Search found 397 matches

by STC
Tue Apr 02, 2013 1:55 pm
Forum: Investing - Theory, News & General
Topic: Why do investors chase dividend paying strategies
Replies: 439
Views: 63371

Re: Why do investors chase dividend paying strategies

This diagram should clear things up. Two stocks, A and B. A pays no dividend. B pays 100% dividend. Assume P/B = 1. Both stock A and B start with book value and market value of $10. After $1 of earnings, A has book value of $11. After $1 earnings and paying %1 dividend B still has $10 book value + $1 cash. Both investors have same $11 in market value ------------- | 1 | ------------- -------------- | | | | | 10 | | 10 | | | | | ------------- | | | | | 1 | ------------- --------------- ------------- A B + Cash Then stock market crashes 50% and P/B = 0.5 ------------- | .5 | ------------- -------------- | | | | | 5 | | 5 | | | | | ------------- | | | | | 1 | ------------- --------------- ------------- A B + Cash They both still have $11 in b...
by STC
Tue Apr 02, 2013 1:52 pm
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7800

Re: What happened to all of the gold bugs?

Jfet wrote: Maybe bitcoins will be the one that survives the next 5000 years because it has a fixed upper limit...

Until someone hacks the algorithm... :oops:

The illusion of safety is such an intoxicating elixir.
by STC
Tue Apr 02, 2013 1:16 pm
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7800

Re: What happened to all of the gold bugs?

[Personal attack removed by admin LadyGeek] I almost flagged this as inappropriate because of the condescending and insulting tone. Perhaps you might wish to rewrite or redact it before someone else does. Brushing aside your Strawman fallacious example, consider this: 1) No fiat currency has ever lasted. Three centuries ago, we might be talking Spanish reales, two centuries, the British pound. Gold has always been the primary or secondary reserve currency throughout history. It doesn't matter if you value it, the point is enough people continue to value the barbaric relic. 2) We purchase many nonperforming assets. No one faults a BH when they purchase disability, life, health or umbrella insurance. Especially for those who made their numbe...
by STC
Tue Apr 02, 2013 9:56 am
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7800

Re: What happened to all of the gold bugs?

wshang wrote:
umfundi wrote:If I did own Yen, I think that as a US resident the only relevant thing to me would be the value of JPY vs. the USD. Why is the price of gold in JPY at all important?
Keith
It is because people all over the world buy gold based upon their own currency. I am answering the OP's question. Looking at the price of gold from our own parochial standpoint is incomplete. The day will come when "the one eyed man in the world of the blind (the US dollar) " is no longer king. Those mocking 'gold bugs' now, will then understand what Japanese investors know and feel presently.
[Personal attack removed by admin LadyGeek]
by STC
Mon Apr 01, 2013 11:32 am
Forum: Investing - Theory, News & General
Topic: Why do investors chase dividend paying strategies
Replies: 439
Views: 63371

Re: Why do investors chase dividend paying strategies

bertilak Re Wellington, that of course is fine--mutual funds of course invest in individual stocks. And Wellington certainly has a great track record and is relatively low cost. As to matters, that is exactly the point--the research makes clear is that the exposure to those factors explains almost all of the risk and expected return of a portfolio. Which is why factor regressions are the gold standard for research papers that look at performance of strategies/funds. Larry The idea of "factors" gets back to a question I posted earlier at: Two Kinds of Value Stocks? . I hear that value is a *risk* factor, but see that some apparently conservative funds (e.g. Wellington) invest in value stocks. It also seems to me that large, establ...
by STC
Mon Apr 01, 2013 10:36 am
Forum: Investing - Theory, News & General
Topic: six ways to avoid expensive investment mistakes
Replies: 12
Views: 2448

Re: six ways to avoid expensive investment mistakes

Blues wrote:Good article, Larry.

