Earnings yield + inflation is my estimate, but make sure you include the entire world in that calculation, not just the S&P.
If one half of the world has an earnings yield of 4% and the other half has an earnings yield of 8%, that doesn't mean the second half has a better expected forward return. The market is pricing them differently because of different forward earnings. So I would say that the expected return for BOTH of them is their average, 6% plus inflation.
Another good simple forward return estimate (it looks pretty solid in the backtest) is something another poster mentioned in a different topic - Treasury 10 year yield plus 4%.
Search found 1949 matches
- Mon Oct 16, 2023 8:18 am
- Forum: Investing - Theory, News & General
- Topic: earnings yield plus inflation - most straight forward stock return estimate?
- Replies: 90
- Views: 7617
- Fri Oct 13, 2023 7:07 am
- Forum: Personal Investments
- Topic: To sell or to hold positions that are showing loss? Revised
- Replies: 44
- Views: 4054
Re: To sell or to hold positions that are showing loss?
Just for fun, here is a portfolio visualizer of how your holdings would perform, if they were held since all the funds you're in became available. Unfortunately FNILX didn't come out until recently, so it only goes back to 2019: https://www.portfoliovisualizer.com/bac ... 8BxSI2QfIN
I encourage you to play around with portfolio visualizer to get more of a perspective.
Here is one comparing different types of assets going back longer: Domestic and international stocks (VTSMX, VGTSX), conservative bonds (VBMFX), and cash: https://www.portfoliovisualizer.com/bac ... lrOgt5OYIm
I encourage you to play around with portfolio visualizer to get more of a perspective.
Here is one comparing different types of assets going back longer: Domestic and international stocks (VTSMX, VGTSX), conservative bonds (VBMFX), and cash: https://www.portfoliovisualizer.com/bac ... lrOgt5OYIm
- Thu Oct 12, 2023 11:21 am
- Forum: Investing - Theory, News & General
- Topic: Is the coming pain really "priced in"?
- Replies: 206
- Views: 25687
Re: Is the coming pain really "priced in"?
I think the market did a good job pricing the 2020 crisis and a much worse job pricing in the 2022 yield hikes
- Thu Oct 12, 2023 8:31 am
- Forum: Investing - Theory, News & General
- Topic: How do we calculate the real return on TIPS, and why is it currently so high?
- Replies: 21
- Views: 3900
Re: How do we calculate the real return on TIPS, and why is it currently so high?
Shocking that there was a peak around 2000. What a great time to get into TIPS..
- Thu Oct 12, 2023 7:32 am
- Forum: Investing - Theory, News & General
- Topic: How do we calculate the real return on TIPS, and why is it currently so high?
- Replies: 21
- Views: 3900
Re: How do we calculate the real return on TIPS, and why is it currently so high?
TIPS works like every other bond in the world, except the coupon also gives you whatever inflation is. So you calculate its return the same way you do any bond in the world, except that the return is in real terms instead of nominal terms.
That leads to the same weirdness in the secondary market as any bond, where the "expected annual return" is different than the actual coupon, because a chunk of the return (or loss) is from the difference between the price you bought it for and the large payout at the end - which will be reflected in a changing NAV as you get closer to maturity.
That leads to the same weirdness in the secondary market as any bond, where the "expected annual return" is different than the actual coupon, because a chunk of the return (or loss) is from the difference between the price you bought it for and the large payout at the end - which will be reflected in a changing NAV as you get closer to maturity.
- Tue Oct 10, 2023 12:33 pm
- Forum: Personal Finance (Not Investing)
- Topic: Selling son's house if he abandons it
- Replies: 36
- Views: 7175
Re: Selling son's house if he abandons it
That is not how it works.RationalWalk wrote: ↑Tue Oct 10, 2023 12:10 pm Some of it is mine, as I've been helping with mortgage payments
You have to be crystal clear about the facts of the situation - whether said facts are your "main concern" or not - BEFORE any help at all can start happening.
