42 votes
Accepted

Why does the Morningstar overview of VMMXX say 81% cash?

Morningstar's definition of cash includes "cash equivalents (fixed-income securities with a maturity of one year or less)". So I'm guessing 81% of its holdings are short-term enough to fall into this ...
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  • 14.7k
19 votes

Are social/responsible stock funds pointless?

It's not just about the ethics of investing in these companies. What if you believe (either hypothetically or with supporting evidence) that companies that show good environmental and social ...
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  • 116k
12 votes

Are social/responsible stock funds pointless?

If you hold a stock in a company you stand to benefit directly from the activities of the company via dividends or stock buy backs. You also benefit indirectly from the company's profitability. The ...
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11 votes
Accepted

What happens to the bond ETF when the underlying bond matures

A bond ETF will hold a basket of many, many bonds. As individual bonds mature, the fund reinvests in newer ones. These can be newly issued bonds or existing ones in the secondary market with time till ...
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11 votes
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How to buy bond index funds only when they are mostly composed by higher interest rate (%) bonds

For a retail investor looking at simplified funds, I think the core assumption should always be that any publicly traded funds are efficiently priced. This concern you have, about the composition of ...
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8 votes
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Pros and cons of bond ETF versus traditional bond mutual fund?

Bond ETFs are just another way to buy a bond mutual fund. An ETF lets you trade mutual fund shares the way you trade stocks, in small share-size increments. The content of this answer applies ...
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8 votes

Should I scale down my 401k?

Because stock markets don't always go up, sometimes they go down. Sometimes they go way down. Between 2007 and 2009 the S&P 500 lost over half its value. So if in 2007 you thought you had just ...
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8 votes
Accepted

If a bond index fund's income is re-invested, how can it be a fixed income asset?

No, you are not quite correct. Assume you have a simple bond that costs you $100. There are 2 ways the bond provides you money: It might provide you with interest every month/quarter/year, or it ...
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7 votes
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Municipal Bond Fund tax risks?

First, I would push back some on your premise. Yes investments add some complications to tax, but it needn't be much hassle. As long as you stick to the mainstream -- US-based retail funds, or "normal"...
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7 votes

No maturity, for bonds in ETFs or bond ETFs?

When you invest in an ETF or mutual fund, you're not investing in stocks or bonds. You're buying shares of a company that invests in stocks or bonds. This level of indirection is what makes it so bond ...
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  • 3,795
7 votes

How should I be investing in bonds as part of a diversified portfolio?

For most people, you don't want individual bonds. Unless you are investing very significant amounts of money, you are best off with bond funds (or ETFs). Here in Canada, I chose TDB909, a mutual fund ...
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7 votes
Accepted

How is a mutual fund and ETF priced?

The price of a traditional mutual fund is determined by something called the Net Asset Value (NAV). Each day after the market closes, this value is calculated by adding up everything that the fund ...
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6 votes

Does buying bonds individually offer an advantage over bond funds/ETFs in a low interest rate environment because bonds can be held to maturity?

I wrote about this a while back, and it boils down to risk profile. If you hold the bond to maturity, then you minimize your capital risk: if you bought a $1,000 bond, once it matures, you are ...
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  • 433
6 votes
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Does a bond etf drop by the amount of the dividend just like an equity etf

No, they do not. Stock funds and bonds funds collect income dividends in different ways. Stock funds collect dividends (as well as any capital gains that are realized) from the underlying ...
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  • 176
6 votes

Why aren't bond mutual funds seeing huge selloffs now?

The Fed sets the overnight borrowing costs by setting its overnight target rate. The markets determine the rates at which the treasury can borrow through the issuance of bonds. The Fed's actions ...
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  • 6,337
6 votes
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When are bond ETF dividends taxed?

Is this tax withheld before the dividend is paid out to the investor? Only if you've been naughty. https://www.irs.gov/taxtopics/tc307 Topic Number: 307 - Backup Withholding When it applies, backup ...
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  • 49k
6 votes

Are social/responsible stock funds pointless?

Owning stock (and owning a fund which owns stock is owning stock as far as I'm concerned) directly gives power to a company. As a result of your ownership of the company (or, of your ownership of the ...
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  • 35k
6 votes
Accepted

Criteria for selecting Bond ETFs

I handle bonds similar to how I do stocks, which is to say I assume the rest of the market knows more than me, so I pick the cheapest, most generic index funds available. Just like I don't overweight ...
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  • 14.7k
5 votes

If a bond index fund's income is re-invested, how can it be a fixed income asset?

I think you're taking "fixed income" a bit too literally. They are funds that consist of fixed-income investments. They provide nothing unless you're able to sell for a higher price than you ...
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  • 116k
4 votes

Is it wise to invest in bond fund when interest rates are low?

This is just a pedestrian (my) opinion: Yes, It is wise to invest in bond funds even in a low interest environment. Check out the lazy man's portfolio on bogleheads. The reason is: You cannot ...
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4 votes

How does a bond fund fall in value?

Bond funds go up and down depending on whether the underlying bonds go up or down in value. One reason that bonds may go down is, as you said, the risk of default. Besides defaults, the other main ...
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  • 5,971
4 votes

Are social/responsible stock funds pointless?

Remember that funds are backed by actual stocks. It might not give you access to the general meeting of the companies, but when you buy into EvilFund, they go out and buys evil-stocks for the money. ...
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  • 386
4 votes

Criteria for selecting Bond ETFs

I've been doing some research on this, and found a great answer on a Bogleheads forum: I think the value of bond diversification is frequently over-estimated by simple (and flawed) analogy with ...
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3 votes

Where to learn about Trusts and alike?

I would like to specifically address your second question. There are a number of great resources available online, but I found that when I was first starting out the website Investopedia was a very ...
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3 votes

Where to learn about Trusts and alike?

An investment trust is quoted just like a share. You just compare what you paid (your book cost) with its current share price, not the NAV, as a trust's price can be at a premium greater than the ...
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  • 192
3 votes

Should I scale down my 401k?

IMHO your thinking is spot on. More than likely, you are years away from retirement, like 22 if you retire somewhat early. Until you get close keep it in aggressive growth. Contribute as much as ...
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  • 75k
3 votes

Should I scale down my 401k?

the whole room basically jumped on me I really have an issue with this. Someone providing advice should offer data, and guidance. Not bully you or attack you. You offer 3 choices. And I see ...
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3 votes

how to estimate bond ETF price once interest rate changes?

You would need to see the weight of each position in the fund. Then you just calculate the price change of each bond and calculate according to weight. Formula for each bond i attached from ...
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  • 939
3 votes

Dividend amounts -- not just yield -- from my bond fund decreased over the past 18 months

After all, the bonds still exist like when I bought the fund. Some of them do (or most of them, or none of them, depending on how long ago you bought the fund). Each individual bond has a maturity ...
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  • 8,392
3 votes
Accepted

I need cash. What funds or stocks should I sell?

Unfortunately there is no perfect answer for this. First, there is a huge difference between liquidating 5000-10000€ for a "new" used car, 20-30k for a new car and >>100k for a house/...
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  • 6,708

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