KlangFool wrote: ↑Sat Jan 22, 2022 11:28 am I do not trust the government's reported inflation number. Hence, I do not trust TIPS.
The government's official inflation number is never to going to match each of us personal inflation experience.
Sometimes it works in your favor. 7% inflation adjustment to Ibonds, TIPs, and Social Security payments is a bonus for me, because I'm not affected by the large amount of inflation on rents, gasoline, and new and used cars.
HomerJ,
Sorry! I am even more pessimistic than that. I do not believe the official inflation number has anything to do with the real inflation at all.
What ever happend to set it and forget it, only check balances at quarterly statement time and stay the course?
Are y'all retrospective market timing?
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. |
(Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)
I moved to 20% bonds Aug/Sep 2018 and with the recent lows I have built up to 34% fixed income through additions. I would like to rebalance back to 70/30 if we get another 3-4% drop.
Since the move to bonds, I need
- another 7% drop for that move to have given both better returns and better risk-adjusted returns as compared to 100% total us stock market.
- another 1% drop for that move to have given both better returns and better risk-adjusted returns as compared to a similar ratio of US/global with 100% stock.
- My portfolio is currently beating 100% US SCV in both returns and better risk-adjusted returns
Given the great run in stocks and the differences above, my general advice is to invest heavily in stocks during accumulation and really diversify as assets become big relative to remaining wages. For me this meant going instantaneously from 100% stocks to 80% stocks six years before expected retirement and accumulating fixed income to 70/30 by three years before expected retirement. I plan to spend mostly fixed income in the first 5 years after retirement, shielding from the portion of sequence of return risk due to early withdrawals.
I prefer to match my bond percentage with specific spending needs and the highest sequence of risk. My decisions are in hopes of helping to damper long term drag from bonds as compared to stocks due to lesser returns or inflation, while benefitting from a smaller range of outcomes when sequence of returns risk is biggest. I see bonds as very useful if one can find a way to balance all the risks and rewards relative to their behavioral preferences and desired outcomes. I see no reason why this should not result in different use of bonds for different people.
whodidntante wrote: ↑Sat Jan 22, 2022 2:08 am
Bonds look a lot better if you ignore inflation, so let's do that! And we can also assume that interest rate risk probably won't hurt much. All aboard the confirmation bias train! Choo-choo!
If I have low net worth, however, and I am therefore in the accumulation phase, am I not better off buying stocks 100% in this environment, just twice a month on schedule making my purchases? The price is cheaper. I am buying low. If I were buying 30% bonds, then I would be directing 30% of each purchase into buying assets that are comparatively more expensive, that is, buying high, correct?
Malum Prohibitum wrote: ↑Sun Jan 23, 2022 7:38 am
If I have low net worth, however, and I am therefore in the accumulation phase, am I not better off buying stocks 100% in this environment, just twice a month on schedule making my purchases? The price is cheaper. I am buying low. If I were buying 30% bonds, then I would be directing 30% of each purchase into buying assets that are comparatively more expensive, that is, buying high, correct?
I would say no, that is not a helpful way to think about it. Stocks are volatile. Maybe we're at the end of a small dip or maybe we're at the start of a huge decline. No one knows in advance. I would suggest buying assets according to your long-term investment plan regardless of whether you think prices are high or low in "this environment".
Malum Prohibitum wrote: ↑Sun Jan 23, 2022 7:38 am
If I have low net worth, however, and I am therefore in the accumulation phase, am I not better off buying stocks 100% in this environment, just twice a month on schedule making my purchases? The price is cheaper. I am buying low. If I were buying 30% bonds, then I would be directing 30% of each purchase into buying assets that are comparatively more expensive, that is, buying high, correct?
Nobody knows what the future brings. Stocks offer no guarantees, you "equitably" share the companies financial gains and losses.
Stocks have tended to go up over time, and over longer periods they've done much better than alternative places to passively save money.
