Perfect timing for EDV (Long term treasury)

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iCare
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Perfect timing for EDV (Long term treasury)

Post by iCare »

I had perfect timing to purchase EDV as a lumpsum chunk in August 2021! What an investment decision it turned out to be, with the value down 34% from the purchase price!

Did I understand correctly that it'd take a 52% recovery just to break even? I looked up that 10 years returns being a measly 1.5% and the 15-year returns being a whopping 3.7%. I further found that the standard deviation for both EDV and the stock market over the past 5 years is above 19%.

Wondering why should I hold EDV and not shift that chunk to SPY for faster recovery. Should I hold EDV as part of my portfolio? Simple math tells me that EDV sucks worse than the stock market = with high volatility with measly expected returns. And I should just cut the losses on EDV and move that money to TSM?

Am I missing something?
muffins14
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Re: Perfect timing for EDV (Long term treasury)

Post by muffins14 »

Ideally, you buy investments because they fit into your long - term plan.

EDV is a great investment if you want a non-zero allocation to bonds, and will need the money 20-50 years from now.

Do you want bonds?

Are you planning to spend this money entirely within the next 10-15 years, or will it be a longer horizon?

If answer are: “yes” and “longer”, then EDV is a great investment choice.

Making a rash decision to sell your bonds and hold only stocks is much riskier than holding bonds.
Crom laughs at your Four Winds
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iCare
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

muffins14 wrote: Mon Jan 30, 2023 6:48 am Ideally, you buy investments because they fit into your long - term plan.

EDV is a great investment if you want a non-zero allocation to bonds, and will need the money 20-50 years from now.

Do you want bonds?
As you say 20-50 years horizon, aren't stocks better for such a long term? Why even bother with EDV?
er999
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Re: Perfect timing for EDV (Long term treasury)

Post by er999 »

As someone who bought VGLT in 2021 and had large losses (not as bad as EDV but about 25%) I’d look at it as an education in long term bonds behavior. The drop in bonds is so historically bad it’s the equivalent of the Great Depression for stocks. That also means that it’s likely a great time to buy long term bonds — buying now is selling low and buying something else at a high. Of course that’s only if it makes sense to own the asset class long term.

I decided I didn’t want long term nominal bonds but I’m keeping my current allocation to see if the price spikes back in the future. No guarantees as you could miss out on stock returns in the meantime. EDV is up 9.8% is the past month so the EDV price could spike up quickly again.

I decided for my bonds to buy long term individual tips held to maturity as long as the real rate is > 1%.

Did you buy EDV hoping for the negative correlation with stocks in a market crash — that failed spectacularly in 2022 but doesn’t mean the idea is will never work. EDV or VGLT isn’t a mainstream choice so I suspect you were influenced by some of the esoteric stuff on this site. Hopefully it wasn’t too much money for you. I personally agree with you that taking risk in equities is preferable but might be better to post your entire portfolio to get a better review.
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Re: Perfect timing for EDV (Long term treasury)

Post by muffins14 »

iCare wrote: Mon Jan 30, 2023 7:53 am
muffins14 wrote: Mon Jan 30, 2023 6:48 am Ideally, you buy investments because they fit into your long - term plan.

EDV is a great investment if you want a non-zero allocation to bonds, and will need the money 20-50 years from now.

Do you want bonds?
As you say 20-50 years horizon, aren't stocks better for such a long term? Why even bother with EDV?
Bonds provide fixed income. It is a nice diversifier for stocks to make a portfolio less volatile in the income stream it provides

I was previously 80/20 with all EDV in 2019, and made nice gains in 2020 when I switched to 100/0. I decided I should be all stocks until I have about 20x expenses in my portfolio
Crom laughs at your Four Winds
Marseille07
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Re: Perfect timing for EDV (Long term treasury)

Post by Marseille07 »

iCare wrote: Mon Jan 30, 2023 6:34 am I had perfect timing to purchase EDV as a lumpsum chunk in August 2021! What an investment decision it turned out to be, with the value down 34% from the purchase price!

Did I understand correctly that it'd take a 52% recovery just to break even? I looked up that 10 years returns being a measly 1.5% and the 15-year returns being a whopping 3.7%. I further found that the standard deviation for both EDV and the stock market over the past 5 years is above 19%.

Wondering why should I hold EDV and not shift that chunk to SPY for faster recovery. Should I hold EDV as part of my portfolio? Simple math tells me that EDV sucks worse than the stock market = with high volatility with measly expected returns. And I should just cut the losses on EDV and move that money to TSM?

Am I missing something?
You aren't missing anything but there's no easy way out here.

But asking questions like this tells me you don't really have an asset allocation you're aiming for. If you want to exit EDV and go equities only, then folding might not be a bad idea though.
Triple digit golfer
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Re: Perfect timing for EDV (Long term treasury)

Post by Triple digit golfer »

If you bought in August, it was somewhere between $96-105 per share.

It dropped as far as $74 per share and is back up to $90 today.

So, you are down somewhere between 6% and 14%, not 34%.

Regardless of all that, you need to determine your long-term asset allocation and that's how you should be invested. Don't be concerned with trying to recoup losses. Your portfolio is a pile of money today. Invest it according to your long-term plan, which may or may not include long-term treasuries.
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Re: Perfect timing for EDV (Long term treasury)

Post by Beensabu »

iCare wrote: Mon Jan 30, 2023 6:34 am Am I missing something?
I'm guessing you haven't rebalanced into EDV yet? If it's part of your long-term asset allocation, then you kind of have to do that. That comes with it, if you want it to work right.
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Re: Perfect timing for EDV (Long term treasury)

Post by Hector »

What was the intention behind buying long term treasurys?
secondopinion
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Re: Perfect timing for EDV (Long term treasury)

Post by secondopinion »

iCare wrote: Mon Jan 30, 2023 6:34 am I had perfect timing to purchase EDV as a lumpsum chunk in August 2021! What an investment decision it turned out to be, with the value down 34% from the purchase price!

Did I understand correctly that it'd take a 52% recovery just to break even? I looked up that 10 years returns being a measly 1.5% and the 15-year returns being a whopping 3.7%. I further found that the standard deviation for both EDV and the stock market over the past 5 years is above 19%.

Wondering why should I hold EDV and not shift that chunk to SPY for faster recovery. Should I hold EDV as part of my portfolio? Simple math tells me that EDV sucks worse than the stock market = with high volatility with measly expected returns. And I should just cut the losses on EDV and move that money to TSM?

Am I missing something?
Never look at returns had in the past when it deals with treasuries and bonds in general. The yield of the fund is going to often be the most helpful number, if anything, as to the returns to expect. With something like EDV, the yield is sitting about I think 3.75%; this gives a ballpark of what to expect over 25 years per year (but of course the bonds renew, so there is some variability). TIPS out that far are suggesting a 1.5% real yield. Not bad, but certainly nothing to be excited about.

