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Re: The random stock portfolio bogey - beating the monkey

... (potentially today's roaring valuations in BioTech) .. Some perspective on biotechs that needs consideration, certainly all of them or even most of them won't have outstanding gains, but it's hard to say that a portfolio diversified across them isn't being "efficiently" priced relativ...
by JoMoney
Mon Mar 30, 2015 3:22 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: The random stock portfolio bogey - beating the monkey

I believe that if buyers and sellers both have access to the same information when executing trades , then the market is efficient and stocks are fairly priced. Just because one party is speculating about the future does not make the market inefficient. Just because one party guesses wrong about th...
by JoMoney
Mon Mar 30, 2015 3:13 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: The random stock portfolio bogey - beating the monkey

... If you seek to beat the capitalization weighted index, you have to go smaller and more value-y. Tweedy, Browne charges relatively high fees for managing your money, but they at least provide some foundational documents for their methods, which closely track the advice of Benjamin Graham. They d...
by JoMoney
Mon Mar 30, 2015 2:18 am
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: The random stock portfolio bogey - beating the monkey

...and yet despite the idea that "Cap-weighting appears to be surprisingly easy to beat" the vast majority of real-world mutual funds fail to beat their cap-weighted index. Simple arithmetic can show you proof of why this must be the case for at least half of the invested assets.
by JoMoney
Sat Mar 28, 2015 11:46 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: The random stock portfolio bogey - beating the monkey

.. But I'm increasingly drawn to the idea there's a limit to how popular any strategy can get before it starts behaving counter-intuitively (I've tried to imagine what would happen hypothetically if say 99% of investors held the S&P 500 index) .. There's no doubt in my mind that using some stra...
by JoMoney
Sat Mar 28, 2015 4:07 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: The random stock portfolio bogey - beating the monkey

It's interesting to see how the markets weight has shifted across various time periods as well. The average or median market-cap of the total market has been shrinking since the late 1990's, less and less of a "Total Market" portfolio has been allocated to the biggest stocks. The trend sin...
by JoMoney
Fri Mar 27, 2015 9:49 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: The random stock portfolio bogey - beating the monkey

...What is so special about the handful of stocks that attract the lion's share of capital? Is there any evidence that they will provide better returns than other stocks going forward? Not that I know of. Is there evidence that you believe predicts they will provide worse returns than other stocks ...
by JoMoney
Fri Mar 27, 2015 9:21 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: Interest in multi asset class investing and crises

No... But I'm not really a "fan of multi-asset class investing" unless you consider owning stocks AND bonds as a multi-asset class investing. The "correlation" of the bonds or interest rates relative to the return on stocks doesn't mean anything, it has changed over various times...
by JoMoney
Fri Mar 27, 2015 8:51 pm
 
Forum: Investing - Theory, News & General
Topic: Interest in multi asset class investing and crises
Replies: 11
Views: 839

Re: The random stock portfolio bogey - beating the monkey

Something to bear in mind... although there may be some general correlation between market-cap and firm size, "float adjusted" stock market cap size is not necessarily a measurement of the size of the business. It's only a measure of the value in the market, "large cap" stocks as...
by JoMoney
Fri Mar 27, 2015 8:04 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: The random stock portfolio bogey - beating the monkey

Cap weighting makes sense as far as a simple way to manage the portfolio that doesn't require additional turnover. It also makes sense if your goal is to capture the stock markets returns - owning the market as it is (weighted by market-cap) seems logical to me. If on the other hand your goal is to ...
by JoMoney
Fri Mar 27, 2015 6:40 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: Zen Boglehead's

Sitting here, doing nothing Spring comes-- The grass grows by itself That might be Basho, can't remember. It's amazing how ingrained the impulse to " do something " is when it comes to the financial markets. You can show people the simple proof that is The Arithmetic of Active Management ...
by JoMoney
Fri Mar 27, 2015 3:55 pm
 
Forum: Investing - Theory, News & General
Topic: Zen Boglehead's
Replies: 19
Views: 2320

Re: Russell 1000 and Russell 2000 total returns since incept

You can find data since 1995 on the Russell Index's web page http://www.russell.com/indexes/americas/tools-resources/index-performance-calculator.page One factoid to keep in mind is that despite having created data sets going back to 1978, the Russell indices didn't actually exist until 1984. http:/...
by JoMoney
Thu Mar 26, 2015 3:58 pm
 
Forum: Investing - Theory, News & General
Topic: Russell 1000 and Russell 2000 total returns since inception
Replies: 11
Views: 771

Re: Should a BH investor never use futures/options?

