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Re: Philosophy Differs From Strategy

Do you still see a benefit to the brain damage of eleven funds versus four? I've read lots of what you have written here and on your blog over the interim years and can't tell if you have changed your position significantly on this topic. 3 is fine, 4 is fine, 10 is fine; 20 is too much. Rick Ferri
by Rick Ferri
Mon Sep 01, 2014 8:06 pm
 
Forum: Investing - Theory, News & General
Topic: Philosophy Differs From Strategy
Replies: 21
Views: 2121

Re: No advantage of Slice and Dice vs 3Fund?

The best portfolio allocation is the one you'll stick with for the long-term and through all market conditions. Slice and dice has delivered higher returns historically because it has more risk than a market-only portfolio, but this didn't help investors who had difficulty sticking with the strategy...
by Rick Ferri
Sun Aug 31, 2014 6:19 pm
 
Forum: Investing - Theory, News & General
Topic: No advantage of Slice and Dice vs 3Fund?
Replies: 38
Views: 2138

Re: I'd buy an S&P 500 index fund in a pinch

L, All Bogleheads have the same philosophy (low-cost, broad diversification, don't market time), but you'd be hard pressed to find two of us who have an identical investment strategy. Philosophy is universal; strategy is personal. What works for you is good for you; don't let anyone tell you otherwi...
by Rick Ferri
Sun Aug 31, 2014 6:03 pm
 
Forum: Investing - Theory, News & General
Topic: I'd buy an S&P 500 index fund in a pinch
Replies: 45
Views: 5407

Re: I'd buy an S&P 500 index fund in a pinch

Rick, What then about your previous recommendation that Real Estate is underrepresented in the total market, so you'd add a tilt to REITs? Doesn't that apply to the S&P as well as the total market? L. Yes, but that' a different concept. See my thoughts here: The Total Economy Portfolio. Rick Fe...
by Rick Ferri
Sun Aug 31, 2014 1:58 pm
 
Forum: Investing - Theory, News & General
Topic: I'd buy an S&P 500 index fund in a pinch
Replies: 45
Views: 5407

I'd buy an S&P 500 index fund in a pinch

I’m an index fund investor, but I don’t invest in S&P 500 index funds. It’s not the type of index I want in my portfolio, unless I’m in a pinch. Here’s why:

S&P 500: A Great 2nd Place Index Fund

Rick Feri
by Rick Ferri
Thu Aug 28, 2014 8:53 pm
 
Forum: Investing - Theory, News & General
Topic: I'd buy an S&P 500 index fund in a pinch
Replies: 45
Views: 5407

Re: CFA Results

Excellent! Congrats!

Rick Ferri
by Rick Ferri
Tue Aug 19, 2014 7:49 am
 
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 3335

Re: High Yield Bonds - Uncorrelated to Stocks and Bonds?

According to my calculations, High Yield Bonds have a .72 correlation with the total stock market index fund over the last 30 years. I'm sure that's correct. However, I'd be willing to bet that no single year was 0.72, or even any 3-year period. One of the tests for unique risk in an asset class is...
by Rick Ferri
Thu Aug 07, 2014 12:30 pm
 
Forum: Investing - Theory, News & General
Topic: High Yield Bonds - Uncorrelated to Stocks and Bonds?
Replies: 73
Views: 4758

Re: High Yield Bonds - Uncorrelated to Stocks and Bonds?

Credit risk is a cousin of equity risk, but it's not the same. Consequently, credit risk has varying correlation with equities, and that makes a small allocation to HY a decent diversifier. Sometime it is high and sometimes it is not. HY began selling off before equities prior to the financial crisi...
by Rick Ferri
Thu Aug 07, 2014 12:11 pm
 
Forum: Investing - Theory, News & General
Topic: High Yield Bonds - Uncorrelated to Stocks and Bonds?
Replies: 73
Views: 4758

Re: The Core Four

There isn't a four-4 taxable w/REITs for investors in a high tax bracket. In a taxable account, you would substitute a tax-expmpt fund for the taxable one and leave out REITS, and you might split bonds to include TIPS, which would give you a core-4 again.

Rick Ferri
by Rick Ferri
Thu Aug 07, 2014 11:15 am
 
Forum: Investing - Theory, News & General
Topic: The Core Four
Replies: 279
Views: 138344

Re: Volatility: Oh how I love thee.

