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Post by anitya on Sept 20, 2022 22:55:59 GMT
All Treasury Bills are zero coupon bonds.
"As per internet they should be bought in tax deferred accounts."
Why? What is wrong with buying them in a taxable account if one is buying other taxable bonds in a taxable account?
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Post by Deleted on Sept 20, 2022 23:09:20 GMT
Yes, you are correct. T-Bills are < 1 yr and are generally zero coupon.
I think follow applies to zero coupon treasuries in general and not just t-bills. ie I most likely used T-bills incorrectly in my previous post.
from RBC wealth management site:
One important point for zero
investors to know is that, as a
zero bond accretes (accumulates
interest) over time, the earnings
are federally taxable each year,
even though the investor doesn’t
receive any payments. The IRS
considers zero coupon bonds
as original issue discount debt
obligations. Due to this tax treatment,
many investors prefer to use zero
coupon bonds in tax-advantaged
accounts such as pension funds and
Individual Retirement Accounts.
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Post by retiredat48 on Sept 22, 2022 4:13:56 GMT
Helping my recently retired brother convert his portfolio from growth to value and higher yield stuff. Today he bought some VGSH (2 yr treasury fund), dividing the buy into three parts. The first third was bought about an hour before fed announcement. With the 75 bps announcing, the 2 yr treasury yield zoomed upward (NAV price falling). Then quickly stopped, stabilized some, and yield resumed a decline. Brother bought remaining 2/3 at that turnaround time. He was "ahead" at the close.
R48
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Post by Deleted on Sept 22, 2022 16:02:48 GMT
What is the yield on VGSH?
Add: Found it, from vanguard site
30 day SEC yield as of 9/20/22
3.60% A
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Post by marquay on Sept 22, 2022 20:18:14 GMT
Will two year Treasury Note at Fidelity be a good buy(9/26), with a coupon/frequency of 4.125 and an expected yield of 4.108% for my Taxable and non-taxable accounts? Or I can wait till it gets to 4.50%. What do you think? Thank you!
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Post by retiredat48 on Sept 23, 2022 19:56:53 GMT
Will two year Treasury Note at Fidelity be a good buy(9/26), with a coupon/frequency of 4.125 and an expected yield of 4.108% for my Taxable and non-taxable accounts? Or I can wait till it gets to 4.50%. What do you think? Thank you! ,...HI Well your question is the age-old conundrum...to buy now, or wait a little? IMO the 2 yr can be bought now, or later...so it is a "good buy." Stocks are growth vehicles; bonds are contractual instruments. You hold bonds for a duration, at a yield, and barring default you get your money back plus interest earned. You do not "lose" on a bond if you buy it (or a fund) that is yielding 4.125 and yields go to 4.5%. Bond manager guru Jeff Gundlach recently stated that investors should not try to market-time the bond market yield top...too difficult and fleeting. That is , if it hits 5%, it will not last long there...maybe a few hours. Gundlach suggested when the given bond hits yield that has value to you, buy it. I agree with this. Like, if you wait and the bond yield gets to 4.482% (not quite 5%), and peaks, not getting to 5%. Now what do you do? Modify your strategy? If the 2 yr settles at 4.2%, what do you do? Knowing as soon as you buy, it could go to 4.5% yield. Thus the Gundlach position that you buy when it provides you an acceptable value. For many retirees, 4+% is great for asset allocated portfolios. And if the longer term bonds (like 10 yr and 30yr) get to 4%, and you can lock in long term yields, consider switching from short to longer. R48 |
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Post by FD1000 on Sept 27, 2022 12:46:22 GMT
