Bogleheads.org

More specifically Bernstein means reducing risk in stocks. Other sources of risk take more nuanced handling. How risky how much in stocks actually is would also be as nuanced discussion, but I think there is wisdom in the point for some investors. Yeah reducing risk in stocks is easy but maintaining purchasing power while doing so is not. The declining glidepath appears to fit the bill, although "stop playing" sounds more abrupt than the slow glidepath over years and decades. I've never seen how you get around the historical result that a 60/40 stock/bond portfolio has a 96.6% success rate at 4% for 30 years (using this tool as an example: https://engaging-data.com/visualizing-4-rule/ ) but the result at 100% bonds is a 47.9% suc...

Since you said Roth, it is absolutely of no meaning except you probably want to make sure dividends are reinvested and not inadvertently dumped into a settlement fund that gets bigger and bigger.

In taxable accounts some people find it convenient to use the dividend as one method for shifting money out of the stock holding to something else, such as spending it. For such a person an annual dividend may or may not be preferred. That does not mean getting dividend is anything other than a transaction that may or may not be convenient.

I store cash at a suboptimal rate not because I am old, which I am, and can't get around, which I can because I can use a computer, but because the whole issue is not important enough to waste time on or to add more accounts to keep in the data base. There are most likely investors for whom the actual financial consequences are more meaningful, or at least those investors think the consequences are meaningful. Your example above would evidently qualify as a case where serious questions would be asked about the use of that money. Perception or misperception of risk would seem to be the dominating factor. The physical branch does grant some additional security. If I received a large check or if I need a cashier check in a hurry. If my accoun...

To be more direct, buyers of bonds, primary or secondary, bid a price in a market that obtains a given yield. What sets the yield that all the buyers and sellers arrive at, I have no idea. Said yield is hugely affected by the duration of the bond and by faith in the credit of the borrower. It originates in the prospect of future financial gain in lending or borrowing money.

1) is there any evidence showing benefit to diversifying the bond portion into short , longs etc My opinion is that by far the larger part of portfolio design effects are washed out by the vast uncertainty and unpredictability of investment results. You could say there are benefits but that you will never actually see them. A good start is to consider the problem of how much difference the stock/bond allocation makes. If choosing a variation of 10% in that split does not produce a meaningful difference, which it doesn't, then what would you expect from shifting 10% from intermediate to short bonds? I am convinced that people exaggerate how much their results are a result of their own design, cleverness, and intelligence and how much is a r...

I keep about $2k as spending buffer at suboptimal rate. My pay checks get deposited there and it immediately get a fixed amount transferred to a high savings account and other investments. The rest get earmark for bills. I find that some older population store money in subpar accounts because they don’t trust banks without a physical branch, but as they age their ability to get around is reduced, restricting the branch they can visit. This can come in a high cost. The storage of money at subpar rates cost my mom about $800 a month in interest. After much argument, I manage to reduce the loss by convincing her to transfer 2/3 to high yield account but she won’t do more even at a loss of profit. The reason is that she feel it is unsafe. My v...

Goodman60 wrote: ↑Tue Mar 28, 2023 5:30 am I think it means to reduce risk as much as possible.

More specifically Bernstein means reducing risk in stocks. Other sources of risk take more nuanced handling. How risky how much in stocks actually is would also be as nuanced discussion, but I think there is wisdom in the point for some investors.

The best approach to this question, which comes from an expression of Bill Bernstein, is to go read Bernstein, delete out any reference to playing games, and then read the rest of what he actually has to say. The latter is reasonable material, well explained, and worth thinking about. That does not mean one agrees in detail with everything he says.

The whole situation might be a reminder that investment by aphorism may not be the best approach to it, though probably some people like to think that way.

You can see here that the yield curve can change a lot regarding the relationship between shorter and longer rates. It is very difficult to think about what the Fed has done/is doing and how bond prices across the durations will move:

https://stockcharts.com/freecharts/yieldcurve.php

You can drag the red cursor to explore history. Note a dominant feature right now is the inverted curve meaning short rates are as high or higher than long rates.

