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mrmcd posted:T-bill yields are calculated (iirc) on ACT/ACT or ACT/365. If you click through to bond details on whatever brokerage you're using it should have the method listed in there. Gotcha, thanks. That makes a lot more sense. I should give Four Pillars a re-read, it’s been a while and I need a refresher.
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Mar 11, 2023 17:58
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Pollyanna posted:Got it. So then that incentivizes buying longer term bills, since the closer they are to a year, the closer you are to getting a return of (for example) 4.8% of the money you bought the T bill for. Yes but also no. Generally longer term instruments have higher yields, because you're locking your money up for longer, so you want a bigger interest payment. But things can get... weird. The first thing is that right now the Fed has pretty much promised they are gonna keep groin punching labor by raising rates bigly. This means that if you buy a 6 month t-bill at 5%, in 3 months new issues could be getting 5.5% or 6%. At the same time, if you need to sell the bill before maturity, you might lose money (or at least a good chunk of the interest) because any discount a buyer will demand a discount comparable to current interest rates, not the rate you paid for it. This is what's know as interest rate risk. Usually it isn't a big deal when you're talking about short term bonds (<1 year) and small retail investor amounts of 5, 6 figures. But when you're playing this game in the $200 billion range with 30 year bonds, that's a good way to explode your whole bank. The other thing is that the bond market can have what's called an "inverted yield curve". This means the market is pricing bonds with longer maturity dates higher (demanding less interest payments) than shorter dated bonds. All the economic shamans and oracles obsess over it, because it's normally something that should be illogical (pay me less to hold my money longer!!), and when it happens it's thought to be an omen of bad times ahead. This is currently the situation we're in. It doesn't really matter as a retail bond buyer, because you aren't entering competitive bids-- you get the final auction price decided by people with much, much more money-- but it's an interesting thing talked about a lot in financial news. mrmcd fucked around with this message at 18:08 on Mar 11, 2023 |
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Mar 11, 2023 18:00
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Valicious posted:Is Ivy Bank currently the highest APY at 4.75%? They were mentioned briefly here, but I think someone said that they track US Treasury bond so no need to chase rates? Honestly if you're inclined to rate chase with your zero-risk cash pile, I'd just open a brokerage account, set your core position to VUSXX/SPAXX, and buy new issue 1-3 month tbills and brokered cds with whoever is offering the best deal each week.
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Mar 11, 2023 18:06
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Since I'm not going to buy a house this year either (renting in the area for a year first), I might move my non-emergency money out of Ally into my non-retirement Vanguard brokerage account and buy up some T-bills. That feels like playing with money, though, and the general wisdom is that time in the market > timing the market. Plus, you gotta deal with tax fuckery when you move money around and I hate that poo poo. That reminds me, I also have money in my Vanguard brokerage (non-retirement) account parked in a 90/10 stock-bond split, 80/20 US/international. My intent with that money a couple years ago was to stick it in (mostly) the stock market and treat it the same as my retirement accounts. I have not changed my stance on that - I ain't touching a goddamn cent of that until I retire in 2055. (Exceptions made for rebalancing via contribution.) Considering I'm not getting any younger, maybe I'll bump that retirement date to 2050...
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Mar 11, 2023 18:25
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Pollyanna posted:Since I'm not going to buy a house this year either (renting in the area for a year first), I might move my non-emergency money out of Ally into my non-retirement Vanguard brokerage account and buy up some T-bills. That feels like playing with money, though, and the general wisdom is that time in the market > timing the market. Plus, you gotta deal with tax fuckery when you move money around and I hate that poo poo. The "market timing" that's generally proscribed is when you make financial decisions based on your guesses about external timelines, not your own. If you know that you don't need that money to be liquid for a year, then go ahead and lend it out. (And I'm not sure what "tax fuckery" you're worried about - if the money is just in a savings account then transferring it out shouldn't trigger any taxable events.)
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Mar 11, 2023 18:42
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Isn't activity in a non-retirement brokerage account taxable?
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Mar 11, 2023 19:29
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Pollyanna posted:Isn't activity in a non-retirement brokerage account taxable? You have to pay taxes on the money you eventually make from the t-bills.
