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Re: Does market cap weighted indexing logically follow from

I've read that all stock market gains in the last 30 years or so have come from 30% of the stocks. That means that 70% of all public stocks have resulted in losses, so if you were using equal weighting with yearly rebalancing, you would be rebalancing into losers and out of winners every year. Is t...
by Clive
Mon Sep 29, 2014 7:17 pm
 
Forum: Investing - Theory, News & General
Topic: Does market cap weighted indexing logically follow from EMH?
Replies: 17
Views: 943

Re: Future equities 2% real rhetoric is hogwash

This being said, I am not too sure what's the point of a 10-yrs forecast, as opposed to something more long-term, and then the speculative factor is starting to become less significant. Hopefully! :wink: Right. For most investors planning for retirement, it's the expected returns over 30 or 40 year...
by Clive
Mon Sep 29, 2014 6:33 pm
 
Forum: Investing - Theory, News & General
Topic: Future equities 2% real rhetoric is hogwash
Replies: 45
Views: 3560

Re: Future equities 2% real rhetoric is hogwash

Well, this last statement is the key... 4.6% might the fundamental return, but when taking in account the speculative aspect and assuming some sort of return to the mean in the coming decade for equity valuations, then expected (real) equity returns do fall under 2%... Treasury real yield curve for...
by Clive
Mon Sep 29, 2014 12:58 pm
 
Forum: Investing - Theory, News & General
Topic: Future equities 2% real rhetoric is hogwash
Replies: 45
Views: 3560

Re: Future equities 2% real rhetoric is hogwash

I'm old enough to remember buying stocks via the post (snail mail), not having tax efficient/exempt options and market makers spreads being almost totally hidden. Funds would also charge a lot to manage your money. 6% dividend stock, less 30% withholding (or other tax) = -1.8% less = 4.2% less 1% ma...
by Clive
Mon Sep 29, 2014 12:48 pm
 
Forum: Investing - Theory, News & General
Topic: Future equities 2% real rhetoric is hogwash
Replies: 45
Views: 3560

Re: Domicile of funds and tax leakage.

Is the USA the only main country that we should worry about withholding tax? Both links deal with US equities but not European or Japanese, so I assume these countries don't have DWT? Most countries apply some level of withholding tax. Some even apply that to capital gains i.e. China IIRC applies 1...
by Clive
Mon Sep 29, 2014 7:21 am
 
Forum: Investing - Theory, News & General
Topic: Domicile of funds and tax leakage.
Replies: 16
Views: 1107

Re: Will Investment Returns Ever Revert to "Normal"?

I think they ARE normal. When we retired 26 years ago, my back of the envelope calculations, based on a little reading, was an approximate average total return of 10% for stocks and 5% for bonds over the previous 60 years. These are the numbers we plugged into our decision of whether we could retir...
by Clive
Sun Sep 28, 2014 4:18 am
 
Forum: Investing - Theory, News & General
Topic: Will Investment Returns Ever Revert to "Normal"?
Replies: 56
Views: 4262

Re: Withholding tax on bonds

Is there any withholding tax on interest payments of bonds? ... I'm an Irish citizen. I'm UK and its my understanding that provided you've completed/filed a W-8BEN US Treasury Bills, Notes, Bonds are exempt from withholding tax (but you'll of course have to pay any Irish tax that might fall due on ...
by Clive
Sat Sep 27, 2014 8:20 pm
 
Forum: Investing - Theory, News & General
Topic: Withholding tax on bonds
Replies: 3
Views: 260

Re: Will Investment Returns Ever Revert to "Normal"?

Depends if you consider a single stock market to be 'stocks' or not, and whether the US might expand upwards from 50% to perhaps 75% of the total stock market, or contract from 50% to perhaps 25%. http://static5.businessinsider.com/image/51156986ecad04e86900002f-618-/moneygame-cotd-020813.jpg Based ...
by Clive
Sat Sep 27, 2014 7:40 pm
 
Forum: Investing - Theory, News & General
Topic: Will Investment Returns Ever Revert to "Normal"?
Replies: 56
Views: 4262

Re: Domicile of funds and tax leakage.

