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Re: Family Financial Health Check and Advice

I suggest boosting life insurance on you. That is only around ten years worth or so of your income. Well, more because is social security benefits. But at least run some numbers on what it would take to last through getting kids through college. Definitely want wills and such. Definitely want the 40...
by Rodc
Sat Apr 19, 2014 9:38 am
 
Forum: Personal Finance (Not Investing)
Topic: Family Financial Health Check and Advice
Replies: 14
Views: 1207

Re: Does this strategy invite unnecessary risk?

FWIW it is pretty well known that in theory and practice that you really don't need a bunch of little slices like Merrimen recommends. You get to essentially the same place by simply adding small value to a total market fund rather than large blend, large value, small blend, small value for example....
by Rodc
Sat Apr 19, 2014 7:46 am
 
Forum: Investing - Theory, News & General
Topic: Does this strategy invite unnecessary risk?
Replies: 42
Views: 2507

Re: Expensive med. test not covered by insurance

Update: My OBGYN's office manager put me in touch with their rep at the lab. To make a long story short, the most I'll have to pay out of pocket is $25. Yes, $25. And, it doesn't even matter that this is a pre-pregnancy screening. I won't celebrate until I actually get the bill (which won't get to ...
by Rodc
Fri Apr 18, 2014 4:02 pm
 
Forum: Personal Consumer Issues
Topic: Expensive med. test not covered by insurance
Replies: 74
Views: 3706

Re: The dangers of backtesting and overfitting data - paper

I think this is the authors' website Mathematicians Against Fraudulent Financial and Investment Advice (MAFFIA) Interesting. Thanks. I noted this: For instance, if only five years of daily data are available, no more than 45 independent model configurations should be tried I wonder if they are suff...
by Rodc
Fri Apr 18, 2014 3:58 pm
 
Forum: Investing - Theory, News & General
Topic: The dangers of backtesting and overfitting data - paper
Replies: 21
Views: 1169

Re: Using Valuations for Asset Allocation

They seem to think that these have statistical meaning. They do and they should know better IMHO. :) About the only use that makes sense is to use these to temper expectations if they predict returns will be low, that is try to save more, not for asset allocation. And one should always be saving as...
by Rodc
Fri Apr 18, 2014 12:34 pm
 
Forum: Investing - Theory, News & General
Topic: Using Valuations for Asset Allocation
Replies: 12
Views: 513

Re: Asset allocation over time

I think it is best to occasionally reassess goals and progress towards goals, reassess your job security, how you feel about risk and the actual consequences should something go awry with your current plans. Then remake your plan, rather than decide decades early how you will adjust (ie I don't like...
by Rodc
Fri Apr 18, 2014 12:24 pm
 
Forum: Investing - Theory, News & General
Topic: Asset allocation over time
Replies: 23
Views: 1216

Re: Using Valuations for Asset Allocation

You might try the search function. There have been approximately 943,782 posts on the topic. Personally I am skeptical of the value of doing this. But, I reserve the right to use valuations should they get super out of whack as a reason to change my allocation. But I am still skeptical. I did use t...
by Rodc
Fri Apr 18, 2014 10:40 am
 
Forum: Investing - Theory, News & General
Topic: Using Valuations for Asset Allocation
Replies: 12
Views: 513

Re: *poor* Bogleheads

I would also suggest that many here have been at this for a while so they (1) have above average pay and (2) have been saving long enough to have a decent nestegg. I suspect it is also true that folks looking around the internet for investing advice tend to have already amassed enough of a nestegg t...
by Rodc
Fri Apr 18, 2014 9:39 am
 
Forum: Forum Issues and Administration
Topic: *poor* Bogleheads
Replies: 78
Views: 5254

Re: *poor* Bogleheads

I learned years ago that there were always people (friends, family, strangers) that would always have lots more talent/money/looks/good health/fill-in-the-blank than me. I also learned that there were always people that would always have lots less talent/money/looks/good health/fill-in-the-blank th...
by Rodc
Fri Apr 18, 2014 9:36 am
 
Forum: Forum Issues and Administration
Topic: *poor* Bogleheads
Replies: 78
Views: 5254

Re: First of two parter on what is risk

Risk is the possibility that you won't be able to retire as planned Risk is the possibility you won't be able to afford the home you're living in Risk is the possibility that you won't be able to buy that little cabin you have been dreaming about Risk is the possibility that you won't be able to le...
by Rodc
Fri Apr 18, 2014 9:21 am
 
Forum: Investing - Theory, News & General
Topic: First of two parter on what is risk
Replies: 26
Views: 1657

Re: Using Valuations for Asset Allocation

You might try the search function. There have been approximately 943,782 posts on the topic.

