Search found 35 matches
- Mon Jun 03, 2013 7:43 pm
- Forum: Investing - Theory, News & General
- Topic: More Unconventional Failure
- Replies: 17
- Views: 2956
Re: More Unconventional Failure
Rick, your article is misleading, despite your two sentences quoted below in response to Frank2012: Mr. Swenson is actually one of the most famous proponents of indexing for the average investor, and does not at all advocate using a Yale-type portfolio for such investing. Which is why I wrote in the article: To his credit, Swensen repeatedly warned in both books that only a handful of the largest organizations have the depth of knowledge to successfully implement such a strategy. That was a nice suggestion by Mr. Swensen, but it was about as useful as telling a freshman college student to avoid parties where alcohol is being served . Rick Ferri The title of your article and its first sentence play on the title of Swenson's second book to cr...
- Mon Jun 03, 2013 12:47 pm
- Forum: Investing - Theory, News & General
- Topic: More Unconventional Failure
- Replies: 17
- Views: 2956
Unconvential Success for individual investors
In his book for individual investors, Unconventional Success , Swenson extensively discusses and recommends a portfolio consisting entirely of low-cost index funds or ETFs, allocated to 6 core asset classes: US equity (30%), US Treasury bonds (15%), US inflation-linked bonds (15%), foreign developed equity (15%), emerging markets equity (5%), and real estate (20%). He also analyzes and recommends against investing in non-core asset classes, including hedge funds, foreign bonds, high-yield bonds, leveraged buyouts, asset-backed securities, corporate bonds, tax-exempt bonds, and venture capital. The performance of his recommended "lazy portfolio" as of June 3 2013 is available on the Paul Farrell's website, and compares favorably to...
- Fri Feb 01, 2013 6:37 pm
- Forum: Personal Finance (Not Investing)
- Topic: What's a better term for 'retired'?
- Replies: 97
- Views: 12270
Re: What's a better term for 'retired'?
I use the term "financially independent".
- Thu Nov 08, 2012 1:23 pm
- Forum: Investing - Theory, News & General
- Topic: Why is holding LT Treasury fund shares dangerous?
- Replies: 15
- Views: 2624
Why is holding LT Treasury fund shares dangerous?
Please help me to understand how Treasury funds and ETFs work. Everyone says that longer-term investments in these are really dangerous. I am trying to see exactly why. The underlying Treasury bills, notes, or bonds in the fund have fixed coupons, so if the price of the fund shares goes down, the total yield should rise as a percentage of current share price... or am I missing something? Suppose I bought $100,000 of VUSUX (VG LT Treasury Fund) or TLT (IShares LT Treasury ETF) when the SEC yield was 3%, making around $3000 per year. Then suppose the price of the shares I bought drops 40%. I will still get $3000, which is now 5% of the current price. Likewise, if the price of the fund shares doubles to $200,000, I will still get $3000, though...
- Wed Oct 10, 2012 11:36 am
- Forum: Investing - Theory, News & General
- Topic: Fixed SPIA with do-it-your-self inflation adjustments?
- Replies: 29
- Views: 2842
Re: Fixed SPIA with do-it-your-self inflation adjustments?
Again, thanks for the very helpful discussion.
I think this discussion is also relevant to Henry Hebeler's
proposal that those who have fixed db pensions can protect against inflation by saving a portion of
their after-tax payout and reinvesting it (see "Withdrawal Strategies in Difficult Times" at www.analyzenow.com).
The question is how they should invest the saved portion. I assumed that the answer was equities.
TwoCyclists
I think this discussion is also relevant to Henry Hebeler's
proposal that those who have fixed db pensions can protect against inflation by saving a portion of
their after-tax payout and reinvesting it (see "Withdrawal Strategies in Difficult Times" at www.analyzenow.com).
The question is how they should invest the saved portion. I assumed that the answer was equities.
TwoCyclists
- Tue Oct 09, 2012 9:40 pm
- Forum: Investing - Theory, News & General
- Topic: Fixed SPIA with do-it-your-self inflation adjustments?