Now, EDV's prospectus states as much that it is more suited for institutional investors; that is, those who have to match nominal liabilities far into the future. For those investors, EDV is a "low risk" choice in actuality. But for individuals where most of the expenses are real denominated, this is a very risky prospect contingent on the ability of the government to control inflation very long-term. Now, there is some theoretical benefits; but the actual benefits will likely be limited in your case (unless you have considerable long-term nominal expenses as I mentioned).

Essentially, you are likely to be stuck with a loss at this point. The speculation failed. Let the next speculator or institutional investor take it off your hands.
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.
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iCare
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

secondopinion wrote: Mon Jan 30, 2023 4:56 pm
iCare wrote: Mon Jan 30, 2023 6:34 am I had perfect timing to purchase EDV as a lumpsum chunk in August 2021! What an investment decision it turned out to be, with the value down 34% from the purchase price!

Did I understand correctly that it'd take a 52% recovery just to break even? I looked up that 10 years returns being a measly 1.5% and the 15-year returns being a whopping 3.7%. I further found that the standard deviation for both EDV and the stock market over the past 5 years is above 19%.

Wondering why should I hold EDV and not shift that chunk to SPY for faster recovery. Should I hold EDV as part of my portfolio? Simple math tells me that EDV sucks worse than the stock market = with high volatility with measly expected returns. And I should just cut the losses on EDV and move that money to TSM?

Am I missing something?
Never look at returns had in the past when it deals with treasuries and bonds in general. The yield of the fund is going to often be the most helpful number, if anything, as to the returns to expect. With something like EDV, the yield is sitting about I think 3.75%; this gives a ballpark of what to expect over 25 years per year (but of course the bonds renew, so there is some variability). TIPS out that far are suggesting a 1.5% real yield. Not bad, but certainly nothing to be excited about.

Why do many bogleheads prefer TIPS based portfolios to the total bond market or other Treasury bonds? TIPS are often touted as a hedge against inflation, but their expected return of only 1.5% over 30 years, despite recent 30-year TIPS auctioning at 0.125% interest rates, is lower than the 4% interest rate offered by long-term Treasury bonds and even a certificate of deposit (CD). It's unclear how a TIPS auctioned at $98.10 becoming $100 after 30 years constitutes protection against inflation.

Can someone explain how TIPS protects against inflation with merely 0.125% interest rate for 30 years?
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Re: Perfect timing for EDV (Long term treasury)

Post by GAAP »

iCare wrote: Mon Jan 30, 2023 7:53 am
muffins14 wrote: Mon Jan 30, 2023 6:48 am Ideally, you buy investments because they fit into your long - term plan.

EDV is a great investment if you want a non-zero allocation to bonds, and will need the money 20-50 years from now.

Do you want bonds?
As you say 20-50 years horizon, aren't stocks better for such a long term? Why even bother with EDV?
Treasuries are the only asset class with any degree of negative correlation to stocks -- it's very minimal, but better than anything that has positive correlation.

EDV provides better diversification for stocks if the duration is appropriate -- the 20-50 years noted above.

Neither of the above statements requires stocks and EDV to move in opposite directions at all times.

There have been periods of 20 years or more where bonds out-performed stocks. There is no requirement that stocks must do better over long periods.

The longer the term of the bond fund, the more volatile it will be, and EDV is pretty much at the upper end.

If EDV meets your needs, then it is a good choice. If it doesn't, then it isn't. Either way, needs determination is an important predecessor to investment selection.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
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Re: Perfect timing for EDV (Long term treasury)

Post by secondopinion »

iCare wrote: Mon Jan 30, 2023 6:10 pm
secondopinion wrote: Mon Jan 30, 2023 4:56 pm
iCare wrote: Mon Jan 30, 2023 6:34 am I had perfect timing to purchase EDV as a lumpsum chunk in August 2021! What an investment decision it turned out to be, with the value down 34% from the purchase price!

Did I understand correctly that it'd take a 52% recovery just to break even? I looked up that 10 years returns being a measly 1.5% and the 15-year returns being a whopping 3.7%. I further found that the standard deviation for both EDV and the stock market over the past 5 years is above 19%.

Wondering why should I hold EDV and not shift that chunk to SPY for faster recovery. Should I hold EDV as part of my portfolio? Simple math tells me that EDV sucks worse than the stock market = with high volatility with measly expected returns. And I should just cut the losses on EDV and move that money to TSM?

Am I missing something?
Never look at returns had in the past when it deals with treasuries and bonds in general. The yield of the fund is going to often be the most helpful number, if anything, as to the returns to expect. With something like EDV, the yield is sitting about I think 3.75%; this gives a ballpark of what to expect over 25 years per year (but of course the bonds renew, so there is some variability). TIPS out that far are suggesting a 1.5% real yield. Not bad, but certainly nothing to be excited about.

Why do many bogleheads prefer TIPS based portfolios to the total bond market or other Treasury bonds? TIPS are often touted as a hedge against inflation, but their expected return of only 1.5% over 30 years, despite recent 30-year TIPS auctioning at 0.125% interest rates, is lower than the 4% interest rate offered by long-term Treasury bonds and even a certificate of deposit (CD). It's unclear how a TIPS auctioned at $98.10 becoming $100 after 30 years constitutes protection against inflation.

Can someone explain how TIPS protects against inflation with merely 0.125% interest rate for 30 years?
The current real yield is 1.5%; the inflation adjustment is for the most part not paid out until maturity (except the minor adjustments to the coupon payments). The 0.125% you see on the latest TIPS is the coupon, not the real yield. The TIPS is currently selling at a discount.

The price quoted is without the inflation factor included (which is a kind of multiplier). If you were to purchase the TIPS, you would see that the inflation factor gets included to the price.
Last edited by secondopinion on Mon Jan 30, 2023 6:25 pm, edited 2 times in total.
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.
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iCare
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

Hector wrote: Mon Jan 30, 2023 4:53 pm What was the intention behind buying long term treasurys?
I don't remember exactly why I did it. The only reason I remember was 2021, the market was starting to get frothy and I was listening to the "talking heads". Invested a large sum in long-term Treasuries, which were thought to be an unheralded safeguard for the portfolios of savants during the 2008 financial crisis. Lots of long-term charts were shared on these forums of almost bulletproof returns of treasuries (cushioning perfectly to stock market calamity).
Last edited by iCare on Mon Jan 30, 2023 6:38 pm, edited 1 time in total.
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Hector
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Re: Perfect timing for EDV (Long term treasury)

Post by Hector »

iCare wrote: Mon Jan 30, 2023 6:24 pm
Hector wrote: Mon Jan 30, 2023 4:53 pm What was the intention behind buying long term treasurys?
I don't know exactly why I did it. The only reason I remember was 2021, the market was starting to get frothy and I was listening to the "talking heads". Invested a large sum in long-term Treasuries, which were thought to be an unheralded safeguard for the portfolios of savants during the 2008 financial crisis. Lots of long-term charts were shared on these forums of almost bulletproof returns of treasuries (cushioning perfectly to stock market calamity).
If you can not sleep well because of that, I think it might be time to sell it. Be prepared to have buyers resources if long term treasurys shoot up in near future.

