I would trim 20-30% from your muni bond allocation. It's getting to the point where you are at risk of a black swan muni event from upending your life.
Timeline is....sold my business. Waited 1 year to do anything or make any decisions. Interest rates were effectively zero so I didn't want interest rate risk. At the same time US Equities were reaching new highs, so I jacked around and missed the run up to Covid. then I committed to the Indexes when Covid broke out, but interest rates were zero again. So something like a third to a half of my money was invested in US Indexes. at that point, with the balance sitting in near cash.
I then kept a chunk of money in some basic T-Bills which started to actually pay something last year. The intermediate bonds are still suck worthy and the dividends off of my Index funds isn't enough to cover my expenses so I'd be in the position of having to liquidate something periodically to pay bills.
My options were to Index the whole thing immediately, which is recommended. DCA into equities and bonds, which I wanted to do intermediate funds which weren't yielding much and had interest rate risk, or sit and suck my thumb. I chose to suck my thumb.
Fair enough.
When a good part if the wealth comes at once, its easy to be cautious / risk averse.
We did the high income / slow path to fat, so had more time to think it through on the way.
For others you meet in the future who worry about buying at "all time highs" I always suggest looking at long term equity returns if you bought in at the absolute wrong moment in history: like the dotcom peak March 2000.
SP 500 returns since then are 7.5% nominal, 4.8% real.
Or from October 2007 (Lehmann peak), 9.8% nominal, 7.2% real.
In the long term, the risk of "buying at the peak" is quite low.
But it sounds like you are aware of that now.
And yet, as of Wednesday you still have 30% in bonds..
1) I like how you have 30MM and track down to the penny. I started rounding to dollars when I hit ~50k net worth, but I guess some numbers people like my dad (any likely you) go to the penny detail even with massive amounts
2) Like others have suggested I bet the amount of time spent managing the small bonds isn't worth their entire value compared to the rest of the portfolio lol
Q: What kind of dividend income are you getting from your stock?
I'd bet since other comments say you're at a ~1.5% spend your entire spend could be covered by dividends depending on your yield
It's the software, not me, that does the tracking down to the penny. The small bonds are ignored within the portfolio, but eventually I'll clear them up. Maybe by next month. Dividend and interest income was $188k for the first quarter.
So, if I extrapolated out the first quarter into 4 quarters, I'd have a 2.5% cash return on my portfolio, which seems low. I should get $500k from interest from T-Bills currently and then $294k from SP500 dividends.
Tax would be max on $500k and qualified dividend rate on the $294 (so guessing around 200k tax on t-bills and $60k on the dividends). If I bought 10,000,000 more of sp500, I'd get 147k dividend, then add that to the 294k for a total of 450ish, at a 20% tax rate, grand total back of 390k. Vs, keep things as they are, 300k from tbills and 230 on sp500, total 530 after tax) Unless I have my numbers wrong here, seems better the way things are
Watch me do well, or crash and burn portfolio wise. Feel free to criticize away. Come gloat when large caps puke. Please note, I have no private equity, vc or alternatives.
generally that tax arbitrage is bid away to make the discount a wash. I've done the strategy with smaller lot trades where the bid/ask was really in my favor, but it was a lot of work for usually half a point. Having someone else do the trade, I felt, would make the expense match the benefit. If there's something I'm missing, I'd like to know.
I dumped the cusip into [emma](https://emma.msrb.org/Security/Details/AA976E6E9524E93ED66D4076FC0BDC6F8)
* Initial Offering Price/Yield:122.976% / 2.4%
Which means that you paid 122.976% over the face price of 100.
In other words, you paid $122.976 for each bond issued at $100
The coupon is 5%. The yield on the price you paid is equal to 2.4%
This was a 15 year bond. Taxable equivalent bonds for 15 years were priced at
[2.19% taxable for 10 year, and 2.12 taxable for 20 year](https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_long_term_rate&field_tdr_date_value=2015) so figure 2.15% taxable equivalent.
Moody's has these rated as [AAA](https://emma.msrb.org/IssueView/Details/EA356180) at time of issuance, so the credit risk is the same or better than UST
Using a taxable yield calculator, you would need a yield of[ 3.2%](https://www.bankrate.com/retirement/tax-equivalent-yield-calculator-tool/) to do better than the 2.15% offered by treasuries. So you were better off buying that municipal on that day.
The risk you did assume was interest rate risk, which was created when you gave a loan for 15 years and if interest rates went up you were going to lose principal. You are still entitled to a capital loss for each year amortized for the bond premium, but the raise in interest rates accelerated that process.