I have a question regarding the following quote:
That means not only avoiding concentrating risk in single companies (especially the stock of your employer), but also concentrating in sectors and countries.
Would that caution apply to REIT's, (which I have never owned outside of TSM), or do you not perceive them as a sector play?
REIT's are both a sector play and vastly under-represented in the TSM relative to the weighting in the economy. Feel free to look at it either way.
by STC
Sun Mar 31, 2013 8:50 am
Forum: Investing - Theory, News & General
Topic: Why do investors chase dividend paying strategies
Replies: 439
Views: 63371

Re: Why do investors chase dividend paying strategies

My thoughts involve SPIAs, options, and dividends; dividends because they are a way of "locking in" return. SIPA - you are too young and yields are too low to make this attractive for you for quite some time Options - really bad idea. if you are doing covered calls, you are cutting off the wrong risk tail to produce income. Not a good idea. Dividends - the illusion of safety. Look at the standard deviations of dividend funds, they are similar to all TSM. Dividends can and have been cut during a downturn. The problem you have is that you seem to need the feeling of safety when none exists. So you are shying towards the "illusion" of safety with dividends, even though the empirical evidence clearly shows that it is in fac...
by STC
Sat Mar 30, 2013 5:36 pm
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7800

Re: What happened to all of the gold bugs?

umfundi wrote:This thread is close to being about nothing, and may thus be locked.

However, I have been contemplating the chart, and it scares me. There is no way I would rebalance into gold if I owned any.

If the chart were for two other classes, like small stocks vs foreign bonds, I'd have no problem. Rebalance immediately.

But for gold? Zero expected return and no theory on its future value. Am I missing something?

Keith
Nope. You aren't missing anything. And all of those visceral defenders of gold have abandoned their zeal for debate. It only took 3 months of poor returns.

For the record, this thread is about performance chasing and staying the course.
by STC
Sat Mar 30, 2013 10:01 am
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7800

Re: What happened to all of the gold bugs?

momar wrote:I don't care. I still wish I had bought gold back in 2000.
I wish I had purchased credit default swaps on MBS's with interest only, no-documentation, loans in 2008. But then again it's easy to invest if you had a time machine,
by STC
Sat Mar 30, 2013 9:56 am
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7800

Re: What happened to all of the gold bugs?

umfundi wrote:Doesn't the chart suggest you should be rebalancing stocks into gold, since they have diverged about 20% in the last few months?

Keith
Only for the PP folks. The chasers are bidding up gold based on their unique understanding of global economies and monetary policy... Of course, I view the parabolic move in price with great suspicion.
by STC
Sat Mar 30, 2013 9:48 am
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7800

Re: What happened to all of the gold bugs?

stevewolfe wrote:They are just sitting back and collecting their dividends... er, wait... :beer
I literally LOL'ed.

The PP crowd I have no issue with. I don't agree with their approach, but get their point and strategy... So meh. But it is rather funny that we haven't seen the chasers posting for a long while. I guess the "currency basket" argument is only valid when you are getting 20% CAGR to match? :oops:
by STC
Sat Mar 30, 2013 7:28 am
Forum: Investing - Theory, News & General
Topic: What happened to all of the gold bugs?
Replies: 57
Views: 7800

What happened to all of the gold bugs?

Was gold just performance chasing? Seems to me that 6 months ago every third thread was about gold. Now, nothing?
by STC
Fri Mar 29, 2013 6:43 pm
Forum: Investing - Theory, News & General
Topic: Bogleheads 2013 Hedgefund Contest
Replies: 151
Views: 23995

Re: Bogleheads 2013 Hedgefund Contest

Wondering why I am not on the list...
by STC
Fri Mar 29, 2013 11:54 am
Forum: Personal Investments
Topic: US:Intl equities ratio - include REIT?
Replies: 8
Views: 1054

Re: US:Intl equities ratio - include REIT?

feh wrote:Hi folks.

About 8% of my portfolio is a REIT. Question - when computing the ratio of US to international stocks, should I include the REIT as part of US stocks?

