Ask Rande 10,000+
- mdorsey
- DanG_6
- Rande
- DanG_6
- Rande
- DanG_6
- Rande
- Inthepoorhouse
- AmatY
- Kirk
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» DanG_6 - Re: Re: GNMAs worth tactical moves?
In response to message posted by mdorsey:Who ME? Market timing? LOL!
Wow! From 90% bonds to 90% MMF in one fell swoop? That would be a colossal shift! And if all at once, it means you'd be giving up something like a 6+% return in favor of something in the 2-3% range if you did it right now. Since investment income is something I count on for current expenses, it seems like that would be much too drastic a cut for me at the present time.
-- posted by DanG_6
» Rande - Re: GNMAs worth tactical moves?
In response to message posted by DanG_6:Dan,
It certainly does appear reasonable that we are near the end of the easing cycle, but I'd still be more inclined to set up a livable long-term allocation and then just stick with it than to be forever trying to figure out when to get into this and out of that. For one thing, after the run that bonds have had there would likely be a tax hit on sale. Even in a deferred account, there would still be the ongoing problem of deciding when to switch back and forth going forward. Sooner or later everyone gets burned playing that game. A small shift as you suggest is probably a better way to go than a wholesale bet, if action it must be. That way, if unlucky in the timing it's still not a disaster and if lucky then some satisfaction and bragging rights for being "brilliant." 
-- posted by Rande
» DanG_6 - Re: Re: GNMAs worth tactical moves?
In response to message posted by Rande:Thanks, Rande. I kind of thought that's what you might say. And though it's sometimes painful to just sit back and ignore the "obvious" (not to mention the pain to the "ego"), as I get older (and aren't we all!) I'm becoming even more appreciative of the old "KISS" philosophy ("Keep it Simple, Stupid" for the 1% who may not be familiar with the concept).
So other than the fun of trading in onesies, twosies (and in rare instances, fivesies) in the tracking stocks or occasional individual stock, I'm pretty much "laid back" as far as longer term investments are concerned. In light of recent current events, especially!
PS--Psssst! But on the other hand, did you see that huge volume upside breakout gap in DTL today? Man, I just gotta get me some! Maybe on a pullback ... but then again ...
-- posted by DanG_6
» Rande - Re: Re: Re: GNMAs worth tactical moves?
In response to message posted by DanG_6:
Dan,
As long as you get enjoyment out of it and keep it recreational, why not? For those who don't get much of a kick out of following this stuff and have better things to do, there's nothing quite like the freedom of a "gone fishin'" allocation. Can you imagine retiring and feeling like you can't even travel for a month without CNBC or a computer at your fingertips? Not for me, and I do enjoy following the markets. But for someone who doesn't even get enjoyment out of it all, being a timer must be like a junkie trying to kick a bad habit. Twelve-step program:
1. Set up an appropriate allocation you can live with, based on your own circumstances, goals, objectives, cash flow needs, time horizon, risk tolerance, etc., and diversify within those appropriate asset classes.
2. Rebalance periodically as needed, do something else you enjoy the other 364 days of the year.
3. Be patient.
4. Be patient.
5. Be patient.
6. Be patient.
7. Be patient.
8. Be patient.
9. Be patient.
10. Be patient.
11. Be patient.
12. Be patient.
BTW -- In the context of bonds, the last two weeks is a classic example of how difficult it can be even in the fixed income arena. The 10-year Treasury was below 4.2% on its way to 4 and in a few short days is back pushing 5% -- the better part of a full percent. This sort of stuff can drive you nuts if your financial success depends on timing these things correctly.
-- posted by Rande
» DanG_6 - Re: Re: Re: Re: GNMAs worth tactical moves?
In response to message posted by Rande:Rande, as long as this appears to be the beginning of a bull market (and it does to me), my "kick" of short term "recreational" trading will become less and less. It's hard for traders to compete with the huge potential gains of a bull market.
And in light of recent events, "family and friends" take on an even new meaning. I don't want to be on my death bed and say to my family as my last words, "Be sure to raise my stop in IBM tomorrow if I'm not here."
Here's wishing you and all a Happy Thanksgiving! And may we all maintain perspective!
-- posted by DanG_6
-- posted by Inthepoorhouse
» AmatY - Please Check My Math
My sister is 48 years old. She is single with no children and no plans to ever marry. She has been working since she was 18 and has saved and invested most of her money. She currently has $1.6 million in financial assets (she also has a house worth around $400K, so a total net worth of $2M). She has no debt. She wants to retire and never work again for money, but spend her time teaching kids music and reading skills. Of the $1.6 million, she has $800K in the Total Stock Market Index, and the other $800K in fixed income, mostly GNMA. She wants to draw $40,000/year from her investments and principal, adjusted each year for inflation. She also wants to make sure she never runs out of money. My calculations show that at this low level of withdrawal, using conservative returns, she should be ok. Is my math correct?Thanks,
Amat Yolinda
-- posted by AmatY
» Kirk - Re: Please Check My Math
In response to message posted by AmatY:Assume dividends of 1% (allows for market to go up with no increase of dividends)
$800K VTSMX yields $8K
Now other half in GNMA... Forget about capital fluctuation.... but income of roughly 6% yields $48K
Total income is $54K
Taxes are due.... so you need to figure that out to see if you have the required $40K living expenses.
Gains on VTSMX are split equally each year between fixed and equity providing inflation hedge..
Probably good to charge a nominal fee just to raise money for an IRA and the kids appreciate it a bit more even if just a token amount but I see the idea is to not depend on the income... and perhaps offer "scholarships" where special kids don't pay.
Total Bond Fund offers BETTER DIVERSITY than GNMA. Many that sell advice probably say GNMA so they stand out from the crowd... but Total Bond is about 1/3 GNMA so you are well covered.
-- posted by Kirk
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