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Re: It seems Warren Buffett believes in DCA

Using Shiller's data for US stocks since 1871 and One Year Interest Rates, and loading into stocks 10% each year for 10 years, with a 30 year total investment period (lifetime) and comparing to lump sum from day 1..... for all possible 30 year periods since 1871, and using inflation adjusted total ...
by Clive
Fri Aug 01, 2014 11:18 am
 
Forum: Investing - Theory, News & General
Topic: It seems Warren Buffett believes in DCA
Replies: 14
Views: 1061

Re: It seems Warren Buffett believes in DCA

Fclevz wrote:There is no choice but to dollar-cost-average, since no career choice will give you your lifetime earnings up front.

Someone might be holding a lottery ticket that would suggest otherwise.
by Clive
Fri Aug 01, 2014 11:17 am
 
Forum: Investing - Theory, News & General
Topic: It seems Warren Buffett believes in DCA
Replies: 14
Views: 1061

Re: It seems Warren Buffett believes in DCA

I seem to recall Buffett suggesting that investors should accumulate shares over a period of time (years) - i.e. not have bought all shares at a single point in time Here's one of his quotes : “…If you like spending 6-8 hours per week working on investments, do it. If you don’t, then dollar-cost av...
by Clive
Fri Aug 01, 2014 8:36 am
 
Forum: Investing - Theory, News & General
Topic: It seems Warren Buffett believes in DCA
Replies: 14
Views: 1061

Re: It seems Warren Buffett believes in DCA

In this video, Warren says that they should not jump in at the wrong time I seem to recall Buffett suggesting that investors should accumulate shares over a period of time (years) - i.e. not have bought all shares at a single point in time. I've not however seen any of his advice as to how to do th...
by Clive
Fri Aug 01, 2014 7:30 am
 
Forum: Investing - Theory, News & General
Topic: It seems Warren Buffett believes in DCA
Replies: 14
Views: 1061

Re: It seems Warren Buffett believes in DCA

Please explain by comparison to a stock that pays no dividend Generally with a dividend stock where dividends are reinvested you accumulate more shares of a stock whose share price appreciates less quickly than a growth stock. With a growth stock you hold a constant number of shares (maybe 100), wi...
by Clive
Fri Aug 01, 2014 7:09 am
 
Forum: Investing - Theory, News & General
Topic: It seems Warren Buffett believes in DCA
Replies: 14
Views: 1061

Re: It seems Warren Buffett believes in DCA

To some extent lump sum is also a DCA process when dividends are being reinvested. Share price yearly average 5.7% stdev 17.8 (4.2% implied CAGR) Dividend average 4.5% stdev 1.5 (4.5% implied CAGR) (implied CAGR are approximate values estimated using pythagorean approximation http://www.financialwis...
by Clive
Fri Aug 01, 2014 4:42 am
 
Forum: Investing - Theory, News & General
Topic: It seems Warren Buffett believes in DCA
Replies: 14
Views: 1061

Re: Stocks: losing money for 20-30 years not uncommon

Does the data include dividends? Seems to me that every time I've read about long periods of negative stock returns, dividends have been excluded and the situation looks much better once they are considered. The 1900 - 2012 US annualised real of 6.26% is indicative that the figures are total real r...
by Clive
Thu Jul 31, 2014 7:27 am
 
Forum: Investing - Theory, News & General
Topic: Stocks: losing money for 20-30 years not uncommon
Replies: 43
Views: 4044

Re: Do any boggleheads invest in individual companies?

If you have a 'portfolio' that provides a reasonably good chance of ending 30 years with a similar inflation adjusted amount as at the start, together with having paid a 3.3% average income (that also grew with inflation) then conceptually for those with no heirs or need to leave a inheritance that ...
by Clive
Thu Jul 31, 2014 6:52 am
 
Forum: Investing - Theory, News & General
Topic: Do any boggleheads invest in individual companies?
Replies: 95
Views: 5296

Re: Do any boggleheads invest in individual companies?

If an investor believes he/she has stock-picking skill and can select a portfolio containing stocks with higher returns, or lower variances or correlations, than the market averages, that investor can adjust the risk-adjusted returns derived from randomly-selected stock studies accordingly. The inv...
by Clive
Thu Jul 31, 2014 6:34 am
 
Forum: Investing - Theory, News & General
Topic: Do any boggleheads invest in individual companies?
Replies: 95
Views: 5296

Re: Do any boggleheads invest in individual companies?