Rick, could you maybe elaborate a bit more on what you actually do to take advantage of volatility? Volatility is a form of risk that lead to a risk premiumIn. It always occurs in down markets and is always temporary. Rebalancing into an asset class during periods of high volatility spells opportun...
by Rick Ferri
Thu Aug 07, 2014 10:52 am
 
Forum: Investing - Theory, News & General
Topic: Volatility: Oh how I love thee.
Replies: 44
Views: 3087

Re: Volatility: Oh how I love thee.

Yeah, that was sort-of a confusing use of words. Better to say that I'll be rebalancing in a lower prices. :wink:

Rick
by Rick Ferri
Thu Aug 07, 2014 9:51 am
 
Forum: Investing - Theory, News & General
Topic: Volatility: Oh how I love thee.
Replies: 44
Views: 3087

Volatility: Oh how I love thee.

There’s nothing like good market volatility. It makes me sleep well at night. Plunging prices, several days of bad news, it makes me all smiles. No, I’m not a masochist. I just know that weak-minded investors become nervous and sell in a roller-coaster market, and that gives me more opportunities to...
by Rick Ferri
Thu Aug 07, 2014 9:39 am
 
Forum: Investing - Theory, News & General
Topic: Volatility: Oh how I love thee.
Replies: 44
Views: 3087

Re: U.S. stocks in freefall

Volatility is your friend; embrace it!

Rick Ferri
by Rick Ferri
Wed Aug 06, 2014 7:16 am
 
Forum: Investing - Theory, News & General
Topic: U.S. stocks in freefall
Replies: 802
Views: 135599

Re: Risk and Return of Tilted and Market Balanced Funds

Taylor, I have always said that "alpha" from tilting goes to the manager, and in the case of DFA funds, to the adviser. In other words, in a managed portfolio where an adviser is paid, any benefit that is derived from tilting ends up in the pocket of the adviser - not the client. I am not ...
by Rick Ferri
Wed Aug 06, 2014 7:13 am
 
Forum: Investing - Theory, News & General
Topic: Risk and Return of Tilted and Market Balanced Funds
Replies: 19
Views: 2485

Confessions of an Index Fund Investor

I’m a diehard index fund fan. I’ve written books on index funds, lectured on index funds, co-authored an award-winning paper on portfolios of index funds, and Forbes even named me “The Indexer” when I began writing for them several years ago. The problem with being “The Indexer” is that I don’t inve...
by Rick Ferri
Thu Jul 31, 2014 4:17 pm
 
Forum: Investing - Theory, News & General
Topic: Confessions of an Index Fund Investor
Replies: 8
Views: 3023

Re: To Tilt or Not to Tilt - Rick Ferri's Latest

Expecting "tilt" to offset the cost of the advisor did not seem feasible. 1210 Using Rick's Portfolio Solutions projections, a 60/40 portfolio would have an expected return of 5.76% (60% x 7.6%)+(40% x 3.0%). If an adviser charges 1% per annum, how much "tilt" would be required ...
by Rick Ferri
Sat Jul 19, 2014 4:44 pm
 
Forum: Investing - Theory, News & General
Topic: To Tilt or Not to Tilt - Rick Ferri's Latest
Replies: 72
Views: 6717

93 Ways to Underperform the Market

A fortune awaits anyone who can analyze a price chart and accurately determine if there is a pot of gold hidden at the end. It sounds like a worthy endeavor. Unfortunately, successful technical analysis is easier believed than achieved. Jiali Fang, Yafeng Qin and Ben Jacobsen, all from Massey Univer...
by Rick Ferri
Fri Jul 11, 2014 7:20 am
 
Forum: Investing - Theory, News & General
Topic: 93 Ways to Underperform the Market
Replies: 2
Views: 1262

Re: The Risk of Short-term Bond Funds

ogd wrote:Under the narrow interpretation, it's hard to convince anyone that intermediate bonds are worth it, even with Rick's writing skill.



I'm overrated. :wink:
by Rick Ferri
Wed Jul 09, 2014 11:15 am
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10864

Re: The Risk of Short-term Bond Funds

Opportunity cost is the risk of being in short-term bond funds when you don't need short-term bonds. I understand the need for emergency money. That's different. If your liabilities are intermediate- long-term, why put your investment portfolio in short-term bonds? Opportunity cost is real - it's a...
by Rick Ferri
Tue Jul 08, 2014 12:55 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10864

Re: In Which Theories Should I Have Confidence?