- Replies: 29
- Views: 2842
Re: Fixed SPIA with do-it-your-self inflation adjustments?
Yes, my idea was inspired by Wade Pfau's "efficient-frontier-for-retirement-income" article, where he finds that under current conditions of projected low inflation. low interest, and low growth, fixed SPIAs combined with equities do better than stocks and bonds, and better than inflation-indexed SPIAs. I also thought that there would be a mathematical answer to my question---if the payout is a very small percentage of the total assets, then the compounding inflation increment would also remain a small percentage under certain conditions -- well below even a low growth rate for the equities. So it occurred to me that it might work under some conditions which the very smart boglehead contributors could immediately see. Thank you fo...
- Tue Oct 09, 2012 6:54 pm
- Forum: Investing - Theory, News & General
- Topic: Fixed SPIA with do-it-your-self inflation adjustments?
- Replies: 29
- Views: 2842
Fixed SPIA with do-it-your-self inflation adjustments?
Suppose: If you annuitize half your assets, using a fixed spia at today's rates, you can cover 100% of your desired retirement income; the remaining half of the assets are invested largely in equities (in the form of low-cost indexed funds). Can you compensate for the expected effects of inflation depreciating your fixed spia over 30-35 years by withdrawing just the needed inflation-based increases from your equities portfolio? In other words, instead of paying for an inflation-indexed SPIA up front, you pay for a nominal (fixed) SPIA, and withdraw just the inflation increasements from your equities portfolio. Is there anything wrong with this idea? It seems to me it would allow for a very high degree of retirement security as well as a lik...
- Mon Feb 06, 2012 11:07 am
- Forum: Personal Finance (Not Investing)
- Topic: SPIAs -- do you exceed the max?
- Replies: 1
- Views: 360
SPIAs -- do you exceed the max?
How many of you have purchased SPIAs in amount that exceed the maximum
insurance consortium coverage for failure in your state?
In California the max (200k) is less than the amount of annuity that would be most useful for us
(and only 80% is covered any way). Would it be better to forgo the additional income because
of agency risk and keep a SPIA purchase less than 200k, or to assume more agency risk and buy a larger SPIA?
TC
insurance consortium coverage for failure in your state?
In California the max (200k) is less than the amount of annuity that would be most useful for us
(and only 80% is covered any way). Would it be better to forgo the additional income because
of agency risk and keep a SPIA purchase less than 200k, or to assume more agency risk and buy a larger SPIA?
TC
- Sat May 28, 2011 12:57 am
- Forum: Investing - Theory, News & General
- Topic: Is Wealth Genetic?
- Replies: 31
- Views: 3756
Are you a genetic boglehead or a cultural boglehead? Do your own personal habits of saving come from genetics or from how you were raised? With all respect, I don't think being a boglehead is really about frugality and saving. I think it is about an approach to rational and prudent investing: (i) minimize investment expenses through passively managed index funds, alignment of your interests with those of the fund managers (for example, via a non-profit brokerage), and tax-sensitive asset location, and (ii) adjust for risk through appropriate asset class diversification over your time horizon. Both of my parents were very frugal. Our vegetable garden provided food for the table, a meat-grinder was used in preference (no need to buy pre-form...
- Sat Sep 04, 2010 11:15 am
- Forum: Investing - Theory, News & General
- Topic: Adrian's Rule Revisited
- Replies: 24
- Views: 5409
forecasting loss in retirement
"The question remains, how should the common rules for acceptable loss be modified to properly forecast loss for those in retirement?" We can't forecast loss, but we have seen a 90% loss from equities in the Great Depression and losses close to 50% have occurred three times in the past 10 Bear Markets (starting in 1957). Here's what I have done, FWIW. Calculate the minimum annual income you need to live on in addition to your retirement income from pension/Social Security, etc. Plan to withdraw that amount of annual income at approximately 2.5% from a portfolio of highest-quality fixed income assets (e.g. Treasuries, TIPS, CDs, MM). That is your fixed-income allocation. Above that, invest in a portfolio of diversified, low-cost, d...