Many BH investors use futures/options without even knowing it. Read your fund(s) prospectus and supplemental additional information. Almost all of the index funds can (and do) utilize stock index futures and or options to some limited extent to help manage the fund. They're explicitly not used to cr...
by JoMoney
Thu Mar 26, 2015 4:39 am
 
Forum: Investing - Theory, News & General
Topic: Should a BH investor never use futures/options?
Replies: 68
Views: 3920

Re: Vanguard index fund security lending in 2014

http://www.chicagotribune.com/business/breaking/ct-northern-trust-settlement-0220-biz-20150223-story.html "Northern Trust to pay $60 million to settle securities-lending cases" Exxon was a plaintiff in this case. Why doesn't Exxon invest their pension funds with Vanguard? They can't possi...
by JoMoney
Thu Mar 26, 2015 2:20 am
 
Forum: Investing - Theory, News & General
Topic: Vanguard index fund security lending in 2014
Replies: 23
Views: 1714

Re: U.S. cash pouring into international

The posts about whether international is even needed are driven by folks who have a strong preference for a very simple investing life. They are apparently willing to give up real benefits in order to simplify. Most folks who appreciate the benefits of diversification are adding to international st...
by JoMoney
Wed Mar 25, 2015 3:55 pm
 
Forum: Investing - Theory, News & General
Topic: U.S. cash pouring into international
Replies: 23
Views: 2441

Re: Vanguard index fund security lending in 2014

There have been funds that didn't necessarily "blow up", but lost money in securities lending because they took too much risk with investing the collateral. Despite the borrower putting up 100% of the value as collateral, the firm receiving that collateral will often invest it in hopes of ...
by JoMoney
Wed Mar 25, 2015 3:27 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard index fund security lending in 2014
Replies: 23
Views: 1714

Re: The Only S&P 500 Index Funds You Will Ever Need

...because the S&P committee uses some modest screens for profitability and quality and size... This sounds an awfully lot like an actively managed fund. :shock: Every index has some methodology criteria for inclusion in the index. Even the CRSP "Total Market" index has criteria that ...
by JoMoney
Wed Mar 25, 2015 3:15 pm
 
Forum: Investing - Theory, News & General
Topic: The Only S&P 500 Index Funds You Will Ever Need
Replies: 11
Views: 2736

Re: The Only S&P 500 Index Funds You Will Ever Need

The obsession with the S&P500 annoys me too. It's pure marketing. Even as a slicer or dicer, I'd much prefer to have Vanguard Large-Cap Index Fund Admiral Shares (VLCAX) rather than another S&P500 fund. But because of the obsession with the S&P500 index, the Large-Cap Index has fewer as...
by JoMoney
Wed Mar 25, 2015 2:25 am
 
Forum: Investing - Theory, News & General
Topic: The Only S&P 500 Index Funds You Will Ever Need
Replies: 11
Views: 2736

Re: Vanguard index fund security lending in 2014

For funds that have a "Ratio of security lending income/fund expenses" of over 100%, why do these funds not have a 0.00% (or negative) expense ratio? "Expense ratio" is calculated using specific items, it doesn't include additional income earned, it doesn't even include all the ...
by JoMoney
Tue Mar 24, 2015 2:52 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard index fund security lending in 2014
Replies: 23
Views: 1714

Re: What Happens When Vanguard Owns Everything?

Vanguard's role is definitely becoming more important with it's increased size. There's some responsibilities with that I'd like to see more efforts on, such as aligning corporate governance with the interests of the owners. ... When the manager cares deeply and the directors don’t, what’s needed is...
by JoMoney
Tue Mar 24, 2015 2:42 pm
 
Forum: Investing - Theory, News & General
Topic: What Happens When Vanguard Owns Everything?
Replies: 19
Views: 4717

Re: The one area I disagree with Jack

I don't follow a "constant mix" rebalancing strategy, so Jack's advice doesn't cause any dissonance with me. I don't try to maintain a fixed percentage of fixed income so trying to assign a value to social security is meaningless. What matters to me is the income it will produce, and my ne...
by JoMoney
Sat Mar 21, 2015 5:39 pm
 
Forum: Investing - Theory, News & General
Topic: The one area I disagree with Jack
Replies: 93
Views: 7328

