Search found 13218 matches

by alex_686
Sun Mar 17, 2024 11:42 am
Forum: Personal Investments
Topic: Minimum Required Distributions Wrinkle
Replies: 11
Views: 1449

Re: Minimum Required Distributions Wrinkle

diehard wrote: Sun Mar 17, 2024 11:31 am Thanks. The purpose would be to delay my RMDs.
Right, the purpose doesn’t serve a business/economic purpose. Rather the purpose is for tax reasons. This is a big no-no.
by alex_686
Sun Mar 17, 2024 11:21 am
Forum: Personal Investments
Topic: Minimum Required Distributions Wrinkle
Replies: 11
Views: 1449

Re: Minimum Required Distributions Wrinkle

Poorly.

What would be the purpose of selling and then buying back the company? If the purpose is for tax reasons then it is invalid from a tax perspective.

What economic risk is involved? Could the value of the company increase over the course of the year? Or have contracts been put in place to minimize risk? If so this would be considered a “sham transaction” with legal consequences.

This seems like a lot of effort, expense, and risk for a minor tax advantage.
by alex_686
Sat Mar 16, 2024 11:35 am
Forum: Personal Finance (Not Investing)
Topic: UTMA Mystery
Replies: 2
Views: 329

Re: UTMA Mystery

Technically no, however it happens all the time. Best practice would have been to transfer over to a new UTMA at the new firm. When I worked in Custody we would follow the instructions from the custodian - it is their responsibility. Leakage, both minor and major, innocent and malicious happens.

Besides checking the state for lost property you don’t have ant real options. Responsibility lies with the custodian. The only real option would be to sue the custodian. Which, as you imply, isn’t a real or good option here.
by alex_686
Fri Mar 15, 2024 9:21 am
Forum: Investing - Theory, News & General
Topic: What is the appeal of Robinhood
Replies: 85
Views: 5900

Re: What is the appeal of Robinhood

They could have been more conservative about the amount of collateral they were prepared to post. You say that the correct price for GameStop was infinite, the weak link was Robinhood, and "if not them, it would have been another broker." But it WAS them. It was Robinhood that was the weak link, not someone else. Not the traditional brokerages. And it was a combination of insufficient collateral, a strategy of attracting the profitable "betting"-oriented clientele, and a UI that intentionally encourages "betting" behavior. Because of their intentional business strategy, they needed more collateral than traditional brokerages, but had less. What do you mean by “ more conservative about the amount of collateral ...
by alex_686
Thu Mar 14, 2024 5:45 pm
Forum: Personal Investments
Topic: Finding a ticket symbol for 85744W226 in my 401k portfolio
Replies: 5
Views: 553

Re: Finding a ticket symbol for 85744W226 in my 401k portfolio

sport wrote: Thu Mar 14, 2024 5:30 pmUse the value for SSFEX and multiply it by 10/85.
Remember to adjust the factor every time the fund pays a dividend.
by alex_686
Thu Mar 14, 2024 5:07 pm
Forum: Personal Investments
Topic: Finding a ticket symbol for 85744W226 in my 401k portfolio
Replies: 5
Views: 553

Re: Finding a ticket symbol for 85744W226 in my 401k portfolio

It is probably a Collective Investment Trust (CIT). Functionally the same as a mutual fund but cheaper to run. The portfolio manager that runs the public fund probably also runs the CIT. They can only be held in retirement plans.

For example, did you know that mutual funds have to pay news services to publish their NAV and other end of day data? As things go, it is a fairly big expense for funds. CITs don't have to pay that expense.
by alex_686
Thu Mar 14, 2024 1:41 pm
Forum: Personal Finance (Not Investing)
Topic: CIT bond fund question
Replies: 9
Views: 455

Re: CIT bond fund question

exodusNH wrote: Thu Mar 14, 2024 1:35 pm I don't know when the CIT price is published for normal human consumption, but if OP is comparing the price at 5 PM to BND, they're not making a proper comparison.
On that, this is one of the reasons why CITs are more expensive than funds. Funds my publish their NAV by 5:30. Must. We had a backup team of accountants in another state ready to strike the NAV on the off chance that the office caught fire due to the backup generator catching fire during a disaster recovery test. CITs can be a bit more relaxed.
by alex_686
Thu Mar 14, 2024 1:23 pm
Forum: Personal Finance (Not Investing)
Topic: CIT bond fund question
Replies: 9
Views: 455

Re: CIT bond fund question

exodusNH wrote: Thu Mar 14, 2024 1:15 pm I mean the accountants estimating NAV at a single point vs the continuous market pricing, plus the timing of the data being published. If they're looking at BND at 4:30 PM and comparing it to the CIT, they may be looking at yesterday's price for the CIT but the market (and maybe after market) pricing of the ETF.
Yes, it is important to know the difference between a market price and a NAV. However, I am going to quibble.

