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Re: Please explain a 3% SWR to me

Recency bias. And on the forum a game of seeing who can win the title of most pessimistic. I remember listening to some moms playing a similar game, "who can be the best mom": topic was how old would your child have to be before you would leave them alone in a hotel room while you went dow...
by Rodc
Wed Apr 23, 2014 2:06 pm
 
Forum: Investing - Theory, News & General
Topic: Please explain a 3% SWR to me
Replies: 44
Views: 2337

Re: Long Term Risks of Global Stock Markets

Rodc, come on, don't leave us hanging. What do you think about this study, especially the finding that U.S. stocks have been systematically less risky than other countries. I have a feeling this will not continue, what do you say? Paul I haven't read it carefully, but it seems plausible that high r...
by Rodc
Tue Apr 22, 2014 9:12 pm
 
Forum: Investing - Theory, News & General
Topic: Long Term Risks of Global Stock Markets
Replies: 20
Views: 1287

Re: Long Term Risks of Global Stock Markets

I'm not sure I read to page 5 of that thread and at any rate I don't recall reading the paper.

So, thanks!
by Rodc
Tue Apr 22, 2014 8:22 pm
 
Forum: Investing - Theory, News & General
Topic: Long Term Risks of Global Stock Markets
Replies: 20
Views: 1287

Re: Savings Rate what do you include?

I do this because I think that if you say that you have a certain savings rate, it is implicit that you are living on that percentage less of your salary. I've always thought that the 15-20% recommendation for retirement assumes that you are living on 80-85% of your salary and is designed to replac...
by Rodc
Tue Apr 22, 2014 11:40 am
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 36
Views: 2239

Re: Is 1800s stock market data even relevant?

In the LT I believe markets are efficient and have been for thousands of years the only thing that has changed is how fast new information is incorporated in prices. That is only relevant if the data are accurate and representative and clearly (see various posts above) they are not, unless you thin...
by Rodc
Tue Apr 22, 2014 11:34 am
 
Forum: Investing - Theory, News & General
Topic: Is 1800s stock market data even relevant?
Replies: 59
Views: 2616

Re: Is 1800s stock market data even relevant?

packer16 » Tue Apr 22, 2014 9:11 am For those who dismiss history are bound to repeat the mistakes that others have already experienced. Catchy phrases may sound good, buy irrelevant historical data is irrelevant - regardless of its "history." It is only irrelevant if you can find no use ...
by Rodc
Tue Apr 22, 2014 10:22 am
 
Forum: Investing - Theory, News & General
Topic: Is 1800s stock market data even relevant?
Replies: 59
Views: 2616

Re: The EMH, fact or fiction

Is there anyway to read these without registering at Seeking Alpha? Not to my knowledge. I use a dummy email address. Create one at yahoo, etc or through your isp domain. I never read its email, except to delete it all occasionally, and I set up Firefox to automatically enter the dummy password I s...
by Rodc
Tue Apr 22, 2014 10:19 am
 
Forum: Investing - Theory, News & General
Topic: The EMH, fact or fiction
Replies: 5
Views: 375

Re: The EMH, fact or fiction

Is there anyway to read these without registering at Seeking Alpha?
by Rodc
Tue Apr 22, 2014 9:34 am
 
Forum: Investing - Theory, News & General
Topic: The EMH, fact or fiction
Replies: 5
Views: 375

Re: Savings Rate what do you include?

Funny I was just thinking about this as I was in my hotel lobby and Fox news was on, an ad for The Principal had a quiz on what Americans were saving (including employer match). The answer: 6%. The recommendation: 11-15%. My view: 15-20%. FWIW: despite what I just wrote, I also think this can work ...
by Rodc
Tue Apr 22, 2014 9:32 am
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 36
Views: 2239

Re: Savings Rate what do you include?

What Rodc said. +1. Why complicate things? Save what you can, when you can. My reason to calculate it is to answer questions such as "can we go to ( insert expensive but memorable vacation destination ) next year?" The answer depends on whether we are hitting our savings rate target (30%)...
by Rodc
Tue Apr 22, 2014 9:27 am
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 36
Views: 2239

Re: The dangers of backtesting and overfitting data - paper

Over-fitting is a common problem that is routinely solved by something called "Cross Validation". I have never seen it used by financial types which is a shame since it is such a universal technique. Maybe somebody like Rodc can also comment on cross-validation? I'm sure quantitative fina...
by Rodc
Tue Apr 22, 2014 9:14 am
 
Forum: Investing - Theory, News & General
Topic: The dangers of backtesting and overfitting data - paper
Replies: 31
Views: 1766

Re: Mortgage = negative bond, Rent = negative income?

This horse is dead. Not only dead but beaten to a pulp. Repeatedly.