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Mar 11, 2023 19:34
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Natch. I guess I'm comparing it to that terrifying tax bill I got when I first learned what it takes to dump ISOs 
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Mar 11, 2023 19:36
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Strong Sauce posted:how do 0.5 percenters (or whatever people who have >$1M and maybe <$10M are called) handle their cash in accounts/banks anyways? i'm guessing they wouldn't leave much in a regular bank account but i mean in the interim you have to hold that cash somewhere so i'm curious if they just open multiple accounts each filled near $250K? if they're dumping a bunch into CDs how do they deal with it once the money goes back into their account and it holds >$250K? i'm curious how that all works out Vox Nihili posted:Maybe Giannis can buy SVB
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Mar 11, 2023 20:56
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Strong Sauce posted:how do 0.5 percenters (or whatever people who have >$1M and maybe <$10M are called) handle their cash in accounts/banks anyways? i'm guessing they wouldn't leave much in a regular bank account but i mean in the interim you have to hold that cash somewhere so i'm curious if they just open multiple accounts each filled near $250K? if they're dumping a bunch into CDs how do they deal with it once the money goes back into their account and it holds >$250K? i'm curious how that all works out It really depends on what their income stream(s) are and their cash needs. Generally you would want to keep just enough in cash to cover short term expenditures and needs. So maybe you are keeping 1m in CDs, with maybe 85k rolling over every month. If you keep 1 million dollars in cash for a year, and inflation is 5% that year, you effectively lose $50,000 (assuming you're earning 0 interest) so wealthy people are all about earning a return - they hire people to analyze their spending habits and credit available and maximize their return balanced vs immediate cash needs. Businesses might turn over 5m a month , so they need to have huge amounts of cash. The wealthy are generally earning (lol) okay getting money by having it working for them, so they are probably keeping as little in cash as possible, and quite possibly taking on personal debt if the cost of that debt is less than they can earn in the market with those funds.
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Mar 11, 2023 21:13
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Strong Sauce posted:how do 0.5 percenters (or whatever people who have >$1M and maybe <$10M are called) handle their cash in accounts/banks anyways? i'm guessing they wouldn't leave much in a regular bank account but i mean in the interim you have to hold that cash somewhere so i'm curious if they just open multiple accounts each filled near $250K? I don’t really understand the question. What is the “interim”? If I had five million dollars assets, why would I have more than $250K in cash?
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Mar 11, 2023 22:24
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I am sick today. Not covid, but it still sucks and I'm full of cold meds. So I did what most people do when they are sick and built a Google spreadsheet to calculate if it makes sense to make additional payment to my mortgage or take what would have been those additional payments and invest them in something. Please comment where my calc is wrong. Notes: I am bad a spreadsheets and I wouldn't be surprised if it's all wrong. https://docs.google.com/spreadsheets/d/1yZDwQSCcL5oam6e0qN6GIGolaj2sTp1bw9pdZSuwUlg/edit?usp=sharing
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Mar 12, 2023 16:25
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Due to the amount of bad news in the financial media, I think it’s a good time to zoom out and appreciate where we all are on our journey. 20s:
30s:
40s:
50s:
60s+:
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Mar 12, 2023 17:02
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DNK posted:Due to the amount of bad news in the financial media, I think it’s a good time to zoom out and appreciate where we all are on our journey. nice levelheaded post, thanks. since a lot of people are learning about bonds' interest-rate risk for the first time this weekend, I'm also gonna quote the OP and a post of mine from nearly exactly two years ago: quote:Help, I don't understand bonds! pmchem posted:I realize bonds are generally viewed as more conservative than stocks and that this discussion is for a long-term horizon, but, just going with conventional wisdom of "bonds aren't risky" is REALLY not a great idea sometimes, like say in an inflationary environment after long bond yields plummeted to near zero. this sort of thing becomes more important as the duration of the bonds you own meets or exceeds the potential holding period of them, and is partly why Buffett's advice to his heirs advocates for a portfolio that holds T-Bills, not T-Bonds.
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Mar 12, 2023 17:15
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daslog posted:I am sick today. Not covid, but it still sucks and I'm full of cold meds. So I did what most people do when they are sick and built a Google spreadsheet to calculate if it makes sense to make additional payment to my mortgage or take what would have been those additional payments and invest them in something. It's possible rates may keeping go up, but after the banking problem that's emerged last week, rates may stay in a holding pattern, or possibly even decline slightly, depending on how the Fed, the executive branch, and the market responds. Your $1500 inflow should also be discounted against the estimated inflation rate, which is still slightly higher than the savings rate. But even with the inflation discount the total interest earned is still higher than interest saved on the increased mortgage payments.