I hope you learn from this, and invest into something you are comfortable with.
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

secondopinion wrote: Mon Jan 30, 2023 6:23 pm

The current real yield is 1.5%; the inflation adjustment is for the most part not paid out until maturity (except the minor adjustments to the coupon payments). The 0.125% you see on the latest TIPS is the coupon, not the real yield. The TIPS is currently selling at a discount.

The price quoted is without the inflation factor included (which is a kind of multiplier). If you were to purchase the TIPS, you would see that the inflation factor gets included to the price.
The current annual US Inflation Rate is at 6.45%, compared to 7.11% last month and 7.04% last year. This is higher than the long term average of 3.27%. So what is this Real Yield 1.5%? Shouldn't the TIPS be discounted at long term inflation rates?

treasurydirect shows 30 year TIPs price at $98.102682 and not at $63.9762 (for 1.5% return) OR $38.420 (for 3.27% return) in 30 years.
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iCare
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

Hector wrote: Mon Jan 30, 2023 6:30 pm
iCare wrote: Mon Jan 30, 2023 6:24 pm
Hector wrote: Mon Jan 30, 2023 4:53 pm What was the intention behind buying long term treasurys?
I don't know exactly why I did it. The only reason I remember was 2021, the market was starting to get frothy and I was listening to the "talking heads". Invested a large sum in long-term Treasuries, which were thought to be an unheralded safeguard for the portfolios of savants during the 2008 financial crisis. Lots of long-term charts were shared on these forums of almost bulletproof returns of treasuries (cushioning perfectly to stock market calamity).
If you can not sleep well because of that, I think it might be time to sell it. Be prepared to have buyers resources if long term treasurys shoot up in near future.

I hope you learn from this, and invest into something you are comfortable with.
hahaha didn't realize that you asked a question just to lecture. How smart! You got me!
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Re: Perfect timing for EDV (Long term treasury)

Post by Hector »

iCare wrote: Mon Jan 30, 2023 6:40 pm
Hector wrote: Mon Jan 30, 2023 6:30 pm
iCare wrote: Mon Jan 30, 2023 6:24 pm
Hector wrote: Mon Jan 30, 2023 4:53 pm What was the intention behind buying long term treasurys?
I don't know exactly why I did it. The only reason I remember was 2021, the market was starting to get frothy and I was listening to the "talking heads". Invested a large sum in long-term Treasuries, which were thought to be an unheralded safeguard for the portfolios of savants during the 2008 financial crisis. Lots of long-term charts were shared on these forums of almost bulletproof returns of treasuries (cushioning perfectly to stock market calamity).
If you can not sleep well because of that, I think it might be time to sell it. Be prepared to have buyers resources if long term treasurys shoot up in near future.

I hope you learn from this, and invest into something you are comfortable with.
hahaha didn't realize that you asked a question just to lecture. How smart! You got me!
That is one downside of asking someone. You might not hear what you want sometimes.
FWIW, I bought long term treasurys once. I was not comfortable with big changes. And I sold it. Even though, I sold it for more that what I paid, I realized that long term treasurys are not for me.
Last edited by Hector on Tue Jan 31, 2023 12:11 am, edited 1 time in total.
secondopinion
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Re: Perfect timing for EDV (Long term treasury)

Post by secondopinion »

iCare wrote: Mon Jan 30, 2023 6:33 pm
secondopinion wrote: Mon Jan 30, 2023 6:23 pm

The current real yield is 1.5%; the inflation adjustment is for the most part not paid out until maturity (except the minor adjustments to the coupon payments). The 0.125% you see on the latest TIPS is the coupon, not the real yield. The TIPS is currently selling at a discount.

The price quoted is without the inflation factor included (which is a kind of multiplier). If you were to purchase the TIPS, you would see that the inflation factor gets included to the price.
The current annual US Inflation Rate is at 6.45%, compared to 7.11% last month and 7.04% last year. This is higher than the long term average of 3.27%. So what is this Real Yield 1.5%? Shouldn't the TIPS be discounted at long term inflation rates?

treasurydirect shows 30 year TIPs price at $98.102682 and not at $63.9762 (for 1.5% return) OR $38.420 (for 3.27% return) in 30 years.
TreasuryDirect is wrong. The Feb 2052 TIPS has $69.914 as the clean ask price on Fidelity with $74.773023 as the adjusted price (it has an inflation factor of 1.06950); the 1.387% real yield would be explained. The amount gained (barring real yield changes) is inflation + quoted number. However, if real yields change due to market pricing, it can greatly change the price (like EDV was impacted by changes in market yield). However, you get the real yield once the TIPS matures. That is, 1.387% yield after adjusting for inflation is what the 30-year TIPS gives.

But you were quoted an equivalent TIPS for EDV and that is not the 30-year TIPS. Since EDV is 20 to 30 years with STRIPS, I took the 25-year TIPS (which does have a higher real yield around 1.5%). I gave a rough estimate because that is the best one will get.

What the past/present inflation was is mostly irrelevant to market pricing; it is the expected future that the market cares about.
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.
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iCare
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

secondopinion wrote: Mon Jan 30, 2023 6:51 pm
iCare wrote: Mon Jan 30, 2023 6:33 pm
secondopinion wrote: Mon Jan 30, 2023 6:23 pm

The current real yield is 1.5%; the inflation adjustment is for the most part not paid out until maturity (except the minor adjustments to the coupon payments). The 0.125% you see on the latest TIPS is the coupon, not the real yield. The TIPS is currently selling at a discount.

The price quoted is without the inflation factor included (which is a kind of multiplier). If you were to purchase the TIPS, you would see that the inflation factor gets included to the price.
The current annual US Inflation Rate is at 6.45%, compared to 7.11% last month and 7.04% last year. This is higher than the long term average of 3.27%. So what is this Real Yield 1.5%? Shouldn't the TIPS be discounted at long term inflation rates?

treasurydirect shows 30 year TIPs price at $98.102682 and not at $63.9762 (for 1.5% return) OR $38.420 (for 3.27% return) in 30 years.
TreasuryDirect is wrong. The Feb 2052 TIPS has $69.914 as the clean ask price on Fidelity with $74.773023 as the adjusted price (it has an inflation factor of 1.06950); the 1.387% real yield would be explained. The amount gained (barring real yield changes) is inflation + quoted number. However, if real yields change due to market pricing, it can greatly change the price (like EDV was impacted by changes in market yield). However, you get the real yield once the TIPS matures. That is, 1.387% yield after adjusting for inflation is what the 30-year TIPS gives.

