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Consider that anyone who is currently "in" the market could sell at any time. Then buy again the next day, sell again, etc. So everyone here who is already in is also implicitly choosing to re-buy every day. "Holding" is a false concept. So if you were "in" a year ago, ...

umfundi wrote:
Why lock yourself in to the minimum, when the upside is so much more likely (expected) than the downside?

I'm curious, what makes you think so much more likely?

try searching the forum, lots of threads covering this.

to the OP: I don't think it's logical to think this way. You're thinking: IF the stock drops 10%, THEN that means it is probable that it will decrease further, thus I should sell. But you have no evidence for the THEN statement. All you know is that it could plummet at any time, regardless of whethe...

Active funds are discretionary-- picks and timing dictated by the insight/intuition of the managers. Passive funds are algorithmic-- picks and timing is determined in advance by a set of rules. Not necessarily true. If you fuss around with your algorithm enough it will be doing exactly what an acti...

Active funds are discretionary-- picks and timing dictated by the insight/intuition of the managers.
Passive funds are algorithmic-- picks and timing is determined in advance by a set of rules.

I chose the DFA SCV fund only because it has a long history.

Here's the Morningstar growth chart. Certainly they could have incorrect data, but this is what they have.

I didn't mean to derail the thread or propose a DFA vs Vanguard contest. My point was that I think it's hard to argue that there's not significantly different risk/return profiles happening in different corners of the market. And if so, why couldn't that differentiation be refined with further study...

OverTheHill,

Wondering what do you make of this [nonsense --admin LadyGeek]?...

DFA Small Value (DFSVX), since inception (1993): Growth of 10K -> $103,681

Vanguard Total Stock (VTSMX), same period: Growth of 10K -> $55,228

jeb Yes one would have thought so. And Buffett thought of it 50 years before the academics got around to it. But should that mean you should ignore it, or that the evidence is any less valuable? I do what I think intelligent people do, they follow the evidence, make sure it's logical and persistent...

Call_Me_Op wrote:Rising rates are good for long-term holders of intermediate bond funds.

But even better if you wait to buy them

From a distance, it does seem strange that these discoveries have taken so long to appear since the original Fama/French research. It would seem obvious to turn over all the rocks right away, run backtests on long-short portfolios based on every equity parameter imaginable and see if anything stood ...

OverTheHill wrote:It's called making it up as you go along.

I know, stupid research, finding out new things all the time.

Larry Thanks for sharing. Two questions 1- So DFA's growth funds or AQR's momentum funds will differ from a vanilla growth fund (say VUG) in that they will have higher MOM and profitability factor loads and lower beta loads? Do you have the actual factor loadings for comparison? 2- How "crowdab...

I would stay the course. Yeah, you can try CDs, just not in cyprus please, and i bonds, and series E, but really beyond those which are limited, there is no substitute for treasuries and TIPS. Can you explain why an FDIC insured savings account with a higher yield than a treasury fund is no substit...

If we assume one is choosing between a short term bond fund (BSV) at 0.47% and a savings account at 0.84%, can anyone provide an argument for the bond fund? I get that there is some room for bond NAVs to appreciate, but a heck of lot less than their downside potential. The primary reason I maintain...

I know, I prefer fund launch timers who can demonstrate real skill.

I don't invest in Hussman or recommend it. I just think the OP was lazy and inaccurate to paint Hussman as if he were some Bob Prechter character going on CNBC biweekly to make short term market predictions. That's not at all his deal, he runs a buy and hold stock fund with a hedging option which he...

If we assume one is choosing between a short term bond fund (BSV) at 0.47% and a savings account at 0.84%, can anyone provide an argument for the bond fund? I get that there is some room for bond NAVs to appreciate, but a heck of lot less than their downside potential.

YDNAL You can change the chart to see what you want but fact is, 10K growth since inception: HSGFX...17430 SP500...13926 Homer: He's still predicting a crash... Sooner or later he will be right... and then he will claim that he "called it" right, you know this about him. You can't get much...

Ah, ok. Thanks Larry

Hussman's flagship fund since inception:

Larry, This thread: http://www.bogleheads.org/forum/viewtopic.php?f=10&t=112450&newpost=1635324 You say: First, valuations matter and they matter a lot. But to show you how wide the potential dispersion of returns is: when the Shiller PE 10 is 21-25 the AVERAGE real return for next 10 years ...

two main ways financial economists estimate returns today First is the Gordon Model Take dividends, say 2%, add estimate of real growth (say 2.5%, though some think less is more appropriate) that gets you the estimated real return and then add in inflation, say 2.5% for total of 7. Then there is th...

Craigr: thank you for that excellent post. Especially item #5.

