Ask Rande 10,000+

Top 316. Oct 17, 2001 12:07 PM

» CaptRon - Imbedded Cap Losses

Rande. Just off the top of my head, is it plausible to imagine some folks with cap gains this year would buy Mut Funds with imbedded cap losses prior to Oct 31st to book those losses in Nov to offset their gains?
Dunno myself, but wonderin' out loud....TIA

-- posted by CaptRon

Top 317. Oct 17, 2001 1:51 PM

» Rande - Re: Imbedded Cap Losses

In response to message posted by CaptRon:

CR,

Mutual funds can't pass through realized losses. They can be used at the mutual fund portfolio level to offset realized gains, but any realized losses in excess of realized gains would be carried over at the fund level, not passed through to shareholders. So, the best you could hope for is no taxable capital gain distributions. Worst case is to have taxable distributions AND an overall loss in total return for the year. Not uncommon.

-- posted by Rande

Top 318. Oct 17, 2001 1:56 PM

» CaptRon - Re: Re: Imbedded Cap Losses

In response to message posted by Rande:

Thanx, Rande. Knew you would have definitive answer....8-)

-- posted by CaptRon

Top 319. Oct 18, 2001 10:49 AM

» George36 - Suze Orman on Bonds

Suze Orman was on CNBC a short while ago, explaining why she favored holding individual bonds over bond funds. She said that if interest rates fluctuate, then your income from the bond fund could go down. Certainly the dividend as a percentage of principal will fluctuate, but when I checked the actual dividend payout history posted for one of Vanguard's bond funds, the dollar amount was essentially constant regardless of rate and bond price fluctuations. So what gives? Is there any truth to what she's saying?

-- posted by George36

Top 320. Oct 18, 2001 11:30 AM

» TonyFromGlendale - I-Bonds

Greetings Rande,

I have about $50,000 with VanGuard with Ginny. I have been thinking about taking $30K from that fund and buying I Bonds before the end of Oct. to tie up 5.92% for 6 months. I would do it with a credit card that gets me NorthWest frequent flyer miles which I use often. The taxes on interest earned not being a problem until the bonds are cashed would also be helpful with my taxes. And I like the idea of loaning the USA some money especially right now.

Do you have a personal-professional opinion about I-Bonds especially compared to Ginny?

Thanks from Glendale!!!

-- posted by TonyFromGlendale

Top 321. Oct 18, 2001 11:35 AM

» Rande - Re: Suze Orman on Bonds

In response to message posted by George36:

George,

I understand that's been her longstanding preference. Not that big an issue for most from my perspective. A good solid fund such as the Total Bond Market Index at Vanguard will keep adjust to current market interest rates over time -- as rates go up the fund's yield should rise as it's NAV falls, and as rates go down the fund's yield should fall as it's NAV rises. Over the long haul it should all even out. With individual bonds, you could be stuck with both a lower coupon if you're holding to maturity and market rates rise in the meantime (and though you might no care, the current value of the bond will also drop in such an environment, just as the NAV in a bond fund might).

Bottom Line -- For most investors a good, high-quality, intermediate-term bond fund with low expenses should be fine. If all you're going to invest in are Treasuries, then I would say to forget about the fund and go Treasury Direct. But if you are going to diversify into corporates and/or govt. agencies (or munis in taxable accounts) and don't have enough to properly diversify (around $25K per issue would be nice if you want decent pricing) and/or don't know enough to navigate the world of bond pricing in the secondary market, then stick with the fund.

-- posted by Rande

Top 322. Oct 18, 2001 11:44 AM

» Rande - Re: I-Bonds

In response to message posted by TonyFromGlendale:

Tony,

I'm not overly-enamored with "Ginny" to begin with (prefer the Total Bond Index fund), though it's certainly not a bad choice. The I-Bonds are a good choice too, especially since you can defer recognition of the income AND the interest income is state-tax free in any event.

-- posted by Rande

Top 323. Oct 18, 2001 12:06 PM

» Kirk - Re: I-Bond Smell Test

In response to message posted by TonyFromGlendale:

This ability I read about to buy them with a credit card doesn't pass the smell test.

Credit cards make their money charging the merchant 1% to 5%, give or take, to handle the transaction.

My Shell Oil Visa gives me 1% back in the form of Shell Gasoline. This means I'd effectively get 6.92% on those bonds when you add back in the gas rebate. Is the government paying Shell 2% for that transaction and thus effectively paying 7.92% or more?

I don't think so.. this sounds too good to be true. What have you seen Rande?

I've got a pile of GNMA's sitting in Vanguard from selling HWP in the hundreds... perhaps I'll charge $30K and get $300 worth of gasoline and then pay it off with a check from my Vanguard GNMA fund... just sounds too good to be true.

-- posted by Kirk

Top 324. Oct 18, 2001 12:30 PM

» Kirk - Re: Re: I-Bond Smell Test

I was right! Looks like my nose is still working. smile

Too bad, I'd have liked that free gasoline.

In response to message posted by Kirk:

Just saw the answer to my question on a thread many here avoid like the plague:
http://www.suite101.com/discussion.cfm/i...
Author: kaysie52
Date: October 18, 2001 12:00 PM
Subject: Re: Re: Re: Bob's I-Bonds

In response to message posted by Will_L:

Will,

I just checked with GM MasterCard and they said that if I went to a bank and used my GM Card to purchase I-Bonds, that the amount would be treated as a cash loan and 21% interest would start from the day I made my purchase. Also an additional 3% would be charged to me immediately. I would think the same would be true if any charge card was used. Is this correct? Also they said that as a cash loan it would not qualify to build points for the purchase of a GM car. Wonder if yours would allow air travel miles.

-- posted by Kirk