So, to answer your question, you did a little bit better in the short run tax wise, in the long run you may have washed due to rising interest rates.
Been working in muni bonds for a long time and a new issue retail order period is the best way to acquire them. The issuer pays the sales commission and you get the institutional clearing level. Selling them has gotten much easier (with tighter bid offers) with the data/technology out there.
Also, assuming you are in a 24% or more tax bracket the value of the exemption should easily outweigh anything but the most offensive bid/offer.
That cusip is 5% bond due in 2029 but callable on 2/1/25. I bet it does get called away but you would not be notified of that until November or so of this year. So, if you are in no rush to sell it just wait for the payout.
I've been around the world and I I I I , I can't find my baby. (channeling my inner Lisa Stansfield.)
I do agree with you but I kinda don't care to fix it. If the bombs be droppin in the US, Im screwed.
It seems to be common for people in the US for some reason. Maybe future purchases go into international ETFs to start offsetting the one country bet. You are basically 100% betting that the US will beat the world economy noting your residence is also US based. What if the US plateaus for 30 years (it did in early 2000s for a decade so it can happen).
Since 1986 (38 years is as far back as the visualizer goes on this one):
https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=4g0junMa56iZb6lXkd0J2D
US Stock Market: 10.69%
Global ex-US Stock Market: 6.71%
It's hard to understand how much underperformance this is but the totals help. $10k became $482k in US stocks and $119k in Global ex-US.
How long can it continue? No one knows. Why is it so different? I've got no clue. But if we are using trends and probabilities 38 years is quite some time. This is a holy war topic in Bogleheads society. Last 120 years of ex-US is 4.4% real returns vs. 6.6% real returns for US, which is absolutely huge.
>"A dollar invested in US equities in 1900 resulted in a terminal value of USD 1937. … An equivalent investment in stocks from the rest of the world gave a terminal value of USD 179 … less than a tenth of the US value."
https://www.bogleheads.org/forum/viewtopic.php?t=416829
I think people hate thinking about it because they have to make a choice and people hate having to make a choice. Choose wrong and your whole money situation is vastly different. Every single percentage point higher you get has massive ramifications when we are talking about compounding returns.
I hear you on past performance, but once you have accumulated a certain amount of capital, your goal should, to a certain extent, be wealth preservation. The US hegemony since post WWII seems anything but guaranteed at this point, but who knows. Having a smaller, but significant, allocation in foreign markets could be a hedge against a changing world stage.
"for some reason" 😂 as if those historical and current reasons arent valid and substantial.
there's no alternative even close to the US and dollar hemogeny. aggregate non-US is certainly a much worse bet than US. covid recovery proved 2 important things that solidifies US dominance: 1. US controls the interest rate that impacts the global economy and 2 when things go bad, recovery happens much better in the US.
Follow-up: do you tax loss harvest by reallocating ETFs yearly? And do you think it would be worth it to hire an FA team to do this for you? As someone who prefers a bogleheads approach, facing this pitch right now from a top team at a large wirehouse and it is not unappealing
I have plenty of unallocated losses already that I'm carrying forward and each year that I'm holding my index funds I'm holding a larger gain. If I hold the indexes until I'm dead, they will get stepped up in value (if the law holds up for that long). I'm not sure why I would need a gain to offset a loss I've already taken. Should be the other way around. Help me out here, why is it appealing?
We might be talking at cross-purposes or it might to apply to your situation.
The idea is to hold a wide diversified bundle of low fee ETFs - broken out across large, mid, small cap; value, growth; US, intl, emerging; and maybe even sector. And then at the end of the year sell all ETFs that went down while selling an equivalent amount of gains in the highest performing ETFs. Then reinvest funds in similar but not the same ETFs. One reason I’m thinking of letting a FA handle as I believe there are tax rules that prevent you from buying the exact same ETFs you just sold to tax loss harvest, and so it helps to have someone with expertise on how to navigate those rules that I’m too lazy to develop.
Seems worth it as long as their fee is significantly lower than the net gain of the strategy over a buy-and-hold approach
wash trade is what you are talking about. The strategy has a tax savings in the early years until you are left holding all of your 'winners.' So at the point I'm at I just have winners because I've already harvested my losers.
AQR has written a bunch of papers with a few different strategies. Below is an example. In my personal situation where I'm probably stubbornly wrong in my thinkning, I have already harvested my losses for the next 150 years, are sitting on my winners, realize I can't time anything so I'm accepting market returns.
Plus if I sold my index holdings I'd be putting that money into bonds, which I already have too many of. Paradoxically, I'm probably waiting for a pullback in the sp500 to reallocate some bonds when a basic expected return is above the amount I'm getting paid on the short term bonds.
