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by Random Walker
Sun May 24, 2015 8:22 am
Forum: Investing - Theory, News & General
Topic: Simple (ex: DFA core) Vs Complex (S&D multiple segments)
Replies: 10
Views: 626

Re: Simple (ex: DFA core) Vs Complex (S&D multiple segments)

I don't think the DFA core funds were a response to the simplicity of VG TSM funds. I think they represent an evolution of asset class tilted investing to become more efficient: minimize forced trading, minimize taxes, minimize rebalancing costs. Now of course, got to admit that those are all excell...
by Random Walker
Sun May 24, 2015 8:17 am
Forum: Investing - Theory, News & General
Topic: another look at dividend paying stocks and valuations
Replies: 43
Views: 2541

Re: another look at dividend paying stocks and valuations

My understanding is that total return of a stock is independent of dividend policy. The total return includes both price appreciation and dividends. But dividend paying stocks are more likely to be value stocks and perhaps higher dividend yield stocks are more valuey. So it is expected that dividend...
by Random Walker
Sat May 23, 2015 7:43 am
Forum: Investing - Theory, News & General
Topic: Simple (ex: DFA core) Vs Complex (S&D multiple segments)
Replies: 10
Views: 626

Re: Simple (ex: DFA core) Vs Complex (S&D multiple segments)

My understanding is that the DFA Core funds maintain a fixed degree of tilt. In fact I think they maintain more pure exposure to the factors than other funds by rebalancing much more frequently, I think daily. I also believe it makes sense to add component value or small value funds to the core fund...
by Random Walker
Fri May 22, 2015 7:56 pm
Forum: Investing - Theory, News & General
Topic: Risk Factors: Variance Skewness Kurtosis
Replies: 9
Views: 1159

Re: Risk Factors: Variance Skewness Kurtosis

I think I remember reading that the data on momentum is so strong that even Fama has become a believer despite the absence of a risk story.

Dave
by Random Walker
Sat May 16, 2015 1:01 pm
Forum: Investing - Theory, News & General
Topic: The CFA Designation
Replies: 4
Views: 426

Re: The CFA Designation

I've looked at bit of the 1st year curriculum and it looks like pretty solid information that make someone better suited to give advice
by Random Walker
Thu May 14, 2015 6:30 pm
Forum: Investing - Theory, News & General
Topic: Poll: Average E/R [Expense Ratio]
Replies: 49
Views: 3122

Re: Poll: Average E/R [Expense Ratio]

"You'll just have to bare with some of us who see it as the equivalent of taking your investment returns and then paying someone to throw it on a roulette wheel and hope it comes up in your favor.." Actually, I see it the same way :-) I don't know how roulette odds work, but that is a good...
by Random Walker
Thu May 14, 2015 4:40 pm
Forum: Investing - Theory, News & General
Topic: Poll: Average E/R [Expense Ratio]
Replies: 49
Views: 3122

Re: Poll: Average E/R [Expense Ratio]

Sharpjm, That was a bit of a snarky comment. Higher fees clearly take away from returns. As I said, costs are certain. Potential advantages of a non TSM type portfolio are only potential. That being said, one should weigh the the advantages and disadvantages of different investment strategies as bes...
by Random Walker
Thu May 14, 2015 2:39 pm
Forum: Investing - Theory, News & General
Topic: Poll: Average E/R [Expense Ratio]
Replies: 49
Views: 3122

Re: Poll: Average E/R [Expense Ratio]

Well, I'm the outlier that put my expense ratio at 0.9%. I have an advisor who provides DFA access. The AUM fee is 0.5% and the average ER of all my funds rounds to about 0.4%. So, since this is a DIY Vanguard forum, I thought It fair to add the two together to total 0.9%. But here is what I get for...
by Random Walker
Tue May 12, 2015 2:51 pm
Forum: Investing - Theory, News & General
Topic: WSJ Opinion:The Federal Reserve Asset Bubble Machine
Replies: 12
Views: 1477