Here in the UK, a TD Direct Investing (UK's branch of TD Waterhouse/Ameritrade) trading account permits you to hold/exchange multiple currencies all within the same single account. You can also trade in any one or more of 17 different stock markets around the world (15 online). For a home-brew globa...
by Clive
Thu Jul 31, 2014 6:11 am
 
Forum: Investing - Theory, News & General
Topic: Do any boggleheads invest in individual companies?
Replies: 95
Views: 5296

Re: Stocks: losing money for 20-30 years not uncommon

In fact, MOST countries had a 30 year period where you could have lost money- ouch! I'm guessing that 30-year period was 1916-1945; a period that included two World Wars and a worldwide Great Depression. I would call that period uncommon. US 1915 CPI = 10.1 1920 CPI = 19.3 UK 1914 Cost of Living In...
by Clive
Wed Jul 30, 2014 2:04 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: losing money for 20-30 years not uncommon
Replies: 43
Views: 4044

Re: Stocks: losing money for 20-30 years not uncommon

Rodc wrote:And worse, US has had a simultaneous horrible 30-year period in stocks and bonds! They both stank at the same time.

Because periods of high inflation occurred at the same time.
by Clive
Wed Jul 30, 2014 1:28 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: losing money for 20-30 years not uncommon
Replies: 43
Views: 4044

Re: Stocks: losing money for 20-30 years not uncommon

Inflation at times can be high. Being on the losing side of a war can be devastating. Inflation and wars can at times be more widespread/global - in which case more remote continents can be more protected from such global crises. Diversification reduces the risk/reward. More middle road rather than ...
by Clive
Wed Jul 30, 2014 1:15 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks: losing money for 20-30 years not uncommon
Replies: 43
Views: 4044

Re: Question about long treasuries and increased supply

What you are suggesting is that the Gov. Is mysteriously stealing money from us. They are out to get us. We are doomed. It's unfair. People don't even know about it! How can this be? We have to do something about it. Change the system. We must survive. Oh my gosh. It's Godzilla!!! (Blast of nuclear...
by Clive
Wed Jul 30, 2014 7:52 am
 
Forum: Investing - Theory, News & General
Topic: Question about long treasuries and increased supply
Replies: 17
Views: 1017

Re: Question about long treasuries and increased supply

Your analysis would suggest that anytime there is movement in a currency's value downward, that EVERY borrower who borrows in that currency is in DEFAULT because they are paying back less "value" than originally promised. By your analysis then, defaulting is an everyday, expected, and una...
by Clive
Wed Jul 30, 2014 4:03 am
 
Forum: Investing - Theory, News & General
Topic: Question about long treasuries and increased supply
Replies: 17
Views: 1017

Re: Question about long treasuries and increased supply

The original debt is paid off per contract. Because the US is not presently running a surplus, it needs to borrow again the original principal, which it does via auction to willing participants, who choose to bid on behalf of themselves and their customers. If all the original terms are fulfilled, ...
by Clive
Tue Jul 29, 2014 3:25 pm
 
Forum: Investing - Theory, News & General
Topic: Question about long treasuries and increased supply
Replies: 17
Views: 1017

Re: Question about long treasuries and increased supply

Think of it as refinancing (technically it's called refunding). Refunding/refinancing = default (partial) renegotiated terms with the lender(s) (buyers/holders of treasury bonds). Banks accept deposits and use that (your) money to 'speculate' on a heads we win, tails you (taxpayer) lose basis. 2008...
by Clive
Tue Jul 29, 2014 11:57 am
 
Forum: Investing - Theory, News & General
Topic: Question about long treasuries and increased supply
Replies: 17
Views: 1017

Re: Why should stocks go up over the long term?

Stocks of particular companies do not for the most part go up over the long-term. Stocks that are growing in value change over time because economies are dynamic. Many of the biggest US stocks today were tiny or non-existent in 1980. Many of the biggest stocks in 2050 are undoubtedly tiny or non-ex...
by Clive
Mon Jul 28, 2014 8:04 pm
 
Forum: Investing - Theory, News & General
Topic: Why should stocks go up over the long term?
Replies: 34
Views: 2763

Re: Why should stocks go up over the long term?

