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Questions from a longterm lurker
Posted: Fri Nov 30, 2012 2:27 pm
by annieB
Sometimes I sit and think,other times I just sit.
I've been reading this site for months.Read Fail Safe Investing and the Permanent Portfolio.
Very refreshing after wandering in the desert.A big thanks to all for the education.
I plan to set up a simple four ETF portfolio by the new year.Just a couple of questions:
Assume that $15,000 of my total $100,000 portfolio is in an IRA.
I'll put $5,000 of the IRA money in each of VTI,TLT,and IAU.This will be the first sold when I need to rebalance.
This could limit my taxes for a while.I'm not putting any IRA money in my cash allociation because of there won't
be any serious income at the current low interest rates.Any thoughts?
On using SHY, 1-3 treasury notes, for the cash allocation above emergency expenses.Has there been any experience
of being trapped in these during rising interest rates?
Thanks for any comments...
Re: Questions from a longterm lurker
Posted: Fri Nov 30, 2012 3:19 pm
by MediumTex
annieB wrote:
Sometimes I sit and think,other times I just sit.
I've been reading this site for months.Read Fail Safe Investing and the Permanent Portfolio.
Very refreshing after wandering in the desert.A big thanks to all for the education.
I plan to set up a simple four ETF portfolio by the new year.Just a couple of questions:
Assume that $15,000 of my total $100,000 portfolio is in an IRA.
I'll put $5,000 of the IRA money in each of VTI,TLT,and IAU.This will be the first sold when I need to rebalance.
This could limit my taxes for a while.I'm not putting any IRA money in my cash allociation because of there won't
be any serious income at the current low interest rates.Any thoughts?
On using SHY, 1-3 treasury notes, for the cash allocation above emergency expenses.Has there been any experience
of being trapped in these during rising interest rates?
Thanks for any comments...
Welcome.
I think that sounds like a pretty good plan.
As far as going with SHY vs. SHV, I would be more inclined to go with SHV if you are the least bit concerned about a rising interest rate scenario affecting your cash portion of the portfolio. Right now, the benefits of going with SHY compared to SHV seem pretty modest.
Do your own due diligence before making any decisions, of course. The potential for future regret seems pretty minimal with whatever course you take, assuming the wheels don't fall off the PP.
If you've read the forum for a while, you know that most of the obstacles to success with the PP are between the ears.
Re: Questions from a longterm lurker
Posted: Fri Nov 30, 2012 3:37 pm
by Ad Orientem
Hi Annie
Welcome aboard. I like what I read for your proposal. It's about as simple and well reasoned as you can get for a start up PP. And simple is good. I agree with MT's advice about SHV vs SHY (I'd probably go with SCHO over SHY as I tink it's a tad cheaper but I digress). SHV is the safer play and in a world with interest rates this low there is no real advantage to going with the slightly longer dated bonds.
My only suggestion would be with respect to gold. IAU is fine for general purposes and much cheaper than the over-hyped GLD. But in the coming years when you hit rebalancing points, if you need to add to your gold position consider buying some coins and salting them away in a safe deposit box. Having a little of the real stuff just in case is a good idea. You can always use IAU for selling gold in a rebalance situation.
Re: Questions from a longterm lurker
Posted: Sat Dec 01, 2012 10:05 am
by annieB
You guys are the best.Thanks!
Re: Questions from a longterm lurker
Posted: Sat Dec 01, 2012 1:28 pm
by notsheigetz
I went with the 4 ETF's approach when I first started my own PP but I quit TLT when I learned how easy it is to buy your own treasury bonds at Fidelity. The fee for TLT is pretty low but it adds up over time and when you see how easy it is to do it yourself you'll wonder what you're paying for.
annieB wrote:
Sometimes I sit and think,other times I just sit.
I've been reading this site for months.Read Fail Safe Investing and the Permanent Portfolio.
Very refreshing after wandering in the desert.A big thanks to all for the education.
I plan to set up a simple four ETF portfolio by the new year.Just a couple of questions:
Assume that $15,000 of my total $100,000 portfolio is in an IRA.
I'll put $5,000 of the IRA money in each of VTI,TLT,and IAU.This will be the first sold when I need to rebalance.
This could limit my taxes for a while.I'm not putting any IRA money in my cash allociation because of there won't
be any serious income at the current low interest rates.Any thoughts?
On using SHY, 1-3 treasury notes, for the cash allocation above emergency expenses.Has there been any experience
of being trapped in these during rising interest rates?
Thanks for any comments...
Re: Questions from a longterm lurker
Posted: Sun Dec 02, 2012 6:58 am
by annieB
I do like your suggestion on the bonds.And holding gold coins.
I'm thinking keeping it simple at the start and then build on that over time.
Re: Questions from a longterm lurker
Posted: Mon Dec 10, 2012 7:47 pm
by j831526
What's wrong with just using an interest bearing insured bank or brokerage account to hold the cash asset class right now? I'm using Scottrade right now, and each move into or out of the cash portion costs a $7 commission, and there are still small ETF management fees. In a higher short term interest rate environment and ETF might be better. As far as risk goes I don't see an ETF as being really safer than an insured account with a reputable bank or brokerage.
If I'm wrong (a sadly high probability), I NEED TO KNOW:-)
Thanx
Re: Questions from a longterm lurker
Posted: Mon Dec 10, 2012 7:57 pm
by Pointedstick
Scottrade isn't a great PP-friendly broker, for just the reason you've discovered. I used to use Scottrade, but now I use Vanguard, Schwab, and TDAmeritrade, and they all have commission-free cash options such as SCHO, SHY, VGSH, and of course, good old-old-fashioned T-bill purchases.
Re: Questions from a longterm lurker
Posted: Tue Dec 11, 2012 12:35 pm
by j831526
Pointedstick wrote:
Scottrade isn't a great PP-friendly broker, for just the reason you've discovered. I used to use Scottrade, but now I use Vanguard, Schwab, and TDAmeritrade, and they all have commission-free cash options such as SCHO, SHY, VGSH, and of course, good old-old-fashioned T-bill purchases.
What do you do for gold using Vanguard or Schwab? Do you have to use their brokerage services, or do they have physical metals mutual funds? I haven't started yet (sitting in cash waiting for us to go cliff diving:), and was planning to go with SGOL for gold unless I could find a good option with a mutual fund family.
Thanx
Re: Questions from a longterm lurker
Posted: Tue Dec 11, 2012 12:53 pm
by Pointedstick
I use their brokerage services to purchase SGOL and IAU, respectively. I don't know of any gold mutual funds, although rumors persist about Vanguard opening a gold ETF at some point (please oh please oh please).