ETFs publish their NAV every 15 minutes plus at the end of the day. The accounting standard is exactly the same.

The market price isn't a accounting standard.
by alex_686
Thu Mar 14, 2024 1:08 pm
Forum: Personal Finance (Not Investing)
Topic: CIT bond fund question
Replies: 9
Views: 455

Re: CIT bond fund question

exodusNH wrote: Thu Mar 14, 2024 1:03 pm I wouldn't compare it to the ETF. Use the mutual fund. That will have a closer accounting methodology.
Out of curiosity, what accounting methodology are you referring to? I can't think of any differences off hand.
by alex_686
Thu Mar 14, 2024 12:55 pm
Forum: Personal Finance (Not Investing)
Topic: CIT bond fund question
Replies: 9
Views: 455

Re: CIT bond fund question

Funds, either mutual funds or CITs, accrue income daily. It is reflected in the fund's NAV. Distributions have nothing to do with cashflows or economics. The sole purpose if for tax reporting. Let us say that a bond fund is worth $105 and had $5 of income in 2023. When I was in fund accounting we would do a distribution at year end. We would distribute a $5 dividend, leaving you with 1.05 shares, each share worth $100, for a total value of $105. No cash was moved, just journal entries. The distribution would trigger a 1099-DIV to be printed. CITs can only exist in retirement plans, retirement plans don't pay trigger income taxes, so no need to do distributions. I am confused. The funds daily/monthly/yearly total return with dividends reinve...
by alex_686
Thu Mar 14, 2024 9:36 am
Forum: Personal Investments
Topic: EFT's vs Mutual funds and taxes
Replies: 11
Views: 932

Re: EFT's vs Mutual funds and taxes

EFTs ( sic) ' are generally better with taxes in the current year right? Debating if I should just start putting all new money into eft's vs the mutual funds. One needs to get drilled into their head that Vanguard index mutual funds and their cognate ETFs have absolutely identical tax efficiency. ETF tax-efficiency is better than non-index actively-managed mutual funds from non-Vanguard financial institutions. Got it? thanks- I thought I have read and heard multiple times that ETF's don't distribute as much of their income/capital gains on a yearly basis, therefore they defer taxes better vs their mutual fund counterparts Vanguard is special and has a patent to prove it. Some of their funds have both a ETF and mutual fund class. Distributi...
by alex_686
Thu Mar 14, 2024 9:30 am
Forum: Personal Investments
Topic: How to use Google 401k for 2-3 fund portfolio
Replies: 63
Views: 6218

Re: Google 401k choices shockingly bad

Ideally Vanguard itself would document the ratio, but documentation doesn't appear to be Vanguard's strong suit. How important is to get exact ratio / emulate VXUS exactly -- I assume it's ok if I'm 5-10% off? No brokerage does. That’s why you come to Bogleheads for answers. Just pick a ratio and stick with it. 80/20, 85/15, 83/17 for S&P 500/Extended Market. Vanguard’s Total International has 24.7% in Emerging Markets, so 25% is good. But it depends on how you define emerging markets. Morningstar considers Taiwan as developed but Vanguard considers it emerging. It’s 4.9% of Total International, so you could use 20% for EM, if using non-Vanguard funds. To extend a bit, there isn't a exact ratio. Vanguard uses CRSP indexes for the US an...
by alex_686
Thu Mar 14, 2024 6:22 am
Forum: Personal Investments
Topic: How to use Google 401k for 2-3 fund portfolio
Replies: 63
Views: 6218

Re: Google 401k choices shockingly bad

madbrain wrote: Thu Mar 14, 2024 2:44 am
rob wrote: Thu Mar 14, 2024 12:49 am The difference between total market & sp&p500 is overblown in these parts. They are "substantially identical" to steal a term from the IRS :D
A term which the IRS has never used in relation to S&P500 and TSM funds ;)

But yes, the performance certainly is very similar.
Not exactly true, but then again few people have had the privilege of having their wash sale procedure audited by them. For context I used to work in fund accounting.
by alex_686
Wed Mar 13, 2024 10:04 pm
Forum: Personal Investments
Topic: How to use Google 401k for 2-3 fund portfolio
Replies: 63
Views: 6218

Re: Google 401k choices shockingly bad

These sounds like Collective Investment Trusts.