Thanks.

I have the same US/Intl split in REIT's as I do in other equities (50/50). I use VNQ and VNQI. I manage them separately from the rest of my equity allocation, keeping them to 10% (although I am considering dropping that to 8%)
by STC
Fri Mar 29, 2013 10:47 am
Forum: Investing - Theory, News & General
Topic: Pimco Total Return
Replies: 19
Views: 3784

Re: Pimco Total Return

PTTRX is my only holding for intermediate term bonds. I have short term corporate, short term muni, and IBonds as well. It is also the only actively managed fund I own. The long track-record and the agility to react to artificially low interest rates is reason enough for me to "gamble"
by STC
Fri Mar 29, 2013 9:57 am
Forum: Investing - Theory, News & General
Topic: Thinking about increasing risk. Any advice?
Replies: 46
Views: 4237

Re: Thinking about increasing risk. Any advice?

C4NT wrote: with 4-5% of that bond allocation in REIT. .
REIT's are equities. NOT NOT NOT NOT NOT Bonds
by STC
Tue Mar 26, 2013 9:34 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 36221
Views: 4685338

Re: U.S. stocks in freefall

wshang wrote:
STC wrote:Freefall? LOL This doesnt even count as a correction. Its ~6.5% drop. Need a 10% drop before its a correction.
You might well get your wish . . . IWN is already down 10% from the top -11.5% (as I write), SPY down 8.2%. I would write something political, but it would only make me chagrined. Perhaps some people are happy about this.
Where is wshang?
by STC
Tue Mar 26, 2013 10:45 am
Forum: Personal Investments
Topic: Where to put home down payment saving
Replies: 8
Views: 1596

Re: Where to put home down payment saving

3CheersforLkyJack wrote:What about putting half of that in a short term bond fund like VFSTX and the other half in CDs or cash? Or would that to be too risky?
VFSTX has a standard deviation of 3.31 over 5 years, and a 3.87% annualized return over that time period. If you were to incur a loss, it would be minimal (1-3% in a bad case). I keep my short term money in:

VCSH - Vanguard Corp Short Term
SHM - iShares short term national muni

I am fine with the minimal volatility.
by STC
Tue Mar 26, 2013 5:57 am
Forum: Personal Investments
Topic: Where to put home down payment saving
Replies: 8
Views: 1596

Re: Where to put home down payment saving

150-175 So you need $150 - $175 You have $125 You can save $48 Total: $173 Delta: +$23 - -$2 Now run assume a 40% decline in equities over the next two years (worst case). You do nothing You have $75 You can save $48 Total: $123 You cut your equities to 1/2 You have $100 You can save $48 Total: $148 You cut your equities to 1/4 You have $112.5 You can save $48 Total: $160.5 Since you cant predict when the next 40% decline will hit, the best way to ensure you meet your goal range is to immediately sell 3/4 of your current $125k taxable portfolio. Those funds could go into CD's or savings accounts to protect the principle. You can get more aggressive with your assumptions if you are ok with missing your goal, or delaying the home purchase.
by STC
Mon Mar 25, 2013 9:44 pm
Forum: Personal Investments
Topic: Where to put home down payment saving
Replies: 8
Views: 1596

Re: Where to put home down payment saving

3CheersforLkyJack wrote:All gains would be long term. My hope is to put down at least half of the total cost, if not more.
And how much is that...?
by STC
Mon Mar 25, 2013 7:51 pm
Forum: Personal Investments
Topic: Where to put home down payment saving
Replies: 8
Views: 1596

Re: Where to put home down payment saving

Are your gains long term? And how much do you need for downpayment?
by STC
Mon Mar 25, 2013 6:55 pm
Forum: Investing - Theory, News & General
Topic: what is an ibonds duration?
Replies: 150
Views: 15378

Re: what is an ibonds duration?

