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Re: Small cap value premium

Here's another interesting (to me anyway) comparison: Dr. Bernstein reported on his website that the P/E's for 6/30/1998 Wilshire Large-Growth Index P/E was 35.2x Wilshire Small-Value Index P/E was 19.6x From the Wilshire Associates website we can find the current P/E's as of 10/31/2014 Wilshire Lar...
by JoMoney
Thu Nov 27, 2014 6:45 am
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

Let's look at the change of relative P/E ratios over the past decade for Vanguard's Small-Value fund and Total Stock Market According to Morningstar: $10,000 invested in VISVX (Vanguard Small-Value) from 06/30/2004 to 06/30/2014 grew to $25,107.56 (total return including dividends) $10,000 invested ...
by JoMoney
Thu Nov 27, 2014 12:28 am
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

...Ya but didn't jack bogle point out in his book that if you take a long enough time period all the speculation eventually dissolves and the return is solely determined by earnings and dividends? Yes, and in the past it certainly has waxed and waned where someone who averaged in and averaged out a...
by JoMoney
Wed Nov 26, 2014 8:47 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

... this might explain short-term differences in return but if we agree that long-term returns are ONLY driven by two things, earnings growth and dividend yield, then volatility does not factor in. A company's, or a group of companies', future long-term growth should solely be dependent on their fu...
by JoMoney
Wed Nov 26, 2014 7:37 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

I'd say there's at least a 60% chance (over any period) that behavioral errors like performance chasing will lead to people underperforming a "Total Stock Market" index fund. 10+ year periods where "Small-Cap Value" underperforms shouldn't be hard to imagine http://i61.tinypic.co...
by JoMoney
Wed Nov 26, 2014 7:18 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

...Remember that we need to explain the behavior of over half of the market. It isn't one or two people being foolish can explain away this - you need big institutional buyers to be stupid too. Right, except if it's just stupidity or "behavioral" people will wise up sooner or later. You h...
by JoMoney
Tue Nov 25, 2014 3:42 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Question about options for annuities

An Annuity You Really Should Avoid : Big promises but skimpy returns plague equity-indexed annuities. http://www.kiplinger.com/article/insurance/T003-C000-S002-an-annuity-you-really-should-avoid.html Index annuities are poison for your pocketbook http://www.clarkhoward.com/news/clark-howard/insuranc...
by JoMoney
Tue Nov 25, 2014 6:11 am
 
Forum: Investing - Theory, News & General
Topic: Question about options for annuities
Replies: 13
Views: 878

Re: Small cap value premium

In a competitive market, why would prices not rise to a equilibrium (at least within term length)? If there's excess returns to be found, in a open and competitive market it will get squeezed out. It's also hard to see why a stock would be considered a unique "asset class" but only if trad...
by JoMoney
Mon Nov 24, 2014 4:20 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

...That hasn't happened. The spread has in fact widened a bit. Crowding is obviously possible. But it also hasn't happened in the +22 years since the publication of the original Fama and French paper.... And yet a Growth index has outperformed over the past decade, and is trading at a lower P/E and...
by JoMoney
Mon Nov 24, 2014 3:36 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: bond fund yield variation and the case for long-term fun

I'm not sure if this is helpful or not, but here's three charts of the dividend distributions from three Vanguard bond funds since March 1994. This might give some feel for how quickly interest rate changes impact the yield on a bond fund. The dividend data is from Yahoo. The spikes are from the LT ...
by JoMoney
Mon Nov 24, 2014 5:02 am
 
Forum: Investing - Theory, News & General
Topic: bond fund yield variation and the case for long-term fund
Replies: 18
Views: 1254

Re: Small cap value premium

Is "factor crowding" a looming issue for smart beta investors? Bruce Jacobs and Kenneth Levy of Jacobs Levy Equity Management believe so: ... Read the report here: Investing in a Multidimensional Market ... This is interesting, there's another report that is referenced there, "Abnorm...
by JoMoney
Sun Nov 23, 2014 3:40 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

... If Larry can produce a paper or interview in which Gene Fama refers to small value as an asset class, Larry wins. Such talk is "accepted language of finance" and not just accepted talk for DFA salesmen. If Larry can't, then it's not and Rick wins. Eugene Fama is in the category of DFA...
by JoMoney
Sat Nov 22, 2014 3:36 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

... One other comment. Even if two asset classes have the same returns, it can still be that investors can expect to make more money regularly buying the one asset than buying the other. The reason being that for investors DCAing over time, extra volatile is in fact a good thing. It provides more o...
by JoMoney
Fri Nov 21, 2014 9:39 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Does investing in a 401k actually save any money?

