Personal Finance: Financial Planning & Investing

[BamaNation]

had a young guy (20 yrs old) come and work on our dryer this weekend. He was espousing the virtues of "investing" in NFTs. "Buy them for $100 today and sell them for $50,000 a few months later!"

I told him if he can do that, why is he fixing dryers? #TheTruthHurts #DontBelieveEverythingYouReadOnTheInternet

 

[4Q Basket Case]

had a young guy (20 yrs old) come and work on our dryer this weekend. He was espousing the virtues of "investing" in NFTs. "Buy them for $100 today and sell them for $50,000 a few months later!"

I told him if he can do that, why is he fixing dryers? #TheTruthHurts #DontBelieveEverythingYouReadOnTheInternet

OK, Boomer…..you’re just MEAN!

 

[B1GTide]

had a young guy (20 yrs old) come and work on our dryer this weekend. He was espousing the virtues of "investing" in NFTs. "Buy them for $100 today and sell them for $50,000 a few months later!"

I told him if he can do that, why is he fixing dryers? #TheTruthHurts #DontBelieveEverythingYouReadOnTheInternet

He may be doing both? Belittling people with whom you do not agree helps this thread?

 

[4Q Basket Case]

Any opinions on series I saving bonds? 7.12% for bonds issued November 2021 - April 2022

@Bamaro - given the max Series I Bond amount you can get is $10k/person it's not a bad way to save extra/free cash right now. It's about 7% more than you can get at your bank! (of course the 7.12 is really 3.56 for next 6 months, and then it will reset again, but looks like it could still be even more than that given present inflation.

Thanks, I forgot about the 10K limit.

I wasn’t aware of the Series I Bond, and did a quick lookup on how to buy them — back in the day, you used to buy Savings Bonds at the bank. No more. You buy them direct from the Treasury.

There’s some detail around the $10K limit that’s mostly good news. First, it’s $10K in electronic bonds per calendar year. Second, you can buy an additional $5K in paper bonds using your tax refund, also per calendar year.

Unless your 2020 tax return is on extension, it’s probably a bit late for the tax refund aspect this year. But if you plan, you could do it for the refund on your 2021 taxes that you’ll file in 2022.

Point being, it’s already November. So you could buy $10K now. Then when the calendar flips to January in about 40 days, you could buy another $10K. Then use $5K of the tax refund you get in the first half of 2022 to buy paper bonds. In pretty short order, you’d have a total of $25K yielding a 7%+ APR, principal and interest guaranteed by the US Treasury. And you can add $15K a year after that.

In today’s interest rate environment, there is no alternative that would yield a riskless rate of return anywhere approaching that.

I didn’t see a limit on the cumulative amount you can own, just the amount you can purchase in any given calendar year.

Here’s a copy-and-paste from the website:

How much in I bonds can I buy for myself?
In a calendar year, you can acquire:

• up to $10,000 in electronic I bonds in TreasuryDirect
• up to $5,000 in paper I bonds using your federal income tax refund

Two points:

• The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year
• Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit. Two exceptions:
  • If a bond is transferred to you due to the death of the original owner, the amount doesn't count toward your limit
  • If you own a paper bond issued before 2008, you can convert it to an electronic bond in your account in TreasuryDirect regardless of the amount of the bond. (The annual limit before 2008 was greater than today's limit of $10,000.)

 

[4Q Basket Case]

He may be doing both? Belittling people with whom you do not agree helps this thread?

Just curious….do facepalms count as belittling?

 

[B1GTide]

Just curious….do facepalms count as belittling?

I thought this thread was specifically to help people?

 

[BamaNation]

He may be doing both? Belittling people with whom you do not agree helps this thread?

Huh? No belittling here. Reality check, yes.

If you think I was belittling fixing dryers that's absolutely not what I was saying. In fact, I wish more people who are currently trying to do college would go the trade route. They would be well compensated for doing so and not waste years of their life trying to pass classes they have no interest in.

I was talking about the idea that one can "invest" in crazy things like NFTs as a get rich quick scheme. Kind of like the get rich quick TV folks to say "pay me $199 to learn all my secrets" ... why would they do that? If you have a guaranteed return why wouldn't you quit your day job, borrow every cent you can, and put it all in that "investment"... THAT's what I was talking about.

If the don't buy into get rich quick schemes concept isn't helpful, I'm not sure how to communicate it in a way that is.

 

[B1GTide]

Huh? No belittling here. Reality check, yes.

If you think I was belittling fixing dryers that's absolutely not what I was saying. In fact, I wish more people who are currently trying to do college would go the trade route. They would be well compensated for doing so and not waste years of their life trying to pass classes they have no interest in.

