Reddit Posts
Seeking advice for my parents’ investment plan (mid-60s, new $500k inheritance)
Why not sell bond funds if you know Fed is going to hike rates?
SCHP stopped paying dividends. Anyone thinking about selling?
How does one determine the real (holdings) value represented by a TIPS ETF share?
Stagflation ETF Launches as Fed Attempts to Tame Sky-High Prices
Why have TIPS fallen despite the high-interest rate?
Selling stocks now to invest when there is a downturn/correction??
Mentions
I got like 15k invested and I’m down 1k. Mostly Fortune 500 and a little in SCHDand SCHP
Ya, I was looking at SCHP and SGOV... they seem like they get the least wrecked. It's like that now
I've been starting to shift a little bit into SCHP as an inflation hedge.
When I last checked Schwab's Treasury MMFs were yielding less than SWVXX. I'd save state taxes with SNSXX but the tax savings didn't make up the yield difference. SGOV and USFR are ETFs that invest in ultra short term government bonds. SGOV invests in 0-3 month Treasury Bonds and USFR invests in Floating Rate US Treasuries. There are several other ETFs that invest in ultra short term Gov't bonds that are equivalent. I actually have a bit of SWVXX but most of my uninvested cash is in USFR. I haven't checked recently but when I last checked it was yielding slightly more then SWVXX and is state income tax free. The key is they invest in ultra short term securities so you don't have the same interest rate risk you have when investing in longer term bonds. A Money Market Fund keeps a constant share price of $1, orders execute every night and you get paid interest monthly. A Treasury ETF trades like a stock. It has the same limitations of other ETFs at Schwab, no Fractional shares. USFR's share price hovers around $50 and SGOV around $100 so if your dealing with small amounts of cash that can be a pain. If you look at a price graph you'll see they make a nice sawtooth pattern. That's because they slowly increase in price throughout the month as they accumulate interest then drop when the interest is distributed. All of these are fine options and are easy to switch between. You mentioned iBonds and TIPS. You can only buy iBonds directly at Treasury Direct. You can buy TIPS at Schwab, either directly, via a Mutual Fund (SWRSX), or via numerous ETFs (SCHP, TIP, etc). Schwab has other options for cash as well, T-Bills, CDs, etc.... I dabbled with T-Bills for a bit but it was more effort then it was worth and just started buying the ETFs instead. The convenience was worth the minor cost to me.
I am moving to a more defensive position. I was at about 16% bonds and I'm now at 23% on my way to 25%. Not doing it all at once to get an average price. I also diversified my bonds to include foreign bonds (BNDX) as well as TIPS (SCHP for now. May but some directly later.) I was at 1% gold and over the last few months have increased that to 2%. I would like it to be 5% but I'll do that over years rather than but at what might be the high. I have also shifted from about 10% foreign equities to 15% For domestic equities I have shifted to about 15% in "defensive" sectors including consumer staples, utilities, healthcare, and 10% into sectors that sell hard assets(REITs, energy and mining). That still leaves 25% in the s&p which I will keep because any further movement would result in big taxable gains, otherwise I would bring it down to 20%
I would look an ETF of some kind. Someone here recommended a world market one to hedge against volatility in the U.S. or any country. You’ll need to do your homework. Something like this might give you minimal risk - • 50% bonds (core intermediate-term, e.g. BND or AGG) • 10% short-term bonds or CDs (for near-term income stability) • 20% dividend/value stocks (e.g. SCHD or VYM) • 10% total-market or global equities (e.g. VTI or VT) • 5% inflation-protected bonds (TIPS) (e.g. SCHP or VTIP) • 5% cash or money-market fund (for immediate liquidity)
I agree and do the same at 20% allocation. We have very rich equity valuations while still having decent real rates, which is a good setup for this strategy. Also, real rates are unlikely to strongly rise in the short term from here, since the US government can't afford it and would likely manipulate the bond market again if needed, so duration risk is also somewhat limited. In any case, SCHP's weighted average duration of ~7y is right for this strategy. The idea is to wait for better valuations to redeploy in this timeframe.
Ok, well just as a thought experiment, if I did keep some money on the side, does something like SCHP do well in a market crash? Would I be regretting not just keeping it all in a MMA?
If long term, and you don't need the money over the next 5 years, go with a mix of bonds, equities, precious metals. I'd cut out the latter and make it simple with 40% bonds 60% equities, see below: Of the 40 keep 5% in SGOV which can serve for shorter term liquidity needs, the other 35 into longer duration inflation protected bonds (TIPS) like the SCHP ETF. For the equities, I'd recommend going internationally diversified. The US had a great run over the last 15 years, but valuations are stretched by most metrics and nothing lasts forever, so having something that tracks MSCI world (i.e. including US but not exclusively US) may be better. You can put a very small percentage into precious metals as an additional hedge for your bond position and generally anti-stagflationary hedge. But a) using TIPS as your primary bond position already protects that position against stagflation and b) gold already had such a run it seems to anticipate lots of bad things to happen, so upside potential seems limited at this point. If you still want to go with it, then maybe 1% into silver and 1% into platinum which still have some room to catch up. You can slide those percentages around any way it fits your risk profile, the safer you want to be, the bigger you make that TIPS percentage. Once you made a decision stick with it, rebalance once a year, don't panic sell your equity position during market crashes. The latter is a guarantee for bad returns.
You are way too overweight on large cap tech(which has lower expected **future** returns due to overvaluation), underweight value stocks and international, and underweight bonds. Overall, your portfolio is very risky. I'd say something more like: 30% VOO 10% VTV 10% AVUV 10% BND 24% VXUS 5% SCHP 5% NVDA 5% GOOGL 1% Bitcoin ETF This limits your exposure to any single stock, while still maintaining exposure to assets you believe in(GOOGL, NVDA, Bitcoin)
I think mid to long range TIPS are better than TLT. Maybe SCHP? Good to have inflation protection, because oil prices might cause inflation.