I have a goodly amount of money in cash/short term investments, awaiting deployment. Patience is the code word for this money. A couple days ago, bond fund manager Jeff Gundlach recommended the two year Treasury bond as a good buy. Rate then was about 1.92%...yesterday close was 2.158%, partly in reaction to fed stating may go 50 basis points up in fed funds rate at next meeting. So is this a good buy...and is timing now? Also, what is a good Fund or ETF owning 2 year Treasuries? Gundlach had a graph showing historically, the fed funds rate and the 2 year Treasury followed very closely. Since the fed plans to increase rates 6 more times, and assuming one is 50 basis points, then the fed funds rate gets to 2% this year. Expect a two year treasury to be slightly higher rate. I also expect the ten year Treasury to peak around 2.6%...and note the 2/10 spread is very low; about 0.21% now. Over several decades, when I exited funds, in lieu of parking monies in MM Funds, I mostly bought long term corporate bond funds, taking a higher yield, and accepting that NAV fund price would float. Most of the time, I exited with small price gains, as well as higher interest received. Occasionally not so. But I captured more yield. So going out to two years is not a great risk to me. Like, I'll take the 2.16% interest for a year, and live with a floating fund price. That compares to a money market fund that may be 0.5% yield, and no price change. Your thoughts? Timing now?...a good Fund/ETF? TIA R48 It's safe to say now that Gundlach was wrong, as he was several times in the last several years. The 2 year treasury is now double (4.2%) than what Gundlach said (about 2%). Below is another huge miss Gundlach, the king (without cloths) of bonds, predicted in 2016 that the 10 year treasury to be 6% by 2021, see ( article) and again in 2018( link). In 11-05-2021 it's under 1.5%. |
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Post by Chahta on Sept 27, 2022 13:17:06 GMT
If the 10-year is close to 4% now, 6% would be horrible. Glad he was wrong (so far)!
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Post by roi2020 on Sept 28, 2022 0:11:36 GMT
The 3-year Treasury is yielding only 9 bps more than the 2-year Treasury.
09/27/2022
6 mo. - 3.91%
1 yr. - 4.16%
2 yr. - 4.30%
3 yr. - 4.39%
5 yr. - 4.21%
10 yr. - 3.97%
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Post by retiredat48 on Sept 28, 2022 5:11:10 GMT
The 3-year Treasury is yielding only 9 bps more than the 2-year Treasury.
09/27/2022
6 mo. - 3.91%
1 yr. - 4.16%
2 yr. - 4.30%
3 yr. - 4.39%
5 yr. - 4.21%
10 yr. - 3.97%
Good point! ,...Hi. I know it is a little subtle, but the title of and ontent of this thread was using treasuries...FOR CASH! Getting out to three years as a "cash holding" is not necessary. Note also several other very long duration treasuries just got above 4% yields. R48 |
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Post by FD1000 on Sept 29, 2022 3:19:21 GMT
If the 10-year is close to 4% now, 6% would be horrible. Glad he was wrong (so far)! He predicted to be 6% at 2021, not 2022. This year G predicted the 2 year to be just over 2% and it's already over 4%. Total miss on both...and as I said before, the the kink of bonds has no clothes. But hey, most "experts" can't predict, they should just say...it's hard to predict or shut up...but they can't avoid the camera. |
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Post by retiredat48 on Sept 29, 2022 3:37:20 GMT
If the 10-year is close to 4% now, 6% would be horrible. Glad he was wrong (so far)! He predicted to be 6% at 2021, not 2022. This year G predicted the 2 year to be just over 2% and it's already over 4%. Total miss on both...and as I said before, the the kink of bonds has no clothes. But hey, most "experts" can't predict, they should just say...it's hard to predict or shut up...but they can't avoid the camera. You posted the same above. I plan a reply post tomorrow, hurricane permitting! Tough to deal with two hurricanes at once: Ian and FD R48 |
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Post by FD1000 on Sept 29, 2022 3:48:52 GMT
He predicted to be 6% at 2021, not 2022. This year G predicted the 2 year to be just over 2% and it's already over 4%. Total miss on both...and as I said before, the the kink of bonds has no clothes. But hey, most "experts" can't predict, they should just say...it's hard to predict or shut up...but they can't avoid the camera. You posted the same above. I plan a reply post tomorrow, hurricane permitting! Tough to deal with two hurricanes at once: Ian and FD R48 I got plenty of time, I'm retired, it's all fun, especially with 99+% in MM.   |
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Post by retiredat48 on Sept 29, 2022 16:05:00 GMT
I apologize folks, as I guess the hurricane got me...drinking too much rum (Captain Morgan Original)...and in a moment of weakness, posted the following on the Fidelity Forum:
---------------------------------------
"I have known and been posting with FD1000 for about 15 years!
