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Re: Can it be wrong to be too risk averse?

I give your brother credit for at least putting some thought into this. A typical conversation between me and one of my brothers goes as follows: Brother: I'd like to start investing my money, and I was wondering if you'd be willing to advise me. Me: What is your primary goal for this money. Brother...
by Call_Me_Op
Tue Jul 22, 2014 9:30 am
 
Forum: Investing - Theory, News & General
Topic: Can it be wrong to be too risk averse?
Replies: 49
Views: 2267

Re: P/E Ratio: How do YOU interpret/use it?

When I used to buy individual stocks, I did so based upon PEG ratio - ratio of P/E to EGR. As a Boglehead, I do not time the market so have no use for the P/E ratios.
by Call_Me_Op
Tue Jul 22, 2014 6:23 am
 
Forum: Investing - Theory, News & General
Topic: P/E Ratio: How do YOU interpret/use it?
Replies: 26
Views: 1309

Re: Take the plunge on long term treasuries vs. market timin

And yet, despite my new-found education on this topic, I'm having trouble convincing myself to take the plunge into long term treasuries right now given the imminent end of quantitative easing, the firming US economy, and expectations that interest rates will begin to rise in the second or third qu...
by Call_Me_Op
Mon Jul 21, 2014 12:06 pm
 
Forum: Investing - Help with Personal Investments
Topic: Take the plunge on long term treasuries vs. market timing?
Replies: 5
Views: 523

Re: Unlimited Book Subscription vs Amazon Kindle Unlimited

Can you store the ebooks on your Kindle for future reference (i.e., do you own the various e-books), or can you only access them in sequence on a separate access site?
by Call_Me_Op
Sun Jul 20, 2014 11:39 am
 
Forum: Personal Consumer Issues
Topic: Unlimited Book Subscription vs Amazon Kindle Unlimited
Replies: 7
Views: 1323

Re: The ultimate Boglehead exercise

sscritic wrote:I am too lazy to move that slowly.


Good one! :wink:
by Call_Me_Op
Sat Jul 19, 2014 4:05 pm
 
Forum: Personal Consumer Issues
Topic: The ultimate Boglehead exercise
Replies: 30
Views: 3445

Re: Understanding I-bonds & TIPS

I've found the Bogleheads Wiki page on I-Bonds vs. TIPS a useful starting point for this discussion. Note also that because I-Bonds don't have interest rate risk, that includes upside risk as well. In a high-interest rate environment, you couldn't make a quick profit from an unforeseen drop in inte...
by Call_Me_Op
Sat Jul 19, 2014 11:34 am
 
Forum: Investing - Theory, News & General
Topic: Understanding I-bonds & TIPS
Replies: 17
Views: 1948

Re: Understanding I-bonds & TIPS

Can you think of a better word to use ... [ than "principal" ] for the interest-paying basis for an I-Bond [ ? ] I would just say "value". But if you want to say "principal" that's cool. The Treasury uses both words: The interest is compounded semiannually. Twice a yea...
by Call_Me_Op
Sat Jul 19, 2014 11:14 am
 
Forum: Investing - Theory, News & General
Topic: Understanding I-bonds & TIPS
Replies: 17
Views: 1948

Re: Understanding I-bonds & TIPS

For I Bonds the interest rate itself is adjusted. Since they aren't really bonds -- but more in the nature of a savings account -- it doesn't really make sense to speak of an I Bond's "principal", unless one is just referring to the initial amount purchased. Can you think of a better word...
by Call_Me_Op
Sat Jul 19, 2014 8:12 am
 
Forum: Investing - Theory, News & General
Topic: Understanding I-bonds & TIPS
Replies: 17
Views: 1948

Re: Do any bogleheads hold the "Larry Portfolio?"

