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Re: Bond Funds - Higher Rates - Point of Indifference

Thanks much for the clear explanations Kevin and thx1138.
by Chris M
Thu Aug 08, 2013 3:56 pm
 
Forum: Investing - Theory, News & General
Topic: Bond Funds - Higher Rates - Point of Indifference
Replies: 35
Views: 4056

Re: Bond Funds - Higher Rates - Point of Indifference

I agree these graphs would be good addition to the wiki. But I'm trying to reconcile the graphs with an example in a paper by Vanguard that was highlighted by another recent thread. The paper is here https://advisors.vanguard.com/iwe/pdf/ICRROL.pdf All of the graphs in this thread, for all the vario...
by Chris M
Thu Aug 08, 2013 10:55 am
 
Forum: Investing - Theory, News & General
Topic: Bond Funds - Higher Rates - Point of Indifference
Replies: 35
Views: 4056

Re: Time horizon for a new retiree

I'd be careful about using life expectancy as your time horizon. There is a significant chance you could live longer. For example, using the Social Security Administration's life table http://www.ssa.gov/OACT/STATS/table4c6.html there's a nearly 20 percent chance a 60 year old male could live to age...
by Chris M
Fri Aug 02, 2013 5:04 pm
 
Forum: Investing - Theory, News & General
Topic: Time horizon for a new retiree
Replies: 19
Views: 2066

Re: Taxable vs. Non-taxable Accounts

Many thanks for the very helpful information; all of my questions have been answered. I will be buying VNQ within my Roth IRA. Are there any other asset classes that y'all recommend be purchased only within a tax-protected account? I know that there are certainly considerations about withdrawal tim...
by Chris M
Thu Aug 01, 2013 4:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: Taxable vs. Non-taxable Accounts
Replies: 7
Views: 735

Re: Fantasy Versus Factors

I disagree that value and growth "zig" mostly together and that large and small mostly "zag" together. The 1990's, particularly the later half saw the large growth stocks outperform. Value pretty well got left in the dust. Small stocks also did not do as well. The 2000's were th...
by Chris M
Thu Aug 01, 2013 1:29 pm
 
Forum: Investing - Theory, News & General
Topic: Fantasy Versus Factors
Replies: 24
Views: 1757

Re: Fantasy Versus Factors

The author of the piece made a good argument for why certain factors work. I have argued the same things that value investing is boring and that investors for the most part won't stick with it. Investors lack patience. Yes, and this goes double for most of the professional traders who really set ma...
by Chris M
Wed Jul 31, 2013 11:04 am
 
Forum: Investing - Theory, News & General
Topic: Fantasy Versus Factors
Replies: 24
Views: 1757

Re: Stock market recovery time

So the question is, why are you asking? I don't know why you're bringing it up, but a typical context is that someone will claim that some strategy is reliable because it would have survived the most extreme event that has yet occurred. But that shouldn't give any reassurance at all. Extreme events...
by Chris M
Mon Jul 29, 2013 5:15 pm
 
Forum: Investing - Theory, News & General
Topic: Stock market recovery time
Replies: 20
Views: 1586

Re: Why bonds? How to allocate across accounts?

Chris M, I think there is an emotional and an objective element to market risk, and maybe a good way to distinguish the two is via the concept of time horizon. If you are investing with a short-term goal in mind--say, paying for a college education in three years--then the objective aspect of marke...
by Chris M
Sat Jul 27, 2013 3:20 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why bonds? How to allocate across accounts?
Replies: 38
Views: 44790

Re: Why bonds? How to allocate across accounts?

The thing that stands out to me is that, at extreme equity allocations, you're increasing risk (the standard deviation) disproportionately as compared to the increase in expected returns. longinvest, I think FinancialRamblings point is as close as you can come to the "mathematical/rational (no...
by Chris M
Fri Jul 26, 2013 11:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why bonds? How to allocate across accounts?
Replies: 38
Views: 44790

Re: What did Bogleheads do when the stock market crashed?

I didn't do anything up until Dec. 2008, when I did tax loss harvesting. And then in Jan. 2009 I rebalanced out of bonds and into stocks (including reinvestment of the cash I raised from tax loss harvesting in December). It was a scary experience though, especially since I had semi-retired in 2006. ...
by Chris M
Wed Jul 24, 2013 4:40 pm
 
Forum: Investing - Theory, News & General
Topic: What did Bogleheads do when the stock market crashed?
Replies: 127
Views: 79328

Re: is "age in bonds" really good Bogleheads advice?