TIPS = treasury inflation protected securities. They operate the same as normal bonds but the real yield could actually be higher than a nominal yield of a normal bond if the interest rate stays the same and inflation increases. TIPS and gold are two of the best hedges against stagflation. tickers: STIP, LTPZ,TIP, SCHP
Tips etf (SCHP) 30% High quality corp bond etf (LQD) 20% A small amount of total us market etf (VTI) 10% European market etf (VWO) 20% Emerging market etf (VEA) 10% Bitcoin etf (IBIT) 10% Possibly reallocate to specific sectors like consumer staples, semis, etc if they begin to look attractive. As we start to bottom, begin positioning back into the us market.
didn't know those existed. thanks. i have a personal boycott of blackrock now though. so that will prevent me from buying any of these. [https://www.ishares.com/us/strategies/bond-etfs/build-better-bond-ladders](https://www.ishares.com/us/strategies/bond-etfs/build-better-bond-ladders) though i see. can i buy individual tips @ Schwab? hate the treasury direct website. right now in STPZ (more) and SCHP (very little) ok i see this: [https://www.bogleheads.org/forum/viewtopic.php?t=389303](https://www.bogleheads.org/forum/viewtopic.php?t=389303)
You're smart to prioritize safety and preservation in this market! Your current strategy is a good starting point, but we can refine it. Here's what I'd consider : 1-Re-evaluate SGOV Allocation: While SGOV offers a decent 4.2% return, consider diversifying a portion into short-term corporate bond ETFs like VCSH or IGIB for potentially higher yields with relatively low risk. 2- Add Inflation Protection: With your focus on preservation, consider adding inflation-protected securities like TIPS (Treasury Inflation-Protected Securities) through ETFs like TIP or SCHP. 3- Review ETF Overlap: Your current ETF selection has some overlap, particularly in the US large-cap and dividend space. Streamline your holdings to avoid overexposure to specific sectors or factors. 4- Maintain Cash Position: Given your preference for safety and potential market volatility, maintaining a significant cash position is wise
It depends on any number of factors, so use your best judgement. I recommend a longer-term plan rather than just a few trades. Also consider tax efficiency (if money is in taxable account). But some quick options to consider include: \* VYM - high-div US index fund \* CMDY - commodities index fund & inflation hedge \* VEA, VXUS, or other non-US/international fund \* alternative assets like bitcoin, gold, etc. \* high-yield bond fund like SPHY \* TIPS fund like SCHP I also advise keeping some money where it is now, in a MM fund while the yield is high, and in case you need it for an unexpected expense. Again, disclaimers that this isn't personalized advice and your situation may warrant a different strategy.
I have recently rebalanced my holdings to overweight bonds (TLT, IEF, SCHP). I can’t time the market, but I’m planning on a stock correction with lowered interest rates within a year.
Starting in the first quarter of 2024, I started rotating some investments into physical silver, gold and platinum. Along with metals, I chucked some cash into the safe deposit box in case things really go tits up. I’ve substantially reduced exposure to stocks and overweighted bonds (TLT, IEF, SCHP). I’m bad at timing the market so I worked on defense positions throughout the year. My assumption is that the Fed will go to zero and start buying bonds to avoid a bank failures. Metals are a hedge in case we have post WW1 inflation, German-style.
4% cash (t-bills or floating rate note or money market fund) 5% TIPS (SCHP) 5% longer term bonds (SPTL) 6% multisector or core-plus (PONAX)
1. IF you invest in QQQ, which I wouldn’t recommend, go with QQQM. It’s the same fund with a lower expense ratio. Also more volatility/risk does not equal higher potential growth aka if you take uncompensated risks like investing in QQQ(M) 2. You could always keep it simple and go with a Target Date Fund, but if you want to manage his portfolio you’re on the right track with a 60/40 portfolio. For the stock proportion VT or VTI/VXUS is a good option. BND is also ok for bonds but you could do slightly better if you focus on treasury bonds since they have a better negative correlation with stocks. VGLT – 15%VGIT – 5% SCHP – 20% could be a good option for bond allocations
https://www.pimco.com/us/en/resources/education/everything-you-need-to-know-about-bonds Yes you can buy a bond index fund in a mutual fund structure or an ETF structure. Bonds (excluding I-bonds) are priced in a market like stocks, and insofar as markets are efficient and you we don't know more than the aggregated market equilibrium, one type of bond won't look better than another type. However, different bond types have different risk profiles and some may be more suitable for you than others. If you are looking for minimal risk, then short term, high rated bonds are better: USFR or SCHO or money market fund. If you want a little more credit risk for a little more yield, short term commercial bonds like JPST or STOT. If you want broad coverage of lots of types of bonds, there are aggregate funds like BKAG. These cover US treasurys and corporate bonds and agency mortgages but you can add more types of bonds with SCHP inflation linked and BNDX foreign. Long term bonds will be more volatile and may diversify your stock portfolio more: TLT or BLV High yield/junk bonds will have even more credit risk premium than investment grade bonds and will be even more correlated to stocks: HYLB
