DSEEX Explanation I would think that investing in DSEEX would give similar diversification to a vanilla hybrid fund that had a roughly 50/50 stock/bond mix. The difference is one of magnitude of performance (i.e. getting hammered harder).
In DSEEX, you get full exposure to CAPE. That means that if $10,000 invested in CAPE were to drop 10%, losing $1,000, then you'd expect a $10,000 investment in DSEEX to similarly lose $1,000 before even looking at the gains or losses on the bond side.
That $10,000 investment in DSEEX, aside from getting you stock exposure, buys nearly $10,000 worth of bonds in the fund's portfolio. If bonds drop 4%, your $10,000 worth of bonds lose $400.
So the $10,000 investment loses $1,000 + $400 = $1400.
This is as one would expect:
100% stock exposure x $10,000 x 10% loss + 100% bond exposure x $10,000 x $4% loss
= $1,000 + $400
= $1400
= (10% + 4%) x $10,000 = 14% x $10,000.
In the vanilla 50/50 hybrid fund, that $10,000 invested buys $5,000 worth of "real" stock and $5,000 of bonds. When stocks decline by 10%, the $5,000 worth of stocks drops $500 in value. When bonds decline by 4%, the $5,000 worth of bonds drops $200 in value.
So the $10,000 investment loses $500 + 200 = $700.
This too is as one would expect:
50% stock exposure x $10,000 x 10% loss + 50% bond exposure x $10,000 x 4%
= $500 + $200
= $700
= (50% x 10% + 50% x 4%) x $10,000 = 7% x $10,000.
Note that DSEEX is likely not providing the full 200% exposure (100% to CAPE, 100% to bonds), but it's still a reasonable approximation. DoubleLine writes that while: "Each $1 investment seeks to obtain $1 of exposure to the CAPE® Index ... and $1 of exposure to the underlying portfolio of bonds ... market fluctuations likely will preclude full $1 for $1 exposure between the swaps and the fixed income portfolio.
Bond Questions Again @davidrmoranCorrect. The chart performance is strictly total percentage return for a time period; from wherever the total arrives, being price performance, a yield/dividend or a short/long
capital gain or loss.
Barron's Cover Story: The Housing Market’s Rebound Is Far From Over "THE BIGGEST RISK to the housing market’s health today is interest rates, which have been creeping higher. "
In my mind, increasing interest rates will cap any gains for the US housing market, with the exception of a few "hot" cities.
So weird to see "bullish" articles from Barrons.
DSEEX Explanation This is very helpful
@LLJB. There are two ways to invest in the CAPE strategy, through the OEF or through the Barclays ETN, CAPE. I don't think I understand fully why there are warnings about investing in ETNs; it seems to boil down to assessing the stability of the issuer of the debt instrument (Barclays). For the investor, there is an essential difference, in my opinion. ETNs pay no income or
capital gains, but OEFs do. In the case of DSEEX/DSENX, distributions are monthly and there are annual CG payouts. I don't see any notable difference in the overall returns of the two instruments. The ETN acts like a growth stock that pays no dividend, but CAPE is not that. Trading CAPE can be a bit of a challenge as the spreads are wide and the bid/ask prices reflect current market sentiment and are often at variance with the last price quoted. Maybe others know more about the ETN structure as it pertains to this strategy. I like it for a taxable account if I don't need regular income from it.
Bond Questions Again @msf: Appreciate the post. We all have to play both ends off the middle, so to speak, given interest rates, market conditions, personal goals, and our own risk tolerance. CDs and Savings Bonds are worthless for generating real profits these days. I'm willing to slog through some bond-averse conditions like rising rates for quite a while, assuming that rates can't go up forever. And I am less and less worried about share price, and want to see the dividends coming in regularly into my bond funds and "balanced" funds. (bonds= 37% of total portfolio, but that 37% is not all in specific and discreet bond funds.) I have two that pay monthly, and I get quarterlies from the hybrid, MAPOX. (PRWCX is a hybrid, but pays only in December, so its div. is a thing I just consider a supplement to its cap.
gains.) How often are we reminded that all of this sh-- (STUFF) is
cyclical, eh? Of course evolving markets and new situations cannot just be ignored. Over time, countries move out of "frontier" to "emerging" status. And anything else you can think of, too. It all goes into the soup--- the world we invest into.
************************
Bond
funds: much easier than trying to get into individual bonds, except for special offerings like the Massachusetts "mini-bonds" I recall, years ago. It's regular income, even though I don't need it right away and am reinvesting it all. All these years of reinvesting and re-deploying a big slug into STOCKS has worked well for me. And I'm 7 years away, still, from RMDs.
Trade wars and tariffs in today's global interconnect & other swans Hi
@Old_SkeetThis house, not unlike your's; "hearts" investing profits, but
capital preservation is imperative.
As interest rates continued to creep up in late 2017, and viewing reactions over a period of months found real estate to continue very weak into early 2018......all of our real estate was sold. Also took the money and run from broad Europe holdings.
As the equity markets became more "insane" in January, sold away most of our technology and healthcare related.
In mid-January our portfolio was about 80% equity and is currently at 38.5%. The majority of this remains in tech. and healthcare related.
As bonds were still stuck in "suck land", what would have been a normal area for us to travel to with equity sells, all moved to plain cash.
So, we took the money and ran. Below is where we are parked at this moment.
EQUITY = 38.5%
BONDS = 21.4%
CASH = 40.3%
Sidenote: small caps continue to attempt to become better performers, so far this year.
