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Re: Let me get this straight about SCV & factor diversificat

My goal is to do everything online from a Chromebook if possible, so found a site that would execute R script online, and used that. I just stumbled on a Google sheets function that generates the linear regression outputs: LINEST. I tried it, and it generates exactly the same regression coefficient...
by Kevin M
Tue Sep 16, 2014 2:31 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Let me get this straight about SCV & factor diversificat

First output looks like R, right? Yes. I am a complete novice on this, and simply copied the R script from a tutorial on http://www.CalculatingInvestor.com (very cool site, which I'm now digging through), and did slight modifications as necessary. My goal is to do everything online from a Chromeboo...
by Kevin M
Mon Sep 15, 2014 10:47 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Let me get this straight about SCV & factor diversificat

Ketawa, point taken about the changes in indexes. It would be interesting to see regressions of the returns on the different indexes that Vanguard's value funds tracked in the past vs. the CRSP indexes they are tracking now. At least this would help us understand how much of the puzzle is explained...
by Kevin M
Mon Sep 15, 2014 6:15 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Do I need to hold my emergency fund in cash?

If you have enough in taxable accounts, I don't think it's necessary to think in terms of "emergency fund"; I never did. You do need to think about liquidity, which in my mind includes not having to sell an asset at a disadvantageous time. I'd prefer not to sell stocks after a big decline-...
by Kevin M
Sun Sep 14, 2014 6:56 pm
 
Forum: Investing - Help with Personal Investments
Topic: Do I need to hold my emergency fund in cash?
Replies: 29
Views: 3047

Re: The dangerous practice of rebalancing...

What I've read, and it seems reasonable, is that there can be a decent rebalancing bonus in volatile markets without a strong, longer-term trend, but rebalancing is more likely to work against you in long, trending markets. It seems that we were offered some excellent opportunities to generate a reb...
by Kevin M
Sat Sep 13, 2014 10:51 pm
 
Forum: Investing - Theory, News & General
Topic: The dangerous practice of rebalancing...
Replies: 180
Views: 11237

Re: Let me get this straight about SCV & factor diversificat

Kevin, this whole ex post regression thing is not that reliable. Look at the 95% confidence intervals the PV site gives you when clicking detailed stats. Usually you better better results with a so called holdings based analysis. Morningstar does this for their style boxes, for example. Our problem...
by Kevin M
Sat Sep 13, 2014 10:26 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Why is REIT only sector fund recommended in slice & dice

This thread is drifting way off topic. There are many threads on tilting to small-cap and value stocks; probably one started almost every day. We are well into page 3, and OP has not participated since page 2. Perhaps the thread has run its course.

Kevin
by Kevin M
Sat Sep 13, 2014 10:06 pm
 
Forum: Investing - Theory, News & General
Topic: Why is REIT only sector fund recommended in slice & dice?
Replies: 113
Views: 7444

Re: Need some advice on expanding my portfolio!

In the taxable side of things, what might be a good setup? I'm thinking here go slightly heavier in the bonds as we (my wife and I) are mainly doing this as a liquid/accessible way to get some better returns on our cash. I'm still good with a fair amount of risk here. Plus I'll be adding 1000-1500/...
by Kevin M
Sat Sep 13, 2014 9:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: Need some advice on expanding my portfolio!
Replies: 6
Views: 832

Re: Let me get this straight about SCV & factor diversificat

<snip>If you switch to a four factor regression you see the reason for this behaviour: Momentum of -0.08 (LV) vs. -0.01 (TSM) <snip> We see that momentum can offset value. We also see that there is a size difference between largecaps and the market portfolio. Nothing new so far, I'd say. More good ...
by Kevin M
Sat Sep 13, 2014 3:20 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Let me get this straight about SCV & factor diversificat

The annual alpha is approximately in line with the expense ratio. Historical premiums have been about 6% for Market over the risk free rate, 2% for Size, 4% for Value, and 7% for Momentum. Multiply all those numbers together with the factor loadings and subtract the fund's expense ratio, and you ge...
by Kevin M
Sat Sep 13, 2014 3:06 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Percentage of bond money in foreign bonds

Portfolio Watch doesn't know about the 70% of my fixed income that is direct CDs (held at banks and credit unions, not at Vanguard). I doubt you'll find a single Vanguard research paper that recommends buying CDs from banks and credit unions, but I'm confident that it is a superior strategy (for me)...
by Kevin M
Fri Sep 12, 2014 10:44 pm
 
Forum: Investing - Help with Personal Investments
Topic: Percentage of bond money in foreign bonds
Replies: 8
Views: 777

Re: The dangerous practice of rebalancing...

