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Re: Is Low-Vol Anomaly really explained by Value factor?

Winguy: Depends on which ETFs you use but the returns (below) have been good—outpacing the broad market—and volatility is low, since their inception 1-2 years ago, and well-advertised. So, huge inflows. I think they target the lowest volatility 100 or so stocks in their chosen index. And there may b...
by Roy
Sat May 18, 2013 7:24 am
 
Forum: Investing - Theory, News & General
Topic: Is Low-Vol Anomaly really explained by Value factor?
Replies: 51
Views: 1669

Re: The new profitability factor, US and int'l evidence

And I agree with Roy :happy . Although human behavior is amazingly consistent over generations, I have a lot more faith in risk stories than behavioral ones. Although I do think a behavioral component can only help the value story. Of course the longer the period demonstrating a source of return, e...
by Roy
Fri May 17, 2013 3:50 pm
 
Forum: Investing - Theory, News & General
Topic: The new profitability factor, US and int'l evidence
Replies: 167
Views: 7323

Re: The new profitability factor, US and int'l evidence

Crake, Under your case #1, I believe there is a huge difference between taking on more risk by adding more of the same risk versus adding some of a different risk. There is benefit to diversifying across risk factors. For example, for tilters the benefit of small and value is not just increased exp...
by Roy
Fri May 17, 2013 3:04 pm
 
Forum: Investing - Theory, News & General
Topic: The new profitability factor, US and int'l evidence
Replies: 167
Views: 7323

Re: disregarding ''daily noise"

Imperabo wrote:Immerse yourself in it until you build up your immunity.


Agreed with the G. Gordon Liddy approach. Boredom follows in time. Then it's on to other things.
by Roy
Thu May 16, 2013 4:43 pm
 
Forum: Investing - Theory, News & General
Topic: disregarding ''daily noise"
Replies: 34
Views: 1869

Re: The new profitability factor, US and int'l evidence

For everyone else. There is a consistent error in "terminology" made here regarding the FF model. The model never explained 90%+ of returns. What it does is explain 90%+ of the variance in returns between WELL DIVERSIFIED portfolios. The smaller the number of issues in the portfolio the m...
by Roy
Thu May 16, 2013 11:17 am
 
Forum: Investing - Theory, News & General
Topic: The new profitability factor, US and int'l evidence
Replies: 167
Views: 7323

Re: The new profitability factor, US and int'l evidence

Thanks, RNJ. Unless I'm missing something, the Fees and Minimums are $1,000,000 for QCENX for initial investment. The top holdings do appear to be many of the usual "quality" suspects in a GMO (and others) sense. How they use Momentum to guide them is another thing. FWIW, Fidelity appears...
by Roy
Wed May 15, 2013 3:48 pm
 
Forum: Investing - Theory, News & General
Topic: The new profitability factor, US and int'l evidence
Replies: 167
Views: 7323

Re: The new profitability factor, US and int'l evidence

Here is the AQR Core Equity Fund Class N (QCENX). The "N" stands for NOT with respect to having the $5 Million minimum for the less expensive, presumably institutional class shares. From the Vanguard site: Large Value Expense ratio as of 05/01/2013: 1.12% Inception date 03/26/2013 Ticker ...
by Roy
Wed May 15, 2013 3:10 pm
 
Forum: Investing - Theory, News & General
Topic: The new profitability factor, US and int'l evidence
Replies: 167
Views: 7323

Re: The new profitability factor, US and int'l evidence

Could this factor help explain why Wellesley and Wellington have done so well for so long? At least, I think of Wellington Management as being in the Graham and Dodd tradition. Hi, Scone, Agreed this has been a good topic. It is true that Wellington management targets undervalued stocks that have g...
by Roy
Wed May 15, 2013 1:41 pm
 
Forum: Investing - Theory, News & General
Topic: The new profitability factor, US and int'l evidence
Replies: 167
Views: 7323

Re: The new profitability factor, US and int'l evidence

[Inflammatory comment removed by admin LadyGeek] Vanguard is not just about selling indexing and carries many fund families, but they do charge a transaction fee to access some of them. I believe AQR's 3 funds that apply this strategy (Domestic Large and Small,and one International fund) can be acq...
by Roy
Wed May 15, 2013 9:32 am
 
Forum: Investing - Theory, News & General
Topic: The new profitability factor, US and int'l evidence
Replies: 167
Views: 7323

Re: Why do investors chase dividend paying strategies

larryswedroe wrote:That is why I called this a cult. IT's a belief without any evidence of any logic.