But you were quoted an equivalent TIPS for EDV and that is not the 30-year TIPS. Since EDV is 20 to 30 years with STRIPS, I took the 25-year TIPS (which does have a higher real yield around 1.5%). I gave a rough estimate because that is the best one will get.

What the past/present inflation was is mostly irrelevant to market pricing; it is the expected future that the market cares about.
OK, that explains the discrepancy somewhat to start with. But why is the real yield so much lower than inflation? where is the protection of the dollar against inflation baked in these numbers? If one puts $1 in TIPS today, it's not protecting the dollar against inflation.
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Re: Perfect timing for EDV (Long term treasury)

Post by secondopinion »

iCare wrote: Mon Jan 30, 2023 7:03 pm
secondopinion wrote: Mon Jan 30, 2023 6:51 pm
iCare wrote: Mon Jan 30, 2023 6:33 pm
secondopinion wrote: Mon Jan 30, 2023 6:23 pm

The current real yield is 1.5%; the inflation adjustment is for the most part not paid out until maturity (except the minor adjustments to the coupon payments). The 0.125% you see on the latest TIPS is the coupon, not the real yield. The TIPS is currently selling at a discount.

The price quoted is without the inflation factor included (which is a kind of multiplier). If you were to purchase the TIPS, you would see that the inflation factor gets included to the price.
The current annual US Inflation Rate is at 6.45%, compared to 7.11% last month and 7.04% last year. This is higher than the long term average of 3.27%. So what is this Real Yield 1.5%? Shouldn't the TIPS be discounted at long term inflation rates?

treasurydirect shows 30 year TIPs price at $98.102682 and not at $63.9762 (for 1.5% return) OR $38.420 (for 3.27% return) in 30 years.
TreasuryDirect is wrong. The Feb 2052 TIPS has $69.914 as the clean ask price on Fidelity with $74.773023 as the adjusted price (it has an inflation factor of 1.06950); the 1.387% real yield would be explained. The amount gained (barring real yield changes) is inflation + quoted number. However, if real yields change due to market pricing, it can greatly change the price (like EDV was impacted by changes in market yield). However, you get the real yield once the TIPS matures. That is, 1.387% yield after adjusting for inflation is what the 30-year TIPS gives.

But you were quoted an equivalent TIPS for EDV and that is not the 30-year TIPS. Since EDV is 20 to 30 years with STRIPS, I took the 25-year TIPS (which does have a higher real yield around 1.5%). I gave a rough estimate because that is the best one will get.

What the past/present inflation was is mostly irrelevant to market pricing; it is the expected future that the market cares about.
OK, that explains the discrepancy somewhat to start with. But why is the real yield so much lower than inflation? where is the protection of the dollar against inflation baked in these numbers? If one puts $1 in TIPS today, it's not protecting the dollar against inflation.
1.5% real yield means "inflation + 1.5%". It is the amount in excess to inflation; TIPS protects the dollar just fine.
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.
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iCare
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

secondopinion wrote: Mon Jan 30, 2023 7:07 pm
iCare wrote: Mon Jan 30, 2023 7:03 pm
secondopinion wrote: Mon Jan 30, 2023 6:51 pm
iCare wrote: Mon Jan 30, 2023 6:33 pm
secondopinion wrote: Mon Jan 30, 2023 6:23 pm

The current real yield is 1.5%; the inflation adjustment is for the most part not paid out until maturity (except the minor adjustments to the coupon payments). The 0.125% you see on the latest TIPS is the coupon, not the real yield. The TIPS is currently selling at a discount.

The price quoted is without the inflation factor included (which is a kind of multiplier). If you were to purchase the TIPS, you would see that the inflation factor gets included to the price.
The current annual US Inflation Rate is at 6.45%, compared to 7.11% last month and 7.04% last year. This is higher than the long term average of 3.27%. So what is this Real Yield 1.5%? Shouldn't the TIPS be discounted at long term inflation rates?

treasurydirect shows 30 year TIPs price at $98.102682 and not at $63.9762 (for 1.5% return) OR $38.420 (for 3.27% return) in 30 years.
TreasuryDirect is wrong. The Feb 2052 TIPS has $69.914 as the clean ask price on Fidelity with $74.773023 as the adjusted price (it has an inflation factor of 1.06950); the 1.387% real yield would be explained. The amount gained (barring real yield changes) is inflation + quoted number. However, if real yields change due to market pricing, it can greatly change the price (like EDV was impacted by changes in market yield). However, you get the real yield once the TIPS matures. That is, 1.387% yield after adjusting for inflation is what the 30-year TIPS gives.

But you were quoted an equivalent TIPS for EDV and that is not the 30-year TIPS. Since EDV is 20 to 30 years with STRIPS, I took the 25-year TIPS (which does have a higher real yield around 1.5%). I gave a rough estimate because that is the best one will get.

What the past/present inflation was is mostly irrelevant to market pricing; it is the expected future that the market cares about.
OK, that explains the discrepancy somewhat to start with. But why is the real yield so much lower than inflation? where is the protection of the dollar against inflation baked in these numbers? If one puts $1 in TIPS today, it's not protecting the dollar against inflation.
1.5% real yield means "inflation + 1.5%". It is the amount in excess to inflation; TIPS protects the dollar just fine.
hmmm... I don't see if holding 30-year tips to maturity, how does it protect a dollar against inflation.
But then I went back to see that from 2001, the return of TIPS=4.5%, which is higher than long-term average inflation. 3.25% (long-term inflation) + 1.25% above?
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Re: Perfect timing for EDV (Long term treasury)

Post by secondopinion »

iCare wrote: Mon Jan 30, 2023 7:39 pm
secondopinion wrote: Mon Jan 30, 2023 7:07 pm
iCare wrote: Mon Jan 30, 2023 7:03 pm
secondopinion wrote: Mon Jan 30, 2023 6:51 pm
iCare wrote: Mon Jan 30, 2023 6:33 pm

The current annual US Inflation Rate is at 6.45%, compared to 7.11% last month and 7.04% last year. This is higher than the long term average of 3.27%. So what is this Real Yield 1.5%? Shouldn't the TIPS be discounted at long term inflation rates?

treasurydirect shows 30 year TIPs price at $98.102682 and not at $63.9762 (for 1.5% return) OR $38.420 (for 3.27% return) in 30 years.
TreasuryDirect is wrong. The Feb 2052 TIPS has $69.914 as the clean ask price on Fidelity with $74.773023 as the adjusted price (it has an inflation factor of 1.06950); the 1.387% real yield would be explained. The amount gained (barring real yield changes) is inflation + quoted number. However, if real yields change due to market pricing, it can greatly change the price (like EDV was impacted by changes in market yield). However, you get the real yield once the TIPS matures. That is, 1.387% yield after adjusting for inflation is what the 30-year TIPS gives.