It sounds like you have the philosophy. What your seeking is a strategy. That could be a number of answers. This blog may help: Philosophy differs from strategy. From the bog: "I find that newly enlightened self-managed investors can spend a considerable amount of time and energy trying to figu...
by Rick Ferri
Tue Jul 08, 2014 12:53 pm
 
Forum: Investing - Theory, News & General
Topic: In Which Theories Should I Have Confidence?
Replies: 43
Views: 4335

Re: Can no longer purchase Admiral Shares at Schwab

I understand Vanguard could tell Schwab what is available to different classes of investors, but that is not the question. The questions are what are the classes of investors and what in fact has Vanguard told Schwab as to what the rules are. Also I don't have concerns; I just want to know what the...
by Rick Ferri
Mon Jul 07, 2014 10:02 am
 
Forum: Investing - Help with Personal Investments
Topic: Can no longer purchase Admiral Shares at Schwab
Replies: 27
Views: 2328

Re: Can no longer purchase Admiral Shares at Schwab

But can we address the question on this thread, which is about Admiral share class at Schwab, and now as to whether or not people who work with advisers at Schwab will still have access to buy Admiral share classes while people who are not working with advisers at Schwab will no longer be able to b...
by Rick Ferri
Sun Jul 06, 2014 4:36 pm
 
Forum: Investing - Help with Personal Investments
Topic: Can no longer purchase Admiral Shares at Schwab
Replies: 27
Views: 2328

Re: Can no longer purchase Admiral Shares at Schwab

Are you actually saying that the customer can negotiate a commission rate with the adviser that gets the customer access to ADMIRAL SHARE CLASSES that you don't have if you don't have an adviser. Clients don't negotiate a mutual fund commission rate with an adviser. Advisers negotiate this commissi...
by Rick Ferri
Sun Jul 06, 2014 1:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: Can no longer purchase Admiral Shares at Schwab
Replies: 27
Views: 2328

Re: Can no longer purchase Admiral Shares at Schwab

Some advisers do have access to various Vanguard funds and share classes through Schwab whereas an individual may not. An adviser usually has to be approved for this access by Vanguard (they don't want advisers who trade a lot.) Rick Ferri Access surely does not mean that you don't have to pay some...
by Rick Ferri
Sat Jul 05, 2014 7:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Can no longer purchase Admiral Shares at Schwab
Replies: 27
Views: 2328

Re: Rick Ferri's Emergency Fund

I didn't want to complicate things too much, so I wrote that I only own one fund. That isn't true. I should have explained this in my previous post rather than trying to keep it simple. That clearly isn't working. So, here is what I actually do: I don't use only the short-term muni fund because I do...
by Rick Ferri
Sat Jul 05, 2014 11:26 am
 
Forum: Investing - Theory, News & General
Topic: Rick Ferri's Emergency Fund
Replies: 28
Views: 6423

Re: Rick Ferri's Emergency Fund

Still Vanguard, but due to taxes I use Vanguard short-term tax exempt funds for my emergency cash. Thanks for asking.

Rick Ferri
by Rick Ferri
Sat Jul 05, 2014 8:12 am
 
Forum: Investing - Theory, News & General
Topic: Rick Ferri's Emergency Fund
Replies: 28
Views: 6423

Re: The Risk of Short-term Bond Funds

Like everything else in the market a lot of ifs....If rates had gone up substantially there would be a different tone here....but they did not so many have the hindsight of being very smart. It does go to show once again how the experts are not very good at predictions. Wait a minute hoops777. Mayb...
by Rick Ferri
Fri Jul 04, 2014 8:10 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10864

Re: Can no longer purchase Admiral Shares at Schwab

Some advisers do have access to various Vanguard funds and share classes through Schwab whereas an individual may not. Depending on the adviser and the fund, an adviser usually has to be approved for this access by Vanguard (they don't want advisers who trade a lot.)

