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Re: Questions about Fee-Only Financial Advisor

The only two legitimate options are to manage it yourself, following one of the models in William Bernstein's 4 Pillars or Intelligent Asset Allocator, or hire an independent, fee-only RIA (registered investment advisor) firm to assist you. They should have a strong belief in passive investment prin...
by EDN
Tue Apr 23, 2013 9:42 pm
 
Forum: Investing - Help with Personal Investments
Topic: Questions about Fee-Only Financial Advisor
Replies: 18
Views: 1806

Re: When to add 30 year bonds to one's portfolio?

^ There is a lot there, and not a lot I agree with. But you seem pretty invested in your views. I will just say (repeat) if long treasuries continue to counterbalance equities as they have since 2000, you will almost certainly earn large negative (not low, but negative) real returns into perpetuity....
by EDN
Tue Apr 23, 2013 5:07 pm
 
Forum: Investing - Theory, News & General
Topic: When to add 30 year bonds to one's portfolio?
Replies: 34
Views: 1620

Re: When to add 30 year bonds to one's portfolio?

Rmelvey, I'm not so sure things are as cut and dry as you assume. Just off the top of my head: #1 --The utility of extended duration bonds (i.e. longer than long-term) is a recent phenomenon. I'm not sure you would have come to the same conclusion looking at the previous few decades ending in 1999 -...
by EDN
Tue Apr 23, 2013 4:22 pm
 
Forum: Investing - Theory, News & General
Topic: When to add 30 year bonds to one's portfolio?
Replies: 34
Views: 1620

Re: Do small cap value tilters need REITs?

Bradley, Sectors are certainly not core holdings. Nice try. If you hold a TSM based portfolio, sure, REITs or almost anything else provide great diversification. Hold small and value, not so much, as my example above shows. Performance of sectors are full of noise, and some will outperform SV even o...
by EDN
Mon Apr 22, 2013 11:49 pm
 
Forum: Investing - Help with Personal Investments
Topic: Do small cap value tilters need REITs?
Replies: 45
Views: 5154

Re: Do small cap value tilters need REITs?

Sorry if some took my comments about REITs being in SV to represent that's why they aren't necessary. That was just a passing comment. No, small value is a 1,000 to 1,500 stock asset class diversified across all the sectors in the market that is well defined by the FF multifactor research. REITs, on...
by EDN
Mon Apr 22, 2013 9:09 pm
 
Forum: Investing - Help with Personal Investments
Topic: Do small cap value tilters need REITs?
Replies: 45
Views: 5154

Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

The slice and dicers and the tilters are all trying to win the race, which of course means that they can crash and burn along the way. When it comes to investing, I'm happy with coming in second or third, because I'm more likely to avoid a crash along the way, plus it's just easier on the soul. Sor...
by EDN
Mon Apr 22, 2013 5:31 pm
 
Forum: Investing - Help with Personal Investments
Topic: A Question for Folks Who Have Abandoned Slice&Dice/Tilting
Replies: 36
Views: 3783

Re: Do small cap value tilters need REITs?

I'm at 70% stocks, 60% of that domestic, and 40% of my domestic equity is in Vanguard small cap value index (60% TSM). Of my total portfolio, TSM is 25% and SCV is 17%. From this link, which I'm not sure is still accurate (it's not too recent), it appears that REITs make up about 2% of TSM and abou...
by EDN
Mon Apr 22, 2013 4:36 pm
 
Forum: Investing - Help with Personal Investments
Topic: Do small cap value tilters need REITs?
Replies: 45
Views: 5154

Re: Ferri's 60-20-20 Bond Portfolio

In a recent discussion about the oddities of the Barclays Aggregate Bond Index used by the Total Bond funds, Rick Ferri mentioned a possible way to get around its 70% (approx) in government bonds. I believe his suggestion was the following: -- 60% in the Total Bond Market Index Fund -- 20% in the V...
by EDN
Mon Apr 22, 2013 2:48 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: A Question for Folks Who Have Abandoned Slice&Dice/Tilti