(1) In general, I recommend against CDs. If you are willing to lock money up for some number of months, you can buy US Treasury bills in your brokerage account which often pay a little more interest and are exempt from state tax. A bank savings account is for money that is in motion and might be needed soon. I don't have the best options off the top of my head but you can search "best high yield savings accounts". A money market fund in your brokerage account is another cash equivalent with no risk, often with good yields, though you may need to compare the available options. Note for all these cash equivalents, rates should change over time with the Fed's decisions. See https://fred.stlouisfed.org/series/DGS3MO (2) For retirees, a year expenses in cash and the rest in investments. For savers, typically 3 months expenses / 6 months income in cash and the rest in investments (with stock and bond allocation dependent on age, risk tolerance, etc). If the business income is inconsistent, it makes sense to keep a larger cushion of cash. (3) Stocks: VTI, VXUS, Bonds: BND, SCHP (4) Open a brokerage account at Fidelity or Schwab. You can open a IRAs or Roth IRAs for tax exempt retirement investing for up to 8k per person (8k is for people older than 50; you can contribute 7k per year to your own once you have earned income). https://www.reddit.com/r/investing/wiki/index/gettingstarted https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy
I've also developed a more complex profile after some research and would like any feedback in comparison to my current TBA: VTI (Vanguard Total Stock Market ETF) - 45% VXUS (Vanguard Total International Stock ETF) - 15% BND (Vanguard Total Bond Market ETF) - 10% SCHP (Schwab U.S. TIPS ETF) - 5% VWO (Vanguard FTSE Emerging Markets ETF) - 10% VNQ (Vanguard Real Estate ETF) - 10% VBR (Vanguard Small-Cap Value ETF) - 5%
Assuming everything is tax-advantaged. High-stock allocation (early saver): - VT (total world stock) - AVUV (US small-cap value) - AVDV (developed international small-cap value) - EDV or VGLT (extended-duration or long-term Treasuries) Low stock allocation (pre-retirement and early retirement): - VT - AVUV - VGLT - SCHP (all-term TIPS)
Yes basically. Risk tolerance is personal. The stock market fell a bit over 50% in 2008 and it probably will again at some point. If you are okay losing that much, then all stocks is appropriate. If not, mix in more bonds. Global equity index: VT, or sliced up domestic VTI and foreign VXUS Factor titled equities: VFMF CAPE IMTM FNDF Bond indexes: BNDW SCHP
He is underperforming: Alternative for low risk that is better performing ( I am not a financial advisor so this is for illustration purposes and I don't know your entire financial situation.) SoFi has FDIC insurance (via I think some sort of sweep) up to $2 million and is paying out 4.6% interest in the account. They had 4% a few years ago so using this as the interest. Let's say you had $100k with your money manager in 3.5 years if you would have just put the money in a savings account your account would now be at: - $114,714.07 using this calculator: [https://www.sofi.com/calculators/apy-calculator/](https://www.sofi.com/calculators/apy-calculator/) Compared to: - 6.5%/3 years so 1.86%/year which would be: **- $106,662.77** This is an $8k difference. He literally could have put your money in this savings account pocketed $8k and gave you the rest to perform the same. I didn't even remove his 1% fee from that. Seems like you are better off with a savings account at that performance. sample portfolio performance (I use https://www.portfoliovisualizer.com/optimize-portfolio#analysisResults) - SCHG: 75% (0.04% fee I think) - SCHP: 25% (0.03% fee I think) - maximum drawdown for 1/1/2021-7/11/2024: 25% - Annualized return: 9.17% I don't know the full story, but in comparison since January 1, 2021 to today July 11, 2024 (which is about 3.5 years) - retirement portfolio performance: 24.18% (6.34% annualized) - aggressive portfolio performance: 56.55% (13.56% annualized) Just some examples of comparative portfolio performance for the same time period. In summary: - Your portfolio: 1.86% annualized - Savings Account: 4% annualized - Treasury/Growth Portfolio: 9.17% annualized - Managed Retirement: 6.34% annualized - Aggressive Portfolio: 13.56% annualized
taking advantage of that sweet lower margin interest rate....call me bearish af, but GLD,TLT,SCHP is my play until I pay this baby off with the sweat from my brow
I'll try the bear then. I closed the position even though I'm not really that bearish on it - not like I think $0 is a possibility in my lifetime. But I'm pretty conservative in the portfolio, lots of dividends, REITS (I just retired 2024, wife is part time now). But AAPL was one of just a couple growth slots I had kept (in equities - equities are just 1/3 or so of NW, started for fun and it sure is!), but I'm not seeing the growth prospects as much going forward and there were some really good dividend and income plays at the time, so I closed the position in Aug 2022 (opened NOV 2012) at a 8.4x multiple. It does at least pay a dividend, but I wanted to repurpose that capital to earn more than the 0.56% AAPL pays now. It was also a TLH play, as earlier in the year I'd booked some big losses (LUMN, PARA, SCHP, MMM, ROKU) so the tax was $0. The taxed account now earns 4% dividend, the IRA equities 5.7%, so that's a good chunk of income for us. If/when we have to draw down, we have plenty in mutual funds to draw from, so this income should hold as long as the companies' dividends cooperate.