I was talking about the idea that one can "invest" in crazy things like NFTs as a get rich quick scheme. Kind of like the get rich quick TV folks to say "pay me $199 to learn all my secrets" ... why would they do that? If you have a guaranteed return why wouldn't you quit your day job, borrow every cent you can, and put it all in that "investment"... THAT's what I was talking about.

If the don't buy into get rich quick schemes concept isn't helpful, I'm not sure how to communicate it in a way that is.

Thanks for the clarification and I apologize for my mistake. But keep in mind that investing in some of these new commodities is not a get rich quick scheme for everyone. For some it may be, but most people and companies that own crypto and NFTs are very conservative. This is seen as a hedge against the market and fiat currency.

 

[BamaNation]

@Bamaro - given the max Series I Bond amount you can get is $10k/person it's not a bad way to save extra/free cash right now. It's about 7% more than you can get at your bank! (of course the 7.12 is really 3.56 for next 6 months, and then it will reset again, but looks like it could still be even more than that given present inflation.

An article on iBonds that I came across today:
Buy iBonds and Worry Less about Inflation (retirementincomejournal.com)

 

[4Q Basket Case]

An excellent article on diversification -- what it is, what constitutes diversification, etc.

I will say that I didn't think the author mentioned that if you own shares in a mutual fund, that's not one security...it's however many securities the fund owns.

He does point out that, as you diversify, you give up some risks, but assume others. For example, if you diversify into International funds (by and large, a good thing to do), you reduce domestic risk, but increase currency and international political risk.

This comes from the Seeking Alpha site. You get a few free accesses, but after that you have to pay. So if you already used up your free allotment, you might not be able to access. Still, a worthwhile, and educational read.

The Rule Of 42 Can Protect Your Income Stream | Seeking Alpha

 

[BamaNation]

I wasn’t aware of the Series I Bond, and did a quick lookup on how to buy them — back in the day, you used to buy Savings Bonds at the bank. No more. You buy them direct from the Treasury.

There’s some detail around the $10K limit that’s mostly good news. First, it’s $10K in electronic bonds per calendar year. Second, you can buy an additional $5K in paper bonds using your tax refund, also per calendar year.

Unless your 2020 tax return is on extension, it’s probably a bit late for the tax refund aspect this year. But if you plan, you could do it for the refund on your 2021 taxes that you’ll file in 2022.

Point being, it’s already November. So you could buy $10K now. Then when the calendar flips to January in about 40 days, you could buy another $10K. Then use $5K of the tax refund you get in the first half of 2022 to buy paper bonds. In pretty short order, you’d have a total of $25K yielding a 7%+ APR, principal and interest guaranteed by the US Treasury. And you can add $15K a year after that.

In today’s interest rate environment, there is no alternative that would yield a riskless rate of return anywhere approaching that.

I didn’t see a limit on the cumulative amount you can own, just the amount you can purchase in any given calendar year.

Here’s a copy-and-paste from the website:

How much in I bonds can I buy for myself?
In a calendar year, you can acquire:

• up to $10,000 in electronic I bonds in TreasuryDirect
• up to $5,000 in paper I bonds using your federal income tax refund

Two points:

• The limits apply separately, meaning you could acquire up to $15,000 in I bonds in a calendar year
• Bonds you buy for yourself and bonds you receive as gifts or via transfers count toward the limit. Two exceptions:
  • If a bond is transferred to you due to the death of the original owner, the amount doesn't count toward your limit
  • If you own a paper bond issued before 2008, you can convert it to an electronic bond in your account in TreasuryDirect regardless of the amount of the bond. (The annual limit before 2008 was greater than today's limit of $10,000.)

Just wanted to follow up on this since it's near the end of the year... This may only apply to a few folks but it's useful info regardless - especially if anyone got a nice Christmas bonus (I'm in academia - we don't do bonuses )

You could buy $10K in iBonds this week and $10K next week and get the 7.54% return for next 5 months until the rate is set again (which at this point looks like it might be even higher). You could then (if you get up to $5K back on your tax return, buy an additional $5K.

 

[Padreruf]

Anyone have any experience with Leveraged Loan Bonds? What sort of return are you getting?

 

[4Q Basket Case]

Anyone have any experience with Leveraged Loan Bonds? What sort of return are you getting?

My experience with Leveraged Loan Bonds is vicarious, and dates to the 2008 - 12 time frame.

They have fat yields for a reason: Leverage = Risk. In a robust economy, propped up by the US Treasury dumping $9T into the money supply, they’re a legitimate way to increase yield, especially useful for an oldster…..and just for the record, I’m almost 63, retired, and count myself in that cohort.

