Bogleheads.org

There are some people that you just can't change.

Rick Ferri

The more complicated he can make investing, the more he can charge.

Rick Ferri

I've learned over the past few weeks that there are two investment topics that people become very passionate about - gold and houses. Rick Ferri Can you understand why some of us might find this to be an ad hominem argument? I wonder if I would get away with a statement like that. I knew my recent ...

You may find this of interest. Forecasts about future economic growth have no impact on the future performance of the stock market while the past performance of the stock market has a meaningful impact on what forecasters believe about the future.

Markets Can Predict People

Rick Ferri

The weighted average expense ratio for a broadly diversified mutual fund portfolio should be no more than 0.20%. If an adviser is hired to manage a portfolio, the total investment expense should be no more than 0.75% including fund expenses, the adviser fee and trading costs. This would equal 15% of...

I prefer a fixed allocation to developed and emerging markets and rebalance occasionally, but having one fund for both works well also.

Rick Ferri

They mean everything in the Vanguard Total Bond Index fund; Treasuries, motrgages, corporates, assert backed securities, Yankee bonds. Fixed income that has a rating of Baa or higher.

Rick Ferri

There are advantages and disadvantages.

Advantages:

Potential for higher nominal and risk-adjusted returns

Disadvantages

More complexity
Higher cost
Greater discipline to stay the course

Rick Ferri

In other words,

I ain't got nowhere else to go! I ain't got nothin' else.

Rick Ferri

Larry,

I agree 100%. If anything, ETFs add liquidity to the market and increases efficiency.

Rick Ferri

Rick, when considering risk, do you approve of a retiree holding Vanguard's Intermediate Muni or Limited Term Muni bond funds in their taxable portion of the portfolio? Thanks, Charles I'm currently invested in the limited-term muni fund because I'm using it as a holding place for cash to pay incom...

No changes except perhaps something I've talked about before: Own Stocks To Offset Low Rates The biggest temporary issue affecting our markets today are artificially low interest rates. 10-year Treasuries bonds are yielding 1.75%. They should be yielding closer to 3.0% based on inflation expectation...

OK, thanks for pointing it out. The article is referring to people who are replacing investment grade with higher yielding securities that have more risk. That's not a good idea. Higher yielding / higher risk fixed income investments could compliment investment grade bonds, not replace them. Rick Fe...

The report said there is a likelihood of higher rates. That's quite different than a near certainty of higher rates. I believe rates are going to stay low for several years, although there will be bumps in the road.There's too much slack in the global economy for inflation to rise. I agree with the ...

I'll let you know the day after you invest.

Rick Ferri

I agree with Taylor. We all have the same philosophy. We're all Bogleheads. Strategy is personal, to each his or her own. Quite frankly, if you're following Boglehead philosophy, then strategy doesn't matter a whole lot. Let's call it quits on this conversation. We'll pick it up again in the next ro...

I've learned over the past few weeks that there are two investment topics that people become very passionate about - gold and houses.

Rick Ferri

Got $200k to invest. I told myself I'd put it all in Wednesday (tomorrow). But the market has gone up dramatically over the past few days, and now I'm spooked. Should I still do it? Ahhh, the perils of market timing. You'd be asking yourself the same question if the market went down dramatically ov...

The Vanguard fund follows the Barclay's US Aggregate Float-adjusted Bond Market. It has fewer Treasury bonds and mortgages than the Barclay's US Aggregate Bond Market. The returns are not material different.

Rick Ferri

The whole idea of owning bonds is to protect your portfolio by providing diversification. That's one strategy. Another is to include high yield bonds because they are a large and viable part of the US bond market, thus should be included as part of a total-total bond portfolio. This is no different...

Larry, DFA core funds are equity funds, so it makes sense to say that their equity factors change, especially since those funds are actively managed. We're talking about bonds. I have always said that HY has equity type risk, but this risk is highly variable. Back in 2006, in All About Asset Allocat...

The bubble has popped and home prices are back down to their inflation-adjusted values. A home may not make a great investment, but you have to live someplace, and it beats paying rent. Whether it beats paying rent depends entirely on the relative costs of renting a home and buying a home. Clearly ...

I am sure Jared's math was correct. But could he tell you beforehand what the regression was going to be? Absolutely not! Can he tell you what that regression will be in the future? Absolutely not. So, what is the point of this random regression analysis? I know you can't be going to go down the pat...

Are we playing with numbers here? From an odd starting data in 1988, and obscure regression found that some random allocation to size, beta, BtM generated the same risk and return as high yield bonds. Is this supposed to be useful?

Rick Ferri

Honobob

99.999% of Ameican houshols are not affected by rent control.

Rick Ferri

Honobob, A house rental is not like a corporation. All else equal, the rent from a house does not grow faster than inflation because the house does not get bigger and grow real earnings like a company might. It is more like an inflation-adjusted bond that requires a new roof every 15 years. Rick Ferri

Also you did not explain how you came to the conclusion that "average" houses are "supposed" to appreciate at the rate of inflation. There is nothing mysterious about this. A home doesn't pay income and it doesn't grow into two houses over time. Homes are a hard asset. They go u...