- Tue Oct 10, 2023 11:56 am
- Forum: Personal Finance (Not Investing)
- Topic: Selling son's house if he abandons it
- Replies: 36
- Views: 7175
Re: Selling son's house if he abandons it
If it's his house, how would you be the one stuck with foreclosure?
- Tue Oct 10, 2023 9:00 am
- Forum: Personal Investments
- Topic: Advice on preparing to FIRE in next 1-2 years
- Replies: 28
- Views: 5930
Re: Advice on preparing to FIRE in next 1-2 years
I'm planning to quit in early-mid 40s with 1.5 million. I feel comfortable with that and I'm not even planning to ex-pat! I think OP you will be fine.
- Mon Oct 09, 2023 12:57 pm
- Forum: Investing - Theory, News & General
- Topic: Barron's: Stock investors shoud not accept returns less than 9.2%
- Replies: 43
- Views: 5607
Re: Barron's: Stock investors shoud not accept returns less than 9.2%
I love the idea that 4%+riskfree is a predictor. Exciting if true, right nowabc132 wrote: ↑Mon Oct 09, 2023 12:19 pm People tend to pick whatever conflicting indicator they want to fit their own narrative.
From Jan 1972-present:
CAPE 10
Average CAPE10 1972-present is 21.4. Use 1/CAPE 10 we would expect 4.67% real. With 3.97% inflation we get 8.64% nominal.
Predicted: 4.67% real
Actual: 6.35% real
4% + risk free
Using the 10 year treasury as risk-free
Predicted: 6.26% real
Actual: 6.35% real
Is there a chart anywhere of returns for the 10 year treasury vs. the next 10 years of stock returns annualized?
- Mon Oct 09, 2023 11:10 am
- Forum: Investing - Theory, News & General
- Topic: Barron's: Stock investors shoud not accept returns less than 9.2%
- Replies: 43
- Views: 5607
Re: Barron's: Stock investors shoud not accept returns less than 9.2%
4.5% is quite a premium.
S&P earnings yield is only something like 4.12%. By default, shouldn't one assume that will be the forward real returns? So even with 3% inflation, that's only 7.12%, well short of what Barron's wants.
Maybe the market is pricing in some strong earnings growth. Or maybe the accepted equity risk premium is way lower.
S&P earnings yield is only something like 4.12%. By default, shouldn't one assume that will be the forward real returns? So even with 3% inflation, that's only 7.12%, well short of what Barron's wants.
Maybe the market is pricing in some strong earnings growth. Or maybe the accepted equity risk premium is way lower.
- Mon Oct 09, 2023 8:43 am
- Forum: Investing - Theory, News & General
- Topic: understanding rationale for world vs us indices
- Replies: 7
- Views: 780
Re: understanding rationale for world vs us indices
Good reason to include international:
Diversification
Bad reason to include international:
P/E or CAPE ratio
Good reason to avoid international:
Taxation increases effective ER by 30 points, uncompensated currency volatility
Bad reason to avoid international:
Recent underperformance
Diversification
Bad reason to include international:
P/E or CAPE ratio
Good reason to avoid international:
Taxation increases effective ER by 30 points, uncompensated currency volatility
Bad reason to avoid international:
Recent underperformance
- Fri Oct 06, 2023 4:39 pm
- Forum: Personal Investments
- Topic: Bonds vs Cash?
- Replies: 24
- Views: 2760
Re: Bonds vs Cash?
No I mean 1870! Check the chart.retired@50 wrote: ↑Fri Oct 06, 2023 3:58 pmI think you mean 1970 instead of 1870... Anyway, I suspect that has to do with Nixon finally removing the U.S. from the gold standard.Tamalak wrote: ↑Fri Oct 06, 2023 12:51 pmWhy did the value of gold stop tracking the dollar around 1870?retired@50 wrote: ↑Wed Oct 04, 2023 12:22 pmOver the long term, cash tends to lose to inflation too...
See chart.