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Mar 12, 2023 18:19
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daslog posted:I am sick today. Not covid, but it still sucks and I'm full of cold meds. So I did what most people do when they are sick and built a Google spreadsheet to calculate if it makes sense to make additional payment to my mortgage or take what would have been those additional payments and invest them in something. One error - in your extra payment calc you are assuming it comes at the beginning of the month (you earn interest on the first $1,500 in the first month) whereas when applying to mortgage you treat it as if it was paid at end of month (mortgage interest accrues on the beginning balance of each month). One missing piece - taxes are not taken into account. You always have to pay taxes on your earnings, but depending on whether you itemize and get the mortgage interest deduction, you may or may not get a tax benefit from the mortgage interest. It's mostly ignorable if you itemize, but if you don't itemize it makes a big difference. The rest of the calculations aren't technically wrong per se but they also don't take into account for the fact that you finish paying off your mortgage much earlier. Once that is done you can invest whatever you were spending on your mortgage PLUS the extra amount at the high rate, instead of your mortgage payment at the low rate and the extra amount at the high rate. You'll want to adjust so that you are comparing value at the same moment in time. The two times that make the most sense are when the mortgage would originally have been paid off, and when the mortgage would be paid off under the accelerated payment strategy.
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Mar 12, 2023 22:47
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Just finished doing taxes and we owe a bunch, unlike last year. Seems like it's largely due to dividends from VTSAX/VTIAX as our taxable brokerage account gets larger. My W-4 is already at 0, but does it make sense to also have extra tax deducted per paycheck? I'm happy enough to owe some tax and consider it a free loan, but it's getting more difficult to tell if we'll be in underpayment penalty range in any given year. Also, whoever asked a while back whether the increased dividends from total international funds offsets the foreign tax credit was perhaps onto something...
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Mar 13, 2023 01:48
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runawayturtles posted:Just finished doing taxes and we owe a bunch, unlike last year. Seems like it's largely due to dividends from VTSAX/VTIAX as our taxable brokerage account gets larger. Yes, we add an extra withholding amount. We try to target around what we paid last year so that we are under the safe harbor guidelines so as to not pay underpayment penalties. International for the past decade has been bad in taxable for us, especially given our high state tax situation, living in OR. Higher dividend rate plus the lower qualified dividend amount has had quite an effect.
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Mar 13, 2023 02:38
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How much are we talking? It's irrelevant unless you didn't withhold 10% or more of your total tax bill. Are you hitting that number?
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Mar 13, 2023 02:42
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I mentioned a few days ago that 2020 broke my brain a bit and I tried to outsmart the market. I never really gambled with too much money, but going down the rabbit hole of picking stocks meant that I ended up loving around with my long-term positions as well and I really need to start fixing them. This is my current distribution, across multiple accounts:   The topline is that I’m currently 100% in index funds/stocks, and extremely overweighted into tech, which has gone as well as you can imagine. If you need more specific information, let me know, I figured I would just start with the overall picture. Edit: added another table with the positions within each type of account. dpkg chopra fucked around with this message at 04:07 on Mar 13, 2023 |
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Mar 13, 2023 04:02
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dpkg chopra posted:I mentioned a few days ago that 2020 broke my brain a bit and I tried to outsmart the market. I never really gambled with too much money, but going down the rabbit hole of picking stocks meant that I ended up loving around with my long-term positions as well and I really need to start fixing them. If you could start fresh, what would your ideal allocation be?
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Mar 13, 2023 04:33
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That's a good question. I started investing at 31 years old and barely in a relationship, I'm now 37 and married. When I started I had 100% VFFVX in my Roth IRA, and 100% SPY in my Vanguard brokerage (for future use, no specific goal). I'm not sure I want to go back to that, but it somewhat feels like I should, if that makes sense.
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Mar 13, 2023 04:42
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dpkg chopra posted:That's a good question. I started investing at 31 years old and barely in a relationship, I'm now 37 and married. Okay maybe a slightly different question: What do you want your equity/bond mix to look like?
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Mar 13, 2023 04:45
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CubicalSucrose posted:Okay maybe a slightly different question: What do you want your equity/bond mix to look like? Not sure how to answer that question. I always understood Target Date funds to be a lazy-man's alternative to managing a three-fund portfolio, which I understood to be the goal for a "conservative" account such as an IRA. For my brokerage account I was willing to accept more risk for more growth, so I went with 100% SPY, i.e.: no bonds. I'm not sure if that's still a good idea, but that's still how I feel about it.
