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So would it be acceptable to buy one of vanguard's treasury funds instead of purchasing individual ones through the auction to build a ladder? I believe there is a short term, medium term, and long term treasury fund. And what would be the advantage of treasuries over a tips fund? I know that a few of the target retirement funds have TIPS.

Thanks for any insight.
 
If you want short duration government and quality. Check out EALDX. 2% yield and the liquidity ease of a fund. No load at Fido.
 
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volfan said:
So would it be acceptable to buy one of vanguard's treasury funds instead of purchasing individual ones through the auction to build a ladder? I believe there is a short term, medium term, and long term treasury fund. And what would be the advantage of treasuries over a tips fund? I know that a few of the target retirement funds have TIPS.

Thanks for any insight.
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Purchasing t-bills at a discount does not subject you to changes in NAV as in a fund when interest rates change. Plus, there are no fees and you get your investment back at maturity (face value).

TIPS are a play on inflation changes.
 
ncbill said:
But do we have anyone else here who has such rental RE experience?
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There are a number of us here who have plenty of rental real estate experience, but he was/is certainly a higher profile poster over the last few years. My wife and I are semi-retired due to our real estate investments.
 
aja8888 said:
Purchasing t-bills at a discount does not subject you to changes in NAV as in a fund when interest rates change. Plus, there are no fees and you get your investment back at maturity (face value).

TIPS are a play on inflation changes.
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I don’t see this as an advantage. Seems like you are just ignoring the real world. Existing t-bills/bonds go up and down in value every day.
 
audreyh1 said:
I don’t see this as an advantage. Seems like you are just ignoring the real world. Existing t-bills/bonds go up and down in value every day.
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But not if held to maturity. The par value is known in advance. With most bond funds there is no maturity date and the future NAV is not predictable.
 
audreyh1 said:
Yes they are going up and down in value while you are holding them.
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But if you only hold to maturity, then the interim values are irrelevant. The advantage is knowing you will get the par value at maturity. With most bond funds the NAV may be more or less than your purchase price when you want to sell.
 
daylatedollarshort said:
But if you only hold to maturity, then the interim values are irrelevant. The advantage is knowing you will get the par value at maturity. With most bond funds the NAV may be more or less than your purchase price when you want to sell.
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It was a good many years ago, but I read an article that Vanguard had put out that showed that this was not an issue...

The gist is that you do know the principal amount you will get, but you have no idea what interest rate you will be able to invest that money when it does mature... it might be LOW... so, over time your return is similar to a bond fund... and might be lower...



IOW, a false sense of taking away interest rate risks.... now, if you are going to use that money when it matures for some reason, then that is much better than a bond fund.... you have matched your investment with your spending needs...
 
daylatedollarshort said:
But if you only hold to maturity, then the interim values are irrelevant. The advantage is knowing you will get the par value at maturity. With most bond funds the NAV may be more or less than your purchase price when you want to sell.
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True, but I think that "advantage" is lost when you want to re-invest that money in a similar bond. If the NAV of the fund goes down due to interest rates rising, the fund is selling bonds as they mature, and buying new bonds at the better rate, every day (or at some interval), while you are holding your bond to maturity. Your bond is still earning whatever interest you got, but the bond fund is buying newer bonds at a higher yield than yours.
I'm assuming we are talking short-medium duration in both cases.

By the time your bond matures, it's a wash, because of the improved yield of the fund compared to individual bond, during the period of rising interest rates.
 
audreyh1 said:
I don’t see this as an advantage. Seems like you are just ignoring the real world. Existing t-bills/bonds go up and down in value every day.
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A miniscule amount in the case of bills the longest maturity one can buy is one year. Commonly one might buy 13 or 26 week bills.

Ha
 
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Texas Proud said:
It was a good many years ago, but I read an article that Vanguard had put out that showed that this was not an issue...

The gist is that you do know the principal amount you will get, but you have no idea what interest rate you will be able to invest that money when it does mature... it might be LOW... so, over time your return is similar to a bond fund... and might be lower...



IOW, a false sense of taking away interest rate risks.... now, if you are going to use that money when it matures for some reason, then that is much better than a bond fund.... you have matched your investment with your spending needs...
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The advantage isn't that you will always make more money with fixed maturity issues, that advantage is the predictability, which is why only fixed income investments and not funds are used in matching strategies.
 
Texas Proud said:
Never said you would always make more money.... I said maybe... and maybe make less...

