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Re: Should I use margin to buy a balanced fund?

I'm not convinced that leveraged ETFs have a place in a buy-and-hold portfolio. The need to frequently rebalance makes them problematic in my opinion. Though, maybe it's more personal disappointment with how leveraged ETFs work. Rob, half in 2x S&P500 (SSO), half in a VFISX/TLT (shorter dated/l...
by Clive
Fri Oct 24, 2014 6:57 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Three Possible Outcomes for Future Investment Returns

Equities should deliver 3-4% real. On average. For some - 20 years of 0%, for others - 20 years of 8%. The more recent decades have tended to be on the better side of that average. 1980 - 1999 TSM +12.5% real, combine that with 2000 - 2019 TSM -4.5% real and in combination 1980 - 2019 = +4% real av...
by Clive
Thu Oct 23, 2014 4:48 am
 
Forum: Investing - Theory, News & General
Topic: Three Possible Outcomes for Future Investment Returns
Replies: 32
Views: 2245

Re: Why include International Index in AA?

Isn't the US something like 50% of the total world market? And aren't 50% of the S&P500 total earnings derived from foreign revenues/earnings? So the S&P500 is already aligned with total world weightings - at least for the largest weighted component (US). A total world index/fund such as VT ...
by Clive
Tue Oct 21, 2014 8:43 pm
 
Forum: Investing - Theory, News & General
Topic: Why include International Index in AA?
Replies: 39
Views: 2571

Re: Risk in a high dividend stock portfolio

If we assume that the only difference between company A and company B is that A chooses to pay out higher dividends, then the two company's stocks are equally good. There should be no financial difference between spending the $1,000 of dividends from company A, and selling $1,000 of company B's sto...
by Clive
Tue Oct 21, 2014 1:29 pm
 
Forum: Investing - Theory, News & General
Topic: Risk in a high dividend stock portfolio
Replies: 19
Views: 1969

Re: Just curious: What if markets were open 24/7

They already practically are. 5pm Sydney 2pm Hong Kong 7am London 2am New York Through single brokers such as TD Direct (UK name for a.k.a. TD Waterhouse, TD Ameritrade) you can buy/sell stocks in each/any of those markets. Toyota for example is 7203 in the Toyko stock exchange, TYT in London and NY...
by Clive
Mon Oct 20, 2014 2:46 am
 
Forum: Investing - Theory, News & General
Topic: Just curious: What if markets were open 24/7
Replies: 8
Views: 1024

Re: Stocks as long term investments

because you are simply putting more money in J&J than its market cap would indicate. Off topic from the OP, but a genuine question - if I've $20,000 to add to stocks and I fancy tilting to tech sector stocks, why should I drop three times as much into MSFT than as much invested into Cisco simpl...
by Clive
Sat Oct 18, 2014 2:41 pm
 
Forum: Investing - Theory, News & General
Topic: Stocks as long term investments
Replies: 54
Views: 3831

Re: AA: 50/50 Domestic and International Stock IPS

Except its been more than a couple months. INTL has underperformed for a while now, about 5 years. Especially 2013 and 2014, INTL has been getting killed by the SP 500. The UK FT100 (largest 100) stocks is pretty international, something like just 27% of earnings from domestic and the rest from for...
by Clive
Sat Oct 18, 2014 9:57 am
 
Forum: Investing - Theory, News & General
Topic: AA: 50/50 Domestic and International Stock IPS
Replies: 18
Views: 1552

Re: Poll: which portion of the chart shows higher volatility

The classic example of broadened diversification, of course, is the addition of foreign stocks to U.S. equity portfolios .... Now, the way to make comedy out of all of this would be to calculate the standard deviation for overlapping, rolling 30-year periods. That is to say, plot the returns and st...
by Clive
Fri Oct 17, 2014 2:36 pm
 
Forum: Investing - Theory, News & General
Topic: Poll: which portion of the chart shows higher volatility?
Replies: 26
Views: 1450

Re: "The best response to market volatility"

"Global investors have endured an epic financial crisis, a global recession, several bouts of uncertainty in Europe, a tsunami and nuclear crisis in Japan, unrest in the Middle East and Russia, and persistent talk of Fed tapering. Through it all, an investor who remained balanced, diversified,...
by Clive
Thu Oct 16, 2014 7:21 pm
 
Forum: Investing - Theory, News & General
Topic: "The best response to market volatility"
Replies: 27
Views: 3342

Re: Should I use margin to buy a balanced fund?