FD is very knowledgeable and excellent at managing his portfolio. He is especially good at selecting bond funds...getting under the hood and combining momentum, for a selection. I have used many of his picks.
FD typically holds from 3 to 6 mutual funds/ETFs. He focuses on risk-adjusted returns, and asset protection.
However, don't take his post as an indication to sell everything. Because, don't be surprised if FD in 2-4 weeks is back into the market, with 50% to 100% of his portfolio! If he posts what he is buying, do pay attention.
We also post on a forum called "Big Bang Investors."
Good luck all."
-----------------------------------------
R48
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Post by richardsok on Sept 29, 2022 16:15:59 GMT
Don't get yr point, r.
Seems like a straight forward post .
Why the mea culpa?
FD's a big boy.
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Post by retiredat48 on Oct 2, 2022 17:06:34 GMT
At FD1000 ,...who posted this re Jeff Gundlach bond manager guru prediction: "This year G predicted the 2 year to be just over 2% and it's already over 4%. Total miss on both...and as I said before, the the kink of bonds has no clothes. But hey, most "experts" can't predict, they should just say...it's hard to predict or shut up...but they can't avoid the camera."I disagree with FD here. One cannot just cherry-pick data points, and draw conclusions. Guru guidance is a continuous thing. This is an excellent example where a guru may have missed slightly but the course correction got everything back on track, and served the investor well. I started this thread on 2 yr treasury as a place for CASH...awaiting opportunities....partly because Gundlach suggested this is the sweet spot with rates at 2%. I waited, and per this thread entered at about 3.25% yields (after fed raised terminal rates). Since then, yes, the surprise was the fed announcing an additional increase in its terminal (end) policy rate, taking it to about 4.6% range, a one percent increase. 2 yr treasury bonds fell in NAV price a little. BUT WHO IS WRONG HERE...Gundlach or the fed?? Fact is, shortly after the fed move, and swift market readjustment taking longer dated bond yields to just above 4%, Gundlach announced for investors to now switch to longer dated securities. That he was BUYING same. This is key. For example, TLT 20 year Treasury Bond fund fell 17% in price after fed announcement, while short bond fell perhaps 1-1.5%. So now Gundlach moved to long Treasuries like TLT. So one following his guidance gave up about 1-1.5% in short term loss, to be able to now secure a LT Treasury at 4% yield. This is a huge benefit to ones portfolio. Indeed, the long term rates have now swiftly fallen/retracted some, so one gained back that short term loss, and is now invested in a 4% yield for 20 years. And when fed gets inflation down, and eventually lowers rates (due either 1)big recession..or 2)inflation controlled) long bond likely will have yields back down to much lower levels. That is, a RISE in NAV bond prices. Even fed prediction rates have such bond yields lower in future. Real life example...my brother is retiring, converting his portfolio from 100% growth stock funds, to a balanced one with fixed income. He needs 3% from portfolio for living purposes. He bought some VGSH a month ago; but is now shifting all this to (among other things) longer dated treasuries, locking in the close to 4% yield. The very small loss in VGSH will be a blip on the total return he will get over the years. And with good prospects of a capital gain if yields lower in the future. One invests in the markets as you find them, not as you wish them to be. I submit Gundlach will be right in the (not too) long run, and the investor well-rewarded by following his guidance. R48 |
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Post by Deleted on Oct 2, 2022 18:27:22 GMT
retiredat48, Are you then thinking it might be time to start adding to an aggregate bond fund like BND. To be clear for everyone, I am not asking R48 to advise nor would ever act on such alone. But, I am interested in R48's analysis.