- Fri Aug 13, 2010 10:02 am
- Forum: Investing - Theory, News & General
- Topic: Challenges Facing the Middle Class
- Replies: 33
- Views: 5074
Yes, and over that same period (according to EW's data) men's incomefreebeer wrote:All these comments about how the middle class is better off now: sure, in material goods families may be better, but at the cost of a huge shift to two-income households. % of working age women working doubled from 1970 to 2003, from sub 40% to almost 80%. This has had a profound change on many things including parental time spent with children (which is down dramatically), nutrition, etc.
did not increase in real terms while costs for basic necessities (health care, housing, child care, etc) did.
- Fri Aug 13, 2010 9:51 am
- Forum: Investing - Theory, News & General
- Topic: Challenges Facing the Middle Class
- Replies: 33
- Views: 5074
I watched the video of Elizabeth Warren's lecture, which I thought was excellent. She provided data that addresses many of the speculations and opinionated assertions that have been given so far in comments to the OP -- for example, the difference in housing (measured by number of rooms) for a median-income husband and wife with two children in 1970 and 2003 is, IIRC, 5.8 vs. 6.1 -- one more bathroom or bedroom in 2003 (but not both). She demonstrates that increased expenditures for basic necessities such as health care, child care, and housing debt took up 75% of the (two-earner) family income in the early 2000's, compared to 50% of the single-earner family income in 1970. She shows that if we view the family units as small businesses, we ...
- Sat Jul 24, 2010 12:37 am
- Forum: Investing - Theory, News & General
- Topic: New Paper on Not So Safe Withdrawals
- Replies: 92
- Views: 12889
- Thu Jun 03, 2010 10:42 pm
- Forum: Personal Finance (Not Investing)
- Topic: pay CA income tax on VG Treasury funds in taxable?
- Replies: 2
- Views: 802
- Thu Jun 03, 2010 10:12 pm
- Forum: Personal Finance (Not Investing)
- Topic: pay CA income tax on VG Treasury funds in taxable?
- Replies: 2
- Views: 802
pay CA income tax on VG Treasury funds in taxable?
I can't find out whether interest from the VG US Treasury funds (such as VFIRX, VUSTX) is taxable by the State of California income tax.
Anyone have the answer?
Anyone have the answer?
- Sat Apr 10, 2010 10:12 am
- Forum: Investing - Theory, News & General
- Topic: TIPS: why did VIPSX and not VIPIX go up today?
- Replies: 3
- Views: 1909
- Fri Apr 09, 2010 5:44 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS: why did VIPSX and not VIPIX go up today?
- Replies: 3
- Views: 1909
TIPS: why did VIPSX and not VIPIX go up today?
Can anyone explain why VIPSX and VAIPX are up 8 basis pts today, while
VIPIX is up 0? VIPIX institutional shares are only $10.06. I thought these
funds have the same holdings.... ?
VIPIX is up 0? VIPIX institutional shares are only $10.06. I thought these
funds have the same holdings.... ?
- Fri Sep 25, 2009 6:11 pm
- Forum: Investing - Theory, News & General
- Topic: Help on Scary personal finance subjects
- Replies: 72
- Views: 12607
I'm a little surprised at these responses to the call for scary topics in personal finance. Everyone is joking about the usual practices that Bogleheads disdain. But not long ago, we were genuinely afraid -- we saw share prices of the top financial institutions in the US and the world drop to unbelievable levels never before seen, we saw a money market fund break and a stampede toward Treasury-backed MM funds, we saw no place to hide as entire countries defaulted and US Treasuries have been called the next big bubble. It was scary to see that in this very forum many of the "brilliant minds" were engaged in miles-long market timing threads, comparing the worth of different augurs for buying and selling. This forum is a source of in...