Re: The random stock portfolio bogey - beating the monkey

...Maybe what we should be doing is looking for the closest thing we can find to the monkey portfolio at the lowest cost and just go with the monkey. Maybe what we should be doing is forget about trying to earn excess returns by out-trading other market participants, and focus on ensuring the compa...
by JoMoney
Sat Mar 21, 2015 2:55 pm
 
Forum: Investing - Theory, News & General
Topic: The random stock portfolio bogey - beating the monkey
Replies: 119
Views: 6090

Re: Economist Article on role of government bonds

If you're buying bonds with the expectation that you're holding them to maturity there is no risk, you have a promise that you'll be repaid the principal and interest by the maturity. You can't get guaranteed "fixed income" from stocks, there are no assurances that stocks will have a certa...
by JoMoney
Sat Mar 21, 2015 2:45 pm
 
Forum: Investing - Theory, News & General
Topic: Economist Article on role of government bonds
Replies: 11
Views: 1700

Re: S & P 500 index fund vs S&P 500 Growth fund

Portfolio Constituency Rules and the Value Premium in the Small-Cap Space ... Market-based value style equity portfolios do not systematically outperform market-based growth style equity portfolios, despite considerable academic research that suggests that they should. ... ... Houge and Loughran [2...
by JoMoney
Mon Mar 09, 2015 2:51 pm
 
Forum: Investing - Theory, News & General
Topic: S & P 500 index fund vs S&P 500 Growth fund
Replies: 7
Views: 795

Re: Vanguard Total Stock Market Index Fund (VTSAX)

Perhaps odd too some given the small-cap superiority often touted here, but I prefer the S&P500 fund because it avoids small-caps. By my preference, TSM is overweight small.
by JoMoney
Sun Mar 08, 2015 11:15 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard Total Stock Market Index Fund (VTSAX)
Replies: 11
Views: 2594

Re: WWWD (what would warren do)

There are interviews where he has said that TSM "is good enough". People make too much out of this, its not like there's major differences between them, or like anyone could tell you what any future difference between TSM or SP500 would be. FWIW, in the Intelligent Investor Ben Graham had ...
by JoMoney
Tue Mar 03, 2015 3:06 am
 
Forum: Investing - Theory, News & General
Topic: WWWD (what would warren do)
Replies: 21
Views: 1639

Re: Dividends and Market Slides

There is a distinction between "high dividend" and "dividend growth" stocks. Neither is a good representation of how value or growth styles are generally depicted, but high div would tend to be more value style and div growth more growth-y. Come up with a list of really high div ...
by JoMoney
Sun Mar 01, 2015 11:07 am
 
Forum: Investing - Theory, News & General
Topic: Dividends and Market Slides
Replies: 55
Views: 3394

Re: 10 Interesting facts about the S&P500

The S&P was a total market index adding members until it out grew 500, and the committee then decided to stop expanding the number of members. My unresearched guess is 10% residual, 50 companies. Wasn't the initial index, started early in the 20th century? Somewhat like the Dow, it was the pric...
by JoMoney
Tue Feb 24, 2015 5:55 pm
 
Forum: Investing - Theory, News & General
Topic: 10 Interesting facts about the S&P500
Replies: 28
Views: 3688

Re: Full Faith and Credit

I'm not sure what direction you're going with this, but the difference I see is that it's not written into law or something that congress appropriates money for. So some government entities are able to go around creating liabilities, under what is interpreted as a backing of the government, but cong...
by JoMoney
Tue Feb 24, 2015 3:16 pm
 
Forum: Investing - Theory, News & General
Topic: Full Faith and Credit
Replies: 37
Views: 2542

Re: 10 Interesting facts about the S&P500

I don't know much about the S&P500 other than it's cap weighted meaning that it's overweight the most expensive stocks and underweight the cheapest ones. :) I don't think cap weighted means what you think it means. If you're going to say that it's "overweight" or "underweight&quo...
by JoMoney
Tue Feb 24, 2015 6:59 am
 
Forum: Investing - Theory, News & General
Topic: 10 Interesting facts about the S&P500
Replies: 28
Views: 3688

Re: Risk--Again. The common stepping stone

The why would be that while those characteristics are accurate the implications are not clear without a lot of additional information. This is particularly the case if one wants to put some sort of quantitative margins around the issue. As to different risks, that is a very valid point. However, it...
by JoMoney
Mon Feb 23, 2015 3:49 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 57
Views: 3470