Slowly "averaging" in (and eventually averaging out) over time, by consistently making regular purchases (and later withdrawals) across all sorts of price ranges, sometimes they will appear to have been relatively high, sometimes relatively low, will get you something close to the "average" price and closer to the "average" gain. If you try to time or select specific entry/exit points you may not get that "average" result (for better or worse.)
Since stocks have mostly gone up over time, it's tended to usually have higher returns to get money in sooner rather than later, and when selling to wait as long as possible to get out.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Sometimes, you make the most by "losing (at least on paper)" the least. Also, we went back and looked at invested asset totals over the past 15 years since I retired, and the total is up an average of approximately 6% a year after all expenses have been deducted. Taking the past bull market into consideration aids immeasurably with not adding more doom and gloom to the other things beyond control that are happening in the outside world.
Tamalak wrote: ↑Sat Jan 22, 2022 8:39 am
I thought the essential draw of bonds was not the lower risk/reward but poor correlation with stocks. I'm not seeing that poor correlation..
Would it be clearer to you if stocks were down only 5% and bonds up 0.5%?
Down 9% vs. 0.9% looks good to me for bonds and doing exactly what one would hope.
For my own portfolio of individual municipal bonds, over the time period referenced, it is down about 0.6%, and that will be recouped within the next 60 days from interest payments, all else being equal.
Won't your bond funds be reduced by the amount of the interest payments when they are paid? Not sure it is 100% accurate but I am fairly sure accrued interest is priced into fixed income assets like bonds and CDs daily. Hopefully someone more knowledgeable in the space can clarify this.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Tamalak wrote: ↑Sat Jan 22, 2022 8:39 am
I thought the essential draw of bonds was not the lower risk/reward but poor correlation with stocks. I'm not seeing that poor correlation..
Would it be clearer to you if stocks were down only 5% and bonds up 0.5%?
Down 9% vs. 0.9% looks good to me for bonds and doing exactly what one would hope.
For my own portfolio of individual municipal bonds, over the time period referenced, it is down about 0.6%, and that will be recouped within the next 60 days from interest payments, all else being equal.
Won't your bond funds be reduced by the amount of the interest payments when they are paid? Not sure it is 100% accurate but I am fairly sure accrued interest is priced into fixed income assets like bonds and CDs daily. Hopefully someone more knowledgeable in the space can clarify this.
No, they are not priced in... The price of a bond fund is fairly stable... You get the dividends, but the price doesn't change over time. For instance, BND was $81/share five years ago, and it's $83/share today. Ten years ago it was $84/share.
Bond funds are self-correcting. Value of the bond fund goes down when bond interest rates go up. But if interest rates go up, then bond fund starts paying more in dividends, so you make back the value that was lost over time.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Nowizard wrote: ↑Sun Jan 23, 2022 8:15 am
Sometimes, you make the most by "losing (at least on paper)" the least.
Quite true, and this is what many have gotten hung up on with bonds for a while now. Expected (or practically guaranteed in the case of TIPS) negative real yields are unpleasant, but many have forgotten that other assets, like stocks, can easily have real losses too.
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
Tamalak wrote: ↑Sat Jan 22, 2022 8:39 am
I thought the essential draw of bonds was not the lower risk/reward but poor correlation with stocks. I'm not seeing that poor correlation..
Would it be clearer to you if stocks were down only 5% and bonds up 0.5%?
Down 9% vs. 0.9% looks good to me for bonds and doing exactly what one would hope.
For my own portfolio of individual municipal bonds, over the time period referenced, it is down about 0.6%, and that will be recouped within the next 60 days from interest payments, all else being equal.
Won't your bond funds be reduced by the amount of the interest payments when they are paid? Not sure it is 100% accurate but I am fairly sure accrued interest is priced into fixed income assets like bonds and CDs daily. Hopefully someone more knowledgeable in the space can clarify this.
No, they are not priced in... The price of a bond fund is fairly stable... You get the dividends, but the price doesn't change over time. For instance, BND was $81/share five years ago, and it's $83/share today. Ten years ago it was $84/share.