Buying more SCHP WULF and LNC
Do this bro… really. 1. Open a Roth IRA: Put in your limit for the year… $7000 I think it is now. I use Schwab - I take my yearly amount an distribute it between ETFs or Indexes etc… I use SCHB, SCHD, SCHF, SCHP and finally SWPPX. Primarily most of it goes into the S&P 500 index… SWPPX. These are all ETFs and Indexes that mirror the stock market values. Your money is invested into the best companies and securities without you lifting a finger… Never take this money out! Add to it every year. I’ve contributed over the last 3 years and have yielded 9.43%… Reinvest all gains and dividends. This will dip at some point! But it will rise again. Never take it out, invest in only long term strategies… mine is all Schwab ETFs and indexes… 2. Take your remaining 43k… and put it into a HYSA or Money Marker Fund. You will get a safe 5% return for the short term… Use these short term safe gains to build a nest egg and save for a house… or another more expensive investment. The rates are good now because banks really need our money… they’re lending at very high interest rate loans that they are probably accounting for eventual defaults/foreclosures. Example… I am actually doing something similar. I opened a Schwab brokerage account and put 50k in. I’m taking that 50k and investing to SWVXX. This is a Schwab money market fund that is BASED on government high interest securities. This fund is not FDIC insured…but it will not fail you unless the banks fail… just monitor it. SWVXX has a 7 day net yield of 5.19%. It pays its dividends every month and compounds when you reinvest capital & dividend payments. That 50k will turn into 52.6K by the end of the year…. The benefit of using money market funds is that your still VERY liquid. You can sell all your assets and use it the next or same day…. Example…: say the rates begin to drop 2025 and now that money market is going down under 4%. You need a car because your Subaru shit the bed. Sell your money market fund assets and put a hefty down payment on a car. Oh , you see you can lock a 3.75% interest mortgage rate now?? Okay, take all those money market fund assets and buy a house.. 3. If you can - YOU MUST TRY to Keep taking out $500 a month to be ready to replenish your ROTH IRA next year…. Put that $500 into your HYSA or your brokerage account money market fund - it will help with compounding. 4. Still contribute to your work’s 401k and health savings account…. Esp if you’re young. My company matches what I put in up to 3%…. That’s FREE MoNeY! Put in the bare minimum if you must in order to get this. A Health Savings Account. It is great to put money into as well… contribute a tiny amount each check in your early 20s to build the habit. It can help you be taxed less and plans for your future health. They’re like untaxable IRA’s accounts… you can mirror your contributions to what you invested in your ROTH IRA to keep it simple. This is my strategy man…. I’m only 31 and have about 110k net worth, but I’m beginning to feel more dialed in. I’ve invested into individual stocks here and there and made a tiny bit, it also lost some. I profited 3k last year investing and selling in things like DLR… Individual stock investing is risky, but is playful. Be careful.
It does. It shows what 500k initial plus 10k added quarterly would look like, with one investor putting everything in SPY and one putting everything in SCHP.
Inflation remains stubbornly high, so TIPS funds like SCHP are feeling the pinch. The Fed is trying to get prices under control, hopefully this current downturn is temporary.
The performance of TIPS (Treasury Inflation-Protected Securities) and related ETFs like SCHP can be influenced by various factors. While TIPS are designed to protect against inflation, their prices can be affected by changes in real interest rates and market sentiment. Factors like changes in interest rates, economic conditions, and investor expectations can impact TIPS prices. It's possible that movements in interest rates or other market dynamics since March 2022 have influenced SCHP's performance. To get a more detailed understanding, you may want to look into recent economic and market developments, central bank policies, and other factors influencing the fixed-income market.
A bond ETF like SCHP holds a basket of different bonds with different maturities. The average maturity of SCHP is 7.1 years. As interest rates rise, bond prices fall. In theory, all else being equal (e.g. no other interest rate changes), you’d make back that difference due to the increased yield after about 7 years. Even if you bought individual TIPS bonds yourself and held them to maturity, remember that TIPS only protect against *unexpected* inflation. This is because the amount of expected inflation is already priced into the yield when you buy the bond. If you want absolute inflation protection, then you should be looking at I-bonds. But there’s a limit to how many I-bonds you can buy a year.
Why would we default? They will just print more money. You essentially think that we will be forced to print a lot so go bet on inflation. Something like TIPS: SCHP would make the most sense in that situation
You can buy TIPS through any major broker (i.e. not robinhood). No need to transfer. (In fact, you cannot transfer assets from outside an IRA to within an IRA, only cash) There are a few differences. They are largely taxed the same but I wonder if you need to calculate the imputed tax on a TIPS yourself? I haven't done it so maybe your broker will calculate it for you on your 1099, not sure. TIPS funds will be n your 1099 for sure. TIPS maintain a constant duration profile. It's like holding a portfolio of different TIPS and rolling the maturing ones into new ones. That means they continually have some duration risk, whereas an individual TIPS held to maturity has one date with some guaranteed return. Funds have management fees. Though 3bps for SCHP is pretty low, it's not hard to just buy TIPS yourself.
Not a father but I put my nieces' 529s in 100% stocks. They are currently younger than yours and I don't intend to reduce it until a couple years out. But you obviously have more responsibility and more money at stake. You don't want to go too high risk and be uncertain how much you (and/or they) will have / need to save, but you also don't want to go too low and give up potential gains and maybe underperform the rate of tuition inflation. You listed a bunch of distribution-focused funds, including ones that use option premiums. If a high distribution rate gives you more confidence in their performance, then I say go for it. But in general I don't see a point in shuffling money around from one pocket to the other and back again. For a medium risk portfolio: 15% VTI, 15% VFMF, 10% VXUS, 25% BNDW, 10% JPST, 10% SCHP, 10% DBMF, 5% IAU
SCHP is way better and less expense
Thoughts on VTIP or SCHP, are TIPS the same as BND? or are these completely different?
Whenever people are confused about bond fund, I generally suggest they consider what the underlying holdings of the fund are. Despite popular opinion, bond funds are not fundamentally different than their underlying holdings. Each US Treasury bond (of all types) pay coupons bi-yearly. Any bond ETF that distributes monthly is relying on the fact that there are a bunch of outstanding bonds that have coupon payments ***roughly*** evenly throughout the year. That's more or less true for Treasury nominal bonds, especially because they've been issued for (literally) hundreds of years. However, TIPS are... kinda weird: * they are uncommon for the Treasury to issue - they're only about 10% of outstanding debt. * they also are relatively new (only since 1997) * there isn't a consistent supply of different maturity dates (for example, 20 year TIPS are no longer issued). I suspect what you're seeing is related to lumpiness in the coupon dates of Treasury bonds resulting in inconsistent coupon payments to the fund - and hence, inconsistent distributions to holders. In addition, most of the holdings of SCHP will be older TIPS that have pretty low to negative yield - current high TIPS rates haven't been seen since the Great Financial Crisis timeframe. Before 2022 or so, inflation was very low, and sometimes month-to-month CPI was zero or even negative. Take a low/negative coupon payment, and a low/negative CPI adjustment - and you'll get near-zero/zero coupon payments. The investment you appear to be looking for - high yield, risk-free, paying monthly, inflation-adjusted, with consistent distributions - is something I don't think exists. I also don't think it **can** exist because inflation-adjustment inherently results in inconsistent distributions since inflation is not consistent. Which requirement do you care about least?
