Search found 304 matches

by BackInTheBlack
Thu Jun 01, 2017 8:52 pm
Forum: Investing - Theory, News & General
Topic: Q&A WITH JACK BOGLE - Got a Question for Jack?
Replies: 53
Views: 17817

Re: Got a Question You'd Like to Ask Jack Bogle?

Hi Mel, Can we get Jack to expand on his comments (link below) regarding the market consisting of greater than 75% of indexers? What does this mean for the individual investor in terms of the indexing pathway? https://www.bogleheads.org/forum/viewtopic.php?f=10&t=220189 This is a very good point, and something that has concerned me for a few years. When you combine a majority of invested dollars being passively-managed, irrespective of value, with a surge in high-frequency-trading algorithms effectively dictating moves in large swathes of the stock market, then how much more likely are we to experience a repeat of the "Flash Crash" and other similar phenomena in the future? Wouldn't it also be fairly easy for another London-W...
by BackInTheBlack
Thu Jun 01, 2017 8:24 pm
Forum: Investing - Theory, News & General
Topic: What are you up YTD? [Year To Date]
Replies: 5249
Views: 899957

Re: What are you up YTD? [Year To Date]

I need to figure out Alpha, Treynor, and Sortino ratios for my portfolio. To be honest, my all-stock portion (I have a portfolio of about 30 individual stocks) has performed extremely well in absolute terms since '09, but in risk-adjusted terms, I'm not so sure. Overall, though, YTD my equity portfolio has gained 20.91%, dividends included (actually, since the market bottom on 03/06/2009, I've managed a CAGR of 21.58% annually). I'm guessing it is largely, if not entirely factor-driven. I'd love to think I'm just a whiz at picking stocks, but in all honestly, I'm sure I'm getting commensurate return to the risk I'm taking on. Which makes sense, because the volatility I've experienced has certainly not been for the faint of heart! Interestin...
by BackInTheBlack
Thu May 25, 2017 12:26 am
Forum: Investing - Theory, News & General
Topic: Bloomberg hit piece - Vanguard's Irritating Perch on the Moral High Ground
Replies: 52
Views: 11120

Re: Bloomberg hit piece - Vanguard's Irritating Perch on the Moral High Ground

Vanguard sounds like a mutual savings bank in structure. Not-for-profits certainly make profits - they have to if they intend to stay viable over the long term. See another thread about churches and what can happen when revenues in the form of contributions/donations and investment support dry up. A strong balance sheet will help them weather a downturn. The really important thing for me is that Vanguard is not a publicly traded company like Charles Schwab, T. Rowe Price, Fidelity, and Blackrock. ... Agreed. Although, BlackRock (BLK) is a great stock to own if you'd like to take advantage of the tectonic shift going on from active to passive investment management in the fund industry. Having seen the kind of momentum Vanguard was gaining w...
by BackInTheBlack
Sat Apr 30, 2016 9:06 pm
Forum: Investing - Theory, News & General
Topic: Putting Active Management to the Test
Replies: 143
Views: 27033

Re: Putting Active Management to the Test

Here is a 2 year update comparing performance of 24 active funds with their passive benchmarks. The 24 funds were selected based on ER, turnover, active strategy, past performance and other factors as discussed in OP. IMO the comparison is interesting since it represents how active funds might be selected. This is better than most active-passive comparisons that do not filter out funds with high ER, high turnover, bad strategies, poor past performance, or other criteria a real-world investor might employ. The 1st figure shows the comparison for the year ending Sep 30, 2015. The 2nd figure shows composite results for 2 years from Sep 30, 2013. http://i62.tinypic.com/33kahjr.gif Figure 1: Summary active vs benchmark comparison for 12 months ...
by BackInTheBlack
Sat Apr 30, 2016 8:57 pm
Forum: Investing - Theory, News & General
Topic: Putting Active Management to the Test
Replies: 143
Views: 27033

Re: Putting Active Management to the Test

I will post a much more detailed performance update when I have more time (very soon), but having just run the numbers tonight, it looks like, at first blush, 19 of 24 actively-managed funds from this list have outperformed their respective passively-managed benchmarks. That period of outperformance covers roughly the last 2.5 years (from early November 2013 to basically May 2016), and marks the quarter-way point in this 10-year thought experiment. I'm just posting this as a head's up, though, to look out for the forthcoming formal update. While two and a half years is certainly not very long, 19/24, or 79.16% of funds outperforming, is still very significant. Is it difficult to pick actively-managed outperformers ahead of time? Absolutely....
by BackInTheBlack
Fri Aug 22, 2014 8:29 pm
Forum: Investing - Theory, News & General
Topic: Shiller P/E nearly guaranteed to be lower in 5 years
Replies: 19
Views: 4801