Re: John Bogle on International Investing

JoMoney, from prior posts I see you favor the S&P 500. I would think the Vanguard FTSE Europe (VGK) would be a good extension of that. In fact it's like the European S&P 500. 516 large and mid cap of Europe's best companies. Just look at the top 25 holdings. I would think this would be a gr...
by JoMoney
Mon Feb 23, 2015 3:36 pm
 
Forum: Investing - Theory, News & General
Topic: John Bogle on International Investing
Replies: 184
Views: 15768

Re: Risk--Again. The common stepping stone

The crux of a lot of disputes comes about with the idea that some people insist they can quantify all the risk, and that people are going to weigh different risks the same way. Why does the difference between stocks/bonds have to be presented as anything more than the idea that bonds are promises to...
by JoMoney
Mon Feb 23, 2015 3:20 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 57
Views: 3470

Re: John Bogle on International Investing

...FWIW, Bogle does recommend a 20% international allocation. He repeatedly has said that he doesn't do it, he doesn't recommend it, he doesn't think it's necessary for U.S. investors, but if you feel so compelled he would suggest limiting it to no more than 20%. Oddly enough, he's suggested that i...
by JoMoney
Mon Feb 23, 2015 2:54 pm
 
Forum: Investing - Theory, News & General
Topic: John Bogle on International Investing
Replies: 184
Views: 15768

Re: John Bogle on International Investing

“people feel comfortable with risk they are taking in their home country, but as they leave their home country they start to be less sure about where are the risks” ….”that creates … the distinction between risk and uncertainty, that uncertainty outside the US may be pushing investors to tilt less ...
by JoMoney
Mon Feb 23, 2015 6:24 am
 
Forum: Investing - Theory, News & General
Topic: John Bogle on International Investing
Replies: 184
Views: 15768

Re: Risk--Again. The common stepping stone

...In other words, these additional risks are in the eye of the beholder ... I think there's something to this, my preference would be that "risk" was defined as losing "value" instead of money, although money is typically used to measure value, different people can value things...
by JoMoney
Sun Feb 22, 2015 3:41 pm
 
Forum: Investing - Theory, News & General
Topic: Risk--Again. The common stepping stone
Replies: 57
Views: 3470

Re: Worst case scenario

Do these charts include dividends reinvested? I think the S/P NAV dropped by >50% in the last recession but if you count duvidends I thought it was more like 35-40%? Anyone know? Thx Yes, the charts are Morningstar.com "total return" growth charts that include dividends. They are also rep...
by JoMoney
Sun Feb 22, 2015 3:12 pm
 
Forum: Investing - Theory, News & General
Topic: Worst case scenario
Replies: 16
Views: 1848

Re: Worst case scenario

From the perspective of whom? http://www.bloomberg.com/bw/articles/2014-08-18/russia-seized-citizens-pension-funds-dot-could-that-happen-in-the-u-dot-s-dot If your home country was seizing assets and shutting down capital markets as in some sort of communist revolution that could certainly take thin...
by JoMoney
Sun Feb 22, 2015 12:50 am
 
Forum: Investing - Theory, News & General
Topic: Worst case scenario
Replies: 16
Views: 1848

Re: Most trading strategies are not tested rigorously enough

The thinking probably goes along the lines that if you find some methodology to divide the universe of these financial products in half, the sum of them all together will be the universe of all financial products. One half or the other will ex-post appear to be superior, the problem will be distingu...
by JoMoney
Sat Feb 21, 2015 10:49 pm
 
Forum: Investing - Theory, News & General
Topic: Most trading strategies are not tested rigorously enough
Replies: 1
Views: 313

Re: John Bogle on International Investing

... And why should one portfolio necessarily be more or less efficient than another - when the combination of every one of our portfolios make up an "efficient" market portfolio? ... Well, I can certainly agree that someone's belief in the "efficient market" might weigh heavily ...
by JoMoney
Sat Feb 21, 2015 9:03 pm
 
Forum: Investing - Theory, News & General
Topic: John Bogle on International Investing
Replies: 184
Views: 15768

Re: The Distribution of Individual Stock Returns, 1983-2006

Even at 5% of a portfolio a single stock isn't making much of an impact. By the time you get a dozen or so stocks in a portfolio almost all of the idiosyncratic factors unique to that company hardly play a role. Well, is that really true? If 25% of the companies are the ones making the real returns...
by JoMoney
Sat Feb 21, 2015 8:32 pm
 