And of course you have to make certain that any US domiciled ETF you buy outside of an ISA or SIPP is 'UK reporting'. Several of the Vanguard US ones are, but it would be incredibly easy to accidentally buy one, either Vanguard or other, that isn't. Good point. My understanding is that if a reporti...
by Clive
Fri Sep 26, 2014 5:45 pm
 
Forum: Investing - Theory, News & General
Topic: Domicile of funds and tax leakage.
Replies: 16
Views: 1107

Re: Domicile of funds and tax leakage.

Thanks for that link Ted. the Irish domiciled fund matches or beats the alternatives. And that's just for holding US stocks Could be wrong, but my understanding is that a UK investor who has filed a W8BEN will be taxed 15% withholding tax against a US ETF's dividend income. For a higher rate taxpaye...
by Clive
Fri Sep 26, 2014 11:04 am
 
Forum: Investing - Theory, News & General
Topic: Domicile of funds and tax leakage.
Replies: 16
Views: 1107

Re: Domicile of funds and tax leakage.

So the government won't tax anybody that's not a US based investor in these examples? I'm not a tax resident anywhere (no need to go into that on this thread) so I assume once I can invest in a fund that is domiciled in Ireland, I won't be taxed by the Irish government Ireland does have a 20% divid...
by Clive
Fri Sep 26, 2014 8:12 am
 
Forum: Investing - Theory, News & General
Topic: Domicile of funds and tax leakage.
Replies: 16
Views: 1107

Re: Factor exposure and (Markowitz) diversification

VTI Total US (being cap weighted of sorts) is somewhat like 92% VOO (S&P500) combined with 8% or so small. Substituting VISVX (small cap value) for the small i.e. 92% VOO, 8% VISVX has produced very similar results to VTI (total market). A index of all stocks will include all factors - there wil...
by Clive
Thu Sep 25, 2014 5:18 am
 
Forum: Investing - Theory, News & General
Topic: Factor exposure and (Markowitz) diversification
Replies: 8
Views: 632

Re: Does Equity Risk Decrease over Time?

Just on a point of note, I do not and would not hold all in one single broker/provider as the concentration risk is too high. Another factor to check is costs and taxes. Typically a reasonable low cost fund might come in at a 0.1% expense rate, if that fund holds foreign stocks however then it might...
by Clive
Thu Sep 25, 2014 5:00 am
 
Forum: Investing - Theory, News & General
Topic: Does Equity Risk Decrease over Time?
Replies: 51
Views: 2619

Re: Does Equity Risk Decrease over Time?

... Equal weight 20 countries yearly rebalanced worst 30 year annualised real +119% (bettered only by US 132% and Australia 198%) http://tinyurl.com/okcb29c I have many pet peaves and one is when folks present excellent data and do not talk about the alternative. It isn't like if you look at terrib...
by Clive
Thu Sep 25, 2014 3:36 am
 
Forum: Investing - Theory, News & General
Topic: Does Equity Risk Decrease over Time?
Replies: 51
Views: 2619

Re: Does Equity Risk Decrease over Time?

Worst case 30 year % annualised real (US$) since 1900 Russia -100 Germany -99.16 Austria -98.57 Japan -97.21 France -66.93 Spain -57.36 Italy -54.65 Belgium -53.6 Netherlands -52.31 Norway -40.4 Sweden -39.56 Finland -37.32 Equal weight 20 countries yearly rebalanced worst 30 year annualised real +1...
by Clive
Wed Sep 24, 2014 4:49 pm
 
Forum: Investing - Theory, News & General
Topic: Does Equity Risk Decrease over Time?
Replies: 51
Views: 2619

Re: Does Equity Risk Decrease over Time?

The concept of “long–term” exists only in accumulation portfolios. There is no such thing as “long term” in a distribution portfolio I run with a strategic approach rather than a stock/bond rebalanced approach. 30 years worth of income in inflation bond ladder (drawdown), the rest in growth (stock ...
by Clive
Tue Sep 23, 2014 11:29 am
 
Forum: Investing - Theory, News & General
Topic: Does Equity Risk Decrease over Time?
Replies: 51
Views: 2619

Re: Does Equity Risk Decrease over Time?