Bond funds are self-correcting. Value of the bond fund goes down when bond interest rates go up. But if interest rates go up, then bond fund starts paying more in dividends, so you make back the value that was lost over time.
So you are saying if a bond paid interest annually and the payment was due to the bondholder of record a week from now that the 11+ months of accrued interest is not reflected in the current price of the bond? I really don't think that is the case, although I can understand how this could be obscured in the way bond funds function. Please feel to correct me, I am no fixed income expert.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
willthrill81 wrote: ↑Sun Jan 23, 2022 11:52 am
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
Would you also say that there is no such thing as 'paper gains'?
willthrill81 wrote: ↑Sun Jan 23, 2022 11:52 am
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
Would you also say that there is no such thing as 'paper gains'?
Yes. There is no such thing as 'paper' gains or losses. All of them are real. The only reason the term 'paper loss' was invented was to make people feel better about the situation.
Telling retirees who have been making contributions for decades that their balance isn't 'real' because most of it is gains would just be silly, at best.
Nowizard wrote: ↑Sun Jan 23, 2022 8:15 am
Sometimes, you make the most by "losing (at least on paper)" the least.
Quite true, and this is what many have gotten hung up on with bonds for a while now. Expected (or practically guaranteed in the case of TIPS) negative real yields are unpleasant, but many have forgotten that other assets, like stocks, can easily have real losses too.
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
I feel like the market surged over the last two years with extraordinary low rates. With this unwinding, you have to bail to capture those gains before everything resets back to 2018.
Nowizard wrote: ↑Sun Jan 23, 2022 8:15 am
Sometimes, you make the most by "losing (at least on paper)" the least.
Quite true, and this is what many have gotten hung up on with bonds for a while now. Expected (or practically guaranteed in the case of TIPS) negative real yields are unpleasant, but many have forgotten that other assets, like stocks, can easily have real losses too.
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
I feel like the market surged over the last two years with extraordinary low rates. With this unwinding, you have to bail to capture those gains before everything resets back to 2018.
That's not a question of 'paper' losses or gains though. It's just market timing.
Tamalak wrote: ↑Sat Jan 22, 2022 8:39 am
I thought the essential draw of bonds was not the lower risk/reward but poor correlation with stocks. I'm not seeing that poor correlation..
Would it be clearer to you if stocks were down only 5% and bonds up 0.5%?
Down 9% vs. 0.9% looks good to me for bonds and doing exactly what one would hope.
For my own portfolio of individual municipal bonds, over the time period referenced, it is down about 0.6%, and that will be recouped within the next 60 days from interest payments, all else being equal.
Won't your bond funds be reduced by the amount of the interest payments when they are paid? Not sure it is 100% accurate but I am fairly sure accrued interest is priced into fixed income assets like bonds and CDs daily. Hopefully someone more knowledgeable in the space can clarify this.
It depends. Bond mutual funds typically accrue daily and pay monthly, so there is no NAV drop upon distribution. If you sell in the middle of the month, you will receive a partial distribution based on the number of days you held your shares. By contrast, bond ETFs include coupon payments in the NAV, which is deducted on the ex-dividend date.
Last edited by DeliberateDonkey on Sun Jan 23, 2022 12:20 pm, edited 1 time in total.
Tamalak wrote: ↑Sat Jan 22, 2022 8:39 am
I thought the essential draw of bonds was not the lower risk/reward but poor correlation with stocks. I'm not seeing that poor correlation..
Would it be clearer to you if stocks were down only 5% and bonds up 0.5%?
Down 9% vs. 0.9% looks good to me for bonds and doing exactly what one would hope.
For my own portfolio of individual municipal bonds, over the time period referenced, it is down about 0.6%, and that will be recouped within the next 60 days from interest payments, all else being equal.
Won't your bond funds be reduced by the amount of the interest payments when they are paid? Not sure it is 100% accurate but I am fairly sure accrued interest is priced into fixed income assets like bonds and CDs daily. Hopefully someone more knowledgeable in the space can clarify this.