Re: Shiller P/E nearly guaranteed to be lower in 5 years

My question is, what are the other useful measuring sticks out there, and where does Shiller's eponymous tool fit in? Is it even useful at all? I'm sure some will say that I'm beating a dead horse on this forum, but respectfully, I'm trying to shine a somewhat different light on things by presenting a peek into the possible future. Find dividends more meaningful than PEs, as they give me jam today rather than tomorrow and are influenced by the companies in total deciding a smoothed payout from smoothed underlying earnings. A look at the S&P500 historic yield http://www.multpl.com/s-p-500-dividend-yield/ immediately reveals the problem with this method, as the payout ratio has changed over time due to tax and other isssues. Nevertheless...
by BackInTheBlack
Fri Aug 22, 2014 8:24 pm
Forum: Investing - Theory, News & General
Topic: Shiller P/E nearly guaranteed to be lower in 5 years
Replies: 19
Views: 4801

Re: Shiller P/E nearly guaranteed to be lower in 5 years

Very interesting JoMoney, thanks. I take it this is from a Vanguard whitepaper? (seems to be in the same format) As for the predictive value of Shiller PE10, would it be correct to say that since said metric explains 43% (according to the chart provided) of the variance of future stock market performance and "nearly 60% of the variation in long-run stock returns is unexplained by valuations" (to quote you), that it predicts with near 100% accuracy the variance of market movement that is dependent upon valuations? ... Yes, that's a Vanguard paper - the link to it is at the top of the quote, you're not quoting me, you're quoting the Vanguard paper. No, I don't think it's accurate to say it even predicts the variation based on earni...
by BackInTheBlack
Thu Aug 21, 2014 9:58 pm
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 10169

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

It's somewhat of a point of contention on here as you know, and kind of boils down to a referendum on the EMH, but I don't want to hijack the thread for the purpose of steamrolling that horse carcass anymore, ... Actually, not. Jack Bogle is now very insistent that the Efficient Market Hypothesis (EMH) has little or nothing to do with it. It's the CMH: Cost Matters Hypothesis. L. I'm saying that my pointing out there are notable exceptions even beyond the caveat of "after costs" (by adding generally, etc.) equates to a kind of mini-debate on the EMH. Anyway, we are arguing semantics at this point, which happens to me quite often on this forum, leading me to believe that I am a pretty poor communicator. Oh well, I will endeavor to...
by BackInTheBlack
Thu Aug 21, 2014 9:53 pm
Forum: Investing - Theory, News & General
Topic: When did you hear of Bill Miller and Legg Mason Value Trust?
Replies: 32
Views: 3915

Re: When did you hear of Bill Miller and Legg Mason Value Tr

I claim that because excitement over an apparent trend builds exponentially, most of the people who hear about a trend, hear about it late in the process when it is almost over. To test this hypothesis, I would like you to think back as best you can and see whether you can remember the approximate year in which you first became aware of Bill Miller and Legg Mason Value Trust, the manager and fund who beat the S&P 15 consecutive years, 1991-2005 inclusive. It's unlikely you will be able to remember or find any documentation of the exact year, just do the best you can. My own recollection is that I first became aware of them in the mid 2000's, and that it was because I was seeing articles wondering whether he'd be able to keep it up. At ...
by BackInTheBlack
Thu Aug 21, 2014 9:38 pm
Forum: Investing - Theory, News & General
Topic: When did you hear of Bill Miller and Legg Mason Value Trust?
Replies: 32
Views: 3915

Re: When did you hear of Bill Miller and Legg Mason Value Tr

I claim that because excitement over an apparent trend builds exponentially, most of the people who hear about a trend, hear about it late in the process when it is almost over. To test this hypothesis, I would like you to think back as best you can and see whether you can remember the approximate year in which you first became aware of Bill Miller and Legg Mason Value Trust, the manager and fund who beat the S&P 15 consecutive years, 1991-2005 inclusive. It's unlikely you will be able to remember or find any documentation of the exact year, just do the best you can. My own recollection is that I first became aware of them in the mid 2000's, and that it was because I was seeing articles wondering whether he'd be able to keep it up. At ...
by BackInTheBlack
Thu Aug 21, 2014 9:18 pm
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 10169

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Watty wrote:I have not followed how much they use it but with that much stock Vanguard should have a lot of clout with the companies that it owns shares of so they may be able to help get companies more focused on doing what is in the shareholders best interests.
Vanguard has become more active re: proxy fights in recent years. Here's an article highlighting some recent headlines on the matter: http://www.reuters.com/article/2013/09/ ... YV20130913
by BackInTheBlack
Thu Aug 21, 2014 8:56 pm
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 10169

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Just to get y'all back on track: It's not indexing, or not not stock picking. It's low costs. I believe Jack Bogle freely admits some stock pickers can beat the market before costs (or after very low costs) . After costs, (generally) not (at least not for their clients). L. My slight edit in red. I won't quibble with the edit. i should have the word " consistently " in my original message. You can decide where it should have been inserted. :?: L. It's somewhat of a point of contention on here as you know, and kind of boils down to a referendum on the EMH, but I don't want to hijack the thread for the purpose of steamrolling that horse carcass anymore, so cheers to your reply. Also, I know red is an angry color to use, but I only ...
by BackInTheBlack
Thu Aug 21, 2014 8:41 pm
Forum: Investing - Theory, News & General
Topic: Financial Advisor Compensation
Replies: 36
Views: 4827

Re: Financial Advisor Compensation

livesoft wrote:If you place trades through your broker, they may skim some of the bid/ask spread or give you a poor execution.