- Might have better/lower cost investments available in some 401k plans - 401k/ERISA plans offer shielding from various types of liability claims - You can sell / exchange / trade / rebalance assets within a plan and not incur any taxes - Income from bonds and REITS do not get any special capital-ga...
by JoMoney
Fri Nov 21, 2014 9:11 pm
 
Forum: Investing - Theory, News & General
Topic: Does investing in a 401k actually save any money?
Replies: 59
Views: 5086

Re: Small cap value premium

....Thanks everyone, sorry for starting this agonizing thread. Thanks for posting. Some people complain, but they're free to ignore the thread altogether if they wish to. You may want to note that Vanguard's Small-Cap fund (NAESX) was not always an "index fund" nor always an index fund. h...
by JoMoney
Fri Nov 21, 2014 8:21 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

In recent years, the longest period of time when small-value under-performed was 18 years (from 1984 through 2001). You should be prepared to wait that long if you're going to take this additional risk. I call it "a life-long investment strategy." Don't do it if you're not willing to comm...
by JoMoney
Fri Nov 21, 2014 6:58 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Tracking Error Aversion

"Tracking error" is a measure of how closely a portfolio follows the index to which it is benchmarked. People on here often bring up the idea that aversion to tracking error is some sort of problem that people need to get over... I just don't get why people say that :? . Every index fund s...
by JoMoney
Fri Nov 21, 2014 6:36 pm
 
Forum: Investing - Theory, News & General
Topic: Tracking Error Aversion
Replies: 3
Views: 409

Re: 10 Reasons why Merriman dislikes Total Stock Mkt

What Merriman is being accused of is being a fan of DFA and possibly being a salesman for them - he was in the past, and it's a credit to him that he actually believed in the product he was selling. The idea that people believe that's derisive is telling of people's opinion of DFA, and I think it's ...
by JoMoney
Fri Nov 21, 2014 6:19 pm
 
Forum: Investing - Theory, News & General
Topic: 10 Reasons why Merriman dislikes Total Stock Mkt
Replies: 88
Views: 8221

Re: Small cap value premium

It confounds me that people have trouble accepting that a segment of the market can persistently beat the market (over long time periods). If we accept that some segments are riskier than the market as a whole, and if we accept that risk and expected return are inextricably linked, then it follows ...
by JoMoney
Fri Nov 21, 2014 8:36 am
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: 10 Reasons why Merriman dislikes Total Stock Mkt

I find it interesting that being called a fan of DFA is considered derogatory. :D
by JoMoney
Fri Nov 21, 2014 8:06 am
 
Forum: Investing - Theory, News & General
Topic: 10 Reasons why Merriman dislikes Total Stock Mkt
Replies: 88
Views: 8221

Re: TSM vs S&P500

theoretically, the TSM should be closer to its benchmark over the long run because you can ride the full path of a stock from nothing to large cap, whereas the S&P funds always slightly lag the index when companies are added and dropped. This appears to have manifested as no more than in roundi...
by JoMoney
Fri Nov 21, 2014 7:16 am
 
Forum: Investing - Theory, News & General
Topic: TSM vs S&P500
Replies: 19
Views: 1993

Re: TSM vs S&P500

If you're investing in an index fund, "Tracking Error" is important, but you have to make sure you're using the right benchmark to compare it to. The S&P500 is not the "Total U.S. Market" and expecting an index fund following one index to track with some other index is silly,...
by JoMoney
Fri Nov 21, 2014 6:25 am
 
Forum: Investing - Theory, News & General
Topic: TSM vs S&P500
Replies: 19
Views: 1993

