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by JoMoney
Thu May 28, 2015 6:45 am
Forum: Investing - Theory, News & General
Topic: Stemikger "Volatility is far from synonymous with risk."
Replies: 83
Views: 4282

Re: Stemikger "Volatility is far from synonymous with risk."

... In his opinion, an experienced investors assessment of risk is better than these quantitative techniques. Despite knowing that all the security analysts in the world, no matter how good they are, can't beat themselves as a group - I still think the world needs people trying to do this work with...
by JoMoney
Thu May 28, 2015 6:19 am
Forum: Investing - Theory, News & General
Topic: Market Capitalization Flaw in Index Funds
Replies: 11
Views: 943

Re: Market Capitalization Flaw in Index Funds

...What are the odds of such predictions/timing being correct over that of level betting the field (equal weighting all 9 sectors)?... My guess, would be that the markets estimates are about as good as a coin flip, and the odds of some random or equal weighted portfolio somehow being better about t...
by JoMoney
Thu May 28, 2015 4:37 am
Forum: Investing - Theory, News & General
Topic: Market Capitalization Flaw in Index Funds
Replies: 11
Views: 943

Re: Market Capitalization Flaw in Index Funds

If the broad cap-weighted stock market portfolio is "distorted" then the entire market is distorted. Cap-weighting doesn't systematically over-weight or under-weight anything, it owns everything in proportion to how the market values it. That's not to say the entire market can't become ove...
by JoMoney
Thu May 28, 2015 2:34 am
Forum: Investing - Help with Personal Investments
Topic: Do I really need International equities in my portfolio ?
Replies: 53
Views: 4115

Re: Do I really need International equities in my portfolio ?

It's interesting to me, the fervor with which people believe an international allocation is necessary. Bogle has been forthright about the fact that a lot of smart people do believe it's a good thing, and leaves it up to the investor to decide for themselves. He doesn't do it, he doesn't recommend i...
by JoMoney
Wed May 27, 2015 4:21 pm
Forum: Investing - Theory, News & General
Topic: How to be a successful fund manager
Replies: 12
Views: 1126

Re: Super fund manager

.. But most UK active funds have beat the market over 3, 5 and 10 years - so I do think it's an easier market for active managers While I'm sure there have been "some" that beat the market, saying "most" would conflict with a lot of the studies 'Just one fund manager in 100 beat...
by JoMoney
Wed May 27, 2015 3:28 pm
Forum: Investing - Theory, News & General
Topic: Stemikger "Volatility is far from synonymous with risk."
Replies: 83
Views: 4282

Re: Stemikger "Volatility is far from synonymous with risk."

http://i58.tinypic.com/18khty.png We use dollars as our standard measure of value, but a dollars usefulness is only in what it can be exchanged for. If it was volatile in the short-term, it wouldn't be a good medium of exchange, but over long periods of time it's far from being a "risk free&qu...
by JoMoney
Tue May 26, 2015 8:56 pm
Forum: Investing - Theory, News & General
Topic: Guide to Investing's international allocation confusion
Replies: 9
Views: 1025

Re: Guide to Investing's international allocation confusion

...Is this diversification (80% correlation) worth the price? That's always the question. Is an assets prospective future returns worth the current price. For those of us that aren't sure, we diversify across time assuring we get an "average" price. Basing the decision on past returns can...
by JoMoney
Tue May 26, 2015 8:30 pm
Forum: Investing - Theory, News & General
Topic: Stemikger "Volatility is far from synonymous with risk."
Replies: 83
Views: 4282

Re: Stemikger "Volatility is far from synonymous with risk."

...Does someone have an actual risk measure of two actual moderately diversified investments where A is clearly more risky than B, and yet by using standard deviation we would judge A to be clearly less risky than B? CAPE ratio Large-Cap U.S. stocks 1995-1999 vs Bonds http://i59.tinypic.com/k3r5gw....
by JoMoney
Tue May 26, 2015 4:05 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Volatility is a Big Drag on Returns
Replies: 48
Views: 4098

Re: Portfolio Volatility is a Big Drag on Returns

What matters is the portfolio as a whole. And you are right, the geo mean will always be less than the weighted average annual return of portfolio components. But a more efficient portfolio will minimize the difference between geo mean and arithmetic mean. What I'm saying is that multiple sources o...
by JoMoney
Tue May 26, 2015 7:19 am
Forum: Investing - Theory, News & General
Topic: Why is the higher ER winning?
Replies: 6
Views: 1212

Re: Why is the higher ER winning?