Regards,
See link for details: https://www.federalreservehistory.org/e ... ility-ends
Regards,
- Fri Oct 06, 2023 12:51 pm
- Forum: Personal Investments
- Topic: Bonds vs Cash?
- Replies: 24
- Views: 2760
Re: Bonds vs Cash?
Why did the value of gold stop tracking the dollar around 1870?retired@50 wrote: ↑Wed Oct 04, 2023 12:22 pmOver the long term, cash tends to lose to inflation too...
See chart.
Regards,
- Fri Oct 06, 2023 7:55 am
- Forum: Investing - Theory, News & General
- Topic: Long Treasuries down 55%. Time to bottom fish?
- Replies: 416
- Views: 52060
Re: Long Treasuries down 55%. Time to bottom fish?
The 30 year just popped past 5% for the first time right in front of my eyes
- Thu Oct 05, 2023 9:21 am
- Forum: Personal Investments
- Topic: Going all in on VYM/SCHD?
- Replies: 57
- Views: 7509
Re: Going all in on VYM/SCHD?
Bonds and dividend funds may both have a high coupon, but that is a misleading similarity. VYM/SCHD's total return is gonna be very similar to total market stocks and nothing like any kind of bond.
- Thu Oct 05, 2023 9:10 am
- Forum: Personal Investments
- Topic: Where is the excitement about higher bond yields?
- Replies: 84
- Views: 11296
Re: Where is the excitement about higher bond yields?
Yup. This is why I'm excited about higher bond yields even though I'm not even in bonds!TipsQuestions wrote: ↑Thu Oct 05, 2023 8:35 am Keep in mind that when bond returns rise, expected stock returns do as well, so allocating more to bonds may not necessarily make sense.
- Wed Oct 04, 2023 2:28 pm
- Forum: Investing - Theory, News & General
- Topic: Now that long TIPS yields are 60 bp off their highs I will…
- Replies: 2937
- Views: 611530
Re: Now that long TIPS have surged past 2.25% I will…
[ In the above scenario I do not know if waiting or not waiting for 3 months is considered market timing :confused . Or buying LTPZ now in general is market timing. My advice: ("Tell me great hero but please make it brief..." - Bob Dylan) Don't beat yourself up over it. Buy when you feel like it. You might do better than if you bought today. Or maybe worse. Meanwhile hopefully you are getting 5% plus in a money market, which is beating inflation now anyway, so you are getting what you want with TIPS for the time being one way or another. It was different when some of us started buying TIPS near zero YTM last year- we were scrambling to buy ASAP because money markets were losing 7-8% real and nobody knew in which direction inflati...
- Wed Oct 04, 2023 11:27 am
- Forum: Personal Investments
- Topic: Investment Advice - all cash currently
- Replies: 11
- Views: 1200
Re: Investment Advice - all cash currently
I would consolidate your $1.30 into one savings account and not worry any further about it.
- Wed Oct 04, 2023 8:02 am
- Forum: Personal Investments
- Topic: HELP! I am losing money on VTI and VXUS
- Replies: 30
- Views: 3742
Re: HELP! I am losing money on VTI and VXUS
In 2015 I invested 90% of my entire net worth into VTI and VXUS. In the intervening time I've been looking around for a better investment than that, and haven't found any. VTI+VXUS just holds up too well, both in backtesting and forward looking expectations. So we're riding the same storm, but I'm real confident in our boat, OP
- Wed Oct 04, 2023 7:25 am
- Forum: Personal Investments
- Topic: HELP! I am losing money on VTI and VXUS
- Replies: 30
- Views: 3742
Re: HELP! I am losing money on VTI and VXUS
Yes, it's recommended to also invest in bonds so.. oh wait
- Tue Oct 03, 2023 7:23 pm
- Forum: Personal Investments
- Topic: Sell everything
- Replies: 100
- Views: 21773
Re: Sell everything
I wonder if this is why the Equity Risk Premium still seems so low. People with low risk tolerance aren't bailing out of stocks and into bonds.. they're just bailing out of everything
- Tue Oct 03, 2023 2:03 pm
- Forum: Personal Investments
- Topic: BND exceeding my patience - need something different
- Replies: 169
- Views: 19682
Re: BND exceeding my patience - need something different
I had my own performance-chasing delusions about bonds and was fortunately disabused of them by this board way back in 2018: viewtopic.php?p=3779143#p3779143burritoLover wrote: ↑Tue Oct 03, 2023 1:57 pm Can't wait until cash and short-term treasuries are yielding <1% at some point and all the new posts will be about getting back into BND. It wouldn't be so ridiculous if it weren't so predictable.
