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Re: Shiller CAPE 10 — Why So High These Days?

I'm not a fan of valuing today's stock market based on earnings from 10 years ago. Using today's earnings, the S&P 500 PE is 19. That's the important number. It's not low, but it's not high either given the current economic expansion and low interest rates. Keep it in perspective.

Rick Ferri
by Rick Ferri
Wed Nov 26, 2014 8:23 am
 
Forum: Investing - Theory, News & General
Topic: Shiller CAPE 10 — Why So High These Days?
Replies: 38
Views: 2479

Re: Small cap value premium

This all gets back to the three risks of factor investing: 1) it's always more expensive to implement than beta only 2) there can be a long delay between implementation and benefit 3) prolonged negative tracking error often leads to capitulation at the wrong time The decision to impliment a factor t...
by Rick Ferri
Sun Nov 23, 2014 5:29 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 140
Views: 9319

Re: Small cap value premium

Asset allocation is determined by considering the risk and return of asset classes, and to some extent, how those asset classes behave relative to each other. How one divides asset classes is subjective, but normally it's done using broad categories; US equity, international equity, investment grade...
by Rick Ferri
Sun Nov 23, 2014 8:03 am
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 140
Views: 9319

Re: Small cap value premium

Asset classes are divided into categories, styles, sectors, etc. They're all part of the same US equity asset class. How these categories are used in a portfolio is called strategy.

Rick Ferri
by Rick Ferri
Sat Nov 22, 2014 9:39 am
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 140
Views: 9319

Re: Small cap value premium

I think you are really trying hard here. It's accepted in the language of finance that small value is an asset class within the broader equity asset class. It's not a strategy, but an asset class. To the extent the US equity market is often divided into industry sectors and styles, one could refer ...
by Rick Ferri
Sat Nov 22, 2014 8:08 am
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 140
Views: 9319

Re: Small cap value premium

Rick You're kidding right, small cap value stocks are not an asset class? Larry Larry, If you're trying to make an augment that investment strategy is an asset class, I would disagree. The two are quite different. US equities are an asset class. How one chooses to invest in US common stocks is inve...
by Rick Ferri
Sat Nov 22, 2014 7:57 am
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 140
Views: 9319

Re: Small cap value premium

There is a difference between diversifying among asset classes and investing in a strategy within an asset class. People will stay diversified among asset classes because it's prudent to do so even when an asset class isn't performing. A strategy like small-value isn't an asset class. It's trying to...
by Rick Ferri
Fri Nov 21, 2014 6:57 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 140
Views: 9319

Re: Small cap value premium

In recent years, the longest period of time when small-value under-performed was 18 years (from 1984 through 2001). You should be prepared to wait that long if you're going to take this additional risk. I call it "a life-long investment strategy." Don't do it if you're not willing to commi...
by Rick Ferri
Fri Nov 21, 2014 6:01 pm
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 140
Views: 9319

Re: Rick Ferri 60/40 portfolio

dbr wrote:Rick, it is truly refreshing to hear from a well regarded adviser and author in the field that people do not need to agonize over all the over-engineering of portfolios that is presented in too many places.


:happy

Rick Ferri
by Rick Ferri
Fri Nov 21, 2014 10:31 am
 
Forum: Investing - Help with Personal Investments
Topic: Rick Ferri 60/40 portfolio
Replies: 18
Views: 4305

Re: Small cap value premium

Is "factor crowding" a looming issue for smart beta investors? Bruce Jacobs and Kenneth Levy of Jacobs Levy Equity Management believe so: "Smart beta strategies are often based on common, generic factors used by many managers. This approach leaves their performance susceptible to fact...
by Rick Ferri
Fri Nov 21, 2014 10:24 am
 
Forum: Investing - Theory, News & General
Topic: Small cap value premium
Replies: 140
Views: 9319

Re: Rick Ferri 60/40 portfolio

Hi Rick, I really like the Three Fund Portfolio. In fact, the older I get, the more I appreciate it. It has been reassuring to hear you discuss the many benefits over the last year or so. Best. A three fund portfolio provides the main ingredients of a successful asset allocation. All else is icing ...
by Rick Ferri
Fri Nov 21, 2014 9:45 am
 
Forum: Investing - Help with Personal Investments
Topic: Rick Ferri 60/40 portfolio
Replies: 18
Views: 4305

Re: Rick Ferri 60/40 portfolio

Hi and thanks for asking.