Larry: Thank-you for taking the time to unpack all this. I didn't realize how far down the rabbit hole this went.
by Roy
Wed Apr 03, 2013 4:18 pm
 
Forum: Investing - Theory, News & General
Topic: Why do investors chase dividend paying strategies
Replies: 426
Views: 22566

Re: Swedroe versus Ferri on Recommended Asset Classes

Bradley Third, if you were even thinking correctly at all you would compare the return of the high yield in 2008 to the return of what the substitute was, say 5 year Treasury or Investment Grade at very least, and you would see massive underperformance. With CCF you would have compared that return ...
by Roy
Sat Mar 23, 2013 7:22 am
 
Forum: Investing - Theory, News & General
Topic: Swedroe versus Ferri on Recommended Asset Classes
Replies: 127
Views: 23284

Re: Hussman discusses valuations this week

http://www.hussmanfunds.com/wmc/wmc130311.htm He says: Wall Street is grossly overestimating the value of stocks based on profit margins that are 70% above the historical norm. This is a reason for looking at a longer term average of earnings or, alternatively, normalizing the earnings in some othe...
by Roy
Tue Mar 12, 2013 10:25 am
 
Forum: Investing - Theory, News & General
Topic: Shiller PE10 nearing nosebleed territory?
Replies: 80
Views: 6170

Re: Active vs. Passive

Also, I often see people mention Wellington and Wellesley Income as examples of "good" active management, and compare them to the Vanguard Balanced Index. But they are just an example of value investing and taking TERM and CREDIT risk in bonds. If we compare 65/35 and 35/65 blends of Russ...
by Roy
Mon Mar 11, 2013 1:18 pm
 
Forum: Investing - Theory, News & General
Topic: Active vs. Passive
Replies: 21
Views: 1247

Re: Shiller PE10 nearing nosebleed territory?

John Hussman was the first author that I have read that promoted the peak earnings method (he used reported rather than operated earnings). For some reason, which I won’t speculate on here (but I do have a speculation!), John has stopped promoting his price-to-peak earnings method of valuing the st...
by Roy
Sat Mar 09, 2013 4:28 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller PE10 nearing nosebleed territory?
Replies: 80
Views: 6170

Re: Small Caps really necessary??

Roy, Lets say you have a negative equity risk premium for a period (say 00-09), and lets say you also have a negative size and or value premium of a similar magnitude over the same period. While too short a period to say so conclusively, we would be seeing a very high correlation between the return...
by Roy
Sat Mar 02, 2013 11:02 am
 
Forum: Investing - Help with Personal Investments
Topic: Small Caps really necessary??
Replies: 26
Views: 2503

Re: Small Caps really necessary??

Greyfox, Yes, "size" has had the lowest return of 3 factors. Part of the reason is how it's calculated (bottom half of stocks minus top half of stocks), vs value as top 1/3 minus bottom 1/3. If we calculate size the same way, we find the size and value premiums have been similar. Also, si...
by Roy
Sat Mar 02, 2013 9:06 am
 
Forum: Investing - Help with Personal Investments
Topic: Small Caps really necessary??
Replies: 26
Views: 2503

Re: "Time to say goodby to the lost decade"

You could adopt the view of efficient market advocates, such as Fama, that the equity market portfolio is always an efficient portfolio and that the main reason to deviate by tilting towards value would be to take more risk in the hope of higher returns. That the three factor model does a good job ...
by Roy
Wed Feb 27, 2013 1:37 pm
 
Forum: Investing - Theory, News & General
Topic: "Time to say goodby to the lost decade"
Replies: 48
Views: 4761

Re: Irony

One comment that should be considered for its sheer irony is this frequently made point: One of the most interesting things on this board is that total market investors like Taylor and nisiprius will always stress the uncertainty of markets. In contrast, the most devoted of the tilters will stress ...
by Roy
Wed Feb 27, 2013 1:33 pm
 
Forum: Investing - Theory, News & General
Topic: "Time to say goodby to the lost decade"
Replies: 48
Views: 4761