Otherwise, these folks can hope for the future when you pay them something. At least they know that your assets have not gone to a competing firm. The broker can claim a larger value for "assets under management" which may help them.
That's what I'm thinking. If the broker ever wants to sell his book of business, your portfolio only helps to enhance the value of his AUM to a prospective purchaser of said assets, especially if it's a large portfolio. It's like getting an assessment on your house after including an addition - it certainly helps increase the value of the property.
by BackInTheBlack
Thu Aug 21, 2014 8:30 pm
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 10169

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Leeraar wrote:Just to get y'all back on track: It's not indexing, or not not stock picking. It's low costs.

I believe Jack Bogle freely admits some stock pickers can beat the market before costs (or after very low costs). After costs, (generally) not (at least not for their clients).

L.
My slight edit in red.
by BackInTheBlack
Thu Aug 21, 2014 7:30 pm
Forum: Investing - Theory, News & General
Topic: Shiller P/E nearly guaranteed to be lower in 5 years
Replies: 19
Views: 4801

Re: Shiller P/E nearly guaranteed to be lower in 5 years

The fifty fifty solution. As I understand, Doctor Jeremy Siegel is not buying his friend Doctor Robert Shiller's stock valuations and is calling for a Dow 18,000 by the end of 2014. If you listen to Doctor Shiller there is a good possibility that you will SELL your equity mutual funds. If you listen to Doctor Siegel there is a good possibility that you will BUY more equity mutual funds. The solution: Go with a 50% equities and 50% bonds allocation and forget about it. Thanks for reading. Edit: Dow 18,000 vice 19,000 Not a bad solution really, whether tongue in cheek or not :mrgreen: In fact, the more and more noise one hears re: valuations, the more a straight 60/40 portfolio (along the lines of Vanguard Balanced, VBINX) seems about as sen...
by BackInTheBlack
Thu Aug 21, 2014 7:24 pm
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 10169

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Interesting. Investors have similarly been throwing money into Blackrock's products for the very same reason. iShares ETF's are very, very popular investment vehicles, and by far the biggest threat to Vanguard's market share going forward. Observing the inexorable move by the investment community into passive investments, I found myself wishing there was some way to own equity in Vanguard (not talking about owning the funds and benefiting from cost-savings as a mutual owner). However, I decided to opt for the next best thing and throw some money into BLK and continue to be very pleased with the progress of the company. Margins are exceptional, capital return policies are very shareholder-friendly, and the company is riding the rising tide o...
by BackInTheBlack
Thu Aug 21, 2014 7:07 pm
Forum: Investing - Theory, News & General
Topic: Shiller P/E nearly guaranteed to be lower in 5 years
Replies: 19
Views: 4801

Re: Shiller P/E nearly guaranteed to be lower in 5 years

Don't count on it. Shiller PE is is based on the observation that corporate profits have risen and fallen over the course of the business cycle. It looks at 10 years worth of earnings since this time period includes all phases of the typical business cycle, covering periods of both high and low earnings. Corporate profit margins right now are exceptionally high, which explains much of the gap between PE10 and PE1. When we rely on Shiller PE (PE10) instead of PE1, what we're really doing is predicting that at time soon profit margins are going to revert somewhere near their historic mean, and when they do, stocks will be very richly valued on a price/earnings basis. It's worth noting though that this is just a prediction based on things tha...
by BackInTheBlack
Thu Aug 21, 2014 6:48 pm
Forum: Investing - Theory, News & General
Topic: Shiller P/E nearly guaranteed to be lower in 5 years
Replies: 19
Views: 4801

Re: Shiller P/E nearly guaranteed to be lower in 5 years

...what are the other useful measuring sticks out there... Depends on what you think "useful" means.... https://personal.vanguard.com/pdf/s338.pdf http://i59.tinypic.com/28lq9go.png ...Readers will also note that the projected distribution of annualized 10-year U.S. stock returns ... displays wide and fat tails. A key reason is that, as we have discussed, nearly 60% of the variation in long-run stock returns is unexplained by valuations. .. ...Economically for investors, such fat-tailed deviations from any fitted “point forecast” have been and can be meaningful. The average is in fact a poor description of the norm: ... about two-thirds of 10-year periods had realized returns that deviated from a 5% band around the best-fit line....
by BackInTheBlack
Thu Aug 21, 2014 6:33 pm
Forum: Investing - Theory, News & General
Topic: Your biggest "Missed Money" event that still kills you?
Replies: 102
Views: 14103

Re: Your biggest "Missed Money" event that still kills you?