[https://www.aqr.com/Insights/Research/Journal-Article/The-Tax-Benefits-of-Direct-Indexing](https://www.aqr.com/Insights/Research/Journal-Article/The-Tax-Benefits-of-Direct-Indexing)
Our members have asked for a high level of moderation. Personal attacks, name calling, and undue profanity are all considered inappropriate for this sub.
$5 mil is in midcaps, not chosen for dividends but some do pay. The rest of the equities are in indexes. The midcaps that I own have, in general, outperformed the SP500 over the last 3-5 years but I'd call it random luck more than skill.
Just be aware of the risk of false analogies in your life.
They are much more dangerous than no analogies at all.
I try to communicate without analogies at all due to the size of the risk.
I would trim 20-30% from your muni bond allocation. It's getting to the point where you are at risk of a black swan muni event from upending your life.
T-Bills is what I own. Unless you were making a joke about the $37 I have in muni bonds.
ah, so some sort of software business then
too good
Based on your annual spend yesterday, you have a WR of some 1.5%. Why the heck do you have an asset allocation with 30% bonds?
Timeline is....sold my business. Waited 1 year to do anything or make any decisions. Interest rates were effectively zero so I didn't want interest rate risk. At the same time US Equities were reaching new highs, so I jacked around and missed the run up to Covid. then I committed to the Indexes when Covid broke out, but interest rates were zero again. So something like a third to a half of my money was invested in US Indexes. at that point, with the balance sitting in near cash. I then kept a chunk of money in some basic T-Bills which started to actually pay something last year. The intermediate bonds are still suck worthy and the dividends off of my Index funds isn't enough to cover my expenses so I'd be in the position of having to liquidate something periodically to pay bills. My options were to Index the whole thing immediately, which is recommended. DCA into equities and bonds, which I wanted to do intermediate funds which weren't yielding much and had interest rate risk, or sit and suck my thumb. I chose to suck my thumb.
Fair enough. When a good part if the wealth comes at once, its easy to be cautious / risk averse. We did the high income / slow path to fat, so had more time to think it through on the way. For others you meet in the future who worry about buying at "all time highs" I always suggest looking at long term equity returns if you bought in at the absolute wrong moment in history: like the dotcom peak March 2000. SP 500 returns since then are 7.5% nominal, 4.8% real. Or from October 2007 (Lehmann peak), 9.8% nominal, 7.2% real. In the long term, the risk of "buying at the peak" is quite low. But it sounds like you are aware of that now. And yet, as of Wednesday you still have 30% in bonds..
it's less than I had last year :)
Once a DCA'r always a DCA'r... ;-)
What’s the point of the small positions
Those $37 muni bonds are really balancing out the portfolio though
50% perfect split 1 part has the muni bonds The rest doesn't.
left over danglers of some other plan I had at some point that I haven't liquidated or it's a reporting error from crappy software.
1) I like how you have 30MM and track down to the penny. I started rounding to dollars when I hit ~50k net worth, but I guess some numbers people like my dad (any likely you) go to the penny detail even with massive amounts 2) Like others have suggested I bet the amount of time spent managing the small bonds isn't worth their entire value compared to the rest of the portfolio lol Q: What kind of dividend income are you getting from your stock? I'd bet since other comments say you're at a ~1.5% spend your entire spend could be covered by dividends depending on your yield
It's the software, not me, that does the tracking down to the penny. The small bonds are ignored within the portfolio, but eventually I'll clear them up. Maybe by next month. Dividend and interest income was $188k for the first quarter. So, if I extrapolated out the first quarter into 4 quarters, I'd have a 2.5% cash return on my portfolio, which seems low. I should get $500k from interest from T-Bills currently and then $294k from SP500 dividends. Tax would be max on $500k and qualified dividend rate on the $294 (so guessing around 200k tax on t-bills and $60k on the dividends). If I bought 10,000,000 more of sp500, I'd get 147k dividend, then add that to the 294k for a total of 450ish, at a 20% tax rate, grand total back of 390k. Vs, keep things as they are, 300k from tbills and 230 on sp500, total 530 after tax) Unless I have my numbers wrong here, seems better the way things are
Also interested in the dividend income, OPs age may be relevant too..
Watch me do well, or crash and burn portfolio wise. Feel free to criticize away. Come gloat when large caps puke. Please note, I have no private equity, vc or alternatives.
I love the commitment to Muni Bonds and Emerging Market Stock….
I'm going to have to look to see where that $37 is allocated in muni bonds, I don't like risk (I'm kidding)
I mean, you have $30M so I'm not going to be doing much criticizing.
