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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: 66
Views: 5650

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: 1230

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: 10057

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: 10057

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: 4189

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: 2295

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: 2295

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: 2295

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: 2295

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: 6244

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: 6244

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: 10057

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: 2295

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: 10057

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: 10057

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: 10057

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: 10057

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: 9294

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: 10057

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: 16
Views: 1641

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: 16
Views: 1641

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: 16
Views: 1641

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: 204

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: 1730

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: 1755

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: 1676

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: 1676

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: 2395

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: Personal Finance (Not Investing)
Topic: Roll Call for the Retirement Class of 2014!
Replies: 154
Views: 13503

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: Personal Finance (Not Investing)
Topic: Roll Call for the Retirement Class of 2014!
Replies: 154
Views: 13503

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: Personal Finance (Not Investing)
Topic: Roll Call for the Retirement Class of 2014!
Replies: 154
Views: 13503

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: 6996

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: 1961

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: 2733

Re: Do you need international bonds?

G-Money The hedging cost for Vanguard is only about 0.15% per year (take it on my word that I have a good source). The difference in yield is because the yields of the bonds in the fund are lower. Pretty straight forward. But this doesn't mean the expected total return is lower in local currency. Un...
by Rick Ferri
Mon May 26, 2014 3:29 pm
 
Forum: Investing - Theory, News & General
Topic: Do you need international bonds?
Replies: 29
Views: 2733

Do you need international bonds?

I agree with much of what Larry wrote on this often asked question: Do you need international bond exposure? My answer is no. Larry may not agree. I based my conclusions on the cost for retail investors to access this market. It may make sense if your a gigantic institution that trades for extremely...
by Rick Ferri
Mon May 26, 2014 12:44 pm
 
Forum: Investing - Theory, News & General
Topic: Do you need international bonds?
Replies: 29
Views: 2733

Re: Good article on style premium investing & AQR new fund

Alpha goes to the manager. In other words, any premiums that do accrue are eventually absorbed by management fees. The net result to individual investors is a market return or less. I tell my own clients that the risk premiums they earn from factor tilts is what pays my fee, and I ain't lyin'. Rick ...
by Rick Ferri
Sun May 25, 2014 8:16 pm
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 62
Views: 5984

Re: Good article on style premium investing & AQR new fund

The question is this; are you going to "invest" in these technologies by paying higher fees for the hope of a higher return, or buy a simple portfolio of low-cost index funds and be happy matching the markets? I'm inclined to do more of the latter - and have been for quite some time. A 25%...
by Rick Ferri
Sat May 24, 2014 5:57 pm
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 62
Views: 5984

Re: Good article on style premium investing & AQR new fund

I'm becoming concerned the proliferation of factor investing (also known as "smart beta" strategies) are going to turn risk premiums into risk discounts. Where are all the new dumb investors coming from who are going to supply these future risk premiums?

Rick Ferri
by Rick Ferri
Sat May 24, 2014 3:47 pm
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 62
Views: 5984

Re: We won best paper from S&P SPIVA worldwide!

Thank you all. It was quite a surprise.

I have been invited to join the current class of Wall Street Warfighters when they visit S&P in NY next week. I'm looking forward to it.

Rick Ferri
by Rick Ferri
Fri May 23, 2014 6:42 pm
 
Forum: Investing - Theory, News & General
Topic: We won best paper from S&P SPIVA worldwide!
Replies: 39
Views: 3028

Re: commodities and multi-asset class portfolios

Gold has risen 500% in the last 13 years with little inflation. Other commodities have also done very well. Have their returns already frontrun future unexpected increases in inflation, thus adversely affecting their role in a portfolio going forward? Makes sense to me. I wrote this back in April 2...
by Rick Ferri
Fri May 23, 2014 1:29 pm
 
Forum: Investing - Theory, News & General
Topic: commodities and multi-asset class portfolios
Replies: 65
Views: 3512

Re: Does a small value tilt reduce porfolio volatility?