WSJ Opinion:The Federal Reserve Asset Bubble Machine

Anyone read this opinion piece in the Wall Street Journal. It basically says the Fed's easy money policy has led to lofty valuations in all three major asset classes: stocks, bonds, real estate. Certainly gets my attention. Don't think I'll do anything with the information, but it makes me ponder my...
by Random Walker
Mon May 11, 2015 8:14 am
Forum: Investing - Theory, News & General
Topic: Reducing the Black Swans
Replies: 11
Views: 1694

Re: Reducing the Black Swans

Don't know specific ETFs, but I have a response to your basic premise that the SV tilt is more risky in retirement. The heavy tilt to SV is only in the equity portion. The basic stock/bond split can be adjusted to any risk tolerance level. In fact a person may have a lower equity allocation with sam...
by Random Walker
Fri May 08, 2015 10:58 pm
Forum: Investing - Theory, News & General
Topic: Ang's Book Helped Me Understand Beta Better
Replies: 13
Views: 1116

Re: Ang's Book Helped Me Understand Beta Better

I've become a bit of an asset class junkie. I'm a huge fan of Roger Gibson's Asset Allocation and multi asset class investing. I really appreciate the fact that an asset class' contribution to a portfolio depends on expected return, volatility, and correlations. Never learned much about CAPM, but re...
by Random Walker
Fri May 08, 2015 8:29 pm
Forum: Investing - Theory, News & General
Topic: Ang's Book Helped Me Understand Beta Better
Replies: 13
Views: 1116

Ang's Book Helped Me Understand Beta Better

Trying to read Ang's Asset Management. In describing CAPM, he defines beta very nicely. Previously I had just thought of it as volatility. But apparently it's defined as (Volatility of asset)(correlation to market) / volatility market. He calls beta a measure of the Lack of Diversification Potential...
by Random Walker
Fri May 08, 2015 8:15 pm
Forum: Investing - Theory, News & General
Topic: part two of Facts and fiction on value investing bl
Replies: 70
Views: 4500

Re: part two of Facts and fiction on value investing bl

What matters is the behavior of the portfolio as a whole. Volatility is a return killer. Because of volatility the compounded return of the portfolio is less than the weighted average return of the portfolio components. Adding asset classes to a portfolio that can dampen portfolio volatility can bri...
by Random Walker
Wed May 06, 2015 5:23 pm
Forum: Investing - Theory, News & General
Topic: part two of Facts and fiction on value investing bl
Replies: 70
Views: 4500

Re: part two of Facts and fiction on value investing bl

Browser, I think there is another way to look at it. There do not need to be winners and losers regarding the trade of a value stock. Instead there can be market participants with differing appetites for risk, types of risk, and associated returns. Value stocks earn part of their premium because of ...
by Random Walker
Tue May 05, 2015 11:28 am
Forum: Investing - Theory, News & General
Topic: the missing value premium
Replies: 34
Views: 3313

Re: the missing value premium

And to amplify Grap003's point, It takes a lot more of the relatively more expensive value fund to obtain the same tilt with VG than it does with DFA. Also need to take on more market exposure to obtain same tilt with VG that you can get elsewhere. So the VG portfolio with Factor loadings same as sa...
by Random Walker
Sat May 02, 2015 12:09 pm
Forum: Investing - Theory, News & General
Topic: "Don't invest in something you don't understand."
Replies: 55
Views: 3444

Re: "Don't invest in something you don't understand."

I agree that one needs to take the plunge and invest a bit beyond the level of understanding. I got a pretty good grip on risk, expected returns, diversification, etc. For me though, I understand the powerful diversification benefit of CCFs but have very little understanding of their return drivers,...
by Random Walker
Fri May 01, 2015 8:42 am
Forum: Investing - Theory, News & General
Topic: Vanguard vs. DFA when tax efficiency really matters
Replies: 35
Views: 2033

Re: Vanguard vs. DFA when tax efficiency really matters

I am very interested in this post. FWIW, I am about 85% taxable accounts and for this reason chose to go with an advisor who uses DFA. I didn't put hard numbers to the decision (not sure I could figure out how), but the improved portfolio efficiency, less beta exposure for same tilt, and expected ta...
by Random Walker
Tue Apr 28, 2015 11:26 am
Forum: Investing - Theory, News & General
Topic: Why Does My Muni Bond Fund Frequently Not Change Price?
Replies: 5
Views: 811

Why Does My Muni Bond Fund Frequently Not Change Price?