But you were quoted an equivalent TIPS for EDV and that is not the 30-year TIPS. Since EDV is 20 to 30 years with STRIPS, I took the 25-year TIPS (which does have a higher real yield around 1.5%). I gave a rough estimate because that is the best one will get.

What the past/present inflation was is mostly irrelevant to market pricing; it is the expected future that the market cares about.
OK, that explains the discrepancy somewhat to start with. But why is the real yield so much lower than inflation? where is the protection of the dollar against inflation baked in these numbers? If one puts $1 in TIPS today, it's not protecting the dollar against inflation.
1.5% real yield means "inflation + 1.5%". It is the amount in excess to inflation; TIPS protects the dollar just fine.
hmmm... I don't see if holding 30-year tips to maturity, how does it protect a dollar against inflation.
But then I went back to see that from 2001, the return of TIPS=4.5%, which is higher than long-term average inflation. 3.25% (long-term inflation) + 1.25% above?
The inflation adjustment is put to the principal at maturity. Unadjusted pricing will not show it. If you tried to sell the TIPS on the secondary market, they would have to respect that inflation adjustment obtained thus far.
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.
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

secondopinion wrote: Mon Jan 30, 2023 7:44 pm The Feb 2052 TIPS has $69.914 as the clean ask price on Fidelity with $74.773023 as the adjusted price (it has an inflation factor of 1.06950); the 1.387% real yield would be explained.
.......
The inflation adjustment is put to the principal at maturity. Unadjusted pricing will not show it. If you tried to sell the TIPS on the secondary market, they would have to respect that inflation adjustment obtained thus far.
The example you took, Feb 2052 TIPS @$69.914 today, will it mature at $100 or $100*(1+inflation)^29?
Let's assume inflation remains at 3.25% average for the next 30 years, will the TIPs mature at = $261 instead of $100 in Feb 2052?
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Re: Perfect timing for EDV (Long term treasury)

Post by secondopinion »

iCare wrote: Mon Jan 30, 2023 8:01 pm
secondopinion wrote: Mon Jan 30, 2023 7:44 pm The Feb 2052 TIPS has $69.914 as the clean ask price on Fidelity with $74.773023 as the adjusted price (it has an inflation factor of 1.06950); the 1.387% real yield would be explained.
.......
The inflation adjustment is put to the principal at maturity. Unadjusted pricing will not show it. If you tried to sell the TIPS on the secondary market, they would have to respect that inflation adjustment obtained thus far.
The example you took, Feb 2052 TIPS @$69.914 today, will it mature at $100 or $100*(1+inflation)^29?
Let's assume inflation remains at 3.25% average for the next 30 years, will the TIPs mature at = $261 instead of $100 in Feb 2052?
Closer to the $261.
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Re: Perfect timing for EDV (Long term treasury)

Post by Beensabu »

iCare wrote: Mon Jan 30, 2023 6:24 pm
Hector wrote: Mon Jan 30, 2023 4:53 pm What was the intention behind buying long term treasurys?
I don't remember exactly why I did it. The only reason I remember was 2021, the market was starting to get frothy and I was listening to the "talking heads". Invested a large sum in long-term Treasuries, which were thought to be an unheralded safeguard for the portfolios of savants during the 2008 financial crisis. Lots of long-term charts were shared on these forums of almost bulletproof returns of treasuries (cushioning perfectly to stock market calamity).
I don't know about "unheralded safeguard", but they have been good to have during past deflationary recessions. It's just that this one has been inflationary, and they're terrible for those. But we'd had a long string of Type 1, and it had been a long time since Type 2.

But we know you didn't buy them for income, right? Me neither.

So I'll ask you this: Now that you've already experienced (probably, hopefully, most) of the downside of holding very long-term treasuries through an inflationary recession, do you think they're worth holding onto in case of a deflationary recession (the type you got them for) at some point in the future? Or is that not worth hedging against anymore all of a sudden? Or... were you just planning on holding EDV short-term to boost you through an equity downturn and then sell it for a gain? If it's the latter, then you might as well get out. But know they could come in handy next time we hit a Type 1.
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Re: Perfect timing for EDV (Long term treasury)

Post by Geologist »

secondopinion wrote: Mon Jan 30, 2023 6:51 pm
iCare wrote: Mon Jan 30, 2023 6:33 pm
secondopinion wrote: Mon Jan 30, 2023 6:23 pm

The current real yield is 1.5%; the inflation adjustment is for the most part not paid out until maturity (except the minor adjustments to the coupon payments). The 0.125% you see on the latest TIPS is the coupon, not the real yield. The TIPS is currently selling at a discount.

The price quoted is without the inflation factor included (which is a kind of multiplier). If you were to purchase the TIPS, you would see that the inflation factor gets included to the price.
The current annual US Inflation Rate is at 6.45%, compared to 7.11% last month and 7.04% last year. This is higher than the long term average of 3.27%. So what is this Real Yield 1.5%? Shouldn't the TIPS be discounted at long term inflation rates?

treasurydirect shows 30 year TIPs price at $98.102682 and not at $63.9762 (for 1.5% return) OR $38.420 (for 3.27% return) in 30 years.
TreasuryDirect is wrong. The Feb 2052 TIPS has $69.914 as the clean ask price on Fidelity with $74.773023 as the adjusted price (it has an inflation factor of 1.06950); the 1.387% real yield would be explained. The amount gained (barring real yield changes) is inflation + quoted number. However, if real yields change due to market pricing, it can greatly change the price (like EDV was impacted by changes in market yield). However, you get the real yield once the TIPS matures. That is, 1.387% yield after adjusting for inflation is what the 30-year TIPS gives.
For what it is worth, TreasuryDirect was not wrong. $98.102682 was indeed the (adjusted) price…on the day the February 2052 TIPS was auctioned (Feb. 17, 2022)*. What was wrong was the OP assuming the auction price would still be current 11 ½ months later.

As you point out, the value of a TIPS (or any bond) changes with the market and you were also explaining how the inflation adjustment works with TIPS.

*see https://www.treasurydirect.gov/instit/a ... 0217_3.pdf
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Re: Perfect timing for EDV (Long term treasury)

Post by PowderDay9 »

Just a couple years ago there were so many threads on long-term treasuries and how well they had done over the last decade. Interesting how the tide has turned.

Remember this thread?
viewtopic.php?t=287627
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

PowderDay9 wrote: Mon Jan 30, 2023 10:39 pm Just a couple years ago there were so many threads on long-term treasuries and how well they had done over the last decade. Interesting how the tide has turned.