The sorted gains distribution spanning worst (left tail) to best (right tail) is fractal - can be observed at both the small and large scale This image for instance shows the span for both 30 year annualised real gains (in US$ terms) for the worst cases for a range of countries, and also shows the s...
by Clive
Tue Sep 23, 2014 4:48 am
 
Forum: Investing - Theory, News & General
Topic: Does Equity Risk Decrease over Time?
Replies: 51
Views: 2619

Re: Are you using a Martingale strategy and don't know it?

So my question is do we sometimes partake in this fallacy without realizing it? For instance, if you pick a portfolio of 10 different stocks that you are fairly certain will still be around in 30 years, and all 10 survive, you're going to look like a genius and you may have very well outperformed t...
by Clive
Mon Sep 22, 2014 7:26 pm
 
Forum: Investing - Theory, News & General
Topic: Are you using a Martingale strategy and don't know it?
Replies: 28
Views: 2160

Re: Are you using a Martingale strategy and don't know it?

d'Alembert is a watered down variant of Martingale. With d'Alembert you start with 1 unit stake and increase the stake by 1 unit after each losing play, reduce by 1 unit after each winning play (minimum stake 1 unit). In a casino you can encounter a long series of losing outcomes that result in bank...
by Clive
Mon Sep 22, 2014 7:09 pm
 
Forum: Investing - Theory, News & General
Topic: Are you using a Martingale strategy and don't know it?
Replies: 28
Views: 2160

Re: Could you sleep with all your money in Berkshire Hathawa

Isn't there a significant amount of tax risk in BRK, something like 25% of its book value being deferred taxes, the company lodging 14,000 pages of tax filings each year, and a number of long standing legal battles with the tax-man. The risk of that coming to a head after Buffett's demise would be a...
by Clive
Sun Sep 21, 2014 12:25 pm
 
Forum: Investing - Theory, News & General
Topic: Could you sleep with all your money in Berkshire Hathaway?
Replies: 49
Views: 3895

Re: Individual Stocks

If you hold perhaps 4 stocks in each of 9 sectors (36 stocks) in equal proportion (2.8% weighting each) that might be no riskier/safer than buying the Dow 30. In the UK dividend income is taxed differently from price appreciation. For a basic rate taxpayer there will be no further tax on dividends a...
by Clive
Sat Sep 20, 2014 7:41 pm
 
Forum: Investing - Theory, News & General
Topic: Individual Stocks
Replies: 46
Views: 3229

Re: Why invest in bonds?

Not too be a broken record but as Financial Dave just proved again,it is easy to be 80 to 100 pct in equities when your expenses are covered by pensions and SS. Age 50 and have enough to live off 2%/year, so drop 60% into a 30 year inflation bond ladder, 40% into growth (stock/accumulation). 30 yea...
by Clive
Tue Sep 02, 2014 2:48 pm
 
Forum: Investing - Theory, News & General
Topic: Why invest in bonds?
Replies: 103
Views: 6322

Re: Why invest in bonds?

The advice I have heard most often is, invest your age in bonds. But bonds only just about keep up with inflation. By permanently keeping 30% to 40% or more of your money in bonds you are giving up a on lot of growth. Looking at more recent years real return government bond yields and picking out e...
by Clive
Tue Sep 02, 2014 2:24 pm
 
Forum: Investing - Theory, News & General
Topic: Why invest in bonds?
Replies: 103
Views: 6322

Re: Why invest in foreign funds?

Thanks Valuethinker Here's one for Shell but with the 'view' flipped (from the other direction) http://finance.yahoo.com/q/bc?t=1y&s=RDS-A&l=on&z=m&q=l&c=rdsa.l%2Cgbpusd%3Dx&ql=1 http://chart.finance.yahoo.com/z?s=RDS-A&t=1y&q=l&l=on&z=m&c=RDSA.L,GBPUSD=X&...
by Clive
Tue Sep 02, 2014 7:51 am
 
Forum: Investing - Theory, News & General
Topic: Why invest in foreign funds?
Replies: 35
Views: 2258

Re: Why invest in foreign funds?