If you look at the holdings of the fund, it's very heavy into healthcare stocks, something close to 40% of the fund, with almost 10% in a single stock. Vanguard does have an active stock picking fund (PRIMECAP VPMCX ) that's also heavily into Healthcare and Tech stocks (their top holding is the same...
by JoMoney
Tue May 26, 2015 3:56 am
Forum: Investing - Theory, News & General
Topic: "Does Your Fund Manager Consistently Beat the Stock Market?"
Replies: 42
Views: 3309

Re: "Does Your Fund Manager Consistently Beat the Stock Market?"

Of course there is another way of looking at this.... Someone who invested $10k in 1975 would have today (I chose 1975 since that person would probably retire about now): FMAGX = $4.80M S&P 500 = $1.04M So despite the lackluster performance lately, over the long run it still looks pretty good. ...
by JoMoney
Mon May 25, 2015 11:26 pm
Forum: Investing - Theory, News & General
Topic: Stemikger "Volatility is far from synonymous with risk."
Replies: 83
Views: 4282

Re: Stemikger "Volatility is far from synonymous with risk."

...Volatility is far from synonymous with risk. This is a pointed jab at the "Efficient Market Hypothesis" and the related models like CAPM. While the difficulties of beating the market have been long acknowledged, and the idea of a group of market participants somehow beating themselves ...
by JoMoney
Mon May 25, 2015 4:32 pm
Forum: Investing - Theory, News & General
Topic: another look at dividend paying stocks and valuations
Replies: 63
Views: 4380

Re: another look at dividend paying stocks and valuations

...I personally have endorsed two methods of investing for new investors. First would be market-cap weighted indexing using the very broad indexes in a 3-5 fund portfolio. This is for the people who believe in efficient markets and who are skeptical of factor investing. Second would be small/value ...
by JoMoney
Sun May 24, 2015 10:34 pm
Forum: Investing - Help with Personal Investments
Topic: Do I really need International equities in my portfolio ?
Replies: 53
Views: 4115

Re: Do I really need International equities in my portfolio ?

This Vanguard paper presents an interesting framework for considerations you might look at: https://personal.vanguard.com/pdf/icrrhb.pdf http://i60.tinypic.com/20qgx29.png It also goes over some numbers regarding how much "home bias" there is in various countries. I'm still trying to figur...
by JoMoney
Sun May 24, 2015 8:10 pm
Forum: Investing - Theory, News & General
Topic: Stemikger "Volatility is far from synonymous with risk."
Replies: 83
Views: 4282

Re: Stemikger "Volatility is far from synonymous with risk."

... What seems to be missing from the risk = volatility equation is valuations? Is the stock market equally risky with PE at 8 or 24? While I agree that valuation may play a role in how "risky" it is, I think your example is a bit to simplistic. During the 2008-2009 financial crisis we ha...
by JoMoney
Sun May 24, 2015 6:47 pm
Forum: Investing - Theory, News & General
Topic: "active" funds that are really index funds
Replies: 2
Views: 594

Re: "active" funds that are really index funds

English readers may find a translation more interesting: https://translate.google.com/translate?hl=en&sl=auto&tl=en&u=http%3A%2F%2Fwww.hegnar.no%2Fpersonlig_okonomi%2Fsparing_pensjon%2Fartikkel509241.ece (Or you may be able to right-click in the google "Chrome" browser and choo...
by JoMoney
Sun May 24, 2015 6:10 am
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

I believe the distinction you're pointing to, is the returns over a period dependent time frame that's not necessarily representative of other time periods. I believe the papers (including Fama-French Cross-Section of Expected Stock Returns) look at average monthly returns. Even looking within the 1...
by JoMoney
Sun May 24, 2015 4:51 am
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

We can cherry pick time periods and groups of stocks that outperform over some particular time period, but what the research found, was that when measured against a real-world set of investable stocks, the "Value Premium" disappeared as a significant factor explaining the returns, and adds...
by JoMoney
Sun May 24, 2015 4:11 am
Forum: Investing - Help with Personal Investments
Topic: Do I really need International equities in my portfolio ?
Replies: 53
Views: 4115

Re: Do I really need International equities in my portfolio ?