Age in bonds is just a starting point. I would argue that it IS optimal for investors who don't particularly care to learn anything about investing (which is sadly, the majority) because 1.) it's easy to remember, 2.) it's easy to implement, 3.) it has moral weight behind it since it's been so ofte...
by Chris M
Mon Jul 22, 2013 11:23 am
 
Forum: Investing - Theory, News & General
Topic: is "age in bonds" really good Bogleheads advice?
Replies: 94
Views: 8201

Re: is "age in bonds" really good Bogleheads advice?

But I think the data from target funds supports my argument that age-in-bonds is not ideal "naked" guidance for the general population. VG target funds glide-path for example ([1]) have 50% equities at retirement, presuming the nominal standard age 65: that's 43% more equities than age-in...
by Chris M
Mon Jul 22, 2013 10:47 am
 
Forum: Investing - Theory, News & General
Topic: is "age in bonds" really good Bogleheads advice?
Replies: 94
Views: 8201

Re: is "age in bonds" really good Bogleheads advice?

The Wiki article states: "All age-based guidelines are predicated on the assumption that an individual's circumstances mirror the general population's." What I would infer from this statement is that age in bonds is an appropriate guideline for the general population, but an individual's ...
by Chris M
Sun Jul 21, 2013 10:23 pm
 
Forum: Investing - Theory, News & General
Topic: is "age in bonds" really good Bogleheads advice?
Replies: 94
Views: 8201

Re: is "age in bonds" really good Bogleheads advice?

The Wiki article states: "All age-based guidelines are predicated on the assumption that an individual's circumstances mirror the general population's." What I would infer from this statement is that age in bonds is an appropriate guideline for the general population, but an individual's c...
by Chris M
Sun Jul 21, 2013 2:04 pm
 
Forum: Investing - Theory, News & General
Topic: is "age in bonds" really good Bogleheads advice?
Replies: 94
Views: 8201

Re: Critique this Stock & Option Strategy?

I use technical analysis so that I can determine a better entry time. One can't time the market per se, but one can intelligently determine when to enter & exit. Even the best like Tom Sosnoff, creator of Think or Swim & Dave Johnson, technical analyst extraordinaire, can be fooled. So if I...
by Chris M
Sat Jul 20, 2013 3:03 pm
 
Forum: Investing - Theory, News & General
Topic: Critique this Stock & Option Strategy?
Replies: 33
Views: 1892

Re: Is the Expense of Total International Stock Index Worth

For the same reason that one would invest in Total Stock Market as opposed to a single stock with a 0% expense ratio: diversification. The diversification effect is, of course, much smaller, but the rationale is the same. E.g. it's possible that either Apple or Samsung wins the smartphone battle, w...
by Chris M
Sat Jul 20, 2013 2:34 pm
 
Forum: Investing - Help with Personal Investments
Topic: Is the Expense of Total International Stock Index Worth It?
Replies: 13
Views: 1717

Re: Soliciting Boglehead opinions on this paper

Sorry, it's not the same at all as rebalancing. The normal withdrawal approaches, the ones that don't do as well as bonds first, all assume rebalancing. Buying stocks when the market is down might seem to be an approach which gives the best outcomes, but the study results say the opposite. Not buyi...
by Chris M
Sat Jul 20, 2013 1:36 pm
 
Forum: Investing - Theory, News & General
Topic: Soliciting Boglehead opinions on this paper
Replies: 12
Views: 1114

Re: u.s. & foreign reits for asset allocations

You can get correlations between VNQ and other ETFs here: http://www.assetcorrelation.com/majors Note that the correlations between VNQ and the Vanguard Large Cap, Mid Cap and Small Cap ETFs are pretty high. In general, the correlations between U.S. REITs and the broader stock market have moved up s...
by Chris M
Fri Jul 19, 2013 5:52 pm
 
Forum: Investing - Help with Personal Investments
Topic: u.s. & foreign reits for asset allocations
Replies: 5
Views: 472

Re: Selling Mutual Funds & ETFs

In addition to commissions, ETFs, like individual stocks, are subject to the bid/ask spread--the difference between the price the seller will receive and the (higher) price the buyer must pay. The difference is pocketed by the market maker. Bid/ask spreads vary depending on the ETF; you can check cu...
by Chris M
Fri Jul 19, 2013 5:31 pm
 
Forum: Investing - Theory, News & General
Topic: Selling Mutual Funds & ETFs
Replies: 6
Views: 559

Re: Soliciting Boglehead opinions on this paper

What's going on is this: One of the big reasons why portfolios fail is because of poor market returns early in retirement. That means that capital gets spent which would otherwise produce future earnings. A long term bear market in the first five years of retirement does far more damage than the sa...
by Chris M
Fri Jul 19, 2013 12:28 pm
 
Forum: Investing - Theory, News & General
Topic: Soliciting Boglehead opinions on this paper
Replies: 12
Views: 1114

Re: Dynamic AA - does it make sense?