But isn't this essentially what Dr. Bernstein recommends: <snip> Not exactly. This is what he recommends for investors near or in retirement--an LMP to meet basic needs, and an RP for assets beyond that. For young investors, a portfolio of 100% stocks, highly tilted to small-value is rational, sinc...
by Kevin M
Fri Sep 12, 2014 10:25 pm
 
Forum: Investing - Theory, News & General
Topic: The dangerous practice of rebalancing...
Replies: 180
Views: 11237

Re: Let me get this straight about SCV & factor diversificat

Browser, thanks for clarifying. Do you have a portfolio now? An investment policy? (Sorry, didn't search your posts to see). From what you say, it sounds like if you have a portfolio, it's probably something like the three-fund portfolio, and you are exploring the idea of modifying your investment p...
by Kevin M
Fri Sep 12, 2014 6:54 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Why is REIT only sector fund recommended in slice & dice

jay22 wrote:Small cap index (NAESX) is also recommended for those who slice & dice, isn't it?

Yes, some recommend it as part of a sliced/diced/tilted portfolio, but small-cap is not a sector as the word typically is used.

Kevin
by Kevin M
Fri Sep 12, 2014 5:38 pm
 
Forum: Investing - Theory, News & General
Topic: Why is REIT only sector fund recommended in slice & dice?
Replies: 113
Views: 7444

Re: Let me get this straight about SCV & factor diversificat

Browser, based on your various posts, it seems like sticking with total market investing probably is an appropriate choice for you. Probably also for many if not most others. Are you really struggling with this, or just looking to confirm your bias toward total market investing (no negative inferenc...
by Kevin M
Fri Sep 12, 2014 5:35 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Should I break my CD at Ally and get a new one's ?

I neglected to mention one really nice feature about PenFed early withdrawal penalties: they do not eat into principal! So if you buy a PenFed CD, then a month or two later they increase their rates significantly, you only lose the one or two months of interest if you break the CD and buy the new CD...
by Kevin M
Fri Sep 12, 2014 5:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I break my CD at Ally and get a new one's ?
Replies: 14
Views: 1810

Re: Interest rates - Bond effects?

I’m a little vague in my undemanding why bonds become less valuable when interest rates rise. <snip> But, how interest rate increases directly affect the value (price?) of bonds still isn’t entirely clear to me. Hopefully the explanations so far have helped. To fully understand this topic you just ...
by Kevin M
Fri Sep 12, 2014 5:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Interest rates - Bond effects?
Replies: 7
Views: 885

Re: Should I break my CD at Ally and get a new one's ?

Right after the 3% special Penfed's rates plummeted. Currently a 5/7 year are only at 1.21%. It costs little to join PenFed just in case. But, with their rate so low now; I doubt they will go from 1.21 to 3+% this year end. Of course no one knows, but as a calibration point, PenFed's 7-year CD rate...
by Kevin M
Thu Sep 11, 2014 10:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I break my CD at Ally and get a new one's ?
Replies: 14
Views: 1810

Re: Should I break my CD at Ally and get a new one's ?

Good rates at PenFed typically last a month or two. Since this a taxable account, should be no problem to join and open a CD within a few days (can take 2-3 weeks to do an IRA transfer, but that's another story). If you are planning on continuing to use CDs longer term, you'll probably do well at Pe...
by Kevin M
Thu Sep 11, 2014 9:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I break my CD at Ally and get a new one's ?
Replies: 14
Views: 1810

Re: Need some advice on expanding my portfolio!

A few comments. Looks like you basically like the idea of the 3-fund portfolio (somewhat modified in the Target Retirement funds by adding a total international bond fund). You state you want 80/20 stock/bond. TR funds do US/International stocks at 70/30 ratio, so for an 80/20 portfolio that works o...
by Kevin M
Thu Sep 11, 2014 8:08 pm
 
Forum: Investing - Help with Personal Investments
Topic: Need some advice on expanding my portfolio!
Replies: 6
Views: 832

Re: Should I break my CD at Ally and get a new one's ?