Looking into this further, I see that SCHP has missed several payments. It's supposed to pay monthly, but apparently it only paid twice in December 2022, and always appear to skip January. This is a horribly unreliable source for income! Apparently the don't pay if there is a negative CPI growth, but I don't see why that should make a difference. As long as the CPI number is positive, the cashflow should be growing. And even with deflation, the interest still has to be paid! I just don't understand this instrument at all.
Wow, thanks for the explanation! Even though I still haven't fully understood, I think I might have realized that the yield on a TIPS bond ETF isn't the same as the yield on a single TIPS. The coupon on [the recent single 30-year TIPS bond](https://www.treasurydirect.gov/auctions/announcements-data-results/tips-cpi-data/tips-cpi-detail/?cusip=912810TP3) is 1.5%, but I don't know at what price those bonds were sold, so I can't say what the actual yield is. But I don't think it's 4% or more like the SCHP TIPS ETF. I know that there are target date bond ETFs, but to my knowledge, there aren't any target date TIPS bond ETFs. It's a shame, because purchasing these TIPS bonds directly is probably a pain, and being inexperienced, I might make some costly mistakes, as I understand the market isn't particularly liquid and I don't have much trading experience. I just might end up holding cash in a money market fund instead :(
You are intermixing a number of potential investment options (switching from a 20-30 year nominal bond, to TIPS, to a intermediate duration TIPS bond fund), and a number of investment metrics (fund yield, bond yield, coupon vs yield), so I'm not entirely sure how to respond here. SCHP yield is comprised of two primary components - the coupon payments from the underlying bonds, and the capital gains of SCHP having TIPS mature at a par value of >100. Addressing each of those separately: a) **Coupon payments**: *on existing SCHP bonds,* assuming constant positive inflation, the coupon payments will always increase. As an example, the biggest holding of SCHP is CUSIP 91282CGK1, with a coupon 1.125%, issued 31 Jan 2023. At that point, it would have paid coupons of $1.125/$100 invested yearly \[\*\]. It currently has an index ratio of 1.02611, so it currently has a par value of 102.611, so will currently pay coupons of $1.154/$100 invested yearly. *However,* every year \~20% of the bonds either mature or are sold by the fund (see turnover). All of the newly purchased bonds will have coupon payments based on the prevailing interest rate at the time, which might be lower than, more than, or equal to existing bonds. * This is the real yield of the underlying TIPS (1.92%-2.12% right now for 5-10 year TIPS. b) **Capital gains**: all bonds that mature or are sold with par value >100 (ie, most all of them) will get a capital gains distribution. *However*, that's a one-time thing (a bond can only mature/be sold once). So although this gain is a function of inflation, it won't increase over time unless inflation increases. And when inflation increases, the bump in capital gains distributions is only one time for the same reason. * This is the market expectation of future inflation. Right now, that's 2.17%-2.26% over a timeframe of 5-10 years (difference between TIPS yield and nominal Treasury yields). The easier way to think of bond funds is that they are a single synthetic bond created from all of the underlying holdings in the fund. This is much simpler - and actually accurate, because arbitrage holds bond fund pricing to exactly the same price as the underlying holdings. You can view SCHP as a single bond of 4.24% nominal yield (weighted YTM), with a bond duration of 6.7 years. Hence, it's reasonable to expect 4.24% return for the next 6.7 years. That said, that doesn't imply that bond fund distributions / cash flow is 4.24% for the next 6.7 years - the returns come from a), b), and NAV adjustments due to interest rate changes. Coupon payments increase based on inflation, capital gains only increase if inflation increases (and will decrease if inflation decreases), and NAV adjustments are due to the prevailing interest rate environment. I know from this post and your other posts that you are really interested in cash flow from your investments, as opposed to total returns. If you want deterministic, inflation-adjusted cash flow (as opposed to returns), you'll want to buy a single TIPS right now, and right now, that'll get you about 2.0% inflation-adjusted coupon payments. \[\*\] actually half of that bi-yearly - and yes, I know that only a single coupon payment has ever been made by this bond so far.
Currently, SCHP paid $2.34 in the last 12-months on an NAV of $51.64. That's a 4.53% yield in actual dollars hitting the bank account. As long as inflation remains positive, that means the cashflow (interest) keeps growing every year, am I correct?
I think you are counting inflation twice. There are no 4% coupon TIPS that exist right now; all outstanding TIPS have coupons around 0%-3% or so. That 4.24% YTM has to be including the inflation adjustment already. SCHP has a effective duration of 6.7 years, so its expected return is equivalent to a TIPS purchased right now with 6.7 year duration. Calculating the duration of a TIPS is really weird, and I don't know if there's a standard definition, but one can expect somewhere between a 5 year TIPS and a 10 year TIPS. Right now, that means about 2.0% real, for somewhere between 5-10 years. You can't forecast out to 30 years, because by that time, the "average" bond in SCHP would have already matured and been repurchased by SCHP, with whatever interest rates are in 5-10 years. Each year you will get 2.0% + inflation back from the investment - that might mean on the first year you get only 2.0% back (if inflation is low), or significantly higher than that (if inflation is high). However, on average, the market prices TIPS and (nominal) Treasuries to have equal expected returns. Since a 5-10 year Treasury has \~4.2% nominal yield, you can expect \~4.2% nominal yield for the effective duration of SCHP.