Conceptually, does the inclusion of IBonds change your "blended duration" within your FI portfolio? And if so, do you adjust your holdings to compensate? Do you think of IBonds as having 0 duration, because there is no interest rate risk? For example: Target duration: 5 years IBonds as a % of FI: 50% Duration of TBM: 5 years Blended duration: 2.5 years Should this investor look at longer dated FI instruments to get the blended duration out to the target 5 years? Edit: By extension, if it is generally accepted that TBM is the baseline that you can tilt from, then should the target duration be that of TBM? So, if you own IBonds or EEBonds you would need to buy some extended maturities along with your core TBM holdings to accurately ...
by STC
Mon Mar 25, 2013 3:32 pm
Forum: Personal Investments
Topic: IBonds & Portfolio Duration
Replies: 1
Views: 458

IBonds & Portfolio Duration

Conceptually , does the inclusion of IBonds change your "blended duration" within your FI portfolio? And if so, do you adjust your holdings to compensate? Do you think of IBonds as having 0 duration, because there is no interest rate risk? For example: Target duration: 5 years IBonds as a % of FI: 50% Duration of TBM: 5 years Blended duration: 2.5 years Should this investor look at longer dated FI instruments to get the blended duration out to the target 5 years? Edit: By extension, if it is generally accepted that TBM is the baseline that you can tilt from, then should the target duration be that of TBM? So, if you own IBonds or EEBonds you would need to buy some extended maturities along with your core TBM holdings to accuratel...
by STC
Mon Mar 25, 2013 1:14 pm
Forum: Investing - Theory, News & General
Topic: From Vanguard: The bond market: Challenges ahead
Replies: 17
Views: 2462

Re: From Vanguard: The bond market: Challenges ahead

If you are young enough, hide in IBonds as much as possible. I also have shortened my bond duration. I consider it prudent.
by STC
Mon Mar 25, 2013 12:45 pm
Forum: Personal Investments
Topic: When did you start investing outside retirement accounts?
Replies: 31
Views: 6072

Re: When did you start investing outside retirement accounts

I ask because I think I should be, but I'm not sure. I'm maxing my 401k and my wife contributes 11% to her pension fund. Additionally, we both max out backdoor roths. We own a home with 20% equity and a 3.75% mortgage. I have an emergency fund greater than 6 months. So my question is when did you start and how much do you contribute monthly (% or number) outside of retirement funds? Do you invest additionally for retirement? Do you keep separate brokerage accounts for different things? For example, maybe a retirement supplemental long term account or a different one if I want to maximize my investments on a five year horizon for a home renovation, new car, etc. Congrats on getting to this point! Excellent. However, you are not out of retir...
by STC
Sun Mar 24, 2013 11:43 am
Forum: Personal Investments
Topic: Am I on track for early retirement?
Replies: 25
Views: 4564

Re: Am I on track for early retirement?

I actually don't think we disagree at all. Your number is your number. And reguardless of the differences in our respective numbers, the point remains the same. Enjoy what you do, while you work towards making progress on your number. The information you had shared up until the last post indicated a "tolerable" job that did not seem to be fulfilling. Many in that situation look at retirement as a "way out." This is a mistake in my opinion. The "way out" is to do what you enjoy doing, while you work towards making progress on your number. I was clearly a bit hasty in projecting that profile onto you, and you seem to have some clear plans on getting to where you want to be. Thats the right move. So we do agree. H...
by STC
Sun Mar 24, 2013 10:52 am
Forum: Personal Investments
Topic: Am I on track for early retirement?
Replies: 25
Views: 4564

Re: Am I on track for early retirement?

So your point is noted, but I respectfully decline to take up your negative outlook on life. :) edit: I feel like I should also point out that based on your savings rate and your income, you will want/need a lot more money than I will in retirement, so your $500k in savings so far is not particularly comparable to my $150k in savings. The best way to assure early retirement to is live simply and cheaply, IMO. I'm no Mr. Money Mustache, but I am pretty frugal, and that is something that will continue whether I have kids or retire or what-have-you. I live very comfortably on $35k/year of spending right now, and if I had extra time on my hands I could almost certainly reduce that to $30k, because currently I pay for a lot of things out of con...
by STC
Sun Mar 24, 2013 9:25 am
Forum: Personal Investments
Topic: Am I on track for early retirement?
Replies: 25
Views: 4564

Re: Am I on track for early retirement?