- Sat Sep 05, 2009 10:10 am
- Forum: Investing - Theory, News & General
- Topic: dumb question about bond/tips funds
- Replies: 3
- Views: 1500
- Fri Sep 04, 2009 10:41 am
- Forum: Investing - Theory, News & General
- Topic: dumb question about bond/tips funds
- Replies: 3
- Views: 1500
dumb question about bond/tips funds
I'm embarrassed to ask this, but in teaching I believe that no question is too dumb. I'm trying to understand bond fund investments to explain to my sister. If I spend $100,000 on shares of a bond fund such as VG Long-Term Treasuries (VUSUX), and if the yield when I buy is 4%, do I continue to receive $4000 from my investment even if the NAV drops or rises? My (imperfect) understanding is that the yield is the average coupon of the underlying individual bond holdings, so that they keep paying the same coupon even if interest rates cause changes in their NAV. If interest rates rise, the value of the bonds drops, but they are still paying the same average coupon, which would be $4000 in my example above. Over time the fund manager rolls over ...
- Thu Aug 06, 2009 1:37 am
- Forum: Personal Investments
- Topic: inheritance cash coming,have run out of room in tax-deferred
- Replies: 11
- Views: 2443
It occurs to me (sorry this is dumb!) that when you are retired and drawing income from your portfolio, it doesn't so much matter to have everything located for tax efficiency.
In other words, if I invest the inherited cash in TIPS or in some other income-producing investment in taxable, what does it matter, if I'm oing to be withdrawing the income from it anyway?
I would like your thoughts on this simple idea before going into all of the portfolio details and formatting....
TwoCyclists
In other words, if I invest the inherited cash in TIPS or in some other income-producing investment in taxable, what does it matter, if I'm oing to be withdrawing the income from it anyway?
I would like your thoughts on this simple idea before going into all of the portfolio details and formatting....
TwoCyclists
- Wed Aug 05, 2009 7:39 pm
- Forum: Personal Investments
- Topic: inheritance cash coming,have run out of room in tax-deferred
- Replies: 11
- Views: 2443
Thank you all for all the advice -- quite a range: i) getting rid of REITs in order to build the TIPS ladder in tax-deferred, using the inheritance money to buy VG SCV in taxable -- This makes sense to me, especially since REITs are generally small value, I believe. It is probably really the smart thing to do, since we have so much fixed income and we could benefit from the riskiness and potential upside of small value. Yet I do find Swenson's arguments that REITs are a separate asset class convincing, and I don't want to change our AA in mid-stream. Seems contrary to the investing principles I've been trying to adopt and apply, to sell an asset class after it has tanked. ii) using the inheritance money to pay for a roth conversion of a rol...
- Wed Aug 05, 2009 1:42 pm
- Forum: Personal Investments
- Topic: inheritance cash coming,have run out of room in tax-deferred
- Replies: 11
- Views: 2443
inheritance cash coming,have run out of room in tax-deferred
I am concerned about how to invest a coming inheritance that will probably consist of a lot of CDs and some individual stocks. Our portfolio is split nearly 50/50 between tax-deferred and taxable accounts. For tax efficiency, we have all of our bonds (consisting exclusively of VG US Treasury and TIPS funds) in tax-deferred, along with most of our REIT funds. Our taxable accounts contain VG indexed funds for the total market, developed international, and foreign emerging markets, along with a small amount of a REIT ETF (RWR) that couldn't be relocated into tax-deferred. We've just retired at ages 64 and 60. Our overall AA is currently 44/37/20 equities/bonds-tips/cash. I would like to keep the overall equities allocation between 37% and 47%....
- Sun Jul 19, 2009 6:21 am
- Forum: Investing - Theory, News & General
- Topic: TIPS + LT Treasury Bonds + MMF
- Replies: 25
- Views: 4349
Swensen recommends long term bonds...
Swensen recommends long term bonds or bonds at the market median duration... in his book Unconventional Success: A Fundamental Approach to Personal Investment he recommends holding them in the duration you need, IIRC. Given our expected long lifespans, that would mean we could hold long-term bonds until well into our 70's. The average duration of VUSTX -- Vanguard's Long-Term Treasuries fund, is current 11.1 years. Seems like a good choice for 1/3 of your fixed portfolio, for the reasons mentioned by the OP.
