patrick.net

Al_Sharpton_for_President says

‘T-Bill and Chill’

Good article and post

Yeah, all about Risk Premium (investment return an asset is expected to yield in excess of the risk-free rate of return.)

That is why I knew Vanguard Total Bond Market Index Fund ETF would rebound after crashing about 25%.

So for those who have at least 40% of their IRAs and 401Ks in investment-grade bonds, it is HODL through a cycle like this.

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AD says

That is why I knew Vanguard Total Bond Market Index Fund ETF would rebound after crashing about 25%.

For every 1% increase in interest rates there is generally a 1% decrease in the price of a bond for every year of remaining duration.

I think the reason why Vanguard's bond fund dropped about 25% because the average duration of its bond portfolio (based on a bond ladder strategy) was around 6 years.

So with interest rates increasing from around 0.5% to 5% (~5% x 5 years), this may explain why Vanguard's bond fund dropped 25%.

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naturally 2021 and 2022 were disastrous for Vanguard Total Bond Market Index Fund ETD (ticker: BND)

just like naturally 2009 - 2011 were very good years for BND

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Over the very long run, the stock market has had an inflation-adjusted annualized return rate of between six and seven percent.

http://www.moneychimp.com/features/market_cagr.htm

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AD says

Over the very long run, the stock market has had an inflation-adjusted annualized return rate of between six and seven percent.

There is no such investment as "the stock market." At best, you can buy some index funds. In reality, a stock investor must choose from a small subset of stocks over his own lifetime with "your results may vary." Plus, in the "very long run" we are all dead.

AD says

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Over the very long run, the stock market has had an inflation-adjusted annualized return rate of between six and seven percent.

http://www.moneychimp.com/features/market_cagr.htm

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Passive income!

Today I was chatting with a guy who lives nearby, and he said he was a "financial adviser".

He was also a CPA, MBA, and had an M.S. in something with computers.

He started asking me questions and I almost laughed at his bullshit.

He offered me "advice". No thank you.

"Are you diversified into private equity, real estate, commodities, etc. blah blah blah?"

"I think my Fidelity Contrafund may own some "private equity" but I'm not sure and it's a small amount of my money."

I made a fucking ton of money with Vanguard Primecap and Vanguard Capital Opportunity; both funds are managed by Primecap in Pasadena, CA.
I also rolled the dice on shares of Apple and that's become huuuuuuuuge.

It doesn't matter anyway; you will do well with Vanguard Total Stock Market Index Fund or similar at Fideilty.

The trick is have it in there for 30 years of so. Too bad nobody has a time machine to start investing in 1990.

HeadSet says

There is no such investment as "the stock market." At best, you can buy some index funds. In reality, a stock investor must choose from a small subset of stocks over his own lifetime with "your results may vary." Plus, in the "very long run" we are all dead.

I copied that statement about "the stock market" from the S&P 500 CAGR calculator. The website for the calculator meant that "the stock market" is the S&P 500, as far as context.

But I agree as far as investing in "the stock market".

Seems like the best you could do is invest in a Wilshire 5000 fund to try to get as much broad range of stocks.

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There's only 3403 stocks in the Wilshire 5000 nowadays. There is simply not the investment choice that there used to be. This is from a variety of factors from companies cannibalizing each other, to private owners seeing the crap Wall Street does, and new IPOs designed to bilk investors instead of raising capital to expand their business. There is a ton of VC money and crazy pension fund managers, as well, making private equity valuations greater than they could get in the public markets. There is also much greater regulatory hurdles to meet nowadays.

Really, who wants to go through all that ???

So, we've still got millions upon millions of people continuously pouring ever more money into the stock market. Nobody even looks at valuations anymore.

The stock market capitalization is about $55.2 trillion. Our GDP is about $25.4 trillion...so an increase in stock values of 6% would be about 13% of our economy. This doesn't even include the dividends that are paid.

Apple trades at 8.75 times sales. Not income but sales. Sales and income are forecasted to be decreasing. Hewlett Packard trades at about .63 times sales.

However, Apple commands the #1 position in terms of capitalization. It therefore attracts the most of any company from index investors.

You've got about 100 million people that are working, that are putting their money blindly into the stock market through their retirement programs where they work.

You've only got about 2.3 million first time home buyers a year.

Good luck trying to convince either group that what they are spending is waaaaaaay outta line.

Misc says

There's only 3403 stocks in the Wilshire 5000 nowadays.

Yes, but that is the closest to getting enough broad market exposure or diversification as far as investing in the "entire stock market".

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Misc says

You've got about 100 million people that are working, that are putting their money blindly into the stock market through their retirement programs where they work.