When I check the value of my municipal bond fund periodically, I'm surprised by the number of days there is no change in price. Are the munis priced daily? I know the market is relative to Treasuries very illiquid and opaque. Thanks

Dave
by Random Walker
Fri Apr 24, 2015 2:13 pm
Forum: Investing - Theory, News & General
Topic: Is tax loss harvesting that powerful ?
Replies: 44
Views: 3240

Re: Is tax loss harvesting that powerful ?

I believe the big benefit of TLH is not the 3K offset of yearly ordinary income. I believe it is the delayed capital gains tax when one is making withdrawals in retirement. Sure, the cost basis is lower, resulting in a bigger tax when one ultimately liquidates those shares. But during mid retirement...
by Random Walker
Fri Apr 24, 2015 8:47 am
Forum: Investing - Theory, News & General
Topic: Anyone have an asset allocation not based on percentages?
Replies: 26
Views: 2398

Re: Anyone have an asset allocation not based on percentages

Bs010101, I believe your thinking is quite clear. What you are describing I think sounds similar to a Liability Matching Portfolio. I would recommend you read William Bernstein's short and cheap e-book called: The Ages Of The Investor: A Critical Look At LifeCycle Investing. I think his basic premis...
by Random Walker
Tue Apr 21, 2015 10:17 am
Forum: Investing - Theory, News & General
Topic: Can't get excited about bond funds
Replies: 19
Views: 1616

Re: Can't get excited about bond funds

Currently reading a good little book called Why Bother With Bonds by Rick Van Ness. The foreword is by Larry Swedroe. I'm mid way through, but already recommend it.

Dave
by Random Walker
Sat Apr 18, 2015 9:44 pm
Forum: Investing - Theory, News & General
Topic: New Vanguard White Paper: "Factor-based investing" (Apr '15)
Replies: 21
Views: 3272

Re: New Vanguard White Paper: "Factor-based investing" (Apr

There is much more to factor investing than just "higher risk/higher reward". What matters is the portfolio as a whole and how its constituent parts contribute to it. Portfolio volatility is a huge drag on portfolio compounded return. By diversifying across sources of return within a portf...
by Random Walker
Fri Apr 17, 2015 8:45 pm
Forum: Investing - Theory, News & General
Topic: Fact, Fiction, and Value Investing - Asness/AQR
Replies: 9
Views: 1175

Re: Fact, Fiction, and Value Investing - Asness/AQR

Actually, An investor could rationally choose growth asset classes. If value stocks are higher risk and higher expected return, then growth stocks are lower risk and lower expected return. Moreover an investor is also choosing between different types of risk. Value stocks tend to do bad in bad times...
by Random Walker
Wed Apr 15, 2015 9:34 am
Forum: Investing - Theory, News & General
Topic: Does the daily re-balancing undermine asset allocation?
Replies: 13
Views: 1364

Re: Does the daily re-balancing undermine asset allocation?

Daily rebalancing is the purest way to maintain one's desired risk profile. But people deviate from this because of difficulty, costs, and evidence of momentum in the market. For individuals, probably makes sense to rebalance rarely: every year or two. For funds that can probably trade much cheaper,...
by Random Walker
Sun Apr 12, 2015 3:19 pm
Forum: Investing - Theory, News & General
Topic: AA beyond achievement of your "number"
Replies: 22
Views: 2311

Re: AA beyond achievement of your "number"

Think you should read Bernstein's short e-book: the ages of the investor. I should reread it too! Think he addresses your dilemma. Think he basically discusses a very conservative liability matching portfolio for the money you have and will need and a separate elective or risk portfolio for money be...
by Random Walker
Thu Apr 09, 2015 12:14 pm
Forum: Investing - Theory, News & General
Topic: Small cap premium
Replies: 32
Views: 2464

Re: Small cap premium

And I believe, when the risks for size and value shows up is relevant as well. In bad times or when liquidity dries up, lenders will cut off credit to these risky companies first. Doing bad in bad times is a unique risk that deserves a premium as well.

