Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Vanguard TIPS fund...
Old 08-03-2006, 05:09 PM   #41
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Vanguard TIPS fund...

Quote:
Originally Posted by TromboneAl
Good job guys. You have cemented my belief that TIPS funds aren't worth it -- too complicated.
Its EASY Al!

First you take a bond. Then you take away part of the interest payment and replace it with a calculation based on tens of thousands of bits of information collected by the government, parsed in a manner than most people cant understand, and modelled on a fictitious lifestyle that probably isnt yours. In fact, its definitely not YOURS, since you're not working and not living in an urban area.

Then, you take that part of the income (the made up part) and you pay taxes on it, but you dont actually get it for 20 years.

Then, because some people dont wanna hold individual bonds, you buy a bunch of them into a fund, sell shares of the fund, charge people for doing that for you, and in return they pay you a part of the made up return thats being taxed.

The ideal outcome of all of this is that while you're paying the taxes, trying to figure out where the hell your money is and where its going, you dont notice that you're also losing 8% on your principal.

And all that keeps your mind off of watching the S&P500 go up, realizing you have a bunch of money, and spending it recklessly.
__________________

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Vanguard TIPS fund...
Old 08-03-2006, 05:50 PM   #42
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Re: Vanguard TIPS fund...

Quote:
Originally Posted by wab
3) Bonds are all about "total return."* *If you hold a bond till maturity, you get a predictable total return.* *If you hold a fund long enough, you'll get that same total return.
NO NO NO NO NO

Well yes, you were right about saying that if you hold a bond till maturity you get a predictable total return. BUT If you hold a fund you will always be a slave interest rates and the NAV it imparts.
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 05:57 PM   #43
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Vanguard TIPS fund...

Quote:
Originally Posted by Cute Fuzzy Bunny
Then, you take that part of the income (the made up part) and you pay taxes on it, but you dont actually get it for 20 years.
d00d, what is this Jihad you're on? You've seen that the Vanguard TIPS fund pays out the inflation adjustment as dividends.

In another thread, you say that your wonderful high-yield junk bond fund yielded 8%, but you neglect to mention that it dropped 6% in NAV over that time.

TIPS simply remove the inflation risk from nominal treasury bonds. Nothing more, nothing less. Get over that hairball of yours.
__________________
wabmester is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 05:59 PM   #44
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Vanguard TIPS fund...

Quote:
Originally Posted by 2B
NO NO NO NO NO

Well yes, you were right about saying that if you hold a bond till maturity you get a predictable total return.* BUT* If you hold a fund you will always be a slave interest rates and the NAV it imparts.
When the fund's NAV goes down, that means interest rates have gone up. Higher coupons offset the decline in NAV. Always. That's how bonds work.
__________________
wabmester is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 06:04 PM   #45
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Vanguard TIPS fund...

Quote:
Originally Posted by wab
d00d, what is this Jihad you're on? You've seen that the Vanguard TIPS fund pays out the inflation adjustment as dividends.
No jihad, but no we didnt find all the money, we're about a percent short of what it looks like is expected. I'm sure theres a reason, but I dont really need to know what it is. This fell off my list of stuff to look at buying. Easy.

Quote:
In another thread, you say that your wonderful high-yield junk bond fund yielded 8%, but you neglect to mention that it dropped 6% in NAV over that time.
Ah, no it didnt! Its actually down about 4.5% in the time I've owned it. And my net gain beats the crap out of 2%.

You like that hand grenades and horseshoes kind of close-enough, hmm?

Quote:
TIPS simply remove the inflation risk from nominal treasury bonds. Nothing more, nothing less. Get over that hairball of yours.
Actually it doesnt do that either, it pays the CPI-U rate and a very limited additional coupon. To the extent that CPI-U equals your personal rate of inflation, your statement would be true.

But we all know that already, right?
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 06:07 PM   #46
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Vanguard TIPS fund...

Quote:
Originally Posted by Cute Fuzzy Bunny
Ah, no it didnt!* Its actually down about 4.5% in the time I've owned it.* And my net gain beats the crap out of 2%.
Vanguard says their high-yield bond fund returned 2.87% over 1 year. Is that the one you're talking about? The one that beat the crap out of 2%? You took a lot more risk for that 0.87% difference.
__________________
wabmester is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 06:29 PM   #47
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Vanguard TIPS fund...