You've only got about 2.3 million first time home buyers a year.

I read that contributions to the S&P 500 index fund through 401K and IRA contributions such as the federal government employees contributing every 2 weeks to their Thrift Savings Plan adds volume to the S&P 500 and contributes to demand every 2 weeks.

I'm not sure how many workers out of 100 million contribute regularly such as at least monthly to their 401Ks (and IRAs) and adding that much demand for the S&P 500 stocks.

I know of 1099 contractors who max out their retirement contributions such as Solo 401Ks and Traditional IRAs.

But I see where there is concern the stock market is a ponzi scheme or at risk of wiping people out such as the +53% drop in the S&P 500 around 2001 and 2009. Hopefully those close to retirement only had no more than 30% in stocks.

Where else can you put your 401K money ? Or don't put the money in a 401K ?

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There's about 330 million people in the US with a work participation rate of about 63%. About half have an employee contribution plan at work that they are taking advantage of. That's where I get the ballpark number of 100 million blindly contributing.

Given the market cap of the US stock market and estimated returns, the math just don't pencil out.

If you get selective, there are some stocks worthy of investment, but none that are widely known. Any stock known by the masses is hugely overvalued, especially if it is has a large market cap, as those are driven by inflows into index funds.

What 100 million lemmings cannot be wrong.

Just put in enough to get the match, and do it pre-tax, no Roth 401-k where you don't get the tax benefit. Best you can do with a 401-k type program and stay away from Index funds.

While it is possible for an individual to "save" money, it is impossible for a society to do so.

At the society level, all investment/savings programs Ponzi.

Misc says

Just put in enough to get the match, and do it pre-tax, no Roth 401-k where you don't get the tax benefit. Best you can do with a 401-k type program and stay away from Index funds.

I agree about contributing to traditional 401K (pre-tax). When you retire and withdraw from it, you'll be in a lower tax bracket.

What do you mean stay away from index funds like Wilshire 5000 or S&P 500 ? ? ? ?

Where do you put the money ? If you work for the federal guvmint, the Thrift Savings Plan (i.e., 401K) only has index funds and government bond fund.

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Misc says

While it is possible for an individual to "save" money, it is impossible for a society to do so.

At the society level, all investment/savings programs Ponzi.

Well I understand as us investors such as through government bond funds, depend on future society to be functional enough.

If not, then those bonds will never be paid back, but I guess we will have a lot bigger concerns such as society becoming like a Mad Max movie.

So when you invest like this, its an investment in hope for a better (or tolerable) future.

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AD says

Misc says

Just put in enough to get the match, and do it pre-tax, no Roth 401-k where you don't get the tax benefit. Best you can do with a 401-k type program and stay away from Index funds.

I agree about contributing to traditional 401K (pre-tax). When you retire and withdraw from it, you'll be in a lower tax bracket.

What do you mean stay away from index funds like Wilshire 5000 or S&P 500 ? ? ? ?

Where do you put the money ? If you work for the federal guvmint, the Thrift Savings Plan (i.e., 401K) only has index funds and government bond fund.

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Lots of private companies have been sold on the Index fund route a, as well. By at least getting the match and going pre-tax, you lose less value over the long term. Mathematically, the vast majority of people must lose value on their investments. The idea is to lose as little as possible.

Anyone here buying Tbills through Treasury Direct?

HeadSet says

Anyone here buying Tbills through Treasury Direct?

I used to but now the return pretty meh.

Misc says

Lots of private companies have been sold on the Index fund route a, as well. By at least getting the match and going pre-tax, you lose less value over the long term. Mathematically, the vast majority of people must lose value on their investments. The idea is to lose as little as possible.

I never lost money on my S&P 500 Fund as I've sold shares that I owned for at least 7 years

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Today's market can best be described as Insurance companies dash for cash. The property/casualty folks are about to be hit with what is probably a record dollar amount of claims. They gotta sell everything to meet that cash demand.

I wonder how many of these will make it.

https://www.alliance321.com/top-homeowners-insurance-companies-in-florida/

Misc says

Today's market can best be described as Insurance companies dash for cash. The property/casualty folks are about to be hit with what is probably a record dollar amount of claims. They gotta sell everything to meet that cash demand.

I wonder how many of these will make it.

https://www.alliance321.com/top-homeowners-insurance-companies-in-florida/

It's not only property, but the profits of life insurance companies suffering under the procrustean duress of a 6-sigma surge in excess mortality (and payouts) and rising interest rates.

(how did y'all like that $10 word?)

HeadSet says

Anyone here buying Tbills through Treasury Direct?

No. I use my brokerage account.