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Cash bucket options (short term needs). CD tents, Bond tents etc. dynamic situation.

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  • #46
    Originally posted by Tangler View Post

    OK, I will check it out. I thought it would be easier at VG but perhaps I am just foolish.

    Here is another ignorant question: They are bought at auction? Is that similar to buying ETFs at the VG brokerage?

    I will keep trying to figure it out. Thanks
    I have looked at treasury direct and wondered the same thing about the auction process. If you are buying short term t bills having to hold to maturity is not a problem.

    Comment


    • #47
      yes, i certainly intend to hold until end of term = maturity.

      I might try to buy on monday.

      Sounds dumb, to be uncertain but I have never done it except for buying I-bonds.

      Comment


      • #48
        I have no issue w people tinkering with the cash/fixed side of portfolio like buying treasuries etc bc it is something to pass the time and of little consequence and keeps us from messing around w the majority equities side which is best left alone

        Comment


        • #49
          Originally posted by Tangler View Post
          yes, i certainly intend to hold until end of term = maturity.

          I might try to buy on monday.

          Sounds dumb, to be uncertain but I have never done it except for buying I-bonds.
          If you intend to hold to maturity then there is not much difference in my mind between a 1-5 year CD (if FDIC insured) or 1-5 year treasury. Both will have interest rate risk and act like a nominal bond for the period.

          If you are worried about inflation, then you can get TIPS and hold until maturity.
          TIPS will act much more poorly than nominal bonds in a deflationary environment and may have a capital loss in the event of deflation (as can nominal bonds in an inflationary environment).

          The real question is what %TIPS to have in your bond allocation in retirement if you are worried about inflation.
          In this environment, I don't think a US only stock portfolio and nominal bonds will offer sufficient inflation protection.

          I really can't find any good data on SWR for someone retiring in the 1966-1972 period with 60:40 US only portfolio with only nominal bonds. It is mentioned that a 60:40 portfolio failed at a 4% SWR during this period, but I am unsure if the SWR was adjusted for inflation.

          I think everyone should check their tolerances on their bonds and their US/international allocation and be sure that they can stay the course under scenarios that are possible and not too far-fetched (i.e have occurred since 1930).

          If you look at the 1970-1990 period, international stocks outperformed US stock by around 400% (the mirror of the current situation). Bonds did not do well. US stocks did not do well either.

          So if you imagine the 70's, we would be in year 2 or 3 of that and another 17 years of pain on a 60:40 US only portfolio.
          It is all too easy for people to say they will stay the course on the 60:40 US only portfolio when there has been this incredible period of outperformance between 2000-2021. I think it will be tested and my thought (guess) is that maybe the majority of people will abandon it during the next 15-20 years before all is said and done.

          I thought it was not prudent to have a US only portfolio and only nominal bonds last year. The risk is now showing up, namely inflation. I am not sure how people got convinced that it would be ok with inflation. I guess it was the consensus, but made no sense to me.

          Comment


          • #50
            Originally posted by Dont_know_mind View Post

            If you intend to hold to maturity then there is not much difference in my mind between a 1-5 year CD (if FDIC insured) or 1-5 year treasury. Both will have interest rate risk and act like a nominal bond for the period.

            If you are worried about inflation, then you can get TIPS and hold until maturity.
            TIPS will act much more poorly than nominal bonds in a deflationary environment and may have a capital loss in the event of deflation (as can nominal bonds in an inflationary environment).

            The real question is what %TIPS to have in your bond allocation in retirement if you are worried about inflation.
            In this environment, I don't think a US only stock portfolio and nominal bonds will offer sufficient inflation protection.

            I really can't find any good data on SWR for someone retiring in the 1966-1972 period with 60:40 US only portfolio with only nominal bonds. It is mentioned that a 60:40 portfolio failed at a 4% SWR during this period, but I am unsure if the SWR was adjusted for inflation.

            I think everyone should check their tolerances on their bonds and their US/international allocation and be sure that they can stay the course under scenarios that are possible and not too far-fetched (i.e have occurred since 1930).

            If you look at the 1970-1990 period, international stocks outperformed US stock by around 400% (the mirror of the current situation). Bonds did not do well. US stocks did not do well either.

            So if you imagine the 70's, we would be in year 2 or 3 of that and another 17 years of pain on a 60:40 US only portfolio.
            It is all too easy for people to say they will stay the course on the 60:40 US only portfolio when there has been this incredible period of outperformance between 2000-2021. I think it will be tested and my thought (guess) is that maybe the majority of people will abandon it during the next 15-20 years before all is said and done.

            I thought it was not prudent to have a US only portfolio and only nominal bonds last year. The risk is now showing up, namely inflation. I am not sure how people got convinced that it would be ok with inflation. I guess it was the consensus, but made no sense to me.
            Thank you! This is great info.

            Yes, I have no clue what the best AA for the next 20-30 years will be but I plan on having 90-95% stocks (70:30 USA: international) and 5-10% "safe" assets {cash, CD, bonds, TIPS?)

            I hope to just to over-save and expect the worst. I will hold my stocks for 20-30 and build a strong "cash bucket" with new income.

            cool that you mentioned TIPS. Also agree international stocks are important. International bonds?

