Analytical and entrepreneurial-minded data nerd, usability enthusiast, Boglehead, and Oxford comma advocate.
Having a math background and a curious, quantitative mind in general, I've always naturally tried to analyze and "optimize" everything - health, fitness, sleep, work, finance, investing, decisions, cooking, websites, you name it. So I figured I'd create a RU-vid channel to help others do the same for investing and personal finance.
Topics covered include beginner advice, how-to's, "lazy portfolio" reviews, brokerage reviews, ETFs, leverage, dividends, bonds, loans, credit cards, insurance, budgeting, and more.
So, if I understand you correctly, HFEA is essentially a 60/40 stocks/bonds portfolio, but on steroids, meaning 3x leverage? Do you still follow this strategy, despite 2022? If so, could you explain why?
Worst case scenario is that IRS disallows this and you have to amend your prior years taxes and pay up as ordinary income plus interest. Read numerous articles on this tax dodge, I think I will steer clear. Also unclear about what happens during high redemptions. Among others, google... The Tax Trap Inside the BOXX
I've already read those, though admittedly after I published this video. All theoretical and hypothetical at this point. As you noted, worst case, the seemingly magical advantages go away. We'll see how it shakes out, I guess. Maybe I'll do a follow up video on the potential so-called "tax trap."
My income from all sources is below the government threshold of $47K so I pay 0% capital gains taxes. And still aggressively investing at 62 years young.
Assuming you meant "bad," they are not inherently "bad," just that they don't really do anything. Share price compensates for div payments: x.com/OptimizedPort/status/1810907019219468339/photo/1
No I don’t own it but considering it and what you think which is could be better govt or High from simplify . ? What you think ? And many than,s for the video as usual super good
I can't provide personalized advice, but as usual, it comes down to the context - goal(s), time horizon, and need, capacity, and tolerance for risk. Those are 2 completely different products.
Can you please do a review on the Simplify Enhanced Income ETF (HIGH)? It uses a call spread to supplement the income from T-bills and I’m thinking about adding it to my portfolio as a slightly higher risk higher return portion of my emergency fund. I love your content, thank you so much!
I learned about this strategy few years ago. The only problem , no one seems to talk about it is how these loans get paid. So the rich sell enough assets just to cover the loan? Do they roll the debt by paying with another debt? Also, the rich cannot deduct the interest rate if it is being used for personal matters ( only IRS itemized qualified purchases deductions) . So who can answer this question? I don’t know any ultra wealthy person.
The loan doesn't get paid. As long as the asset maintenance requirement is met and the asset appreciates, your borrowing power just increases. They don't need to "deduct" anything, because they likely have zero income in the first place, meaning zero taxes. That's the whole point of the strategy.
@@OptimizedPortfolio Thanks for the reply. I see that as borrowing to reinvest. But I heard for instance that Elon Musk use this to live off. Meaning paying for his day to day personal consumption of basic necessities. Any thoughts on this ?
@@t-tradenow No need to "reinvest" so I'm not sure what you mean. The whole point of this idea is to use the borrowed money to live off of and pay for day to day consumption.
I really cant figure out if i should add bonds to my portfolio or nah. could you possibly do a video explaining bonds and why (or why not) someone should include bonds in thier portfolio?
Thanks for the suggestion. For now, I've my personal reasons for including them in a blog post on my portfolio here: www.optimizedportfolio.com/ginger-ale-portfolio/ And a more general one on bonds here: www.optimizedportfolio.com/how-to-buy-bonds/
Great video and I can see the rationale for your conclusions. I am a UK investor however so cannot access all of the ETF's you mention. Could you kindly recommend UK equivalents for your modified portfolio?
I hold GOVT, I like the idea of it holding all the curve. question: is it exactly the same as holding intermediate government bonds of it's average (about 8 years)? if not - then what is the difference? I heard this can become a very complex issue.
Excellent question. With some hand waving, those two options should behave nearly identically. The main tangible differences would be: A) GOVT may have to do more buying/selling than a comparable intermediate fund, which may be of concern for taxable space, and B) not really what you asked, but "average" and "intermediate" aren't necessarily the same thing in that GOVT just has the average duration of the total market, which can shift up or down, while a dedicated "intermediate" fund is aiming for a specific target duration.
@@NivHaramati Another great question. Arguably, like I noted, simplicity and less mental effort required in just "buying the total market." That may sound silly to the seasoned investor, but it's potentially valuable behaviorally for the novice. You'd be surprised at how fervent Bogleheads get about that goal, though. Many of them would likely choose GOVT over intermediate treasuries.
@@OptimizedPortfolio But in treasury bonds - whats the point of "holding all the market"? I mean - It's not stocks with many totally different risks - they are all government treasuries. So, do you think it's better, say, hold each asset class of bonds (tips/short/intermediate/long)? or a kind of a Bar Bell - holding only long (say EDV) and short (say SGOV)? I'm asking from pure portfolio construction view - nothing to do with your investment horizon. I think I've learned that long bonds are a good asset to hold no matter what, because it is a good balance for equities (not correlated or even negatively correlated) - so it is wise to hold it just because of that. I know there is no "perfect portfolio" but I really want to learn what is a sensible one.