No, but my equity holdings are relatively small and heavily tilted.
by Call_Me_Op
Sat Jul 19, 2014 7:32 am
 
Forum: Investing - Theory, News & General
Topic: Do any bogleheads hold the "Larry Portfolio?"
Replies: 18
Views: 2368

Re: Understanding I-bonds & TIPS

This is very simplistic but if the government proposes a "deal" that it limits you in making with it, it is probably a good deal, otherwise, they would let you buy an unlimited amount. So, using that admittedly fractured logic, I Bonds are a better DEAL than TIPS. Yes, we can talk about a...
by Call_Me_Op
Fri Jul 18, 2014 7:02 pm
 
Forum: Investing - Theory, News & General
Topic: Understanding I-bonds & TIPS
Replies: 17
Views: 1948

Re: Critique draft IPS

I'd be afraid to tilt heavily or at all if I had an 80/20 portfolio. I hope you can stomach ginormous swings in account value.
by Call_Me_Op
Fri Jul 18, 2014 3:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: Critique draft IPS
Replies: 6
Views: 611

Re: Understanding I-bonds & TIPS

I've been doing a good bit of reading on I-bonds and TIPS lately, trying to better understanding the differences. I understand that the inflation protection difference between the two is mainly that, for I-bonds, the inflation adjustment is applied to the interest rate, while for TIPS it is applied...
by Call_Me_Op
Fri Jul 18, 2014 12:04 pm
 
Forum: Investing - Theory, News & General
Topic: Understanding I-bonds & TIPS
Replies: 17
Views: 1948

Re: Larry: 20 Dollar Bills and Factor Persistence

Isn't 40 years a sufficiently long period upon which to make this assessment? 40 years of US only data is not good enough. In the US you need at least 85 years of data to include the Great Depression. You really want to see how assets behave not only in typical times, but during sustained market cr...
by Call_Me_Op
Fri Jul 18, 2014 7:45 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: recent brokered CD fluctuation

I own some brokered CD's and have not observed this fluctuation. In any case, I really don't care. That's the nice thing about brokered CD's. The secondary market value can do anything it wants; I know I will not lose a penny. As to OGD's point, I too would prefer treasuries if the interest rates we...
by Call_Me_Op
Fri Jul 18, 2014 6:25 am
 
Forum: Investing - Theory, News & General
Topic: recent brokered CD fluctuation
Replies: 13
Views: 865

Re: Larry: 20 Dollar Bills and Factor Persistence

If SV is riskier, I am still waiting for someone to explain why from 1972-2013, the SD of SV is lower than that of SG (per Simba's data). Isn't 40 years a sufficiently long period upon which to make this assessment?
by Call_Me_Op
Thu Jul 17, 2014 10:28 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Early withdrawal penalty of long-term bank CDs

OP,

I suggest you not invest in one of these unless/until you better understand what they are and how they work.
by Call_Me_Op
Thu Jul 17, 2014 10:05 am
 
Forum: Investing - Theory, News & General
Topic: Early withdrawal penalty of long-term bank CDs
Replies: 3
Views: 281

Re: Larry: 20 Dollar Bills and Factor Persistence

acegolfer wrote:
Call_Me_Op wrote:The evidence that I see does not suggest that SV has had higher risk than SG, but has had higher return.


Assuming this past performance continues in the future, one should buy SV but not SG. Correct? Or am I missing something?


Correct.
by Call_Me_Op
Wed Jul 16, 2014 6:39 pm
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Total Bond Market vs Muni

It's OK, as long as you realize that you are taking more somewhat risk with the muni fund.
by Call_Me_Op
Wed Jul 16, 2014 6:36 pm
 
Forum: Investing - Help with Personal Investments
Topic: Total Bond Market vs Muni
Replies: 6
Views: 990

Re: BlackRock Diversified Income Portfolio

So let's see; you are relinquishing control (increasing risk) and increasing costs significantly. What exactly are your reasons for doing this? "Converting an asset-based portfolio to an income-based portfolio..." sounds like a nice cliche, but what does it mean other than using a lower al...
by Call_Me_Op
Wed Jul 16, 2014 9:18 am
 
Forum: Investing - Help with Personal Investments
Topic: BlackRock Diversified Income Portfolio
Replies: 6
Views: 593

Re: Help me understand bond funds

Price history does not include reinvested dividends, which help to smooth-out the ride.
by Call_Me_Op
Wed Jul 16, 2014 9:06 am
 
Forum: Investing - Theory, News & General
Topic: Help me understand bond funds
Replies: 5
Views: 820

Re: Larry: 20 Dollar Bills and Factor Persistence

Here is an interesting discussion of why SCV would be expected to out-perform.

