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Re: Prudent Investment Portfolio for 58-year Old w/20M Net W

Both assume some restraint in annual spending and perhaps downside flexibility, yet both can splurge once in a while relative to their net worth.

We don't live forever and we can't take it with us!

Rick Ferri
by Rick Ferri
Thu Oct 30, 2014 11:14 am
 
Forum: Investing - Help with Personal Investments
Topic: Prudent Investment Portfolio for 58-year Old w/20M Net Worth
Replies: 29
Views: 2070

Re: Paul Merriman criticism?

Rick For what it's worth, the term additional beta I don't think is an accurate one. Larry You'll need to argue that point with Gene Fama. See this direct quote in my article, Smart Beta Is Silly Talk . “Multifactor models have factors in addition to the market factor, and the additional factors ha...
by Rick Ferri
Thu Oct 30, 2014 10:28 am
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 49
Views: 2794

Re: Schwab expands no commission ETFs-no early sell fee

Rick appears to be saying that all ETFs that Schwab sells (for no commission) pay a fee to Schwab. Doubtless, they also pay a similar fee to any other brokerage who sells those ETFs. There are two parts to this. ETF firms pay marketing fees to brokerage firms that do not charge commissions to trade...
by Rick Ferri
Thu Oct 30, 2014 10:24 am
 
Forum: Investing - Help with Personal Investments
Topic: Schwab expands no commission ETFs-no early sell fee
Replies: 29
Views: 1984

Re: Prudent Investment Portfolio for 58-year Old w/20M Net W

Any asset allocation would work in this situation. A person can't spend all $20 mm ($12 mm liquid) with $375k in annual withdrawals assuming 2% income from all bonds or all stocks. There would be over $5 mm liquid left even after 35 years assuming no growth, plus the illiquid amount. 0% in stocks to...
by Rick Ferri
Thu Oct 30, 2014 10:14 am
 
Forum: Investing - Help with Personal Investments
Topic: Prudent Investment Portfolio for 58-year Old w/20M Net Worth
Replies: 29
Views: 2070

Re: Schwab expands no commission ETFs-no early sell fee

I am not saying these programs are a bad deal. They're not.

I am saying that they're not free. The non-Schwab funds in the ETF supermarket program pay to be in the program. If there were no payola, then all ETFs would be in the program.

Rick Ferri
by Rick Ferri
Wed Oct 29, 2014 7:55 am
 
Forum: Investing - Help with Personal Investments
Topic: Schwab expands no commission ETFs-no early sell fee
Replies: 29
Views: 1984

Re: Paul Merriman criticism?

It falls in the same category as "smart beta." Rick, this aversion to the term "Smart Beta" wears thin after awhile because we know you don't care for the marketing aspect. Actually, I'm hearing the term "Strategic Beta" used more and more with these types of index for...
by Rick Ferri
Wed Oct 29, 2014 7:45 am
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 49
Views: 2794

Re: Paul Merriman criticism?

LarrySwedroe wrote:Rick, FWIW IMO you are WAY off base on this one


Larry,

"Evidenced based investing" is another way of saying "back-tested". Let's not make it out to be something special.

Rick Ferri
by Rick Ferri
Tue Oct 28, 2014 1:15 pm
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 49
Views: 2794

Re: Schwab expands no commission ETFs-no early sell fee

Commission free does not mean revenue free. The revenue Schwab gets from the ETF companies is called something else. Those fees come out of the fund and out of total return.

Vanguard does not pay these fees, thus no "commission free" Vanguard ETFs at Schwab.

Rick Ferri
by Rick Ferri
Tue Oct 28, 2014 1:08 pm
 
Forum: Investing - Help with Personal Investments
Topic: Schwab expands no commission ETFs-no early sell fee
Replies: 29
Views: 1984

Re: Paul Merriman criticism?

It falls in the same category as "smart beta."
by Rick Ferri
Tue Oct 28, 2014 12:36 pm
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 49
Views: 2794

Re: Paul Merriman criticism?