Here are results of a recent 30 year tips auction: https://www.cmegroup.com/education/events/econoday/2023/08/feed579637.html Results quoted in real yields. So take that yield number, add a couple points for inflation, and that is your expected return. Math you did for SCHP is already accounting for the inflation adjustment.
That can't be right. The last 12-months actual distribution of SCHP = $2.34. SCHP trades at $51.22 Actual yield of 4.56% . That's the actual yield, not the total return. As we agreed, this yield will keep increasing every year with inflation. Assuming 2% increase per year, means 6.5% risk-free total return.
Yeah, someone else mentioned TIPS in this thread, and it seems to be what I'm looking for, particularly since SCHP yield to maturity is 4.24% right now. It sounds too good to be true, though. I feel I'm missing something.
Currently SCHP is yielding 4.24% with a average duration of 6.7 years. That's...pretty fucking good, right? 4.25% yield that keeps increasing every year with inflation. I have to be missing something, this sounds too good to be true. If we assume a long-term 2% inflation rate, then the total return for TIPS right now = 4.24% + 2% = 6.24%. Risk free!
Currently, the weighted average YTM of SCHP is 4.24%. That means with $150,000 into TIPS, I get $1000/m + some change. And that amount will keep increasing every year based on the inflation percentage. That should be enough to cover the eventual increase in my condo maintenance costs. Sure, it might not be a "real" yield of 4.24%, but who cares, right? I just need to keep paying my condo fees. If assume a long-term inflation rate of 2%, then according to the Gordon Equation, long-term expected return is: Y = current yield + growth of yield = 4.24+2 = 6.24%. 6.24% risk-free! What am I missing?
Assuming >0 inflation, then yes you are on point. Keep in mind that the coupon % is lower. To account, one way to do is stagger maturities… e.g. put $10k into a TIP maturing every year for the next 10 years. In theory, it is the same idea with SCHP (and similar funds.) Keep mind you are locking in a return today that is “guaranteed” if you sell over the course of the fund’s duration (in this case duration is 6.7 years.) So answer is yes if you buy fund today and sell in about 6.5 years.
So let me get this straight. If I do not care about the market value of my TIPS bonds (because I won't sell), then my *cashflow* from the TIPS will keep increasing for the duration of the bonds, correct? (Assume >0 inflation). Even if inflation remains at 2% forever, the principle will keep increasing because even a constant rate of inflation is a positive number. In fact, even if inflation decreases to 1%, my cashflow will still increase (though the rate of increase will obviously go down). Am I understanding this correctly? Also, will a TIPS ETF like SCHP guarantee the same, constantly increasing cashflow?
Make sure you understand how bond funds work. This is a fund of TIPS - Treasury Inflation Protected Securities - see here - [https://www.treasurydirect.gov/marketable-securities/tips/](https://www.treasurydirect.gov/marketable-securities/tips/) This fund has a weighted average maturity of 7.4 years at the moment with an average yield to maturity of 3.71% Your choice of using a fund like SCHP depends on what you are planning to do with the cash and your thesis on future interest rates.
>That's a 4% withdrawal rate You intend to withdraw 4% of your account per year >which is historically safe for a 30 year, inflation adjusted drawdown using US-centric stocks and bonds and that is a safeish rate to withdraw, based on the fact that retirees starting a 30 year retirement most of the time in the past century could consistently withdraw that amount. >There's no need to seek out dividend focused investments. Not sure how to make this sentence clearer. >Dividend focused portfolios do not have higher risk adjusted returns than other portfolios Risk adjusted return is (a) the amount of money you can expect to make each year from an investment, minus (b) the amount of money you could make in cash, divided by (c) the yearly variation in returns (risk). Higher risk adjusted returns is better. Lower risk adjusted return is worse. >particularly when adjusted for common factors like value and quality Value refers to stocks of companies which are priced low compared to the amount of profits the company is making. Quality refers to stocks of companies with profits that are consistent and have high margins and low debt. Stocks with high dividends are often also value stocks. Stocks with consistently rising dividends are also quality stocks. If you control for value and quality, there is no need to look at dividends. >If you are looking for a 30 year drawdown, 20-40% bonds is appropriate. If you want to withdraw 1000 a month from a 300k portfolio for 30 years before you die, then a good portfolio would be between 20 and 40% bonds (things like BNDW, SCHP) plus 80-60% stocks (things like VTI, VXUS). >For a perpetual withdrawal, you will want want 80-100% equities. If you want to withdraw 1000 a month for much longer than 30 years, the you will need to take on more risk by increasing the amount of stocks (things like VTI, VXUS), and lowering the amount of bonds (things like BNDW, SCHP). >I'm sorry, I didnt understand a thing you said this time, remember I'm a beginner to this, so I dont understand that much. https://reddit.com/r/investing/wiki/index/gettingstarted https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy >Also you didnt mention any dividend ETF Correct >and I was hoping you mention it because I ve been looking in to Peter Schiff dividend fund and others like SCHY. I see no reason to buy a fund based on dividends
I think this is the correct place to post this question and I'll try to include all the relevant data. First off I'm 35 and my son is almost 3. I'm putting $7000 into a Wealthfront account and plan to add $200 each month to it that can be a help to him later whether it's for college or something else. Here is the breakdown it's currently going to be invested in. I'm wondering what everyone's thoughts on the security of this is? What I'm trying to avoid is buying something super risky that I don't realize is. I did Google all of these but am not super confident the ones chosen are the correct ones. A note about my overall thoughts/strategy: I think that as the dollar loses global reserve status the US market in general won't do well. Obviously it's anyone's guess as to whether that'll happen in 1, 10, or 50 years but it's the reason so little is in straight up US stocks and some gold/foreign stocks. XLU 15% GLD 15% VTI 10% VTEB 5% SCHP 10% VEA 25% VWO 15% VIG 5%
Which bond fund? AGG? TLT? BND? SCHP?