... @JoMoney: you can't have it both ways. You've talked about added risks of international but then said you don't think international will beat US over time, which suggests those risks you just talked about aren't rewarded. Sorry, but there is no free lunch in US investing, or if there is, then c...
by JoMoney
Sun May 24, 2015 12:20 am
Forum: Investing - Theory, News & General
Topic: another look at dividend paying stocks and valuations
Replies: 63
Views: 4380

Re: another look at dividend paying stocks and valuations

I've never heard Bogle use the Gordon Growth model, which is a dividend growth model. Bogle has frequently used a model that involves " earnings growth + dividends". It makes a difference, because it accounts for the fact that you can have retained earnings grow, or pay out dividends, and ...
by JoMoney
Sun May 24, 2015 12:03 am
Forum: Investing - Help with Personal Investments
Topic: Do I really need International equities in my portfolio ?
Replies: 53
Views: 4115

Re: Do I really need International equities in my portfolio ?

There's lots of various #'s thrown around with regard to the companies in the U.S. stock market and what amount of their revenues are attributable to over-seas operations http://www.businessinsider.com.au/chart-sp-500-revenue-geography-2012-6 Whether or not you "need" an international allo...
by JoMoney
Sat May 23, 2015 9:41 pm
Forum: Investing - Theory, News & General
Topic: another look at dividend paying stocks and valuations
Replies: 63
Views: 4380

Re: another look at dividend paying stocks and valuations

.... The company could also spin off divisions into separate companies to the shareholders and that also is another form of a dividend payment. It's funny how sometimes the market favors mergers, and at other points it wants to break companies apart. It's easy to relate to the idea of a big bloated...
by JoMoney
Sat May 23, 2015 8:08 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

You seem to be anchoring on the returns from one specific period. If you look from more recent years , DFSCX would be outperforming the Value focused fund. Over the past decade, Vanguard's Total Stock market has outperformed DFSVX. Look at the relative annual returns in your link. It doesn't seem to...
by JoMoney
Sat May 23, 2015 7:21 pm
Forum: Investing - Theory, News & General
Topic: another look at dividend paying stocks and valuations
Replies: 63
Views: 4380

Re: another look at dividend paying stocks and valuations

On the other hand, if I don't trust management to be responsible reinvesting the money they would be using to pay the dividend( & thereby weaken the company's cash position), why should I trust them with any of my money? if you're into passive investing you will buy anything, regardless of its ...
by JoMoney
Sat May 23, 2015 6:03 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

countmein wrote:...
- growth managers are probably well aware

Except it's not just "growth managers", it applies to passive index funds as well, because of similar methodologies/constituency requirements.
by JoMoney
Sat May 23, 2015 5:56 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

Small/Micro-Cap stocks make up a very small portion of VTI, and that's specifically the segment of the market where the "Value Premium" people are attempting to capture is said to exist. The paper in part of their study specifically made a point of looking at the DFA Small-Cap Value fund t...
by JoMoney
Sat May 23, 2015 4:18 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

...say that the screens in VTI get you 0.03 value exposure (0.02 with Benchmark Factors). That tiny 0.03 difference between VTI and the FF data demonstrates the opposite of your claim: the "value premium" is related to a some particularly junky "growth" stocks that have severe l...
by JoMoney
Sat May 23, 2015 4:09 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

Read the paper . If you disagree with the findings, fine. I think it adds significantly to the other studies explaining why we find that "Value" funds don't actually beat "Growth" funds outside of the models using real-word funds. I find the evidence especially pointed with regar...
by JoMoney
Sat May 23, 2015 3:53 pm
Forum: Investing - Theory, News & General
Topic: Advice from John Bogle and Warren Buffett
Replies: 35
Views: 2677

Re: Advice from John Bogle and Warren Buffett

Don't forget about the part where Buffett suggests " keeping enough in cash so [you] feel comfortable " - I read "cash" as fixed income security that's in a very low/no-risk instrument with an appropriately matched duration. Otherwise, I follow their advice and have been very muc...
by JoMoney
Sat May 23, 2015 3:37 pm
Forum: Investing - Theory, News & General
Topic: Why not overweight international?
Replies: 37
Views: 3381

Re: Why not overweight international?