Rick Ferri
by Rick Ferri
Thu Jul 03, 2014 1:13 pm
 
Forum: Investing - Help with Personal Investments
Topic: Can no longer purchase Admiral Shares at Schwab
Replies: 27
Views: 2328

Re: The Risk of Short-term Bond Funds

I do find it hard to accept that any bond fund or fixed income product is the only or best choice for every age, goal or risk tolerance. Maybe that is my blind spot :oops: If one wants to mention tilting, based on a three factor model of market, size, and value and then add bonds to that, the two b...
by Rick Ferri
Thu Jul 03, 2014 12:21 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10864

Re: The Risk of Short-term Bond Funds

If you moved some money to short term duration bond funds for capital preservation goals, missing out on better gains from intermediate duration bonds the last few years is less important. The total bond market index funds has short-, intermediate- and long-term bonds. Only the portfolio duration i...
by Rick Ferri
Thu Jul 03, 2014 9:30 am
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10864

Re: The Risk of Short-term Bond Funds

abuss368 You're forgetting that the short-term bond fund also has interest rate risk. The duration is 2.7 years. If rates where to jump by 3% overnight, the NAV would fall by about 8.1% theoretically. So, you'd still be ahead over the entire period with a Total Bond Market index fund. Rick Ferri Wh...
by Rick Ferri
Wed Jul 02, 2014 4:54 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10864

Re: The Risk of Short-term Bond Funds

abuss368

You're forgetting that the short-term bond fund also has interest rate risk. The duration is 2.7 years. If rates where to jump by 3% overnight, the NAV would fall by about 8.1% theoretically. So, you'd still be ahead over the entire period with a Total Bond Market index fund.

Rick Ferri
by Rick Ferri
Wed Jul 02, 2014 2:03 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10864

Re: How are you doing through the first half of 2014?

Honestly, I have absolutely no idea. I only calculate a return once per year (or less). Any more than that and I start "seeing things" that aren't there. :shock:

Rick
by Rick Ferri
Wed Jul 02, 2014 1:20 pm
 
Forum: Investing - Theory, News & General
Topic: How are you doing through the first half of 2014?
Replies: 91
Views: 9606

The Risk of Short-term Bond Funds

Did you miss returns from intermediate-term bond funds because you sat in a short-term bond fund waiting for interest rates to rise? A lot of people did. This strategy has backfired as the opportunity cost of not being in intermediate-term bonds has been more costly than whatever damage rising inter...
by Rick Ferri
Wed Jul 02, 2014 1:11 pm
 
Forum: Investing - Theory, News & General
Topic: The Risk of Short-term Bond Funds
Replies: 152
Views: 10864

Re: Philosophy Differs From Strategy

I've long admired Rick's ability to take his knowledge of the subject of investing and deliver it in a way that is digestible for normal people.


:happy

Rick Ferri
by Rick Ferri
Sun Jun 22, 2014 1:27 pm
 
Forum: Investing - Theory, News & General
Topic: Philosophy Differs From Strategy
Replies: 21
Views: 2121

Re: Philosophy Differs From Strategy

It's easy to be brave in a bull market.

Rick Ferri
by Rick Ferri
Tue Jun 17, 2014 8:24 am
 
Forum: Investing - Theory, News & General
Topic: Philosophy Differs From Strategy
Replies: 21
Views: 2121

Philosophy Differs From Strategy

Want to be a successful investor? Have a sound investment philosophy before trying to create an investment strategy. Your core beliefs about investing should drive strategy and also keep you disciplined in difficult markets. Without a sound philosophy, discipline erodes quickly and strategy goes dow...
by Rick Ferri
Mon Jun 16, 2014 4:21 pm
 
Forum: Investing - Theory, News & General
Topic: Philosophy Differs From Strategy
Replies: 21
Views: 2121

Podcast: How to Navigate Online Financial Advice

On-line financial advice is all the rage. Listen to a recent interview I did on the subject for the Wall Street Journal.

You'll get a big surprise if you make all the way to the end!

How to Navigate Online Financial Advice

Rick Ferri
by Rick Ferri
Mon Jun 16, 2014 2:58 pm
 
Forum: Investing - Theory, News & General
Topic: Podcast: How to Navigate Online Financial Advice
Replies: 1
Views: 208

Pros and Cons of Dollar-Cost Averaging

Dollar-cost averaging is often the prescription for investors who need to increase their equity exposure, but the devil is in the details. Christine Benz explains why in her recent article on Morningstar.

What to Do If You're Light on Stocks

Rick Ferri
by Rick Ferri
Mon Jun 16, 2014 7:36 am
 
Forum: Investing - Theory, News & General
Topic: Pros and Cons of Dollar-Cost Averaging
Replies: 12
Views: 1757

Re: Brett Arends's "Perfect Portfolio" Comments?