The gap between an ADR and its home country price I'm UK so know little about ADR's but I thought they actually bought/held/traded the actual foreign stocks and I put any differences down to being due to FX (stock price change +/- FX change) In this chart BP.L is London (GP£) BP price, BP is US$ BP...
by Clive
Tue Sep 02, 2014 5:32 am
 
Forum: Investing - Theory, News & General
Topic: Why invest in foreign funds?
Replies: 35
Views: 2258

Re: Dollar Cost Averaging vs. Lump Sum

Comparing 30 year real gain factors since 1901 I'm seeing figures of a worst case 30 year real gain factor of 2.31 (131% gain) based on yearly granularity. Average in over three years (third each year) and that increases to 2.65 (165%). i.e. average in over three years had a better worst case (didn'...
by Clive
Tue Sep 02, 2014 5:12 am
 
Forum: Investing - Theory, News & General
Topic: Dollar Cost Averaging vs. Lump Sum
Replies: 31
Views: 3174

Re: Why invest in foreign funds?

iShares NYSE Composite ETF (NYC) - which is due to close in October, includes holding ADR's - which make up around 30% I believe of that index/fund. Compare the S&P500 with NYC and you don't see much of a difference. https://chart.finance.yahoo.com/z?s=NYC&t=my&q=l&l=on&z=m&c...
by Clive
Tue Sep 02, 2014 4:13 am
 
Forum: Investing - Theory, News & General
Topic: Why invest in foreign funds?
Replies: 35
Views: 2258

Re: When to invest in China?

Out of interest, what does the US/China tax treaty agree? The Chinese default is to apply 10% withholding tax to capital gains, dividends, interest, rent and royalties. From a quick skim of http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z it looks lik...
by Clive
Sun Aug 31, 2014 3:03 pm
 
Forum: Investing - Theory, News & General
Topic: When to invest in China?
Replies: 51
Views: 2944

Re: Why invest in foreign funds?

Reduces the risk of having been heavily weighted into the worst Difficult to read the labels in this image, so for clarity in order of the most recent best down to the most recent worst (real gains in USD) Australia S. Africa US World France Italy Austria http://media.tumblr.com/eb247b66c5e4125e6346...
by Clive
Sun Aug 31, 2014 1:29 pm
 
Forum: Investing - Theory, News & General
Topic: Why invest in foreign funds?
Replies: 35
Views: 2258

Re: Berkshire Hathaway Inc. or a Vanguard Variable Annuity

I want something that has no dividends and something I can hold a long time. I would hold B shares in Berkshire if I picked that. It is a tricky question Berkshire is not as diversified as the total market but the tax man would hit you hard in the variable annuity. Equal weight a globally diverse r...
by Clive
Sat Aug 30, 2014 3:36 am
 
Forum: Investing - Theory, News & General
Topic: Berkshire Hathaway Inc. or a Vanguard Variable Annuity
Replies: 33
Views: 2475

Re: A Low-Return Future? Are We Prepared?

Just to offer a concrete example of what a "low-return" future looks like, the table below shows William Bernstein's estimates for expected annual real returns of major asset classes over the next 10 years (from his book, Rational Expectations , published May 2014). These estimates are mo...
by Clive
Fri Aug 29, 2014 2:13 pm
 
Forum: Investing - Theory, News & General
Topic: A Low-Return Future? Are We Prepared?
Replies: 189
Views: 12299

Re: Berkshire Hathaway Inc. or a Vanguard Variable Annuity

Berkshire Hathaway Inc. or a Vanguard Variable Annuity Ttl Stock Market Idx If you could only pick one to hold for 25 years which one would you choose? Berkshire Hathaway pays no dividends and pulls off some clever 'tricks' to do so. Tax deferred is seen by Buffett as yet more 'free cost cash' i.e....
by Clive
Thu Aug 28, 2014 12:35 pm
 
Forum: Investing - Theory, News & General
Topic: Berkshire Hathaway Inc. or a Vanguard Variable Annuity
Replies: 33
Views: 2475

Re: Can a Commodities Fund be a Long-Term Investment?