What's to say that this long term growth of stocks will continue going forward? Couldn't we have hit the "peak" and it no longer grow from here? If you buy some land and sell it 10, 20, whatever years later, you might reasonably expect to receive a similar amount in inflation adjusted ter...
by Clive
Mon Jul 28, 2014 7:39 pm
 
Forum: Investing - Theory, News & General
Topic: Why should stocks go up over the long term?
Replies: 34
Views: 2763

Re: Higher Returns at Lower Risk - please comment

It seems to me that in the link, Vanguard is not arguing the existence of a small cap value premium, rather it is exploring whether (and why) it may or may not exist I'd conjecture that its more a case of reducing the cost of failure/stress - not so much a premium but a reduction of the losses that...
by Clive
Mon Jul 28, 2014 6:21 am
 
Forum: Investing - Theory, News & General
Topic: Higher Returns at Lower Risk - please comment
Replies: 59
Views: 6498

Re: Predict: S&P Doubles or Halves First?

The obvious answer then was and still is that it will likely double before it will half because equities have an upward bias. The OP stipulated do not include dividends Robert Shillers real S&P share prices indicate 1906 236, 1982 251. With hindsight that's a relative high to a relative low how...
by Clive
Wed Jul 23, 2014 2:52 pm
 
Forum: Investing - Theory, News & General
Topic: Predict: S&P Doubles or Halves First?
Replies: 36
Views: 2701

Re: Gold, Silver, Copper

If you base your plan on history in the US, the point is entirely moot, there will be no such crisis, period. 1933 the US bought all investment grade gold at its then fixed market price of around $20 and a year later ramped the price fix up to around $35. In effect a confiscation/default. Periodica...
by Clive
Wed Jul 23, 2014 1:59 pm
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 5016

Re: Gold, Silver, Copper

Hyper inflation in one country is a silly argument for gold. gold is only worth whatever it can buy. Gold can buy other currencies. During 2008 Icelandic financial crisis the price of gold stayed much the same in Euro's, but the Icelandic Krona currency dropped. i.e. the price of gold rose in Krona...
by Clive
Wed Jul 23, 2014 1:35 pm
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 5016

Re: Predict: S&P Doubles or Halves First?

http://www.jfholdings.pwp.blueyonder.co.uk/images/7580FD1DBD45996DBEC05AF93174E161092B0C66.jpg By eye, and assuming US stocks broadly compared to UK stocks halved halved doubled doubled halved doubled halved halved doubled doubled doubled Recency, trend and mean reversion looks more to the next pha...
by Clive
Wed Jul 23, 2014 12:55 pm
 
Forum: Investing - Theory, News & General
Topic: Predict: S&P Doubles or Halves First?
Replies: 36
Views: 2701

Re: Gold, Silver, Copper

the UK is not in the Euro so it pulling out of the EU does not directly impact the Euro Agreed, but the euro zone include the UK's GDP as part of the EU Australia and Canada (nor New Zealand) The UK is 65% self sufficient in food (and on average the populous is 35% overweight!), the rest is made up...
by Clive
Wed Jul 23, 2014 12:14 pm
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 5016

Re: Gold, Silver, Copper

But at the moment, there is this shift (I don't know how big) towards settling in gold. gold Renminbisation BRIC (Brazil, Russia, India, China) is 35% of world trade (global GDP), 42% of the global population, yet have a relatively (disproportionately) small international (financial) voice (11% of ...
by Clive
Wed Jul 23, 2014 8:07 am
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 5016

Re: Gold, Silver, Copper

There's lack of faith in any one single primary reserve currency. The tendency is more towards a one-world fiat paper standard (a new currency unit) issued by a World Reserve Bank - "the bancor", "unita", "phoenix", rather than a return to the finite reserves gold stand...
by Clive
Wed Jul 23, 2014 6:26 am
 
Forum: Investing - Theory, News & General
Topic: Gold, Silver, Copper
Replies: 87
Views: 5016

Re: How indexing let these retirees live footloose and fancy

Rather than a model, let's take a real world case of Japan. From their 1990 peak when interest rates were up at 7% or 8% levels and following strong gains during the 1980's their market prices dived. -40% in 1990, 0% 1991, -23% in 1992 (nominal total gains (dividends reinvested)). Counting that peri...
by Clive
Wed Jul 23, 2014 5:38 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3867

Re: How indexing let these retirees live footloose and fancy

I bet they will receive close to $30K/year in combined SS payments at FRA. The current younger generation live in a 'are-we-there-yet' world. Bio-tech advances is and will continue to prolong life. In the UK we're seeing a trend towards deferring entering the work-place/benefit system until you're ...
by Clive
Wed Jul 23, 2014 4:27 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3867

Re: How indexing let these retirees live footloose and fancy

Whilst smaller markets (such as Greece) periodically openly default, the majors (US, UK etc.) tend to default more via stealth. UK around 1920 defaulted by a series of sequential years of high inflation. US 1933 removed investment gold from the equation by buying it all up for around $20/ounce to th...
by Clive
Wed Jul 23, 2014 4:09 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3867