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Post by retiredat48 on Oct 3, 2022 15:40:02 GMT
retiredat48 , Are you then thinking it might be time to start adding to an aggregate bond fund like BND. To be clear for everyone, I am not asking R48 to advise nor would ever act on such alone. But, I am interested in R48's analysis. OK Sara...not a rigorous assessment, but here's my take on BND. First: --Disclaimer...I have not been a fan of BND, due to low yield in last five years. And that I prefer to split my treasury bond investments and corporate bond funds into spearate funds, so I can act on each if one goes south. Lastly, I consider the historical bond fund managers like PIMCO and Doubleline to be better choices than a Vanguard or Fidelity. Unlike stock index funds (which can own everything), any index bond fund or large fund has to make a decision on bond purchases as they cannot own the bond universe. Historical returns prove the PIMCO's provide better returns. That said, here are considerations for BND, a huge fund of $80+ billion., 0.03% ER: --The duration is 6.67 years (M*), thus intermediate term bond fund. I was surprised the SEC yield was up to 3.98%; 12 month yield of 2.37%. This is decent. --The "weighted price" is 92.86. Excellent. M* data may not be fresh...let's call it 92%. This means the average bond is selling at an 8% discount to par. However, redemption of each bond will be at par, unless sold to buy higher yielding stuff. Technically, this means about (par 100 - 92) an 8% cap gain built into the fund. Hold for duration means about a one percdnt a year cap gain. Good. This gets reflected in the SEC yield. (BND has had a goodly decline in market price recently, bringing about these better parameters). --Fund is 50% gvt (also surprised me); 26% corp; 23% securitized. 71% are AAA; 25% A or BBB in quality. This last point is what puts BND in second place, from owning Treasuries today. Let's assume yields are identical. If we get into a recession, especially a severe one, then the following occurs: --there will be increasing defaults...perhaps some big name ones...and surprise ones. Junk bonds the worse. Historically, the "credit spreads" of high Q to junk to treasuries is currently still narrow...behind. That is, the spreads are smaller than historical. In a recession, expect to see the spreads increase. That is, corporate HQ and corp junk bonds may decline in price. Not so with treasuries. --The fed just increased its reducing its balance sheet...meaning not supporting corporate or MBS bonds. The effect of this remains to be seen. Will it reduce NAVs, as the fed stops their support? Note treasuries are not part of this re-balance. --In recession, usually a flight-to-quality occurs...a flight to treasuries. --And fed will eventually lower the fed funds rate, after inflation controlled..thus a cap gain on such a treasury bond fund. Thus,with a recession, I would prefer, now, owning treasuries alone versus a mix of treasuries and corporates. In a recession (highly likely), treasuries will do well. Unknown corporates. I plan to own corporates some day...just not currently. So Treasuries get a nod over BND, for now. I do think BND has gotten much more favorable in yield and quality, to be in the conversations for investors. R48 |
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Post by Deleted on Oct 3, 2022 16:47:31 GMT
Thank you. At some point I would like to move part of my US Govt TSP G fund into the aggregate bond fund - F fund. I apologize - it follows AGG, but I understood enough of your walk thru on BND to apply and see what I think. It makes sense about more risk with more corporates in a recession of course.