Can a Commodities Fund be a Long-Term Investment? Yes. Most people are familiar with the wealth of Gates and Buffett, but less so with the Koch brothers whose combined $72B wealth compares to Gates'. And that wealth is derived primarily from diversified base/core (Commodity) products such as asphalt...
by Clive
Thu Aug 28, 2014 11:47 am
 
Forum: Investing - Theory, News & General
Topic: Can a Commodities Fund be a Long-Term Investment?
Replies: 45
Views: 2860

Re: Warren Buffet and the S&P index fund

Buffett's pledged to give away 99% of his personal (around $58B recently) wealth, which leaves around $580M. 10% of that in short term treasury bonds = $58M. That's perhaps topped up by another $10M each year by the dividends from the remainder $522M that's invested in the S&P500.
by Clive
Thu Aug 28, 2014 11:23 am
 
Forum: Investing - Theory, News & General
Topic: Warren Buffett and the S&P index fund
Replies: 23
Views: 1764

Re: The Larry Portfolio - For Tilters and S&D'ers Only

Jaab. Value stocks imply some residual value. They might be priced at or below book value and in the event of failure might have some remaining cash or value. Growth will often be in debt and in the event of failure leave no residual value (and outstanding non-repaid loans). Assuming 5000 total stoc...
by Clive
Wed Aug 27, 2014 2:59 am
 
Forum: Investing - Theory, News & General
Topic: The Larry Portfolio - For Tilters and S&D'ers Only
Replies: 27
Views: 3269

Re: The Larry Portfolio - For Tilters and S&D'ers Only

Thanks Larry. Just a observation - last hour or so I've just ran a really simple/quick test of looking at Vanguard's Small Value funds top 10 largest holdings, arbitrarily selected 5 from those and downloaded Yahoo daily adjusted closing prices for the last 12 months for each of the stocks (SNA, AJG...
by Clive
Mon Aug 25, 2014 7:20 pm
 
Forum: Investing - Theory, News & General
Topic: The Larry Portfolio - For Tilters and S&D'ers Only
Replies: 27
Views: 3269

Re: The Larry Portfolio - For Tilters and S&D'ers Only

IIRC French's equal weighted data broadly indicates an even greater annualised (something like 18% if I'm remembering correctly). Just dug out the figures and for 1993 onwards French's S/H equal weighted = 18.8% annualised. The average number of fewer stocks each year (initial set selected at the s...
by Clive
Mon Aug 25, 2014 6:02 pm
 
Forum: Investing - Theory, News & General
Topic: The Larry Portfolio - For Tilters and S&D'ers Only
Replies: 27
Views: 3269

Re: The Larry Portfolio - For Tilters and S&D'ers Only

Clive While data not perfect in sense you don't have trading costs, DFA SV has come within 10bp AFTER all expenses of matching its index over its life, so the concern really isn't warranted. just need to have a fund manager that is a patient trader and not having to be a buyer of liquidity when mar...
by Clive
Mon Aug 25, 2014 3:04 pm
 
Forum: Investing - Theory, News & General
Topic: The Larry Portfolio - For Tilters and S&D'ers Only
Replies: 27
Views: 3269

Re: The Larry Portfolio - For Tilters and S&D'ers Only

French has the "US data on his site French's data is awkward as it forms yearly rewards based on monthly rewards and monthly rewards are based on a initial set selected in June of each year (once/year), and additional data shows the number of firms remaining each month. i.e. the totals are bas...
by Clive
Mon Aug 25, 2014 3:02 am
 
Forum: Investing - Theory, News & General
Topic: The Larry Portfolio - For Tilters and S&D'ers Only
Replies: 27
Views: 3269

Re: International allocation

Taken from Rick Ferri off of a google search for "efficiency frontier - US stock/Int Stock" http://i61.tinypic.com/bev8e1.png Be careful there...depends on what time period you're looking at doesn't it? http://i.imgur.com/oP9dy.jpg http://i.imgur.com/oP9dy.jpg Late 1960's to 1990 Japan's ...
by Clive
Sun Aug 24, 2014 5:43 pm
 
Forum: Investing - Theory, News & General
Topic: International allocation
Replies: 81
Views: 4925

Re: The Larry Portfolio - For Tilters and S&D'ers Only

Please vote yes if you have even something related to this philosophically In the sense that I hold a Talmud type asset allocation (i.e. consider my home(s) as investments and not just consumables), with a target third in each of land, business and reserves then yes - especially when home values ar...
by Clive
Sun Aug 24, 2014 2:36 am
 
