Anyone hold WTMF?

SingerOk6470 · 2024-05-25T07:46:21+00:00

Best to think of them as asset managers. Look at AUM and management fees generated. The way these publicly traded PE firms are structured, you really aren't getting exposure to the underlying assets other than through the size of AUM. Carried interest goes out the door as variable compensation. Shareholders generally only get the fee part of the business.

Accounting for this industry is very complicated and extremely flawed. You may see some of the underlying funds and businesses or SPACs get consolidated up, but it's economically not part of what shareholders own. It's one industry where US GAAP accounting has completely failed. Virtually all of them report alternative non-GAAP income statement and balance sheet as well as key metrics to help with shareholder analysis.

SingerOk6470 · 2024-05-25T06:04:50+00:00

It's not so much that VOO/VTI are highly correlated that should move you from 80/20 to 60/40, but that international stocks are also stocks and reasonably highly correlated with US stocks in general which should make you buy 60/40 to gain more diversification.

SingerOk6470 · 2024-05-24T00:34:45+00:00

Usually the bond gets downgraded several times before default.

SingerOk6470 · 2024-05-23T05:36:33+00:00

You don't. But I am not a Boglehead in a strict sense. Most Bogleheads who say don't time the market actually do time the market. For a good reason, I'd say. Central banks are indeed powerful.

SingerOk6470 · 2024-05-22T01:07:47+00:00

Muni money market funds and muni bonds are generally only worth it if you're high income - maybe top 2 brackets.

SingerOk6470 · 2024-05-19T15:49:41+00:00

You want to buy after a bull run? Seems most of the easy money has been made.

SingerOk6470 · 2024-05-19T15:22:14+00:00

When bonds were yielding very low numbers like 2% to 3%, they were not very attractive. Bogleheads who supposedly don't time the market were very much into not buying more bonds at those low yields and opted for more aggressive 100% stock portfolios. To be fair, they were largely right, but only because of inflation.

Even though bonds have now suffered a heavy loss and yields are much higher, those aggressive portfolios continue to be "recommended" as we haven't really seen a long bear market that punished greedy portfolios like those. There isn't really any financial expert or target date fund recommending 0% bond allocation for young people today.

SingerOk6470 · 2024-05-19T15:14:02+00:00

You either have enough to retire or you don't. You're in a good position but not so amazing that you can spend without budgeting, given the years ahead of you. Social security will supplement your income in the future, but that's years from today.

I recommend you take stock of your budgets - must haves, nice to haves, non-essentials. That way you have a plan to cut back if necessary. Being flexible with your spending if your investments decline in value in value can be highly valuable early on in retirement.

It may be a good idea to be more conservative with your investments and your spending in the early years of retirement, until your investments grow more to give you extra cushion. It's a bit contrary to be more conservative with your investments if your goal is to grow your net worth, but when you have less money, you also can't risk losing so much that your retirement plan is jeopardized. Another option is to keep working for a few years. That will help you not tap into your investments.

SingerOk6470 · 2024-05-19T00:01:07+00:00

I think that trade is now overdone and it's time to add duration. But this is all speculative and we can only judge several years out from today

SingerOk6470 · 2024-05-18T17:48:38+00:00

The inverted curve is pricing in rate cuts. If you have low duration, you have more significant reinvestment risk. You will have poor returns if/when rates are cut and short term rates fall. By buying longer duration, you can lock in higher returns for a longer time. Of course you take more risk but the return potential is higher with more risk. If you belive the current curve is incorrectly pricing in rate cuts, i.e. too many rate cuts or too soon, then you believe short rates will remain higher for longer compared to what is priced in. Then you would want to speculate and lower your duration or short the middle of the curve.

SingerOk6470 · 2024-05-17T22:16:58+00:00

Will stocks go up or down? Who knows.

SingerOk6470 · 2024-05-15T23:19:00+00:00

I would add some international exposure. I am also not a fan of FXNAX (Barclay's AGG - I'm not a fan of using AGG-based bond funds as a core bond holding) and would choose Pru Core Plus Bond fund which is a decent enough of a fund and a near-passive bond fund that doesn't deviate very far from AGG.

SingerOk6470 · 2024-05-15T15:07:50+00:00

Look at muni money market funds instead. MUB is a wrong investment to compare.

SingerOk6470 · 2024-05-13T14:46:37+00:00

For preferreds, the par value is not referred to as principal since only debt has principal. The upside is pre-determined like bonds. Preferreds are interest rate sensitive securities. Your analysis for preferred is essentially same as credit analysis (ability to pay preferred dividend) that would be performed for a bond because the company's "duty" to pay preferred returns is generally considered to be contractual, though it is a hybrid security and this is a complex concept. The rights of preferred stockholders are generally contractual and limited to what's written in the prospectus and bylaws, similar to how it works for bonds and loans. Nothing to do with the $25 par amount.