And my last stmt was matching, which is the reason to own a bond with a known maturity...
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But there is no false sense of interest risk. The interest risk is averted through the matching strategy methodology - i.e., fixed income offset with fixed expenses or TIPS / I-Bond ladders that are inflation (though not real interest rate) adjusted.
 
audreyh1 said:
Yes they are going up and down in value while you are holding them.
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Of course they do. I never said they didn't. I'm buying short term maturities and holding to maturity.

If and when I think rates are topped out (for a while, anyway), I'll use the cash generated by maturing T Bills to buy into a bond fund. I'm 74 and 3/4 of my stash is in tax sheltered accounts and I am pulling RMD's. Since stocks are in the stratosphere, P/E wise, I'm reducing my equity allocation slowly and not wanting to put the sold equity cash into a bond fund in the face of raising interest rates.

I'm sure if I was 15 - 20 years younger and had "time", I'd be more aggressive like some of you folks are.
 
As an aside how far would Berkshire Hathaway’s equity holdings have to fall in order for cash to be a bigger percentage of Berkshire’s portfolio over equity?
 
daylatedollarshort said:
But there is no false sense of interest risk. The interest risk is averted through the matching strategy methodology - i.e., fixed income offset with fixed expenses or TIPS / I-Bond ladders that are inflation (though not real interest rate) adjusted.
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So you have all your expenses matched for the rest of your life? That would be a new one for me as I have never heard anybody do this....
 
Texas Proud said:
So you have all your expenses matched for the rest of your life? That would be a new one for me as I have never heard anybody do this....
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As much as possible we use many of the basic types of matching strategies as in the Boglehead wiki link above. Our property tax is capped at 2% and we have a fixed rate mortgage offset by mainly non-COLA pension income. Our retirement expenses subject to inflation are all covered by inflation adjusted income streams - SS, TIPS ladders, and I-bonds.
 
aja8888 said:
Of course they do. I never said they didn't. I'm buying short term maturities and holding to maturity.

If and when I think rates are topped out (for a while, anyway), I'll use the cash generated by maturing T Bills to buy into a bond fund. I'm 74 and 3/4 of my stash is in tax sheltered accounts and I am pulling RMD's. Since stocks are in the stratosphere, P/E wise, I'm reducing my equity allocation slowly and not wanting to put the sold equity cash into a bond fund in the face of raising interest rates.

I'm sure if I was 15 - 20 years younger and had "time", I'd be more aggressive like some of you folks are.
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Basically you are waiting in a close to cash equivalent for interest rates to stop rising before you put any more money in a bond fund.
 
audreyh1 said:
I buy bond funds because I prefer the constant maturity approach as well as the convenience. I’m holding fixed income forever. I don’t care about the predictability at certain discrete future moments in time.
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I get that, but the issue wasn't what was important to you, personally, the issue discussed previously was why the ups and downs of short term fixed income if held to maturity are not relevant to the price at maturity compared to a bond fund.
 
While it's been bumpy.... S&P on 2/22 closed at 2,704. Closed today at 2,787, up 3%. Only two days closed lower than on 22nd. NASDAQ and Russell 2000 up over 4%. DOW only up 1.5%, but such a narrow band of stocks. I expect more bumps but remaining optimistic on overall trend, at least through summer.
 
This thread came to mind the other day.

Since the beginning of the year I have been selling off my individual stocks and finally got out of Ford (the last one) this week. I did do one trade early Feb while travelling, bought SPY at 258 at the last market bottom in early Feb and sold it a week or two later on the bounce.

Anyone who follows "Dow Theory" was like myself watching the transportation average closely today to see if a confirmation was put in place to confirm the first stage of a bear market.

Close but no cigar! The transports needed to close down 2% in order to confirm and although close, it never reached it or more importantly closed below that level.

While I have many orders in place GTC, well below current prices. I bought 100k of SPY at the close as a hedge in just this situation at you guessed it "258".

Needless to say, my eyes will be on $DJT all next week!
 
Market timing

I will be the first to admire anyone who times the market successfully. I was very tempted to pare down my individual stocks after the bounce, actually before the correction and dollar cost average into the Vanguard total market index over several months. But like so many times before I just take my lumps when the market corrects. I remain confident that while we test the February lows, we will reform a base and move upward. Given the CAPE is so high I don't expect returns much better than 5% over the next decade. Of course the CAPE is a terrible market timing tool, but I think it does have some value in predicting returns over the ensuing decade.
 
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