- Tue Oct 03, 2023 1:49 pm
- Forum: Personal Investments
- Topic: Help with length of dollar cost averaging lump sum
- Replies: 9
- Views: 867
Re: Help with length of dollar cost averaging lump sum
DCA is just a psychological trick, it doesn't have any actual benefits. So your DCA length should be as short as possible without you getting too afraid to start it immediately.
- Tue Oct 03, 2023 1:44 pm
- Forum: Investing - Theory, News & General
- Topic: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]
- Replies: 2106
- Views: 391606
Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]
I see the expense ratio is now listed at 1.71%
- Tue Oct 03, 2023 1:24 pm
- Forum: Investing - Theory, News & General
- Topic: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]
- Replies: 2106
- Views: 391606
Re: Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]
But a negative yield curve is predicting that yields go down, not remain unchanged. So yes, the market making a bad guess in the wrong direction is going to lose you money, as it is with practically all investments.tcrez wrote: ↑Tue Oct 03, 2023 1:18 pm PSLDX borrows at short term rates and invests in long duration bonds....correct?
Given the negative yield curve plus expense ratio ...thats a big time losing proposition right?
assuming interest rates dont change...its borrowing at 5.5%, paying another 1.71% for the expense ratio and investing at 4.75%
- Tue Oct 03, 2023 12:21 pm
- Forum: Personal Investments
- Topic: I have about 8 years left until my retirement.
- Replies: 14
- Views: 4787
Re: I have about 8 years left until my retirement.
In the past 5 years, TQQQ has *doubled*. OP, did your friend really invest in a 3x leveraged stock fund with a timeframe in mind of 2 years?
- Tue Oct 03, 2023 11:48 am
- Forum: Investing - Theory, News & General
- Topic: How lower can TLT drop from here? [iShares 20+ Year Treasury Bond ETF]
- Replies: 87
- Views: 11031
Re: How lower can TLT drop from here?
I am kind of puzzled that TLT (iShares 20+ Year Treasury Bond ETF) drops that bad second day in a row, without any apparent reason (at least for me). I can calculate how much it will drop with any additional 1% interest rate increase, but what I don’t understand is why is it moving down that hard now when the rate is steady, unless it just does not reflect the current interest rate correctly and tries to find it’s equilibrium with it. Maybe someone can enlighten? I think TLT tries to answer the question "what will be the average rate over the next 20+ years?" The FED doesn't actually have to do anything for the consensus answer to that to change. All the FED has to do is look stubborn about keeping rates where they are, and TLT w...
- Tue Oct 03, 2023 11:29 am
- Forum: Investing - Theory, News & General
- Topic: Now that long TIPS yields are 60 bp off their highs I will…
- Replies: 2937
- Views: 611530
Re: Now that long TIPS have surged past 2.25% I will…
Nope.. DXY was just as high around 2000-2003 as it is now.
That said, intl' forward PE has dropped from 20 to 13 in the last 20 years. So that's a pretty decent excuse for underperformance in my book.
- Tue Oct 03, 2023 10:27 am
- Forum: Investing - Theory, News & General
- Topic: Stocks are sinking, bonds are sinking.. where is the benefit of diversification ?
- Replies: 102
- Views: 13460
Re: Stocks are sinking, bonds are sinking.. where is the benefit of diversification ?