I guess we'll just keep talking about different time frames, eh?

Nevermind...you're right...crappy returns are good and its a great idea to buy and own lots of bonds in a rising rate environment

In the time I've owned it, the nav is down about 2500 net, and its paid out roughly $13,400 in dividends.

Really, really sucks.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 06:32 PM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,387
Re: Vanguard TIPS fund...

I kind of enjoy this argument. But actually, Wab, as a wabbit hunter you can't seem to create the edge formerly supplied by Squeegee or whatever he is called now.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 06:33 PM   #49
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Vanguard TIPS fund...

SG had nothin', but I love him like a brother anyhow...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 06:33 PM   #50
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Vanguard TIPS fund...

Sorry, I'm too lazy to figure it for 15 months.

Vanguard says their TIPS fund returned 1.99% over the last year.

Vanguard says their junk-bond fund returned 2.87% over the last year.

Frankly, I was hoping this thread would clarify how this stuff worked for people, but that clearly wasn't your intent.

As far as CPI-U vs personal inflation -- you know that's irrelevant. * TIPS need to be compared to nominal bonds. * Nominal bonds don't care about your personal rate of inflation either.
__________________
wabmester is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 07:28 PM   #51
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Re: Vanguard TIPS fund...

Quote:
Originally Posted by wab
When the fund's NAV goes down, that means interest rates have gone up.* *Higher coupons offset the decline in NAV.* *Always.* *That's how bonds work.
At a certain point I must just say "do the math."

YES!* When NAV goes down the apparent interest rate goes up but you are still getting the old interest rate on your invested capital.* After decades maybe your NAV/interest rate will achieve equilibrium with buying the original bonds with a maturity date but I'd hate to bet on it.

I personally buy fixed income so I know I will get a certain amount of (fixed) income every month and get a certain cash payment back in a certain time frame.* A bond fund is pretty dependable at giving you the pretty close to fixed income but the value at any point in time in the future depends on the current interest rate.

There is a certain amount of interest rate speculation present when you buy a bond mutual fund.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 07:56 PM   #52
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Vanguard TIPS fund...

Quote:
Originally Posted by 2B
At a certain point I must just say "do the math."
Here's an explanation of duration, including the math:

Duration

Note that the duration tells you two things:

1) How sensitive the bond is to interest rate changes

2) When you'll get half the total return of the bond

As I've said, I *think* this puts the upper bound on how long you need to hold a fund at 2 X duration before you're guaranteed the same total return you'd get by holding a bond.

Anyway, I'm sure you'll agree that it's not an unbounded problem. You never have to wait forever.
__________________
wabmester is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 08:59 PM   #53
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Vanguard TIPS fund...

Quote:
Originally Posted by wab
Frankly, I was hoping this thread would clarify how this stuff worked for people, but that clearly wasn't your intent.
It was absolutely my intent. It was clear to me that its hard to figure out exact returns (and we still havent), its a complex product and after re-re-review its still not something I want to own.

What did you think my intent was and can you point to what I said that made you think that way?

Quote:
As far as CPI-U vs personal inflation -- you know that's irrelevant. TIPS need to be compared to nominal bonds. Nominal bonds don't care about your personal rate of inflation either.
Ah....no. You said tips removes the inflation risk from treasuries. It only does that if the owners PRI is the same as the CPI-U. Since mine is not even close, it does no such thing for me.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 09:11 PM   #54
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Vanguard TIPS fund...

Quote:
Originally Posted by Cute Fuzzy Bunny
What did you think my intent was and can you point to what I said that made you think that way?
Heh.* Let's see.* You asked:

Quote:
I'm not seeing that inflation adjustment anywhere in there in either the price or a distribution...what gives?
So, I showed you it was in the dividend.* *You ignored.* *I showed you again.* You said "off by 1%".* *I showed you why.* *Three times.* You said "I'm sure theres a reason, but I dont really need to know what it is."* *And then there was this little rant:

Rant!