CITs are not mutual funds so are not a separate share class. However that is mostly a academic point.

Due to certain regulatory quirks, retirement plans can offer a CIT fund with a slightly lower expense ratio than a public mutual fund.

Nothing to worry about.
by alex_686
Wed Mar 13, 2024 9:43 pm
Forum: Personal Investments
Topic: How is a broker going to make money off me?
Replies: 62
Views: 5781

Re: How is a broker going to make money off me?

billaster wrote: Wed Mar 13, 2024 9:00 pm Of course all bets are off for active funds which may have more than 100% annual turnover. In that case there may be no direct benchmark to compare against and trading costs are largely unknown.
Not exactly. A actively managed ETF with a really high turnover - lets say over 1,000% - could make a solid argument that its trading costs were zero.

Trading costs are borne by the Authorized Participants. And the price it trades at must be the market profit because the trade is setting the market price hence there isn’t any drag due to trading. Who knows what the trading costs would have been if they had used a exchange.

I do like your analogy to dark matter.
by alex_686
Wed Mar 13, 2024 9:21 pm
Forum: Investing - Theory, News & General
Topic: What is the appeal of Robinhood
Replies: 85
Views: 5900

Re: What is the appeal of Robinhood

Popular investing app Robinhood became the focus of the controversy after it decided to freeze trades for GameStop on Jan. 28. https://www.cnet.com/personal-finance/investing/robinhood-backlash-what-you-should-know-about-the-gamestop-stock-controversy/ Let us be fair to Robinhood. The correct price for GameStop was infinite- or a price functionally as high. That isn’t a valid price. As such, the price would continue to go up until the weakest link broke. That weak link was Robinhood. If not them, it would have been another broker. They stopped trading GameStock because by regulation they couldn’t trade it anymore. As a result of Lehman Brother’s collapse brokers need to post collateral in case they go bankrupt in order to minimize counter ...
by alex_686
Wed Mar 13, 2024 8:50 pm
Forum: Personal Finance (Not Investing)
Topic: Excel Forumula Help -cumulative percentage growth
Replies: 13
Views: 1237

Re: Excel Forumula Help -cumulative percentage growth

user9532 wrote: Wed Mar 13, 2024 8:45 pm Assume the beginning dollar value of your investments in 2012 is in cell B1, and
the ending dollar value in 2015 is in B2, then

=(B2-B1)/B1 (format the result for percentage).
XIRR would be more accurate. It requires dates. Inconsistent year ends due to weekend can have a impact, and a surprising big impact. Small errors at the start become huge when doing 10 year returns.
by alex_686
Wed Mar 13, 2024 8:38 pm
Forum: Personal Investments
Topic: How is a broker going to make money off me?
Replies: 62
Views: 5781

Re: How is a broker going to make money off me?

I think it should not be controversial to say that total cost of ownership of fund products could be more transparent than it is. Ok, what specifically would you like to see improved? For context, I think a good 1/2 of the annual statement is junk information. 2 points. We once published a incorrect Statement of Investments. Due to a formatting issue due to a missing end-of-line non-printing character a position dropped. It took 5 months before anyone noticed. I spent the better part of 2 weeks every year with expensive propitiate data to come up with a truly second rate report on related parties. Regulations were put in place after some dot.con IPO scandals to increase trade. So poor output data, highly subjective with lots of holes. Our ...
by alex_686
Wed Mar 13, 2024 7:28 pm
Forum: Personal Investments
Topic: How is a broker going to make money off me?
Replies: 62
Views: 5781

Re: How is a broker going to make money off me?

Mutual fund and ETF providers should publish 12-month trailing expense ratios of all expense cash flows annualized (analogous to an IRR calculation) that include all expenses, not just what the SEC requires in standard expense ratios. How is that different from what they do today? Transaction costs are not included in ER as one example. Imagine going to the grocery, and egg prices displayed do not include the cost of the carton, while the carton costs vary significantly from one product to another. Ok, I think we are on the same page. You want incalculable trading costs to be included. I don’t think subjectivity estimated non-cash expenses which can be gamed should be included because they break fundamental accounting principles. I don’t s...
by alex_686
Wed Mar 13, 2024 5:14 pm
Forum: Investing - Theory, News & General
Topic: What is the appeal of Robinhood
Replies: 85
Views: 5900

Re: What is the appeal of Robinhood

In part they gamify the stock trading experience, lowering newbie anxiety.