Funds are vastly different one from the other, and you need to understand who your particular fund’s ultimate obligors are, and in which sector(s) of the economy they operate.

Second, you need to understand that, so long as the economy rumbles along, leveraged loan funds can be a boon. But when (not if) it turns, leveraged companies are the first to go down. That’s why they pay higher interest on their debt in the first place.

Economic cycles have been around since the Phoenicians. Maybe earlier. Expansions follow recessions, follow expansions, follow recessions, ad infinitum. Point being, this high-yield bond market has a bit of the feel of late-80s LBOs, and 2008 Collateralized Debt Obligation (CDO) funds.

There is one huge difference: In 1990 and 2008, interest rates were much higher than they are today. So when rates fell with a recession, the value of the non-defaulted portion of your higher-yielding debt actually rose. This offset some of the hit you took from higher defaults. If it was long-term debt, you got an extra-special boost — until the borrower refinanced at a new, lower rate. So you also need to understand the prepayment penalties (if any) in the underlying debt agreements.

Today, rates are already low, so the mathematics aren’t actually against you…..It’s just that they’re not nearly so much in your favor in a recession-induced interest rate reduction.

Bottom Line: there’s a reason Leveraged Loan Funds have a fat juicy yield. Caveat Emptor, and be mentally prepared for a short-term reduction in value, should the economy go into recession. And one day, it will.

 

[Bamaro]

Just wanted to follow up on this since it's near the end of the year... This may only apply to a few folks but it's useful info regardless - especially if anyone got a nice Christmas bonus (I'm in academia - we don't do bonuses )

You could buy $10K in iBonds this week and $10K next week and get the 7.54% return for next 5 months until the rate is set again (which at this point looks like it might be even higher). You could then (if you get up to $5K back on your tax return, buy an additional $5K.

I looked around on the site Individual - Series I Savings Bonds (treasurydirect.gov) but couldn't find out anything about how registration (ie husband, wife, joint etc) effects the limits. Anybody familiar with how this works?

 

[BamaNation]

I looked around on the site Individual - Series I Savings Bonds (treasurydirect.gov) but couldn't find out anything about how registration (ie husband, wife, joint etc) effects the limits. Anybody familiar with how this works?

you would each setup your own account / login and then separately deposit into each account. (Funding source can be from same checking/savings acct). Only takes a couple minutes to setup and verify then you can setup the ach transfer.

 

[Bodhisattva]

We are looking to balance out our portfolio and are looking at commercial property. We are eyeing a plaza with 11 units on US 1. All units have long-term tenants, and we are looking to have leases extended a couple of years before we commit. If no snags, we can close on it in the Oct/Nov timeframe.

Took longer than it was supposed to (always does these days), but we closed on our first Florida commercial building earlier this week.

ETA:

* This builder has investor financing for his houses. The investors make payments at each of the five steps in the building process, with the builder getting his profit along the way. No carry cost or risk for him. The investor gets the house, which is lined up to sell upon delivery or shortly thereafter. With all the business I've done last winter through the summer, I've been invited to play with the cool kids. The first house I invested in should be sold next week. A second should be done by the end of next month. This has been a very good business relationship. Looking to keep it rolling for the foreseeable future.

And still continuing to churn our investment money to provide funding for the new builds. The market here is strong and looks to be so for a while.

 

[BamaNation]

@Bamaro - given the max Series I Bond amount you can get is $10k/person it's not a bad way to save extra/free cash right now. It's about 7% more than you can get at your bank! (of course the 7.12 is really 3.56 for next 6 months, and then it will reset again, but looks like it could still be even more than that given present inflation.

@Bamaro

FYI:

Great article just posted on WhiteCoatInvestor.com on how to create an i-bond account and buy i-bonds:

How to Buy I Bonds at TreasuryDirect [With Screenshots]

 

[Bamaro]

 

[BamaNation]

I never invest in anything I don't understand. This is literally true: If my 10 yr old can't understand it, I wouldn't buy it. Especially a covered call option on a long bond index depreciation leverage ratio!

 

[4Q Basket Case]

Good read by one of my favorite financial writers, Christine Benz at Morningstar.

“Don’t just do something! Stand there!!!”

I confess I have a couple of points in my own investing past where I didn’t heed that sage advice. Trust me when I say I wish I’d followed every bit of my training, rather than cave to emotion.

Especially in the investing arena, emotion is the devil.

Ukraine Invasion: Seeking (and Finding) Reassurance in Troubled Times

You won’t be surprised to hear me say that this isn’t the time to upend your well-laid plan.

www.morningstar.com