Re: Swedroe Fat Tails Portfolio for VG 529 Plan

I never thought of a "Fat Tails" portfolio as being appropriate for a 529. I see it more as a portfolio for folks who want to preserve most of their current wealth, but want strong upside potential at the same time (i.e., wealthier folks). Agreed with Op re: the 529. I think if the childr...
by Roy
Sat Feb 02, 2013 9:20 am
 
Forum: Investing - Theory, News & General
Topic: Swedroe Fat Tails Portfolio for VG 529 Plan
Replies: 13
Views: 1162

Re: Swedroe Fat Tails Portfolio for VG 529 Plan

Bogle, If I had to try and imitate the original Swedroe concept given your mix, I would likely be 100% Vanguard Small Cap Index (about 30% of your portfolio), and the rest (70%) in ST High Quality Bonds (given current TIPS yields, and once I thoroughly looked under the hood of that ST fund you have ...
by Roy
Fri Feb 01, 2013 8:05 pm
 
Forum: Investing - Theory, News & General
Topic: Swedroe Fat Tails Portfolio for VG 529 Plan
Replies: 13
Views: 1162

Re: Pimco Total Return Bond Fund down 2.41% in a day

Drop in share price,more shares were issued,you still have same amount of money. Time to pay taxman if you hold in taxable john John and others: So I'm clear, you are saying that—the day's market fluctuation aside—an investor would still have the same amount of money in this Pimco fund—assuming div...
by Roy
Thu Dec 13, 2012 5:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pimco Total Return Bond Fund down 2.41% in a day
Replies: 25
Views: 4040

Re: "DFA vs. Vanguard. Which is Better?"

. On Roy’s point, all this analysis excludes any advisor fees – I think using 1% is a useful benchmark (i.e. lowering alpha by 0.08 percent per year on average). Thanks, Robert. If this is true, then it seems that the fee-adjusted returns plus the extra ER cost of DFA funds, might make these compar...
by Roy
Sat Dec 01, 2012 1:07 pm
 
Forum: Investing - Theory, News & General
Topic: "DFA vs. Vanguard. Which is Better?"
Replies: 167
Views: 21949

Re: "DFA vs. Vanguard. Which is Better?"

This is a well-argued and civil discussion on a hot topic. I'm happy to have read it. One question: in the regressions and analyses, I have lost track on whether there has been any consistent advisor's fee assessed for DFA and what that % was (I know that it varies among advisors). Or have these com...
by Roy
Fri Nov 30, 2012 2:16 pm
 
Forum: Investing - Theory, News & General
Topic: "DFA vs. Vanguard. Which is Better?"
Replies: 167
Views: 21949

Re: Permanent Portfolio Poll

The Permanent Portfolio is future agnostic. When you look at it from this perspective, you can understand why it doesn't need to overweight any particular asset. Yep. Not sure what overweighting is anyway as that also can depend on various definitions. And who knows if the relative volatilities of ...
by Roy
Sun Nov 25, 2012 4:57 pm
 
Forum: Investing - Theory, News & General
Topic: Permanent Portfolio Poll
Replies: 222
Views: 20532

Re: Permanent Portfolio Poll

To test the theory that the PP only performs well when gold is performing well, I looked at the 20 year bear market for gold between 1981 and 2000, and the average annual PP return for this period was 8.34%... Note, however, that this risk to the PP investor doesn't involve losses or a failure of t...
by Roy
Sun Nov 25, 2012 3:07 pm
 
Forum: Investing - Theory, News & General
Topic: Permanent Portfolio Poll
Replies: 222
Views: 20532

Re: Low correlation assets, rebalancing bonus, and taxes

mickens16 wrote:Am I reading correctly, but It appears that Rick looks at each asset separately while Larry looks at how the asset works in a portfolio?


It has been forever thus. Your reading skills are fine.
by Roy
Sun Oct 14, 2012 9:59 am
 
Forum: Investing - Theory, News & General
Topic: Low correlation assets, rebalancing bonus, and taxes
Replies: 38
Views: 2811

Re: THIS is why you diversify

If SCV always outperforms TSM, why isn't it 70-100% of most people's portfolio, who are 20+ years from retirement? Because most people don't know. Given the widespread ignorance about basic concepts of personal finance and investing, this should not be a surprise. I would bet that 99.9% of the popu...
by Roy
Sat Jul 28, 2012 5:57 pm
 
Forum: Investing - Theory, News & General
Topic: This is why you diversify
Replies: 173
Views: 13427

Re: Names for Market-timing

Risk management.
by Roy
Thu Jul 26, 2012 6:19 am
 
Forum: Investing - Theory, News & General
Topic: Call it anything but market-timing!
Replies: 51
Views: 3525

Re: Does Buffett know something you don't?