Dave
by Random Walker
Thu Apr 09, 2015 12:05 pm
Forum: Investing - Theory, News & General
Topic: Small cap premium
Replies: 32
Views: 2464

Re: Small cap premium

The market prices risk, not returns. So the price of a small stock will not rise to equilibrate the expected return with a large stock. The price of the riskier small stock will be relatively depressed resulting in higher expected return for the smaller stock. I really like the cost of capital story...
by Random Walker
Sat Apr 04, 2015 10:36 pm
Forum: Investing - Theory, News & General
Topic: Do you think Ric Edelman is correct, never pay down mortgage
Replies: 257
Views: 23643

Re: Do you think Ric Edelman is correct, never pay dow mortg

I am a huge fan of paying down/off the mortgage. I've done it, and this is what I learned from the experience. 1. The mortgage interest is likely greater than the interest you'll earn from bonds in your portfolio. 2. The "return" from eliminating mortgage interest is a riskless return. 3. ...
by Random Walker
Fri Apr 03, 2015 10:31 am
Forum: Investing - Theory, News & General
Topic: Have P/E Ratios Affected Your Asset Allocation?
Replies: 52
Views: 2833

Re: Have P/E Ratios Affected Your Asset Allocation?

But it does not contradict Boglehead philosophy to alter ones AA as his circumstances change. For example, most people will be heavier equities when young amg increase the bond allocation as they near retirement. Someone may have a vague plan in their head as to how they will do that over the years....
by Random Walker
Fri Apr 03, 2015 10:10 am
Forum: Investing - Theory, News & General
Topic: Have P/E Ratios Affected Your Asset Allocation?
Replies: 52
Views: 2833

Re: Have P/E Ratios Affected Your Asset Allocation?

I don't know that I would call what I'm discussing market timing. Maybe it could be called long term rare market timing. As we progress through life through accumulation phase and then decumulation phase, we also get more realistic views of our own willingness, need, ability to take risk. We get bet...
by Random Walker
Fri Apr 03, 2015 7:38 am
Forum: Investing - Theory, News & General
Topic: Have P/E Ratios Affected Your Asset Allocation?
Replies: 52
Views: 2833

Re: Have P/E Ratios Affected Your Asset Allocation?

When I talk about adjusting the AA, I'm talking about long term, maybe once in a life time alterations. For example, a guy getting close to retirement who has been following a glide path towards 50/50 but sees the recent gains and decides to go straight to 50/50 from something more aggressive rather...
by Random Walker
Thu Apr 02, 2015 8:06 pm
Forum: Investing - Theory, News & General
Topic: Have P/E Ratios Affected Your Asset Allocation?
Replies: 52
Views: 2833

Have P/E Ratios Affected Your Asset Allocation?

I'm rereading Meb Faber's Global Value. He focuses a lot on CAPE being predictive of future expected returns. First, I'm curious if people have any resources they go to to check out P/E's for different markets. More significantly, I'm curious if people incorporate valuations into their asset allocat...
by Random Walker
Mon Mar 30, 2015 10:10 am
Forum: Investing - Theory, News & General
Topic: An alternative to alternative investments [QSPIX]
Replies: 319
Views: 41296

Re: An alternative to alternative investments [QSPIX]

And a small allocation, say <5%, to an expensive fund doesn't increase the overall portfolio expense very much.