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Post by FD1000 on Oct 5, 2022 23:45:52 GMT
At FD1000 ,...who posted this re Jeff Gundlach bond manager guru prediction: "This year G predicted the 2 year to be just over 2% and it's already over 4%. Total miss on both...and as I said before, the the kink of bonds has no clothes. But hey, most "experts" can't predict, they should just say...it's hard to predict or shut up...but they can't avoid the camera."I disagree with FD here. One cannot just cherry-pick data points, and draw conclusions. Guru guidance is a continuous thing. This is an excellent example where a guru may have missed slightly but the course correction got everything back on track, and served the investor well. I started this thread on 2 yr treasury as a place for CASH...awaiting opportunities....partly because Gundlach suggested this is the sweet spot with rates at 2%. I waited, and per this thread entered at about 3.25% yields (after fed raised terminal rates). Since then, yes, the surprise was the fed announcing an additional increase in its terminal (end) policy rate, taking it to about 4.6% range, a one percent increase. 2 yr treasury bonds fell in NAV price a little. BUT WHO IS WRONG HERE...Gundlach or the fed?? Fact is, shortly after the fed move, and swift market readjustment taking longer dated bond yields to just above 4%, Gundlach announced for investors to now switch to longer dated securities. That he was BUYING same. This is key. For example, TLT 20 year Treasury Bond fund fell 17% in price after fed announcement, while short bond fell perhaps 1-1.5%. So now Gundlach moved to long Treasuries like TLT. So one following his guidance gave up about 1-1.5% in short term loss, to be able to now secure a LT Treasury at 4% yield. This is a huge benefit to ones portfolio. Indeed, the long term rates have now swiftly fallen/retracted some, so one gained back that short term loss, and is now invested in a 4% yield for 20 years. And when fed gets inflation down, and eventually lowers rates (due either 1)big recession..or 2)inflation controlled) long bond likely will have yields back down to much lower levels. That is, a RISE in NAV bond prices. Even fed prediction rates have such bond yields lower in future. Real life example...my brother is retiring, converting his portfolio from 100% growth stock funds, to a balanced one with fixed income. He needs 3% from portfolio for living purposes. He bought some VGSH a month ago; but is now shifting all this to (among other things) longer dated treasuries, locking in the close to 4% yield. The very small loss in VGSH will be a blip on the total return he will get over the years. And with good prospects of a capital gain if yields lower in the future. One invests in the markets as you find them, not as you wish them to be. I submit Gundlach will be right in the (not too) long run, and the investor well-rewarded by following his guidance. R48 Cherry-pick? 1) G said clearly twice that the 10 year will be at 6% in 2021...and the rate finished at 1.5%. 2) G said the 2 year rate high will be around 2%+ in 2022...and it already got to 4+% Where is the continuous thing? Then, anybody who bought VGSH according to your posts from 3-23-2022 lost money. On top of that, you told us you will make 3% in 6 months. Look at VGSH, anybody who bought from March 23 to Sep 23 2022(6 months) lost money. And yes, you bought at a better time, but both (one from May( link) + a second in June)) of your purchases are still down. Anybody who used MM + CD/treasury made EASY money. There is no coming back from this. I said in the beginning not to buy VGSH and then to buy CD+treasury when their guarantee pay was 3%. All documented in this thread. When is the time to buy bonds again? When the Fed blinks, and you can see an uptrend. Attachments:
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Post by Deleted on Oct 6, 2022 1:03:21 GMT
Anyone putting money in cds,money market funds, or treasuries - or is holding cash - is losing money in purchasing power terms. Almost always one is losing purchasing power holding cash at any time as there is usually some small level of inflation at a minimum. That is why we speak about nominal and real rates of return. Joe Investor got spanked holding BND and BIV if he sold. I honestly don't know if he should have held or sold as part of an overall portfolio strategy. My guess is most institutions with retirement designed portfolios held - but don't know - anyone know? I don't know if Joe would have been aware enough to know what to do and known how to evaluate options.
As I recall there was discussion on this forum about the Fed "blinking" and then that changed. It was a fake blink. So figuring out blinks seems to be difficult.
I am not sure it matters what Gundlach says about short term moves. But I think he is a lot smarter about these things than most and I think discussing super bright folks' views helps to broaden our knowledge and understanding. Their record is public and one can easily evaluate and weigh any advice. I think we have all agreed a hundred times it doesn't make sense to invest based on such and none of these people say they know the future. They make the best estimate given a point in time. To think otherwise is holding someone to an unrealistic standard of perfect knowledge. Ridiculous, yes? Best to be understood in that context.