Take care,
Catch
The Closing Bell: Stock Market Edges Higher Even As Trade-War Jitters Linger
Stock Buybacks Are Proof Of Tax Reform’s Success This may be one of the most ridiculous arguments I've ever read, falsely equating market value with broader economic value. What's good for shareholders isn't necessarily at all good for the economy as a whole. Moreover, causing a stock price to rise actually adds no
capital internally to a company to help grow its business, hire more workers etc. Companies get
capital to grow via public offerings of shares or bond issuance. This is why the Bush-era dividend tax cuts made no sense at all from an economic growth standpoint. Being pressured to pay a dividend is actually a disincentive towards economic growth.
Capital is leaving the company's coffers and is instead going into the hands of investors who may put the money under a mattress, buy foreign made goods and generally do nothing with it. If economic growth really was the aim--it isn't.--tax cuts would be targeted towards venture
capital creating new businesses, company R&D investments and more specifically hiring American workers. The more jobs you create, the bigger the tax cut. Cutting taxes on profits incentivizes profit maximization, not job growth.
In the article's example:
Now suppose Company B has an idea for a profitable new venture that will cost $100 to get going. The most natural move for investors is to invest their $100 in Company B by buying its stock or bonds. With the infusion of cash, Company B can now fund its venture.
That is only true when the company has its IPO, does a secondary offering or issues new bonds. Otherwise, paper is just trading hands and the company gets no new
capital. If Company A buys back its stock with its $100 in cash it now has $100 less it can use to reinvest in the company and help it grow. It also has $100 less to pay its own debts, putting the company in increasing risk of default and going out of business. Share issuance for new ventures encourages economic growth, not buybacks.
Fidelity Is Losing Market Share on Target Funds If you feel that for example the 2020 is too risky and Fidelity is your only target vchoice just invest in the 2015 or 2010.
IRA funds transfered to Roth IRA in 2018. Want to know if it can be done in 2018. Just trying to be clear on things here ...
- You're planning to take money from your traditional IRA in 2019 to pay taxes on your 2018 Roth conversion. (I guess this from your saying you'd use RMD money, and there's usually no RMD on a Roth.) So far, so good.
- You're planning to take 4% (of what, the traditional IRA?) in 2019.
-- The "usual" 4% rule of thumb is for how much you can safely spend in a year (including "spending" on taxes); it's not an amount you must spend, or even move from investments to cash. Don't confuse RMDs, which are amounts that must be withdrawn from traditional IRAs - that's a tax event - with financial planning - how much money you have available to live on in retirement.
-- The first RMD is usually 1/27.4 = 3.65% (if your 70th birthday is the same year you turn 70.5) or 1/26.5 = 3.77% (if your 71st birthday is the same year you turn 70.5). You don't have to withdraw more than that from your IRAs, and you don't even have to sell any investments (you can just move that amount of securities from your traditional IRA to your taxable account).
- You'll owe taxes in April 2020 for whatever you withdraw from your traditional IRA in 2019.
- You'll be able to withdraw from your Roth tax-free, anytime, tax-free the money your converted in 2018 to your Roth tax-free at any time. But if you dip into the Roth earnings (which happens only after you withdraw all the converted moneys), you'll owe taxes on them unless you wait until Jan 1, 2023 (the beginning of the fifth year after conversion).
- Going forward, you're planning to convert more money each year. That will work if you take your RMD for the year before you do the Roth conversion.
Buy, Sell and Ponder -- March Wondering about the status of SPHD, which seems to be getting pummeled YTD (-6.5%) because of its holdings in Utilities, Real Estate and other interest-sensitive stocks. I have built up pretty large cap gains since I bought it a few years ago. It's definitely in the wrong sectors right now, especially compared to something similar like SCHD. Opinions about SPHD?
Elizabeth Warren Wants To Be Your New Mutual Fund Manager @johnN
Elizabeth Warren Operah is next president/ vp duo 2020!
Learn how to spell Oprah. Crazier things have happen, ala 2016.
It's also good if we only have one healthcare system so everyone is happy and every one is covered.
You said something smart! Was that a slip?
Probably best for the country then they can manage our money, raise our taxes.
Isn't that better than lower taxes on rich corporations and increased spending, ala Trump? Talk about deficits - oh wait, not until the next election when a Democrat is elected.
let more people in with open border in this country to live free
, hmm, I'm going out on a limb here and guessing you were an immigrant, correct? Now its time to close the borders?
Probably best to buy lots of knives and learn judo too since guns will be limited probably best to learn new hands-hands combat
. Great idea. Maybe kids and the rest of us might be safer ala Australia, Japan and just about everyother democratic society?. Won't happen, good thought though.
Bucket #1 ...4-5y worth. Taxable, alas.
@davidrmoran, what do you mean by that? My 4 year bucket #1, MM and CDs, would remain tax deferred if that was what you referred to.
My nearterm bucket, bonds and cash, is in rollover IRAs, and a brokerage account (with big losses in it, so no prob there); and when I take money from the former it is all taxable. (Same with the latter if I ever ever have
capital gains again before I die, which looks unlikely.) Oh, and also a checking-savings account, of course.
Not positive I am getting your query; sorry. Distracted with averting my eyes from the EWarren insulting.
Elizabeth Warren Wants To Be Your New Mutual Fund Manager Great post Ted- She thinks she ll run for Prez in 2020- Im from Massachusetts-lots of people like her-but I sure dont!!!