A brief comment on what I've read here. First, a quick intro: today, we are relatively certain there are at least 5 factors that drive the expected returns of a diversified portfolio: stock/bond, small/large stock, value/growth stock, long/short maturity and credit/government exposure. That is the F...
by EDN
Mon Apr 22, 2013 2:29 pm
 
Forum: Investing - Help with Personal Investments
Topic: A Question for Folks Who Have Abandoned Slice&Dice/Tilting
Replies: 36
Views: 3783

Re: Ferri's 60-20-20 Bond Portfolio

To clarify, DFA 5YR Global Fund (one of the two "high quality bond" comparisons I made, the other Vanguard TBM) underperformed Vanguard HY by 3.8% over the last 10 years Eric Eric, Below is the M* reference which will provide you with the correct data. Vanguard’s HY ( VWEAX ) has actually...
by EDN
Mon Apr 22, 2013 2:11 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Vanguard High Yield

So you'll see, it seems as though you trumpet "diversification" when it works for you, but are quick to scale it back or remove it completely in other circumstances. I'm sure others are in the same :confused camp as I am. I doubt many people are confused at Rick's opinions, at least nowhe...
by EDN
Mon Apr 22, 2013 1:21 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard High Yield
Replies: 139
Views: 9065

Re: Ferri's 60-20-20 Bond Portfolio

Eric, I don't insult you. I disagree with you. A large majority of your posts site DFA research. That's fine, except that it's well known that an adviser is needed to buy DFA funds, and you make it very clear in your posts that you're one of the advisers. Anyone who disagrees with had better standb...
by EDN
Mon Apr 22, 2013 1:17 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Vanguard High Yield

Why would you opt for less diversification when you can have move with high yield bonds? You remember the 1970s. Treasuries don't always go up in value with stocks go down. Because the benefits are minor in terms of adding some unique risk and the negatives far outweigh that small benefit. Larry Ye...
by EDN
Mon Apr 22, 2013 12:58 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard High Yield
Replies: 139
Views: 9065

Re: Ferri's 60-20-20 Bond Portfolio

............ HY suffered devastating losses at just the wrong time in 2008. A total blood bath like nothing we'd ever seen from "bonds". Eric “devastating losses” ??? Eric, you crack me up. I have already provided the data that shows VWEAX (Vanguard’s Hy Yield )outperformed DFGBX ( Dimens...
by EDN
Mon Apr 22, 2013 12:38 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Ferri's 60-20-20 Bond Portfolio

Advisors have 28% of their DFA assets in bonds, institutions have 16%. Thanks for proving my point. Rick Ferri [Response to personal attack removed by admin LadyGeek] Rick, I don't think I insulted you in any way. If I did, please provide the example and I am happy to apologize. That is never my in...
by EDN
Mon Apr 22, 2013 12:21 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Ferri's 60-20-20 Bond Portfolio

The amount that advisors vs institutions have in DFA bond funds as a percentage of their total DFA assets isn't that different. And by the looks of Harvard and Yale, I'm guessing they and their trustees wish it was more! Eric DFA used to make it easy to find this information. They used to breakout ...
by EDN
Sun Apr 21, 2013 10:27 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Ferri's 60-20-20 Bond Portfolio

In 2008, the spread in losses between HY and the two high quality bonds was more than -25%! Eric In 2009, the spread in gain between HY (VWEAX ) and DFA 5 yr Global DFGBX was in excess of 35%! Bradley I'd hope so, HY suffered devastating losses at just the wrong time in 2008. A total blood bath lik...
by EDN
Sun Apr 21, 2013 9:56 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Ferri's 60-20-20 Bond Portfolio