Letting the Govt put some of my TSP in the G fund. Seriously, why does a 20 something need a boatload in the G fund? Also, I may be entering my "missed money opportunity" now. I have 2, count 'em 2!, shares of FB on hand and don't know if I should sell those bad boys or stick with it. I purchased when it started around $20 each, so there's a decent gain on both. Not in the huge sums some of you describe, but I have yet to accumulate those kinds of amounts... Just curious, how much in commission did you pay on that trade? $5. It was a bday present for my wife. Again, facebook fanatic that she is... Gotcha; not too bad actually (considering the tiny trade). To answer your original question, I don't see the harm in holding it. If yo...
by BackInTheBlack
Thu Aug 21, 2014 3:54 pm
Forum: Investing - Theory, News & General
Topic: Shiller P/E nearly guaranteed to be lower in 5 years
Replies: 19
Views: 4801

Shiller P/E nearly guaranteed to be lower in 5 years

Why? Well, the gigantic earnings slump of the financial crisis will be in the rearview, and the denominator in the equation will be considerably higher as a result. In 5 years, we could well be saying that the market is an obvious buy at prevailing prices simply due to this factor. Throw in the fact that higher rates should also contract multiples somewhat in future, and the Shiller P/E could very well be pointing to a market that's very undervalued. However, all this really proves is that this metric of market valuation is extremely flawed, and to be used in conjunction with many others rather than as a stand-alone statistic for relativistic valuation/ My question is, what are the other useful measuring sticks out there, and where does Shi...
by BackInTheBlack
Thu Aug 21, 2014 3:38 pm
Forum: Investing - Theory, News & General
Topic: Your biggest "Missed Money" event that still kills you?
Replies: 102
Views: 14103

Re: Your biggest "Missed Money" event that still kills you?

kazper wrote:Letting the Govt put some of my TSP in the G fund. Seriously, why does a 20 something need a boatload in the G fund?

Also, I may be entering my "missed money opportunity" now. I have 2, count 'em 2!, shares of FB on hand and don't know if I should sell those bad boys or stick with it. I purchased when it started around $20 each, so there's a decent gain on both. Not in the huge sums some of you describe, but I have yet to accumulate those kinds of amounts...
Just curious, how much in commission did you pay on that trade?
by BackInTheBlack
Wed Aug 20, 2014 4:29 pm
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 76
Views: 13250

Re: John Hussman, smart guy, should you listen to his foreca

So much of Hussman's position's validity depends on whether or not the Fed-induced market stimulus is really overinflating earnings or not. Make no mistake, however, on a current price-to-earnings basis, the market it NOT that richly valued (in fact, it's right around the last 30-year average). Hussman's premise seems to be that the denominators in the P/E's floating out there presently are suspect at best and overdue for a major adjustment downward, thereby severely depressing stock prices when that finally happens. However, I'm not so sure that I buy that, considering that the rest of the world is in the same boat, and that moderate growth has resumed by and large. Low interest rates have greatly benefited cash balances of companies, and ...
by BackInTheBlack
Wed Aug 20, 2014 2:20 am
Forum: Investing - Theory, News & General
Topic: Your biggest "Missed Money" event that still kills you?
Replies: 102
Views: 14103

Re: Your biggest "Missed Money" event that still kills you?

Gecko10x wrote:I owned and sold 93 shares of Apple @ $15/share ... back around 2003?... which was before a 2:1 and a 7:1 split. :oops:
Wouldn't that have made the shares $1.07 on a split-adjusted basis then? That's not possible since the shares traded in a range of about $1.80 to $3.40 on a split-adjusted basis in 0'3, and no lower than that since all the way back to 1982. The lowest price you could have bought was at about $26 per share pre-split (or $1.85 split-adjusted). Of course, none of that changes the fact that it was a great entry point, but I'm just nit-picking I guess, no offense intended.
by BackInTheBlack
Wed Aug 20, 2014 1:58 am
Forum: Investing - Theory, News & General
Topic: Your biggest "Missed Money" event that still kills you?
Replies: 102
Views: 14103

Re: Your biggest "Missed Money" event that still kills you?

None too distressing myself, just a couple of missed "double or triple-baggers" as Peter Lynch would say, but nothing to get in a huff about; of course, I'm young, so I'm sure that will change in time! However, I do know that my aunt had almost $600,000 in Sun Microsystems during the tech boom, and ended up selling it after the bubble burst for something like $80,000. That had to hurt something awful, especially considering that that one investment was worth more than her and her husband's entire net worth today.
by BackInTheBlack
Wed Aug 20, 2014 1:48 am
Forum: Investing - Theory, News & General
Topic: Your biggest "Missed Money" event that still kills you?
Replies: 102
Views: 14103

Re: Your biggest "Missed Money" event that still kills you?