Forum: Investing - Theory, News & General
Topic: The Larry Portfolio - For Tilters and S&D'ers Only
Replies: 27
Views: 3269

Re: The Larry Portfolio - For Tilters and S&D'ers Only

design new LP's supposing that the fixed asset will only return inflation rate - 1 percent. ... with say a more "normal" 5 year bond portfolio A 5 year treasury bond ladder initially weighted 70%, when not marked to market and each bond is held to maturity will generally provide a reward ...
by Clive
Sun Aug 24, 2014 2:05 am
 
Forum: Investing - Theory, News & General
Topic: The Larry Portfolio - For Tilters and S&D'ers Only
Replies: 27
Views: 3269

Re: Juice up your cash returns (!) [What do you consider cas

Can't vouch for the accuracy (UK investor) of this US data, but if you run with a 5 year treasury bond ladder holding each bond to maturity, then the yearly reward can be simplified to the (rolling) average of the five years 5 year yields. Each year you have one rung maturing (cash in hand) that rol...
by Clive
Fri Aug 22, 2014 7:38 am
 
Forum: Investing - Theory, News & General
Topic: Juice up your cash returns (!) [What do you consider cash?]
Replies: 11
Views: 2208

Re: Bogleheads and Dividend Paying Stocks

In the UK we have a $17K approx. yearly capital gains allowance - share price gains/profit that can be made in any one year before being liable for capital gains tax. Capital gains are counted against nominal gains (no inflationary offset). Dividends for basic rate taxpayers (up to $75K of income) h...
by Clive
Thu Aug 21, 2014 6:39 pm
 
Forum: Investing - Theory, News & General
Topic: Bogleheads and Dividend Paying Stocks
Replies: 22
Views: 2105

Re: [live off dividends?] How the rich stay/get richer??

Broadly share price only values pace inflation over time - and pay a dividend. As the share price rises with inflation so also does the dividend value increase over time. Reinvest the dividend and your total gain outpaces inflation. If you spend the dividend whilst broadly you might see a dividend v...
by Clive
Wed Aug 20, 2014 2:28 am
 
Forum: Investing - Theory, News & General
Topic: [live off dividends?] How the rich stay/get richer??
Replies: 62
Views: 5006

Re: "Cost" of foreign tax on international investing

I'd ball park estimate around a average 15% withholding tax being applied to foreign dividends and a 4% average dividend yield. So broadly 0.6% (4 x 0.15) For a more accurate figure you'd have to look up the weighting and dividend yield to each country - and then consult tax treaties ...etc For inst...
by Clive
Mon Aug 11, 2014 4:31 am
 
Forum: Investing - Theory, News & General
Topic: "Cost" of foreign tax on international investing
Replies: 19
Views: 1437

Re: Historical question about recessions

3. What were the precipitating factors? Leeraar posted this image link in another thread. The first big up about a quarter of the way into the chart is the rise up to the 1929 peak during the "Roaring 20's". When anything doubles, doubles again and perhaps doubles yet again across a relat...
by Clive
Fri Aug 08, 2014 2:51 am
 
Forum: Investing - Theory, News & General
Topic: Historical question about recessions
Replies: 19
Views: 1112

Re: Volatility: Oh how I love thee.

Volatility: Oh how I love thee You might be interested in this weird observation then. Kenneth French's data since 1927 indicates that stocks that paid no dividends were less rewarding on a annualised basis than dividend paying stocks - when Value weighted. His equal weighted based values however f...
by Clive
Thu Aug 07, 2014 6:46 pm
 
Forum: Investing - Theory, News & General
Topic: Volatility: Oh how I love thee.
Replies: 44
Views: 3157

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

...and expect your long-term return to be about the same either way, then it doesn't make any difference on the return side. All that's really left for the U.S. investor to decide is if they think adding international exposure reduces the risks in their portfolio, or if it introduces new risks that...
by Clive
Mon Aug 04, 2014 9:19 am
 
Forum: Investing - Theory, News & General
Topic: International investing. A good call by our mentor.
Replies: 145
Views: 12569
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