I wonder whether a leverage ratio less than 200% would give similar results to those derived from a 200% leverage ratio. Or how a 0.8 leverage ratio (80/20 stock/bond) compares to a 1.0 leverage ratio (100% stock), http://www.mcculloch.org.nz/Documents/04_03_06.pdf The link above relates to Clive's...
by Clive
Thu Oct 16, 2014 2:05 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Poll: which portion of the chart shows higher volatility

Guessed that the green/right had the higher volatility simply due to having a wider highest to lowest span.
by Clive
Thu Oct 16, 2014 11:41 am
 
Forum: Investing - Theory, News & General
Topic: Poll: which portion of the chart shows higher volatility?
Replies: 26
Views: 1450

Re: Dealing with Volatility

Nobody complains about volatility when things are going up. Nobody complains when they can buy any other product cheaper either. For some odd reason when it comes to stocks shoppers like to buy when prices are high and not buy (or even sell) when prices are low. If you fear lower prices you're eith...
by Clive
Thu Oct 16, 2014 11:10 am
 
Forum: Investing - Theory, News & General
Topic: Dealing with Volatility
Replies: 14
Views: 1123

Re: Should I use margin to buy a balanced fund?

I wonder whether a leverage ratio less than 200% would give similar results to those derived from a 200% leverage ratio.

Or how a 0.8 leverage ratio (80/20 stock/bond) compares to a 1.0 leverage ratio (100% stock),
by Clive
Thu Oct 16, 2014 10:56 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Security Alert

For firefox install https://addons.mozilla.org/en-US/firefox/addon/ssl-version-control/ That will disable SSL3 until Firefox 34 (or 35) are released (late November) that address the problem/risk. If you need to access a site using SSL3 then after the above is installed, TOOLS, ADD-ONS, EXTENSIONS, c...
by Clive
Wed Oct 15, 2014 12:26 pm
 
Forum: Personal Consumer Issues
Topic: Security Alert [SSL "Poodle" attack]
Replies: 9
Views: 1099

Re: Why Are Expected Investment Returns So Low?

http://i.imgur.com/lbXCnvn.png In the UK during the 1970's/1980's inflation and interest rates were high (into double digits). Taxation was also relatively high, around 33% compared to more recent 20% for basic rate taxpayers (average). There weren't the likes of ISA's around - that enable you to i...
by Clive
Wed Oct 15, 2014 4:46 am
 
Forum: Investing - Theory, News & General
Topic: Why Are Expected Investment Returns So Low?
Replies: 13
Views: 1667

Re: AA: 50/50 Domestic and International Stock IPS

I have a harder time selling s&p 500 index than I do buying any of the international funds. I feel like international is one big super sale just waiting to revert to the mean sometime between now and retirement ;-) How far off the mean is international? I wouldn't even know how to determine thi...
by Clive
Wed Oct 15, 2014 3:40 am
 
Forum: Investing - Theory, News & General
Topic: AA: 50/50 Domestic and International Stock IPS
Replies: 18
Views: 1552

Re: Why does the stock market beat inflation?

As for the 8% [real] Taxes and costs historically were much higher than they are in more recent times. 5% inflation (or whatever), 8% real = 13% total, less 33% 'costs/overheads' = 8.7% nominal = 3.7% real (simplistic). Investors used to buy via post and market makers spreads could be very wide. Fu...
by Clive
Tue Oct 14, 2014 6:50 pm
 
Forum: Investing - Theory, News & General
Topic: Why does the stock market beat inflation?
Replies: 62
Views: 3083

Re: What hedges inflation (other than TIPs)

Outside of owning TIPs, are there any other reasonable investments that hedge inflation over a couple plus decades? For example, is real estate a good hedge to inflation with a 20+ year time horizon? As a 30 year 'synthetic TIP' a third in stocks, two thirds in whatever has a high probability of be...
by Clive
Tue Oct 14, 2014 4:50 pm
 
Forum: Investing - Theory, News & General
Topic: What hedges inflation (other than TIPs)
Replies: 11
Views: 755

Re: is anything 'cheap' out there?