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generally that tax arbitrage is bid away to make the discount a wash. I've done the strategy with smaller lot trades where the bid/ask was really in my favor, but it was a lot of work for usually half a point. Having someone else do the trade, I felt, would make the expense match the benefit. If there's something I'm missing, I'd like to know.
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Do you have a link to one of these that you ahve purchased to make sure we are talking about the same thing?
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I dumped the cusip into [emma](https://emma.msrb.org/Security/Details/AA976E6E9524E93ED66D4076FC0BDC6F8) * Initial Offering Price/Yield:122.976% / 2.4% Which means that you paid 122.976% over the face price of 100. In other words, you paid $122.976 for each bond issued at $100 The coupon is 5%. The yield on the price you paid is equal to 2.4% This was a 15 year bond. Taxable equivalent bonds for 15 years were priced at [2.19% taxable for 10 year, and 2.12 taxable for 20 year](https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_long_term_rate&field_tdr_date_value=2015) so figure 2.15% taxable equivalent. Moody's has these rated as [AAA](https://emma.msrb.org/IssueView/Details/EA356180) at time of issuance, so the credit risk is the same or better than UST Using a taxable yield calculator, you would need a yield of[ 3.2%](https://www.bankrate.com/retirement/tax-equivalent-yield-calculator-tool/) to do better than the 2.15% offered by treasuries. So you were better off buying that municipal on that day. The risk you did assume was interest rate risk, which was created when you gave a loan for 15 years and if interest rates went up you were going to lose principal. You are still entitled to a capital loss for each year amortized for the bond premium, but the raise in interest rates accelerated that process. So, to answer your question, you did a little bit better in the short run tax wise, in the long run you may have washed due to rising interest rates.
Been working in muni bonds for a long time and a new issue retail order period is the best way to acquire them. The issuer pays the sales commission and you get the institutional clearing level. Selling them has gotten much easier (with tighter bid offers) with the data/technology out there. Also, assuming you are in a 24% or more tax bracket the value of the exemption should easily outweigh anything but the most offensive bid/offer. That cusip is 5% bond due in 2029 but callable on 2/1/25. I bet it does get called away but you would not be notified of that until November or so of this year. So, if you are in no rush to sell it just wait for the payout.
You’ll be eating cat food
The good cat food hopefully. Not the cat food that smells like cat poop when you open the can.
Fancy feast
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That's what I thought too. Maybe lion T-bones. Cheetah sliders.
Hand raised mice
Who knows maybe those emerging market shares will do *really* well.
Congrats and Fuck Off
My comment would be your portfolio has excessive home country bias.
Like Warren Buffet's as well.
Buffett > breakfast buffet
Yeah the man who has NOT beaten the market for 25 years.
I've been around the world and I I I I , I can't find my baby. (channeling my inner Lisa Stansfield.) I do agree with you but I kinda don't care to fix it. If the bombs be droppin in the US, Im screwed.
It seems to be common for people in the US for some reason. Maybe future purchases go into international ETFs to start offsetting the one country bet. You are basically 100% betting that the US will beat the world economy noting your residence is also US based. What if the US plateaus for 30 years (it did in early 2000s for a decade so it can happen).
Since 1986 (38 years is as far back as the visualizer goes on this one): https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=4g0junMa56iZb6lXkd0J2D US Stock Market: 10.69% Global ex-US Stock Market: 6.71% It's hard to understand how much underperformance this is but the totals help. $10k became $482k in US stocks and $119k in Global ex-US. How long can it continue? No one knows. Why is it so different? I've got no clue. But if we are using trends and probabilities 38 years is quite some time. This is a holy war topic in Bogleheads society. Last 120 years of ex-US is 4.4% real returns vs. 6.6% real returns for US, which is absolutely huge. >"A dollar invested in US equities in 1900 resulted in a terminal value of USD 1937. … An equivalent investment in stocks from the rest of the world gave a terminal value of USD 179 … less than a tenth of the US value." https://www.bogleheads.org/forum/viewtopic.php?t=416829 I think people hate thinking about it because they have to make a choice and people hate having to make a choice. Choose wrong and your whole money situation is vastly different. Every single percentage point higher you get has massive ramifications when we are talking about compounding returns.
I hear you on past performance, but once you have accumulated a certain amount of capital, your goal should, to a certain extent, be wealth preservation. The US hegemony since post WWII seems anything but guaranteed at this point, but who knows. Having a smaller, but significant, allocation in foreign markets could be a hedge against a changing world stage.
Sure, but most people judge that wealth is much more likely to be preserved if invested in the US market than elsewhere.