The search function is your friend.
by Rodc
Tue Apr 22, 2014 9:04 am
 
Forum: Investing - Theory, News & General
Topic: Mortgage = negative bond, Rent = negative income?
Replies: 6
Views: 847

Re: Is 1800s stock market data even relevant?

packer16 » Tue Apr 22, 2014 9:11 am For those who dismiss history are bound to repeat the mistakes that others have already experienced. Catchy phrases may sound good, buy irrelevant historical data is irrelevant - regardless of its "history." It is only irrelevant if you can find no use ...
by Rodc
Tue Apr 22, 2014 9:03 am
 
Forum: Investing - Theory, News & General
Topic: Is 1800s stock market data even relevant?
Replies: 59
Views: 2616

Re: Is 1800s stock market data even relevant?

I wonder if active managers had an advantage over passive investors back then. Or if there were inefficiencies in the market that could have been exploited. Unclear there were "passive" investors in the sense we have now, ie index fund type portfolios. My understanding is that trading was...
by Rodc
Tue Apr 22, 2014 8:40 am
 
Forum: Investing - Theory, News & General
Topic: Is 1800s stock market data even relevant?
Replies: 59
Views: 2616

Re: Is 1800s stock market data even relevant?

What is relevant is what has not changed, the bull/bear emotional cycles in the market. Given what little I know about history (caveat), I think the degree of market manipulation back then was far greater than today. Given that, I don't see why the mathematical details of the bull and bear cycles f...
by Rodc
Tue Apr 22, 2014 8:39 am
 
Forum: Investing - Theory, News & General
Topic: Is 1800s stock market data even relevant?
Replies: 59
Views: 2616

Re: Savings Rate what do you include?

Now for some controversy: do you count employer match of 401(k) as "savings"? Personally I add the match to my numerator and denominator for calculating my savings rate. I don't think it should be ignored altogether. I consider it compensation (denominator) that you are forced to save (nu...
by Rodc
Tue Apr 22, 2014 6:24 am
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 36
Views: 2239

Re: The slackening...

Have been reading these posts with interest. Great points on generational differences and the importance of life experiences to learn how to handle failure and hopefully motivate. As a very involved parent of 3 (the baby is adopted), I would add the unpredictable role of genetics. I think we tend t...
by Rodc
Mon Apr 21, 2014 8:04 pm
 
Forum: Personal Finance (Not Investing)
Topic: The slackening...
Replies: 61
Views: 6539

Re: The slackening...

One "preliminary" thought I have is to for divide our estate in two (two kids). From each of the two portions, match what each kid has accumulated and give the balance to charity. Don't know whether it would be a one for one match or some other method. In this fashion, we would be rewardi...
by Rodc
Mon Apr 21, 2014 7:59 pm
 
Forum: Personal Finance (Not Investing)
Topic: The slackening...
Replies: 61
Views: 6539

Re: POLL: why carry cash?

If felt sorry for the poor cashiers who have to conduct their entire day of business under the fish-eye of a camera.


The flip side is they have protection from false accusations like in this case.
by Rodc
Mon Apr 21, 2014 7:04 pm
 
Forum: Personal Finance (Not Investing)
Topic: POLL: why carry cash?
Replies: 225
Views: 7450

Re: Savings Rate what do you include?

I just make sure I save enough dollars. I rarely think about percentage, and certainly not in that level of detail. In my 401K I set a % of gross just because that is how the company has it set up. In college funds it is just a set amount, I've never calculated a %. Other funds are slightly more irr...
by Rodc
Mon Apr 21, 2014 6:58 pm
 
Forum: Investing - Theory, News & General
Topic: Savings Rate what do you include?
Replies: 36
Views: 2239

Re: POLL: why carry cash?

I find myself frustrated waiting for the ones in front of me to dig pennies out of their pocket or purse, trying to find the exact change.


Think of it as a chance to learn not to be so up tight.

Relax and life gets better.

Or

"First world problem"
by Rodc
Mon Apr 21, 2014 3:22 pm
 
Forum: Personal Finance (Not Investing)
Topic: POLL: why carry cash?
Replies: 225
Views: 7450

Re: Monte Carlo Software

Monte Carlo analysis is about as useless as gum you see on the side of the road. I have yet to see someone revert to their Monte Carlo when things go haywire. They don't say, " oh well, I was prepared for this scenario cause my Monte Carlo said so" I don't think it is quite that bad, but ...
by Rodc
Mon Apr 21, 2014 12:42 pm
 
Forum: Investing - Theory, News & General
Topic: Monte Carlo Software
Replies: 13
Views: 1194

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: 1249

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: 2567

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: 3888

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: 31
Views: 1766

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: 521

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: 1232

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: 521

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: 5344

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: 5344

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: 1673

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: 521

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: 1673

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: 31
Views: 1766

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: 2669

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: 3560

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: 3560

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: 3560

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: 3560

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: 3560

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: 3560

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: 4444

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: 4444

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: 3560

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: 3560

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: 3560

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: 3560

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: 4444

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: 3560
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