Start with three ETFs:

VTI for the US market
VXUS for the international market
BND for bonds or a comparable fund (or CD ladder)

Everything else is an add-on and not particularly important.

Rick Ferri
by Rick Ferri
Thu Nov 20, 2014 8:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rick Ferri 60/40 portfolio
Replies: 18
Views: 4305

Re: Outperforming the Indexes

Your analysis included only funds that survived. On average, about 25% of actively managed mutual fund don't last over the next 5-years. Imagine how poorly the average would have performed if your series didn't include a survivorship bias?

Rick Ferri
by Rick Ferri
Thu Nov 20, 2014 5:53 pm
 
Forum: Investing - Help with Personal Investments
Topic: Outperforming the Indexes
Replies: 13
Views: 1901

Additional Betas: Defining and implementing

Here is a recent interview in did with Chrisitne Benz from Morningstar. The subject is smart beta, strategic beta, additional beta, exotic beta wor whatever you wish to call factor tilts in a portfolio.

Enjoy!

[erri: Patience Required for Strategic-Beta Strategies

Rick Ferri
by Rick Ferri
Mon Nov 17, 2014 6:06 pm
 
Forum: Investing - Theory, News & General
Topic: Additional Betas: Defining and implementing
Replies: 6
Views: 614

Re: Can active funds reliably beat the index? Actually, Yes

It's naive to say that active management "can't" beat the market or "doesn't" beat the market because neither are true. There have been people who beat the market and there will be in the future (nominally and risk-adjusted basis per Larry's point). Some managers do have skill. T...
by Rick Ferri
Sat Nov 15, 2014 2:46 pm
 
Forum: Investing - Theory, News & General
Topic: Can active funds reliably beat the index? Actually, Yes.
Replies: 38
Views: 5138

Re: Can active funds reliably beat the index? Actually, Yes

I wrote about this phenomenon in The Power of Passive Investing. Here is an exerpt: Since the early-2000s, the SEC has required that fund run by one manager must disclose the amount of "skin" the manager has in his or her fund. David F. Swensen, chief investment offi cer at Yale University...
by Rick Ferri
Sat Nov 15, 2014 8:52 am
 
Forum: Investing - Theory, News & General
Topic: Can active funds reliably beat the index? Actually, Yes.
Replies: 38
Views: 5138

Re: International Stock Diversification — A New Look

A simple way to avoid all the confusion is the buy VT, the Vanguard Total World Stock ETF.

Rick Ferri
by Rick Ferri
Mon Nov 10, 2014 10:02 am
 
Forum: Investing - Theory, News & General
Topic: International Stock Diversification — A New Look
Replies: 51
Views: 5620

Re: International Stock Diversification — A New Look

The data appears to be going only in one direction. What's seems to be missing is the percentage of revenue generated by international companies in US sales. The data would look quite different if international sales in the US was included.

Rick Ferri
by Rick Ferri
Mon Nov 10, 2014 8:37 am
 
Forum: Investing - Theory, News & General
Topic: International Stock Diversification — A New Look
Replies: 51
Views: 5620

Happy Birthday, Marines!

[Thread merged, see below. --admin LadyGeek] Today is the Marine Corps 239th birthday. The Continental Congress commissioned Samuel Nicholas to raise two Battalions of Marines on November 10, 1775. Nicholas set up shop in Tun Tavern, and appointed Robert Mullan, the proprietor, to the job of chief ...
by Rick Ferri
Mon Nov 10, 2014 8:22 am
 
Forum: Local Chapters and Bogleheads Community
Topic: Happy 239th Birthday, U.S. Marine Corps
Replies: 20
Views: 882

Re: Want to move out of Ameriprise

Be on the lookout for back-end sales loads on mutual funds and variable annuities, high commission charges to sell other investments, and account closing fees when the accounts transfer.