Grt2bOutdoors wrote: Apple Computer traded at $14 pre-split in late 2004 - today it trades at the equivalent price of $1,400. :oops:
I could be misinterpreting what you're saying, but let's go over the numbers to be sure. The range for the split-adjusted price in 2004 was roughly $3 - $10. The current price is roughly $100. You seem to be inferring that AAPL has gained almost 10,000%, when it has gained only about 1,000% - 3,000%. Still a fantastic return, but not quite as miraculous as turning $14 into $1,400.
by BackInTheBlack
Sun Aug 03, 2014 9:32 pm
Forum: Investing - Theory, News & General
Topic: Suze Orman - Doesn't Like Target Date Funds
Replies: 65
Views: 15199

Re: Suze Orman - Doesn't Like Target Date Funds

In terms of the retail arena, VG is about the only company one should do target date/balanced funds with. In 401Ks, there seem to be better options in some cases. The non-VG target date funds in my 401K charge .12%. I have to disagree here; T. Rowe Price has one of the absolute best assortments of target-date retirement funds on the market, including Vanguard's offerings. While certainly higher than Vanguard's, TRP's ER's for its retirement funds is below average, its collective performance is remarkably good so far, the asset allocation strategy is not gimmicky with eye-popping exposures to international assets for example, overall allocations appear age appropriate, and portfolio turnover is very low. Most of the rest of the industry is ...
by BackInTheBlack
Sun Aug 03, 2014 9:18 pm
Forum: Investing - Theory, News & General
Topic: Arnott's/RAFI 10 year 'expected' returns
Replies: 78
Views: 12772

Re: Arnott's/RAFI 10 year 'expected' returns

Backinblack, I've all but given up on trying to figure out absolute valuations. As Berntson pointed out, the data are disturbingly dependent on where you look (as there are multiple ways to compute them) and fund companies seem to systematically report lower P/X metrics than the other sources. Then you have the issue of forward vs trailing, PE1 vs PE10, etc. Whole thing is kind of a mess really and Rodc's advice is well taken. That said, I couldn't help but notice that a meme was developing around the small = expensive idea and I got curious to find out what kind of foundation it was based upon. You're probably right re: the meme bit, and Bogleheads are best served to stay the course per Jack's timeless advice. I'm one of those rare half-b...
by BackInTheBlack
Sun Aug 03, 2014 8:27 pm
Forum: Investing - Theory, News & General
Topic: Arnott's/RAFI 10 year 'expected' returns
Replies: 78
Views: 12772

Re: Arnott's/RAFI 10 year 'expected' returns

FWIW, I'll post the fundamental value for a few Vanguard funds. The fundamental value (as I'm using the term) is the result of (1) dividing each of the other four valuations measures by the valuation for the total market and (2) averaging the result. This way of doing things lets us express valuation as a percentage over/under the total market. This chart uses Morningstar's forward looking numbers (with the exception of dividends, which are trailing). http://i60.tinypic.com/2ryg3o2.png One interesting feature is that the difference between small growth and large growth is much larger than the difference between small value and large value. SG is 14 percentage points more expensive than large growth. SV is only 5 percentage points more expe...
by BackInTheBlack
Sun Aug 03, 2014 1:42 am
Forum: Investing - Theory, News & General
Topic: International investing. A good call by our mentor.
Replies: 150
Views: 23183

Re: International investing. A good call by our mentor.

Sorry to be blunt, but this thread encapsulates everything that I am starting to find frustrating about this board. Don't get me wrong--I absolutely believe in passive investing, staying the course, diversification, and tax efficiency, But this discussion is about cherry-picking data that supports someone's pre-existing bias. In short, it's meaningless. Investing internationally, as opposed to completely on nearly completely in the U.S. increases diversification. As the saying goes, "if it adds diversification, it's probably a good thing." I don't care what happened the last 15 years. I do care what will happen in the next 15 years. But I don't know, and I don't believe anyone else does either, whether stocks will perform better ...
by BackInTheBlack
Sun Aug 03, 2014 1:33 am
Forum: Investing - Theory, News & General
Topic: Arnott's/RAFI 10 year 'expected' returns
Replies: 78
Views: 12772

Re: Arnott's/RAFI 10 year 'expected' returns

BackInTheBlack, Can you quantify "most unattractive it's been in decades"? Where is the data on small cap valuations in prior decades compared to present? Do you have any data to substantiate the notion of "recent institutional infatuation with factor investing"? To answer your first question, how about I provide a quote from a Kiplinger's article on the subject for you (there are dozens more to choose from, but it was one of the first ones I found when I googled it): What’s more, the Russell 2000 has beaten the S&P 500 every year since 1999, except for 2005, 2007 and 2011. Over that stretch it has returned an annualized 8.2%, compared with 4.7% for the S&P. That’s the longest run of market-beating returns for s...
by BackInTheBlack
Sat Aug 02, 2014 11:56 pm
Forum: Investing - Theory, News & General
Topic: Arnott's/RAFI 10 year 'expected' returns
Replies: 78
Views: 12772