Remember this thread?
viewtopic.php?t=287627
Exactly!
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Re: Perfect timing for EDV (Long term treasury)

Post by muffins14 »

iCare wrote: Mon Jan 30, 2023 10:45 pm
PowderDay9 wrote: Mon Jan 30, 2023 10:39 pm Just a couple years ago there were so many threads on long-term treasuries and how well they had done over the last decade. Interesting how the tide has turned.

Remember this thread?
viewtopic.php?t=287627
Exactly!
That is a good thread with sound reasoning. Your mistake is buying long-term treasuries because you wanted short-term price stability (which they are not at all intended to provide) rather than long-term income stability (which they do provide)

It’s not the product’s fault If the buyer is confused and has no plan
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

muffins14 wrote: Mon Jan 30, 2023 10:49 pm
iCare wrote: Mon Jan 30, 2023 10:45 pm
PowderDay9 wrote: Mon Jan 30, 2023 10:39 pm Just a couple years ago there were so many threads on long-term treasuries and how well they had done over the last decade. Interesting how the tide has turned.

Remember this thread?
viewtopic.php?t=287627
Exactly!
That is a good thread with sound reasoning. Your mistake is buying long-term treasuries because you wanted short-term price stability (which they are not at all intended to provide) rather than long-term income stability (which they do provide)

It’s not the product’s fault If the buyer is confused and has no plan
I noticed that in the 2019 thread of discussion on long-term treasury, the suggestion was made to allocate first 20% of a portfolio to long-term Treasury bonds. [Discourteous comment removed by moderator Kendall.]

Your inconsistent advice is causing confusion and not that buyers are confused or don't have plans. It's a classical timing problem, a new position can sink initially!

The intent of the discussion was to get opinions on staying put with EDV or switching to stocks for the long term? Not expected calling faults...
Last edited by iCare on Mon Jan 30, 2023 11:29 pm, edited 1 time in total.
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Re: Perfect timing for EDV (Long term treasury)

Post by Hyperchicken »

Scenario A
- Investor buys security X because they expect it to literally never go down
- Security X goes down
- Investor concludes that buying X was clearly a mistake, and sells at the bottom

Scenario B
- Investor buys security X because they want to be exposed to X, as in, it fits their portfolio
- Security X goes down
- Original reasoning still applies - position in X provides the investor with the exposure they wanted
- Investor continues holding X, rebalancing into X as required to maintain asset allocation
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

Hyperchicken wrote: Mon Jan 30, 2023 11:28 pm Scenario A
- Investor buys security X because they expect it to literally never go down
- Security X goes down
- Investor concludes that buying X was clearly a mistake, and sells at the bottom

Scenario B
- Investor buys security X because they want to be exposed to X, as in, it fits their portfolio
- Security X goes down
- Original reasoning still applies - position in X provides the investor with the exposure they wanted
- Investor continues holding X, rebalancing into X as required to maintain asset allocation
Your response seems arbitrary. Numerous other scenarios can exist too. Can you clarify your message? Are you myopically fixated on the mistake of the buyer? We are not talking about A security but the recovery of long-term treasury funds here.
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Re: Perfect timing for EDV (Long term treasury)

Post by Hyperchicken »

iCare wrote: Mon Jan 30, 2023 11:36 pm Your response seems arbitrary. Numerous other scenarios can exist too. Can you clarify your message? Are you myopically fixated on the mistake of the buyer? We are not talking about A security but the recovery of long-term treasury funds here.
ETF is a type of security. https://en.wikipedia.org/wiki/Security_(finance)

Also, your question is - "Am I missing something?" And then, when asked "What was the intention behind buying long term treasurys?" you replied - "I don't remember exactly why I did it." It could be more productive to take notes of why you are investing in EDV, etc. Later you can reference that to evaluate your decisions.
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Re: Perfect timing for EDV (Long term treasury)

Post by Beensabu »

iCare wrote: Mon Jan 30, 2023 11:16 pm
muffins14 wrote: Mon Jan 30, 2023 10:49 pm Your mistake is buying long-term treasuries because you wanted short-term price stability (which they are not at all intended to provide) rather than long-term income stability (which they do provide)

It’s not the product’s fault If the buyer is confused and has no plan
I noticed that in the 2019 thread of discussion on long-term treasury, the suggestion was made to allocate first 20% of a portfolio to long-term Treasury bonds. [Discourteous comment removed by moderator Kendall.]
Whoa... If someone is buying long-term treasuries for long-term income stability, higher yields are better. Seems pretty consistent to me. I was mainly balking at inflation risk on that thread, and I got told "well, there's TIPS" - and then I went and bought nominals anyway.

But I get you. I expected the same thing you did from long-term treasuries, even though I was warned of the other possibility, both directly and indirectly. Because those warnings pretty much peppered every LTT thread from since I started reading here (and also before). So I wasn't surprised by the last couple years, just disappointed in my terrible timing and having failed what Bernstein has recently called an "IQ test"... :annoyed But you know... I did rebalance earlier this month, and it was almost entirely into LTTs (that's how much that allocation sucked when viewed individually). Because if you're going to do a thing, do it right, and that means looking at your portfolio as a whole.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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Re: Perfect timing for EDV (Long term treasury)

Post by iCare »

Beensabu wrote: Mon Jan 30, 2023 11:59 pm
iCare wrote: Mon Jan 30, 2023 11:16 pm
muffins14 wrote: Mon Jan 30, 2023 10:49 pm Your mistake is buying long-term treasuries because you wanted short-term price stability (which they are not at all intended to provide) rather than long-term income stability (which they do provide)

It’s not the product’s fault If the buyer is confused and has no plan
I noticed that in the 2019 thread of discussion on long-term treasury, the suggestion was made to allocate first 20% of a portfolio to long-term Treasury bonds. [Discourteous comment removed by moderator Kendall.]
Whoa... If someone is buying long-term treasuries for long-term income stability, higher yields are better. Seems pretty consistent to me. I was mainly balking at inflation risk on that thread, and I got told "well, there's TIPS" - and then I went and bought nominals anyway.

But I get you. I expected the same thing you did from long-term treasuries, even though I was warned of the other possibility, both directly and indirectly. Because those warnings pretty much peppered every LTT thread from since I started reading here (and also before). So I wasn't surprised by the last couple years, just disappointed in my terrible timing and having failed what Bernstein has recently called an "IQ test"... :annoyed But you know... I did rebalance earlier this month, and it was almost entirely into LTTs (that's how much that allocation sucked when viewed individually). Because if you're going to do a thing, do it right, and that means looking at your portfolio as a whole.
After thinking through various points raised on this thread, I am exploring following changes:
1) Sell EDV to buy VTI or VT for long term recovery of 52% loss or even buy EDV (which has 4% yield) ?
2) Buy BND+TIP as the allocation of Bonds for negative correlation
[Discourteous comment removed by moderator Kendall.]