No, they are not priced in... The price of a bond fund is fairly stable... You get the dividends, but the price doesn't change over time. For instance, BND was $81/share five years ago, and it's $83/share today. Ten years ago it was $84/share.
Bond funds are self-correcting. Value of the bond fund goes down when bond interest rates go up. But if interest rates go up, then bond fund starts paying more in dividends, so you make back the value that was lost over time.
So you are saying if a bond paid interest annually and the payment was due to the bondholder of record a week from now that the 11+ months of accrued interest is not reflected in the current price of the bond? I really don't think that is the case, although I can understand how this could be obscured in the way bond funds function. Please feel to correct me, I am no fixed income expert.
It might work that way for an individual bond (I'm no expert either and could be wrong), but it doesn't work like that for a bond FUND.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
willthrill81 wrote: ↑Sun Jan 23, 2022 11:52 am
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
Would you also say that there is no such thing as 'paper gains'?
Yes. There is no such thing as 'paper' gains or losses. All of them are real. The only reason the term 'paper loss' was invented was to make people feel better about the situation.
Telling retirees who has been making contributions for decades that their balance isn't 'real' because most of it is gains would just be silly, at best.
Or maybe because some are actionable (or even taxable?) events. Others just happen on a ledger.
I hold VTIAX. If it is up 1% at noon I have a 1% "paper" gain. But I can't do anything with it. And if it closes down 1%, well....
I mean, it "really" happened. But there is no way I could have "realized" it in my "real" wallet.
Et cetera...
Why does the vocab offend you? You must have some larger point you want to make???
willthrill81 wrote: ↑Sun Jan 23, 2022 11:52 am
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
Would you also say that there is no such thing as 'paper gains'?
Yes. There is no such thing as 'paper' gains or losses. All of them are real. The only reason the term 'paper loss' was invented was to make people feel better about the situation.
Telling retirees who have been making contributions for decades that their balance isn't 'real' because most of it is gains would just be silly, at best.
vanbogle59 wrote: ↑Sun Jan 23, 2022 12:14 pm
I hold VTIAX. If it is up 1% at noon I have a 1% "paper" gain. But I can't do anything with it.
Sure you could. You could sell and realize the gain, and you might have to pay taxes on it now that it's realized. And then you could spend it.
vanbogle59 wrote: ↑Sun Jan 23, 2022 12:14 pm
Why does the vocab offend you? You must have some larger point you want to make???
Because it's just not accurate.
Investors who may still have Enron stock certificates that they haven't sold have still experienced a real loss.
Investors who bought TSLA stock years ago that they haven't sold have still experienced a real gain.
Thinking that only the cash in your checking account or wallet is 'real' and everything else is 'paper' doesn't benefit anyone aside from potentially mentally tricking them into not doing something dumb.
Tamalak wrote: ↑Sat Jan 22, 2022 8:39 am
I thought the essential draw of bonds was not the lower risk/reward but poor correlation with stocks. I'm not seeing that poor correlation..
Would it be clearer to you if stocks were down only 5% and bonds up 0.5%?
Down 9% vs. 0.9% looks good to me for bonds and doing exactly what one would hope.
For my own portfolio of individual municipal bonds, over the time period referenced, it is down about 0.6%, and that will be recouped within the next 60 days from interest payments, all else being equal.
Won't your bond funds be reduced by the amount of the interest payments when they are paid? Not sure it is 100% accurate but I am fairly sure accrued interest is priced into fixed income assets like bonds and CDs daily. Hopefully someone more knowledgeable in the space can clarify this.
It depends. Bond mutual funds typically accrue daily and pay monthly, so there is no NAV drop upon distribution. If you sell in the middle of the month, you will receive a partial distribution based on the number of days you held your shares. By contrast, bond ETFs include coupon payments in the NAV, which is deducted on the ex-dividend date. Individual bond prices function like ETFs (i.e. you are not entitled to a coupon payment unless you hold the bond on the day it is paid, so the value should be assumed to accrue directly to the price over the period between distributions).
