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I have some money in a mutual fund at Vanguard. This money is not in a Roth or IRA (complicated story as to why that is). I'm thinking about moving some of it to a balanced fund. I imagine doing this would result in paying some taxes, but I can't figure out how much. Are there calculators somewhere on-line I can use? Thanks
I have some money in a mutual fund at Vanguard. This money is not in a Roth or IRA (complicated story as to why that is). I'm thinking about moving some of it to a balanced fund. I imagine doing this would result in paying some taxes, but I can't figure out how much. Are there calculators somewhere on-line I can use? Thanks
It depends
You need to calculate your gain first ....then you need to see what tax bracket your in and whether the gains are long term or short term .
In effect you really need to do your taxes to really tell .
A typical long term gain rate unless pretty high can be zero to 15% ...short term is taxed at whatever all your income comes to
Bonds are about appreciation not yield ...if a recession causes rates to fall farther your bonds gains in value and adds to the funds share price.
Heck i made over 10% this year on bonds that paid about 1.25%
That's true only as long as the price of bonds is going up and the yield is going down which is what has been happening for the past year. If/when the interest rates start going up and the resulting price starts going down, the bonds will fall in value like a rock. This is because a small change in the interest rate (yield) makes a MUCH larger percentage change when interest rates are low (as they are today) than when interest rates are high.
That's true only as long as the price of bonds is going up and the yield is going down which is what has been happening for the past year. If/when the interest rates start going up and the resulting price starts going down, the bonds will fall in value like a rock. This is because a small change in the interest rate (yield) makes a MUCH larger percentage change when interest rates are low (as they are today) than when interest rates are high.
Nothing has any guaranteed performance..but rates can stay low or even head to zero on bonds for years ..no one knows.
A good recession could see the 10 year close to zero or below and the 30 year could fall quite a bit.
Even the bond gurus like gundlach and bill gross miscalled the direction of rates
Nothing has any guaranteed performance..but rates can stay low or even head to zero on bonds for years ..no one knows.
A good recession could see the 10 year close to zero or below and the 30 year could fall quite a bit.
Even the bond gurus like gundlach and bill gross miscalled the direction of rates
Sure, that COULD happen, but I think it's just as likely to go the other way. Besides, bond rates are already darn close to zero right now. If the rates go much lower, they will be negative rates. In other words, you'll actually pay to own the bonds. Why would anyone want to do that when they could just put their money in a bank at very low rates but yet it would be insured by the FDIC.
No one insures your bond investments. If rates should go up a couple of percentage points, the value of your bonds will drop like a rock and there's no one protecting you against loss as they would be if your money were in an FDIC account.
Sure, that COULD happen, but I think it's just as likely to go the other way. Besides, bond rates are already darn close to zero right now. If the rates go much lower, they will be negative rates. In other words, you'll actually pay to own the bonds. Why would anyone want to do that when they could just put their money in a bank at very low rates but yet it would be insured by the FDIC.
No one insures your bond investments. If rates should go up a couple of percentage points, the value of your bonds will drop like a rock and there's no one protecting you against loss as they would be if your money were in an FDIC account.
Take a fund like Tlt , if it fell 1% you are looking at an 18% gain ..I would gladly pay 1% to get 18% so even at these levels these funds are owned .
I wracked up about 32k in gains trading Tlt this year .most of it when the yield was about 1.1/4% to 1.50%
But they are not owned alone ,they are used in a portfolio with assets that yin and yang offsetting rises in rates if it happens
As far as why would bonds still be bought ?
Countries can’t take their billions and put it in a bank ...foreign countries who want safe havens for their own money flock to the safest bonds in the safest countries ....they don’t mind a small fee plus they may make it up in currency swaps ...
Individuals do it because they hope the rates go even more negative netting them decent gains or they want fighter cover for their equities if they think markets are headed down .
For my core portfolios I own bonds but only shorter term stuff and high yield ..but I certainly trade funds like Tlt for gains
Last edited by mathjak107; 12-12-2020 at 05:50 PM..
The Federal Capital Gains tax could be 0%, 10% 15% or 20% depending on a few factors. What is the gain. What is your taxable income before the gain.
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