I learned a lot about TIPS in last few days! thanks for sharing the knowledge.
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Re: Perfect timing for EDV (Long term treasury)

Post by secondopinion »

Beensabu wrote: Mon Jan 30, 2023 11:59 pm
iCare wrote: Mon Jan 30, 2023 11:16 pm
muffins14 wrote: Mon Jan 30, 2023 10:49 pm Your mistake is buying long-term treasuries because you wanted short-term price stability (which they are not at all intended to provide) rather than long-term income stability (which they do provide)

It’s not the product’s fault If the buyer is confused and has no plan
I noticed that in the 2019 thread of discussion on long-term treasury, the suggestion was made to allocate first 20% of a portfolio to long-term Treasury bonds. [Discourteous comment removed by moderator Kendall.]
Whoa... If someone is buying long-term treasuries for long-term income stability, higher yields are better. Seems pretty consistent to me. I was mainly balking at inflation risk on that thread, and I got told "well, there's TIPS" - and then I went and bought nominals anyway.

But I get you. I expected the same thing you did from long-term treasuries, even though I was warned of the other possibility, both directly and indirectly. Because those warnings pretty much peppered every LTT thread from since I started reading here (and also before). So I wasn't surprised by the last couple years, just disappointed in my terrible timing and having failed what Bernstein has recently called an "IQ test"... :annoyed But you know... I did rebalance earlier this month, and it was almost entirely into LTTs (that's how much that allocation sucked when viewed individually). Because if you're going to do a thing, do it right, and that means looking at your portfolio as a whole.
My warnings were there:
Taking a bold long-term position on the dollar is not risk-free. Taking a bold long-term position on stocks is definitely not risk-free. The equity risk premium is not guaranteed to happen; it is no free lunch.
My views on LTTs are quite a bit different; unless one has a nominal expense long into the future, LTTs are a position on the long-term future of the US dollar. The core question is how it compares to inflation and the US dollar relates to other countries' currencies.

I no longer see LTTs as safe even for the long term if no expenses get matched up (or even close to being matched up). They are a risk asset in this case.
These were posted very early 2022.
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Re: Perfect timing for EDV (Long term treasury)

Post by secondopinion »

iCare wrote: Tue Jan 31, 2023 12:37 am
Beensabu wrote: Mon Jan 30, 2023 11:59 pm
iCare wrote: Mon Jan 30, 2023 11:16 pm
muffins14 wrote: Mon Jan 30, 2023 10:49 pm Your mistake is buying long-term treasuries because you wanted short-term price stability (which they are not at all intended to provide) rather than long-term income stability (which they do provide)

It’s not the product’s fault If the buyer is confused and has no plan
I noticed that in the 2019 thread of discussion on long-term treasury, the suggestion was made to allocate first 20% of a portfolio to long-term Treasury bonds. [Discourteous comment removed by moderator Kendall.]
Whoa... If someone is buying long-term treasuries for long-term income stability, higher yields are better. Seems pretty consistent to me. I was mainly balking at inflation risk on that thread, and I got told "well, there's TIPS" - and then I went and bought nominals anyway.

But I get you. I expected the same thing you did from long-term treasuries, even though I was warned of the other possibility, both directly and indirectly. Because those warnings pretty much peppered every LTT thread from since I started reading here (and also before). So I wasn't surprised by the last couple years, just disappointed in my terrible timing and having failed what Bernstein has recently called an "IQ test"... :annoyed But you know... I did rebalance earlier this month, and it was almost entirely into LTTs (that's how much that allocation sucked when viewed individually). Because if you're going to do a thing, do it right, and that means looking at your portfolio as a whole.
After thinking through various points raised on this thread, I am exploring following changes:
1) Sell EDV to buy VTI or VT for long term recovery of 52% loss or even buy EDV (which has 4% yield) ?
2) Buy BND+TIP as the allocation of Bonds for negative correlation
[Discourteous comment removed by moderator Kendall.]

I learned a lot about TIPS in last few days! thanks for sharing the knowledge.
You are welcome. I am certainly not a Boglehead in the traditional sense and probably not one by many, but I am an investor/speculator who takes their money seriously. I hope things go better for you going forward.
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.
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Re: Perfect timing for EDV (Long term treasury)

Post by invest4 »

iCare wrote: Tue Jan 31, 2023 12:37 am After thinking through various points raised on this thread, I am exploring following changes:
1) Sell EDV to buy VTI or VT for long term recovery of 52% loss or even buy EDV (which has 4% yield) ?
2) Buy BND+TIP as the allocation of Bonds for negative correlation
[Discourteous comment removed by moderator Kendall.]

I learned a lot about TIPS in last few days! thanks for sharing the knowledge.
* Maybe I missed it upthread, but what % of your portfolio / how much $$ do you have invested EDV?

* If you now want to change (buy high and sell low) what is your reasoning and what do you want your portfolio to look like going forward?

* Switching to VTI right now is also no sure thing. If you don’t have a solid long term plan you believe in, you are just guessing and likely to find yourself in a similar situation as now.

* I have found the learning curve with bonds to be much more challenging than stocks. I have been reading about TIPS for months…the struggle continues.

Perhaps you have fared better and have clarity on your long term way forward.

If not, I would strongly encourage to move more slowly and purposefully while you sort it out.

Best wishes.
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Re: Perfect timing for EDV (Long term treasury)

Post by muffins14 »

iCare wrote: Mon Jan 30, 2023 11:16 pm
muffins14 wrote: Mon Jan 30, 2023 10:49 pm
iCare wrote: Mon Jan 30, 2023 10:45 pm
PowderDay9 wrote: Mon Jan 30, 2023 10:39 pm Just a couple years ago there were so many threads on long-term treasuries and how well they had done over the last decade. Interesting how the tide has turned.

Remember this thread?
viewtopic.php?t=287627
Exactly!
That is a good thread with sound reasoning. Your mistake is buying long-term treasuries because you wanted short-term price stability (which they are not at all intended to provide) rather than long-term income stability (which they do provide)

It’s not the product’s fault If the buyer is confused and has no plan
I noticed that in the 2019 thread of discussion on long-term treasury, the suggestion was made to allocate first 20% of a portfolio to long-term Treasury bonds. [Discourteous comment removed by moderator Kendall.]

Your inconsistent advice is causing confusion and not that buyers are confused or don't have plans. It's a classical timing problem, a new position can sink initially!

The intent of the discussion was to get opinions on staying put with EDV or switching to stocks for the long term? Not expected calling faults...
I am not changing my advice. I am still recommending that if you have long-term needs and want bonds, long-term treasuries are the appropriate option. In that thread, do I recommend buying short-term treasuries for those with long-term needs? Or long-term treasuries for those with short-term needs? If I ever did so, that was a mistake or typo.
Last edited by muffins14 on Tue Jan 31, 2023 7:16 am, edited 2 times in total.
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Re: Perfect timing for EDV (Long term treasury)

Post by muffins14 »

Can we revisit the questions I asked you?