What the fuck I was searching bond volatility ETF’s and found IVOL. It’s an ETF that charges a 1.07% expense ratio and holds nothing but SCHP, an ETF with a 0.06% expense ratio 
SCHP will be paying a dividend of .0856/sh on April 10. This was a similar situation with other TIPs ETFs like STIP and VTIP. Be prepared for highly variable payouts. That's just how these work.
I just spent about 40 minutes looking this thing over. I'm not much into ETFs but I have done some income ETF investing in the past so this kind of interested me. My information comes from Schwab directly. First, this is an index ETF, so it's performance has little to do with the particular fund and is mostly based on the underlying index. So your question is more about the underlying index than about the fund itself. Second, the fund made two payments in Dec22 which it looks like together were the largest monthly payment in several years; overall the payout in '22 looks like it was the best year in quite a while by far. Third, it's not clear to me right off hand why, but a few of the other TIPS funds I found have erratic dividend payments, so this fund isn't unusual in that regard. The Vanguard fund VTIP missed three quarterly dividends in 2020 and one in each of the last two years. The ishares fund STIP did not pay in Oct/Nov 22 and has not yet paid in 23. So SCHP has been the most consistent of the three. Fourth, as to why this happens, perhaps because unlike a stocks, bonds have maturity dates. This fund is restricted to bonds at least one year from maturity, but it doesn't really matter if they mature or fall out of the fund target group, positions must be closed which could result in booking losses that would consume the bond payments. Overall, again because this is an index ETF, it's going to pay out all it can pay out. The question for you is, is a TIPS bond fund the right thing? So that requires looking at the Bloomberg TIPS index and deciding if that's what you think is the right thing.
SCHP has never been a consistent divended payer according to the divended payout. In 2020 the first divended was In September and in 2021 it was in April. I rather just buy Tbills then this.
Geez. I bought SCHP two years ago and didn’t even realize it’d stopped paying dividends. So, thank you. Only thing I see is historical. Looks like they just don’t pay the first few months of the year? I don’t know. I bought it thinking, “well, stuff is super inflated out there, maybe this would be a good place to park some cash.” I’m down 12% over two years. Yeesh.
Haven’t all of the TIP ETFs stopped paying dividends since December? I was looking at them for a while for the eye-popping yields but it seems like they all stopped paying out and there’s no mention of this anywhere. Nasdaq.com shows the last distribution for SCHP and TIP at 12/15/22 after being very regular monthly payers for a long time.
Whatever numbers you're looking at don't account for dividend reinvestment. With re-investment 5 year return on SCHP is 84.8%
Why not buy something with one third the expense ratio? VTIP (Vanguard ST Inflation-Protected Securities ETF) and SCHP (Schwab US TIPS ETF) at .03%?
The market aspect seems too risky, unless its your own treasury where if it goes south you can just hold until maturity and not like an ETF or mixed product. ​ Be careful about buying ETFs, I'm always pro-ETFs but these bond and TIPS ETFs make no sense to me. Look at SCHP, it's down 18.5% from ATH and at a 12 yr low! BND is at a 13+ yr low and its got a yield of only 2% and down 20%! ​ Not sure what rates ppl are using to justify these funds.
I-bonds were quite nice about a year ago because they have a 6 month lag in yield, so when inflation was highest, you could lock that in for six months even after the inflation had already occurred; plus they have a 0% fixed rate floor which was nice when TIPS had negative real yields. Now new Ibonds have a real yield of .4% which is lower than TIPS, so I wouldn't bother with them. T-bills are probably good if you want to use the money soon. If you just want to have some percentage of your portfolio in bonds, then maybe BNDW+SCHP or some other bond fund.
You can buy bonds through most major brokers or through Treasury Direct. You can also buy a portfolio of bonds through a fund. T-bills (1yr and under) have pretty high yield currently, around 5%. The curve is inverted, meaning longer term bonds have lower yield than shorter ones, because participants expect inflation and rates to fall in the future. Longer term bonds are more sensitive to changes in yield (bond prices are inversely related to their yields), and they are not good to have if you are worried about unexpectedly high inflation. If that is your main concern, use short term bills with under a year to maturity, or you can buy inflation-linked bonds called TIPS or a TIPS fund like SCHP. There's also non-marketable series I savings bonds which you can buy through treasury direct. If we are pushed into a minor recession, it is likely inflation and rates would fall, which would be good for longer term nominal bonds and bad for corporate bonds with lower credit ratings.
What is your goal in adding bonds? The boglehead bond equivalents of VXUS and VT are BNDX and BNDW (the US version is BND). SCHP for TIPS. VGLT or EDV if you want long duration. BSV if you want short duration.
VTI holds US stocks, so BND which holds US treasurys, agency mortgages, and investment grade corporate bonds over 1 year to maturity, would be the equivalent for bonds. Shorter term government bonds will be close to cash, meaning very little term premium or credit premium, and good if you want to hold something safe and don't really want bonds. If you want diversification in the modern portfolio sense, you would need to go longer duration. BND is intermediate. VGIT is also intermediate, only holding treasurys. BNDW holds both US and non US bonds (hedged to USD so no foreign currency risk). None of those hold inflation linked bonds, so you could use SCHP for that. Long term bonds like VGLT will be particularly volatile. For example, last year VGLT lost a whopping 29%, probably the worst calendar year for bonds. But now yields are much higher (equivalent to their prices falling) and inflation seems to be cooling, so it's likely they will do better in the future. But inflation is the biggest weakness for bonds and if inflation runs hot again, they will probably do poorly again.
