Gyroscopic Investing

So, in my IRA I can own either actual LTT or TLT. So, which should I own and why. What are the advantages, or disadvantages to each. I'm working my way into a PP.
My only deviations thus far is in the Equity position I'm 12.5% VTI & 12.5% AVUV (been listening to Merriman and Swedloe too much ).
Also, since I can't really own Physical in my IRA (no, I don't want to own an American Eagle Coin IRA) I am buying 4 Bullion ETF'S to spread the risks for my 25% Bullion Allocation; OUNZ; BAR; SGOL; & PHYS. I hope I'm on the right track there. I understand that IAU holds some futures & I don't want to go there along with GLD which is also on the No-Fly List.

Owning individual bonds has been pretty easy, and you avoid the ER. TLT is obviously easier because you won't have to sell them every 10 years, but you pay an ER.

Vanguard didn't process my sell order for individual bonds back when they were at their peak in 2020, I don't think that would happen with a mutual fund. But TLT is an ETF so there might be some equivalent.

The main issues are

1. Can you execute as effectively, efficiently and as cheaply as the ETF ? (no, you can't)
2. Which is the larger cost? The costs of the above or the cost of the ETF management fee? (probably unknown because it is highly unlikely you will do the things you need to do to even know the answer to #1) If you are investing a large sum, then it is probably worth your time to manage it yourself.
3. Convenience

VGLT and SCHQ are pretty much equivalents to TLT and less than half the cost.

Since 1 and 2 are pretty hard to actually compare, I think it basically comes down to #3 and is therefore a matter of preference.

The reason I opted out of TLT was the expense ratio but with a .05 % expense ratios - It's pretty hard to beat SCHQ and VGLT. And it saves the hassle of buying and selling LTT's at auction. But a pro with an actual LTT, is that your only counter party is the US Govt. You will get your money back. They will print it and give it to you.

ppnewbie wrote: ↑Mon Feb 22, 2021 8:55 pm The reason I opted out of TLT was the expense ratio but with a .05 % expense ratios - It's pretty hard to beat SCHQ and VGLT. And it saves the hassle of buying and selling LTT's at auction. But a pro with an actual LTT, is that your only counter party is the US Govt. You will get your money back. They will print it and give it to you.

What is interesting is while there is a fraction of a point difference between vglt and tlt the two funds have different durations ..Tlt goes out about half a year longer than vglt ...so it only seems to reason that in a downward market slide Tlt will see a fraction of a point greater slide too ..

Many times the much larger funds execute at better prices ..because when I sell sometimes it can be 500k chunks the spreads can be a bit better I find on Tlt and even Gld compared to iau which is much smaller .sometimes I had to wait to have a complete sale with iau and the price changed killing any expense difference off

mathjak107 wrote: ↑Tue Feb 23, 2021 4:09 am

ppnewbie wrote: ↑Mon Feb 22, 2021 8:55 pm The reason I opted out of TLT was the expense ratio but with a .05 % expense ratios - It's pretty hard to beat SCHQ and VGLT. And it saves the hassle of buying and selling LTT's at auction. But a pro with an actual LTT, is that your only counter party is the US Govt. You will get your money back. They will print it and give it to you.

What is interesting is while there is a fraction of a point difference between vglt and tlt the two funds have different durations ..Tlt goes out about half a year longer than vglt ...so it only seems to reason that in a downward market slide Tlt will see a fraction of a point greater slide too ..

Many times the much larger funds execute at better prices ..because when I sell sometimes it can be 500k chunks the spreads can be a bit better I find on Tlt and even Gld compared to iau which is much smaller .sometimes I had to wait to have a complete sale with iau and the price changed killing any expense difference off

Yup. You can track this stuff with good brokers who will report execution information on your trades. If you have the info then it becomes a math exercise as to what is most cost effective.

Kbg wrote: ↑Tue Feb 23, 2021 10:07 am

mathjak107 wrote: ↑Tue Feb 23, 2021 4:09 am

ppnewbie wrote: ↑Mon Feb 22, 2021 8:55 pm
The reason I opted out of TLT was the expense ratio but with a .05 % expense ratios - It's pretty hard to beat SCHQ and VGLT. And it saves the hassle of buying and selling LTT's at auction. But a pro with an actual LTT, is that your only counter party is the US Govt. You will get your money back. They will print it and give it to you.

What is interesting is while there is a fraction of a point difference between vglt and tlt the two funds have different durations ..Tlt goes out about half a year longer than vglt ...so it only seems to reason that in a downward market slide Tlt will see a fraction of a point greater slide too ..