These are now more like 3.5/4-year CDs, so those are the rates to use for a fair comparison. The 60-day EWP is valuable, especially if you're using for an emergency fund. Although I have a bunch of Ally CDs purchased when their rates were more competitive and the EWP was 60 days of interest, I would...
by Kevin M
Thu Sep 11, 2014 7:20 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I break my CD at Ally and get a new one's ?
Replies: 14
Views: 1810

Re: Let me get this straight about SCV & factor diversificat

I still haven't seen a reasonable, numerical analysis/explanation of how a fund can have a positive, statistically significant regression coefficient in a multifactor model without "capturing" whatever premium that factor delivered. For example, I could see how the effect of another factor...
by Kevin M
Thu Sep 11, 2014 4:32 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Let me get this straight about SCV & factor diversificat

Well, it failed to make its way into better returns then its growth counterpart, despite the academic research suggesting that its been a great decade for value, VBR have been underperforming VBK since the inception of the 2 ETFs. Regardless of whether it captured "value", it certainly mi...
by Kevin M
Wed Sep 10, 2014 10:36 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Let me get this straight about SCV & factor diversificat

Yeah, that is the biggest reason to be skeptical about the value premium. It seems to be remarkably sensitive to how you try to capture it. Vanguard failed to capture any of it. This does not make sense to me. The regression of VG SCV (VISVX) on the FF research factors for the period 06/01/1998 06/...
by Kevin M
Wed Sep 10, 2014 10:09 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 8517

Re: Rather macabre but necessary question

Did not see anything from OP about wife's work history, but assuming she worked enough to qualify for social security benefits, then starting the survivor benefit as soon as OP quits working is a good suggestion. Can then think more about deferring collecting on own record for the additional longevi...
by Kevin M
Wed Sep 10, 2014 9:54 pm
 
Forum: Personal Finance (Not Investing)
Topic: Rather macabre but necessary question
Replies: 72
Views: 5344

Re: would like to protect principal

It mostly comes down to a trade-off between risk and return, except that currently you can get a somewhat better trade-off on FDIC-insured deposit accounts. At the bottom of the risk/return pyramid is a risk-free, FDIC-insured savings account earning 0.95% pre-tax, which is 0.7125% after tax at a 25...
by Kevin M
Wed Sep 10, 2014 8:07 pm
 
Forum: Investing - Help with Personal Investments
Topic: would like to protect principal
Replies: 15
Views: 981

Re: Ultimate Buy and Hold - 8 slices vs 4

Given how overlooked Mid Cap is, and the sheer number of investors now tilting toward small and small value would it not be prudent to also include the very "unloved" (generally speaking) Mid Cap and Mid Cap value in a portfolio like this one? I've posted a lot about this elsewhere. If yo...
by Kevin M
Wed Sep 10, 2014 6:42 pm
 
Forum: Investing - Theory, News & General
Topic: Ultimate Buy and Hold - 8 slices vs 4
Replies: 624
Views: 213925

Re: "Why 97% of People Don't Use 529 College Savings Plans."

I have never understood how stable value funds can offer liquidity, a stable NAV, and yields much higher than money market funds. Because the insurance companies offering the SV funds take much of the risk; i.e., they invest in riskier assets, like longer-term bonds, expecting higher returns in the...
by Kevin M
Wed Sep 10, 2014 6:15 pm
 
Forum: Investing - Theory, News & General
Topic: "Why 97% of People Don't Use 529 College Savings Plans."
Replies: 110
Views: 10279

Re: So far, so good? Vanguard Total International Bond

<snip>I think it is interesting that international bonds have outperformed domestic bonds for the past year, while the opposite is certainly true on the equity side...I don't have an explanation for that <snip> The bond part should be fairly straightforward. Other than defaults, the return is purel...
by Kevin M
Wed Sep 10, 2014 5:57 pm
 
Forum: Investing - Theory, News & General
Topic: So far, so good? Vanguard Total International Bond
Replies: 44
Views: 3844

Re: Bond Funds and Interest Rates Question

Higher yield almost always means higher risks. The "almost" is an important qualifier, especially if you think in terms of "fixed income" instead of just "bonds". Some big exceptions in the current environment are certain federally insured (FDIC/NCUA) deposit accounts....
by Kevin M
Wed Sep 10, 2014 5:02 pm
 
Forum: Personal Finance (Not Investing)
Topic: Bond Funds and Interest Rates Question
Replies: 17
Views: 1260

Re: "Why 97% of People Don't Use 529 College Savings Plans."

I'm in California. I haven't read very much about 529 plans, is it worth pursuing if you've maxed out all your other retirement funds? Also a CA resident, and as mentioned above, I use the Colorado 529 just to get access to the stable value fund earning 2.64% in 2014 (was earning 3% in 2013 when I ...
by Kevin M
Wed Sep 10, 2014 4:29 pm
 
Forum: Investing - Theory, News & General
Topic: "Why 97% of People Don't Use 529 College Savings Plans."
Replies: 110
Views: 10279

Re: 50 year old looking for retirement advice & help...