The UK looks cheaper than the rest The UK FTSE100 (largest 100 stocks) is comprised 22% financials, 20% invested in just 3 stocks (HSBC (Bank), BP, Shell). The FT100 has also lagged the FT250 (next 250 largest) since 2000, primarily due to being overweight sectors that have suffered (dot com (2000)...
by Clive
Tue Oct 14, 2014 2:58 pm
 
Forum: Investing - Theory, News & General
Topic: is anything 'cheap' out there?
Replies: 54
Views: 5500

Re: Why does the stock market beat inflation?

Think of the simplest of businesses - buy a plot of land, grow and sell stuff.

The land price might generally rise over time with inflation, any profits made from growing/selling stuff on top of that are dividends.
by Clive
Tue Oct 14, 2014 2:37 pm
 
Forum: Investing - Theory, News & General
Topic: Why does the stock market beat inflation?
Replies: 62
Views: 3083

Re: Gold: Is now the time?

Obviously this would be a long term type of play Good to see you recognise that gold is a long term play. http://images.investorshub.advfn.com/images/uploads/2014/9/11/vhmuegold_gbp_1265.png Currently gold at £766 looks to be middle-high of its longer term sideways trading range.
by Clive
Mon Oct 13, 2014 11:02 am
 
Forum: Investing - Theory, News & General
Topic: Gold: Is now the time?
Replies: 36
Views: 2300

Re: Calculating dividend yield

Another choice is dividend value received during the year divided by the value of shares at the start of the year. Stock value $100 January 1st. Receive $4 of dividends during the subsequent year, stock value rises to £$120 by year end, then the return is a 4/100 = 4% dividend yield on year start va...
by Clive
Sun Oct 12, 2014 7:00 am
 
Forum: Investing - Theory, News & General
Topic: Calculating dividend yield
Replies: 9
Views: 837

Re: Japan, 1989

IMO Valuations are important If prices double and double again in the space of a decade !!! : US 'Roaring 20's' http://www.jfholdings.pwp.blueyonder.co.uk/dow_29.gif Japan 1980's https://chart.finance.yahoo.com/z?s=%5eN225&t=my&q=l&l=off&z=m&a=v&p=s&lang=en-GB&region...
by Clive
Sun Oct 12, 2014 6:48 am
 
Forum: Investing - Theory, News & General
Topic: Japan, 1989
Replies: 118
Views: 25915

Re: Japan, 1989

Does anyone think that holding 30% international will save their biscuits, if this were to happen in the US? Look at a period when a 'contraction' has happened in the past. 1970 to 1980 and through to 1990 Japan's economy expanded resulting in the US share of the world market relatively contracting...
by Clive
Sun Oct 12, 2014 4:28 am
 
Forum: Investing - Theory, News & General
Topic: Japan, 1989
Replies: 118
Views: 25915

Re: Japan, 1989

Starting in 1989 is misleading because that is the peak of an almost unprecedented asset bubble Japan 1972 to 2013 inclusive, for a Japanese investor holding a third each (yearly rebalanced) J-Stocks, US TSM, J-5-year-treasury-ladder (not marked to market, but just the five year rolling average of ...
by Clive
Sat Oct 11, 2014 8:58 pm
 
Forum: Investing - Theory, News & General
Topic: Japan, 1989
Replies: 118
Views: 25915

Re: Japan, 1989

Pulling the data as below together to form a yearly rebalanced equal weighted blend of Japanese stocks, US Stocks, 5 year Japanese Treasury Ladder (not marked to market, but simply the rolling average of five 5-year-yields), and I'm seeing a similar chart pattern to bpp's 30/30/40 Japanese stocks, f...
by Clive
Sat Oct 11, 2014 4:42 am
 
Forum: Investing - Theory, News & General
Topic: Japan, 1989
Replies: 118
Views: 25915

Re: "Safe withdrawal rate" for 100% gold: 1.80%

Should emphasis that this web pages table http://patrickoshag.tumblr.com/post/93207823244/the-dangers-of-portfolio-patriotism for 30 year worst case real gains http://media.tumblr.com/22b96639bf9b698f2f524142073c1b29/tumblr_inline_n9h5n4bb4f1sj0pql.png highlights the variability in stock risk. World...
by Clive
Fri Oct 10, 2014 2:48 pm
 