I understand what you are saying about the difference in mutual fund and ETF, but the accrued interest should be reflected in the prices of the bonds making up and ETF.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
HomerJ wrote: ↑Sun Jan 23, 2022 11:42 am
The price of a bond fund is fairly stable... You get the dividends, but the price doesn't change over time. For instance, BND was $81/share five years ago, and it's $83/share today. Ten years ago it was $84/share.
Bond funds are self-correcting. Value of the bond fund goes down when bond interest rates go up. But if interest rates go up, then bond fund starts paying more in dividends, so you make back the value that was lost over time.
In my experience, NAV prices have been a bit more volatile than that. In Dec. 2020, BND was trading at $88/share; today it's at $83. I was lucky to cash out of BND at that time and moved all of my fixed income to stable value. The interest has been about the same, with no decline in NAV. I see no point in taking on interest rate risk in BND unless it is paying a substantial premium to what you can earn in stable value.
willthrill81 wrote: ↑Sun Jan 23, 2022 11:52 am
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
Would you also say that there is no such thing as 'paper gains'?
Yes. There is no such thing as 'paper' gains or losses. All of them are real. The only reason the term 'paper loss' was invented was to make people feel better about the situation.
Telling retirees who have been making contributions for decades that their balance isn't 'real' because most of it is gains would just be silly, at best.
Agreed. This reminds me of when gamblers win money at blackjack or whatever, proceed to lose their winnings, then tell everyone it was "house money" anyway. No. It was YOUR money, and you could have gone home with it in your pocket.
willthrill81 wrote: ↑Sun Jan 23, 2022 11:52 am
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
Would you also say that there is no such thing as 'paper gains'?
Yes. There is no such thing as 'paper' gains or losses. All of them are real. The only reason the term 'paper loss' was invented was to make people feel better about the situation.
Telling retirees who have been making contributions for decades that their balance isn't 'real' because most of it is gains would just be silly, at best.
Agreed. This reminds me of when gamblers win money at blackjack or whatever, proceed to lose their winnings, then tell everyone it was "house money" anyway. No. It was YOUR money, and you could have gone home with it in your pocket.
Precisely. Similarly, people often treat 'found money' differently than earned income, but the bottom line is that it's all their money.
vanbogle59 wrote: ↑Sun Jan 23, 2022 12:14 pm
I hold VTIAX. If it is up 1% at noon I have a 1% "paper" gain. But I can't do anything with it.
Sure you could. You could sell and realize the gain, and you might have to pay taxes on it now that it's realized. And then you could spend it.
vanbogle59 wrote: ↑Sun Jan 23, 2022 12:14 pm
Why does the vocab offend you? You must have some larger point you want to make???
Because it's just not accurate.
Investors who may still have Enron stock certificates that they haven't sold have still experienced a real loss.
Investors who bought TSLA stock years ago that they haven't sold have still experienced a real gain.
Thinking that only the cash in your checking account or wallet is 'real' and everything else is 'paper' doesn't benefit anyone aside from potentially mentally tricking them into not doing something dumb.
First some trivia:
I don't think I can sell VTIAX at noon.
And I do think there's a difference between these 2 scenarios that's in the lingua franca:
1) purchasing a stock at $1, holding it as it rises to $100 and returns to $1
2) purchasing a stock at $1, selling it at $100, buying something else at $100 and holding it as it falls to $1.
But I agree with your larger point:
Thinking that only the cash in your checking account or wallet is 'real' and everything else is 'paper' might lead to poor decision making.
P.S. I'm actually enough of a red-pill, blue-pill geek to think that cash is just as "unreal" as any other ledger balance.
Tamalak wrote: ↑Sat Jan 22, 2022 8:39 am
I thought the essential draw of bonds was not the lower risk/reward but poor correlation with stocks. I'm not seeing that poor correlation..
Would it be clearer to you if stocks were down only 5% and bonds up 0.5%?
Down 9% vs. 0.9% looks good to me for bonds and doing exactly what one would hope.
For my own portfolio of individual municipal bonds, over the time period referenced, it is down about 0.6%, and that will be recouped within the next 60 days from interest payments, all else being equal.