You can check out the post above to see how much you might have in 18 years. It is probably not enough even under optimistic real return scenarios. You should be thinking 2% withdrawal as a margin of safety. Check out http://www.firecalc.com/ 2%, really? Pretty much any literature I've read on the subject recommends 4% as a safe withdrawal rate, which is why I figure 20ish years is a reasonable shot. I actually have a much more sophisticated calculator built for myself in Excel (including mortgage amortization, etc.), so I've got the numbers down and I've played with them pretty extensively. I am making an assumption of 4% real returns (which may or may not be realistic, but who can tell) and 4% withdrawal rate, and it spits out 45-48 as b...
by STC
Thu Mar 21, 2013 10:54 am
Forum: Investing - Theory, News & General
Topic: munis look relatively cheap
Replies: 37
Views: 3989

Re: munis look relatively cheap

Larry - for those of us who are too lazy to pick individual Muni bonds, would SHM (iShares Short term national Muni) be a good alternative?
by STC
Thu Mar 21, 2013 10:43 am
Forum: Personal Investments
Topic: When do you make your 2013 backdoor roth contribution?
Replies: 12
Views: 1707

Re: When do you make your 2013 backdoor roth contribution?

Started it on Jan 1 this year. I forget how long it took for funds to clear then roll-over into the Roth. But definitely was done by Jan 10th for both me and my wife. Good luck!

Process
Fund Trad IRA > Wait for funds to clear > Roll over to rIRA > Purchase investment
by STC
Wed Mar 20, 2013 10:24 am
Forum: Investing - Theory, News & General
Topic: is a stock market bubble brewing
Replies: 33
Views: 5485

Re: is a stock market bubble brewing

It's yet another example of a valuation metric being "interesting," not "definitive" - which you have said many times. It's amazing to me to see the psychology at work here. While the Shiller PE10 is interesting, and may be informative in many situations, in other situations it is not. Still, the detail-oriented people and statisticians will look to pull definitive meaning from this information to the point that they make investment decisions based upon it. In my mind the Shiller PE10 is only currently valuable in looking at the difference between current US and current Intl equities, for a relative valuation. They share the same history and so the delta is the difference in expectations over the time period of the avera...
by STC
Wed Mar 20, 2013 9:10 am
Forum: Investing - Theory, News & General
Topic: is a stock market bubble brewing
Replies: 33
Views: 5485

Re: is a stock market bubble brewing

Larry - The issue I take with the PE 10 is the significant decline in earnings due to the great recession. If you were to remove that major dip from the PE 10 calculation, where are we valued? Is it fair to allow outlier data points to skew the analysis of todays PE 10, vs the historical baseline you are using? I don't think it is.
by STC
Wed Mar 20, 2013 7:47 am
Forum: Investing - Theory, News & General
Topic: What asset classes to put in a Roth?
Replies: 61
Views: 6889

Re: What asset classes to put in a Roth?

Our Roths hold DGS emerging small cap VNQ US REIT VCSH corporate short-term bond I consider our small Roth IRAs to be precious future tax-free space. Sure, I want to have them grow huge and tax-free, but I also don't want to lose lots of money so I have to start over. The amounts that one can contribute each year while working are $5K to $6K, so if the Roth tanks, one cannot top it up by moving a chunk of money from elsewhere (OK, one can "convert" some tIRA to Roth IRA, but the taxes deter that conversion until the future.) So if one puts something like emerging markets small cap (DGS) or REIT index (VNQ) into their Roth, they would not be making any money unless they did a great job with market timing and buying in a relatively...
by STC
Tue Mar 19, 2013 4:16 pm
Forum: Personal Investments
Topic: Poll - adding a diversifyer to a 4 fund portfolio
Replies: 60
Views: 5801

