Gyroscopic Investing

I was looking through a comparison of VTI vs. SCHB. I was wondering what people normally had for their stock-portion of their PP.

Using Fidelity, I looked up some benchmark values (as of 6/11/12):

                                            VTI                SCHB    
Annual Turnover:                        5.0%              3.0%
Tracking Error:                            .07                 .08
Expense Ratio:                            .06%               .06%
Total Holdings:                          1340               1726
Net Assets:                           $20.3B           $970.6M
Bid/Ask Spread:                          .01                 .07
Tax Cost Ratio:                         .29%               .67%
Equity: Price/Trailing Earnings     15.74           14.30
Equity: Price/Book                  2.21                 2.01
Equity: Price/Sales                 1.29                 1.20
Benchmark:                         MSCI US Broad     DOW US Broad

It also looks like within the past 3 years that SCHB has beat VTI by about a percent (not a huge difference). Just wondering if anyone is using SCHB for certain reasons over VTI or vice versa.

in this case, there could be differences of

1 different index being followed by each ETF.  The index SCHB follows seems similar to the index VTI does.  My guesstimate is that each index will have a similar return over a 10+ year time, but on 1 or 3 yr time frames 1 might randomly outperform the other.

2 tracking error against a particular index.  Vanguard invented the index fund & has a track record of (~40 yrs?) successfully running index funds with afaict minimal tracking error during this history.  OTOH Schwab has less such experience.

My instinct would be to use Vanguard/VTI.  Also, if 1 is doing Institutional/Fund diversification, it might make sense to diversify between both VTI & SCHB (or other such US stock market index funds)

Interesting find. I don't see a compelling argument to switch though I do like SCHB as an alternative. But I already use Schwab for the cash component of the PP (SCHO).

Ad Orientem wrote: Interesting find. I don't see a compelling argument to switch though I do like SCHB as an alternative. But I already use Schwab for the cash component of the PP (SCHO).

I was just looking at SCHO, it looks like their annual turnover is 74% of their holdings. From a tax point of view, wouldn't it be a lot cheaper to go with Lone Wolf's plan of holding a ladder of individual 1-3 year bonds and repurchasing yourself? I would think then if you either let your 1 years expire or sell at one year mark that you might only have 33% of your portfolio turning over each year which might mean less tax-wise. Just thinking out-loud in a typing format.

1NV35T0R, you might already have read about I-Bonds US Treasury Savings Bonds on this Forum, but just in case:

afaict I-Bonds are the best bet for the Cash asset, although they aren't liquid for the initial 12 months held, & have an annual purchase limit ($10K + $5K in tax refund).

cabronjames wrote: 1NV35T0R, you might already have read about I-Bonds US Treasury Savings Bonds on this Forum, but just in case:

afaict I-Bonds are the best bet for the Cash asset, although they aren't liquid for the initial 12 months held, & have an annual purchase limit ($10K + $5K in tax refund).

cabronjames,

I actually got into I-Bonds BECAUSE of this forum, so I was quite grateful for that. I'm not sure though how the tax refund would work however. I suppose I'd have it easier since I have to do estimated taxes (or at least I did as being classified as "self-employed"). I guess you'd just send a check to the IRS for $5000 just for fun and then know you get it back at the end of the year (or perhaps tax time next year) and could use that money for I-Bonds.

Come to think of it, if I paid $5000 extra in tax year 2012 for estimated taxes, when would you get that money back for using for I-Bonds? Would it be like May of 2013? Seems like it'd be a while for me to park funds with the government for them to give me my cash back later if that makes any sense. Just trying to understand how that would work.

1NV35T0R wrote: I guess you'd just send a check to the IRS for $5000 just for fun and then know you get it back at the end of the year (or perhaps tax time next year) and could use that money for I-Bonds.

Yes, that's how it works.  Whatever intentional or unintentional overpayment of taxes (up to $5000 or whatever it is these days) can be refunded to you in the form of I-Bonds.

have any of yall tried the $5K overpayment for this 2011 tax return?

if so, how long did it take for you to get your I-Bond refund?

was the I-Bond dated as of the day you filed the taxes, or when you received the refund?

what happens if you overestimate your overpayment of taxes, say you overpaid by $5100 instead of $5000?  does IRS give you a $5000 I-Bond & a $100 check?

cabronjames wrote: have any of yall tried the $5K overpayment for this 2011 tax return?

if so, how long did it take for you to get your I-Bond refund?

was the I-Bond dated as of the day you filed the taxes, or when you received the refund?

what happens if you overestimate your overpayment of taxes, say you overpaid by $5100 instead of $5000?  does IRS give you a $5000 I-Bond & a $100 check?

I'd be interested in this knowledge too. I'll go on an internet adventure and see if I can find anything. I was also wondering, does the $5000 for the I-Bond go towards your 2012 tax year or your 2013? (Since you'd be filing your 2012 taxes in April of 2013).

And could you just send a check to the IRS in April of 2013 for $5100, and then a few months later they give you an I-Bond counting towards your 2012 I-Bond contributions and a $100 refund check?

cabronjames wrote: have any of yall tried the $5K overpayment for this 2011 tax return?

if so, how long did it take for you to get your I-Bond refund?

was the I-Bond dated as of the day you filed the taxes, or when you received the refund?

what happens if you overestimate your overpayment of taxes, say you overpaid by $5100 instead of $5000?  does IRS give you a $5000 I-Bond & a $100 check?

Thanks to this forum, I did this last year. Just told my accountant about it and she filed form 8888. See this link from TD for how to do it:
http://www.treasurydirect.gov/indiv/res ... eature.htm
I had an overpayment of taxes and received iBonds in May just shortly after remaining balance was electronically deposited in my checking account.
Hope this helps.

BearBones, thx for sharing your experience/info

BearBones wrote: Thanks to this forum, I did this last year. Just told my accountant about it and she filed form 8888. See this link from TD for how to do it:
http://www.treasurydirect.gov/indiv/res ... eature.htm
I had an overpayment of taxes and received iBonds in May just shortly after remaining balance was electronically deposited in my checking account.
Hope this helps.

btw were when were your taxes filed, in April?  I wonder if the tax filing date has any impact on when you'll receive the I-Bond back.  If you get the I-Bond in May regardless of if you file in April or January, it would make sense to file in April, even if you're ready to file earlier.

When was the I-Bond dated, as of that May time? Or as of the date at which you filed your taxes?