Please, let's stop saying that a portfolio value going down is "losing money". In this thread and others. It simply is not the case. My gosh - what a loser that lousy investor Buffett is then! When you sell - you lose. That's it. If an investment goes to 0, you sell by default and lose money. If one wants to say a portfolio asset declined with little or no chance of recovery, that may be applicable - i.e. to say "lost money". Saying a purchase is down in value is also correct.
Also - "making money" by holding cds, money market, treasuries - in real terms this is not the case. One might be losing less purchasing power vice another instrument.
Terms are important, as well as to be aware of the insidious erosion due to inflation. There are sound reasons to choose more liquid holdings, but that doesn't change this.
So for cash, Vgsh, money market, cd, treasuries - which ones are maintaining better purchasing power than cash? Can CDs and money markets have decreases/increases in principal - I don't think so - but don't deal with them, so not sure. Cash just goes down. Vgsh - principal risk? Treasuries - for sure. Interest rate risk? Holding period? Others?
Aren't these the factors to use to evaluate options/trade offs given a particular investors needs? Which is why I asked R48 to walk through his reasoning. I liked the real life example and the realistic changing courses when there were better options for VGSH.
Also absolutely agree with FD about not buying yet - not sure about blinks, but at least when rates stabilize. I also would like a positive real return. I have an option that allows me to wait that most don't though, but I do have friends and family that don't and like to learn how long term investors manage this aspect of the portfolio.
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Post by FD1000 on Oct 6, 2022 4:03:10 GMT
Anyone putting money in cds,money market funds, or treasuries - or is holding cash - is losing money in purchasing power terms. Almost always one is losing purchasing power holding cash at any time as there is usually some small level of inflation at a minimum. That is why we speak about nominal and real rates of return. Joe Investor got spanked holding BND and BIV if he sold. I honestly don't know if he should have held or sold as part of an overall portfolio strategy. My guess is most institutions with retirement designed portfolios held - but don't know - anyone know? I don't know if Joe would have been aware enough to know what to do and known how to evaluate options. As I recall there was discussion on this forum about the Fed "blinking" and then that changed. It was a fake blink. So figuring out blinks seems to be difficult. I am not sure it matters what Gundlach says about short term moves. But I think he is a lot smarter about these things than most and I think discussing super bright folks' views helps to broaden our knowledge and understanding. Their record is public and one can easily evaluate and weigh any advice. I think we have all agreed a hundred times it doesn't make sense to invest based on such and none of these people say they know the future. They make the best estimate given a point in time. To think otherwise is holding someone to an unrealistic standard of perfect knowledge. Ridiculous, yes? Best to be understood in that context. Please, let's stop saying that a portfolio value going down is "losing money". In this thread and others. It simply is not the case. My gosh - what a loser that lousy investor Buffett is then! When you sell - you lose. That's it. If an investment goes to 0, you sell by default and lose money. If one wants to say a portfolio asset declined with little or no chance of recovery, that may be applicable - i.e. to say "lost money". Saying a purchase is down in value is also correct. Also - "making money" by holding cds, money market, treasuries - in real terms this is not the case. One might be losing less purchasing power vice another instrument. Terms are important, as well as to be aware of the insidious erosion due to inflation. There are sound reasons to choose more liquid holdings, but that doesn't change this. So for cash, Vgsh, money market, cd, treasuries - which ones are maintaining better purchasing power than cash? Can CDs and money markets have decreases/increases in principal - I don't think so - but don't deal with them, so not sure. Cash just goes down. Vgsh - principal risk? Treasuries - for sure. Interest rate risk? Holding period? Others? Aren't these the factors to use to evaluate options/trade offs given a particular investors needs? Which is why I asked R48 to walk through his reasoning. I liked the real life example and the realistic changing courses when there were better options for VGSH. Also absolutely agree with FD about not buying yet - not sure about blinks, but at least when rates stabilize. I also would like a positive real return. I have an option that allows me to wait that most don't though, but I do have friends and family that don't and like to learn how long term investors manage this aspect of the portfolio. Good post. Gundlach was named the king of bonds because he was good managing his bond fund, concentrating on MBS, which were great after 2009. PIMIX was another excellent multi bond fund and its managers also got to be known. The problem is, MBS were a unique