In part because their native environment is a phone app and low dollar amounts.

I don’t think that there is anything particularly bad about them.

GameStock was a bit of a aberration. They are fundamentally a mid-sized brokerage firm which is modestly capitalized. They then had a sizable part of client base act as a mob. This caused stress on the firm’s operations. This is akin to people being trampled to death at Wal-mart’s Black Friday sale as everyone mobs the door.
by alex_686
Wed Mar 13, 2024 12:50 pm
Forum: Personal Investments
Topic: How is a broker going to make money off me?
Replies: 62
Views: 5781

Re: How is a broker going to make money off me?

Mutual fund and ETF providers should publish 12-month trailing expense ratios of all expense cash flows annualized (analogous to an IRR calculation) that include all expenses, not just what the SEC requires in standard expense ratios. How is that different from what they do today? I mean, we do have NAV. On that, 3 points. There are very good reasons why accrual, not cash accounting is used. So many loopholes to be exploited. Never annualize IRR for periods of less than 1 year. Very bad math here. Can be manipulated. How would suggest that trading costs be handled? The majority of trading costs are implied. i.e. bid/ask spreads. These can only be estimated. Requiring actual costs to be published would slant trades away from agency trades (...
by alex_686
Tue Mar 12, 2024 8:26 pm
Forum: Personal Investments
Topic: Wells Fargo account labels
Replies: 1
Views: 290

Re: Wells Fargo account labels

jodhpur wrote: Tue Mar 12, 2024 8:12 pm Are they really doing nothing unique in labelling accounts?
No, nothing. And from working in operations I think that is best practrice. Random numbers are best. You don't want to give anyone any hints about the account.
by alex_686
Tue Mar 12, 2024 6:04 pm
Forum: Investing - Theory, News & General
Topic: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
Replies: 34
Views: 3176

Re: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'

For #4, a description of SPX box spreads can be found here . Yes, these are options. The money that I'm "borrowing" is actually proceeds from the sale of the box spread, which will need to be paid back at the expiration date. Since I'm getting proceeds from the buyer of the box spread, it would seem that the broker does not need to come up with any money. In this case, I'm wondering if the broker would have any need or desire to hypothecate my holdings. You are pretty much on track here. The broker doesn't need to borrow money to fund your cash withdraw - the cash is coming from your sales proceeds. This is a liability. The broker needs to handle the risk of this liability in case you can't repay. However that is something differ...
by alex_686
Tue Mar 12, 2024 5:54 pm
Forum: Personal Investments
Topic: How is a broker going to make money off me?
Replies: 62
Views: 5781

Re: How is a broker going to make money off me?

Someone on here will know much more than me about this, but brokerages like Fidelity must make a ton of money off a piece of the market makers' bid-ask. No way they don't get a piece of that. No? Not unless they want to lose their license fast. It is a highly regulated bit of the business with lots of external oversight. Interesting. So how do the market makers get access to brokerage firms' customers? In other words, how do they get, say, Fidelity's business? Can a brokerage firm choose what market maker they patronize? Do they enter into contracts? Who is the market makers' client? The exchange? So you have a exchange. Brokers hook up the exchange. You put in buy order and the exchange matches you with a sell order. Presto! Brokers have ...
by alex_686
Tue Mar 12, 2024 5:38 pm
Forum: Personal Investments
Topic: How is a broker going to make money off me?
Replies: 62
Views: 5781

Re: How is a broker going to make money off me?

Charles Joseph wrote: Tue Mar 12, 2024 4:08 pm Someone on here will know much more than me about this, but brokerages like Fidelity must make a ton of money off a piece of the market makers' bid-ask.

No way they don't get a piece of that. No?
Not unless they want to lose their license fast. It is a highly regulated bit of the business with lots of external oversight.

They are operating as your agent. As such, they represent you.

There is a little more wiggle room if you are engage them on a principal basis, but the average retail client only does that when buying bonds.
by alex_686
Tue Mar 12, 2024 5:36 pm
Forum: Personal Investments
Topic: How is a broker going to make money off me?
Replies: 62
Views: 5781

Re: How is a broker going to make money off me?