The live WSJ video stream will start at 3 PM EST today featuring Karen Damato, Morningstar’s Director of Personal Finance Christine Benz, American Association of Individual Investors Vice President Charles Rotblut, and some slug I've never heard of. How to Succeed As a Do-It-Yourself Investor Rick F...

Yes, location is everything. My data is based on the national average home price. Rick Ferri Then of what use is it? If the movement is up but it is only the result of only one geographic area then does it even show a nationwide trend? And is your only argument that ""average" housin...

Right. Thank you. But there are some markets where housing prices have accelerated over a very long term. The little house my parents purchased ca. 1949 in Los Angeles for about $4,900 would sell for more than $400,000 today (Zillow estimate) -- an 80-fold increase in nominal terms, while the CPI h...

Mr Ferri, (and Mr. Swedroe), assuming one has decided to add a little HY to one's portfolio (which I haven't yet by the way :happy ) AND using whatever valuation measures you feel are best for high-yield bond funds/ETFs, do you think that right now is a "good" or "bad" time to d...

I've lived in the same house for 40+ years. In inflation-adjusted terms (using general CPI), its market value today is essentially identical to the price I paid for it. Yes, that's exactly what it is supposed to do. The 'average' house doesn't appreciate in real return like stocks because it has no...

The bubble has popped and home prices are back down to their inflation-adjusted values. A home may not make a great investment, but you have to live someplace, and it beats paying rent. For a long-term perspective...

Rejoice! Your House Is An Investment Again

Rick Ferri

I don't have both books in front of me. I can say that the asset classes haven't changed except that I'm not using micro-cap funds anymore or emerging market debt. Micro-cap was merged into small-cap value because there started to become a lot of overlap now that the number of listed stocks has fall...

Larry, I am having trouble reconciling your statements. Fama-French created the default risk premium to measure the risk of corporate bond default. The data they used to measure this was is the difference between the yield on Baa and Aaa corporate bonds from the Board of Governors of the Federal Rese...

Why are some people insisting the Fama and French are wrong and that their long-term data is wrong, and that we should only be looking at very recent default risk premium data to make a decision about high yield bonds? I have no clue what Rick is talking about here. Larry My point is that FF recogn...

There is another discussion on high yield bonds going on under this conversation: What is the consensus on High Yield Bond Funds?

Rick Ferri

So, you want me give the answer to my own question? OK, I believe the research against high yield bonds is based on data that only goes back to the 1980s. It turns out that the correlation between the Default Risk Premium and the Equity Risk Premium has been higher since interest rates peaked in 198...

Using Fama-French Research factors, I ran a correlation between the US Default Risk Premium and the Total US Market Research Factor . Basically, the correlation between credit risk and equity risk. The correlation was 0.14 from 7/1926 to 3/2013. I ran a second correlation between the US Default Risk...

It's down 23% from the bubble peak and still falling down to it's inflation adjusted price of between $500-$600. There won't be another bubble like the one we've just seen for 20 years. We aren't anywhere near the next gold bubble! Rick Ferri Hmmm, this sounds like chartist talk if not market timin...

It would be a "new normal" for him to focus on running his company for shareholders and stop playing professor in the media. Chief Investment Officers (CIOs) are supposed to be visible. Their main jobs is to be in the media and speak at events to deliver their firm's message to clients an...

Rick, if you're still out there- Do you feel a good manager is important in selecting a fund that may employ some high yield (e.g. Loomis Sayles), or as with other asset classes, only important factor is expense? Bob P.S. Am reading Serious Money. I like reading what prominent authors were saying 7...

Well, well deserved!

Thank's for ALL you're hard work to make the Bogleheads' a huge success.

Rick Ferri

After many years working with individual investors, there isn't much I haven't seen or heard. The most common mistake is believing that someone knows something about the future. People then try to figure out who knows what, and this leads to all kinds of potential mistakes. About this time I step in...

Thanks, and yes it IS embarrassing to the index fund industry to have these 1.0%+ fee S&P 500 index funds on the market. There's not much money in these funds compared to low-fee index funds, and most of the excess fee goes to brokerage firms that sell these funds, so why not just get rid of the...

Since credit on that scale correlates well with beta, HY bonds are sometimes considered to have an equity-like component and hybrid in that sense. I concede the technical point. Over the long-term, the correlation of credit risk and equity is is positive , but it's not always positive. You can look...

The point is that it's a hybrid investment with a strong correlation to equities. Call it what it is and quit hiding behind the fact that it's technically in the bond family. You do a disservice to investors by calling it just another bond when investors ought to know that HY and junk aren't just b...

If an investor were to believe that "safety" means earning a real return from their fixed income portfolio after inflation, or at least not losing real value, then a little high yield makes perfect sense in a well diversified portfolio. Rick Ferri Might as well replace "high yield&qu...

But Rick isn't your typical advisor, either. At least not in my experience of having had 4 terrible advisors (all market timers.) Thanks, but I am not special. I like to earn money just like the next guy. The difference is that I admit publicly that the more I earn the less my clients earn. So, wha...

The TIAA-CREF HY bond fund (TIHYX), which I have access to, isn't just a fair alternative; it outpaces VWEHX in all timespans on my M* plots. I don't know if this is due to higher credit-risk bonds or not, but that's what it is. TIHYX has higher credit risk than VWEHX. There's no free lunch. Rick F...