Forum: Investing - Theory, News & General
Topic: The Distribution of Individual Stock Returns, 1983-2006
Replies: 20
Views: 1891

Re: The Distribution of Individual Stock Returns, 1983-2006

...And then, when you think cap-weighting, there is this tiny bitty detail called Apple Inc. Well, there is only one like that. And it plays quite a significant role in a (US) large-cap index fund. Is there a significant risk for US-only investors to miss a couple of non-US companies like that (and...
by JoMoney
Sat Feb 21, 2015 7:45 pm
 
Forum: Investing - Theory, News & General
Topic: The Distribution of Individual Stock Returns, 1983-2006
Replies: 20
Views: 1891

Re: The Distribution of Individual Stock Returns, 1983-2006

Interesting bit of research. Thanks for posting. This caught my eye: Notice that the average annualized return for all stocks is negative 1.06%. This is remarkable for a period when stocks in general did so well. I think I will pass on the equal-weighted index funds. There's some other papers out t...
by JoMoney
Sat Feb 21, 2015 6:45 pm
 
Forum: Investing - Theory, News & General
Topic: The Distribution of Individual Stock Returns, 1983-2006
Replies: 20
Views: 1891

Re: John Bogle on International Investing

. “ people feel comfortable with risk they are taking in their home country, but as they leave their home country they start to be less sure about where are the risks” ….”that creates … the distinction between risk and uncertainty, that uncertainty outside the US may be pushing investors to tilt le...
by JoMoney
Sat Feb 21, 2015 4:25 pm
 
Forum: Investing - Theory, News & General
Topic: John Bogle on International Investing
Replies: 184
Views: 15768

Re: John Bogle on International Investing

http://www.cnbc.com/id/102369672 "My overall view is if you stick to the U.S. , ... first of all, I don't think your listeners understood this, I got a lot of vituperation for what I've been saying for the last 25 years, all condensed to about two days, about saying... you don't need to do int...
by JoMoney
Sat Feb 21, 2015 6:17 am
 
Forum: Investing - Theory, News & General
Topic: John Bogle on International Investing
Replies: 184
Views: 15768

Re: Full Faith and Credit

I have a question about the concept of "Full Faith and Credit." Sorry if it is too simplistic. But how exactly does this work? How can a government absolutely ensure they can pay you back? Do they structure themselves in a way where this is a guarantee? What happens if they can't? Have th...
by JoMoney
Fri Feb 20, 2015 11:03 pm
 
Forum: Investing - Theory, News & General
Topic: Full Faith and Credit
Replies: 37
Views: 2542

Re: What is Risk?

Anyone is really rolling the dice when they are betting on refinancing down the road. No one lost their home because of a decrease in value with a fixed rate mortgage. I might be wrong, and it might be picking nits, but didn't some banks demand additional principal to make up for the loss in nomina...
by JoMoney
Fri Feb 20, 2015 8:47 pm
 
Forum: Investing - Theory, News & General
Topic: What is Risk?
Replies: 27
Views: 1417

Re: What is Risk?

I'm curious how all these different interpretations of risk relate to expected return. Everyone knows you can't have high expected returns without high risk but what interpretation of risk does this assume? To what extent is this common sense true when applied to different interpretations of risk? ...
by JoMoney
Fri Feb 20, 2015 7:13 pm
 
Forum: Investing - Theory, News & General
Topic: What is Risk?
Replies: 27
Views: 1417

Re: What is Risk?

Risk is the possibility of something bad happening, in particular an investment losing value . One of the many problems with volatility being a measure of risk is that the upside is weighted the same as the downside. The upside isn't a risk, there is no concern that my investments earn too much, the...
by JoMoney
Fri Feb 20, 2015 7:01 pm
 
Forum: Investing - Theory, News & General
Topic: What is Risk?
Replies: 27
Views: 1417

Re: Vanguard merged Mutual fund + brokerage - anyone have ye

I've finally been fully converted... my IRA accounts were converted awhile back, I was looking forward to the cleaner look of having my brokerage account and mutual fund account merged. After it was done, and I found out that I would no longer be able to direct-deposit into my mutual fund or brokera...
by JoMoney
Fri Feb 20, 2015 6:38 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard merged Mutual fund + brokerage - anyone have yet?
Replies: 37
Views: 6561
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