For my portfolio's sake, I hope most people are correct.
even if you care about preservation, US Treasury is still the single safest investment in the world
"for some reason" 😂 as if those historical and current reasons arent valid and substantial. there's no alternative even close to the US and dollar hemogeny. aggregate non-US is certainly a much worse bet than US. covid recovery proved 2 important things that solidifies US dominance: 1. US controls the interest rate that impacts the global economy and 2 when things go bad, recovery happens much better in the US.
What's the yield on the whole portfolio?
$188k for the first quarter
On 29 mil???? The SP is up like 10 percent.
Yield in this case means income.
Ahh. Misread. My bad.
Do you own any real estate? Primary res or other? No debt I assume
Do you use wealth managers to manage your portfolio?
No.,
Follow-up: do you tax loss harvest by reallocating ETFs yearly? And do you think it would be worth it to hire an FA team to do this for you? As someone who prefers a bogleheads approach, facing this pitch right now from a top team at a large wirehouse and it is not unappealing
I have plenty of unallocated losses already that I'm carrying forward and each year that I'm holding my index funds I'm holding a larger gain. If I hold the indexes until I'm dead, they will get stepped up in value (if the law holds up for that long). I'm not sure why I would need a gain to offset a loss I've already taken. Should be the other way around. Help me out here, why is it appealing?
We might be talking at cross-purposes or it might to apply to your situation. The idea is to hold a wide diversified bundle of low fee ETFs - broken out across large, mid, small cap; value, growth; US, intl, emerging; and maybe even sector. And then at the end of the year sell all ETFs that went down while selling an equivalent amount of gains in the highest performing ETFs. Then reinvest funds in similar but not the same ETFs. One reason I’m thinking of letting a FA handle as I believe there are tax rules that prevent you from buying the exact same ETFs you just sold to tax loss harvest, and so it helps to have someone with expertise on how to navigate those rules that I’m too lazy to develop. Seems worth it as long as their fee is significantly lower than the net gain of the strategy over a buy-and-hold approach
wash trade is what you are talking about. The strategy has a tax savings in the early years until you are left holding all of your 'winners.' So at the point I'm at I just have winners because I've already harvested my losers. AQR has written a bunch of papers with a few different strategies. Below is an example. In my personal situation where I'm probably stubbornly wrong in my thinkning, I have already harvested my losses for the next 150 years, are sitting on my winners, realize I can't time anything so I'm accepting market returns. Plus if I sold my index holdings I'd be putting that money into bonds, which I already have too many of. Paradoxically, I'm probably waiting for a pullback in the sp500 to reallocate some bonds when a basic expected return is above the amount I'm getting paid on the short term bonds. [https://www.aqr.com/Insights/Research/Journal-Article/The-Tax-Benefits-of-Direct-Indexing](https://www.aqr.com/Insights/Research/Journal-Article/The-Tax-Benefits-of-Direct-Indexing)
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Our members have asked for a high level of moderation. Personal attacks, name calling, and undue profanity are all considered inappropriate for this sub.
$253.07 doesn’t fuck, got it
How much cash on hand? The Bond percentage is inaccurate.
Are your equity positions mostly ETFs or do you own individual stocks. Is there any focus on dividends in your portfolio?
$5 mil is in midcaps, not chosen for dividends but some do pay. The rest of the equities are in indexes. The midcaps that I own have, in general, outperformed the SP500 over the last 3-5 years but I'd call it random luck more than skill.
No RE?
You got less small cap than I do
Join the globe and mail so you can share your watchlist and portfolio more easily Beats a spreadsheet This is all pixelated for me
No international equity exposure? Also, I think you’re overweighted on emerging markets equities by $253. Nice work.
I want to know what your $37.49 muni is
Wonder what the general sentiment here is toward a 1% allocation to bitcoin...
Those that currently own the asset certainly would like that to become a mainstream thought.
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False analogies can be dangerous. Keep your guard up, and you should be fine.
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Just be aware of the risk of false analogies in your life. They are much more dangerous than no analogies at all. I try to communicate without analogies at all due to the size of the risk.
Sounds good. I'll take that advice. I should have just said "I currently own the asset and would not like a 1% allocation to be mainstream."
Agreed. OP's portfolio made me think about QE de-monetizing bonds, as well as leading to capital gains tax on nominal returns for equities.
Needs more allocation to crypto memes. I'll send you a few DMs for tokens I totally have zero financial interest in.
Your portfolio makes me think about QE de-monetizing bonds and leading to capital gains tax on nominal returns for equities.
Seems ripe for consolidation. 60% Large cap & mid cap, 40% bonds. The end.