Can you please define what you mean by "tracking error" above? The usual meaning is that the portfolio does not have the same performance as total stock market or S&P 500. In other words, that the portfolio in question does not track a broad market index. You can also have tracking er...
by Rick Ferri
Fri May 23, 2014 11:48 am
 
Forum: Investing - Theory, News & General
Topic: Does a small value tilt reduce porfolio volatility?
Replies: 53
Views: 3197

Re: Does a small value tilt reduce porfolio volatility?

Rick, in the past you have recommended and I believe held IJS. Has your opinion of this fund changed in favor of PXSV? I don't recall you mentioning this fund before. I started writing about PXSV a couple of years ago when they Powershares switched to the RA pure small value index. However, I'm sti...
by Rick Ferri
Fri May 23, 2014 4:00 am
 
Forum: Investing - Theory, News & General
Topic: Does a small value tilt reduce porfolio volatility?
Replies: 53
Views: 3197

Re: Does a small value tilt reduce porfolio volatility?

Do you have you done any articles that examined PXSV fund? Does it utilize any screens, etc? It does seems more similar to the DFA fund (maybe even more of a pure value and small play) than is the Vanguard fund and is not too costly, especially sans advisor. Do you have any non-DFA recommendations ...
by Rick Ferri
Thu May 22, 2014 3:26 pm
 
Forum: Investing - Theory, News & General
Topic: Does a small value tilt reduce porfolio volatility?
Replies: 53
Views: 3197

Re: Does a small value tilt reduce porfolio volatility?

These numbers are squishy; they shift over time and depend on the factors used to measure value. For the record, I hold 25% SV and 75% TSM in US and international. That's enough tracking error for me. All things in moderation. Rick Ferri Hi Rick, If you don't mind commenting when you say 25% SV do ...
by Rick Ferri
Thu May 22, 2014 11:37 am
 
Forum: Investing - Theory, News & General
Topic: Does a small value tilt reduce porfolio volatility?
Replies: 53
Views: 3197

We won best paper from S&P SPIVA worldwide!

From the press release: NEW YORK, May 22, 2014 /PRNewswire/: Two researchers from the United States have claimed first prize (USD $30,000) for their study on the outperformance of diversified portfolios of index fund portfolios to portfolios of actively managed funds in S&P Dow Jones Indices' th...
by Rick Ferri
Thu May 22, 2014 10:09 am
 
Forum: Investing - Theory, News & General
Topic: We won best paper from S&P SPIVA worldwide!
Replies: 39
Views: 3028

Re: Does a small value tilt reduce porfolio volatility?

These numbers are squishy; they shift over time and depend on the factors used to measure value. For the record, I hold 25% SV and 75% TSM in US and international. That's enough tracking error for me.

All things in moderation.

Rick Ferri
by Rick Ferri
Thu May 22, 2014 9:20 am
 
Forum: Investing - Theory, News & General
Topic: Does a small value tilt reduce porfolio volatility?
Replies: 53
Views: 3197

Re: How to decide your number?

3. Multiply the amount left by 20 if you don't care to leave anything behind or 25 if you do want to leave an inheritance. That would be an initial withdrawal rate of 5% (X20) or 4% (X25). I might do X30 in our current low return world. I'm assuming an investment in a balanced portfolio and earning...
by Rick Ferri
Wed May 21, 2014 5:33 pm
 
Forum: Personal Finance (Not Investing)
Topic: How to decide your number?
Replies: 61
Views: 6996

Re: How to decide your number?

No specific age. Let's call it 35 years in retirement.

Rick Ferri
by Rick Ferri
Wed May 21, 2014 2:25 pm
 
Forum: Personal Finance (Not Investing)
Topic: How to decide your number?
Replies: 61
Views: 6996

Re: How to decide your number?

Here is a simple way to find your number: 1. Calculate your total expected annual spending in retirement. 2. Subtract annual annuity income, pensions, Social Security, rental income and other non-portfolio income 3. Multiply the amount left by 20 if you don't care to leave anything behind or 25 if y...
by Rick Ferri
Wed May 21, 2014 1:55 pm
 
Forum: Personal Finance (Not Investing)
Topic: How to decide your number?
Replies: 61
Views: 6996
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