Why not just use https://sites.google.com/view/incometaxspreadsheet/home ? It looks much more complicated than it is. If you pull in the form for 2023, you can just populate it with info from 2022 returns to get a quick estimate on what your taxes will be. All that is needed after that is to modify the w-2 info, the 1099 info, and any other user specific forms. You could then hide any tabs that don't pertain to you to make it look less forbidding. This spreadsheet has been very accurate in past years. I don't know why anyone would want to create their own. Just my opinion. I don't recall that being available back in 2002, but maybe it was and I missed it. Site has versions as far back as 1996 tax return. Cool Should be useful for some.

thor111 wrote: ↑Sun Mar 26, 2023 6:17 pm Why not just use https://sites.google.com/view/incometaxspreadsheet/home ? It looks much more complicated than it is. If you pull in the form for 2023, you can just populate it with info from 2022 returns to get a quick estimate on what your taxes will be. All that is needed after that is to modify the w-2 info, the 1099 info, and any other user specific forms. You could then hide any tabs that don't pertain to you to make it look less forbidding. This spreadsheet has been very accurate in past years. I don't know why anyone would want to create their own. Just my opinion.

I don't recall that being available back in 2002, but maybe it was and I missed it.

Percentage-based strategies are withdrawal rates from a probability-based approach. An asset allocation that is probability-based. Some call it the Farmer’s Almanac approach to investing since it relies on historical data to predict the future. Some people are comfortable dying with a large sum of unspent money and some wish to enjoy more of the fruits of their delayed-gratification strategy. Living in constant fear of running out of money during roller coaster gyrations of the market takes a toll on many investors. Some percentage-expressed strategies are a probability-based approach. The 4% SWR stuff is a huge misnomer because it only uses a percentage when you retire, but adjusts CPI thereafter. When i hear the term percentage-based str...

The last person I met who avoided dentists for ten years now also avoids dentists because he doesn't have any teeth. He does have a prosthodentist, who, fortunately, is very good. But it isn't cheap.

I have set up a spreadsheet or two that include some estimation of tax costs. My spreadsheets don't have one simple formula in one cell but rather go through the various steps of how a tax return is filled out and the results computed. It is not all that horrendous but it does take some attention to detail. My spreadsheet work is for me and would not function as an example for someone else.

hudson wrote: ↑Sun Mar 26, 2023 8:30 am Whatever works for you is good technique.
Does everything have to be optimal?
Since I want to get as much rent as possible on my money, I only move it to my checking account when needed.

That would be an example of managing asset allocation to stay in higher returning assets as much as possible. The checking account is an investment asset that has poor return.

I include checking account cash as an asset. Therefore withdrawals happen only when there is a debit against the account, or directly against some other account for some reason.* Consequently I make withdrawals more or less on a daily basis. Everything else is just asset allocation. I keep maybe 1%-2% in cash so just exactly when that asset gets a little larger or a little smaller is of no consequence.

*The biggest withdrawal most years that is not via the checking account is taking tax withholding on my 401k RMD to pay the total tax bill for the year. That happens in December because you do have to take the RMD and you do need to make the tax payment.

This business of what becomes of the money paid out in interest along the way causes yield and return to be two slightly different things. You can compute yield exactly from the start but return on this investment is a little ambiguous as it is on any investment with cash flows along the way.

It is in taxable accounts that changing things around can have costs due to realizing capital gains and paying tax on those. If/when you get to the point of holding significant assets in a taxable account you would want to take some care in what you buy there.

Thanks to all who responded. Im lucky enough (not actually luck be that's another conversation) to be able to WD approx 2.5% of my portfolio now but don't want to be hamstrung by not being able to increase in the future. What I think Im learning from this is that it's probably a bigger concern if I was actually WDing a higher % (ie 4%) and then I know I can't increase it and less of an issue when using a low WD% I would not even say that. 4% comes about as being a fail-safe worst case. In reality if you follow that plan most of the outcomes leave you dying wealthy. 2.5% leaves you dying fabulously wealthy. A little way into retirement you will see whether or not you are actually at a worst case. A person starting in 1982 could have safely ...

Note that something resembling an actual planner distinct from an academic study would allow one to insert options for increasing or decreasing spending, increasing or decreasing cash income, or add or removing lump sums from the portfolio. Even a simple tool like FireCalc has those options on the "Other Income/Spending" tab and the "Portfolio Changes" tab. A typical example concerning other income would be starting Social Security some years after retirement. Note Safe Withdrawal Rate is not a plan but a set of studies that help one to understand how things work out in the balance between spending and a portfolio keeping up with the withdrawals. A real retirement would hardly want to be hamstrung by following a rigid wi...