Evidence based isn't a Meriman creation. It's being used by several "DFA Advisers" who promote DFA funds as well as by a certain paid marketing consultant/ghost writer who works with DFA advisers to promote their businesses. Much of the content in articles on "evidence based investing...
by Rick Ferri
Tue Oct 28, 2014 12:31 pm
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 49
Views: 2794

Re: Paul Merriman criticism?

His approach is evidence-based I don't buy into the term "evidence based" investing. It means there is evidence in the past data to support past results. Isn't that true for everything? Long-term bonds have yield more than short-term bonds, therefore there is evidence that they may yield ...
by Rick Ferri
Tue Oct 28, 2014 11:52 am
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 49
Views: 2794

Re: THANK YOU!!! Bogleheads Conference #13 (2014)

Another HUGE success! The three day conference flew by. Thank you Mel and the gang for all your hard work.

Rick Ferri
by Rick Ferri
Sun Oct 26, 2014 8:49 pm
 
Forum: Local Chapters and Bogleheads Community
Topic: THANK YOU!!! Bogleheads Conference #13 (2014)
Replies: 46
Views: 4147

Re: Rebalancing with dividends

You're correct that it's better to re-invest dividends when you receive them - as long as their isn't a cost to do it. You'll read about people accumulating divineds and buying a lump sum if there's a commission involved.

Rick Ferri
by Rick Ferri
Sat Oct 18, 2014 9:59 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rebalancing with dividends
Replies: 9
Views: 1186

Dealing with Volatility

Here is some good Boglehead advice:

Dealing with Volatility

If you think you shouldn't be nervous about market downturns, don't kid yourself. Everyone becomes concerned (except short-sellers). The question is what you do about it - or don't do.

Rick Ferri
by Rick Ferri
Thu Oct 16, 2014 9:46 am
 
Forum: Investing - Theory, News & General
Topic: Dealing with Volatility
Replies: 14
Views: 1126

Re: ETF's instead of index funds?

Index tracking ETFs are index funds. The difference is the way they are packaged and distributed. What's important is the way the underlying portfolio is managed, not how the basket is delivered. I suggest not getting hung-up on index funds versus ETFs. Use one or the other or both. Whatever is best...
by Rick Ferri
Mon Oct 13, 2014 11:28 am
 
Forum: Investing - Theory, News & General
Topic: ETF's instead of index funds?
Replies: 24
Views: 1353

Re: Current market volatility

Panic is good for my portfolio because I can buy more stock index funds at lower prices (with fresh cash and by rebalancing out of bonds). So, pass the word for everyone to start panic selling. :shock: THANK YOU!

Rick Ferri
by Rick Ferri
Fri Oct 10, 2014 11:27 pm
 
Forum: Investing - Theory, News & General
Topic: Current market volatility
Replies: 21
Views: 1667

A simple division between activie and passive

Here is a simple way to discuss active and passive investing:

Are you a performance taker or seeker?

Rick Ferri
by Rick Ferri
Wed Oct 08, 2014 1:33 pm
 
Forum: Investing - Theory, News & General
Topic: A simple division between activie and passive
Replies: 0
Views: 292

Re: Three fund allocation per Vanguard Flagship CFP?

I don’t disagree with the Flagship CFP recommendation, but it just seems too simple to have only 3 funds in portfolio? It's not the number of funds that matter; it's the number of securities in the funds that give your mom diversification. There are over 15,000 individual securities within the thre...
by Rick Ferri
Thu Oct 02, 2014 6:38 pm
 
Forum: Investing - Help with Personal Investments
Topic: Three fund allocation per Vanguard Flagship CFP?
Replies: 45
Views: 4757

Re: lump sum [How to invest?]

You're advisors are salivating over a potential $25,000+ commission. That's all they see when they look at your situation. Don't go there. Listen to the good advice you'll get here.

Rick Ferri
by Rick Ferri
Wed Oct 01, 2014 10:39 pm
 
Forum: Investing - Help with Personal Investments
Topic: lump sum [How to invest?]
Replies: 5
Views: 649

US REITs: An Expanding Market

Here is a helpful report by S&P on the expanding US REITs market.