There is no such thing as a perfect portfolio. There is only a portfolio that is right for you, conceived for your needs, your understanding of risk, your time horizon, and that you'll hold on to during all market conditions. Philosophy among Bogleheads' is universal; strategy is personal. We all be...
by Rick Ferri
Sun Jun 15, 2014 8:42 am
 
Forum: Investing - Theory, News & General
Topic: Brett Arends's "Perfect Portfolio" Comments?
Replies: 24
Views: 1812

Re: The Problem with Market Timing

Mutual fund investors are trend followers - so there may be some momentum effect. However, behavior seems to vary with trend factors such as the duration, speed and depth. I haven't seen much work done on this. It would be a good study for a PhD student.

Rick Ferri
by Rick Ferri
Fri Jun 13, 2014 8:53 am
 
Forum: Investing - Theory, News & General
Topic: The Problem with Market Timing
Replies: 19
Views: 1704

The Problem with Market Timing

Nothing sounds more appealing than market timing. It's so obvious: buy low and sell high. Only a fool would do anything else. Well, the world must be made up of a lot of fools because most investors do the opposite.

See The Problem with Market Timing

Rick Ferri
by Rick Ferri
Fri Jun 13, 2014 8:36 am
 
Forum: Investing - Theory, News & General
Topic: The Problem with Market Timing
Replies: 19
Views: 1704

Technical Analysis Drags Down Performance

I admit to looking at a chart or two over my career. I’ll even admit to believing at one time that the strategy works. Technical analysis is a compelling idea that tends to consume us because it comes across like finding a treasure map that leads to a chest full of gold. Even Warren Buffett admits t...
by Rick Ferri
Mon Jun 02, 2014 4:02 pm
 
Forum: Investing - Theory, News & General
Topic: Technical Analysis Drags Down Performance
Replies: 52
Views: 2454

Re: Roll Call for the Retirement Class of 2014!

Whatever you'll need that not stocks; probably intermediate-term bonds, perhaps some short-bonds and money market. Rick Ferri Rick, thanks for the recommendation, I read you loud and clear . Thanks for reading. Thank you! You've inspired me to write a blog on this topic that will post next Monday. ...
by Rick Ferri
Fri May 30, 2014 7:39 pm
 
Forum: Local Chapters and Bogleheads Community
Topic: Roll Call for the Retirement Class of 2014!
Replies: 166
Views: 15425

Re: Roll Call for the Retirement Class of 2014!

Old Guy wrote:Rick:

Into what? MM (cash)? Bonds?


Whatever you'll need that not stocks; probably intermediate-term bonds, perhaps some short-bonds and money market.

Rick Ferri
by Rick Ferri
Fri May 30, 2014 2:04 pm
 
Forum: Local Chapters and Bogleheads Community
Topic: Roll Call for the Retirement Class of 2014!
Replies: 166
Views: 15425

Re: Roll Call for the Retirement Class of 2014!

Here is my advice to all of you who are nearing or entering retirement this year: The valuation of the stock market is not extremely high - but it is getting up there. If you've got the money needed for retirement, and are contemplating an asset allocation change with lower equity exposure - you wou...
by Rick Ferri
Fri May 30, 2014 11:10 am
 
Forum: Local Chapters and Bogleheads Community
Topic: Roll Call for the Retirement Class of 2014!
Replies: 166
Views: 15425

Re: How to decide your number?

I agree that my formula works best for someone who is mid- late career and has started to think about end game. Younger investors should only be concerned with developing good savings and investing habits.

Rick Ferri
by Rick Ferri
Fri May 30, 2014 11:06 am
 
Forum: Personal Finance (Not Investing)
Topic: How to decide your number?
Replies: 61
Views: 7158

Re: Should I Care About M* Style Box?

I depends what you want. The "market" has always been composed of primarily large cap companies. When you hear on the news that the market has gone up or down, they're talking about large cap companies. If you wish to take extra risk and pay an extra cost to overweight your portfolio to sm...
by Rick Ferri
Fri May 30, 2014 11:03 am
 
Forum: Investing - Help with Personal Investments
Topic: Should I Care About M* Style Box?
Replies: 33
Views: 1966

Re: Do you need international bonds?

If I remember correctly from one of his earlier books, Larry recommends unhedged funds for foreign equity funds and hedged funds for foreign fixed income funds. Larry, please correct me if I am mistaken in your beliefs. For the record, my view is to get your currency exposure through unhedged forei...
by Rick Ferri
Mon May 26, 2014 5:43 pm
 
Forum: Investing - Theory, News & General
Topic: Do you need international bonds?
Replies: 29
Views: 2800
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