- Sun May 10, 2009 10:24 am
- Forum: Investing - Theory, News & General
- Topic: Fun with anchoring. Progress to get back to even.
- Replies: 21
- Views: 4168
Thanks for the interesting question! On Oct 31, 2007 our portfolio was 60/40 in equities/bonds+cash. As of Friday, May 8, it is 42/60.
I did the IRR thing with a spreadsheet, and found that on Friday, May 8 we are down -13.5% from our Oct 31, 2007 peak. At our low point on March 6, 2008 we were down -25.1%. That's a 57% recovery so far, just on our investments (that is, excluding additions to the portfolio).
We follow Swensen's AA plus a very large reserve given our
short time horizon (starting to draw on the portfolio this coming fall/winter).
I did the IRR thing with a spreadsheet, and found that on Friday, May 8 we are down -13.5% from our Oct 31, 2007 peak. At our low point on March 6, 2008 we were down -25.1%. That's a 57% recovery so far, just on our investments (that is, excluding additions to the portfolio).
We follow Swensen's AA plus a very large reserve given our
short time horizon (starting to draw on the portfolio this coming fall/winter).
- Sun May 03, 2009 10:11 pm
- Forum: Investing - Theory, News & General
- Topic: Tight-Fisted Investing/Rick Ferri in WSJ
- Replies: 82
- Views: 20676
I noticed the same thing about REITs being tamped down in
Swensen's latest interviews, compared with his book Unconventional
Success.... I would be very interested in the reply.
At first I went along and tried revising my AA (on paper), and then
I thought I should stick to my principles.
Thanks for bringing this up.
Swensen's latest interviews, compared with his book Unconventional
Success.... I would be very interested in the reply.
At first I went along and tried revising my AA (on paper), and then
I thought I should stick to my principles.
Thanks for bringing this up.
- Sat Dec 13, 2008 11:57 pm
- Forum: Investing - Theory, News & General
- Topic: What have you learned about investing in the last year?
- Replies: 64
- Views: 11884
learned some basics
Have learned--- Swensen's analysis of asset classes in Unconventional Success is right on the mark: US Treasuries function as portfolio insurance when there is a flight to quality. Non-callable, backed by full faith & credit of US. My only bond investments are TIPS and Treasuries funds. From watching others complaining after trying to get higher returns from fixed income by going into "non-core" assets (in Swensen's terms) such as munis, corporate bonds, and asset-backed securities, I'm convinced that for the fixed portion of a portfolio, it's best to buy only the purest, safest, highest quality fixed income--- even if you pay for it with lower returns, it really pays in times like these. Have learned-- from Bud Hebeler's Gett...
- Wed May 14, 2008 11:56 pm
- Forum: Personal Investments
- Topic: what to do with retirement incentive lump sum?
- Replies: 7
- Views: 2520
Yes, that sounds like a good solution -- to put more MM into
taxable (by placing the incentive lump sum into the tax-exempt MM) and use the MM in tax-deferred to
buy more US Treas/TIPs. At the same time I could liquidate the small amount of REITS in the taxable accounts, which would optimize taxes and reduce
risk.
thanks!
taxable (by placing the incentive lump sum into the tax-exempt MM) and use the MM in tax-deferred to
buy more US Treas/TIPs. At the same time I could liquidate the small amount of REITS in the taxable accounts, which would optimize taxes and reduce
risk.
thanks!
- Wed May 14, 2008 11:19 pm
- Forum: Personal Investments
- Topic: what to do with retirement incentive lump sum?
