Invite your colleagues and friends interested in investing to enter the gates of Shrewd'm, for they will thank you (and their larger pockets!) later.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 0
Back last October Allan Roth wrote an article about BlackRock's
new TIPS defined-maturity bond ETFs:
https://www.etf.com/sections/features/case-blackro...I've been sitting on the fence for a while because the ETF is so new,
but I'm starting to consider this as an option for a portion of my
retirement investments.
Thoughts?
No. of Recommendations: 0
I saw this mentioned over at Bogleheads (bogleheads.org) and thought it was interesting.
For preservation of money with a small real gain it might be better than dealing with bond funds which I've never been a fan of in most cases.
Hopefully someone else can chime in.
No. of Recommendations: 0
I recall intercst was enthusiastic about TIPS, and then suddenly he wasn't. I think ROI changed.
But I don't know enough about them to have a position on the topic. I started as a MF guy, transitioned to single equities, decided I didn't like bonds, didn't like options, and that's about it. I read a book about ETFs, but didn't really understand why I would want those over ordinary MFs. My approach served me well, though company ESPP helped A LOT.
But I will read with interest any contributions to this thread, as I'm always willing to learn new things.
No. of Recommendations: 3
I read a book about ETFs, but didn't really understand why I would want those over ordinary MFs. - 1pg
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The primary advantage of ETF's over MF's is the ability to use limit orders to buy and sell.
Sometimes, the ETF will have a lower expense ratio than its corresponding MF.
An ETF will generally have lower cap gain distributions than its corresponding ETF, an advantage when held in a taxable account.
No. of Recommendations: 3
“I read a book about ETFs, but didn't really understand why I would want those over ordinary MFs.”
ETFs are more tax efficient. Most never distribute a capital gain. Mutual Funds, especially active ones, can distribute very surprising cap gains, even in a losing year. I found this out the hard way :-(
ETFs trade throughout the day, so you know your entry and exit price.
No. of Recommendations: 3
I've never done TIPS or any other Federal government debt instruments; I've always considered that I could do better in the market. Usually, I've been right. For the last 15 years, or so, I've not considered the government to be a good credit risk, either.
My wife and I have been retired for a few years, and our income consists of a chump change pension for me, our social security income, and a small number of preferred stocks and a couple of high dividend paying stocks. We still invest in individual stocks, too. We're in a Fidelity mutual fund for our emergency cash stack, which is a wire transfer away from our checking account, and we use a Vanguard junk bond fund to park our stock investing cash when we're not in the market. Since that's the purpose of mutual funds for us, we don't use ETFs at all; they're too volatile for that.
As for spending inheritances, my parents' goal was to die broke so there'd be nothing left about which us brothers could squabble. In the realization, I was the only brother left when my parents died, but the subtexted point was valid: there was no inheritance extant; it was their money, not their kids'. So it is with us. Although we'd like to leave something fairly substantial for our kid, it's not hers until we die, and we'll use it as we see fit until then.
Eric Hines
No. of Recommendations: 0
I did know about the trading throughout the day. Wasn't aware of the tax side, or at least I didn't remember it (read the book 20 years ago).
So when you sell an ETF, then you're realize the cap gain...correct? I don't think you can get away from it, just perhaps delay it a bit. Or am I not remembering something again?
No. of Recommendations: 3
So when you sell an ETF, then you're realize the cap gain...correct? I don't think you can get away from it, just perhaps delay it a bit. Or am I not remembering something again? - 1pg
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No different that when you sell a MF at a gain.
The difference is that in a MF you get taxable capital gains distributed to you even when you don't sell.
This is not an issue in a Roth or TIRA, but in a taxable account you will be paying taxes each year on the cap gains that the MF distributes.
No. of Recommendations: 0
This is not an issue in a Roth or TIRA, but in a taxable account you will be paying taxes each year on the cap gains that the MF distributes.
On the other hand, when you pull the MF, or ETF, shares out of the TIRA (vis., via an RMD), you'll pay ordinary income tax on those capital gains and dividends accrued in the TIRA.
Eric Hines
No. of Recommendations: 5
I did know about the trading throughout the day. Wasn't aware of the tax side, or at least I didn't remember it (read the book 20 years ago).
So when you sell an ETF, then you're realize the cap gain...correct? I don't think you can get away from it, just perhaps delay it a bit. Or am I not remembering something again?
When you sell you (hopefully) realize a cap gain, sure. But mutual funds also *distribute* capital gains to shareholders. ETFs usually do not have to distribute capital gains. In a tax-deferred account it doesn't matter. In a taxable account ETFs are better.
No. of Recommendations: 1
To add a slight wrinkle to the general MF vs ETF discussion, many Vanguard mutual funds use a Vanguard patented(!) process to avoid capital gains in their MFs, making them as tax efficient as the corresponding ETF. The patent ran out in 2023, so other mutual funds might start doing the same thing, although eventually I'd expect regulators to take note.
Brian
No. of Recommendations: 0
To add a slight wrinkle to the general MF vs ETF discussion, many Vanguard mutual funds use a Vanguard patented(!) process to avoid capital gains in their MFs, making them as tax efficient as the corresponding ETF. The patent ran out in 2023, so other mutual funds might start doing the same thing, although eventually I'd expect regulators to take note.
I'm not sure what they do but at least one MF from Vanguard had a major capitol gain distribution that caused many people over at Bogleheads.org to complain frequently about the tax consequences. I'm not a Vanguard fan nor a MF fan so I'm not sure of the details.