Over here http://www.bogleheads.org/forum/viewtopic.php?f=10&t=165766&hilit=tax#p2492423 I gave my justification for why I believe even a "low-cost International index" might have a .3-.5% drag due to expenses/taxes (not even accounting for "Expense Ratios" which would go...
by JoMoney
Sat May 23, 2015 3:34 pm
Forum: Investing - Theory, News & General
Topic: Why not overweight international?
Replies: 37
Views: 3381

Re: Why not overweight international?

I think there's rational for anyone to have some home country bias. You're likely to have more insight into the business and market practices of your country (or at least easier access to information), the market itself denominated in your currency, potentially lower costs and tax issues, and actual...
by JoMoney
Sat May 23, 2015 3:16 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

the "value premium" is related to a some particularly junky "growth" stocks that have severe liquidity problems and don't find there way into real investable indexes and funds anyway. The point is that I don't think what you say here is true because it appears as if these stocks...
by JoMoney
Sat May 23, 2015 4:30 am
Forum: Investing - Theory, News & General
Topic: Stock Splits and Options
Replies: 3
Views: 350

Re: Stock Splits and Options

http://www.investopedia.com/ask/answers/03/092103.asp
The value of the option is adjusted accordingly, not the number of contracts.
by JoMoney
Sat May 23, 2015 4:04 am
Forum: Investing - Theory, News & General
Topic: Why not overweight international?
Replies: 37
Views: 3381

Re: Why not overweight international?

While certainly not all encompassing, there's plenty of quick lists of the risks: https://personal.vanguard.com/pub/Pdf/p113.pdf?2210091577 U.S. investors who invest abroad will encounter risks not typically associated with U.S. companies because foreign stock and bond markets operate differently fr...
by JoMoney
Sat May 23, 2015 2:00 am
Forum: Investing - Theory, News & General
Topic: Land Values, Tax Deferral, Wealth Retention and Income
Replies: 8
Views: 972

Re: Land Values, Tax Deferral, Wealth Retention and Income

You can defer taxes on just about any asset until you decide to sell it. Land itself doesn't earn any income unless you rent it out, farm it, etc... and the income from that is taxable. People have varying opinions, but I'm not aware of any research suggesting being a landlord or farming offers &quo...
by JoMoney
Fri May 22, 2015 10:30 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

Does CRSP follow securities that trade on an over-the-counter listing service such as Pink Sheets or OTCBB? No. At this time, CRSP follows securities with primary listings on NYSE, NYSE MKT, NASDAQ, and ARCA exchanges. That's not what the paper is talking about. It involves applying constituency re...
by JoMoney
Fri May 22, 2015 9:45 pm
Forum: Investing - Theory, News & General
Topic: Why not overweight international?
Replies: 37
Views: 3381

Re: Why not overweight international?

... is this partial currency exposure a serious enough risk to outweigh the reasons given in favor of overweighting foreign stocks? I've yet to see any persuasive reason to except the additioanl risks and expenses holding an international portfolio entails for a U.S. investor. There's lots of theor...
by JoMoney
Fri May 22, 2015 7:02 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

http://www.crsp.com/resources/data I don't see anything on there that suggests CRSP's database is "Utilizing constituency rules employed by a market-based fund thus allows our results to potentially represent an opportunity set for other funds that are actively engaged in real markets" - ...
by JoMoney
Fri May 22, 2015 3:56 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

... As far as I can tell, the research database does not, but the benchmark database does contain all the screens. And it makes sense that it would for the sake of realistic backtesting work. The charts re active funds are irrelevant, as you know. I think that's probably where are difference of opi...
by JoMoney
Fri May 22, 2015 3:39 pm
Forum: Investing - Theory, News & General
Topic: Obtaining Exposure to Quality / Profitability Factor
Replies: 44
Views: 2000

Re: Obtaining Exposure to Quality / Profitability Factor

I don't see many arguing there is a credit "risk premium", where people expect to buy junk bonds and out-perform higher grade bonds. Obviously the higher risk bonds pay higher yields, and companies with lower earnings expectations are priced at lower multiples, but when amortized out with...
by JoMoney
Fri May 22, 2015 3:05 pm
Forum: Investing - Theory, News & General
Topic: What if the US stock market was only 25% of the world by market cap?
Replies: 37
Views: 2326

Re: What if the US stock market was only 25% of the world by market cap?