http://www.moneychimp.com/articles/inde ... why_sv.htm
by Call_Me_Op
Wed Jul 16, 2014 9:02 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Larry: 20 Dollar Bills and Factor Persistence

All you need is simple cost of capital story to understand that small value stocks will have higher expected returns by definition---only question is what is the size of the premium, not if it exists, at least ex-ante If it's that simple, can you explain your story without stating that it is by def...
by Call_Me_Op
Wed Jul 16, 2014 7:41 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Please advise me on "Brokered CDs"

I have not seen brokered CD's offering YTMs of 4%-5% in over 5 years.
by Call_Me_Op
Wed Jul 16, 2014 6:51 am
 
Forum: Investing - Help with Personal Investments
Topic: Please advise me on "Brokered CDs"
Replies: 3
Views: 560

Re: Small cap valuations "appear to be stretched"

I follow my IPS, regardless of news and prognostications.
by Call_Me_Op
Tue Jul 15, 2014 2:37 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap valuations "appear to be stretched"
Replies: 11
Views: 1379

Re: How do I model 20 yr Treasury portfolio impact?

Duration is the first-derivative of the price versus yield curve. Not to put too fine a point on it, but (modified) duration is not the first derivative of the price with respect to the yield; dollar duration is the first derivative of price with respect to yield. I think you may be putting too fin...
by Call_Me_Op
Mon Jul 14, 2014 12:10 pm
 
Forum: Investing - Theory, News & General
Topic: How do I model 20 yr Treasury portfolio impact?
Replies: 37
Views: 2280

Re: Larry: 20 Dollar Bills and Factor Persistence

@OP, This is the part that I was referring to. Utilizing Larry's analogy, it seems logical that many more people will invest in small-cap value in the future, reducing long-term returns. If that's not your argument, my apologies. Throughout the entire thread, I thought you were using Larry's $20 bi...
by Call_Me_Op
Mon Jul 14, 2014 12:05 pm
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Larry: 20 Dollar Bills and Factor Persistence

acegolfer Premiums do not mean market is inefficient. Beta is a factor and no one argues that because there is beta that markets are inefficient. Now if you have premiums without a risk story that is logical you can then say you think market is inefficient. MOM falls into that category IMO, and it'...
by Call_Me_Op
Mon Jul 14, 2014 10:50 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Larry: 20 Dollar Bills and Factor Persistence

Larry - since value, small, or small value can underperform for years and will do so in the future, and because - as you state - there's no guarantee these premiums will persist in the future - isn't there a prospective dilemma for investors if (when) their factor-based investment allocations stay ...
by Call_Me_Op
Mon Jul 14, 2014 9:30 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Larry: 20 Dollar Bills and Factor Persistence

Expected returns are not the same as returns - I underlined the relevant portion of your earlier post. I am aware of that - which is why I clarified in my follow-up. If risk is taken to mean standard deviation of returns (as common per academics), then we can specify neither risk or return in the f...
by Call_Me_Op
Mon Jul 14, 2014 8:21 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Larry: 20 Dollar Bills and Factor Persistence

OP, Is this your argument? Since factor SV premiums have been persistent, the market is inefficient? (Sorry, if I have misinterpreted.) If yes, then what about market premium? If market is efficient, are you suggesting the market premium should not be persistent because there's no free lunch? I am ...
by Call_Me_Op
Mon Jul 14, 2014 7:44 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: [Poll] Are you more risk averse than average?

In the experience of most people, the stock market has always recovered (to go even higher) after a crash. Thus, they do not see it as risky. To me, risk tolerance is the ability to comfortably withstand the permanent loss of net worth. I don't think many people have high risk tolerance by that defi...
by Call_Me_Op
Mon Jul 14, 2014 6:57 am
 
Forum: Investing - Theory, News & General
Topic: [Poll] Are you more risk averse than average?
Replies: 36
Views: 2593

Re: Brokered CD's vs Bonds

I have never purchased or sold individual bonds. While brokered CDs are much like bonds, there are some differences (as best I understand). At least with Vanguard Brokerage Services, if you sell a bond, depending on factors including the amount you are selling, you probably will not get anything cl...
by Call_Me_Op
Mon Jul 14, 2014 6:49 am
 
Forum: Investing - Theory, News & General
Topic: Brokered CD's vs Bonds
Replies: 24
Views: 2649

Re: Larry: 20 Dollar Bills and Factor Persistence

OP, Is this your argument? Since factor SV premiums have been persistent, the market is inefficient? (Sorry, if I have misinterpreted.) If yes, then what about market premium? If market is efficient, are you suggesting the market premium should not be persistent because there's no free lunch? I am ...
by Call_Me_Op
Mon Jul 14, 2014 6:45 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Will you change your AA based on market performance?

