciling the information on my Vanguard 1099-DIV with the information provided by Vanguard regarding how to calculate foreign income: https://personal.vanguard.com/pdf/FASFTCWS_R_012022.pdf I am using my Vanguard 1099-DIV (Q1-Q3 2021, before my conversion to a brokerage, which generated a separate 1099-DIV with the same issue) and the only fund with foreign income I own is VTIAX. Based on the Vanguard document linked above, I should be able to multiply 0.0594 (Column 3 - Foreign tax paid) by my 1099-DIV "Total ordinary dividends (box 1a)" value to get "Foreign tax paid (box 7)". Yet if I do this, the value I obtain differs from "Foreign tax paid (Box 7)" by 6%. This seems too large to be ...
by hudson4351
Fri Apr 08, 2022 3:45 pm
Forum: Personal Finance (Not Investing)
Topic: property taxes, depreciation, and deduction question
Replies: 0
Views: 265

property taxes, depreciation, and deduction question

I purchased a condo in 2021 that was currently in use as a rental. Once the tenant's lease expired the condo became my primary residence for the remainder of 2021. I received a property tax bill in late 2021 but didn't pay it until its due date in late January 2022. My understanding is that taxes can only be claimed as deductions during the year in which they were paid: https://www.irs.gov/taxtopics/tc503 Assuming that is correct, I did not list the property taxes as an expense on my Schedule E and ended up using most of my allowed depreciation of the condo to offset the rental income I received while I owned the condo and the tenants were still living in it. I later learned that apparently the depreciation benefit must be paid back when th...
by hudson4351
Mon Mar 29, 2021 12:15 pm
Forum: Investing - Theory, News & General
Topic: question about NYT's buy vs. rent calculator and opportunity cost
Replies: 7
Views: 1367

Re: question about NYT's buy vs. rent calculator and opportunity cost

What still doesn't make sense to me is why they ignore the opportunity costs of the recurring expenses in each case, even though the description says: The calculator tabulates opportunity costs for all parts of the buying and renting situations. Probably would be too complex to build, and likely immaterial in comparison to the opportunity costs of a down payment. The down payment is likely in the tens (or hundreds) of thousands of dollars, and is held for the entirety of home ownership. Possible returns on smaller amounts, held for shorter amounts of time, probably shouldn't factor into your decision. Think about the big picture: one decision requires you tying up thousands into one asset up front, the other does not. I think the point is ...
by hudson4351
Sun Mar 28, 2021 5:55 pm
Forum: Investing - Theory, News & General
Topic: question about NYT's buy vs. rent calculator and opportunity cost
Replies: 7
Views: 1367

Re: question about NYT's buy vs. rent calculator and opportunity cost

I believe it's the missed investment returns for your $10k down payment. 1% return on $10k is $100. Minus 15% capital gains tax, $85. Obviously you wouldn't necessarily realize the gain, but probably good they built it that way to ensure opportunity cost accounts for taxes. This somewhat explains it, thanks. All of the upfront costs in both the "buy" and "rent" categories get added to their respective column's opportunity costs, which is then multiplied by 0.85 to account for a 15% capital gains tax. What still doesn't make sense to me is why they ignore the opportunity costs of the recurring expenses in each case, even though the description says: The calculator tabulates opportunity costs for all parts of the buying a...
by hudson4351
Sat Mar 27, 2021 11:43 am
Forum: Investing - Theory, News & General
Topic: question about NYT's buy vs. rent calculator and opportunity cost
Replies: 7
Views: 1367

question about NYT's buy vs. rent calculator and opportunity cost

I've been messing around with the often-cited NYT buy vs rent calculator (https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html) and cannot figure out how they are calculating opportunity cost. To keep the math as simple as possible, I used the following unrealistic values for the various parameters: Home Price: $100,000 How Long Do You Plan to Stay: 1 year What Are Your Mortgage Details: 3.00%, 10% down payment, 30 years Home price growth rate: 0.0% Rent growth rate: 0.0% Investment return rate: 1.0% All other quantities below "Investment return rate" have been set to 0. The summary table on the right then shows the following: Costs after 1 year Rent Buy Initial costs $0 $10,000 Recurring costs $2,768 $4,553 Op...
by hudson4351
Tue Aug 11, 2020 2:47 pm
Forum: Investing - Theory, News & General
Topic: Morningstar X-Ray results question
Replies: 5
Views: 365