I think this is right. Don't have an account at Fidelity and am not an expert so watch for corrections, but... If you have a regular cash account and you don't sign up for securities lending and you buy individual shares in TSLA, they can't lend them out. They have a voluntary program you can sign up for, in which you can agree to let Fidelity lend them out, under supposedly safe conditions, and you get paid for it. I think if you have a margin account part of the deal is that they can lend them out??? In a cash account where you didn't sign up for securities lending, if you buy shares of an ETF or a mutual fund that owns TSLA, they can't lend out the shares of the ETF. But the ETF itself can lend out shares of TSLA or its other holdings t...
by alex_686
Tue Mar 12, 2024 2:28 pm
Forum: Investing - Theory, News & General
Topic: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
Replies: 34
Views: 3176

Re: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'

I kind of tried this A. Even though mutual funds are marginable, you cannot purchase additional units on margin. you need to have cash to buy additional mutual funds B. If you are using the marginable feature of mutual funds, the margin that is made available can only be used to by ETF or stocks. Not mutual funds. So now your account will have etf or stocks that the brokers can lend out. Here is the trick. You can't margin Initial Public Offerings (IPOs) for the first 30 days. It is a old rule dating back from the 1929 crash. It is meant to tame reckless speculation. When you are purchasing mutual fund shares from the fund you are buying brand new shares, hot off of the printing press. i.e., IPO shares. As such, not marginable. As such, yo...
by alex_686
Tue Mar 12, 2024 12:32 pm
Forum: Investing - Theory, News & General
Topic: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
Replies: 34
Views: 3176

Re: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'

Thank you for the details! Very helpful to understand the process. :happy A few clarifications/questions: I could get 'payment in lieu of dividends' from my mutual fund holdings, but the odds are maybe lower compared to ETFs or other higher demand holdings. Hence your statement "you are playing the odds here." Is that right? When I borrow $1m on margin, is it certain that my broker will pledge $1.4m of my assets as collateral to a bank(hypothecation) or could they have some other means of funding the loan? Only if the custodial bank lends out my assets(rehypothecation) will I get 'payment in lieu of dividends.' Is that right? If I were to borrow in the form of short SPX box spreads rather than margin loans, would my broker have a...
by alex_686
Tue Mar 12, 2024 11:40 am
Forum: Investing - Theory, News & General
Topic: Reducing the impact of non-qualified (ordinary) dividends
Replies: 17
Views: 2323

Re: Reducing the impact of non-qualified (ordinary) dividends

I used to work in mutual fund accounting. Portfolio managers specifically do not concern themselves with distributions and tax efficiency. There is the edge case where the fund names calls it out.

As such, all international funds are going to have the same levels of distributions. Doubly so for index funds.

Sure, pay attention to the ex-div date - as much as any other equity fund. International funds are pretty tax efficient considering everything. So don't let the tail wag the dog. i.e., Focus on the big picture of risk and return. Taxes is a bit further down on the list.
by alex_686
Sat Mar 09, 2024 3:40 pm
Forum: Investing - Theory, News & General
Topic: "When" do you sell equities during Retirement?
Replies: 29
Views: 4402

Re: "When" do you sell equities during Retirement?

I get that. But in most scenarios, when markets go up, equities will be over-weighted in your AA. When markets go down, equities will be under-weighted in your AA. So "sell equities when they have been up" will produce the same result as "sell to maintain your AA" You make it sound like the former is a horrible idea, and the later is pure geneious. Kind of odd when they effectively produce the same results. Because engaging in “up” and “down” market language in this context engages people in cognitive and behavioral errors, such as anchoring. You are right, if the market is up then you are over allocated to equities. To extend, if a National Football Conference team wins the Super Bowl equites tend to go up. If the mark...
by alex_686
Sat Mar 09, 2024 2:45 pm
Forum: Investing - Theory, News & General
Topic: "When" do you sell equities during Retirement?
Replies: 29
Views: 4402

Re: "When" do you sell equities during Retirement?

Welcome! This is utter nonsense. I understand where this nonsense is coming from, behavioral and cognitive errors. People hate to sell when things are done. They feel like losers and don’t want to face the emotional pain. And obviously all they have to do is wait for the market to go up again and then they can dodge that pain. Unless the market dips again. Or people think that the market will mean revert. If the market goes down then it must go back up, right? Unless the market dips. This is kind of my day job. The quants with their PhDs tell me the markets don’t mean revert. I can’t come up with a rational model to justify this. Sell or rebalance to get back to your optimal AA. I understand, and largely agree with, what you are saying. Bu...
by alex_686
Fri Mar 08, 2024 7:36 pm
Forum: Personal Investments
Topic: 16 yr old - how can I best take on high risk?
Replies: 65
Views: 5234

Re: 16 yr old - how can I best take on high risk?