To me, the whole idea of strategic asset allocation is to pick an AA that you can stick with regardless of market conditions.
by Call_Me_Op
Mon Jul 14, 2014 6:36 am
 
Forum: Investing - Theory, News & General
Topic: In a crash, will you re-balance to maintain your target AA?
Replies: 64
Views: 4116

Re: Investing is starting to get boring

If you're like me, the learning process never ends. But excitement should be found elsewhere.
by Call_Me_Op
Sun Jul 13, 2014 2:29 pm
 
Forum: Investing - Help with Personal Investments
Topic: Investing is starting to get boring
Replies: 39
Views: 3841

Re: How do I model 20 yr Treasury portfolio impact?

I’ve downloaded 20-year Treasury daily yield data back to 1993. How do I use this to model the expected impact of holding 20 year treasuries in a portfolio? Let’s start simple, with a portfolio that is 100% 20 year treasuries via an ETF like TLT. I think there’s a “rule of thumb” that a 1% increase...
by Call_Me_Op
Sun Jul 13, 2014 2:23 pm
 
Forum: Investing - Theory, News & General
Topic: How do I model 20 yr Treasury portfolio impact?
Replies: 37
Views: 2280

Re: Larry: 20 Dollar Bills and Factor Persistence

The lack of patterns in a Callan Periodic Table shows how variable the returns of sub-asset classes are. Ignore the bonds, and there is still no consistent pattern of the superiority of SCV to Large Caps in that table (large caps as a proxy for total market). Over long periods, SCV is expected to o...
by Call_Me_Op
Sun Jul 13, 2014 2:15 pm
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Brokered CD's vs Bonds

for the brokered CD the value will only go down if you sell my vanguard online recap of my holdings shows the value of my brokerage CDs changing each trading day. Usually down if the Treasury yields are up and vice versa. I'm not sure of the exact trigger of the change i.e. is it tied to the market...
by Call_Me_Op
Sun Jul 13, 2014 2:11 pm
 
Forum: Investing - Theory, News & General
Topic: Brokered CD's vs Bonds
Replies: 24
Views: 2649

Re: Larry: 20 Dollar Bills and Factor Persistence

Reward follows risk, eventually. Assuming you are properly diversified. Sure, but by "risk", you are talking about standard deviation of stock returns. It is quite conceivable that the increase in investment dollars could reduce both returns and risk. After all, why have value stocks been...
by Call_Me_Op
Sun Jul 13, 2014 8:21 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Larry: 20 Dollar Bills and Factor Persistence

I was listening this morning to a radio show from 2011 where Larry Swedroe provided an analogy to efficient markets. Basically, he said that if it were known that there were a lot of 20 dollar bills lying on the ground in a certain area, people would rush to that area to scoop them up. His point was...
by Call_Me_Op
Sun Jul 13, 2014 7:57 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 82
Views: 6743

Re: Retiring soon setting aside 3 years living expenses

I have set aside funds in a three year CD ladder ... liquid, having about the same yield as short term bonds... but no down-side inflation risk. Not correct on the inflation risk. What you have eliminated is the chance of loss of nominal value. You have not eliminated the the chance of loss of real...
by Call_Me_Op
Sat Jul 12, 2014 10:48 am
 
Forum: Personal Finance (Not Investing)
Topic: Retiring soon setting aside 3 years living expenses
Replies: 49
Views: 5190

Re: Brokered CD's vs Bonds

But 2.7% vs 3.3% speaks pretty clearly to me, so why the bias outside of non availability in a 401 or needing some cash for rebalancing? Jim, I don't think there is much of a bias here against brokered CD's versus a bond fund. The bias I see is more toward direct CD's, because they can have an attr...
by Call_Me_Op
Sat Jul 12, 2014 10:29 am
 