You could also live another 40 years. I wouldn't let age discourage you. 50 is the new 40. That would be 20 more years of work, to age 70, and 20 years of retirement, which was the scenario I presented in my earlier reply. It's not a matter of being optimistic or pessimistic, but of being realistic...
by Kevin M
Wed Sep 10, 2014 12:24 am
 
Forum: Investing - Help with Personal Investments
Topic: 50 year old looking for retirement advice & help...
Replies: 15
Views: 1996

Re: Bond Funds and Interest Rates Question

If the FEDS raise interest rates to 4% what will be the corresponding percentage drop in an average bond index fund, for example VTAPX? Let's look at what happened the last time they did that. <snip> It was 1% on June 1, 2004, and 4% on Nov. 1, 2005. To further illustrate this point with the yield ...
by Kevin M
Tue Sep 09, 2014 8:32 pm
 
Forum: Personal Finance (Not Investing)
Topic: Bond Funds and Interest Rates Question
Replies: 17
Views: 1260

Re: Bond Funds and Interest Rates Question

Lots of good answers, but one relevant term that has not been mentioned is "yield curve". To illustrate some of the points already made, playing around with this dynamic yield curve tool is useful StockCharts.com - Free Charts - Dynamic Yield Curve . You can view how the yield curve has ch...
by Kevin M
Tue Sep 09, 2014 7:30 pm
 
Forum: Personal Finance (Not Investing)
Topic: Bond Funds and Interest Rates Question
Replies: 17
Views: 1260

Re: Bond Funds and Interest Rates Question

Thank you both! I'll see what options are available to me. This is inside of a Roth. Keep in mind that you can transfer an IRA (Roth or traditional) to another custodian, so if you don't like the options with your current custodian, you can transfer to another one. I have done many IRA transfers ou...
by Kevin M
Tue Sep 09, 2014 7:24 pm
 
Forum: Personal Finance (Not Investing)
Topic: Bond Funds and Interest Rates Question
Replies: 17
Views: 1260

Re: Anyone use Legal Zoom for LivingTrust?

Yes, I understand a trust's function to avoid an "expensive and complicated" probate. Doesn't it follow then that in states that are considered have streamlined probate ("uniform probate code") and for straightforward ("uncomplicated") circumstances, the use of a trust...
by Kevin M
Tue Sep 09, 2014 6:58 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone use Legal Zoom for LivingTrust?
Replies: 75
Views: 4809

Re: "Why 97% of People Don't Use 529 College Savings Plans."

One reason to use a 529 is to get access to investment options that aren't available elsewhere. An example is the Colorado Stable Value fund, earning 2.64% in 2014. Hard to beat for safe, potentially tax-free fixed income.

Kevin
by Kevin M
Tue Sep 09, 2014 6:31 pm
 
Forum: Investing - Theory, News & General
Topic: "Why 97% of People Don't Use 529 College Savings Plans."
Replies: 110
Views: 10279

Re: Anyone use Legal Zoom for LivingTrust?

Why is a trust needed for the disposition of the house? Couldn't the normal probate process be applied to the real estate and the assets from the sale distributed according to your will? The main purpose of a living trust is to avoid probate in states, like CA, where it can be expensive and complic...
by Kevin M
Tue Sep 09, 2014 5:48 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone use Legal Zoom for LivingTrust?
Replies: 75
Views: 4809

Re: Simplicity vs. Complexity

How about an even simpler, one-fund Vanguard portfolio that did even better over the last 20 years? According to Morningstar, $10K invested in Vanguard Healthcare fund (VGHCX) from 9/8/1994 - 9/8/2014 grew to $195,197. That figure for Vanguard Total Stock (VTSMX) is $62,574, and for Vanguard Balance...
by Kevin M
Tue Sep 09, 2014 5:06 pm
 
Forum: Investing - Theory, News & General
Topic: Simplicity vs. Complexity
Replies: 50
Views: 3310

Re: Rather macabre but necessary question

Sympathies on the diagnosis. Using rough, rounded estimates, with $2M earning 0% real, you could spend $100K/year and it would last 20 years, which is at the far outside range of your expected lifetime. This is 2X the $50K/year you mentioned, and does not include the pension or social security. You ...
by Kevin M
Tue Sep 09, 2014 4:06 pm
 
Forum: Personal Finance (Not Investing)
Topic: Rather macabre but necessary question
Replies: 72
Views: 5344

Re: 50 year old looking for retirement advice & help...