All of my cash is at low rates. There is so little of it that the rate on it is not relevant.

Issues of what yield is aside, yes it is roughly true that you will be paid out a dividend of about that amount of money. You could go to Portfolio Visualizer and look at the "income" over the years for a fixed dollar amount invested. For $10,000 invested in 2012 and taken out as a withdrawal the "income" has ranged from $312/year to $481/year. The CAGR over that period with dividends removed has been 2.49% and with dividends reinvested 5.50%. The 2022 income was $251 starting with a $10k investment for a ratio of 2.51%. Of course that $10k with the dividends withdrawn had fallen to $8136 by year end. On that price the ratio is 3.1%. Honestly, I would encourage thinking of the value of an investment being best tabulated ...

Personally I view this as a foolish worry. Some days the markets go up 2%, some days go down, and a lot in between. If I had to guess I'd say over the last year the market has had more down days than up days although normally it is the other way. Are you talking millions where 1% would be $10K per million? Or 100K where 1% is $1K? This is one of the things where people remember missing out on profits and forgetting about losses. According to this one web site for the SP500 - https://einvestingforbeginners.com/stock-market-days-vs-percentage/ The percentage of stock market days up from ‘96 – 2016 was 53.3%. The percentage of stock market days down was 46.7%. Updating that further, the percentage of stock market days up (from 2016 – 2021) wa...

I have been looking at Wellington and Wellesley for a few years. If one considers distributions Wellington pays higher than Wells but Welles is an income fund. What am I not understanding? are you sure about that? Wellington yield is 2.66% (sec yield, source: https://investor.vanguard.com/investment-products/mutual-funds/profile/vwenx#price) Wellesley yield is 3.28% (source: https://advisors.vanguard.com/investments/products/vwiax/vanguard-wellesley-income-fund-admiral-shares#overview) also dividends over 2022 were: Wellington: $1.22454/share Wellesley: $1.924/share it's possible that dividends for Wellesley were lower than Wellington years ago when interest rates on bonds were 1% or less prior to last year when they went from 1% to 4% ove...

Your post prompted me to look at the numbers. In 2022 Wellington (VWENX) delivered $5.489825 per share to investors. Vanguard balanced index fund (VBIAX) delivered $1.121543 per share to investors Except that per-share income isn't relevant unless the share prices are equal. So what was the difference in dividend yield, per dollar (well, maybe per $50k dollars for example, since that's the Wellington share-class minimum)? The data on that is that 12/31/22 VWENX sold at $66.33. The 2022 dividends were $1.553/share and there was a cap gains distribution of $3.937. VBIAX sold at $39.65 on 12/31/22 with dividends of $0.765 and a capital gains distribution of $0.357. So the dividend yield based on year end price for VWENX was 2.34% Based on yea...

Your post prompted me to look at the numbers. In 2022 Wellington (VWENX) delivered $5.489825 per share to investors. Vanguard balanced index fund (VBIAX) delivered $1.121543 per share to investors Except that per-share income isn't relevant unless the share prices are equal. So what was the difference in dividend yield, per dollar (well, maybe per $50k dollars for example, since that's the Wellington share-class minimum)? The data on that is that 12/31/22 VWENX sold at $66.33. The 2022 dividends were $1.553/share and there was a cap gains distribution of $3.937. VBIAX sold at $39.65 on 12/31/22 with dividends of $0.765 and a capital gains distribution of $0.357. So the dividend yield based on year end price for VWENX was 2.34% Based on yea...

"A bond fund manager recently related to me his difficulty in figuring out the role of TIPS in his portfolios. After fumbling for a reply, I realized that he was right: like Social Security, they don’t occupy a formal slot in most folks’ asset allocation. Rather, they’re an excellent, though still imperfect, supplement to Social Security. In the same way that most retirees don’t capitalize their monthly government checks into the bond component of their portfolios, TIPS should be kept mentally separate from the policy asset allocation as well." Yep. That's the paragraph I've sort of zoned in on as well. As a soon to be retiree I 100% agree with "...they're an excellent, though still imperfect, supplement to Social Security&q...