Forum: Investing - Theory, News & General
Topic: Brokered CD's vs Bonds
Replies: 24
Views: 2649

Re: Devaluation of the dollar scaring me more and more

Just goes to show you can find anything you want on the internet. Go searching for prognostications of gloom and doom, and Google will gladly serve up a few hundred thousand. True, but that doesn't mean some of them can't be true. The problem is with the total mismanagement of our economic system (...
by Call_Me_Op
Sat Jul 12, 2014 8:21 am
 
Forum: Investing - Theory, News & General
Topic: Devaluation of the dollar scaring me more and more
Replies: 22
Views: 1691

Re: Devaluation of the dollar scaring me more and more

Just goes to show you can find anything you want on the internet. Go searching for prognostications of gloom and doom, and Google will gladly serve up a few thousand. Do you remember what was supposed to happen in Y2K?
by Call_Me_Op
Sat Jul 12, 2014 8:07 am
 
Forum: Investing - Theory, News & General
Topic: Devaluation of the dollar scaring me more and more
Replies: 22
Views: 1691

Re: A Look at Current P/E Ratios

The Dan wrote:- If you are thinking of moving your stock allocation from US-heavy to 50/50 US/Int'l, now might be a good time, with the P/E of Int'l being somewhat lower than the US.


Smells of market timing to me.
by Call_Me_Op
Sat Jul 12, 2014 7:38 am
 
Forum: Investing - Theory, News & General
Topic: A Look at Current P/E Ratios
Replies: 53
Views: 5834

Re: Brokered CD's vs Bonds

Here's a unique take on brokered versus non-brokered CD's; why not buy some of both, like I do - along with US Savings Bonds?
by Call_Me_Op
Sat Jul 12, 2014 7:37 am
 
Forum: Investing - Theory, News & General
Topic: Brokered CD's vs Bonds
Replies: 24
Views: 2649

Re: Brokered CD's vs Bonds

If you aren't going to sell, why do you care if their NAV fluctuates? Their value at maturity does not change, so how are non-brokered CDs better? Well in terms of liquidity perhaps they are because non-brokered ones have a set penalty to redeem but other than that case- I see no advantage. The OP ...
by Call_Me_Op
Fri Jul 11, 2014 7:06 pm
 
Forum: Investing - Theory, News & General
Topic: Brokered CD's vs Bonds
Replies: 24
Views: 2649

Re: Tax Efficiency of Treasuries

sscritic, You are assuming (in your example above) that the tax-deferred case starts with a tax-deductible principal. That is not the problem I was solving. I was comparing the two accounts (taxable and tax-deferred) on an equal footing - that is, with the same input. An example of this is investing...
by Call_Me_Op
Fri Jul 11, 2014 4:31 pm
 
Forum: Investing - Theory, News & General
Topic: Tax Efficiency of Treasuries
Replies: 19
Views: 1427

Re: Total Bond fund vs. Brokered CDs in 401k

I have the option of using Fidelity's BrokerageLink in my 401k to purchase various types of equities, bonds, etc. I've been considering changing my current allocation which is 100% in the Spartan US Bond fund (FSITX, 30DY: 2.15%, ER .10%, Dur: 5.26yr, W.A.M: 6.9yrs) for brokered CDs of the same app...
by Call_Me_Op
Fri Jul 11, 2014 12:21 pm
 
Forum: Investing - Help with Personal Investments
Topic: Total Bond fund vs. Brokered CDs in 401k
Replies: 8
Views: 1178

Re: Tax Efficiency of Treasuries

Good point; relatively minor adjustment but relevant. But you are looking at small differences. A small change can thus be a large percentage change. Taxable = 58.98% Tax-Deferred = 60.38% x .6298/.61 = 62.34% 62.34 is 5.7% larger than 58.98. Yes - but that's still just an effective interest rate p...
by Call_Me_Op
Fri Jul 11, 2014 12:18 pm
 
Forum: Investing - Theory, News & General
Topic: Tax Efficiency of Treasuries
Replies: 19
Views: 1427
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