category where managers can find nuggets. It's gone for years. In the last several years, G made several bad calls, about several categories when he predicted ST performance, rates and more. He missed by a mile. I used to listen to G as an expert as a bond investor. I stopped for several years because he has wrong. Then, G showed up on TV about 6+ months ago and say the 2 year treasury will pick at around 2+% is pretty dumb. We knew inflation is already at 7+% and the Fed promised to raise rates rapidly. G is just another bond managers. He competes against others. All I need to do is compare against the others, great for me, bad for managers. I hire the best ones. The usual, I just call it when I see it. One day a manger is great, 2 years later she/he is not. I look for explanation, but not too long. There are always reasons. I don't really care. Many times, the managers have a style and categories they like, but these are not as good as before. Most managers are specialist. I say, wait. We need to see stabilization + uptrends and there is no way to know in advance when. I can't even tell you what funds/categories will be better. The charts tell me. Isn't great to be totally open and flexible? I rather be late than early. I also let my managers decide what to do. Of course, I have a list of the best funds to select from. |
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Post by chang on Oct 6, 2022 5:50:28 GMT
@slooow : Please, let's stop saying that a portfolio value going down is "losing money". In this thread and others. It simply is not the case. My gosh - what a loser that lousy investor Buffett is then! When you sell - you lose. That's it. If an investment goes to 0, you sell by default and lose money. If one wants to say a portfolio asset declined with little or no chance of recovery, that may be applicable - i.e. to say "lost money". Saying a purchase is down in value is also correct.
Semantics. If "a portfolio asset declined" or "a purchase is down in value", then you lost money. I think the old adage "you haven't lost anything until you sell" is nonsense. Your portfolio is worth whatever your brokerage company says it's worth as of 4PM.
Does it also follow that you haven't made money until you sell? In that case, Buffett hasn't actually made any money, because he owns a zillion shares of BRKA that he never sold.
If you have a billion dollars in stock, you are a billionaire.
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Post by Deleted on Oct 6, 2022 8:56:36 GMT
@slooow : Please, let's stop saying that a portfolio value going down is "losing money". In this thread and others. It simply is not the case. My gosh - what a loser that lousy investor Buffett is then! When you sell - you lose. That's it. If an investment goes to 0, you sell by default and lose money. If one wants to say a portfolio asset declined with little or no chance of recovery, that may be applicable - i.e. to say "lost money". Saying a purchase is down in value is also correct.
Semantics. If "a portfolio asset declined" or "a purchase is down in value", then you lost money. I think the old adage "you haven't lost anything until you sell" is nonsense. Your portfolio is worth whatever your brokerage company says it's worth as of 4PM. Does it also follow that you haven't made money until you sell? In that case, Buffett hasn't actually made any money, because he owns a zillion shares of BRKA that he never sold. If you have a billion dollars in stock, you are a billionaire. Chang - your analysis might be applicable to more liquid assets. Not real assets. Like a house. Values go up and down all the time - an owner is not making or losing money. Same with claims on real assets - stocks. Money markets, cash, cds are financial instruments - not claims on real assets. So would agree your point might apply for these items. You are correct if Buffet has a claim on real assets he hasn't sold - he is not realizing a gain (making money - or losing) other than the distributions, dividends he is collecting. Net Worth = assets minus liabilities. I think this is what posters are alluding to when talking about "making and losing money". It fluctuates constantly. But there is no PERMANENT gain or loss until a transaction is made. Assets are broken into short and long term. Cash and the like are short - Stocks and houses usually long. Billionaire - this is based on net worth. It doesn't mean you made or lost money - except with regard to increases in the liquid assets (cash like assets) - which is likely substantial! So yes, they obviously made money. Did Zuckerberg lose money with the fall of META stock? Not until he cashes it in. His net worth declined dramatically and I would think he FEELS like he lost money. Is there a chance for VGSH's value to go back up and then it can be sold to make money? Or is a decline in value permanent, so money was lost regardless? |
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Post by chang on Oct 6, 2022 10:48:18 GMT
@slooow: We will have to agree to disagree. Although, your view probably reflects the majority, and I may be in the minority. I say that your portfolio is worth whatever it says at 4PM. Neglecting dividends, if you bought Tesla for $1000 and today it’s trading at $800, then you lost $200, whether you sell or not. If it’s trading at $1,200, then you made $200.