Dave
by Random Walker
Sun Mar 29, 2015 10:38 pm
Forum: Investing - Theory, News & General
Topic: Interest in multi asset class investing and crises
Replies: 11
Views: 931

Re: Interest in multi asset class investing and crises

I've certainly become an asset class junkie. I've got a 66% equities/24% bonds/10% alternatives portfolio. The equities are tilted to small and value. The alternatives include 3% CCFs, 3% QSPIX,2.5% US REITs, 1.5% Int REITs. I'm a big fan of Roger Gibson's Asset Allocation. But Bernstein's Skating W...
by Random Walker
Sun Mar 29, 2015 9:03 pm
Forum: Investing - Theory, News & General
Topic: Interest in multi asset class investing and crises
Replies: 11
Views: 931

Re: Interest in multi asset class investing and crises

I agree with Pauliec84,
I once looked at correlations between SmB, HmL, and market during some of the bad times for equities in the French data library. The lack of correlation between market and the size and value factors held up well.

Dave
by Random Walker
Sun Mar 29, 2015 2:20 pm
Forum: Investing - Theory, News & General
Topic: How to invest to give back?
Replies: 30
Views: 2039

Re: How do you invest to give back?

Totally agree with Steve M. Donating this way enables one to donate more! Especially after a strong bull market like we have had the last 5 years. One can take some money off the table, rebalance, and maximize the donation this way.

Dave
by Random Walker
Sun Mar 29, 2015 2:02 pm
Forum: Investing - Theory, News & General
Topic: How to invest to give back?
Replies: 30
Views: 2039

Re: How do you invest to give back?

My financial advisor enlightened me to this opportunity. An individual can open a separate donor account. Mine is through Schwab Charitable Giving. You then donate shares from your own personal investment accounts to the donor account. For the purposes of taxes, the donation is made when the shares ...
by Random Walker
Fri Mar 27, 2015 8:39 pm
Forum: Investing - Theory, News & General
Topic: Interest in multi asset class investing and crises
Replies: 11
Views: 931

Interest in multi asset class investing and crises

For fans of multi-asset class investing, I've got a question. Does the fact that correlations go to 1 in crises diminish your interest in multi asset class investing?

Dave
by Random Walker
Wed Mar 25, 2015 8:47 pm
Forum: Investing - Theory, News & General
Topic: Asset Class Junkie Reads Bernstein's Skating Where Puck Was
Replies: 4
Views: 760

Re: Asset Class Junkie Reads Bernstein's Skating Where Puck

SimpleGift, That's a nice diagram to see. I think correlations tend to diverge when the markets turn upwards. And I do think there is benefit from even the moderately positive correlations. The contribution of an asset class to portfolio depends on expected return, volatility, correlations. And of c...
by Random Walker
Wed Mar 25, 2015 7:26 pm
Forum: Investing - Theory, News & General
Topic: Asset Class Junkie Reads Bernstein's Skating Where Puck Was
Replies: 4
Views: 760

Re: Asset Class Junkie Reads Bernstein's Skating Where Puck

I just bought the AQR Style Premia Fund. It was this expensive purchase of a fund for the sake of its low correlations that made me ponder the asset class addiction and reread Skating Where The Puck Is. The more out in left field one goes with asset classes, the more expensive they get. And I'm sure...
by Random Walker
Wed Mar 25, 2015 7:08 pm
Forum: Investing - Theory, News & General
Topic: Asset Class Junkie Reads Bernstein's Skating Where Puck Was
Replies: 4
Views: 760

Asset Class Junkie Reads Bernstein's Skating Where Puck Was

I've been a boglehead for about 15 years. Over this period I've evolved into an asset class junkie. I reread Bernstein's Skating Where The Puck Was over the last couple of days. First of all, like all of Bernstein's books, I recommend it highly. Anyways, the basic tenet of the book is a bit sobering...
by Random Walker
Fri Mar 13, 2015 10:49 pm
Forum: Investing - Theory, News & General
Topic: Any other investors with 70/30 portfolio?
Replies: 71
Views: 8594

Re: Any other investors with 70/30 portfolio?