Forum: Investing - Theory, News & General
Topic: "Safe withdrawal rate" for 100% gold: 1.80%
Replies: 2
Views: 590

Re: "Safe withdrawal rate" for 100% gold: 1.80%

Nice analysis nisiprius - thanks The no-failure rate is 2.18% for Treasury bills So 2.18% x 30 years = 65.4% in inflation bond 30 year ladder (for drawdown) - assuming 0% average real yield across the yield curve .... and 34.6% in stocks (accumulation/growth) - which according to Mike Pipers S&P...
by Clive
Fri Oct 10, 2014 2:35 pm
 
Forum: Investing - Theory, News & General
Topic: "Safe withdrawal rate" for 100% gold: 1.80%
Replies: 2
Views: 590

Re: The Three Fund Portfolio

Hi BogleInvestorLondon Consider that the UK FTSE 100 index earns just 27% of revenue from the UK. The rest is something like 30% from Emerging Markets, 20% from US, 20% from Europe, and odd single digit percentage amounts from Japan, Canada etc. Even the US S&P500 derives around 40% of its earni...
by Clive
Fri Oct 10, 2014 12:27 pm
 
Forum: Investing - Theory, News & General
Topic: The Three Fund Portfolio
Replies: 914
Views: 370303

Re: How much is your fixed income investment earning?

And what is your fixed investment? I'm earning about 1% per annum on deposits with the Irish government and Irish banks, could be doing better I guess. A 5 year ladder of Irish Bank deposits would be earning more, some examples of recent and past 5 year rates Jan 2011 Permanent TSB 5 year 3.7% Oct ...
by Clive
Wed Oct 08, 2014 11:58 am
 
Forum: Investing - Theory, News & General
Topic: How much is your fixed income investment earning?
Replies: 27
Views: 1780

Re: Should I use margin to buy a balanced fund?

but I could see someone using SSO if he wanted to avoid having to manage cash very closely (regularly transferring funds between accounts, occasionally needing to wire money to the brokerage after a crash) The aspect that concerns me about Futures/margin, is that of a glitch down spike and being st...
by Clive
Wed Oct 08, 2014 5:00 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Should I use margin to buy a balanced fund?

I think that there are two critical aspects that you are missing. 1) Daily returns leveraged does not equal annual returns leveraged. ... No, a fair comparison would be SSO/IEI 50/50 vs SPY/IEI 50/50 The LETF's clearly indicate that they do not leverage to twice the annual return, but typically twi...
by Clive
Tue Oct 07, 2014 2:15 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: What evidence would prove the Boglehead mentality wrong?

Back to the OP's question...one thought that comes to mind is what would be the effect on a Boglehead portfolio if the US Dollar was no longer the world's reserve currency? If the US$ was no longer the Primary reserve currency another would step up to the mark. 2000 US$ was weighted 70.5% reserve c...
by Clive
Tue Oct 07, 2014 1:19 pm
 
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 212
Views: 15519

Re: Warren Buffett: "Put my estate in index funds."

A good example is Warren Buffett's will which earmarks most of his wife's inheritance in the form of a Vanguard S&P 500 Stock Index Fund. the "right" answer often depends on who you are investing for. If it's for the next generation or the one after that then it's perfectly appropriat...
by Clive
Tue Oct 07, 2014 11:02 am
 
Forum: Investing - Theory, News & General
Topic: "Stock Exposure: Grow or Shrink Throughout Retirement?"
Replies: 35
Views: 2729

Re: Should I use margin to buy a balanced fund?

Try this line of thought Rob. A fictitious leveraged ETF takes the money you invest with them and borrows the same amount again and buys 2x exposure of the index that they track, readjusting daily. You invest 0.5 in that fund, 0.5 in a charitable bank that pays you the exact same interest on deposit...
by Clive
Tue Oct 07, 2014 5:35 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Should I use margin to buy a balanced fund?

What I'm saying is that your SSO/bond portfolio should be compared to SPY/bond and not just to SPY/ nothing . In the recent past, bonds performed better than stocks, so it stands to reason that a bond-heavy portfolio would perform better than a stock-only portfolio. A fairer comparison would be : S...
by Clive
Mon Oct 06, 2014 4:39 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Should I use margin to buy a balanced fund?