Won't your bond funds be reduced by the amount of the interest payments when they are paid? Not sure it is 100% accurate but I am fairly sure accrued interest is priced into fixed income assets like bonds and CDs daily. Hopefully someone more knowledgeable in the space can clarify this.
It depends. Bond mutual funds typically accrue daily and pay monthly, so there is no NAV drop upon distribution. If you sell in the middle of the month, you will receive a partial distribution based on the number of days you held your shares. By contrast, bond ETFs include coupon payments in the NAV, which is deducted on the ex-dividend date. Individual bond prices function like ETFs (i.e. you are not entitled to a coupon payment unless you hold the bond on the day it is paid, so the value should be assumed to accrue directly to the price over the period between distributions).
I understand what you are saying about the difference in mutual fund and ETF, but the accrued interest should be reflected in the prices of the bonds making up and ETF.
Agreed, and they should be. I read mary1492's post as indicating that they hold a portfolio of individual bonds with a YTM of 3.6%, making a 0.6% return over 60 days a reasonable expectation. That said, it's possible the average coupon is 3.6%, but they are priced above or below par, which would change the math on expected return.
Tamalak wrote: ↑Sat Jan 22, 2022 8:39 am
I thought the essential draw of bonds was not the lower risk/reward but poor correlation with stocks. I'm not seeing that poor correlation..
Would it be clearer to you if stocks were down only 5% and bonds up 0.5%?
Down 9% vs. 0.9% looks good to me for bonds and doing exactly what one would hope.
For my own portfolio of individual municipal bonds, over the time period referenced, it is down about 0.6%, and that will be recouped within the next 60 days from interest payments, all else being equal.
Won't your bond funds be reduced by the amount of the interest payments when they are paid? Not sure it is 100% accurate but I am fairly sure accrued interest is priced into fixed income assets like bonds and CDs daily. Hopefully someone more knowledgeable in the space can clarify this.
No. That's not how bonds and (brokered) CDs work. Stocks, preferred stocks, mutual funds work that way.
When you purchase an individual bond or CD in the secondary market, you pay the bond/CD price and then accrued interest on top of that. The accrued interest will increase every day up until the payment date. The price paid for the bond/CD and mark to market do not include accrued interest. Anyone who has ever purchased/held individual bonds and/or brokered CDs knows this.
Not sure we are in any big disagreement beyond whether clean or dirty price is used.
Nowizard wrote: ↑Sun Jan 23, 2022 8:15 am
Sometimes, you make the most by "losing (at least on paper)" the least.
Quite true, and this is what many have gotten hung up on with bonds for a while now. Expected (or practically guaranteed in the case of TIPS) negative real yields are unpleasant, but many have forgotten that other assets, like stocks, can easily have real losses too.
However, there is no such thing as 'paper losses'. All losses are real, even if they are not yet realized losses.
I feel like the market surged over the last two years with extraordinary low rates. With this unwinding, you have to bail to capture those gains before everything resets back to 2018.
That's not a question of 'paper' losses or gains though. It's just market timing.
Paper gains aren't realized until you sell. Paper loses are a big unknown. You don't know how long it will take to get back what you lost. And you can always buy back in.
Consider a investor/retiree who initially allocates 66% to bonds, 33% to growth (stocks) with a view to draw down bonds at a inflation adjusted 4.5% SWR rate (3% relative to total portfolio value), non rebalanced. Spend bonds first, that transitions from 33/67 stock/bond initial to 100/0 ... averages 67/33.
Sequence of returns risk is also evident for bonds. With negative real yields in earlier years, positive real yields in later years that will be worse than if positive real yields occurred in the earlier years, negative real yields in later years, even though in both cases the outcome might broadly have averaged 0% real total returns.