Is this a reasonable plan? What am I overlooking? Thanks. I think it might frustrate you to be selling stocks at a time when they're down 30% but bonds are up 10%. The recent correlation in performance won't always be the case. Separating the asset classes would let you choose what you want to sell. Of course, "up" and "down" is relative and nobody really knows what up or down should be compared to. There have been some discussion of what's "income" in this thread, and my take is that dividends from the fund are income, but capital gains aren't. The IRS has its own view of course but when you compare other fund yields to Wellington, I'd suggest only looking at dividends. I could add a couple of definitional co...

In my IRA I have $445K in bond funds VWETX (long term investment grade) and VUSUX (long term treasuries) that I am thinking about exchanging for VWENX Wellington to generate more income (e.g. in 2022 VWENX would have generated $72K in dividends and cap gain distributions vs the $17K in dividends from VUSUX+VWETX). Is this a reasonable plan? What am I overlooking? Thanks. The idea that obtaining income by taking withdrawals from a set of investments requires that those investments deliver those withdrawals in the form of dividends and capital gains distributions is a fundamental misunderstanding of how investing works. It is reasonable to consider what the balance of stocks and bonds in your portfolio might be and what the duration of your ...

It remains a mystery why these are not labeled TIIS Treasury Inflation Indexed Securities. Reading labels on potential investments one might purchase is bad investing because it leads to bad thinking, whether it is the "protected" in TIPS or the "retirement" and date in a target retirement fund, or the "growth" in a growth fund or "value" in a value fund.

The TIPS instrument does what it does given whatever circumstances an investor is in. "Protected" is not a property of investments anymore than "safe" and a lot of other nonsense.

We got 4 new tires after having the old ones for a few years. The wear on the old tires indicated a little bit of an alignment issue (not terrible though). So after getting the 4 new tires, we obviously want to get the wheels aligned. Why is it that when we take our car to get our wheels aligned for $89, they always tell us that we need an additional $500-$1,200 in repairs? Is there a way to get your wheels aligned without getting ripped off ? If you can find a local competent mechanic that are the kind that don't rip people off then you go there for a second opinion. Such places do exist but most likely are not equipped to do alignments. It is entirely possible there are suspension repairs needed. Those may even be the reason for uneven t...

Just be aware that in a handful of states IRAs do not have the non-bankruptcy liability protection a 401k has.

This is from an interview with Bill Bernstein: Bernstein recommends a rule of thumb, based on annuity payouts and spending patterns late in life, that you should have 20-25 times your residual living expenses (after pensions/Social Security) invested solely in safe assets. No stocks at all. This should be in TIPS, SPIAs, and short-term bonds. If you have more than that, that's your “risk portfolio” …: Source: https://www.whitecoatinvestor.com/bernstein-says-stop-when-you-win-the-game/ I do think we can get caught up in semantics. Are cash equivalents the same thing as safe assets? If a short-term bond fund’s NAV has not varied by more than 2% over 30 years, is that a cash equivalent? Or are cash equivalents only assets that can be sold at ...

Back in the old days Financial Engines was used as a planner for investing to build a nest egg for retirement. It came free with my 401k. The objective and the outcome was presented in the form of annuitization (which hypothetically I would buy at retirement and was a estimate of where my 401k stood). They did not run a planner that would model retirement spending and prospects of success. The idea goes back to a standard view in finance that the obviously superior way to fund retirement is by holding an annuitized income stream. The reluctance of people to annuitize has been known as the annuity puzzle or the annuity paradox. I am not sure what inspired the near universal exploration of draw down models since the early nineties with Bengen...

Do you consider TIPs held to maturity a CASH Equivalent? As a generalization of course not because you are hostage to timing. Also the terms and conditions regarding the return offered by TIPS are about as opposite to cash as you can get in fixed income. If you really need cash TIPS would be a terrible substitute. In the context of Bernstein's advice TIPS held to maturity are far superior to cash because they are inflation indexed and you may be fortunate enough to obtain them with a positive real return guaranteed at maturity. I would not confuse the concept of an inflation indexed portfolio income stream with holding cash assets. The next closest thing to holding TIPS to maturity is an actual pension such as Social Security but SS has th...