I learned a long time ago that when an equity firm decides to manage fixed income products that it's usually wise to avoid those products. This is why large institutional investors hire DFA for their equity management and not fixed income. Ironically, it's advisers who flock to DFA for fixed income...
by EDN
Sun Apr 21, 2013 9:52 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Ferri's 60-20-20 Bond Portfolio

Another really unique/interesting strategy they've been managing is their "World exUS Government Bond Fund". It too is intermediate term, and offers excellent diversification to their US Government Bond fund (#1 ranked Int'd Government fund for the last 15 years, has actually outperformed ...
by EDN
Sun Apr 21, 2013 9:27 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Ferri's 60-20-20 Bond Portfolio

DFA also has a few intermediate funds, ...........................DFA Investment Grade is similar to Total Bond Index Eric DFA Investment Grade....................DFAPX inception date 3/02/2013. M* has no “Rating & Risk” data because it’s so new. It's over 2 years old. Simulations show a variab...
by EDN
Sun Apr 21, 2013 9:13 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Ferri's 60-20-20 Bond Portfolio

Per the comment above, that shows how $10k in a combo of riskier Vanguard bond funds (noteably Vanguard HY) grew compared to much safer fixed income, it offers another chance to compare "risk in bonds" vs "risk in stocks". If ever there was a decade where the former had a chance ...
by EDN
Sun Apr 21, 2013 9:02 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Ferri's 60-20-20 Bond Portfolio

I learned a long time ago that when an equity firm decides to manage fixed income products that it's usually wise to avoid those products. This is why large institutional investors hire DFA for their equity management and not fixed income. Ironically, it's advisers who flock to DFA for fixed income...
by EDN
Sun Apr 21, 2013 7:46 pm
 
Forum: Investing - Theory, News & General
Topic: Ferri's 60-20-20 Bond Portfolio
Replies: 43
Views: 4966

Re: Jack Bogle: We need to fix the bond index

There is nothing wrong with TBM, you just have to understand that its pricing formula and credit/maturity restrictions can lead to very concentrated exposure when one major issuer of debt is crowding out all others. This is no different than issues with TSM, it too is marketed as "total",...
by EDN
Fri Apr 19, 2013 3:50 pm
 
Forum: Investing - Theory, News & General
Topic: Jack Bogle: We need to fix the bond index
Replies: 48
Views: 6890

Re: Is Low-Vol Anomaly really explained by Value factor?

Eric: Just to make sure I understand you correctly, do you think that low volatility/minimum variance portfolio are more, equally, or less risky than that market overall? Different risky. If you can afford to take value and term risk, but not as much volatility, it's safer. If you are OK with volat...
by EDN
Fri Apr 19, 2013 3:40 pm
 
Forum: Investing - Theory, News & General
Topic: Is Low-Vol Anomaly really explained by Value factor?
Replies: 51
Views: 2077

Re: Jack Bogle: We need to fix the bond index

There is nothing wrong with TBM, you just have to understand that its pricing formula and credit/maturity restrictions can lead to very concentrated exposure when one major issuer of debt is crowding out all others. This is no different than issues with TSM, it too is marketed as "total", ...
by EDN
Fri Apr 19, 2013 3:18 pm
 
Forum: Investing - Theory, News & General
Topic: Jack Bogle: We need to fix the bond index
Replies: 48
Views: 6890

Re: holy cow - what's our definition of SV?

I noticed that in this thread: http://www.bogleheads.org/forum/viewtopic.php?f=10&t=114985&view=viewpoll there doesn't seem to be a consistent definition of "SV". For some folks, it means small and value, and for others, it means small or value. Does the specific lettering/punctua...
by EDN
Fri Apr 19, 2013 3:02 pm
 
Forum: Investing - Theory, News & General
Topic: holy cow - what's our definition of SV?
Replies: 21
Views: 3730