That non-rebalanced 'buckets' style that averages 67/33 but starts with 33/67, ends with 100/0 might broadly be expected to yield similar outcome to that of 67/33 constant (yearly rebalanced), but individually subject to sequence of real yields
Is it better to employ the bucket approach or the constant weighted approach when the start date yields are negative? The indications as I see it are that its better to lighten up on bonds and increase other assets that have a reasonable prospect of hitting positive real yields, 67/33 yearly rebalanced. Bonds aren't doing such a good job as under positive/higher real yields.
KlangFool wrote: ↑Sat Jan 22, 2022 11:28 am
2) I am Financially Independent. Aka, I can retire any time now.
Congratulations on the new job. I don't spend as much time here as I used to, but I remember last year, or maybe the year before, that you had a post here that you were finally laid off and trying to decide your next professional steps, and you had some doubt about whether you could or wanted to find a new job. (And glad that your new job still allows you time to share your wisdom with the rest of Bogleheads.)
KlangFool wrote: ↑Sat Jan 22, 2022 11:28 am
2) I am Financially Independent. Aka, I can retire any time now.
Congratulations on the new job. I don't spend as much time here as I used to, but I remember last year, or maybe the year before, that you had a post here that you were finally laid off and trying to decide your next professional steps, and you had some doubt about whether you could or wanted to find a new job. (And glad that your new job still allows you time to share your wisdom with the rest of Bogleheads.)
HomerJ wrote: ↑Fri Jan 21, 2022 11:22 pm
Vanguard Total Stock Market Index - $10,000 invested on 1/3/2022 is worth $9,095. Down 9% in 3 weeks.
Vanguard Total Bond Market Index - $10,000 invested on 1/3/2022 is worth $9,911. Down 0.9% in 3 weeks.
Doing their job.
So far.
Guess we'll see what happens going forward.
What I do find interesting is how well Global Wellington (approx a 60/40 fund) is really holding up YTD: only down -1.53% YTD.
Willthrill81, thanks for your comment. Could you explain further? I disagree and suggest that losses and gains are semantics to explain what is happening with markets, not losses or gains until sales occur.
Nowizard wrote: ↑Mon Jan 24, 2022 9:13 am
Willthrill81, thanks for your comment. Could you explain further? I disagree and suggest that losses and gains are semantics to explain what is happening with markets, not losses or gains until sales occur.
Tim
I bought my house for $225k. It's market value is now worth $450k. Why would I need to sell the house in order for that gain to be 'real'?
What if someone bought a house back in 2007 for $500k and it's market value is now $300k. Have they not lost anything just because they have not sold?
I would say they have not lost anything in the second case or gained in the first, though they do have the potential for that. If someone has 100K in a portfolio that goes down to 90K but does not sell, and it rises to 110K, have they still lost 10k and gained 10? I would say that they have gained10 on paper but neither gained nor lost at that point.
Nowizard wrote: ↑Mon Jan 24, 2022 12:02 pm
I would say they have not lost anything in the second case or gained in the first, though they do have the potential for that. If someone has 100K in a portfolio that goes down to 90K but does not sell, and it rises to 110K, have they still lost 10k and gained 10? I would say that they have gained10 on paper but neither gained nor lost at that point.
Tim
So gains aren't real unless they are converted to cash?
What if sold my house for $450k and then immediately repurchased it for $450k? Would that make the gain real?
What if someone who is about to retire has a portfolio where 80% of the funds are gains? Does that mean that 80% of the portfolio's balance is fake?
What is the purpose of playing such Jedi mind tricks on oneself?
willthrill81 wrote: ↑Mon Jan 24, 2022 12:25 pm
What if sold my house for $450k and then immediately repurchased it for $450k? Would that make the gain real?
It would lessen the gain and make for one happy, do-nothing real estate agent.
willthrill81 wrote: ↑Sun Jan 23, 2022 12:31 pmSimilarly, people often treat 'found money' differently than earned income, but the bottom line is that it's all their money.
I've a lot of very real money earned by my 95% stock allocation that I can give back before I'd have been better off with a 40% bond allocation.
willthrill81 wrote: ↑Sun Jan 23, 2022 12:31 pmSimilarly, people often treat 'found money' differently than earned income, but the bottom line is that it's all their money.