Re: Morningstar X-Ray results question

I am reading the "Approximating total stock market" article in the Bogleheads wiki and have a question about using the Morningstar X-ray tool. For reference, my 401k does not contain the Vanguard Total Stock Market index fund but does contain the following: Vanguard Institutional Index Fund Institutional Shares (VINIX) Vanguard Mid-Cap Index Fund Institutional Shares (VMCIX) Vanguard Small-Cap Index Fund Institutional Shares (VSCIX) If I plug VSCIX into the X-Ray tool, the style box breakdown percentages don't add to 100: https://i.imgur.com/WOcIv62.jpg The total is only 99%, even though it specifically says "Not Classified 0.00%". Is this just a bug in their code or am I missing something? In the grand scheme of things...
by hudson4351
Tue Aug 11, 2020 2:38 pm
Forum: Investing - Theory, News & General
Topic: Morningstar X-Ray results question
Replies: 5
Views: 365

Morningstar X-Ray results question

I am reading the "Approximating total stock market" article in the Bogleheads wiki and have a question about using the Morningstar X-ray tool. For reference, my 401k does not contain the Vanguard Total Stock Market index fund but does contain the following: Vanguard Institutional Index Fund Institutional Shares (VINIX) Vanguard Mid-Cap Index Fund Institutional Shares (VMCIX) Vanguard Small-Cap Index Fund Institutional Shares (VSCIX) If I plug VSCIX into the X-Ray tool, the style box breakdown percentages don't add to 100: https://i.imgur.com/WOcIv62.jpg The total is only 99%, even though it specifically says "Not Classified 0.00%". Is this just a bug in their code or am I missing something? In the grand scheme of things ...
by hudson4351
Tue Jun 05, 2018 10:55 am
Forum: Personal Finance (Not Investing)
Topic: asset depletion from extended disability
Replies: 5
Views: 834

Re: asset depletion from extended disability

Earl Lemongrab wrote: Mon Jun 04, 2018 1:39 pm Some people will have DNRs filed when they go into assisted living. This can result in cases where they have a cardiac event in the public areas, staff doesn't attempt to resuscitate (correctly) but the witnesses are outraged and it makes the news.
Does this mean that a cardiac event is the only point at which someone would have the "option" to die via a DNR? Meaning that if someone was severely disabled but never had a cardiac event, they would be forced to live on in the assisted living facility until their resources were completely drained?
by hudson4351
Mon Jun 04, 2018 12:03 pm
Forum: Personal Finance (Not Investing)
Topic: asset depletion from extended disability
Replies: 5
Views: 834

asset depletion from extended disability

I realize this is not a pleasant topic to discuss, but after reading some of the posts on this and similar message boards I believe it’s best to be informed and am therefore posing this question to the community. Suppose someone enters retirement with a large nest egg but then contracts an illness or disability that requires staying in a nursing home for an indefinite period of time. I’m assuming the individual could cover the costs out of their retirement savings for a period of time, but what happens if they completely exhaust their savings? Does Medicare pick up the full cost of the particular nursing home they were staying at? Suppose the individual believes that the quality of life in a nursing home is not good enough for them and that...
by hudson4351
Fri Jul 21, 2017 11:31 am
Forum: Investing - Theory, News & General
Topic: Can real estate investing (actual properties) be relatively "hands off"?
Replies: 50
Views: 9156

Re: Can real estate investing be relatively "hands off"?

Pajamas wrote:
hudson4351 wrote:Can real estate be a nearly “hands off” investment in the same way that index funds are?
Vanguard REIT Index Fund would seem to be what you are asking about.

https://personal.vanguard.com/us/funds/ ... IntExt=INT
I've edited my OP to clarify that I am only talking about directly owning investment properties, which have the benefit of leverage that REITs do not.
by hudson4351
Thu Jul 20, 2017 5:18 pm
Forum: Investing - Theory, News & General
Topic: Can real estate investing (actual properties) be relatively "hands off"?
Replies: 50
Views: 9156

Can real estate investing (actual properties) be relatively "hands off"?

Clarification: When I say "real estate investing", I am only referring to owning actual properties, not REITs, which do not allow you to benefit from leverage in the same way that owning actual properties do. Can real estate be a nearly “hands off” investment in the same way that index funds are? I have friends who own investment properties and have tried to convince me to do the same, but the thought of having to deal with tenants, maintenance issues, etc. has really made me shy away from the idea of owning investment properties. It sounds like a very large investment of time compared to just owning index funds. I understand that using a property manager can alleviate some of the hassle of being a landlord (for a price), but do t...