@@NivHaramati I agree with you. I'm not saying there's a rational, objective benefit. Sometimes the irrational, psychological benefits can be just as useful. That's what I was hinting at with mentioning how passionate Bogleheads can get about simplicity and "owning the total market." It's not always perfectly logical, and it doesn't have to be. I can't provide personalized advice. I've written extensively about my views on bonds on my blog. But again, there is no "better" duration. It all depends on context. And investment horizon is one of the primary factors of portfolio construction, so saying "nothing to do with investment horizon" makes no sense.
@@OptimizedPortfolio I think by "better" he means a more uncorrelated to equities, as an asset class. and if you flow with that idea, isn't it sensible to hold very long duration treasury bonds? something like EDV? even regardless of your investment horizon?
@@NivHaramati All else equal, it would indeed be more suitable for a young investor with a long horizon to hold longer bonds, assuming their risk tolerance allows for a more volatile fund that may, in isolation, drop more in a year than a shorter duration fund, though of course this is mental accounting.
@@OptimizedPortfolio Looks like a whole new range of ETFs from SPDR branded "SPDR Portfolio" (under Low Cost Core in their filters), interesting alternative to Vanguard once they grow larger?
Not so much "opposite," but certainly much longer duration. SGOV is 3 month T-Bills. GOVT is effectively intermediate (about 8 years). Something like TLT is arguably "opposite" - 20 years.
I started buying GOVT about a year and a quarter ago in my IRA. I expect it to do well as the Fed begins to lower rates, whenever that happens. All of my smallish IRA is in Treasury Bills, XTRE and GOVT. I'm in my early RMD and Roth Conversion stage.
Me atrai particularmente os investimentos no Tesouro Americano, principalmente de curto prazo como o TFLO. Como investidor fiscal no Brasil, prefiro eles do que os títulos corporativos dentro e fora dos EUA.
I'm thinking about using mutual funds in my Roth Ira (I have Schwab). Would SWTSX/SWISX/SWAGX accomplish this, or would you still go ETFS (VTI/VXUS/BND). I would use the mutual fund version of Vanguards, but Schwab charges a fee.
@@OptimizedPortfolio thank you for the response! Apologies for the not elaborating I didn't want to make the comment too long. SWTSX (total us market) | SWISX (international market) | SWAGX (bonds) - I read that selecting vanguard mutual funds would occur a fee through Schwab, so I selected the Schwab version of the Boglehead concept that you explained in this video. I have been debating between this approach and Schwab's target date fund, but I feel like this will outperform and I don't mind doing the allocations on my own. But that has been my biggest source of conflict is deciding on either of the 2 approaches.
Anytime! All good. I assumed those were what those funds were, but I didn't really have the time (or desire) to look them up. Maybe choose the approach you feel most comfortable with at the moment and if that changes later, you can always switch with no tax consequences.
I am glad someone said this, but I strongly agree that treasury bonds (considering the purpose of bonds in a portfolio) are significantly preferred over corporate ones. And, unlike with stocks, I don't see a major reason for international bond exposure.
Crazy thing is this- many preferred shares are issued by below investment grade companies. This below investment grade rating turns away many investors looking to buy preferred stock. Yet, many of these same investors invest in these same companies via common stock without checking their credit rating. And the common stock has greater price fluctuation and no guarantee of a dividend during financial hardship. PS only really appeals to income investors. Growth investors have no business with PS. If you buy preferred stock of investment grade companies at or below par, then there is no need to worry. Just collect a nice dividend until it’s called. Also, you mentioned missed dividends do not have to be repaid. That’s incorrect. Shares that are sold as ‘Cumulative’ will be paid all missed dividends once dividends resume. There is no guarantee of that with common stock.
Has anyone on this channel looked at the Returns Stacked series of ETFs? RSST, RSSB, and there are a few others. Love the content on the channel and I think it would be a great idea to review these ETFs that have greater capital efficiency advantages. I'd also love to hear about a contrast holding NTSX vs. RSSB or RSST in a taxable portfolio.
I have blog posts on all of them. Videos to follow at some point. RSST - www.optimizedportfolio.com/rsst/ RSBT - www.optimizedportfolio.com/rsbt/ RSSY - www.optimizedportfolio.com/rssy/ RSSB - www.optimizedportfolio.com/rssb/
Damn...I just discovered this fund. I'm guessing it is a bad time to buy it because of the expectation that interest rates will be reduced in the near future.
@OptimizedPortfolio Yes, timing the market is difficult. But occasionally I get it right. I bought airlines and cruise lines at the bottom of the COVID panic. I doubted my money in less than 12 months. unfortunately, I only invested $10k.