Clive
I too like 3x ETFs for concentrated risk, in theory. In practice it's a no go due to high ERs and slippage, they don't keep up with the index long-term. I don't know where you're getting those low ERs. M* shows 0.99 for ERX, for example.

dividends are magic

Clive I appreciate the XOM idea, it's clever, but not so sure about a) taking on that much idiosyncratic risk, b)mixing equity/commodity exposure in one stock and muddying up the allocation vs knowing exactly how much I've got of each. Separating ccf, gold, stock seems cleaner. Though I guess you co...

Harry/Larry compromise:

15% SCV
15% EM
5% CCF
5% Gold
10% Long Treas
50% 5 Yr Treas

And the Simba says (1985-present):

CAGR = 10.82
SD = 8.16
Sharpe = 0.87

It's a good thing when someone says "stock picker's market". Lets you know you'll never need to listen to them again.

This article may not be asking the real question on most Boglehead's minds. It is not "should I dump bonds in favor of riskier assets", but "should I hold SAFE investments without interest rate risk instead of intermediate bonds (I-Bonds, bank CD's, cash, etc)." That is a much h...

When something like 2008-2009 happens, you do not see it as "-50%". You see it as something different in kind from what has gone before. You see high officials on TV and they cannot completely hide the fact that they are scared . You finally get over the visceral impact of Fannie Mae and ...

I'd guess it's seen as gimmicky or antithetical to Bogleheadism or a flash in the pan, etc. It is none of those things. It is old, low-cost, and based on solid theory. The real beauty of it is the mixture of 3 asset classes that respond differently in different economic climates and do not correlat...

I'd guess it's seen as gimmicky or antithetical to Bogleheadism or a flash in the pan, etc. It is none of those things. It is old, low-cost, and based on solid theory. The real beauty of it is the mixture of 3 asset classes that respond differently in different economic climates and do not correlat...

Keep in mind his "calls" are usually for short time horizons, not really relevant to long-term asset allocation.

Regarding efficiency issue,

1985-present, Vanguard funds:

%TSM | %5 Yr T-bill | %HY | CAGR | Sharpe

50 | 50 | 0 | 9.52 | .63
50 | 40 | 10 | 9.50 | .59


%SCV | %5 Yr T-bill | %HY | CAGR | Sharpe

30 | 70 | 0 | 9.12 | .74
30 | 50 | 20 | 9.14 | .66

Rick, If you believe that FF5 is a reasonable model, then it's obvious why you might do a factor regression on it or any asset class. Besides, I asked for it and Larry was generous enough to use his resources to indulge the request. Instead of complaining about Larry's numbers, I would challenge you...

Thank you for this analysis. Is this US only or global?

Interesting. Many thanks for posting the numbers, Larry

thanks Larry

Larry, any opinion on DBC, how it compares to DFA comm and PCRIX ? thanks

Sure it would be interesting to consider why and when the correlations have been highest. Still there is some value to correlation being low at times, if that is the case. And yeah, a factor regression on HY would be great to see. Much better than "if you saw it, you'd think this". So much...

As you go down the credit scale the amount of equity like risk increases, you are adding more equity like risks. So the uniqueness of the risks goes from very high with AAA to low with CCC. Clearly this should not be debatable point. If default risk increases the risks to stocks which get wiped out...

OverTheHill wrote:Me think the Larry does protest too much.

I would like to cancel out this comment by saying that I totally disagree-- Larry can never post too much. I appreciate everything he has to say.

Using Fama-French Research factors, I ran a correlation between the US Default Risk Premium and the Total US Market Research Factor . Basically, the correlation between credit risk and equity risk. The correlation was 0.14 from 7/1926 to 3/2013. I ran a second correlation between the US Default Ris...

In the long term, it's likely to be much, much higher than it is today. Oh really? What makes you say that? History. If you want to make an options bet that the market will be flat in nominal terms over the next 30 years, I am sure you will find many takers. :sharebeer History? You're joking right?...

Recent thread about actual LC returns here: http://www.bogleheads.org/forum/viewtopic.php?f=10&t=112437 Backtest of returns for 3 year notes issued between 2007 and 2009 (maturing 2010-2012), broken down by loan grade: ---------- A: 4.74% B: 1.53% C: 0.69% D: -1.35% E: 0.79% F: -6.76% G: -2.34% ...

From what I've read, high-yield bonds tend to hold up well in rising rate environments. There are many references supporting this on the web--here's one from PIMCO. In a rising rate environment, as would be expected in the recovery phase of the economic cycle, high yield bonds would be expected to ...

The point is that it's a hybrid investment with a strong correlation to equities. Call it what it is and quit hiding behind the fact that it's technically in the bond family. You do a disservice to investors by calling it just another bond when investors ought to know that HY and junk aren't just b...

Hybrid-risk products are not necessarily a problem. The problem is that investors want to kid themselves that they can get extra yield in their bonds and still consider it part of the 'safe side' of their portfolio. As nisiprius demonstrates, there is no point to taking this risk in credit when you ...