HomeStretch wrote: Fri Mar 08, 2024 5:37 pm The thing about outsized investment risk or using margin or options at age 16 is that you may not have the funds to cover any outsized losses. It’s not a good idea. At your age consider having 100% in equity with some cash for non-retirement needs.
On the other hand, fail fast. Learn your lesson young when the cost of failure is low. It is also a great time to undertake smart risky ventures, be that in money, love, travel, or career.
by alex_686
Fri Mar 08, 2024 7:34 pm
Forum: Investing - Theory, News & General
Topic: Teaching wealth building as a new career
Replies: 28
Views: 3586

Re: Teaching wealth building as a new career

Alex_686: Although I do appreciate your feedback, approaching the matter from a CFA’s perspective, as I see it, would be tantamount to attempting to instill in a youngster a love and fascination for astronomy by teaching him/her complex celestial mechanics when simply standing outside as a lunar or solar eclipse reaches totality would have a far greater impact. I want to teach my students how they (or with their parents’ assistance) can, in less than 15 minutes and 20 mouse clicks, own a fully diversified and continually evolving portfolio of stocks ranging from the 500 most successfully run companies in the United States to over 5,000 of the most successfully run companies on the planet. Since I intend to charge for my instruction, by def...
by alex_686
Fri Mar 08, 2024 5:28 pm
Forum: Personal Investments
Topic: 16 yr old - how can I best take on high risk?
Replies: 65
Views: 5234

Re: 16 yr old - how can I best take on high risk?

If looking for high risk, how about 100% Tesla or Nvidia? Those are/were good examples of high Beta stocks. That's a good way to wind up with nothing in 20-30 years. Most companies simply don't last that long. Putting all your money in a single stock for decades is approaching the risk of putting it all on black at a casino . Could literally ruin your financial life. (Average lifespan of a SP500 company around 20 years.) Recommend 100% VT for your investments. Of course what you do for a living and how much you save is far more important, so focus on your education and skillset now, and your health as it is pointless to be rich without health. I know plenty of millionaires who can't do anything fun with their money because their health is ...
by alex_686
Fri Mar 08, 2024 5:09 pm
Forum: Investing - Theory, News & General
Topic: "When" do you sell equities during Retirement?
Replies: 29
Views: 4402

Re: "When" do you sell equities during Retirement?

Welcome!

This is utter nonsense.

I understand where this nonsense is coming from, behavioral and cognitive errors.

People hate to sell when things are done. They feel like losers and don’t want to face the emotional pain. And obviously all they have to do is wait for the market to go up again and then they can dodge that pain. Unless the market dips again.

Or people think that the market will mean revert. If the market goes down then it must go back up, right? Unless the market dips.

This is kind of my day job. The quants with their PhDs tell me the markets don’t mean revert. I can’t come up with a rational model to justify this.

Sell or rebalance to get back to your optimal AA.
by alex_686
Fri Mar 08, 2024 3:54 pm
Forum: Investing - Theory, News & General
Topic: High Yield Term Bond Ladder Crazy or Genius ?
Replies: 52
Views: 5572

Re: High Yield Term Bond Ladder Crazy or Genius ?

philooo wrote: Tue Oct 10, 2023 2:08 pm
Artful Dodger wrote: Tue Oct 10, 2023 12:36 pm According to Standard & Poor’s, junk bond default rates range from 18% for BB-rated securities to more than 50% for CCC/C-rated bonds. This represents data over a range from 1981 – 2018. More recently, the annual average default per rating for a range spanning 2014 – 2018 was: Rating BB – 0.14% Rating B – 1.78% Rating CCC/C – 26.22%

I can't see putting much $ in this space, though I do have a little in ARTFX, which will have a shorter duration than any ladder you would build.

Crazy would be my answer. :P

18% default .. sounds quite outrageaous, are you sure ?
Because then interest rate would have to be above 20% to make any sense

I have a hard time believing it
Factor in the 60%ish recovery rate.
by alex_686
Thu Mar 07, 2024 10:05 pm
Forum: Personal Investments
Topic: 16 yr old - how can I best take on high risk?
Replies: 65
Views: 5234

Re: 16 yr old - how can I best take on high risk?

rkhusky wrote: Thu Mar 07, 2024 10:02 pm If looking for high risk, how about 100% Tesla or Nvidia?
Those are/were good examples of high Beta stocks.
by alex_686
Thu Mar 07, 2024 10:00 pm
Forum: Personal Investments
Topic: 16 yr old - how can I best take on high risk?
Replies: 65
Views: 5234

Re: 16 yr old - how can I best take on high risk?