Yes, the 30 day SEC yield for SCHP is 4.34%
if inflation becomes persistant, and be with us for the next 2-3 or more years, a TIPS bond ETF can be a great choise like $SCHP yield 6-8% right now
Your 401k should have some bond funds among its standard options. The category might say "bonds" or "fixed income". Bonds don't quite yield 6% right now unless you go into lower credit ratings. Series I Savings Bonds are not marketable and you won't be able to get them in your 401k, only through a TreasuryDirect account. You can buy inflation-linked bonds called TIPS in your brokeragelink though. Either individually or through a fund like SCHP.
My taxable is SPLG, SCHD, ITOT, & SCHP.
Put it in a taxable and buy SCHP.
Bond funds/ETFs no more than I already hold (SCHP and SPHY about $80k). As 1 year CDs hit 4%, I started buying monthly CDs in addition to continuing to buy underweight positions (e.g. I'll likely add 5 more shares of MS and 20 of CAT as cash is available).
So can someone tell me why SCHP is down so much too then?
I bought SCHP last year thinking higher than expected inflation would make it go up… inflation was higher than expected but SCHP is down 20% since then. I don’t get it either.
If you want a low volatility high income strategy, there’s passive funds and super low expense ratios that do so. In the US a popular choice is SCHP which tracks the Dow Jones Dividend 100.
I've been buying a bunch of different flavors: SCHP (monthly divs @ 6.91%), VTIP (quarterly @ 6.09%), SPIP (monthly @ 7.79%), TIPX (monthly @ 7.01%). I hedge price drops by selling ATM calls a few months out and roll it when needed. It works better with the monthly versions since it will generally net a profit if they get assigned after a couple of div payouts.
SCHP. solid dividends. Prices are not too drastic of a change. Not too volatile. 2% change in the last 5 years. Fairly cheap for what the returns are.
A slightly better list: SCHB - Total US 70% SCHF - Total Developed world 20% SCHP - Total US-Bond TIPs 10%
Last year SCHP did great when inflation was roughly 7%. This year it did worse than STIP. I'd still lean towards SCHP, but if stability is more important than STIP is a good choices.
TIP and SCHP have almost identical portfolios and performance https://stockcharts.com/freecharts/perf.php?TIP,SCHP&p=4. STIP is shorter duration so less volatility and less returns on average.
so it’s not a bad idea park into SCHP rn right since stock return is negative
I know. I haven't looked into why SCHP dropped so much more than other TIPS etfs YTD. However, the fund has had greater highs too.
SCHP has the best performance, but has more volitility.
im trying to pick between TIP, STIP and SCHP. Any advice?
Some of the bond ETFs though issue monthly dividends. SCHP is one example
Why don’t you put it all into junk bonds like SPHY or inflation protected securities SCHP (yields of 7.89% and 12.52%)and gamble with the approximately 16k-25k a year you’ll get in yields? That way you not only keep your stash relatively safe, but you get to gamble too?
Short term bonds BSV yields 3.25%…..Im thinking SCHP cause the inflation yield is an astonishing 12% right now
300k in SPY. 200k in VT. 100k in SPYD. 100k in VB or VTWG. 50k BND. 50k in VTIP or SCHP. 200k for down payment on a property (or a rental if you’re still living with your dad).
Series I Savings bonds work like the ones you had for your grandparents. You redeem them at face value. You must hold for 1 year minimum and if redeemed before 5 years, you lose 3 months interest. They are inflation adjusted like TIPS; they have a fixed rate (currently 0%) that is locked in as long as you hold the bond plus a variable rate that changes every six months based on inflation. Most bonds work differently. They cannot be redeemed at face value. They mature on a particular date or you can sell them on the market before then, but the price may be higher or lower than face value. For example if you buy a zero coupon, ten year bond at a yield of 2%, the price would be 100/1.02^10 = 82.03. If yields then rise to 3%, your bond would need to fall in price to 100/1.03^10 = 74.41 to deliver a higher yield to prospective buyers. A bond ETF will hold a portfolio of bonds on your behalf and most will continually sell bonds that are close to maturity to buy new bonds. I-bonds must be purchased through Treasury Direct, not your broker, are linked to your SSN, are not marketable, and will not be included in any ETF. However TIPS are inflation-linked marketable treasury bonds that could be in an ETF. For example, SCHP holds TIPS. There are a few benefits to I-bonds. One is that they never lower the fixed rate below zero, so during times like last year when TIPS real yields were negative, they explicitly offer an above-market yield. Another is that you redeem them at face value, so unlike most bonds which can lose value before maturity if yields rise, I-bonds won't. They are also tax-deferred. https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ifaq.htm
I agree with most of the recommendations. Stick with ETFs first. I loaded up on NOBL. Which is basically a fund that picks the top few stocks that pay out good dividends and are fairly stable in prices. SCHP is also a good one. Mostly treasury bonds. But have a nice monthly dividend pay outs. What you need is to start building a fairly stable portfolio that you can earn passive income on. At 16, I would definitely try to pick some ETFs that pay monthly dividends. Reinvest those returns in to the same find and let it compound over years. You should have some nice earnings by the time you’re 21. I wish I knew all this stuff when I was 16. All I cared about back then was cars and girls. 🤣 didn’t even get in to trading until I was in my mid 30s. You have all the knowledge in the world on your phone. Use it! Learn financially literacy. How taxes work. How to file taxes without the IRS robbing you. Those will be a few of the things I’m teaching my daughter when she’s old enough. Good luck! I’m glad that younger people are learning these things. Gives me hope for my daughter.
Bonds: Low expense ratios, and do they beat inflation most years. 2021 & 2022 are statistical outliers for inflation. Usually SCHP has been the best of the bunch. Mutual fund: If they are index mutual funds, I look for low expense ratios and solid performance when compared to their peers. For actively managed mutual funds, I avoid them due to significantly higher expense ratio.