Re: Arnott's/RAFI 10 year 'expected' returns

BackInTheBlack: I think we agree. I'm mostly giving steve_14 a hard time. He's convinced that anyone who thinks that her portfolio has better risk/return characteristics must also believe in free lunches, tooth fairies, and Santa Clause. I'm just pointing out that his views about small caps and REITs entail that he believes in "free lunches" as much as anyone else. The case that small caps are "outrageously priced" is oversold in my opinion. They're cheaper than large caps on a price to book and price to sales basis. They're more expensive on a price to cashflow and dividend yield basis. A simple average of these measures suggests that Vanguard small is about 8% more expensive than the total market. It's not nothing, bu...
by BackInTheBlack
Sat Aug 02, 2014 11:40 pm
Forum: Investing - Theory, News & General
Topic: The Boglehead-prisoner’s dilemma.
Replies: 33
Views: 7086

Re: The Boglehead-prisoner’s dilemma.

Very interesting thought experiment. Here is my solution. This solution relaxes the "trust no one" condition to a "diversify away the trust risk" condition. Which arguably is more Bogleheadish. Assumptions - a 60:40 portfolio (the one the prisoner wants) has an expected nominal return of ~6%, so the prisoner would expect his $2M to grow to roughly $4M in 15 years. - This strategy below is legal. Think its a grey area right now. Strategy 1. Identify a pool of 100 people with the following characteristics. - Actuarial odds of at least one of them dying in the next 15 years > 99% - Actuarial odds of more than one of them dying in the next 15 years < 10% - (Basically you are creating a pool of people such that the actuarial...
by BackInTheBlack
Sat Aug 02, 2014 11:21 pm
Forum: Investing - Theory, News & General
Topic: Arnott's/RAFI 10 year 'expected' returns
Replies: 78
Views: 12772

Re: Arnott's/RAFI 10 year 'expected' returns

I didn't say anything about "overpriced" or "a free lunch". I simply pointed out that investors as a whole have changing preferences for asset classes, and at the moment are willing to pay a lot for small caps, which often means lower returns ahead. The idea is that if there really is evidence that small caps and REITs will have lower returns than the rest of the market, you can improve expected returns without increasing risk by tilting away from them. There are silly investors bidding up stocks in those corners of the market and you, as the well informed investor, can take advantage of their foolishness by buying other, cheaper stocks (or shorting the stocks they're bidding up!). I'm not sure what more you want from a...
by BackInTheBlack
Fri Jul 25, 2014 1:32 am
Forum: Investing - Theory, News & General
Topic: I'm a genius!
Replies: 19
Views: 6035

Re: I'm a genius!

Back in early '09 when the market was completely collapsing and my parents were thinking of going to all cash in their retirement accounts, I talked them out of it, and in fact encouraged them to max out their contributions (including catch-up contributions), and even got my mom to start investing in individual stocks and mutual funds with Vanguard on the side. She has more than doubled her money in 5 years (not including contributions; with contributions she's tripled), and is about 4-5 years ahead of schedule for retirement at this point. She doesn't mind paying for family vacations now. :mrgreen:
by BackInTheBlack
Fri Jul 25, 2014 1:28 am
Forum: Investing - Theory, News & General
Topic: Should market valuations be completely disregarded?
Replies: 50
Views: 6470

Re: Should market valuations be completely disregarded?

Most Bogleheads seem to use the expression 'Market Timing' to mean anything other than fixed Strategic Asset Allocation. Would it more correct to apply the term only to Tactical Asset Allocation? Like "active" in describing a fund covers a range of territory so does "market timing". While I am not a fan of active funds, a low cost low turn over, well diversified active fund (say Wellington) is not an evil thing. Frankly as cost and turn over go down, and diversification goes up, one should expect pretty good convergence between active and index (of similar style). In which case not much harm in active, but not much benefit either (so why not just go index for lowest cost and widest diversification) . It really depends o...
by BackInTheBlack
Tue Jul 22, 2014 3:20 am
Forum: Investing - Theory, News & General
Topic: Value Overvalued
Replies: 23
Views: 3645

Re: Value Overvalued

Well, the reason I've been spending a lot of time looking at Value is currently I have VT (Vanguard Total World) for my stocks. Very simple. And I've been thinking about tilting to 'beat the market', since a lot of information seem to point to the effects of Value, e.g. Shiller's Irrational Exuberance. And Credit Suisse Global Investment Returns Yearbooks (2011, 2013, and 2014) seem to conclude that Dividend tilting works, and had me almost convinced to buy Vanguard's High-Dividend index. But a lot of other sources seem to disagree with its application with real money: John Bogle The Little Book of Common Sense Investing , Charles Ellis Winning the Loser's Game , and Malkiel A Random Walk Down Wall Street I think in the end I'm not going t...
by BackInTheBlack
Mon Jul 21, 2014 5:31 am
Forum: Investing - Theory, News & General
Topic: Value Overvalued
Replies: 23
Views: 3645