Cash isn't shrinking if it's in a money market. Yields from that are well above YoY inflation.
Diversification benefits falter hard when rates are raised explicitly to combat inflation as opposed to in response to a strong economy. Bonds and stocks tend to have correlated returns in that environment and there's not a lot you can do to unglue them until that environment has passed.
Diversification benefits falter hard when rates are raised explicitly to combat inflation as opposed to in response to a strong economy. Bonds and stocks tend to have correlated returns in that environment and there's not a lot you can do to unglue them until that environment has passed.
- Tue Oct 03, 2023 10:09 am
- Forum: Investing - Theory, News & General
- Topic: Now that long TIPS yields are 60 bp off their highs I will…
- Replies: 2937
- Views: 611530
Re: Now that long TIPS have surged past 2.25% I will…
What's even more nuts is TIPS was around 2.5% at the start of those listed periods too.. and so has about equaled returns to international stocks.. really pathetic performance by intl!aj76er wrote: ↑Tue Oct 03, 2023 10:00 am How good is 2.5% real guaranteed returns for 20yrs?
Rolling international (ex-U.S.) equity real CAGR for recent 20yr periods:
2000 - 2020: 1.86%
2001 - 2021: 2.93%
2002 - 2022: 2.94%
2003 - 2023: 3.98% (YTD)
Buying LTPZ at 2% - 3% real yields (and holding for its duration) is locking in equity-like returns.
- Tue Oct 03, 2023 9:20 am
- Forum: Investing - Theory, News & General
- Topic: Now that long TIPS yields are 60 bp off their highs I will…
- Replies: 2937
- Views: 611530
Re: Now that long TIPS have surged past 2.25% I will…
omg this is nuts. Are we going to have two historic bear years for bonds in a row?
If nothing breaks this is going to be awesome, but I'm increasingly worried something will break.
If nothing breaks this is going to be awesome, but I'm increasingly worried something will break.
- Mon Oct 02, 2023 3:08 pm
- Forum: Personal Investments
- Topic: BND exceeding my patience - need something different
- Replies: 169
- Views: 19682
Re: BND exceeding my patience - need something different
BND yield to maturity is now 5%. What are you looking that is a lot higher than that?daacrusher2001 wrote: ↑Mon Oct 02, 2023 2:47 pmBNDs distribution yield is a lot lower than what I can get elsewhere now
- Mon Oct 02, 2023 3:05 pm
- Forum: Personal Investments
- Topic: BND exceeding my patience - need something different
- Replies: 169
- Views: 19682
Re: BND exceeding my patience - need something different
This.. "don't lock in your losses" type thinking is often irrational for stocks, but it's exactly correct for (non junk) bonds. ANY loss in BND you will make up in 7 years, after which you will get permanent extra profit from increased yield.
- Mon Oct 02, 2023 2:27 pm
- Forum: Personal Finance (Not Investing)
- Topic: UPDATE Debating quitting with no new job lined up - possible FIRE?
- Replies: 72
- Views: 12475
Re: Debating quitting with no new job lined up - possible FIRE?
Even if I was not ready to properly FIRE, if I had any kind of financial bedrock I would never stay in a situation with nasty co workers. The very first and most vital thing financial security gives you is the right to walk away from any kind of BS.
- Mon Oct 02, 2023 2:11 pm
- Forum: Investing - Theory, News & General
- Topic: Now that long TIPS yields are 60 bp off their highs I will…
- Replies: 2937
- Views: 611530
Re: Now that long TIPS have surged past 2.25% I will…
Why do you compare stocks to the 10 year? How do you figure what the duration risk of stocks is?watchnerd wrote: ↑Sat Sep 30, 2023 10:42 pmThis is how I model it for Global Equities (VT) at current 10 YR TIPS real yield (2.20%) and 10 YR breakeven inflation (2.35%):
Equities Nominal Return 6.40%
Equities Real Return 4.05%
Real Risk Premium over TIPS 1.85%
If we get to 3% real yield, that would drop the equity real rsk premium over TIPS to 0.85%.