REITs: Making Property Accessible

Rick Ferri
by Rick Ferri
Tue Sep 30, 2014 10:40 am
 
Forum: Investing - Theory, News & General
Topic: US REITs: An Expanding Market
Replies: 29
Views: 4015

Re: Aspiring Personal Finance Advisor

Good advice by Grt2bOutdoors. Also check with your state investment adviser regulator. You're about to enter one of the most over-regulated businesses in America and you'll want to know all the rules first.

Rick Ferri
by Rick Ferri
Mon Sep 29, 2014 5:41 pm
 
Forum: Personal Finance (Not Investing)
Topic: Aspiring Personal Finance Advisor
Replies: 8
Views: 1413

Re: TIPS & Rick Ferri

Rick & Larry, Do either of you recommend owning individual TIPS over TIPS funds? I own a fund because I don't want to bother managing a TIPS portfolio and dealing with interest payments. But that doesn't mean one is better than the other. The strategy you use should suit your needs and willingn...
by Rick Ferri
Mon Sep 29, 2014 10:11 am
 
Forum: Investing - Theory, News & General
Topic: TIPS & Rick Ferri
Replies: 28
Views: 4937

Re: TIPS & Rick Ferri

At the maturity of a TIPS, you receive the adjusted principal or the original principal, whichever is greater. Original principal is it's price ratio to par value at issuance (quoted as a price; 102.3, 100.8, etc). This provision protects you against deflation if you buy a bond at issuance. TIPS inc...
by Rick Ferri
Sun Sep 28, 2014 9:14 pm
 
Forum: Investing - Theory, News & General
Topic: TIPS & Rick Ferri
Replies: 28
Views: 4937

Re: TIPS & Rick Ferri

fwiw The BIGGEST advantage of TIPS IMO is that they allow you to earn the term premium without taking inflation risk Larry Good point. On the flip-side,TIPS add deflation risk. Prices fall causing the par value of TIPS to fall, although they will never mature below their original issue price. Rick ...
by Rick Ferri
Sun Sep 28, 2014 2:45 pm
 
Forum: Investing - Theory, News & General
Topic: TIPS & Rick Ferri
Replies: 28
Views: 4937

Re: TIPS & Rick Ferri

Hi, Tom.

Thanks for asking. I haven't made changes to the portfolio for long-term investors. There are uses for the short-term TIPS fund, though. Here are a couple of recent articles I wrote about TIPS:

The Purpose Of TIPS In A Portfolio

Tips on TIPS

Rick
by Rick Ferri
Sun Sep 28, 2014 12:10 pm
 
Forum: Investing - Theory, News & General
Topic: TIPS & Rick Ferri
Replies: 28
Views: 4937

Re: My 30-day trial experience with Betterment

I speculate most people who frequent this board benefit from tax-loss harvesting. It's an unusual circumstance where a person who has a sizable investment account wouldn't have any ordinary income that could be offset by $3,000 per year in tax losses.

Rick Ferri
by Rick Ferri
Fri Sep 26, 2014 11:38 am
 
Forum: Investing - Theory, News & General
Topic: My 30-day trial experience with Betterment
Replies: 73
Views: 8711

Re: Bond Index Conundrum

Not for investment grade bond funds, including the Total Bond Market Index fund, unless you think the US government is a bad credit risk.

Rick Ferri
by Rick Ferri
Thu Sep 18, 2014 9:15 am
 
Forum: Investing - Theory, News & General
Topic: Bond Index Conundrum
Replies: 16
Views: 2003

Re: Betterment Explanation on Investment Returns

Factoring in all deposits and withdrawal in a time-weighted return means the performance measurement begins with an initial investment, stops and begins fresh when a deposit or withdrawal takes place, stops and begins fresh again when another deposit or withdrawal takes place, and repeats all the wa...
by Rick Ferri
Wed Sep 17, 2014 11:07 am
 
Forum: Investing - Theory, News & General
Topic: Betterment Explanation on Investment Returns
Replies: 11
Views: 759

Re: Betterment Explanation on Investment Returns

Assume a mutual fund increased by 20% from January to June and then decreased by 10% from July to December. The time-weighted return for the entire year is 8.0%. This is the "funds" return, also called the "managers" return. An investor's return (what they call money weighted) wo...
by Rick Ferri
Wed Sep 17, 2014 10:40 am
 
Forum: Investing - Theory, News & General
Topic: Betterment Explanation on Investment Returns
Replies: 11
Views: 759

Re: A History of the Equity Risk Premium and its Estimation

Most bond CEF that are yielding higher than market interest are leveraged. In 1994, these leveraged CE bond funds got absolutely slaughtered.