Re: How indexing let these retirees live footloose and fancy

As stated earlier, they probably had more assets than that based on selling some property. Regarding setting up a conservative bond ladder to fund their retirement from this point on . . . they absolutely don't need to do that. As Billy has told me, they could just live on their upcoming social sec...
by Clive
Wed Jul 23, 2014 3:34 am
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3867

Re: How indexing let these retirees live footloose and fancy

This is not one I would be comfortable with at all, especially since they apparently spent a few months in the US each year, where we know that health care costs can be astronomical. If you get hit by the proverbial truck and land in a US hospital unconscious when you are "going naked", y...
by Clive
Tue Jul 22, 2014 6:29 pm
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3867

Re: How indexing let these retirees live footloose and fancy

They did not start out spending $30,000 per year back in the early 90's when they retired, that is what they spend now. So their withdrawal rate was not 6%. I can recall that throughout the mid-2000's their spending level was consistently about $24,000. $500K 1991 is around $830K more recently in i...
by Clive
Tue Jul 22, 2014 12:56 pm
 
Forum: Investing - Theory, News & General
Topic: How indexing let these retirees live footloose and fancyfree
Replies: 35
Views: 3867

Re: Bond strategy resilient to rate increase

are there better alternatives? A relatively short bond ladder perhaps? Maybe with 5 rungs. With a ladder you generally roll maturing bonds into a replacement 5 year and in holding each rung to maturity there's low/no capital risk should interest rates rise (bond repaid at par), whilst maturing bond...
by Clive
Mon Jul 21, 2014 8:37 pm
 
Forum: Investing - Theory, News & General
Topic: Bond strategy resilient to rate increase
Replies: 13
Views: 1517

Re: Help with International Stock Volatility

One measure I like to monitor is what I call best and rest. For stocks (UK 1900 - 2010) that's simply the average of all yearly gains, nominal 10.9% with 20.8 standard deviation. For inflation 4.1% average with 6.7 standard deviation. For a portfolio however there's a bit more calculation involved. ...
by Clive
Mon Jul 21, 2014 8:10 pm
 
Forum: Investing - Theory, News & General
Topic: Help with International Stock Volatility
Replies: 4
Views: 465

Re: Help with International Stock Volatility

My guess is that most of the supposed extra volatility of holding international stocks is just an artifact of using nominal rather than real returns. If we were to calculate volatility using real returns, most of that volatility would go away. Does anyone know if this is true? Foreign stocks adds i...
by Clive
Mon Jul 21, 2014 7:12 pm
 
Forum: Investing - Theory, News & General
Topic: Help with International Stock Volatility
Replies: 4
Views: 465

Re: Favorite portfolio tracking software

Dedicated hardware - HB input device, parchment display.

Inexpensive, resilient to hardware crashes and power outages.
by Clive
Mon Jul 21, 2014 10:02 am
 
Forum: Investing - Theory, News & General
Topic: Favorite portfolio tracking software
Replies: 14
Views: 1807

Re: Japan's Lost Decades in One Chart

I just figured that over the long term that all the currency fluctuations would even themselves out. Broadly they do (some up/others down) - except if the domestic currency collapses in isolation. I don't do anything particularly clever with currencies, just normal rebalancing stuff. 2009 reduce US...
by Clive
Mon Jul 21, 2014 6:22 am
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2874

Re: Japan's Lost Decades in One Chart

Clive, you raised a great point about currencies. This has been talked about on other threads. Because of YEN appreciation and very low inflation if not a mild deflation, the Japanese investor did not fare as badly as what is perceived here. I am still a believer in international diversification. B...
by Clive
Sun Jul 20, 2014 1:10 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2874

Re: Japan's Lost Decades in One Chart

"it couldn't happen here," when we all know, or at least suspect, that with the right political/economic conditions, it could And the answer is to diversify to reduce risk/impact - up to a point. TIPS, bonds, stocks ... etc have all had periods when they failed to reward sufficiently/as-e...
by Clive
Sun Jul 20, 2014 6:20 am
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2874

Re: Japan's Lost Decades in One Chart

So if folks have enough, i.e. won the game why are they invested in stocks at all? Why not all in TIPS for example. Concentration risk. What if inflation spikes to 16% yearly, TIPS yield 16%, but are taxed at a 25% rate = -4% real, less perhaps 3% withdrawals for living expenses = -7% yearly. If th...
by Clive
Sat Jul 19, 2014 8:24 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2874