Re: Poll - adding a diversifyer to a 4 fund portfolio

You will also never see the high's of these correlation ranges as long as we are not in a global crisis. Further, periods of 5 years is not enough of a sample to draw any conclusion from - except that we likely have experienced the height of global correlations during that period. A 0.64 correlation is quite sufficient to draw diversification benefit from. BTW, the latest 120-day VTI-VWO correlation from ETFReplay is .79 But I ran the numbers from Jan-1999 to Dec-2012 which is 13 years and there was no diversification benefit. (See past post) The correlation of monthly returns of VTSMX-VEIEX over that period was 0.84722, which is high correlation. So by extension, I assume you do not own any Intl Stock? After all the correlation's you are ...
by STC
Tue Mar 19, 2013 12:48 pm
Forum: Personal Investments
Topic: Poll - adding a diversifyer to a 4 fund portfolio
Replies: 60
Views: 5801

Re: Poll - adding a diversifyer to a 4 fund portfolio

Correlations during a global economic crisis only prove correlations during a global economic crisis. Those are rolling 120-day correlation since about the start of the funds. It depends on the fund. For example, correlation VTI-VWO is from Aug 23, 2005 to Mar 18 2013. So the chart is from severals years before to several years after the 2008-2009 crisis. It ranged from .65 to .94 which is moderately high to high. You will never see low correlation between VTI-VWO as long a stock markets are global. You will also never see the high's of these correlation ranges as long as we are not in a global crisis. Further, periods of 5 years is not enough of a sample to draw any conclusion from - except that we likely have experienced the height of gl...
by STC
Tue Mar 19, 2013 12:32 pm
Forum: Personal Investments
Topic: Poll - adding a diversifyer to a 4 fund portfolio
Replies: 60
Views: 5801

Re: Poll - adding a diversifyer to a 4 fund portfolio

I’ve got a 4-funder right now and it’s the usual TSM/TISM/BND/REIT. I want to add just one different stock fund at 10% of portfolio. I have enough room in tax sheltered so tax efficiency of the new fund isn’t important. The horizon is at least 30 years. Right now I’m 30/30/30/10 TSM/TISM/BND/REIT. I plan to be 25/25/30/10/10?? I’m not upping the total equity at all. Please consider current valuations, projected forward returns and diversification value (in my portfolio) when you vote. I really only want one added fund, really. So here are my options – only vanguard options. Thank you for your help. The answer is e) None of the above All three are highly correlated with TSM and TISM, so will provide little or not Markowirz diversification b...
by STC
Tue Mar 19, 2013 8:47 am
Forum: Personal Investments
Topic: Poll - adding a diversifyer to a 4 fund portfolio
Replies: 60
Views: 5801

Re: Poll - adding a diversifyer to a 4 fund portfolio

livesoft wrote:I'm in a market timing mood, so since small-cap value has been doing great and emerging markets has not been, I would say add some small-cap emerging markets in the form of EWX or DGS. Full disclosure: I own these and everything else, too.
I have been adding to EWX and VSS, from IJS and VTI over the last month or so.
by STC
Tue Mar 19, 2013 8:10 am
Forum: Personal Investments
Topic: Poll - adding a diversifyer to a 4 fund portfolio
Replies: 60
Views: 5801

Re: Poll - adding a diversifyer to a 4 fund portfolio

Average wrote:
STC wrote:I add all of the above + EM small cap.

For me - that's a bridge too far. :shock:

Fine. Although I disagree. :) Then IF you TISM contains Emerging Markets, your most-likely best diversifier (by correlations) will be International Small Caps. Valuations also favor intl. small caps. VSS is what I use.