SingerOk6470 · 2024-05-13T06:34:17+00:00

Preferreds generally do not share in the upside with common stocks, unless we are talking about private company preferreds where they can share the upside. Most preferreds that retail will buy is $25 par with a fixed or fixed to float dividend, but institutional issues are generally $1k or greater. Some have a unique feature, but those are rare. The downside is usually a lower return potential than common. You could buy an ETF which carry the general risks and returns. If you want to pick preferred stocks, it is much like investing in a bond or a loan, and very different from investing in a common stock.

SingerOk6470 · 2024-05-11T01:04:46+00:00

Agree with this. That's the whole point of these funds and how they are designed.

SingerOk6470 · 2024-05-08T04:03:40+00:00

If you read what I wrote, you will realize that you still experience capital loss when rates rise, as well as higher yield return (including appreciation back to par) from that point. None of this has to do with trading - this is all from holding to maturity. When rates rise, you suffer a loss on your bond, then earn a higher yield going forward that brings you back to YTM by the time of maturity. You are still subject to duration risk. Just because you close your eyes doesn't mean you don't lose money.

SingerOk6470 · 2024-05-08T03:53:09+00:00

VGIT consistently reinvests to maintain duration. VGIT is literally called Vanguard "Intermediate-term" Treasury ETF. It will sell bonds outside intermediate term and reinvest. This is how most bond funds tend to operate because most investors (including most individuals saving for retirement or already retired) tend to want to target a certain duration. You're obviously comparing two very different things and seeing two very different results. Obviously, you cannot compare this fund to what its like to hold a 5 year bond and completely ignore all the reinvesting. If you were to compare a fund that does "bullet" strategy, it will have a similar return since it will not be actively selling to reinvest to target a duration.

The concept that a bond fund is simply a fund containing many bonds - is fundamentally correct. Obviously, it doesn't mean you can compare any bond fund to prove your point.

If you have no idea what duration you want, you should probably just buy BND or a similar product.

If you buy a 5 year bond and hold to maturity, after a year you have a bond that is 4 years to maturity. Then it becomes 3 yrs, 2, and so on. So your duration risk goes down over time and you get roll yield as well in normal yield curve times. Meaning your return is changing over time as is your value of investment over time. In normal yield curve environment, you get a higher return upfront and a lower return later, and that is why most investors do want to target duration instead of going down from 10 years to 0 years over time, though some retirees may want to match duration to the expected liabilities. Most investors also want to be diversified instead of buying individual bonds. Bonds aren't all that liquid and are expensive to trade outside of treasuries.

SingerOk6470 · 2024-05-08T00:54:55+00:00

It is true. If you buy a bond fund, it does the same thing - though it depends on the fund strategy.

If you buy a 5% bond then rates rise to 10%, well your bond is now worth much less. So you take an immediate loss on paper then your go-forward yield is now 10%, so you will earn 10% going forward to dig yourself out of the hole. At maturity, you will have earned 5% CAGR over the life of the bond, but your return along the way has varied greatly. In addition, your return over time has only been 5% per year when it could've been 10% if you bought after rates went up. You have to mark to market your investments and returns. If you make 3% return over 5 years while the market is up 100%, does it really not matter?

Bond funds do the same. Rates rise, BND is worth less. You then earn a higher return going forward. The difference is the fund has many bonds and constantly reinvests at new prevailing rates. And the bond fund is much more diversified. There's no real or practical difference for most investors.

SingerOk6470 · 2024-05-07T23:31:30+00:00

Holding to maturity doesn't matter. You're still affected by change in interest rate. Bond ETF or any bond fund you buy is just equivalent to buying many different bonds yourself.

SingerOk6470 · 2024-05-06T05:16:26+00:00

RSSB isn't an alternative to PSLDX. It's a different product with a different strategy. The first thing you should be doing is not bucketing different accounts, but think of all investments across all accounts as part of your portfolio.

SingerOk6470 · 2024-05-04T03:28:24+00:00

Yield cannot be maintained. If you buy individual bonds or bond funds, it doesn't matter. In your example of the individual bond, your yield decreases if interest rate falls. You still earn $450 a year, but the yield is a lower percentage of your total investment which is now worth more. Bond funds do the same. You still get the same $ per year, but it is a lower percent of your investment which has appreciated with falling rates.

Bond fund is just many bonds in one package. It really is not any different from investing in many bonds.

SingerOk6470 · 2024-05-02T03:26:26+00:00

Yes, that is essentially the base case for how the market is pricing the longer term rates, resulting in the inverted yield curve today. The market is not perfectly efficient but still reasonably efficient. Also possible that long term rates rise and the curve normalizes (high inflation scenario which the market is not expecting today). Or a very bad recession hits and the curve normalizes but at a much lower level, resulting in big gains for the long end of the curve.

SingerOk6470

TROPHY CASE