Interesting Appel. Couple of avenues for your to explore 1. How sensitive is your model to the 35% drop number? What if you made it 30%? or 20% or 40%? 2. Run the analysis for different time periods. 70-80, 80-90, 90-00 etc. 3. Run the analysis upto to 2007 - see if there is recency bias Appel, it ...
by Chris M
Wed Jul 17, 2013 11:05 am
 
Forum: Investing - Theory, News & General
Topic: Dynamic AA - does it make sense?
Replies: 77
Views: 3916

Re: My dentist asked me for a hot tip

FDIC insured CD. He takes a drill to your teeth--you don't want to suggest anything that could cause him to lose money.
by Chris M
Tue Jul 16, 2013 5:15 pm
 
Forum: Investing - Help with Personal Investments
Topic: My dentist asked me for a hot tip
Replies: 37
Views: 2831

Re: Need some help with my AA, particularly equity/FI

Unless you are planning to spend a big chunk of money (a house? college for your kids?) in the next five years or so, my advice would be to allocate as much to equities as you can stomach and still stick with buy and hold (and sleep at night). Retirement is an expensive proposition, and at your age ...
by Chris M
Tue Jul 16, 2013 5:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Need some help with my AA, particularly equity/FI
Replies: 4
Views: 291

Re: Dynamic AA - does it make sense?

Chris, see the edit to my post above. I was not quick enough and posted while you were posting. Thanks for the link Rodc. He does make the same point in the article too, that rebalancing is more likely to yield a bonus in a global equity portfolio (where long-run returns among asset classes are mor...
by Chris M
Tue Jul 16, 2013 4:39 pm
 
Forum: Investing - Theory, News & General
Topic: Dynamic AA - does it make sense?
Replies: 77
Views: 3916

Re: Dynamic AA - does it make sense?

If there is a rebalancing bonus, then it seems that the bonus would be even bigger if you "over-rebalance", no? There is no consistent rebalancing bonus. Many threads on the subject so won't explain here, other than to point out that over time most rebalancing is from high growth to low g...
by Chris M
Tue Jul 16, 2013 4:24 pm
 
Forum: Investing - Theory, News & General
Topic: Dynamic AA - does it make sense?
Replies: 77
Views: 3916

Re: Dynamic AA - does it make sense?

If there is a rebalancing bonus, then it seems that the bonus would be even bigger if you "over-rebalance", no? There is no consistent rebalancing bonus. Many threads on the subject so won't explain here, other than to point out that over time most rebalancing is from high growth to low g...
by Chris M
Tue Jul 16, 2013 4:15 pm
 
Forum: Investing - Theory, News & General
Topic: Dynamic AA - does it make sense?
Replies: 77
Views: 3916

Re: Dynamic AA - does it make sense?

If you had 70/30 before 2008, and went to 100/0 (the extreme) after/during the market collapsed, you would be buying low. Years later, you will benefit. To begin with, I don't think this is market timing, since you are over weighting assets which have done bad in the past. Of course it is blatant m...
by Chris M
Tue Jul 16, 2013 11:48 am
 
Forum: Investing - Theory, News & General
Topic: Dynamic AA - does it make sense?
Replies: 77
Views: 3916

Re: REIT Blues

I'm not clear on what function you are looking to REITs to perform in your portfolio? A lot of people hold REITs as a diversifier, and it is true that they did well during the 2000-02 bear market. But since then U.S. REIT correlations with the overall market have increased substantially. The correla...
by Chris M
Tue Jul 16, 2013 10:35 am
 
Forum: Investing - Theory, News & General
Topic: REIT Blues
Replies: 3
Views: 1084

Re: Confused on bond funds and all the bad news

The example with real numbers makes sense and I also understand how the #1 is riskier with more money being in stocks. In your example above you earned more with the Roth, but didn't it also cost you more to fund it? At 29.5, there is a whole lot greater chance that I'm going to live to be 59.5 tha...
by Chris M
Sat Jul 06, 2013 3:18 pm
 
Forum: Investing - Theory, News & General
Topic: Confused on bond funds and all the bad news
Replies: 26
Views: 3008