Deeply skeptical of the math behind this. The higher the risk the higher the volatility, the higher the volatility the higher the volatility drag, the higher volatility drag the lower your geometric returns are. You can actually have high annual returns but low compounding returns.

That being said, high Beta stocks would be a be better choice than small cap value.
by alex_686
Thu Mar 07, 2024 7:22 pm
Forum: Investing - Theory, News & General
Topic: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
Replies: 34
Views: 3176

Re: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'

Funds (both mutual and ETFs) have securities lending programs which they lend out their securities. Since mutual funds cannot be short sold , to whom would the mutual funds be lent and for what purpose? Can you point me to a securities lending program that states that mutual funds can be lent? Not off hand. It has been a few years since I worked the margin desk. I then went to mutual fund accounting. Now I work with collateral in a slightly different way. Mostly Treasuries. So here is the deal. Brokers are not banks. If you want to borrow a $1m dollars overnight your broker’s balance sheet just isn’t set up for that. However banks are. So the broker pledges 1.4 million of your assets as collateral, ships the assets over to the bank, and th...
by alex_686
Thu Mar 07, 2024 4:55 pm
Forum: Investing - Theory, News & General
Topic: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'
Replies: 34
Views: 3176

Re: Margin Accounts - Avoiding 'Payment In Lieu Of Dividends'

Brokers can lend out 140% of your margin balance. So if you borrow $100 they can lend out $140 worth of stuff. If that stuff is lent out over record date, payment in lieu.

Brokers can lend out any assets in your margin account. They will tend to favor in-demand securities. For example, SPY is in much higher demand than VOO so those ETFs get lent out first. There are structural reasons for this, mostly tied to volume and their use in option contracts. Mutual funds tend not to be in demand. However, you are playing the odds here.

Funds (both mutual and ETFs) have securities lending programs which they lend out their securities. This is one of the reasons why dividend distributions are not 100% qualified.
by alex_686
Thu Mar 07, 2024 4:21 pm
Forum: Personal Consumer Issues
Topic: Home phone (copper) solution for parents
Replies: 26
Views: 2492

Re: Home phone (copper) solution for parents

CorradoJr wrote: Thu Mar 07, 2024 3:47 pm Secondly - what is the easiest way nowadays to send a "fax"? Would it be feasible to get them a cheap scanner, create a PDF, and then just send via email? They have iPhones but realistically cannot handle anything other than very basic functions (writing an email, text, web browsing).
Take a picture of the document with the phone, then message or e-mail said picture.

I personally find the quality distressing but that is how Gen Z rolls.
by alex_686
Thu Mar 07, 2024 4:13 pm
Forum: Investing - Theory, News & General
Topic: Argument against people that say stock market is rigged, so don’t invest in it
Replies: 80
Views: 5448

Re: Argument against people that say stock market is rigged, so don’t invest in it

It’s true that bonds can be very complex as well, as are the legalities and mathematics behind them, but consider, from the perspective of an unsophisticated investor like the OP posits: ... I’d say those are some great advantages for someone who disfavors equities but still wants to invest. I would argue that if we are talking about a rigged market than only point #4 matters. And the bond market has much greater issues with distorted markets that are rigged against investors than equities. I am looking at this on a relative scale. As a example, consider Financial Repression. This is when the government pushes Treasury rates below the rate of inflation. Or Quantitative Easing, when the central bank pushes down the yield of long term Treasu...
by alex_686
Thu Mar 07, 2024 3:53 pm
Forum: Personal Investments
Topic: SEP-IRA Contribution Year
Replies: 6
Views: 499

Re: SEP-IRA Contribution Year

If you did 100k in work in 2023, and you are basing your SEP contribution calculatilons on that value, then it would be a 2023 contribution and it would be reflected as such on your 2023 taxes. If you have already filed your 2023 taxes - well, then things get complex. Refile or start thinking how 2024 is going to go. I haven't filed my taxes yet. I did the work spread out over end of 2023 and early 2024. It was a flat rate so I am not sure how it should be broken up? (For example, I cannot really say that I did X hours in 2023 and X hours in 2024). To be clear, it is $10k of work, not $100k. ' 'Thinking out loud, if am able to do either 2023 or 2024, then wouldn't it make sense to report on my 2024 so I get to hold off on paying taxes for ...
by alex_686
Thu Mar 07, 2024 3:44 pm
Forum: Personal Investments
Topic: SEP-IRA Contribution Year
Replies: 6
Views: 499

Re: SEP-IRA Contribution Year

If you did 100k in work in 2023, and you are basing your SEP contribution calculatilons on that value, then it would be a 2023 contribution and it would be reflected as such on your 2023 taxes.