Personally I am skeptical of the value of doing this. But, I reserve the right to use valuations should they get super out of whack as a reason to change my allocation. But I am still skeptical.
by Rodc
Fri Apr 18, 2014 9:06 am
 
Forum: Investing - Theory, News & General
Topic: Using Valuations for Asset Allocation
Replies: 12
Views: 513

Re: First of two parter on what is risk

In my little world of disasters RISK is a probability of an event In mine, and I thought this was pretty universal, risk was the probability of an event times the magnitude of harm of the event. This is how, for example, the FAA views risk when considering a change to the national airspace system. ...
by Rodc
Thu Apr 17, 2014 9:47 pm
 
Forum: Investing - Theory, News & General
Topic: First of two parter on what is risk
Replies: 26
Views: 1657

Re: The dangers of backtesting and overfitting data - paper

I'm surprised this rises to the level of a paper in a math journal as I think this is well known, and the same issue arises across many disciplines. It would be more useful if it appeared in a finance J. But good that it came up in the FT where it can do some good. Hopefully people will pay attentio...
by Rodc
Thu Apr 17, 2014 3:10 pm
 
Forum: Investing - Theory, News & General
Topic: The dangers of backtesting and overfitting data - paper
Replies: 21
Views: 1169

Re: Fidelity Full View

Not sure how many of you use this feature at Fidelity. But, Ive been using it for about 2 years now and find it a very powerful tool to keep up with expenses and account balances all in one location. Anyway, Fidelity updated Full View this weekend and its now almost useless. Ok, not useless, but no...
by Rodc
Thu Apr 17, 2014 2:01 pm
 
Forum: Investing - Theory, News & General
Topic: Fidelity Full View
Replies: 23
Views: 2621

Re: Another take on the "rebalancing bonus"

I find it interesting how much press rebalancing gets, how much effort goes into study of trivially different rebalancing techniques, etc vs how little it matters. I agree with you that over the decades long time scale it might matter some, but then given stocks have risen very high you have more m...
by Rodc
Thu Apr 17, 2014 11:53 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Another take on the "rebalancing bonus"

The question remains for me: what do you do when your AA of 50/50 drifts to 70/30? What is different between the Browser that pegged his risk tolerance at 50/50 and the Browser that keeps going with 70/30? A bull market? The confidence that both Browsers are smart enough to outmaneuver it? Despite ...
by Rodc
Thu Apr 17, 2014 10:56 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Another take on the "rebalancing bonus"

Here is an interesting example which someone pointed out to me not too long ago. We all know that really the action in rebalancing comes during market crashes like 2008 where we get to buy shares really cheap and sell them when they rebound. It is not the little nickle and dime rebalancing that make...
by Rodc
Wed Apr 16, 2014 7:16 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Another take on the "rebalancing bonus"

It might be useful to point out to the general forum reader that this debate really does not matter one way or the other. This is one of those dancing on the head of a pin exercises we so often get into that has no real value to investors. Most of us hold a stock and bond portfolio, and most rebalan...
by Rodc
Wed Apr 16, 2014 6:49 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Another take on the "rebalancing bonus"

I did a simulation of rebalancing for the decade 2000-2009, and the bonus was quite noticeable: About 0.3% a year. I would guess there probably has been a rebalancing penalty over recent years since then. Sounds like we are in agreement, sometimes you get lucky and get a small bonus, sometimes you ...
by Rodc
Wed Apr 16, 2014 5:03 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Another take on the "rebalancing bonus"

The problem with your examples are you set them up in a non-random way, they always have some guaranteed return to the mean so you force a greater amount of buy low sell high than exists in the real world. You are arguing about a different point than I was making. Clearly you have not bothered to r...
by Rodc
Wed Apr 16, 2014 7:49 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Why are total bond market funds so often recommended?