But what I would really do in your case is:

20 - TSM
20 - TISM
30 - BND
10 - REIT
5 - US Small (IJS, VBR)
5 - Intl Small (VSS)
5 - Emerging Markets Small (EWX)
5 - Emerging Markets large (VWO)
by STC
Tue Mar 19, 2013 7:36 am
Forum: Personal Investments
Topic: Poll - adding a diversifyer to a 4 fund portfolio
Replies: 60
Views: 5801

Re: Poll - adding a diversifyer to a 4 fund portfolio

I add all of the above + EM small cap.
by STC
Mon Mar 18, 2013 2:32 pm
Forum: Personal Investments
Topic: Best place to put infant's money
Replies: 14
Views: 2993

Re: Best place to put infant's money

Personally, I would put 50/50 in VBR/VSS. A lifetime is a long horizon...
by STC
Mon Mar 18, 2013 1:36 pm
Forum: Personal Investments
Topic: Covered Calls (yes, again, but *twist)
Replies: 8
Views: 1057

Re: Covered Calls (yes, again, but *twist)

livesoft wrote:A 1% premium may not cover your costs. There may be no volume at the strike price you want. These are just the usual caveats with this strategy.
I noticed that with:

VV
IJS
VSS

However, plenty of volume with EEM.

And yes, I know VWO is a better emerging markets etf then EEM. I TLH'ed last year away from VWO and then emerging markets took off before I could get back. So I would likely focus on EEM and 5 contracts or so monthly.
by STC
Mon Mar 18, 2013 1:27 pm
Forum: Personal Investments
Topic: Covered Calls (yes, again, but *twist)
Replies: 8
Views: 1057

Covered Calls (yes, again, but *twist)

I am quite familiar with general opinions about covered calls, but I am thinking that I may be in a unique situation that makes it make sense during the course of this year. My wife and I are buying a house this time next year. Most of the money for our 22% down payment is in bonds and will come from planned salary cash flow over the next 12 months. A small portion of that down payment ($30k - $40k) will come from a taxable equity account that is currently valued north of $120k. I am sitting on nice gains, and have no losses harvested to off-set those gains. Due to the size difference between what I need and the total value of the taxable account, I am not worried about volatility. If the market completely collapses, I likely wont buy a hom...
by STC
Sun Mar 17, 2013 7:53 pm
Forum: Personal Finance (Not Investing)
Topic: Finance Home Remodeling
Replies: 29
Views: 3495

Re: Finance Home Remodeling

The remodel is an increase in consumption. I would be happy with new cabinets, a new fridge & a new floor, the last 2 I can do myself. But this is something my wife has been talking about for more than a few years. Hard to put a price on that. So its the intangibles that tip the scale for a go vs. no go. I want to retire early, but its not a hard goal. And it will probably be semi-retirement to start. The college stuff will definitely tell the tale. That & my wife going back to work. OuterMarker: Spending 45k to sell wouldn't bring 45k in price. But it is a good market. Based on the equity in our house and costs at potential "retirement locations", I'm fairly confident we can purchase a place outright. But then I know tha...
by STC
Sun Mar 17, 2013 7:34 pm
Forum: Personal Investments
Topic: $500K in Stable Value Fund-Entry point for equities?
Replies: 15
Views: 2068

Re: $500K in Stable Value Fund-Entry point for equities?

Some points:

1: your current portfolio is likely to have a negative real return for the next several years - if that's ok, ok. If not, then you will need to move out on the risk curve
2: efficient frontier models almost always see both better returns and lower risk when some equities are added

So, given those points, I would tend to agree with the Vanguard rep and I think 30% isn't a bad amount. I do disagree with DCA though. Search "Dollar cost averaging" here and read up. It's been debated.... To death... In the past.
by STC
Sun Mar 17, 2013 11:05 am
Forum: Investing - Theory, News & General
Topic: Theory on taking capital gains/losses
Replies: 6
Views: 1076

Re: Theory on taking capital gains/losses

That "if the timing works out" is a biggie.