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Mar 13, 2023 04:51
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dpkg chopra posted:Not sure how to answer that question. Money is fungible, but if you sleep better separating them in your head then I guess that's probably not horrible? In the case where you have an "unknown risk tolerance..." TDFs are fine if you don't have any clearer idea, so shifting your Roth back to 100% (whichever) TDF seems like a bit of a no-brainer. For the rest of it, you might have capital gains/losses? So that might make things a little more complicated, but unless you have like 10k+ in net capital gains then I'd just fully fix everything to where I'd want to be at. You mentioned now being married, so thinking about your total assets as a couple (might) make more sense, because money is fungible. Also you might have a mortgage which can be considered a negative bond. You also haven't mentioned a 401(k) or 457 or TSP or anything else like that. If you (and/or your spouse) have one available with anything-but-the-worst fees/fund options, then contributing there makes more sense than leaving the money in your brokerage account (unless you have some specific needs for liquidity, which you said you didn't).
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Mar 13, 2023 05:06
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KYOON GRIFFEY JR posted:How much are we talking? It's irrelevant unless you didn't withhold 10% or more of your total tax bill. Are you hitting that number? It definitely wasn't an issue this time, the amount owed was just like 5% of the total. I'm just envisioning a possible scenario in the future where my salary stays the same (such that withholding is less than the total prior year tax) but my continued brokerage contributions or market factors result in enough dividends to reach the 10% threshold. It at least seems like a possible concern after (hopefully) a couple more years of brokerage growth.
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Mar 13, 2023 17:56
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With today's CPI report, most of what's needed for the next I bond rate is in:TIPS watch posted:Through the five months, inflation has run at 1.36%, which would translate to a variable rate of 2.72%. One month remains, so it looks like the new variable rate should fall into a range of about 3.2% to 3.5%, down substantially from the current 6.48%. The I Bond’s fixed rate will also be reset May 1, but the outlook for that reset is highly uncertain, given the volatility of real yields over the last week.
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Mar 15, 2023 04:38
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truavatar posted:I set up a weekly ladder last month - first bill is maturing/rolling over on 3/14 based on the 3/9 auction, so I'll let you know how it goes. How'd it go? Did it all work out like expected?
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Mar 15, 2023 15:27
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Thanks to input from this thread (and double-checking with a financial advisor), I've gotten the ball rolling on transferring pre-tax money out of my traditional IRA into the company 401k, with the goal of being able to make backdoor contributions into my roth IRA without running into the pro-rata rule.  I know this doesn't fall into long-term advice, but the next thing I wanna figure out is what to do with the substantial pile of cash I have sitting in an HYSA. I don't have kids, nor are there any big expenses planned over the next few years. I'm already maxing out my HSA and IRA contributions, and I have more than enough in I-bonds to cover my emergency fund should it be needed, so the thought of tossing a bunch into t-bills and/or CDs seems kind of redundant. My next thought was to buy up ETFs in my regular brokerage account to mimic VSMGX (Vanguard LifeStrategy Moderate Growth Fund; 65% stocks, 35% bonds) so that it has more growth potential more than the HYSA but carry a bit less risk than the VFIFX I'm using for my IRA retirement savings. Is this sensible, or is there another avenue I should consider?
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Mar 15, 2023 16:12
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GFBeach posted:Thanks to input from this thread (and double-checking with a financial advisor), I've gotten the ball rolling on transferring pre-tax money out of my traditional IRA into the company 401k, with the goal of being able to make backdoor contributions into my roth IRA without running into the pro-rata rule. That's sensible. 60/40 isn't very high equity-wise, but if it keeps you sleeping well at night and you won't do anything silly, and the expense ratio is low, then that's good enough. I would argue that with like 25ish years until retirement (given your 2050 target date fund), something like "all in VTI" is by no means unreasonable, but I know how I sleep during downturns.
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Mar 15, 2023 16:51
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esquilax posted:How'd it go? Did it all work out like expected? Yep, rolled over as expected. Difference between purchase price and face value was deposited to my originating bank account.
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Mar 15, 2023 18:12
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What’s the word on best mmfs? I’m looking to dump some short term cash into a potentially better yield, but I may need it under a year so I don’t want it tied up anywhere.