I'd like to say: "On this side, we've got stocks (she knows stocks), and on this side we've got risk free government bonds." Use TBM, and I have to get into call, prepay, default, etc. risks, or leave her with a portfolio she has an incomplete understanding of. Maybe that's ok. Why you ne...
by Rodc
Wed Apr 16, 2014 7:48 am
 
Forum: Investing - Theory, News & General
Topic: Why are total bond market funds so often recommended?
Replies: 52
Views: 4352

Re: Why are total bond market funds so often recommended?

BTW, SEC Yield is only higher by 0.5% between VBTLX (2.19%) and VFIUX (1.69%). Yes, that's only a 30% differential. Nearly all bondholders would sniff at such a meager increase in income - why bother? :happy Eric Percents in and of themselves are generally not very useful. You need to know percenta...
by Rodc
Wed Apr 16, 2014 7:44 am
 
Forum: Investing - Theory, News & General
Topic: Why are total bond market funds so often recommended?
Replies: 52
Views: 4352

Re: Another take on the "rebalancing bonus"

Rodc: One manufactured point really does not mean anything. I can manufacture one going the other direction. Me: Please manufacture your own point that contradicts mine. I would be interested to see it. cost A shares A total A cost B shares B total B total no rebal $1.00 10.00 $10.00 $1.00 10.00 $1...
by Rodc
Wed Apr 16, 2014 7:31 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Another take on the "rebalancing bonus"

Rodc, So I was maybe imprecise. I meant do not move with a correlation coefficient of +1.0. steve_14, In my original post I divided the prices into a trend plus noise. By my definition, the noise is fluctuation about a mean. Yes, it always reverts to the mean, by definition. Any signal can be decom...
by Rodc
Tue Apr 15, 2014 8:38 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Another take on the "rebalancing bonus"

Rodc, So I was maybe imprecise. I meant do not move with a correlation coefficient of +1.0. steve_14, In my original post I divided the prices into a trend plus noise. By my definition, the noise is fluctuation about a mean. Yes, it always reverts to the mean, by definition. Any signal can be decom...
by Rodc
Tue Apr 15, 2014 8:24 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Another take on the "rebalancing bonus"

Rodc, So I was maybe imprecise. I meant do not move with a correlation coefficient of +1.0. steve_14, In my original post I divided the prices into a trend plus noise. By my definition, the noise is fluctuation about a mean. Yes, it always reverts to the mean, by definition. Any signal can be decom...
by Rodc
Tue Apr 15, 2014 7:05 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Why are total bond market funds so often recommended?

Perfection is hard to come by so TBM falls into the "pretty good" and "good enough for most uses" buckets. I don't use it myself, but it is a solid low cost well diversified choice. And frankly the different between TBM and intermediate treasury (which I prefer) falls into the ca...
by Rodc
Tue Apr 15, 2014 4:43 pm
 
Forum: Investing - Theory, News & General
Topic: Why are total bond market funds so often recommended?
Replies: 52
Views: 4352

Re: Another take on the "rebalancing bonus"

If the investments are not correlated, there will be rebalancing as they fluctuate relative to each other. And, there will be a bonus by rebalancing across the uncorrelated noise. No, if two investments move randomly, and are uncorrelated, there will be no rebalancing bonus. For example, if you hav...
by Rodc
Tue Apr 15, 2014 4:35 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3516

Re: Mr. Money Mustache: Hero or Foolish?

Everyone says we need to all be consumers to keep our economy going, but what if we could all just have less stuff, all work less, and all be happier, have more time with our families and strengthen our local communities. I think this would actually make people less happy, but that's another discus...
by Rodc
Tue Apr 15, 2014 3:08 pm
 
Forum: Investing - Theory, News & General
Topic: Mr. Money Mustache: Hero or Foolish?
Replies: 227
Views: 24648

Re: What exactly is a risk premium?