I use P/E ratio, but it can't be that simple..
- Mon Oct 02, 2023 1:02 pm
- Forum: Investing - Theory, News & General
- Topic: The unloved 20-year Treasury bond (now over 5%)
- Replies: 33
- Views: 6575
Re: The unloved 20-year Treasury bond (now over 5%)
TIPS is the safer of the two investments, right? So this would be a prediction by the market that inflation will be lower than 2.78% (although it's probably better to compare TIPS to the 10 or 30 year, not the neglected 20 - so I bet the market is predicting inflation lower than 2.5%)
- Mon Oct 02, 2023 7:45 am
- Forum: Personal Finance (Not Investing)
- Topic: Will you ever again see such a high ex-ante ERP?
- Replies: 14
- Views: 3232
Re: Will you ever again see such a high ex-ante ERP?
New question, will we ever see such a LOW ERP again?
- Sat Sep 30, 2023 6:36 pm
- Forum: Investing - Theory, News & General
- Topic: What’s So Bad About Cash (v. Buying a Bond Fund)?
- Replies: 122
- Views: 9811
Re: What’s So Bad About Cash (v. Buying a Bond Fund)?
Cash is better than bonds because if rates go up, you don't lose money
Bonds are better than cash because if rates go down, you make extra money.
Bonds are better than cash because if rates go down, you make extra money.
- Fri Sep 29, 2023 2:54 pm
- Forum: Investing - Theory, News & General
- Topic: What (real) rate of return do you expect from stocks/bonds?
- Replies: 19
- Views: 1526
Re: What (real) rate of return do you expect from stocks/bonds?
I use a ~10 year moving average of global P/E ratio to determine real rate of return of stocks. Right now it expects 5.7% real. I am picking through this post. You are using something like CAPE 10 but not exactly. What is your rationale? CAPE 10 never made sense to me because it uses CURRENT prices but PAST earnings. So if earnings have increased very quickly over 10 years, CAPE will be unreasonably gloomy about forward returns. Instead I use both PAST prices and PAST earnings. To me, there are two things that will change P/E ratio: 1. changes in expected future earnings (i.e. optimism/pessimism) 2. changes in the discount rate (that is, time value of money driven by things like competing investments, fed rate etc) P/E changes driven by #1...
- Fri Sep 29, 2023 2:26 pm
- Forum: Investing - Theory, News & General
- Topic: What (real) rate of return do you expect from stocks/bonds?
- Replies: 19
- Views: 1526
Re: What (real) rate of return do you expect from stocks/bonds?
I use a ~10 year moving average of global P/E ratio to determine real rate of return of stocks. Right now it expects 5.7% real.
For bonds, that's easier, it's just yield minus 3, so 2% real
But now that I say that, TIPS is returning 2.3%, and it doesn't make sense that TIPS - a safer investment - would offer more real returns than something not inflation-protected.
For bonds, that's easier, it's just yield minus 3, so 2% real
But now that I say that, TIPS is returning 2.3%, and it doesn't make sense that TIPS - a safer investment - would offer more real returns than something not inflation-protected.
- Fri Sep 29, 2023 11:34 am
- Forum: Personal Finance (Not Investing)
- Topic: What delayed gratification choices have you made lately?
- Replies: 129
- Views: 13319
Re: What delayed gratification choices have you made lately?
To continue working
- Fri Sep 29, 2023 11:03 am
- Forum: Investing - Theory, News & General
- Topic: What are the "best" indices for stocks, with no tilt?
- Replies: 34
- Views: 2052
Re: What are the "best" indices for stocks, with no tilt?
Ok.. well.. the benchmark Vanguard uses for VT is the FTSE Global All Cap Index
- Fri Sep 29, 2023 10:46 am
- Forum: Investing - Theory, News & General
- Topic: What are the "best" indices for stocks, with no tilt?
- Replies: 34
- Views: 2052
Re: What are the "best" indices for stocks, with no tilt?