            I am about to read about TIPS

            I just saw this link (below, awesome Harry Sit blog post!) and now reading this info from you is also very helpful.

            I really appreciate the help.

            Happy mother's day to all you mom's.

            I have two Moms: 1. biological momma, in Al 2. Japanese momma (mother-in-law who lives with us and is delightful)

            Attached are pictures of my children.

            OK, time to read about TIPS. Thanks for the help!

            here is the blog post I am reading:
            https://thefinancebuff.com/inflation...r-i-bonds.html
            Attached Files

            Comment


            • #51
              I ordered Harry's Book:
              https://www.amazon.com/Explore-TIPS-...dp/B08HN9PYGC/

              Comment


              • #52
                Originally posted by Tangler View Post

                here is the blog post I am reading:
                https://thefinancebuff.com/inflation...r-i-bonds.html
                That is an excellent article and a great point that under certain situations, TIPS maybe better than ibonds, depending on whether TIPS yields are positive.
                Also, hello to Harry and welcome to the forum. Please release an audiobook version of your book, I would definitely buy it! Unfortunately, my brain is too degenerated to read much text nowadays...

                It would be great to know what Harry thinks are the main driving factors for the change in TIPS yields over time- if this is in one of Harry's articles, please if Harry or someone else could post a link.

                Comment


                • #53
                  30 month CD at Vanguard. 3% monthly interest. What say you?

                  Comment


                  • #54
                    Originally posted by Kennyt7 View Post
                    30 month CD at Vanguard. 3% monthly interest. What say you?
                    sounds pretty good but I want a little shorter duration. 3mo-1 year. Might make a tent that goes longer but want some to be available in 3-6 mo.

                    Comment


                    • #55
                      20k in stablecoins at blockfi and 80k in cash under your mattress yields more interest than 100k in HYSA

                      Comment


                      • #56
                        Started reading Harry’s book.

                        Explore TIPS.

                        Really like it!

                        Anyone considering making their own bond or CD tent will benefit

                        Anyone wanting a simple book that explains types of bonds might also enjoy this short book.

                        I will finally understand TIPS and other bonds!

                        https://www.amazon.com/Explore-TIPS-...dp/B08HN9PYGC/

                        Comment


                        • #57
                          Update: HY savings account at Sofi + short term bonds + short term CDs + reading.

                          Will keep saving and reading.

                          Comment


                          • #58
                            "If you look at the 1970-1990 period, international stocks outperformed US stock by around 400% (the mirror of the current situation). Bonds did not do well. US stocks did not do well either.

                            So if you imagine the 70's, we would be in year 2 or 3 of that and another 17 years of pain on a 60:40 US only portfolio.
                            It is all too easy for people to say they will stay the course on the 60:40 US only portfolio when there has been this incredible period of outperformance between 2000-2021. I think it will be tested and my thought (guess) is that maybe the majority of people will abandon it during the next 15-20 years before all is said and done.

                            I thought it was not prudent to have a US only portfolio and only nominal bonds last year. The risk is now showing up, namely inflation. I am not sure how people got convinced that it would be ok with inflation. I guess it was the consensus, but made no sense to me."

                            It is a good thing you are only playing with the cash bucket. It is very difficult for new investors to grasp that sometimes there is no place to hide for a very long time. AA, diversification and a plan that you maintain is about the only chance. Even then, there is a small chance the best plan can fail. In that case, the only solution is to save more.

                            Comment


                            • #59
                              Originally posted by Tim View Post
                              "If you look at the 1970-1990 period, international stocks outperformed US stock by around 400% (the mirror of the current situation). Bonds did not do well. US stocks did not do well either.

                              So if you imagine the 70's, we would be in year 2 or 3 of that and another 17 years of pain on a 60:40 US only portfolio.
                              It is all too easy for people to say they will stay the course on the 60:40 US only portfolio when there has been this incredible period of outperformance between 2000-2021. I think it will be tested and my thought (guess) is that maybe the majority of people will abandon it during the next 15-20 years before all is said and done.

                              I thought it was not prudent to have a US only portfolio and only nominal bonds last year. The risk is now showing up, namely inflation. I am not sure how people got convinced that it would be ok with inflation. I guess it was the consensus, but made no sense to me."

                              It is a good thing you are only playing with the cash bucket. It is very difficult for new investors to grasp that sometimes there is no place to hide for a very long time. AA, diversification and a plan that you maintain is about the only chance. Even then, there is a small chance the best plan can fail. In that case, the only solution is to save more.
                              Yep. Save more. Diversify into international. Turn off news.

                              Comment


                              • #60
                                Originally posted by Tangler View Post

                                Yep. Save more. Diversify into international. Turn off news.
                                If you duration match your bond ladder, there is only interest rate risk.
                                if you duration match with TIPS, it takes away the interest rate risk.

                                There is not much popularity with TIPS due to the bull market in nominal bonds the last 20 years+
                                I am surprised they are not used more. They may become much more attractive if TIPS yields are positive again.

                                The TIPS yield to me represents compensation for the risk of sovereign default and should be positive, as although this risk is low, it is definitely not zero.

                                Comment

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