1) Do you want bonds?

2) Are you planning to spend this money entirely within the next 10-15 years, or will it be a longer horizon?

If answer are: “yes” and “longer”, then EDV is a great investment choice.


—-

If you do not want bonds, you do not need to buy them. As I wrote, I mentioned that I discovered bonds were not what I needed to reach my goals at that time, so I sold EDV at a very large gain in 2020. I had decided 100/0 was a better allocation until I reached 20x expenses because it suits my risk tolerance and given the difference in expected returns, there is a higher probability I hit 20x faster with all stocks. When I am there, I will be buying EDV for my bonds as I build to 28X, my “number”

If you do not match your investment horizon to your investment choices, you take on interest rate risk, so if your horizon is long, BND will be expected to have more interest rate risk with than something like BLV. That is not the same thing as price risk, and neither are exactly the same as the degree of how much your overall portfolio fluctuates.

You might say “I only care about price volatility because I need this money in 5 years”, and that is totally fine. Then you should definitely not buy EDV.

If you only care about minimizing short-term price volatility but you want this money in 30 years, that’s also “fine” for someone to prefer, but one should acknowledge that in exchange for maximum price stability you must be giving up some income
Last edited by muffins14 on Tue Jan 31, 2023 7:47 am, edited 1 time in total.
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Re: Perfect timing for EDV (Long term treasury)

Post by exodusNH »

iCare wrote: Tue Jan 31, 2023 12:37 am After thinking through various points raised on this thread, I am exploring following changes:
1) Sell EDV to buy VTI or VT for long term recovery of 52% loss or even buy EDV (which has 4% yield) ?
2) Buy BND+TIP as the allocation of Bonds for negative correlation
[Discourteous comment removed by moderator Kendall.]

I learned a lot about TIPS in last few days! thanks for sharing the knowledge.
Selling EDV and buying VTI is a drastic asset allocation change. If you don't need bonds, it makes sense. If you do and your timeframe is 20+ years, it makes sense. If interest rates go down, the fund value will go up just as dramatically as it went down.

Bonds are not negatively correlated. Many people thought they were. They kind of acted like it in the last 40 years. The truth is they are near zero correlated, which is entirely different.
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Re: Perfect timing for EDV (Long term treasury)

Post by Kendall »

Several discourteous comments have been removed. Remember that this forum does not tolerate personal attacks and that discussions must stick to ideas, not insults.
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Re: Perfect timing for EDV (Long term treasury)

Post by Cornflakey »

Bringing this thread back to life since EDV is now at its all time low. In the history of the ETF since its inception in 2007 the current price below $71 is the lowest it has ever been. Curious as to whether any commenters on the thread are taking another look at EDV now, given that most projections seem to be putting the Fed's terminal rate no higher than 6%.

One might even say that EDV has been beaten up almost as much as it can be and has very little downside left in it now. Thoughts?
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Re: Perfect timing for EDV (Long term treasury)

Post by Scott S »

Cornflakey wrote: Tue Sep 26, 2023 11:15 am Bringing this thread back to life since EDV is now at its all time low. In the history of the ETF since its inception in 2007 the current price below $71 is the lowest it has ever been. Curious as to whether any commenters on the thread are taking another look at EDV now, given that most projections seem to be putting the Fed's terminal rate no higher than 6%.

One might even say that EDV has been beaten up almost as much as it can be and has very little downside left in it now. Thoughts?
EDV has a lot of "buy the dip" appeal right now. But your first question should always be, "What does my IPS say to do?" Mine has me buying a little EDV, but since most things are dipping lately, I'm not backing up the truck on it alone.
"Old value investors never die, they just get their fix from rebalancing." -- vineviz
Olemiss540
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Re: Perfect timing for EDV (Long term treasury)

Post by Olemiss540 »

Cornflakey wrote: Tue Sep 26, 2023 11:15 am Bringing this thread back to life since EDV is now at its all time low. In the history of the ETF since its inception in 2007 the current price below $71 is the lowest it has ever been. Curious as to whether any commenters on the thread are taking another look at EDV now, given that most projections seem to be putting the Fed's terminal rate no higher than 6%.

One might even say that EDV has been beaten up almost as much as it can be and has very little downside left in it now. Thoughts?
Performance chasing up thread is just as bad of an investment mistake as market timing down thread.

Make decisions based on your IPS, or develop an IPS if you do not have one. I hold Total Bond and have no reason to change that regardless of recent chart activity. All-in-one funds are underappreciated if for no other reason than preventing frequent manipulation caused by fear or excitement.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
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nisiprius
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Re: Perfect timing for EDV (Long term treasury)

Post by nisiprius »

GAAP wrote: Mon Jan 30, 2023 6:11 pm...Treasuries are the only asset class with any degree of negative correlation to stocks -- it's very minimal, but better than anything that has positive correlation...
No. Not "negative."

First of all, no asset classes "have" negative correlation. As with anything else, all you can say is that they "have had" negative correlation, in the past, over some specific period of time. And correlations are unstable. In the case of stocks and bonds--the Ibbotson "large company stocks" and "long-term government bonds" data series--here are the rolling 36-month correlations:

Image

They have had a negative correlation for about twenty years.

But before that, they had had a positive correlation for about thirty-five years.

But before that, negative for about ten years.

But before that, positive for about twenty years.

This is important, because the difference between "near-zero correlation" and "negative correlation" is important. Near-zero correlation, if robust and stable, produces a moderate improvement in portfolio long-term risk-adjusted return. But negative correlation is almost magical, because it implies that the negatively-correlated asset can actually cancel out, counteract, erase stock risk. With the right linear combination, leveraged up to restore average return, you could get the return of stocks without the risk. I've phrased this as a hypothetical because I seriously doubt that such a thing is possible.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
muffins14
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Re: Perfect timing for EDV (Long term treasury)

Post by muffins14 »

Cornflakey wrote: Tue Sep 26, 2023 11:15 am Bringing this thread back to life since EDV is now at its all time low.
Why? We do not need to encourage market timing as a community. There are too many posts about bond duration timing
Crom laughs at your Four Winds
er999
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Re: Perfect timing for EDV (Long term treasury)

Post by er999 »

EDV for a somewhat bogleheads approved investment (it really isn’t but still in the the boglehead universe compared to individual stocks) is probably more likely to either double or half your money in the next five years compared to other investments.

Look at VTI — past 5 years peak ~ 241 11/12/21, trough 115 3/20/20. EDV past 5 years trough 9/26/23 70.14, peak 175.91 4/24/20. Equity like volatility and like nisprius said no guarantee negative correlation will return.
manuvns
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Re: Perfect timing for EDV (Long term treasury)

Post by manuvns »

selling $69 EDV put tommorow to make $135-165
Thanks!
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