Re: Transferring S&P 500 index fund in kind

I'm going to be faced with a similar problem at some point. I really don't like the idea of sitting out of the market for a month, but it may be the simplest choice to get the job done. :annoyed My 401k administrator is Fidelity, and they offer a feature in the 401k plan called BrokerageLink that wi...
by JoMoney
Thu Nov 20, 2014 3:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: Transferring S&P 500 index fund in kind
Replies: 13
Views: 1187

Re: Small cap value premium

In regards to the behavior theory : I would argue that as of late there's been a lot of publicity towards SCV tilting and thus they may be OVER valued if anything. Small Cap Value cannot be over-valued, by definition (i.e. if the price rose high enough to make the stock over-valued, then it wouldn'...
by JoMoney
Thu Nov 20, 2014 3:13 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: 10 Reasons why Merriman dislikes Total Stock Mkt

...if I have historical evidence on one hand and my crystal ball on the other, I will let history be my guide. Does that historical guide ignore the past decade where TSM outperformed DFA's Small-Cap Value, and did so with lower standard deviation and no adviser fees? http://i58.tinypic.com/otoh3d....
by JoMoney
Thu Nov 20, 2014 7:27 am
 
Forum: Investing - Theory, News & General
Topic: 10 Reasons why Merriman dislikes Total Stock Mkt
Replies: 88
Views: 8221

Re: 10 Reasons why Merriman dislikes Total Stock Mkt

... 3.Small value isn't riskier if you view risk as standard deviation. ... I think there are problems with the idea of standard deviation representing risk, but since that was one of his points, I think it's worth pointing out that for the past 10 years, the S&P500 has had significantly lower ...
by JoMoney
Wed Nov 19, 2014 4:16 pm
 
Forum: Investing - Theory, News & General
Topic: 10 Reasons why Merriman dislikes Total Stock Mkt
Replies: 88
Views: 8221

Re: Small cap value premium

Mr. Bogle analyzed actual mutual funds http://johncbogle.com/speeches/JCB_Phila_Ana_2-01.pdf ...Years ago, I analyzed the records of growth funds and value funds going back to 1937, long before the inception of the S&P/Barra Growth and Value Indexes, which date back to 1975. Linking my data with...
by JoMoney
Wed Nov 19, 2014 3:44 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Small cap value premium

I apologize as I know this topic has been discussed in detail. But I am still having trouble wrapping my mind around why or how a particular sector or style box can outperform indefinitely. We hear that SCV have historically higher returns that the rest of US market. But would this not mean that th...
by JoMoney
Tue Nov 18, 2014 3:56 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 138
Views: 8723

Re: Is investing more risky today today than before the inte

Even beyond investing, I think the Internet has brought new risks to our lives. There's a lot of day-to-day activities people are growing more and more reliant on the Internet for, and there's new types of fraud, identity theft, and ways people can be victimized without ever leaving their house. The...
by JoMoney
Tue Nov 18, 2014 4:23 am
 
Forum: Investing - Theory, News & General
Topic: Is investing more risky today today than before the internet
Replies: 30
Views: 2823

Re: Can We Trust the Mutual Fund Price Quotes on Morningstar

Mutual funds only update price once a day, until that day's close is updated the previous close is the most recent price. If you need more frequent pricing (for whatever reason), mutual funds may not be the best choice.
by JoMoney
Tue Nov 18, 2014 2:15 am
 
Forum: Investing - Theory, News & General
Topic: Can We Trust the Mutual Fund Price Quotes on Morningstar?
Replies: 6
Views: 689

Re: Why I Like Index Funds

...A Index Fund with a 0.1% yearly expense/fee, when a investment perhaps triples in value in real terms over 30 years, will have the equivalent of a average expense/fee of 0.2%/year. More expensive than just paying one off purchase costs to buy a bunch of stocks and incurring no further ongoing co...
by JoMoney
Mon Nov 17, 2014 3:21 pm
 
Forum: Investing - Theory, News & General
Topic: Why I Like Index Funds
Replies: 26
Views: 3920

Re: Why own International at all?