Please run as many backtests as you can. Pick your favorite portfolio with SSO, then replace it with SPY and compare the results. The portfolio with SPY is more efficient long-term (i.e., it has the higher Sharpe ratio). I expect that it will have similar if not better returns and significantly low...
by Clive
Mon Oct 06, 2014 2:30 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Should I use margin to buy a balanced fund?

On page 2 of this thread , Park provides a link to a helpful paper on this topic: http://www.etf.com/publications/journalofindexes/joi-articles/6414-understanding-returns-of-leveraged-and-inverse-funds.html From that paper: Rebalancing is an effective tool for investors whose goal is to approximate...
by Clive
Mon Oct 06, 2014 12:44 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Should I use margin to buy a balanced fund?

An additional benefit for me as a UK investor in US stock (S&P500) is that if I buy SPY then as the trailing 12 month dividend yield is around 1.9% the US will withhold 15% of that, leaving a net 1.62% dividend, a overhead/cost of 0.28%. If instead I invest half as much is SSO and hold UK bonds ...
by Clive
Mon Oct 06, 2014 12:36 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Should I use margin to buy a balanced fund?

Several pages back, we discussed leveraged ETFs briefly. The problem with leveraged ETFs is that volatility reduces their effectiveness. We gave the hypothetical example of the market increasing by 10% one day then dropping by 10% the next. The net result would be that a normal ETF would drop by 1%...
by Clive
Mon Oct 06, 2014 12:13 pm
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Should I use margin to buy a balanced fund?

Just remember that you need to rebalance once/year or so otherwise the tracking error can start to drift excessively. Agree with you that leveraged ETFs are a fine way to implement this strategy. However, seems to me that using rebalancing bands, rather than a calendar-based frequency, would make m...
by Clive
Mon Oct 06, 2014 11:37 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Should I use margin to buy a balanced fund?

Leveraged ETF's though can be less costly than margin borrowing. The ETF's are generally doing so called total return swaps with implied borrowing rates of LIBOR+ the profit margin of the derivative provider, nowhere near 1.5% (FF+1.5% is only slightly less than L+1.5% in today's market, even for t...
by Clive
Mon Oct 06, 2014 8:53 am
 
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 380
Views: 33032

Re: Bogleheads, help me be less afraid of international stoc

I always like to look at a chart like ... Nice tool, thanks for the pointer. I like this one (Portfolio 3) http://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&Gold3=8&mode=2&annualOperation=0&endYear=2013&initialAmount=10000&FiveYearTBills3=34&IntlStoc...
by Clive
Mon Oct 06, 2014 5:23 am
 
Forum: Investing - Theory, News & General
Topic: Bogleheads, help me be less afraid of international stocks
Replies: 53
Views: 3708

Re: Bogleheads, help me be less afraid of international stoc

I always like to look at a chart like ... Nice tool, thanks for the pointer. I like this one (Portfolio 3) http://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&Gold3=8&mode=2&annualOperation=0&endYear=2013&initialAmount=10000&FiveYearTBills3=34&IntlStoc...
by Clive
Sun Oct 05, 2014 6:31 pm
 
Forum: Investing - Theory, News & General
Topic: Bogleheads, help me be less afraid of international stocks
Replies: 53
Views: 3708

Re: Bogleheads, help me be less afraid of international stoc

I guess I also should remember that many of these EZ and Japanese firms get a lot if not the majority of their revenue from overseas sales, mitigating much of the domestic issues? UK FTSE 100 (largest 100) stock index gets 30% of its revenues from emerging markets, 19% from the US, 17% from Europe ...
by Clive
Sun Oct 05, 2014 6:10 pm
 
Forum: Investing - Theory, News & General
Topic: Bogleheads, help me be less afraid of international stocks
Replies: 53
Views: 3708

Re: What will you do during the next crash?

What will you do during the next crash sale? At the end of October 2008 you could pick up US Treasury 20 year bonds on offer at 3.3% real. http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldYear&year=2008 Why can't we have sales like that e...
by Clive
Sat Oct 04, 2014 6:39 am
 
Forum: Investing - Theory, News & General
Topic: What will you do during the next crash?
Replies: 63
Views: 4007

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: 1013

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: 3816

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: 3816

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: 3816
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