Rick Ferri
by Rick Ferri
Sun Nov 09, 2014 6:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Want to move out of Ameriprise
Replies: 5
Views: 1056

Re: Explaining muni bond spreads

Rick There is simply no way Vanguard can do what a separate account manager who has access to institutional pricing can do. This must be a typo. Vanguard is managing $3 trillion in assets. I think that qualifies them for institutional pricing. We'll agree to disagree. Enough said by me. Rick Ferri
by Rick Ferri
Mon Nov 03, 2014 6:11 pm
 
Forum: Investing - Theory, News & General
Topic: Explaining muni bond spreads
Replies: 40
Views: 3513

Re: Explaining muni bond spreads

Rick, Sorry buddy but that isn't even correct. We add significant value and easy to show and we don't charge any more dollars to use us as muni or taxable bond advisor than if we used a fund. Larry, Sorry buddy, but we'll agree to disagree on that if the "fund" your talking about is manag...
by Rick Ferri
Mon Nov 03, 2014 4:00 pm
 
Forum: Investing - Theory, News & General
Topic: Explaining muni bond spreads
Replies: 40
Views: 3513

Re: Explaining muni bond spreads

I'll say it again, you can't beat Vanguard's Tax Exempt funds for low-cost, broadly diversified, well managed portfolios. Sure, an adviser may be able to do a bunch of trading gymnastics that might generate a higher after-tax return; but in the end, any advantage of doing that goes to pay the manage...
by Rick Ferri
Mon Nov 03, 2014 1:15 pm
 
Forum: Investing - Theory, News & General
Topic: Explaining muni bond spreads
Replies: 40
Views: 3513

Re: Investing in Art, Antiques, and Collectibles and wines

Collecting should be viewed as a hobby first and an investment second. Collecting for investment only is a lot of work and typically doesn’t pay well. Only when a potential financial benefit is combined with the “psychic return” of holding collectibles does the expected payoff makes sense. Collectin...
by Rick Ferri
Mon Nov 03, 2014 11:12 am
 
Forum: Investing - Help with Personal Investments
Topic: Investing in Art, Antiques, and Collectibles and wines
Replies: 53
Views: 3806

Re: Fighting Through Risk Tolerance Questionnaires

Is there any data to support taking risk tolerance questionnaires makes one any better at avoiding mistakes then those who don't? Any idea if studies like that have been done in the financial investing world? Sounds like a great PhD thesis. Dan Kahnemann would say that knowing your risk tolerance (...
by Rick Ferri
Mon Nov 03, 2014 11:06 am
 
Forum: Investing - Theory, News & General
Topic: Fighting Through Risk Tolerance Questionnaires
Replies: 53
Views: 3024

Fighting Through Risk Tolerance Questionnaires

What people say they believe about financial risk and the way they think they’ll act under market stress is often contradicted by their behavior. Long-term investors frequently become short-sighted at the first sign of trouble. Many times this reaction is brought on by answering an investment questi...
by Rick Ferri
Mon Nov 03, 2014 10:44 am
 
Forum: Investing - Theory, News & General
Topic: Fighting Through Risk Tolerance Questionnaires
Replies: 53
Views: 3024

Re: Explaining muni bond spreads

From the article, "The findings are an important reminder to investors that while high-quality municipal bonds...are relatively good substitutes for Treasurys in terms of credit risk, they do not provide the same hedging qualities as Treasurys when there are liquidity shocks.On the other hand, ...
by Rick Ferri
Mon Nov 03, 2014 9:47 am
 
Forum: Investing - Theory, News & General
Topic: Explaining muni bond spreads
Replies: 40
Views: 3513

Re: ETF premium/discount

The ETF companies would say it's all price discovery, of course!