I wonder how J Bogle would answer this question, since in the past he has indicated that international stocks may or may not be advantageous to the investor. I think what he's said, is along the lines of he doesn't do it, and doesn't think its necessary for U.S. investors... as well as point out th...
by JoMoney
Fri May 22, 2015 7:04 am
Forum: Investing - Theory, News & General
Topic: Obtaining Exposure to Quality / Profitability Factor
Replies: 44
Views: 2000

Re: Obtaining Exposure to Quality / Profitability Factor

I don't see many arguing there is a credit "risk premium", where people expect to buy junk bonds and out-perform higher grade bonds. Obviously the higher risk bonds pay higher yields, and companies with lower earnings expectations are priced at lower multiples, but when amortized out with ...
by JoMoney
Fri May 22, 2015 6:25 am
Forum: Investing - Theory, News & General
Topic: Obtaining Exposure to Quality / Profitability Factor
Replies: 44
Views: 2000

Re: Obtaining Exposure to Quality / Profitability Factor

As far as risk stories go, I think momentum takes the cake. Not a day goes by that you don't find people urging to sell merely because something has gone up, believing that a reversal in price or earnings or whatever is eminent. To me, it seems perfectly clear that someone choosing to sell, is selli...
by JoMoney
Fri May 22, 2015 3:38 am
Forum: Investing - Theory, News & General
Topic: What if the US stock market was only 25% of the world by market cap?
Replies: 37
Views: 2326

Re: What if the US stock market was only 25% of the world by market cap?

It depends. :?
My general concern would be to have a reasonably diversified group of stocks that I can buy and hold at very low cost. I'm not much of a believer in the idea of market-cap having some major role in a businesses profitability.
by JoMoney
Fri May 22, 2015 3:26 am
Forum: Investing - Theory, News & General
Topic: Obtaining Exposure to Quality / Profitability Factor
Replies: 44
Views: 2000

Re: Obtaining Exposure to Quality / Profitability Factor

... it doesn't change the zero-sum nature of it, all the players at the table still can't beat each other. For every dollar won, there's an offsetting dollar lost... This ignores the role of the corporation in the process. These are capital markets which raise money for companies and also distribut...
by JoMoney
Fri May 22, 2015 2:30 am
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

... I just don't think that's right because as far as I can tell the CRSP indicies employ the same baseline inclusion screens as the CRSP Benchmark data (ie "the FF data"). Maybe, but CRSP is a pretty new player in the game of creating investable stock indexes. I find it hard to believe C...
by JoMoney
Fri May 22, 2015 2:14 am
Forum: Investing - Theory, News & General
Topic: Obtaining Exposure to Quality / Profitability Factor
Replies: 44
Views: 2000

Re: Obtaining Exposure to Quality / Profitability Factor

... ANC wrote: " The more notable thing about these numbers, however, is just how high they are. To the extent this discussion is directed towards small, I would ask do you really want to buy these things now? " They say it takes two differing opinions to make a market. My stock funds por...
by JoMoney
Fri May 22, 2015 12:49 am
Forum: Investing - Theory, News & General
Topic: Obtaining Exposure to Quality / Profitability Factor
Replies: 44
Views: 2000

Re: Obtaining Exposure to Quality / Profitability Factor

^ I too am/was drawn to the idea of "GARP". It's a compelling idea/story, and I think these new ideas of mixing "value" while screening for profitability and negative momentum is just trying to rehash the same thing under some "Factor" paradigm. But it doesn't make real...
by JoMoney
Thu May 21, 2015 9:41 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

... Can you provide examples of junky stocks that are corrupting French's data? I had pointed to the research paper over here: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=157764 It seems to imply that when actual mutual-funds (index or otherwise) are implemented, that the most illiqui...
by JoMoney
Thu May 21, 2015 4:18 pm
Forum: Investing - Theory, News & General
Topic: Market Cap and Value
Replies: 46
Views: 2249

Re: Market Cap and Value

I have a belief that small-cap stocks are the equivalent of junk bonds. You can't just universally buy junk bonds all the time and expect to earn some "premium", but there have been times that the spread between junk and quality bonds sometimes get very high and it makes for a more appeali...

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