Re: Japan's Lost Decades in One Chart

Japan is an excellent example of why an investor should diversify internationally. One should note that while Japan was experiencing bust in the 1990's, the US Stock Market was booming. To paint a more artful than scientific picture - whilst US stock total gains doubled in nominal terms 1990 - 1995...
by Clive
Sat Jul 19, 2014 7:53 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2874

Re: Japan's Lost Decades in One Chart

In the 1980's Japan's economy was rising strongly, heading towards and reaching becoming the world dominant economy. http://static5.businessinsider.com/image/51156986ecad04e86900002f-618-/moneygame-cotd-020813.jpg Many indexes are market cap weighted - weighting larger companies more heavily than sm...
by Clive
Sat Jul 19, 2014 5:42 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2874

Re: If you are currently leveraged...when to deleverage?

Realign to whatever is now suggested by the model that incited you to be 150% leveraged (mine is currently indicating 0.76 and hasn't been anywhere near 1.5 since the 2009 lows - when it indicated 1.7 (model based on ValueLine's Price Appreciation Potential)). 1.0 leveraged is just a figure, sometim...
by Clive
Fri Jul 18, 2014 4:51 am
 
Forum: Investing - Theory, News & General
Topic: If you are currently leveraged...when to deleverage?
Replies: 2
Views: 682

Re: Withdrawal Rate and Net Worth

If I was comfortable spending the proverbial inflation-adjusted 4% of starting portfolio value (given my age and risk-tolerance) I would certainly not be comfortable spending 8% of a portfolio just because I had a house worth the same amount. Its mostly a mental accounting thing, but it can also gi...
by Clive
Thu Jul 17, 2014 8:56 pm
 
Forum: Investing - Theory, News & General
Topic: Withdrawal Rate and Net Worth
Replies: 16
Views: 1805

Re: Imputed income (rent) Owner occupied houses.

P.S. I am so old that the standard was rent your house for 1% a month. A $40,000 house would rent for 400 a month or 12% per year. I don't know when this 5% stuff came in, but I have seen it before. It's closer to the 1/2% a month rule, 6%. I think that is a 90s thing. 12%/year sounds more like a 8...
by Clive
Sat Jul 12, 2014 5:27 am
 
Forum: Investing - Theory, News & General
Topic: Imputed income (rent) Owner occupied houses.
Replies: 21
Views: 2369

Re: International exposure: does it really help?

Egypt. Rome. Great Britain. Japan. USA. China. Can you discern a historical pattern? I quite like this chart that I posted in another thread recently. The US time at the helm was handed over to Japan during the 1970's/80's (having peaked at around 75% during the late 1960's) before being handed bac...
by Clive
Sat Jul 12, 2014 3:52 am
 
Forum: Investing - Theory, News & General
Topic: International exposure: does it really help?
Replies: 75
Views: 7568

Re: Imputed income (rent) Owner occupied houses.

I am simply fascinated that Bogleheads who analyze investment portfolios to multiple decimal places do not analyze their imputed income and its related housing expenses. Most studies use an average of 5 percent of the capital value of a home as the imputed income. 7.5% average yearly gross rent, le...
by Clive
Sat Jul 12, 2014 3:40 am
 
Forum: Investing - Theory, News & General
Topic: Imputed income (rent) Owner occupied houses.
Replies: 21
Views: 2369

Re: Tax Efficiency of Treasuries

Taxable - 100*[(1+0.67*0.035)^20 - 1] = 58.98% Tax-Deferred - 100*[(1+0.035)^20 - 1]*0.61 = 60.38% So you earn a mere 1.4% (cumulative) more over the 20 years (an average of 0.07%/year) in the tax-deferred account. This is a difference I can comfortably ignore. Comments welcome. UK 1900 to 2010 20 ...
by Clive
Fri Jul 11, 2014 10:59 am
 
Forum: Investing - Theory, News & General
Topic: Tax Efficiency of Treasuries
Replies: 19
Views: 1613

Re: Risk Adjusted Return?

Indeed. But with a collapse of the British Empire, two costly world wars, nigh on hyperinflation in the mid 1970's and a global inflation following that in the early 1980's .... etc. one would hope that the longer term (30 year) risk premium for taking on shorter term (yearly) stock volatility would...
by Clive
Fri Jul 11, 2014 6:35 am
 
Forum: Investing - Theory, News & General
Topic: Risk Adjusted Return?
Replies: 61
Views: 4615
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