Circe wrote: ↑Mon Mar 20, 2023 7:31 pm The only ones I liked were the RAV and the Outback. I had a 2006 Forester that was great and a 2016 Forester that I did not like because of how it handled. I now have an Outback. The Subaru batteries are bad (you get 2 free replacements!) but otherwise a pretty good car. Check out owners' forum where you can get questions answered.

A person may do better replacing those batteries with an AGM type from one of the battery companies. I use an Interstate MTZ-34 in the Outback. It does fit even though they say officially it does not fit.

Let’s just concentrate on my VWIAX situation. If the market value of my holdings in VWIAX is $1,000,000 January 1 and I receive $58,000 in dividends during 2023 that $58,000 will not contribute a single dollar of additional growth to that $1,000,000 no matter the stock price into the future, correct or am I missing something? If on Jan. 1 your VWIAX is valued at $1m, the value of the fund should grow during the year to $1.058m to accommodate the dividends that have been accrued from the stocks and bonds it owns. When the dividends are paid by WI, your fund's value would decrease back to $1.0m. If you reinvested those dividends back into WI, its value goes back up to $1.058m. If you do not reinvest them, you have WI worth $1.0m and cash wor...

So now I am beyond confused. I thought it was settled that dividends do not provide any real benefit. This information turns all that on its head. I am now being told if the fund pays $58,000 in dividends my holdings increase by $58,000. Both scenarios cannot be correct. What is settled is that sorting funds on the dividend yield does not predict a greater return. Some investments deliver a larger part of the return in dividends and less in share price increases that are in addition to dividends. Some investments can deliver the same return in capital appreciation and not in dividend. In the example above there was no capital appreciation after dividends and all the return was in dividends, obviously of great value. A different investment ...

So now I am beyond confused. I thought it was settled that dividends do not provide any real benefit. This information turns all that on its head. I am now being told if the fund pays $58,000 in dividends my holdings increase by $58,000. Both scenarios cannot be correct. What is settled is that sorting funds on the dividend yield does not predict a greater return. Some investments deliver a larger part of the return in dividends and less in share price increases that are in addition to dividends. Some investments can deliver the same return in capital appreciation and not in dividend. In the example above there was no capital appreciation after dividends and all the return was in dividends, obviously of great value. A different investment ...

FYI my investing is completely covered by VTI (total stock market US), VXUS (international stock index), SWRSX (intermediate TIPS fund), and the cash in the checking account. I use the Schwab TIPS fund because that account is in a Schwab brokerage link in the 401k and it is lower cost than the Vanguard fund.

The biggest issue that one has to weigh when considering whether to enter into an Advisory relationship or to stay in an Advisory relationship is the ongoing fees. I work in tax preparation and as I look at client 1099 statements from their brokerage, I am amazed at the fees that people pay. It really adds up, particularly when the portfolio balances get larger and larger. I actually am pro-Advisor and still believe that most people would benefit from an Advisory relationship. However, the ongoing fees can be pretty high and over time it is a big drag on returns. The question is whether the benefits received are worth the costs paid. You are paying $20,000 to $22,000 a year and that is a lot. I think you said you were paying 1.1% a year in...

Prudence may warrant keeping 2 or 3 years of living expenses liquid and readily accessible in an income producing account. In fairness "prudence" in terms of 2 or 3 years in cash in an "income producing account" has only been heard of frequently around here recently, really during the last year or so. An emergency fund as always been popular, but more in the sub-year range, even for retirees. And of course in the CFG we had all kinds of discussions about low-percentages of equities, but it was almost always bonds that were on the other side of that. If we see a few more consecutive years like 2022 your post would probably read 5 or 6 years of cash-like investments, and I'm not being critical at all, I'm just saying that...

Comparisons of Vanguard's bond funds VBTLX (0.5%) total bond vs VBILX(0.7%) have come up before. Currently, they both have the same Yield to Maturity but the VBIRX has a shorter duration. This seems to make the VBIRX a better deal. Your thoughts? Is there any guidance on how to split one's bond portion of a portfolio between the two? How did this question come up? In general the choices in bond funds lie on a line of credit risk (Treasuries zero to junk bonds high), duration (short, intermediate, and long), and nominal vs inflation indexed (TIPS). Trying to choose within the same rough credit, duration, and inflation risk is tilting at windmills. Probably picking the right duration (first), inflation index (second), and credit risk (third)...