There's no such thing as a free lunch on Wall Street.

Rick Ferri
by Rick Ferri
Tue Sep 16, 2014 1:58 pm
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1775

Re: A History of the Equity Risk Premium and its Estimation

The biggest problem with MCS are the correlations. Asse class correlations pairs are dynamic, not static and not cyclical. If they were static, then there's a problem because there's no unique risk between the two asset class. If they were cyclical, then future correlation would be predictable, whic...
by Rick Ferri
Tue Sep 16, 2014 9:27 am
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1775

Re: Premiums: Size, Value, Beta, Momentum

The difference between the return on a portfolio of small-cap stocks and the return on a portfolio of large-cap stocks (rME). The size factor earns an average return of 0.31 percent per month and is statistically significant at the 5 percent level. It should be noted that the 0.31 percent historica...
by Rick Ferri
Tue Sep 16, 2014 9:03 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2947

Re: CalPERS Eliminates Hedge Fund Program

In the press release, CalPERs states they are targeting a 7.5% annual return. That's going to be though given an expected return from stocks around the 6% range and an expected return from bonds at perhaps 3%.

Rick Ferri
by Rick Ferri
Mon Sep 15, 2014 6:17 pm
 
Forum: Investing - Theory, News & General
Topic: CalPERS Eliminates Hedge Fund Program
Replies: 44
Views: 2964

Re: A History of the Equity Risk Premium and its Estimation

I'm not a fan of MC. So, my answer is B.

Rick
by Rick Ferri
Mon Sep 15, 2014 5:24 pm
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1775

Re: A History of the Equity Risk Premium and its Estimation

Our difference is negligible. I'm expecting 6% for equity net of fees. 2% for fixed income net of fees. Also, I don't assume there will be premiums for factor risks or a portfolio benefit from rebalancing. I'm not saying there won't be premiums or a rebalancing benefit, I just never count on them wh...
by Rick Ferri
Mon Sep 15, 2014 2:18 pm
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1775

Re: A History of the Equity Risk Premium and its Estimation

Thanks, Larry. The important point is that the expected annualized return for US stocks is not 8%', which is the number people tend to use for planning purposes because it's approximately the historic nominal norm. I'm using 6% for stocks, 2% for investment grade bonds. Anything higher is an unexpec...
by Rick Ferri
Mon Sep 15, 2014 1:45 pm
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1775

Avoid Being An Out-Of-Style Investor

A persistent “performance gap” exists between investor returns and the returns of the funds they invest in. DALBAR’s 2014 annual Quantitative Analysis of Investor Behavior (QAIB) measured the performance gap for US equity fund investors at 4.2% annualized over a 20-year period ending in 2013. DALBAR...
by Rick Ferri
Mon Sep 15, 2014 10:19 am
 
Forum: Investing - Theory, News & General
Topic: Avoid Being An Out-Of-Style Investor
Replies: 0
Views: 394

Re: Due diligence on RAFI Pure Small Value

SnowSkier,

The issue with this approach is that you're paying a lot of money for beta exposure.

FNDB has an expense ratio of 0.32%. You could engineer a lower cost portfolio with the same factor exposures by investing in VTI and adding a small cap value fund.

Rick Ferri
by Rick Ferri
Sun Sep 14, 2014 12:05 pm
 
Forum: Investing - Theory, News & General
Topic: Due diligence on RAFI Pure Small Value
Replies: 187
Views: 16492

A History of the Equity Risk Premium and its Estimation

Here is an interesting paper on the history of the equity risk premium (ERP), which includes a recent estimate of where it is today. In summary, the author concludes that ERP is in the range of 3-4 percent for both geometric and arithmetic means. Assuming a 3.5% ERP, plus a 10-year T-note yield of 2...
by Rick Ferri
Sun Sep 14, 2014 11:54 am
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1775

Re: 100% Small and Value Tilting

We've just had one of best periods for small value stocks in the history of the stock market and now you want to take the plunge? I think you should reconsider.