This stood out to me. It seems the risk question is not so important with a long time frame to recover, but that by the time a portfolio becomes significant, there wouldn't be much risk tolerance anymore. That was not quite my point. Say you start by investing $100 a month. A year later maybe you h...
by Rodc
Mon Apr 14, 2014 9:07 pm
 
Forum: Investing - Theory, News & General
Topic: What exactly is a risk premium?
Replies: 14
Views: 977

Re: SCV premium is a history/math story, its not scientific

well I guess that it's purely a coincidence that A) After FF original study showing size and value premiums for 63-92, that we now have out of sample tests both before 63 and after 92 that show not only the same premiums but similar size B) We have the same premiums in developed markets all around ...
by Rodc
Mon Apr 14, 2014 8:17 pm
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2241

Re: SCV premium is a history/math story, its not scientific

"Larry Swedroe says we should not confuse strategy and outcome, but IMHO it is all but impossible to evaluate strategies in any fundamental way" Consider the following The best example is someone who is married and has young kids and decides to buy life insurance to protect against premat...
by Rodc
Mon Apr 14, 2014 8:10 pm
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2241

Re: The slackening...

Dutch wrote:It seems there's one thing pretty much consistent throughout history: older generations complaining about younger generations.

Not sure who is doing to the slackening.

Now get off my lawn!! :D


A lot of truth in that.
by Rodc
Mon Apr 14, 2014 5:38 pm
 
Forum: Personal Finance (Not Investing)
Topic: The slackening...
Replies: 57
Views: 5858

Re: Stock AA

See this first:

viewtopic.php?f=1&t=6212

More information is need before anyone can offer meaningful advice.
by Rodc
Mon Apr 14, 2014 4:04 pm
 
Forum: Investing - Help with Personal Investments
Topic: Stock AA [Asset Allocation]
Replies: 11
Views: 678

Re: TIPS and the Equity Bear

For a ladder I plan to hold to maturity I really only care about the YTM when I buy and very little to not at all what happens to value between when I buy and maturity. Agreed if you never ever ever will use your TIPS to rebalance which is why the post is titled "... and the equity bear"....
by Rodc
Mon Apr 14, 2014 4:02 pm
 
Forum: Investing - Theory, News & General
Topic: TIPS and the Equity Bear
Replies: 20
Views: 1599

Re: TIPS and the Equity Bear

Two sort of opposite sayings: Learn from your mistakes Generals are always fighting the last war This is certainly fighting the last war, and may or may not be learning something fundamental about TIPS. For a ladder I plan to hold to maturity I really only care about the YTM when I buy and very litt...
by Rodc
Mon Apr 14, 2014 2:39 pm
 
Forum: Investing - Theory, News & General
Topic: TIPS and the Equity Bear
Replies: 20
Views: 1599

Re: New Housing Bubble and upcoming cycle peak

FWIW: article in the Boston Globe today about the increasing use of "We''ll beat your best offer by $5000" clauses in bids on homes for sale, because it is getting so hot around here.

Seems like a sign of a bubble forming... Might go on for years. Or not.
by Rodc
Mon Apr 14, 2014 1:47 pm
 
Forum: Investing - Theory, News & General
Topic: New Housing Bubble and upcoming cycle peak
Replies: 74
Views: 6369

Re: SCV premium is a history/math story, its not scientific

pkcrafter wrote:Rodc wrote:
So the "must" is much too strong.

Ah, yes, I "must" agree.

Paul


Hi Paul,

Thought you might. :)
by Rodc
Mon Apr 14, 2014 11:10 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2241

Re: SCV premium is a history/math story, its not scientific

If they are greater risk than large stocks, they should be cheaper. I do not know the answer to this question: if the e in p/e is expected to grow faster for small companies vs for large (more stagnant?) companies then the use of past e might not be the same as the e the market is using to price sm...
by Rodc
Mon Apr 14, 2014 10:59 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2241

Re: SCV premium is a history/math story, its not scientific

Rodc, are you saying this is not true? stocks are more risky, they must pay out more than bonds to get people to take the risk of stocks. Paul Yes. Due to the fact that risk may well show up. Stocks are more risky so they are (generally) priced so that there is a reasonable statistical expectation ...
by Rodc
Mon Apr 14, 2014 10:54 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2241

Re: What exactly is a risk premium?