Re: MOMENTUM based investing in real world

FWIW, I view the approach that unbundles (for the most part) low-priced value from high-priced profitability as a better one for investors than one that tries to do everything (profitability, value, and momentum) all inside a core fund. There maybe some trading efficiencies there (relative to a pure...
by EDN
Fri Apr 19, 2013 1:49 pm
 
Forum: Investing - Theory, News & General
Topic: Momentum based investing in real world
Replies: 24
Views: 1837

Re: MOMENTUM based investing in real world

So this could be used as a tilt, just like one might tilt to value? To what would you attribute the disparity in tracking error between the small and large caps? If you hold a value fund, or even large and small value, a momentum fund is not what I would use to counterbalance it. Let's set aside th...
by EDN
Fri Apr 19, 2013 1:37 pm
 
Forum: Investing - Theory, News & General
Topic: Momentum based investing in real world
Replies: 24
Views: 1837

Re: Is Low-Vol Anomaly really explained by Value factor?

Eric--actually if you read Falkenstein's stuff he bashes the CAPM more than anyone I've seen. In terms of the history of the theory, CAPM was developed because of the hypothesis that higher risk=higher expected returns. The low vol. proponents and the value titling proponents both agree that CAPM h...
by EDN
Fri Apr 19, 2013 11:29 am
 
Forum: Investing - Theory, News & General
Topic: Is Low-Vol Anomaly really explained by Value factor?
Replies: 51
Views: 2077

Re: Is Low-Vol Anomaly really explained by Value factor?

But low vol seems to be well explained by other issues To get to the practical level, why should I care how much one return stream covaries with another one? If I can get the market return and take less risk than the market overall, who cares whether some academic or fund company selling a differen...
by EDN
Fri Apr 19, 2013 11:16 am
 
Forum: Investing - Theory, News & General
Topic: Is Low-Vol Anomaly really explained by Value factor?
Replies: 51
Views: 2077

Re: iShares Enters Factor Investing Market in a Big Way

I'd love to have access to a DFA-like fund without having to hire an advisor. I agree to that thought. RM I know what you are saying, but to defend DFA, we were just treated to this comment above: Some years ago, I invested in a Vanguard value fund and it performed quite poorly. I decided to just s...
by EDN
Thu Apr 18, 2013 5:18 pm
 
Forum: Investing - Theory, News & General
Topic: iShares Enters Factor Investing Market in a Big Way
Replies: 41
Views: 2882

Re: Is Low-Vol Anomaly really explained by Value factor?

Why would it be dangerous to not know where your returns are coming from? Well, during a period where the strategy isn't working (because the return on beta is significant, or the value premium is negative), you might be fooled into thinking this anomaly no longer works. But if you understand the un...
by EDN
Thu Apr 18, 2013 4:07 pm
 
Forum: Investing - Theory, News & General
Topic: Is Low-Vol Anomaly really explained by Value factor?
Replies: 51
Views: 2077

Re: iShares Enters Factor Investing Market in a Big Way

Eric If you're going to make the argument that index funds and ETFs that track indexes are inferior to whatever you're selling, then you're going to have to quantify in real dollars. Provide some relevant analysis. Sure, the iShare S&P 600 value ETF (IJS) has only 446 holdings while other funds...
by EDN
Thu Apr 18, 2013 3:24 pm
 
Forum: Investing - Theory, News & General
Topic: iShares Enters Factor Investing Market in a Big Way
Replies: 41
Views: 2882

Re: Is Low-Vol Anomaly really explained by Value factor?