Rick Ferri
by Rick Ferri
Sun Nov 02, 2014 7:09 pm
 
Forum: Investing - Theory, News & General
Topic: ETF premium/discount
Replies: 7
Views: 779

Re: ETF premium/discount

It's not just the closing price of local markets. ADRs that trade on US exchanges are used to interpolate ETF prices in markets that are closed. Thus, it may appear that an international ETF is trading at a premium or discount when it is actually a price discovery vehicle. In other words, the price ...
by Rick Ferri
Sat Nov 01, 2014 1:14 pm
 
Forum: Investing - Theory, News & General
Topic: ETF premium/discount
Replies: 7
Views: 779

Re: "Why Bother With Bonds" -- A Gem

Do you realize that stocks can lose in one day what bonds might lose in a year?


Great quote! I never thought about it like that.

Rick Ferri
by Rick Ferri
Fri Oct 31, 2014 11:58 am
 
Forum: Investing - Theory, News & General
Topic: "Why Bother With Bonds" -- A Gem
Replies: 29
Views: 7389

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

Well, at least this makes me feel a little better about costing Schwab so much money in ATM fees while never giving them any commissions. I still think they're deep in the red with my account.... I assure you they are not in the red. Have you looked at the fees they charge for money market funds? R...
by Rick Ferri
Thu Oct 30, 2014 1:21 pm
 
Forum: Investing - Theory, News & General
Topic: Schwab expands no commission ETFs-no early sell fee
Replies: 42
Views: 3216

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

Again, I'm not saying these programs are bad. I'm just trying to explain why Schwab trades some non-Schwab ETFs commission free. Commission free does not mean Schwab makes no revenue; they just get it a different way - directly from the ETF companies and on trading spreads by controlling execution. ...
by Rick Ferri
Thu Oct 30, 2014 12:49 pm
 
Forum: Investing - Theory, News & General
Topic: Schwab expands no commission ETFs-no early sell fee
Replies: 42
Views: 3216

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 10:14 am
 
Forum: Investing - Help with Personal Investments
Topic: Prudent Investment Portfolio for 58-year Old w/20M Net Worth
Replies: 39
Views: 4808

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 9:28 am
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 59
Views: 4525

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 9:24 am
 
Forum: Investing - Theory, News & General
Topic: Schwab expands no commission ETFs-no early sell fee
Replies: 42
Views: 3216

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 9:14 am
 
Forum: Investing - Help with Personal Investments
Topic: Prudent Investment Portfolio for 58-year Old w/20M Net Worth
Replies: 39
Views: 4808

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 6:55 am
 
Forum: Investing - Theory, News & General
Topic: Schwab expands no commission ETFs-no early sell fee
Replies: 42
Views: 3216

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 6:45 am
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 59
Views: 4525

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 12:15 pm
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 59
Views: 4525

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 12:08 pm
 
Forum: Investing - Theory, News & General
Topic: Schwab expands no commission ETFs-no early sell fee
Replies: 42
Views: 3216

Re: Paul Merriman criticism?

It falls in the same category as "smart beta."
by Rick Ferri
Tue Oct 28, 2014 11:36 am
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 59
Views: 4525

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 11:31 am
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 59
Views: 4525

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 10:52 am
 
Forum: Investing - Theory, News & General
Topic: Paul Merriman criticism?
Replies: 59
Views: 4525

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 7:49 pm
 
Forum: Local Chapters and Bogleheads Community
Topic: THANK YOU!!! Bogleheads Conference #13 (2014)
Replies: 69
Views: 7142

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 8:59 pm
 
Forum: Investing - Help with Personal Investments
Topic: Rebalancing with dividends
Replies: 9
Views: 1418

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 8:46 am
 
Forum: Investing - Theory, News & General
Topic: Dealing with Volatility
Replies: 14
Views: 1141

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 10:28 am
 
Forum: Investing - Theory, News & General
Topic: ETF's instead of index funds?
Replies: 24
Views: 1542

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 10:27 pm
 
Forum: Investing - Theory, News & General
Topic: Current market volatility
Replies: 21
Views: 1772

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 12:33 pm
 
Forum: Investing - Theory, News & General
Topic: A simple division between activie and passive
Replies: 0
Views: 311
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