No way would I hold an array of funds like that. VPAS should not do that to someone either. This does not mean the ultimate distribution of assets has anything wrong with it other than pointless complexity. Therefore you could continue to pay 0.3% and stay there if for some reason you like letting someone else run things. The one dilemma is with taxable investing. If you stay with those investments then over time they may accrue sufficient unrealized gains that it is expensive in tax costs to sell and change things around. You may be able to do that now at minimum costs or even harvesting tax losses to your advantage. How confident you are in understanding what to hold and how to hold it and to continue to manage on your own is for you to e...

Thanks, Dave. So the APY assumes compound interest but if interest is paid outside of the CD before maturity the actual APY will be less than stated. It sounded like that was the case but I wasn't sure how it worked from a calculation standpoint. The result depends on what you do with the interest payments between payout and the end of the CD term. If you spend them, then the accounting could be that they are withdrawals. You could reinvest them in something and consider the asset to be the CD plus whatever holdings the interest is then invested in. In any case there is a difference between yield on a fixed income investment and your ultimate return on the money you invested when the process is complicated by cash flows during the term of ...

Markr867 wrote: ↑Sun Mar 19, 2023 8:40 am
Absolutely understand, and I hope that they too have 15-20 more years (or more) to recoup their losses and make money on their investment. The fact that I inserted myself at all was because I felt that they were being taken advantage of by this neighbor and I didn't want to see them being swindled.

I think I would not use the language "recoup their losses." It is the nature of the beast that value of investment assets rises and falls yo unpredictable degrees at unpredictable times. You just live with the rise and fall. The enterprise is worthwhile because there is an underlying upward trend to be expected. Where that trend ends up is an uncertain proposition except that the expectation is that the average of it is good.

VASIX is appropriate for a conservative investment for people looking at a 15-25 year time line, which a person at age 70 probably would be looking forward to. An investment like that is not appropriate for a 2-5 year timeline. Put differently, you don't judge an investment like that by looking at performance over a timeline of only a few years. But the real question is what your parents want and expect from their investment. "Getting more return" is not the only objective in investing. In this case they may have understood the stocks but you were all unprepared for results in bonds, which in all fairness have been extreme. Bonds do by their intrinsic nature recover, but not so quickly as in a couple of years. And then the future ...

All assets you own are by definition part of your portfolio. You are entitled to your own opinions but not your own facts, i.e. you're not entitled to your own definition of words. You get to choose what's in and out. For example, some folks might set aside 300K house DP outside of portfolio. Nothing wrong with that, as they don't want to rebalance their house DP. Of course you can consider the management and results of any aggregation you want to think about. As you say there can be good reasons to look at one set of assets in a different context from another set of assets. It might be counterproductive to do that arbitrarily without attention to why you are managing that way. One of the peculiarities of my definition is that I count the ...

And yes, yes, yes, I understand sequence of return risks. I had them. 50% drop right after retiring. That is an interesting example. 2007 had one of the worst two year starts exceeded only by 1973 and 1930. Yet by 10 years in 2007 was above the worst 25% We have yet to see what is next for that retirement year. It is true that if one had skipped up to 2008, then in the first ten years one would be above the 75th percentile in outcome, even though 2008 had one of the worst first years. One should realize though, that this is not a matter of choosing to delay retirement to a better year. A person picking 2009 instead of 2007 will now have seen the money he has to retire on destroyed as much by 2008-2009 whether retired or not. It does say th...

If you're retired, which safe withdrawal rate (SWR) has allowed you actually to grow your nest egg, inflation-adjusted? This response will make me sound like a simpleton compared to the entries above, but all I did was review my spending for the 2 years prior to retirement to get a sense of what I'd need. Then, I set all the dividends in my taxable portfolio to go to my settlement fund. I've been using that money ever since. Every once in a blue moon I have to sell something, but it's rare. This has allowed my tax-deferred and Roth accounts to continue to grow. Even my taxable account has grown, but at a slower rate than it would have, had I not been taking the dividends. Regards, On the contrary there is a difference between models for di...