I seem to recall that Buffett owns a modest 3BR house in a suburb of Omaha, and drives an old Cadillac or Lincoln. But he’s a rich man because he owns $100 billion of BRKA, none of which he ever sold. He MADE a lot of money. Just as more people than we could ever count LOST a lot of money, and it doesn’t matter whether or not they sold.
JMO. I think we’re arguing semantics.
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Post by Deleted on Oct 6, 2022 11:04:18 GMT
I completely agree with the statement that a portfolio is worth a certain amount at a point in time. Again - BRKA could go to 50% tomorrow on some crazy news and bounce back a month later. If you want to term that losing and then making money, it would be good to make that clear as some of us are using different definitions and not equating net worth at a point in time to making money. Making money is generating income. Income is different from net worth. IMO we are arguing definitions which are widely defined and can be easily looked up.
No more on this topic from me.
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Post by Deleted on Oct 6, 2022 11:41:20 GMT
There's repeated rationalization of what or why we choose to hold, buy, or sell in what is clearly a bear market. It seems as though the purpose of the posts is to convince oneself because it doesn't seem to change the opinion of others.
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Post by fishingrod on Oct 6, 2022 15:36:14 GMT
I am of the thought that if we "ignore" the people we don't want to hear or don't like to hear, we won't hear or listen to what we need to hear.
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Post by Chahta on Oct 6, 2022 17:43:16 GMT
The VALUE of a portfolio goes up and down over time. It is only a loss or gain if sold.
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Post by retiredat48 on Oct 6, 2022 20:55:41 GMT
Sara...good posts above.
I see it differently on one thing. You stated: "Money markets, cash, cds are financial instruments - not claims on real assets. So would agree your (Chang)point might apply for these items.(ie, a loss)."
You are correct re these are "financial instruments"...they will pay you interest, over a time period, and then (barring default) you get your principal (money) back. That a brokerage house may "mark to market" in your portfolio is irrelevant to the investor holding for the stated maturity date. They do not lose.
Note money market funds have bonds that fluctuate daily mark-to-market...but the gvt has allowed them to use a constant quote of one dollar per share. Because the time period is like up to 150 days in length...short, and reasonable to hold for the duration.
Let's consider a person who has a treasury bond ladder...owns a 1yr, 2yr, 3yr , 4yr, and 5yr t-bond of equal amount. Each year that investor takes the bond maturing and rolls it over into a new 5yr t-bond. He/she always gets their principal back, and reinvests at the current new rate for 5 yr t-bonds. All mark-to-market losses can be ignored, in this scheme.
Ditto a two year treasury bond fund such as VGSH. The time period is so short that it is reasonable to assume one can hold for the duration. Then, (that bond rule of thumb again) one will have a total return approximating the starting yield. Some will get 3.75% on VGSH; my brother will get 3.95%; but no one will "lose", unless a conscious decision is made to move quickly into a better opportunity...like a long term bond at 4+%, and lock that up for 10 to 20 years.
IOW if you followed Gundlach and bought the 2 yr when I did, and the fed surprised with an ADDIONAL 1% added to its terminal rate, your VGSH went down a little, but the 10 year and twenty year treasury bond fund, such as TLT, declined 17%...and a yield above 4%. This opportunity to buy was great, and Gundlach recommended going into the LT Treasury Bonds. LT rate has since fallen and TLT has gone up (way more than VSGH moves). Thus the combination of Gundlach guidance is ahead, and one has secured for themselves a very good yield, for long term.
R48
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