1: anyone carrying forward losses cannot do this
2: to produce both a $3k gain and a $3k loss you would likely have to own investments that are volatile and negatively correlated - like extended duration bonds and equities - or have a lot of money invested in low volatility and negatively correlated assets - like intermediate muni's and equities.
by STC
Sun Mar 17, 2013 10:51 am
Forum: Personal Finance (Not Investing)
Topic: Finance Home Remodeling
Replies: 29
Views: 3495

Re: Finance Home Remodeling

A home is not an asset, it is a liability masquerading as an asset. A home is not an asset, it is a liability masquerading as an asset. A home is not an asset, it is a liability masquerading as an asset. Ok, I'll repeat it daily as I'm here to learn. Straying slightly off topic: the home is not an asset, but isn't the equity an asset? It is part of my net worth, the majority of which is in retirement - 80% in 401/IRA. I wouldn't classify it as massive, but substantial. My original question was how to pay or finance the remodel and I've got some good advice and options I hadn't thought of. I know you don't make these kind of decisions (whether to remodel or not), in a vacuum, so the extra advice and thoughts are welcome. It all depends on h...
by STC
Sat Mar 16, 2013 1:25 pm
Forum: Personal Finance (Not Investing)
Topic: helping my daughter buy a house
Replies: 18
Views: 2820

Re: helping my daughter buy a house

With 20% down she can avoid PMI with most conventional mortgages. If she wanted to go FHA and avoid PMI, she would need to do 22% down and a 15y mortgage. The FHA route would give here a fantastic rate, if she can do a 15y mortgage. So I would: 1: Make sure she avoids PMI 2: Evaluate the ability to take a 15y vs 30y 3: If 15y is an option, look at FHA 4: Otherwise, see if a guarantor/co-signer moves the needle on her rate... but be careful, co-signing has implications that I am sure others here will be better suited to inform you of If you wanted to pony up some funds, then I would add a principle payment each year against her mortgage up to the taxable gift limit (i think its $13k). That would help pay off the mortgage, while at the same t...
by STC
Sat Mar 16, 2013 1:14 pm
Forum: Personal Finance (Not Investing)
Topic: helping my daughter buy a house
Replies: 18
Views: 2820

Re: helping my daughter buy a house

How much can she put down as a percentage of purchase price? Are you looking to help with funds, or trying to get her a better rate via guarantee?
by STC
Sat Mar 16, 2013 12:52 pm
Forum: Personal Finance (Not Investing)
Topic: Finance Home Remodeling
Replies: 29
Views: 3495

Re: Finance Home Remodeling

What ever became of that school of thought: "if you can't pay cash for it, you can't afford it."? +1. If you're six years out from retirement and can't comfortably afford this with room to spare, I would think hard about a $45,000 remodeling. Streamline expenses and work on building up retirement savings. There are actually more facts that support your recommendation (e.g. twin 12 yr olds - so 6 more years till college), but I haven't been looking at this as do or don't do decision. And in our area (DC Metro), the remodel is an investment in one of my larger assets. Repeat after me: "A home is not an asset, it is a liability masquerading as an asset." "A home is not an asset, it is a liability masquerading as an as...
by STC
Sat Mar 16, 2013 12:51 pm
Forum: Personal Finance (Not Investing)
Topic: Finance Home Remodeling
Replies: 29
Views: 3495

Re: Finance Home Remodeling

ThatGuy wrote:
STC wrote:What ever became of that school of thought: "if you can't pay cash for it, you can't afford it."?
That's been outmoded since at least 1407 when Banco di San Giorgio was established, but possibly as early as 2000 BC with grain loans.

The same stuff has been going on forever, and it's ridiculous to impose your own morality as a rose colored hue on top of 'old' values.

I see, so paying interest on consumption items is the "new" values... Good luck with that, and thank you for the cash flows into my bond funds (which own instruments from lines of credit and asset backed loans). I will be sure to spend your money well.