Re: Value Overvalued

I find it interesting that, as I have pointed out in another thread, the best performing "style box" in recent decades was mid-cap value, not small-cap value. According to JPM, some of that is due to faster expanding multiples, which is surprising.
by BackInTheBlack
Sat Jul 19, 2014 1:27 pm
Forum: Investing - Theory, News & General
Topic: Millennials (with jobs) are super-saving their retirement
Replies: 65
Views: 13905

Re: Millennials (with jobs) are super-saving their retiremen

After graduating in '09, I always contributed at least 15% of my income to the company plan, but got very sick pretty early on, and haven't even been able to work for a few years now. With huge medical bills and little income to speak of, I learned pretty quickly how damaging illness can be for one's wealth and ability to save. So, first and foremost, let's just say that it helps to be healthy! Fortunately, I have actually taken to managing my family's accounts since '09, and greatly increased their respective pots of money for retirement, etc., and I figure that even if I can't save much for retirement directly, I can still help to ensure a more secure retirement for myself by increasing the size of my future inheritance (granted that I ge...
by BackInTheBlack
Thu Jul 17, 2014 1:41 am
Forum: Investing - Theory, News & General
Topic: POLL: Do you have a dedicated REIT allocation?
Replies: 123
Views: 13209

Re: POLL: Do you have a dedicated REIT allocation?

Not currently, but I do plan to add some whenever valuations become more reasonable. According to Morningstar data, the average P/E is 44.6 in the industry right now. I don't know what the long-term average is, and I'm sure it's a bit higher than most other sectors given the high income, but even so, current multiples have to be well above the long-term average. It's easy to see why, given the insanely low interest-rate environment and related discount rates. Investors got a rude awakening late last year when rates began to rise, though, and I expect that to happen again in the second half of 2015 and beyond. I agree with the general sentiment that current investors in REIT's are probably well-advised to stay the course, but new investors i...
by BackInTheBlack
Thu Jul 17, 2014 1:04 am
Forum: Investing - Theory, News & General
Topic: was Bogle right about ETFs?
Replies: 26
Views: 3953

Re: was Bogle right about ETFs?

ETFs have certainly terrorized the retail financial advisory industry, as they've taken the middle man out of investing. No more do we have to pay loads, or go through advisors, to own diversified portfolios. And we can move from one fund family to another (for example to TLH) without being held captive by a single one. Not to mention their low ERs (about half traditional funds on average), which have greatly reduced the high fees the industry used to command. Ok, I'll bite. 1. You haven't had to pay loads on index mutual funds in decades. 2. There is absolutely no need for an advisor 3. Total Market, International, and Bond index funds is as diversified portfolio as you really need. 4. With todays offerings from Vanguard, Fidelity, Schwab...
by BackInTheBlack
Thu Jul 17, 2014 12:35 am
Forum: Investing - Theory, News & General
Topic: Man turned $2 m into 187 million and gave it away
Replies: 7
Views: 3172

Re: Man turned $2 m into 187 million and gave it away

... whether investing in S&P 500 or a VG 3 fund portfolio would have worked out similarly ... Measuring Worth put the January 2013 average of its "Accumulated S&P Index" at 360 times its January 1953 average. http://www.measuringworth.com/datasets/sap/ Also see Morningstar's growth of 10k charts for Wellington Fund, VWELX, and Massachusetts Investors Trust, MITTX, two mutual funds you actually could have bought sixty years ago. But don't forget to adjust for taxes. There weren't any IRAs or 401ks sixty years ago. Ron This whole discussion got me interested in old funds in general and I found a neat little list on investopedia. One of the funds I found, Pioneer Fund (PIODX), which got its start in 1928, trounces everything...
by BackInTheBlack
Wed Jul 16, 2014 12:37 am
Forum: Investing - Theory, News & General
Topic: Man turned $2 m into 187 million and gave it away
Replies: 7
Views: 3172

Re: Man turned $2 m into 187 million and gave it away

turned a $2m inheritance into 187 million over 60 years (187 / 2) ^ (1 / 60) = 7.86% annual growth S&P 500 60 years ago was around $22 and today $1973, so 7.78% annual growth, so 8 basis points less. Does this mean he could manage a fund with 0.08% expense ratio to get the same results? Yes, but the S&P500 also paid out dividends (well, the constituent companies did anyway). That compounding makes all the difference. Since June 1954, the S&P 500 gained 7.24% annually in price return only, but factoring in the reinvestment of dividends, total annual return jumps to 10.6%. The guy did well considering the dearth of investor-friendly funds for the first few decades of his investment horizon and the high transaction costs that brok...
by BackInTheBlack
Mon Jul 14, 2014 8:19 pm
Forum: Investing - Theory, News & General
Topic: Bet it ALL on Small Cap Value when you're young
Replies: 64
Views: 10585