Rick Ferri
by Rick Ferri
Thu Sep 11, 2014 10:45 pm
 
Forum: Investing - Theory, News & General
Topic: 100% Small and Value Tilting
Replies: 72
Views: 4656

Re: 100% Small and Value Tilting

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

Rick Ferri
by Rick Ferri
Thu Sep 11, 2014 10:23 pm
 
Forum: Investing - Theory, News & General
Topic: 100% Small and Value Tilting
Replies: 72
Views: 4656

I've never been a fan of commodity funds

Here's a topic that I haven't seen discussed in a while. Wonder why?

Commodity ETFs at Multi-Year Lows on Supply Glut

Rick Ferri

PS. Not that I'm bragging or anything, but...least we forget The Great Commodities Debate (part 1) from early 2008.
by Rick Ferri
Thu Sep 11, 2014 8:04 pm
 
Forum: Investing - Theory, News & General
Topic: I've never been a fan of commodity funds
Replies: 28
Views: 2341

Re: Approximating Total Stock Mkt or CoffeeHouse Portfolio?

The "better" option is the portfolio you thoroughly understand and are willing to stick with through all market conditions. It appears you're not quite sure what factor tilts are, so I would recommend sticking with the first option at this time.

Rick Ferri
by Rick Ferri
Thu Sep 11, 2014 11:44 am
 
Forum: Investing - Theory, News & General
Topic: Approximating Total Stock Mkt or CoffeeHouse Portfolio?
Replies: 3
Views: 529

Re: Why is Total Intl's turnover rate much lower than its pa

Rick, I simply chose not to buy such a small share of Vanguard's small cap international fund. Right decision? That's not for me to decide. The right decision is the one you're happy with because odds are better you'll stick with it for the long-term, and that's what really counts. :wink: Rick Ferri
by Rick Ferri
Fri Sep 05, 2014 2:19 pm
 
Forum: Investing - Theory, News & General
Topic: Why is Total Intl's turnover rate much lower than its parts?
Replies: 12
Views: 852

Re: Why is Total Intl's turnover rate much lower than its pa

Total international includes small- and mid-cap stocks. Europe and Pacific funds are only large cap. This means more turnover within the regional funds. Also, you'll need a small-cap international fund to round the portfolio into a "total" international equity exposure. I use a small-cap v...
by Rick Ferri
Fri Sep 05, 2014 1:03 pm
 
Forum: Investing - Theory, News & General
Topic: Why is Total Intl's turnover rate much lower than its parts?
Replies: 12
Views: 852

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

Factor investing is becoming quite popular. I haven't seen actual data, but my gut tells me that "smart beta" and "fundamental indexing" concepts are certainly being applied in more portfolios and in smaller accounts. Given these return premiums must come from somewhere, someone ...
by Rick Ferri
Fri Sep 05, 2014 10:50 am
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 9286

Peter Lynch was wrong

Legionary Fidelity Magellan fund manager Peter Lynch wrote “buy what you know” in his classic book, One Up on Wall Street: How to use what you already know to make money in the market. The basic principle is simple: you’re more likely to be successful in the market if you buy what you’re familiar wi...
by Rick Ferri
Fri Sep 05, 2014 10:28 am
 
Forum: Investing - Theory, News & General
Topic: Peter Lynch was wrong
Replies: 64
Views: 6213

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

There's more to factor investing than meets the eye. 1) it is always more expensive than a simple TSM (beta) portfolio. 2) it adds unfamiliar risks to a portfolio that creates tracking error. 3) when the tracking error is large and negative, there is the added risk of capitulation. Here is how I rec...
by Rick Ferri
Thu Sep 04, 2014 8:38 pm
 
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 153
Views: 9286
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