Couple of comments, The long-term performance of the total international index is much lower than the total stock market index. Eh? Developed international stocks have beat US stocks since 1972. A 50/50 split between domestic and international did better yet. The full results are here . The problem ...
by JoMoney
Sun Nov 16, 2014 3:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why own International at all?
Replies: 45
Views: 4011

Re: Warren Buffett:Stocks Are In a Zone of Reasonable

Im glad buffet (an 84 year old market timer, and stock picker) has views on the market valuation. I don't put much value in his thoughts, but there are soothsayers out there for sure. I don't think anyone really knows. I think Buffett would probably argue against the "market timer" monike...
by JoMoney
Sun Nov 16, 2014 5:25 am
 
Forum: Investing - Theory, News & General
Topic: Warren Buffett:Stocks Are In a Zone of Reasonable
Replies: 5
Views: 1248

Re: Is Boglehead investing becoming the conventional wisdom?

Doesn't index investing depend upon a relatively efficient market? And doesn't the efficient market require a lot of people watching it? As the popularity of index funds increases there will be fewer people trying to determine what the fair price of any stock is. One could easily see how this would...
by JoMoney
Sun Nov 16, 2014 3:37 am
 
Forum: Investing - Theory, News & General
Topic: Is Boglehead investing becoming the conventional wisdom?
Replies: 23
Views: 3041

Warren Buffett:Stocks Are In a Zone of Reasonable

Warren Buffet gave a presentation in Sun Valley back during the dot-com bubble of late 1999. At that speech he compared the total stock market capitalization to GDP as a relative comparison to show how far stock prices had grown and that they were seriously over valued at 1999 levels. I've seen this...
by JoMoney
Sat Nov 15, 2014 10:55 pm
 
Forum: Investing - Theory, News & General
Topic: Warren Buffett:Stocks Are In a Zone of Reasonable
Replies: 5
Views: 1248

Re: How to buy happiness (WSJ)

Money can't buy happiness, but it will pay the salaries of a large research staff to study the problem.
by JoMoney
Sat Nov 15, 2014 8:40 pm
 
Forum: Personal Consumer Issues
Topic: How to buy happiness (WSJ)
Replies: 31
Views: 3587

Re: Why Not 100% Treasuries if your Risk is on the Equity Si

Treasuries are among the most liquid of bonds and therefore the ones least likely to encounter problems. There was a recent "flash crash" in Treasury yields. If it's stilll available to non-WSJ subscribers through Google, I would recommend this article: Bond Swings Draw Scrutiny .... That...
by JoMoney
Sat Nov 15, 2014 6:36 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why Not 100% Treasuries if your Risk is on the Equity Side?
Replies: 40
Views: 3690

Re: What NW amount makes this person financially free?

The Single Life Expectancy table in IRS Pub 590 says a 35 year old has a life expectancy of 48.5 years $24,000 x 48.5 = $1,164,000 Assuming you can find a safe investment that earns enough to keep up with inflation+taxes you take your $24k (+inflation adjustment) each year leaving you with $324,000 ...
by JoMoney
Sat Nov 15, 2014 5:42 am
 
Forum: Investing - Theory, News & General
Topic: What NW amount makes this person financially free?
Replies: 19
Views: 2441

Re: 2014 not a year for stock pickers

...active fund managers are scrambling to find ways to stay relevant. Is the S&P 500 the default index when a fund's holdings are secret :confused They seem to want to compare themselves to the S&P500 when it makes them look good, when they're lagging the market they're quick to explain how...
by JoMoney
Fri Nov 14, 2014 9:24 pm
 
Forum: Investing - Theory, News & General
Topic: 2014 not a year for stock pickers
Replies: 24
Views: 3381

Re: Why own International at all?

I'm not sure what the future returns of International vs. U.S. will look like. They have certainly traded back and forth over time, a lot of that difference has been the effect of relative currency exchange rates. It does appear that the markets expectations for growth in the U.S. are much higher go...
by JoMoney
Fri Nov 14, 2014 8:41 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why own International at all?
Replies: 45
Views: 4011

Re: 2014 not a year for stock pickers

Attached article from Bloomberg confirms that active manangers will never figure it out. What they are doing is trying to figure out how to save their million dollar jobs. I don't care what they say all active funds CANNOT beat the index. For every seller there has to be a buyer, a winner and a los...
by JoMoney
Fri Nov 14, 2014 6:25 pm
 