Eric, this is not a DFA bashing, so you can relax. Will you please back up your claims with evidence? Did you look at the chart in the post showing the inconsistency of the value factor? What exactly is the term loading on a low-vol portfolio such as SPLV? Another poster has shown that a 5 factor r...
by EDN
Thu Apr 18, 2013 3:06 pm
 
Forum: Investing - Theory, News & General
Topic: Is Low-Vol Anomaly really explained by Value factor?
Replies: 51
Views: 2077

Re: iShares Enters Factor Investing Market in a Big Way

Just one thought here It's much better to have a core fund strategy that incorporates multifactors than to have separate funds for each factor Larry The other thing is, and I speak from real world application and not theoretical academic performance perspectives -- there are significant behavioral ...
by EDN
Thu Apr 18, 2013 2:41 pm
 
Forum: Investing - Theory, News & General
Topic: iShares Enters Factor Investing Market in a Big Way
Replies: 41
Views: 2882

Re: buying bonds, why sometimes buying smaller can be better

In taxable space, if using munis, it is much easier to vary average maturity using a combo of short-term and intermediate-term funds than individual bonds. DFA ideally manages two that cap credit exposure at AA or above and have a modified variable maturity process inside the funds (using cash-flow...
by EDN
Thu Apr 18, 2013 2:24 pm
 
Forum: Investing - Theory, News & General
Topic: buying bonds, why sometimes buying smaller can be better
Replies: 30
Views: 3066

Re: Is Low-Vol Anomaly really explained by Value factor?

Yes, value and TERM. These guys hate it when they are trying to sell a new strategy and find out combos of old strategies work better. Happens all the time. They just hope there are enough uninformed to pay the bills.

Eric
by EDN
Thu Apr 18, 2013 2:20 pm
 
Forum: Investing - Theory, News & General
Topic: Is Low-Vol Anomaly really explained by Value factor?
Replies: 51
Views: 2077

Re: buying bonds, why sometimes buying smaller can be better

Conceivably, an advisor building individual bond ladders has access to all passive/structured funds. And if so, I doubt the benefits of buying any size of individual holdings. Most bond investors will want to place them in tax-deferred accounts, which means you can use high quality globally diversif...
by EDN
Thu Apr 18, 2013 2:07 pm
 
Forum: Investing - Theory, News & General
Topic: buying bonds, why sometimes buying smaller can be better
Replies: 30
Views: 3066

Re: iShares Enters Factor Investing Market in a Big Way

I'm not sure it is in ETF form. Either you reconstitute just once per year and your exposure to the factors is completely watered down, or you do so on a monthly or quarterly basis and the blind reconstitution trading kills you in costs. ETFs have come a long way in the past few years. Holdings are...
by EDN
Thu Apr 18, 2013 1:58 pm
 
Forum: Investing - Theory, News & General
Topic: iShares Enters Factor Investing Market in a Big Way
Replies: 41
Views: 2882

Re: iShares Enters Factor Investing Market in a Big Way

Simple question: Will all the new products competing to exploit the FF size and value premiums overgraze the available S&V premiums and reduce returns to the just the equity premium? It seems to me that most equity investments now are done by institutions and professionals, all of whom are fami...
by EDN
Thu Apr 18, 2013 1:46 pm
 
Forum: Investing - Theory, News & General
Topic: iShares Enters Factor Investing Market in a Big Way
Replies: 41
Views: 2882

Re: "value factor" doesn't seem reliable to me

No source of higher EXPECTED return is reliable (read: guaranteed), not stocks over bonds, or long bonds over short ones. That is not specific to this conversation. Eric People often fail to see the forest for the trees. It can be useful to point out the forest. I continue to find the term "ex...
by EDN
Thu Apr 18, 2013 12:55 pm
 
Forum: Investing - Theory, News & General
Topic: "value factor" doesn't seem reliable to me
Replies: 66
Views: 3870

Re: how heavily do you tilt?