If you have already filed your 2023 taxes - well, then things get complex. Refile or start thinking how 2024 is going to go.
by alex_686
Thu Mar 07, 2024 3:35 pm
Forum: Investing - Theory, News & General
Topic: Argument against people that say stock market is rigged, so don’t invest in it
Replies: 80
Views: 5448

Re: Argument against people that say stock market is rigged, so don’t invest in it

AnnetteLouisan wrote: Thu Mar 07, 2024 3:16 pm
alex_686 wrote: Thu Mar 07, 2024 2:59 pm
AnnetteLouisan wrote: Thu Mar 07, 2024 2:04 pm How does he feel about the bond market? Maybe he can do CDs and treasuries.
The CD and Treasury market is about as rigged as the equity market. So....
But it’s easier to understand.
Are you sure? My bond books are heavier and is much more computationally heavier than my equity books. :D

I both do and don't agree with what you are saying. It certainly seems more straightforward and intuitive than equities. Personally, I wouldn't push this angle too hard. Part of my job is training finance majors (most from fancy private colleges, some with masters in mathematics) how CDs and Treasuries and more exotic bond like things work.
by alex_686
Thu Mar 07, 2024 2:59 pm
Forum: Investing - Theory, News & General
Topic: Argument against people that say stock market is rigged, so don’t invest in it
Replies: 80
Views: 5448

Re: Argument against people that say stock market is rigged, so don’t invest in it

AnnetteLouisan wrote: Thu Mar 07, 2024 2:04 pm How does he feel about the bond market? Maybe he can do CDs and treasuries.
The CD and Treasury market is about as rigged as the equity market. So....
by alex_686
Thu Mar 07, 2024 1:57 pm
Forum: Investing - Theory, News & General
Topic: Argument against people that say stock market is rigged, so don’t invest in it
Replies: 80
Views: 5448

Re: Argument against people that say stock market is rigged, so don’t invest in it

My favorite is "The stock market is a casino." It sure is, but you're the house, not the mark. And occasionally, the house has a bad night. It’s like poker. The fund companies rake the pot. The brokers rake the pot. But there is still a pot. And new money comes to the table. First, you are not the house. Second, lets us assume that the market is rigged but the casinos play fair. If you play the rigged market by holding equities you gain about 7% to 10% a year. You are playing a positive sum game. Poker is a zero sum game. Everyone bring $X amount of money to the table, you play poker, the money gets redistributed, so when you leave the table some people have more, others less. But it still averages out to $X per person. Expect yo...
by alex_686
Thu Mar 07, 2024 1:47 pm
Forum: Personal Finance (Not Investing)
Topic: Pay Cash or Asset Backed Mortgage at 7.75% for a $1.5M home
Replies: 24
Views: 2218

Re: Pay Cash or Asset Backed Mortgage at 7.75% for a $1.5M home

A mortgage, or really any loan, is a negative bond in your asset allocation. As such, there are a couple of different ways to think about this. With a clean sheet of paper write down your Investment Policy Statement. This would included your goals (which would include liquidity), risk tolerances, and market expectations (for both stocks and bonds). This will drive your asset allocation. What is it? How would a negative 1.5m bond look? Next, think about the relationship between a high-risk high-return investment (like stocks, see your market expectations above) verse a zero risk investment (-7.75% bond). Mathematically this is a pretty hard sell. The medium forecasted return is in the 7% range. Your expected returns for stocks would have to ...
by alex_686
Thu Mar 07, 2024 12:47 pm
Forum: Personal Investments
Topic: How to determine fund quality?
Replies: 15
Views: 776

Re: How to determine fund quality?

I find it fascinating that the International Index Fund has outperformed, in every reported time period, the MSCI EAFE Index that it's tracking, according to its Factsheet . I wonder how BNY Mellon does that. :D Tracking error. The difference between the returns on a spreadsheet verse the quality of execution in real life. Remember, tracking error could either be negative or positive. Maybe the fund uses statistical replication for the smaller positions and got lucky. Securities lending. Tax withholding. MSCI assumes full tax withholding. Funds may be able to claim some of that back. FX trading. MSCI assumes a naive FX trading strategy. On the plus side a naive FX trading strategy is dead easy to run and objective - which makes it great wh...