I've a lot of very real money earned by my 95% stock allocation that I can give back before I'd have been better off with a 40% bond allocation.
Nowizard wrote: ↑Mon Jan 24, 2022 9:13 am
Willthrill81, thanks for your comment. Could you explain further? I disagree and suggest that losses and gains are semantics to explain what is happening with markets, not losses or gains until sales occur.
Tim
I bought my house for $225k. It's market value is now worth $450k. Why would I need to sell the house in order for that gain to be 'real'?
What if someone bought a house back in 2007 for $500k and it's market value is now $300k. Have they not lost anything just because they have not sold?
Today I had substantial paper losses in VTIAX.
Followed by even greater paper gains.
In the end, my paper says I had a modest real gain (that would have been considered quite big on just about any other day).
(I couldn't resist putting this down on paper. I REALLY do support the distinction Will is making. )
KlangFool wrote: ↑Sat Jan 22, 2022 11:28 am
2) I am Financially Independent. Aka, I can retire any time now.
Congratulations on the new job. I don't spend as much time here as I used to, but I remember last year, or maybe the year before, that you had a post here that you were finally laid off and trying to decide your next professional steps, and you had some doubt about whether you could or wanted to find a new job. (And glad that your new job still allows you time to share your wisdom with the rest of Bogleheads.)
Yules
Thanks.
Someone made me an offer that I cannot refuse.
A) Work from home 100% of the time.
B) 10 to 15 minutes to the office if necessary.
C) 30% to 40% increase in compensation.
D) Slower pace and interesting work.
KlangFool
I took a similar offer, but I already had A and my work is boring. Of course, I get bored easily. If it pays the bills and then quite a bit more, then I guess it is helpful for early retirement.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
james22 wrote: ↑Mon Jan 24, 2022 1:19 pm
I've a lot of very real money earned by my 95% stock allocation that I can give back before I'd have been better off with a 40% bond allocation.
I don't think the point of bonds is to maximize returns. In the last 10 years VTSMSX returned 16.16% CAGR and those in bonds today are about protecting some of those earnings. I assume many of those in bonds earlier had significant assets to protect, and that they are doing just fine after stellar stock returns.
If we can meet our goals and retire in 3-5 years or we can be 100% stocks and make this something more like 1-12 years, the rational choice is about which of the outcomes we prefer, maximizing wealth or achieving financial independence. I would argue financial independence should be more important than highest possible outcome or highest average outcome, and that the use of some bonds can help achieve this goal.
abc132 wrote: ↑Mon Jan 24, 2022 4:54 pm...bonds today are about protecting...
Yeah, I'm not sure if bonds can be thought of that way.
What will Treasuries yield once the Fed stops intervening? What'll today's Treasuries trade at then?
Why can't they be thought that way?
Bond funds are self-correcting.
If interest rates go up, sure the bond value will go down (a little), but then new bonds bought by the bond fund will have a higher interest rate, and the bond fund will slowly recover all it's losses and get back to even with all current bonds paying more than in the past.
I will totally love to see a rise to 3% interest rates... Far better than just staying near 0% for the next 10-20 years. I'd rather take 5 years to break even and then get 5-15 years of 3% dividends from then on.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
abc132 wrote: ↑Mon Jan 24, 2022 4:54 pm...bonds today are about protecting...
Yeah, I'm not sure if bonds can be thought of that way.
What will Treasuries yield once the Fed stops intervening? What'll today's Treasuries trade at then?
Why can't they be thought that way?
Bond funds are self-correcting.
If interest rates go up, sure the bond value will go down (a little), but then new bonds bought by the bond fund will have a higher interest rate, and the bond fund will slowly recover all it's losses and get back to even with all current bonds paying more than in the past.
I will totally love to see a rise to 3% interest rates... Far better than just staying near 0% for the next 10-20 years. I'd rather take 5 years to break even and then get 5-15 years of 3% dividends from then on.
What protection does the bond fund offer until it gets back to even?
I'll invest somewhere more attractive until bonds are again.