Since I began investing in 2015 I have been 100% VT. I keep searching for any way to improve on that portfolio and no luck..
- Fri Sep 29, 2023 7:49 am
- Forum: Investing - Theory, News & General
- Topic: Swedroe (9/27/23 Morningstar): “It’s Too Soon to Say the Value Premium Is Dead”
- Replies: 88
- Views: 9187
Re: Swedroe (9/27/23 Morningstar): “It’s Too Soon to Say the Value Premium Is Dead”
Great quote, this is exactly why I would have trouble holding value through one of its "periods of underperformance".. because of the nagging question of, is it really still just a period?nisiprius wrote: ↑Fri Sep 29, 2023 7:36 am Jared Kizer wrote, in 2015,it is virtually impossible to determine whether a given factor premium no longer exists precisely because each is capable of extended periods of underperformance. The period of underperformance could either be because “the world has changed” or simply a reasonable point on the distribution of possible outcomes.
- Fri Sep 29, 2023 7:38 am
- Forum: Investing - Theory, News & General
- Topic: My stock has lost 17% in 5 days without any announcement: what to do?
- Replies: 70
- Views: 10586
Re: My stock has lost 17% in 5 days without any announcement: what to do?
17% change ain't even all that much for a random low volume baby cap stock. It's done a swing like that six times in two years. Enjoy the ride!
- Thu Sep 28, 2023 12:16 pm
- Forum: Personal Investments
- Topic: Advice to invest 400,000 dollars
- Replies: 13
- Views: 2698
Re: 400k Start investing today
TIPS are giving about 2.5% real right now aren't they? That guarantees the next 30 years with a real growth of 0.5% annualized. After 30 years, OP will have to reevaluate.
- Thu Sep 28, 2023 10:40 am
- Forum: Personal Investments
- Topic: Can You Help Me Understand This Bond (TIPS) Purchase?
- Replies: 23
- Views: 1473
Re: Can You Help Me Understand This Bond (TIPS) Purchase?
What happens to the last 0.8% then? Does it get added to the NAV of the bond??stevewolfe wrote: ↑Thu Sep 28, 2023 10:39 amThe coupon is 1.5% real and paid on the inflation adjusted value of the bond.
- Thu Sep 28, 2023 10:33 am
- Forum: Personal Investments
- Topic: Can You Help Me Understand This Bond (TIPS) Purchase?
- Replies: 23
- Views: 1473
Re: Can You Help Me Understand This Bond (TIPS) Purchase?
Is the coupon 1.5% real? Or 1.5% nominal?stevewolfe wrote: ↑Thu Sep 28, 2023 9:58 amYes, it's real rate. Note the difference between the real yield to maturity (2.3x) vs. the coupon of the bond (1.50) and be sure you understand the difference before you purchase.
- Thu Sep 28, 2023 9:49 am
- Forum: Personal Investments
- Topic: Are Short Term Bonds preferable to Total Bond Market Index Funds?
- Replies: 60
- Views: 7005
Re: Are Short Term Bonds preferable to Total Bond Market Index Funds?
2022 was the worst year for bonds in 100 years. People should not be making investing decisions based on that..
- Thu Sep 28, 2023 7:39 am
- Forum: Personal Investments
- Topic: What to do with BLV
- Replies: 21
- Views: 2160
Re: What to do with BLV
It’s hard for me to understand how an asset that has an upside of maybe 7-8 percent return, with a downside of 20-25 percent could be a good investment. Bonds are weird.. the way they work individually is very simple but the way they work in the market, or in a fund is tough to understand. BLV's sustainable upside comes from the yield. For every ~14% BLV drops in price, the annual yield will go up by 1%. So any losses BLV takes will be made up for in AT MOST 14 years by the yield - and then after that the extra yield is pure profit. In a way, it's good that BLV has dropped. It has kind of made an investment in itself. Down now, but with a future expected return of 5% per year instead of 2%. If BLV goes up again in price, you'll get your lo...