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Mar 15, 2023 19:55
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I would personally take VUSXX right now if you have a Vanguard account edit: or SGOV if you dont, its an ETF not a money market, but it invests in 0-3 month treasuries so should be similar to a treasury money market in terms of risks and returns drk fucked around with this message at 21:50 on Mar 15, 2023 |
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Mar 15, 2023 21:47
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Keep in mind that certain money market funds are allowed to limit and/or penalize redemptions in times of great liquidity stress, which are probably going to be very correlated with when you might need to be using an emergency fund, so make sure you read the fine print of whatever you pick!
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Mar 15, 2023 23:00
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Can anyone explain how Roth contributions work within a 401k? What are the contribution limits, etc? In my case Empower is the provider. I can't find any explanation on their website (doesn't mean it's not there). I'm currently contributing 7%, which gets me all of my employer's match. Thanks in advance.
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Mar 15, 2023 23:15
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ncumbered_by_idgits posted:Can anyone explain how Roth contributions work within a 401k? What are the contribution limits, etc? In my case Empower is the provider. I can't find any explanation on their website (doesn't mean it's not there). I'm currently contributing 7%, which gets me all of my employer's match. Thanks in advance. Both traditional and Roth contributions combined can't go over $22.5k for 2023. You can mix between them, or go fully one or the other, but $22.5k is the cutoff. Employer contributions are classified as traditional (pre-tax), but do not count towards your personal yearly contribution limit.
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Mar 15, 2023 23:30
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raminasi posted:Keep in mind that certain money market funds are allowed to limit and/or penalize redemptions in times of great liquidity stress, which are probably going to be very correlated with when you might need to be using an emergency fund, so make sure you read the fine print of whatever you pick! Is this a practical concern with Treasury money market funds like VUSXX? The "prime" money markets that had a lot of commercial paper seem to be much less common than they used to be.
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Mar 15, 2023 23:45
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drk posted:Is this a practical concern with Treasury money market funds like VUSXX? My understanding is that the "certain" in my post describes non-government MMFs, so it wouldn't apply to government funds like VUSXX. But I'm not an expert, I just posted because it wasn't something I knew when I first started poking around at MMFs and I only found it myself by reading fine print.
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Mar 15, 2023 23:54
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The last time a major money market fund broke the buck, it was 2008 and it was like, a cent for a day and everyone lost their loving minds and the fed stepped in. So they aren't technically FDIC insured but if SPAXX or VUSXX broke the buck then, like, some major poo poo is going down. Also aiui after 2008 they passed new regulations on mmf's and the "government" ones have much higher liquidity requirements. Prime funds will give you slightly better yield if you're ok with possible rate limited withrdawls in times of great stress. Ignore muni mmf's unless you're expecting like, over a million a year in income.
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Mar 16, 2023 02:34
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I got a couple newbie questions here. I'm lazy and basically just kept pushing my 401k contributions to try to get as close to the cap as I can reasonably handle, of the options my employer's plan provided, I just chose a target date fund that seemed to have reasonable fees. I still however have money left over beyond even just having a safe nest egg in savings and have been eyeing saving more/more efficiently, so I started googling about roth IRAs. From what I gather I can put up to 6k in there a year, and since I haven't filed my taxes yet for last year, I can still put in the 6k from then. Additionally, I am married, so as it's 6k per person, that would be up to 12k for last year. So questions: 1. The 12k for being married part, what are the mechanics of opening a roth IRA for that? Is it just opened like a joint account? Do we both open our own accounts then put 6k individually in them? Could I open up an individual account and put 12k in that if she doesn't have one? 2. Does it matter where I open the account? Like my bank offers a "self directed roth IRA account" and seems p much low/no fee, up to 100 trades/yr with no brokerage fee which seems like more than sufficient for a set it and forget it situation. 25/yr maint fee which I guess is 5 more bucks than vanguard but seems negligible if it's just easier for me to have stuff in the same place. 3. I guess follow up to 2, and this is probably the dumbest question but bear with me I've never bought stocks or anything personally before, does where the account is change in what funds I would have access to? Like could I open an account with my bank and just buy more shares of the same target date fund my 401k is in, or pick up one of vanguard's? e: I think I found the answer to 1, though most articles talking about it assume you already have an IRA prior to getting married. It sounds like we both would just make an account and contribute 6k to them individually, which would work just fine. PoundSand fucked around with this message at 03:33 on Mar 16, 2023 |
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Mar 16, 2023 03:23
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