Re: Confused on bond funds and all the bad news

Chris, you must have missed my comment above (before your post): Stocks in a Roth is a myth. If you "tax-adjust" your asset allocation, it doesn't matter which type of IRA you hold what in. This has been discussed extensively here. Kevin Yes, I must have been writing when you posted that....
by Chris M
Fri Jul 05, 2013 5:29 pm
 
Forum: Investing - Theory, News & General
Topic: Confused on bond funds and all the bad news
Replies: 26
Views: 3008

Re: Confused on bond funds and all the bad news

Chris: the first allocation is riskier (more stocks) and it benefits from that. You need to take the tax adjustment into account when doing asset allocation. Hmmm...good point. And thank you for clarifying that. cdogg44, please ignore my original reply and refer to ogd's above. And sorry for the mi...
by Chris M
Fri Jul 05, 2013 4:25 pm
 
Forum: Investing - Theory, News & General
Topic: Confused on bond funds and all the bad news
Replies: 26
Views: 3008

Re: Confused on bond funds and all the bad news

I agree with Call_Me_Op that you should avoid holding bonds in a taxable account, but especially for someone as young as you I would strongly favor putting them in a traditional IRA rather than a Roth. I would save the Roth for stocks, which have much higher expected returns than bonds. Over your w...
by Chris M
Fri Jul 05, 2013 3:59 pm
 
Forum: Investing - Theory, News & General
Topic: Confused on bond funds and all the bad news
Replies: 26
Views: 3008

Re: Confused on bond funds and all the bad news

I agree with Call_Me_Op that you should avoid holding bonds in a taxable account, but especially for someone as young as you I would strongly favor putting them in a traditional IRA rather than a Roth. I would save the Roth for stocks, which have much higher expected returns than bonds. Over your w...
by Chris M
Fri Jul 05, 2013 12:32 pm
 
Forum: Investing - Theory, News & General
Topic: Confused on bond funds and all the bad news
Replies: 26
Views: 3008

Re: 1929 Crash being a Boglehead?

Good points Valuethinker, nisprius and Clive. My comments were about recoveries from cyclical bear markets, but I don't disagree that we have experienced long secular bear markets where the market has essentially moved sideways--2000 to ??? (at least 2011) being the latest example... How, exactly, ...
by Chris M
Fri Jul 05, 2013 12:25 pm
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: Confused on bond funds and all the bad news

cdogg44, You are right that in general, dividends constitute the vast majority of the returns you will see over the long run with a bond or bond fund. Capital appreciation has been very limited. For example, from 1925 to 2010 $1 invested in intermediate-term government bonds would have grown to $92....
by Chris M
Fri Jul 05, 2013 11:25 am
 
Forum: Investing - Theory, News & General
Topic: Confused on bond funds and all the bad news
Replies: 26
Views: 3008

Re: 1929 Crash being a Boglehead?

The point is not that market crashes sometimes take a decade or more to recover (Japan from the 1990's being the rare exception). It's that market crashes are almost invariably soon followed by good years in which the effects of the crash are ameliorated (table below). Three of the countries below ...
by Chris M
Thu Jul 04, 2013 5:25 pm
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: 1929 Crash being a Boglehead?

Good points Valuethinker, nisprius and Clive. My comments were about recoveries from cyclical bear markets, but I don't disagree that we have experienced long secular bear markets where the market has essentially moved sideways--2000 to ??? (at least 2011) being the latest example (this is different...
by Chris M
Thu Jul 04, 2013 5:24 pm
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: 1929 Crash being a Boglehead?

ogd, I'm intrigued--when you say bogleheadism is rooted in the Depression, do you mean in the sense that the Depression served as a kind of lesson in the need to control for risk in investing? Or something more? Chris That -- plus thrift, patience, avoiding speculation and concentration, and a heal...
by Chris M
Thu Jul 04, 2013 5:02 pm
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: 1929 Crash being a Boglehead?

According to this article http://money.msn.com/investment-advice/bear-market-losses-have-been-erased-marketwatch, if you look at the entire market, include dividends, and take deflation into account then it took a little over 7 years for the market to recover from the 1929 Crash. Again I am quite c...
by Chris M
Thu Jul 04, 2013 1:54 pm
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: Dr. Bernstein's new factor tilts

patriciamgr2 wrote:I've seen discussions of how to incorporate momentum (go long stocks with a recent positive return; go short lower-returning stocks)--although I've personally never done that.


This sounds like it requires frequent trading. Is the momentum premium sufficient to offset the trading costs?