You probably will have to save a huge percentage of your work income starting this late. There are a number of fancy retirement calculators out there, but you can get a rough idea by doing some simple spreadsheet work. You need to estimate your annual expenses in retirement, estimate your annual soc...
by Kevin M
Mon Sep 08, 2014 10:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: 50 year old looking for retirement advice & help...
Replies: 15
Views: 1996

Re: Do you consider your emergency fund part of your portfol

I voted "yes", since I don't think in terms of an emergency fund, and there was no choice for "I don't have an emergency fund". I include all of my financial assets in my portfolio, including checking and savings accounts. I'm retired, so whether or not an expense is anticipated ...
by Kevin M
Mon Sep 08, 2014 9:54 pm
 
Forum: Investing - Theory, News & General
Topic: Do you consider your emergency fund part of your portfolio?
Replies: 50
Views: 3038

Re: So far, so good? Vanguard Total International Bond

If the two bond funds were expected to perform exactly the same over short time periods, there would have been no reason for Vanguard to add the international bond fund to their TR and LS funds. The fact that they performed somewhat differently over a year is evidence that adding the international b...
by Kevin M
Mon Sep 08, 2014 7:50 pm
 
Forum: Investing - Theory, News & General
Topic: So far, so good? Vanguard Total International Bond
Replies: 44
Views: 3844

Re: Bond Funds

One reason not to roll over a 401k to an IRA is if you want to do backdoor Roth IRA contributions, which is what people do when their income is too high to do direct Roth IRA contributions. If you don't anticipate being in that situation, then rolling a lousy 401k into an IRA is a good idea. There i...
by Kevin M
Mon Sep 08, 2014 7:33 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond Funds
Replies: 5
Views: 565

Re: Cost Basis Methods

In the past Vanguard did not track specific tax lots for mutual funds, but they do now, so selling specific tax lots purchased since the change is now easy. Since your account is fairly new, all of your shares are "covered shares", for which Vanguard tracks tax lots. You can set up the ele...
by Kevin M
Mon Sep 08, 2014 7:17 pm
 
Forum: Investing - Help with Personal Investments
Topic: Cost Basis Methods
Replies: 19
Views: 771

Re: Fund Questions

1. Is there any major difference between: VTSMX (min $3k, ER 0.17%) vs VTSAX (min $10k, ER 0.05%) ? 2. Will it considered "wash sale" if I sold Vanguard's Total stock fund (VTSAX) and buy fidelity's total stock fund (FSTVX)? 1. Yes, VTSAX has a lower expense ratio and higher minimum (as y...
by Kevin M
Mon Sep 08, 2014 3:53 pm
 
Forum: Investing - Help with Personal Investments
Topic: Fund Questions
Replies: 8
Views: 494

Re: Anyone use Legal Zoom for LivingTrust?

This TOD has really confused me....So I die she gets my IRA and when she dies she can leave it 50/50 to our 2 kids.No TOD needed...just the 2 kids listed as beneficiaries.That was what I thought initially and someone got me hung up on this TOD thing.Then all I have to worry about is the house which...
by Kevin M
Mon Sep 08, 2014 3:04 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone use Legal Zoom for LivingTrust?
Replies: 75
Views: 4809

Re: Rebalancing a 3 fund portfolio

I had just purchased the TBM a week ago when I sold my Apple holdings, so my gain is basically zero. Great, so basically starting with a clean slate for this piece. Here's a bit more on the way I'd think about your fixed income trade-offs in a taxable account. First, you want to compare taxable-equ...
by Kevin M
Sun Sep 07, 2014 9:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rebalancing a 3 fund portfolio
Replies: 21
Views: 1953

Re: Rebalancing a 3 fund portfolio

I changed the dividends/distribution on my Vanguard taxable account so it is now going into the Vanguard money market vs being reinvested. There is no reason to use a money market fund in a taxable Vanguard mutual fund account. Just link your Ally savings account to Vanguard, and direct the dividen...
by Kevin M
Sun Sep 07, 2014 7:04 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rebalancing a 3 fund portfolio
Replies: 21
Views: 1953

Re: Rebalancing a 3 fund portfolio

Their 5 year rates recently went up and are currently 2% which is only .3% behind the leaders in the 5 year interest race, but Ally only charges a 150 day penalty for early withdrawal where the others charge 1 year penalty, if that should be needed. Actually, Synchrony bank pays 2.3% (2.25% if <$25...
by Kevin M
Sun Sep 07, 2014 7:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rebalancing a 3 fund portfolio
Replies: 21
Views: 1953
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