In other words, just a hunch.*

Quote:
Ah....no.* You said tips removes the inflation risk from treasuries.* It only does that if the owners PRI is the same as the CPI-U.* Since mine is not even close, it does no such thing for me.
Let me walk you through this.* *Nominal treasuries have an interest rate that includes the market's estimate of inflation, right?* * TIPS give you a real return + CPI-U.* *They remove the market's estimate of inflation.* *See?* *Sometimes the nominal treasury market is right about inflation.* *Sometimes its wrong.* *Sometimes waaay wrong.* *TIPS removes the risk of the market being wrong.

Neither market gives a damn about your personal rate of inflation.
__________________
wabmester is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-03-2006, 10:06 PM   #55
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,387
Re: Vanguard TIPS fund...

Could you guys please explain how this interacts dynamically with the question of whether to pay your mortgage before you retire?*

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-04-2006, 01:07 AM   #56
Thinks s/he gets paid by the post
 
Join Date: Feb 2003
Location: Mesa
Posts: 3,588
Re: Vanguard TIPS fund...

Quote:
Originally Posted by HaHa
Could you guys please explain how this interacts dynamically with the question of whether to pay your mortgage before you retire?*

Ha
I could do that, Ha, but I'm afraid I would be accused of having to be right.
__________________
sgeeeee is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-04-2006, 02:06 AM   #57
Thinks s/he gets paid by the post
ladelfina's Avatar
 
Join Date: Oct 2005
Posts: 2,713
Re: Vanguard TIPS fund...

Quote:
Frank Armstrong says it could also be called "diworsification".
Thanks, Nords.. I am feeling splendidly deworsified!! I drank the asset allocation Kool-Aid, going from 99% stocks, 1% int'l. bonds to 85%/15% (not counting some cash). I am at peace now. I know I am buying into a stable income stream and though I mentioned the temporary drop in value I am not really concerned about it. What's done is done and this will just be another buy & hold forever position. For me it's just to have something a little better than cash that won't go up & down 10-20% at a time. I guess it's 'crappy' but it was either that or buy more stocks!!!*
__________________
ladelfina is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-04-2006, 04:03 AM   #58
Thinks s/he gets paid by the post
Tadpole's Avatar
 
Join Date: Jul 2004
Posts: 1,174
Re: Vanguard TIPS fund...

I got interested to look at my own VIPSX Roth. Over the past 2 1/2 years I have made monthly contributions totalling about $9500. In that time redeposits have totalled about $500. The holding is currently worth about $9500. Is this just a short term holding type effect or is buying this fund on dollar cost averaging a bad idea?
__________________
Tadpole is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-04-2006, 07:05 AM   #59
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Re: Vanguard TIPS fund...

Quote:
Originally Posted by wab
When the fund's NAV goes down, that means interest rates have gone up.* *Higher coupons offset the decline in NAV.* *Always.* *That's how bonds work.
YES YES YES YES

The problem with bond funds is you really never know where interest rates will go so you can never be sure of what your NAV will be on any specific date. With a real bond that really matures, you know when it will be worth $1000.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Re: Vanguard TIPS fund...
Old 08-05-2006, 01:59 PM   #60
Thinks s/he gets paid by the post
BUM's Avatar
 
Join Date: Feb 2004
Location: Mid Hudson Valley
Posts: 1,778
Re: Vanguard TIPS fund...

wab,

The more I read the confuseder I get. I bought VIPSX

1/05 4000 @ 12.50
1/06 800 @ 12.21
5/06 550 @ 11.80

I started reinvesting the dividends in January '06.

Arithmatically speaking should I be or ?



.
__________________

__________________
In a panamax down by the river.
BUM is offline   Reply With Quote
Reply

Tags
vanguard


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
TIPS vs. Vanguard TIPS Fund Cut-Throat FIRE and Money 16 08-15-2006 06:32 AM
Vanguard Precious Metals Fund ash FIRE and Money 13 05-20-2006 11:56 AM
Vanguard Fund Actions REWahoo FIRE and Money 1 04-20-2006 03:36 PM
Vanguard Dividend Appreciation Index Fund ats5g FIRE and Money 5 02-01-2006 07:37 PM
Vanguard Tips Fund - Kinda Scary in a Good Way !! Cut-Throat FIRE and Money 4 03-01-2004 11:35 AM

 

 
All times are GMT -6. The time now is 11:02 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.