Chris
by Chris M
Thu Jul 04, 2013 12:21 pm
 
Forum: Investing - Theory, News & General
Topic: Dr. Bernstein's new factor tilts
Replies: 9
Views: 3027

Re: 1929 Crash being a Boglehead?

...whether we can learn anything from that period of history to safeguard our financial futures. Though the 1920-1930 run-up and crash was really in a league of its own for the U.S., one big lesson from the history of market crashes is the consistency of recovery . If one looks at U.S. stock crashe...
by Chris M
Thu Jul 04, 2013 12:14 pm
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: 1929 Crash being a Boglehead?

ogd, I'm intrigued--when you say bogleheadism is rooted in the Depression, do you mean in the sense that the Depression served as a kind of lesson in the need to control for risk in investing? Or something more? Chris That -- plus thrift, patience, avoiding speculation and concentration, and a heal...
by Chris M
Thu Jul 04, 2013 11:47 am
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: 1929 Crash being a Boglehead?

There were no bogleheads then, and furthermore "bogleheadism" was impossible at that time. Umm... no internet? [Captain Obvious] I gotta say though, the stock market was at least recognizable . Like, if you were dropped there you would kind of know what to do. The graphs would look famili...
by Chris M
Wed Jul 03, 2013 11:13 pm
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: 1929 Crash being a Boglehead?

A lot of Bogleheads likely would've been in trouble as the posts above really haven't mentioned the dearth of actual cash in circulation. Yes, maybe today the FDIC would protect us from some of that problem, but it just gives a backstop to the hoarding of cash that existed at the time. Nisi has quo...
by Chris M
Wed Jul 03, 2013 9:50 pm
 
Forum: Investing - Theory, News & General
Topic: 1929 Crash being a Boglehead?
Replies: 74
Views: 4634

Re: Will the Small-Value premium persist over 40 years?

That said, in general the explanations of the premium we might expect to remain valid are those that are rooted in characteristics that should persist over time. IlliniDave notes that one of the explanations is that value stocks aren't the glamor stocks that get all the press and popularity. This p...
by Chris M
Wed Jul 03, 2013 6:03 pm
 
Forum: Investing - Theory, News & General
Topic: Will the Small-Value premium persist over 40 years?
Replies: 73
Views: 5798

Re: Bond Funds

Now I learn that I should not hold bonds in a taxable account... Should I sell the funds in the taxable account and reopen and diversify in one or more the tax-sheltered accounts? Last question for now, I struggle with investing significant amounts in bond funds when all have negative YTD returns a...
by Chris M
Tue Jul 02, 2013 5:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond Funds
Replies: 67
Views: 5004

Re: Is Social Security a bond for asset allocation?

SS has bond-like characteristics, but it has zero liquidity and can't be rebalanced. So I would say it should be handled separately, as an income source that reduces the amount of money you will have to draw out during retirement. I agree with this approach. The best thing about SS is that it enabl...
by Chris M
Tue Jul 02, 2013 5:31 pm
 
Forum: Investing - Theory, News & General
Topic: Is Social Security a bond for asset allocation?
Replies: 18
Views: 1520

Re: Danger in bond funds?

golfallday,

Yes, you're understanding this correctly. Basically, the price of your 2% bond will drop until the yield on the bond (for a new purchaser) matches the 3% yield for the new bond (assuming the two bonds are equal in all other respects).

Cheers,
Chris
by Chris M
Tue Jul 02, 2013 10:44 am
 
Forum: Investing - Theory, News & General
Topic: Danger in bond funds?
Replies: 33
Views: 2093

Re: "Stocks on sale", "reversion to the mean", etc.

If I buy this $1 Stock for $0.50 tomorrow, after a drop, the likelihood to lose money has been lowered yet the likelihood to make money is higher.[/list] ‣ Why shouldn't I expect that buying at $0.50 today will sell for $1+ tomorrow ? ← that was my initial premise to begin with. ‣ If we don't belie...
by Chris M
Tue Jul 02, 2013 10:35 am
 
Forum: Investing - Theory, News & General
Topic: "Stocks on sale", "reversion to the mean", etc.
Replies: 22
Views: 2036

Re: Will the Small-Value premium persist over 40 years?

I'm young, and investing for a very long time. With the pace of innovation in this world, I have no idea what the world will look like in 40 years, yet I'm trying to make a decision today whether to invest in TSM or a small-value tilted approach. There are various explanations for the small-value p...
by Chris M
Mon Jul 01, 2013 5:54 pm
 
Forum: Investing - Theory, News & General
Topic: Will the Small-Value premium persist over 40 years?
Replies: 73
Views: 5798
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