Many times the much larger funds execute at better prices ..because when I sell sometimes it can be 500k chunks the spreads can be a bit better I find on Tlt and even Gld compared to iau which is much smaller .sometimes I had to wait to have a complete sale with iau and the price changed killing any expense difference off

Yup. You can track this stuff with good brokers who will report execution information on your trades. If you have the info then it becomes a math exercise as to what is most cost effective.

Would Vanguard be considered a "good broker"? Fidelity?

Fidelity is much better as a broker

Mofo's are the best.

vnatale wrote: ↑Tue Feb 23, 2021 10:13 am Would Vanguard be considered a "good broker"? Fidelity?

IDK. Call them up and ask them if they provide trade execution statistics or reporting in general and on your specific trades/account.

Very instructive and thanks to all for all the assistance.
It seems that if one goes the ETF route, you don't get the duration that a straight up 30yr LTT gives you. You can tell from looking at the yield on these
ETFs that they don't have as much duration, but then you don't have as much durational risk either. HB wanted to have as much volatility as he could get in a LTT- so, there's that. Like everything, there's the uncertainty and seeking to know the unknowable. You just have to throw the dice I guess and they roll how there gonna roll.

johnnywitt wrote: ↑Wed Feb 24, 2021 11:23 am Very instructive and thanks to all for all the assistance.
It seems that if one goes the ETF route, you don't get the duration that a straight up 30yr LTT gives you. You can tell from looking at the yield on these
ETFs that they don't have as much duration, but then you don't have as much durational risk either. HB wanted to have as much volatility as he could get in a LTT- so, there's that. Like everything, there's the uncertainty and seeking to know the unknowable. You just have to throw the dice I guess and they roll how there gonna roll.

Yep...one advantage to ETFs if you are targeting a duration is you are likely to more closely adhere to it with an ETF. Unless you have very large wad of cash and buy a boatload of LTTs your duration is likely to wobble around quite a bit if through nothing other than progression of time. You also greatly expose yourself to greater randomness of results (which cuts both ways) depending on when you buy/sell.

Kbg wrote: ↑Wed Feb 24, 2021 12:13 pm

johnnywitt wrote: ↑Wed Feb 24, 2021 11:23 am Very instructive and thanks to all for all the assistance.
It seems that if one goes the ETF route, you don't get the duration that a straight up 30yr LTT gives you. You can tell from looking at the yield on these
ETFs that they don't have as much duration, but then you don't have as much durational risk either. HB wanted to have as much volatility as he could get in a LTT- so, there's that. Like everything, there's the uncertainty and seeking to know the unknowable. You just have to throw the dice I guess and they roll how there gonna roll.

Yep...one advantage to ETFs if you are targeting a duration is you are likely to more closely adhere to it with an ETF. Unless you have very large wad of cash and buy a boatload of LTTs your duration is likely to wobble around quite a bit if through nothing other than progression of time. You also greatly expose yourself to greater randomness of results (which cuts both ways) depending on when you buy/sell.

KISS is good. As one ages or the PP gets inherited it will be less complicated & easier to maintain.

Yeah, my feeling is it's really a personal choice. Whatever works best for the individual so long as they know the +/-s going in and are good with the tradeoffs.

Tough choice.

I found that selling bonds on discount brokerage platforms can get pretty tricky. I would not buy bonds in lots smaller than 10 (i.e. $10K face value). To be on the safe side you might want to go higher, like 20.

I'd suggest accumulating money in TLT, then when you hit a certain amount shift some of the $$ to an individual bond. Also, if you have to buy bonds in taxable accounts, definitely go with TLT or a convenient mutual fund. With individual bonds, you'll need to sell then when they are 20 years to maturity, which could force you to pay taxes on the gains.

I own both TLT and 30 year T-bonds.

When I first established my PP I bought TLT exclusively. I liked the ease of buying and selling an ETF inside of my IRA.

After I was comfortable with LTTs, I started shifting into actual T-bonds, which I now have laddered. No annual expense ratio, no counterparty risk.

If you have the time and the inclination, you might also consider EE-bonds, which currently have a 20 year fixed yield of 3.53% and no fluctuation in principal value.

You don’t have to practice this kind of diversification outlined above, but it does add a measure of resiliency to your portfolio over the long run.

I have never invested in Treasury futures so I can’t really advise on their characteristics. Why would you want to hold a synthetic derivative rather than the real thing?

1. Have you PM'ed blue_ruin17? He is a Canadian investor who frequently posts here and has even written his own book on the HBPP.
See: Investing Equanimity: The Logic And Wisdom of the Permanent Portfolio.


2. Harry Browne warned against the use of leverage for "money you cannot afford to lose" in his rules for investing.