- Replies: 7
- Views: 2520
Dear EmergDoc, I only saw the first paragraph of your message before responding -- sorry, I'm not used to posting on this forum. Here are the allocations of the overall combined big portfolio: US 19.5% For Dev 15.5% Emrg Mkt 4.8% REITs 15.3% TIPS 19.8% US Treas 11.5% MM 13.5% Swensen suggests as you get closer to retirement to withdraw funds so that you keep your "risky" portfolio in its same AA while building up a "riskless" portfolio of MM funds or similar for spending needs. Hebeler's book, which I like for its practical detail, emphasizes the need to keep sufficient reserves for emergencies, capital replacement costs, long-term care self-insurance, and retirement income gaps. So I've kind of combined these ideas in a...
- Wed May 14, 2008 11:05 pm
- Forum: Personal Investments
- Topic: what to do with retirement incentive lump sum?
- Replies: 7
- Views: 2520
- Wed May 14, 2008 9:52 pm
- Forum: Personal Investments
- Topic: what to do with retirement incentive lump sum?
- Replies: 7
- Views: 2520
what to do with retirement incentive lump sum?
Dear wise Bogleheads, I am about to retire this summer, and will receive a lump sum incentive payment from employer worth approx 6-7% of entire portfolio after taxes. I will continue working part-time for several years, which will reduce income needed from portfolio. My income bracket after retirement will be 25-28% Fed and 9.3% CA, except for year of receipt of lump sum. The question is what is the optimal thing to do with the lump sum? I would like to lower overall equities percentage of my combined portfolio (see below) from current 55% closer to 50%, but how, given that the lump sum is in taxable? --to invest it in fixed or in a balanced fund would be tax-inefficient. --to invest it in equities would increase the risk of my AA beyond wh...
- Fri Oct 12, 2007 9:33 pm
- Forum: Personal Finance (Not Investing)
- Topic: Which Linux distro are you using?
- Replies: 57
- Views: 20073
- Wed Feb 21, 2007 12:48 am
- Forum: Personal Investments
- Topic: how to withdraw from split risky/riskless portfolio?
- Replies: 5
- Views: 7160
Thank you for responding. I am confused about how bond funds workProkofiev wrote:25% cash seems like a very high allocation to just a MM fund. Things look pretty good right now with a flat yield curve, but should rates drop overall or ST rates drop and LT stay where they are you will be losing.
I would consider using a ST bond fund for some of this money and also look into holding some dividend paying value stocks/funds in your taxable to take advantage of the 15% qualified dividend and 15% LT cap gain rates.
during withdrawal... Does it matter that you can be selling them off at
depressed prices and losing principal?
- Wed Feb 21, 2007 12:43 am
- Forum: Personal Investments
- Topic: how to withdraw from split risky/riskless portfolio?
- Replies: 5
- Views: 7160
Thanks for pointing out the problem.SmartSometimes wrote:I see a problem here.
In other words, you're pulling money out of tax deferred accounts before taxable accounts, which is opposite to what's usually recommended.Most of the cash ... in tax-deferred accounts ... My basic, rather sketchy idea is that each year I could take the interest from the MM fund
Any pension in the offing?
No pension... just social security plus my partner's pension, which
together would be about 30% of needed income, I estimate.
One thing I was thinking about was to annuitize the cash portion of
the tax-deferred accounts, perhaps getting an immediate annuity from Vanguard. That would just about completely cover the necessities, then.
- Tue Feb 20, 2007 7:45 pm
- Forum: Personal Investments
- Topic: how to withdraw from split risky/riskless portfolio?
- Replies: 5
- Views: 7160
how to withdraw from split risky/riskless portfolio?
After reading _Unconventional Success_ by David Swensen, I divided my portfolio into two -- the risky portfolio, which has this AA, all in Vanguard index funds or in ETFs (except for about 6-7% in a US single stock gift from my father, which has a very large capital gain): 25% US equities 20% Foreign Developed markets 5% Foreign Emerging Markets 20% REITs 15% US Treasury bonds 15% TIPS -- and a "riskless" portfolio of Vanguard MM funds. Currently the risky portfolio is 75% of retirement assets and the riskless portfolio is 25%. The riskless portfolio is large enough to provide for 7-8 years of income. Again following Swensen, I decided to sacrifice some of my return in order to protect my risky portfolio from unexpected deflation ...