Last year Vanguard GNMA made just under one percent or 0.87% for 2018 as interest payments offset a decline in bond prices from rising interest rates. As I’ve written to you before, you don’t want to be in the interest rate prediction business. You simply want to collect your interest payments and let the chips fall as they may. When you near retirement your success as an investor depends on a nine to five mentality—work nine to five to steadily save money for retirement and invest to keep what you’ve saved. It’s that simple. A survival guy investment strategy helps you to win the war … [Read more...]
American Municipalities Offer Less Info, More Debt
You might think that after the blunders of the recent past, public borrowers would have learned the lessons of 2008, but that would be wrong. Rather than increasing the information available, municipalities are providing less transparency to lenders. Gunjan Banerji and Heather Gillers write in The Wall Street Journal: U.S. cities and counties are using fewer ratings to assess the risks of the bonds they sell, providing investors with just one opinion on an increasing amount of new debt. Roughly 25% of the dollar value of all municipal debt issued this year carried a single grade from one … [Read more...]
In Retirement Stop Working, Start Earning. Here’s How
Despite the recent market turbulence, there is one group of investors who have so far been insulated by good decisions they made long ago. Dividend investors have collected their payments regularly, as those who invested looking to sell to the "greater fool," in the future have been tossed on a sea of volatility. If you are serious about a retirement portfolio you can count on, making dividends and income a central focus in your investment plan would be a great start. You shouldn't have to work throughout your retirement, and you should have a portfolio of investments that earns year … [Read more...]
My Concerns with the Vanguard Precious Metals and Mining Fund
This post I wrote on September 25 was one of readers' favorites this year. My concerns with the Vanguard Precious Metals and Mining Fund should be taken seriously. I'm concerned about Vanguard more broadly as well, and have written a series on that here. Barron’s had a solid write-up on gold over the weekend. “Gold has been a traditional hedge against financial and economic crises, playing that role during the 2008-09 meltdown. Gold rallied 17% from the collapse of Lehman Brothers on Sept. 15, 2008, until the stock market bottomed on March 9, 2009—a period during which the S&P 500 fell … [Read more...]
The Dangers of Being Unemployed and Older
It's harder for older workers who have lost their jobs to get back to work. According to Ruth Simon in The Wall Street Journal "Nearly eight million older Americans are out of work or stuck in low-quality jobs." The problem with unemployment at an older age is the lack of time to make up for any mistakes. With retirement age right around the corner, you should be packing away as much savings as possible. Those years should be your peak earning years as well, but unfortunately, some older workers who have lost their jobs are still struggling to find new ones. The sad reality is that when … [Read more...]
Will Vanguard GNMA be Up in 2019?
You know, it has been a good year-end advance for Vanguard GNMA. Which is why, if investors can take away one thing from 2018, it’s that they should never allow predictions to run their money. Because, if you recall, it was at this time last year when everyone was predicting higher interest rates for 2018. And because of that (not you of course) many soured on Vanguard GNMA and bonds all together, hence removing a most powerful counterbalancing force in their portfolio. Not a good move as it turns out. Predicting the direction of interest rates is about as useful as predicting the … [Read more...]
Why We Favor Laddering Bonds
Yesterday I asked readers Do You Know this about Vanguard Wellington and Wellesley Funds? I explained that we have not soured on the funds, but that their effective maturities are longer than we'd like. I also wrote that at Young Research we recommend laddering bonds. One of the reasons we favor laddering bonds is to help strip-out interest rate risk. When you own a bond outright you have control over your holding period. Duration measures a bond’s sensitivity to interest rates. For example, a bond with a 15-year duration will decline by 15 percent with every one percent increase in … [Read more...]
Your Questions, My Answers: Custodial Accounts and Gifts to Minors
Considering a monetary gift for your grand-kids for Christmas? They will certainly be happy, but you should read through this piece I wrote back on November 16, 2018 first. Your Question: My mother is planning on gifting my children some money this year. Since there is enough in their 529 accounts, I thought I would open custodial accounts for them to take care of this money, and start them on the road to retirement saving and learning about investing. In your opinion, is a custodial account the best option in this situation and if so, is Fidelity a good place to do it? My Answer: Yes. I … [Read more...]
Do You Know this about Vanguard Wellington and Wellesley Funds?
As you know our concerns about Vanguard continue to mount. Yesterday, a reader wrote: “[Dick] used to be big on Wellington and Wellesley, given their longevity and resistance to tail risk over time. Also, it seemed to me that Wellington Management's fixed income expertise would be an asset in this part of the cycle. I'm wondering why he has soured on these funds.” The quick answer is no we have not soured on Wellington and Wellesley with two distinctions. First, Vanguard has nothing to do with the management of Wellington and Wellesley. Vanguard has outsourced those management … [Read more...]
Fidelity is Boston and Boston is Fidelity
When you’re an intern at a start-up, you have certain responsibilities. For me, it was to go pick-up lunch when the founders ordered out. But what was cool about being the intern was that I had a seat at the table. I was privy to all their war stories. It was fun (for them) to talk about how hard it was when they were my age—broke, jobless and about to graduate from college. As they looked back it was the road not the destination. Easy for them to say. One of the stories I liked best was when the CEO would talk about how he decided to work in Boston. He said, “I knew it was going to be hard … [Read more...]
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