6) The crux of my question is this: if one prefers a whole market fund to bonds, t-bills, etc, then why not prefer a high risk asset class over time instead? One can do this. You would want to do it in a way that is very low cost and you would want to avoid too little diversification. In an ideal w...
by Rodc
Mon Apr 14, 2014 10:00 am
 
Forum: Investing - Theory, News & General
Topic: What exactly is a risk premium?
Replies: 14
Views: 977

Re: SCV premium is a history/math story, its not scientific

stocks are more risky, they must pay out more than bonds to get people to take the risk of stocks. sounds good, but completely wrong for past 50 years. You lost me here. No one knowledgeable believes the second clause of the first sentence. Indeed as stated you have an oxymoron. A statement that is...
by Rodc
Mon Apr 14, 2014 9:53 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2241

Re: 5 yr TIPs auction announced 4/10- any takers?

2) any data on how much better rolling 4 wk treasuries do for unexpected inflation vs TIPS? I'm not sure I buy the claim. Expected inflation: Why T-bills lead The high correlation of T-bills with expected inflation rates reflects the nature of these securities—short- term, government-guaranteed deb...
by Rodc
Sat Apr 12, 2014 7:53 pm
 
Forum: Investing - Theory, News & General
Topic: 5 yr TIPs auction announced 4/10- any takers?
Replies: 36
Views: 3073

Re: 5 yr TIPs auction announced 4/10- any takers?

I confess I don't really get 5-year TIPS. I worry about inflation in the long run much more than in the short run. Sure I can roll over short TIPS, but easier to buy longer TIPS. "Easy" shouldn't be a factor. (1) The best inflation hedge would be rolling 4 wk Treasuries bills. (2) But you...
by Rodc
Fri Apr 11, 2014 7:47 pm
 
Forum: Investing - Theory, News & General
Topic: 5 yr TIPs auction announced 4/10- any takers?
Replies: 36
Views: 3073

Re: 5 yr TIPs auction announced 4/10- any takers?

I confess I don't really get 5-year TIPS.

I worry about inflation in the long run much more than in the short run.

Sure I can roll over short TIPS, but easier to buy longer TIPS.
by Rodc
Fri Apr 11, 2014 3:33 pm
 
Forum: Investing - Theory, News & General
Topic: 5 yr TIPs auction announced 4/10- any takers?
Replies: 36
Views: 3073

Re: BH Greatest Hits: PE10 predicitive power

The problem with p/e is one year is noisy. The problem with CAPE is it includes years which are no longer relevant. Vanguard found the two methods to have equal predictive power. As I mentioned up-thread: "We confirm that valuation metrics such as price/earnings ratios, or P/Es, have had an in...
by Rodc
Fri Apr 11, 2014 10:25 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2955

Re: BH Greatest Hits: PE10 predicitive power

The problem with CAPE is it includes years which are no longer relevant. Vanguard found the two methods to have equal predictive power. I wouldn't call R^2 of 0.43 vs R^2 of 0.38 "equal". A better comparison would be to Price to Peak Earnings or Tobin's Q. While I think the comparison wit...
by Rodc
Thu Apr 10, 2014 12:46 pm
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2955

Re: What next after you have enough sort of.

I'm in a similar boat. I read the other thread as well. To avoid recovering ground others have covered, I would only add that I would start making plans to fully retire in 0 years, 3 years, 6 years, 12 years, or to down shift to half time (or really half pay) in 0, 3, 6, 12 years. So run eight plann...
by Rodc
Thu Apr 10, 2014 10:46 am
 
Forum: Investing - Theory, News & General
Topic: What next after you have enough sort of.
Replies: 31
Views: 3358

Re: The case against small cap value

Boy, the thread started not to tilt then ended up okay let's tilt. Either way let me throw my two cents in. Don't assume those who tilt are avid SCV fanatics. If they were they would be 100% SCV. I think most on here who do tilt, they might not even be aware of why, do it to crease a poor mans equa...
by Rodc
Wed Apr 09, 2014 6:40 pm
 
Forum: Investing - Theory, News & General
Topic: The case against small cap value
Replies: 53
Views: 5127

Re: Rebalancing the whys and hows of it

Bobcat IMO you are confusing strategy with outcome. The investor choose an asset allocation because of the expected returns and risks met his goals and risk profile. Rebalancing keeps that profile, though one should also adjust over time for expected returns to make sure that the AA still meets the...
by Rodc
Wed Apr 09, 2014 4:54 pm
 
Forum: Investing - Theory, News & General
Topic: Rebalancing the whys and hows of it
Replies: 25
Views: 2262
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