I was a little surprised when my advisor described me as 70/30. I'm 66% equities, 24% bonds, 4% REITs, 3% CCFs, 3% QSPIX. The advisor considered REITs equities and CCFs and QSPIX as more fixed income like. I suppose CCFs and QSPIX are way more risky than bonds, but I like the way they mix in the por...
by Random Walker
Thu Mar 05, 2015 8:02 pm
Forum: Investing - Theory, News & General
Topic: 3 Costs Investors Must Control
Replies: 61
Views: 5780

Re: 3 Costs Investors Must Control

Regarding minimization of taxes in taxable accounts. Small and value funds can be relatively tax inefficient. Can anyone guesstimate the benefit of using core funds and/or tax managed funds to tilt for taxable investors? Thanks,

Dave
by Random Walker
Mon Mar 02, 2015 1:00 pm
Forum: Investing - Theory, News & General
Topic: Understanding correlations and return
Replies: 10
Views: 681

Re: Understanding correlations and return

You'll want to read Roger Gibson's book Asset Allocation and possibly Rick Ferri's All About Asset Allocation. The compounded (annualized) return of a portfolio is always less than the weighted simple average return of the components. The drag on the portfolio is due to volatility. Using less than p...
by Random Walker
Fri Feb 06, 2015 5:36 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Total Bond - Not reccomended by Swedroe??
Replies: 23
Views: 4052

Re: Vanguard Total Bond - Not reccomended by Swedroe??

I think it's fair to say that Larry's belief is that it is more efficient to take the risk on the equity side. So he likes to keep the fixed income side very low risk, which means highest credit quality and shortest duration. I believe that as one increases credit risk and duration risk, the bonds t...
by Random Walker
Sun Feb 01, 2015 11:56 am
Forum: Investing - Theory, News & General
Topic: An alternative to alternative investments [QSPIX]
Replies: 319
Views: 41296

Re: An alternative to alternative investments [QSPIX]

Sammy M, I agree completely. I think a person simply has to focus on the ride of the entire portfolio. The more likely someone is to focus on individual portfolio components, perhaps the less likely they are to stick with the plan. In a well diversified portfolio, some component is always underperfo...
by Random Walker
Sat Jan 31, 2015 11:57 pm
Forum: Investing - Theory, News & General
Topic: An alternative to alternative investments [QSPIX]
Replies: 319
Views: 41296

Re: An alternative to alternative investments [QSPIX]

Can't buy past performance, so doesn't make sense to look at cost per unit past performance. Unless you think past performance of an active fund will continue. Of course, no boglehead will depend so heavily on past performance of an active fund to make decisions. But cost per unit of factor exposure...
by Random Walker
Sat Jan 31, 2015 9:56 pm
Forum: Investing - Theory, News & General
Topic: An alternative to alternative investments [QSPIX]
Replies: 319
Views: 41296

Re: An alternative to alternative investments [QSPIX]

Hi, I'm looking at purchasing this fund through my Fidelity 401K. I see two different share classes: QSPIX and QSPNX. Looks like the QSPNX is a share class with no transaction fee and higher ER and QSPIX is a share class with a transaction fee but higher ER. Both share classes have stated ERs >2%. D...
by Random Walker
Fri Jan 30, 2015 11:24 am
Forum: Investing - Theory, News & General
Topic: Thoughts on DFA equities?
Replies: 19
Views: 1938

Re: Thoughts on DFA equities?

For taxable investors, DFA has tax managed small and value funds. Tilting to small and value is relatively tax inefficient. DFA's tax managed value and small funds are a significant benefit to the taxable investor. VG last I checked has no such offering. Unfortunately I do not know how to quantify t...
by Random Walker
Thu Jan 29, 2015 7:53 am
Forum: Investing - Theory, News & General
Topic: Why not a 2 fund portfolio like Bogle suggests
Replies: 36
Views: 4166

Re: Why not a 2 fund portfolio like Bogle suggests

TwoByFour, You are confusing stock markets with economies. All the risks you describe are already priced into the markets. Moreover, it is good to be exposed to different kinds of risk: diversify across risk factors. Interesting tidbit of info I got from Jeremy Siegel's Future for Investors. Just li...

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