Re: Bet it ALL on Small Cap Value when you're young

Well, looking at the last roughly 30 years, small cap value has been greatly overshadowed by mid-cap value, interestingly enough, both on a risk-adjusted AND absolute basis. From 1985-2013 MCV: 13.23% CAGR 18.45% SD 0.59 Sharpe 1.03 Sortino SCV: 11.79% CAGR 18.92% SD 0.51 Sharpe 0.83 Sortino Maybe since data has been kept on small value, i.e. all the way back to the '20's, the small value premium has proven to be greater than all the rest (domestically speaking), but certainly the last 3 decades show the folly of such an assumption for all time periods/horizons. I think what it DOES show, however, is that the value premium is particularly dependable, much moreso than that attributed to market capitalization anyway. I have a definite value t...
by BackInTheBlack
Sun Jul 06, 2014 9:04 pm
Forum: Investing - Theory, News & General
Topic: Vanguards Devil's Advocate
Replies: 55
Views: 10219

Re: Road to investment success.

I am curious if there other major schools of thought that are quite the contrary to Vanguard's ideas of investing. BigPrince: I don't understand how you could read the five books you listed and not be convinced of the Boglehead Investment Philosophy . Perhaps I can save you time. Below is a link to hundred's of books I have read. Result: I became more convinced than ever that our Boglehead Philosophy is the best road to investment success: Investment books I have read "The enemy of a good plan is the dream of a perfect plan." -- Jack Bogle Best wishes Taylor Great list Taylor, thanks for sharing. I think I've read a total of about 50 investment books, so this definitely gives me some food for thought! Do all of the books on this ...
by BackInTheBlack
Sat Jul 05, 2014 6:50 pm
Forum: Investing - Theory, News & General
Topic: NY Times: Not enough younger investment advisors
Replies: 72
Views: 10568

Re: NY Times: Not enough younger investment advisors

In college I did an internship at an Edward Jones office (yeah yeah, laugh it up), and got somewhat of a feel for what a "successful" practice was like. The guy I worked under had $200 million AUM, which is pretty considerable by most standards in that business. He had over 1,000 clients, several of whom were businesses. It was just him and his secretary... excuse me, "business office administrator"... and they managed to keep things humming at a good pace. That was back in '08, right before the financial crisis hit. He plowed most investors into American Funds, and while there are certainly worse fund families out there, 5.75% front-load commissions are never good for clients' wealth. Once I learned about index funds a...
by BackInTheBlack
Sat Jul 05, 2014 6:41 pm
Forum: Investing - Theory, News & General
Topic: Any Bogleheads get involved in private equity?
Replies: 52
Views: 11969

Re: Any Bogelheads get involved in private equity?

If you could be a general partner and take advantage of the carried interest provision in the tax code, sure! Otherwise, I'd stick with the Boglehead strategy that's helped you build your wealth in the first place.
by BackInTheBlack
Tue Jul 01, 2014 12:56 pm
Forum: Investing - Theory, News & General
Topic: NY Times: Not enough younger investment advisors
Replies: 72
Views: 10568

Re: NY Times: Not enough younger investment advisors

In college I did an internship at an Edward Jones office (yeah yeah, laugh it up), and got somewhat of a feel for what a "successful" practice was like. The guy I worked under had $200 million AUM, which is pretty considerable by most standards in that business. He had over 1,000 clients, several of whom were businesses. It was just him and his secretary... excuse me, "business office administrator"... and they managed to keep things humming at a good pace. That was back in '08, right before the financial crisis hit. He plowed most investors into American Funds, and while there are certainly worse fund families out there, 5.75% front-load commissions are never good for clients' wealth. Once I learned about index funds af...
by BackInTheBlack
Tue Jul 01, 2014 12:17 pm
Forum: Investing - Theory, News & General
Topic: NY Times: Not enough younger investment advisors
Replies: 72
Views: 10568

Re: NY Times: Not enough younger investment advisors

After reading this post its seems to me that advisors are needless Imagine if... doctors' benchmarks for good performance were... performing the bare minimum of cost-ineffective procedures while performing as many high-margin procedures as possible. There would still be people who love their doctors, but the incentives would not be in the patients' favor. Not sure if you're being facetious or what, but many, many doctors do precisely that. There have been exposés all over the place about it. Many doctors are absolutely incentivized to do unnecessary/highly expensive procedures accruing no benefit to the patient whatsoever. In fact, the WSJ just ran a piece recently about doctors running up medicare claims into the millions of dollars annua...
by BackInTheBlack
Mon Jun 30, 2014 11:16 pm
Forum: Investing - Theory, News & General
Topic: Bond yield =/= guaranteed return
Replies: 36
Views: 4974

Re: Bond yield =/= guaranteed return

acegolfer wrote:BIB,

Sorry I got confused with the Fabozzi book. The following Fabozzi book is used as a textbook.

Bond Markets, Analysis and Strategies

http://www.amazon.com/Bond-Markets-Anal ... strategies
Wow, that book looks like a must-have for me. I might have to wait until I have enough funds to get it, though. Man, all of the best investment books out there are so pricey. Oh well, in the long-run they should all pay for themselves many, many times over (unless I don't learn anything along the way lol).