Forum: Investing - Theory, News & General
Topic: 2014 not a year for stock pickers
Replies: 24
Views: 3381

Re: Why Not 100% Treasuries if your Risk is on the Equity Si

I'm not sure what the point of higher "income" for a balanced stock and bond investor with bonds most likely in a 401K or IRA would be. A person who wants to hold nothing but bonds and is locked in on equating interest paid on bonds with income to a cash flow account can do that if they w...
by JoMoney
Fri Nov 14, 2014 6:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why Not 100% Treasuries if your Risk is on the Equity Side?
Replies: 40
Views: 3690

Re: Why Not 100% Treasuries if your Risk is on the Equity Si

Here's a PortfolioVisualizer.com chart of the income of a $10k investment in Vanguard Intermediate-Term Investment Grade Fund (Blue) Vanguard Intermediate-Term Treasury Fund (Red) http://i58.tinypic.com/2vdi4w4.png Without looking at price, the income on the investment grade corporate fund has been ...
by JoMoney
Fri Nov 14, 2014 3:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why Not 100% Treasuries if your Risk is on the Equity Side?
Replies: 40
Views: 3690

Re: Vanguard ETF vs. Mutual Fund when expenses equal

I find Vanguard ETF's a lot more convenient for monthly rebalancing, and also are good for knowing that I am always getting Admiral expense ratios. For example, with most of the Vanguard mutual funds, after you sell, you need to wait 60 days before you can buy again. Wow! You are the only person wh...
by JoMoney
Fri Nov 14, 2014 3:03 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard ETF vs. Mutual Fund when expenses equal
Replies: 27
Views: 1775

Re: More money equates to feeling poor?

I don't think being Boglehead frugal means you have to deprive yourself, although some people really enjoy being frugal (I'm more envious of someone who got a "better deal" than any sort of flashy name-brand stuff). But it does entail spending something less than you make, and wisely inves...
by JoMoney
Fri Nov 14, 2014 4:09 am
 
Forum: Personal Finance (Not Investing)
Topic: More money equates to feeling poor?
Replies: 34
Views: 3034

Re: Bogleheads get to hedge fund guy

My guess is his reference to Jack's being "too young and inexperienced" is better understood in context, i.e., the reference to '30s investing and Keynes. Here's more of it: "The trouble with Jack Bogle is that he is too young and inexperienced. If he had been investing in the 1930s ...
by JoMoney
Fri Nov 14, 2014 2:26 am
 
Forum: Investing - Theory, News & General
Topic: Bogleheads get to hedge fund guy
Replies: 28
Views: 4417

Re: Why Not 100% Treasuries if your Risk is on the Equity Si

Some people like income. Corporate bonds promise a higher level of regular income than treasuries, and have considerably lower volatility than stocks. The long-term total return on corporates vs. treasuries may not offer a compelling reason to use them, but that can vary over different times and dif...
by JoMoney
Thu Nov 13, 2014 3:42 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why Not 100% Treasuries if your Risk is on the Equity Side?
Replies: 40
Views: 3690

Re: Vanguard ETF vs. Mutual Fund when expenses equal

Mr.Bogle often brings up the fact that ETF's are designed for "trading", and may lure some people into more trading than they might do otherwise. Looking at the volume traded in various ETF's shows that is how they are used, often turning over the equivalent of all their assets several tim...
by JoMoney
Thu Nov 13, 2014 3:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard ETF vs. Mutual Fund when expenses equal
Replies: 27
Views: 1775

Re: Uber Car and the real cost of driving

I would think the government rate is pretty close to the average. AAA does a report with their findings:
by JoMoney
Thu Nov 13, 2014 5:54 am
 
Forum: Personal Consumer Issues
Topic: Uber Car and the real cost of driving
Replies: 32
Views: 2791

Re: Vanguard launches new offering ...

I like the "Retiree in training" shirt, but I'd have to be careful where I wore it. People at work might get the wrong impression.
The big "V" shirt makes me think it should come with a Guy Fawkes mask.
by JoMoney
Thu Nov 13, 2014 4:21 am
 
Forum: Personal Consumer Issues
Topic: Vanguard launches new offering ... [Vanguard merchandise]
Replies: 115
Views: 11223
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