Eric I'm sure you can play with these numbers and come up with a hypothetical strategy of some mix using large-value, small-value, S&P 500 and whatever that shows it beat the market during the 1981-2000 period. The question in this conversation was the benefit of adding small-cap value to a tot...
by EDN
Thu Apr 18, 2013 12:32 pm
 
Forum: Investing - Theory, News & General
Topic: how heavily do you tilt?
Replies: 23
Views: 1569

Re: iShares Enters Factor Investing Market in a Big Way

Just one thought here It's much better to have a core fund strategy that incorporates multifactors than to have separate funds for each factor Larry Larry, I'm not sure it is in ETF form . Either you reconstitute just once per year and your exposure to the factors is completely watered down, or you...
by EDN
Thu Apr 18, 2013 12:28 pm
 
Forum: Investing - Theory, News & General
Topic: iShares Enters Factor Investing Market in a Big Way
Replies: 41
Views: 2882

Re: iShares Enters Factor Investing Market in a Big Way

I agree, more choices are a good thing. I have a belief though that as more products become available to capture certain factors/styles of the market that their previous premiums will diminish. In general, more choices are a good thing. But the evidence shows that investors are particularly suscept...
by EDN
Thu Apr 18, 2013 12:27 pm
 
Forum: Investing - Theory, News & General
Topic: iShares Enters Factor Investing Market in a Big Way
Replies: 41
Views: 2882

Re: how heavily do you tilt?

http://i902.photobucket.com/albums/ac225/Justin_Melquist/ee368906-8d51-45f7-a36c-864adef7d582_zps4ef3f113.jpg From Rick Ferri Great graph by Mr. Ferri, but not useful. Unless one is investing at the start of one decade and cashing out at the end does it matter?? Unlike most on here I think rolling ...
by EDN
Thu Apr 18, 2013 12:20 pm
 
Forum: Investing - Theory, News & General
Topic: how heavily do you tilt?
Replies: 23
Views: 1569

Re: iShares Enters Factor Investing Market in Big Way

More products from the Wall Street marketeers. Some basis in legitimate asset pricing research, some attempt to exploint recent patterns and profit from the fees for doing so. Some of these will survive, others won't. I'd be very hesitant to use ETFs outside of conventional market cap weighted strat...
by EDN
Thu Apr 18, 2013 11:13 am
 
Forum: Investing - Theory, News & General
Topic: iShares Enters Factor Investing Market in a Big Way
Replies: 41
Views: 2882

Re: "value factor" doesn't seem reliable to me

The underlying issue is the value premium is not reliable. Value is a risk factor and sometimes gets a higher return due to higher risk. If we could clearly identify value stocks and have a high degree of confidence in their performance, then they wouldn't be riskier and therefore there would be no...
by EDN
Thu Apr 18, 2013 11:03 am
 
Forum: Investing - Theory, News & General
Topic: "value factor" doesn't seem reliable to me
Replies: 66
Views: 3870

Re: "value factor" doesn't seem reliable to me

I find it a bit ironic today when I read folks believe or buy into the size effect, but question the value premium. 5 or 10 years ago, it was the opposite. What changed? Simple: small premium has been high lately, value premium has been more muted. So it's a plain and simple recency effect with rati...
by EDN
Thu Apr 18, 2013 10:25 am
 
Forum: Investing - Theory, News & General
Topic: "value factor" doesn't seem reliable to me
Replies: 66
Views: 3870

Re: "value factor" doesn't seem reliable to me

"Value", or more appropriately the high book to market effect identified by FF is just a way to isolate high from low priced (relative to fundamentals) stocks I understand that, but I have a problem with the underlying assumption that we know the fundamentals. And if we don't know the fun...
by EDN
Thu Apr 18, 2013 10:19 am
 
Forum: Investing - Theory, News & General
Topic: "value factor" doesn't seem reliable to me
Replies: 66
Views: 3870

Re: "value factor" doesn't seem reliable to me

I just skimmed, something like this comes up weekly. "Value", or more appropriately the high book to market effect identified by FF is just a way to isolate high from low priced (relative to fundamentals) stocks--a distinct expected return from the overall market effect. A ton of empiracle...
by EDN
Thu Apr 18, 2013 9:08 am
 
Forum: Investing - Theory, News & General
Topic: "value factor" doesn't seem reliable to me
Replies: 66
Views: 3870
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