Hey, I love Buffett. But considering who he is, 10 years still seems a long time for a break-even result with a chimp. I would have expected a large degree of outperformance for BRK.A. Though, BRK.A is better at 5 years and 15 years, VTSMX better at 3 years and 10 years. An equity portfolio diversif...
by Roy
Wed Jul 18, 2012 2:10 pm
 
Forum: Investing - Theory, News & General
Topic: Does Buffett know something you don't?
Replies: 25
Views: 3833

Re: Does Buffett know something you don't?

Muchtolearn wrote:In my humble opinion, Buffet knows no more than anybody else.


As of a few weeks ago, BRK.A and VTSMX had similar 10-year returns. I think Buffet's main advantages lie in his ability to structure deals that ordinary guys cannot.
by Roy
Wed Jul 18, 2012 10:02 am
 
Forum: Investing - Theory, News & General
Topic: Does Buffett know something you don't?
Replies: 25
Views: 3833

Re: Another look at high yield bonds

The problem I find with all this from Larry's side is that it makes a mountain over a mole hill. Even if we accept that he is correct about efficiency, it misses the bigger picture; a 20% bond stake in VWEHX only amounts to 2.5% "equity like" allocation even if you assign as high as 25% e...
by Roy
Mon Jul 16, 2012 7:56 pm
 
Forum: Investing - Theory, News & General
Topic: Another look at high yield bonds
Replies: 121
Views: 7832

Re: Another look at high yield bonds

That is an unreasonable comparison because no Boglehead would recommend putting 100% of their bond allocation in a narrow segment of the treasury bond market limited to 5 year treasuries! Mptfan: I think a number of people here have used Intermediate Treasuries as their primary if not exclusive fix...
by Roy
Mon Jul 16, 2012 6:57 pm
 
Forum: Investing - Theory, News & General
Topic: Another look at high yield bonds
Replies: 121
Views: 7832

Re: Another look at high yield bonds

Bradley: It is more appropriate to compare similar maturities in the funds, so VFITX (Intermediate Treasury) makes a better comparison than VFISX, but even this isn't my biggest issue, since that is, again, an isolation view and therefore not the right way to attack the problem. And certainly, the t...
by Roy
Mon Jul 16, 2012 1:08 pm
 
Forum: Investing - Theory, News & General
Topic: Another look at high yield bonds
Replies: 121
Views: 7832

Re: Another look at high yield bonds

So Larry seems to judge the credit quality of the fixed income, and then assigns a percentage of that to count as equity (not all of it, and the amount is based on the quality). It isn't only about High Yield, but anywhere credit risk appears in fixed income, just that HY seems to have greater pote...
by Roy
Mon Jul 16, 2012 10:27 am
 
Forum: Investing - Theory, News & General
Topic: Another look at high yield bonds
Replies: 121
Views: 7832

Re: Another look at high yield bonds

I think I understand you, Rick. The way I view it is more about tendencies and potentials than absolute behavioral predictions. Now, a small amount of HY (whatever that means) can clearly impact a portfolio differently than a much larger weighting of it, and then there is also the question of the qu...
by Roy
Sun Jul 15, 2012 8:11 pm
 
Forum: Investing - Theory, News & General
Topic: Another look at high yield bonds
Replies: 121
Views: 7832

Re: Another look at high yield bonds

Viewing them in strict isolation, as Larry argues, is missing the big picture. Rick: Larry has long argued that the addition of High Yield Bonds is not beneficial to a portfolio as a whole , has shown combinations he deemed a better fit for a portfolio as a whole , and if one were to use High Yield...
by Roy
Sun Jul 15, 2012 7:08 pm
 
Forum: Investing - Theory, News & General
Topic: Another look at high yield bonds
Replies: 121
Views: 7832

Re: Another look at high yield bonds

Viewing them in strict isolation, as Larry argues, is missing the big picture. Rick: Larry has long argued that the addition of High Yield Bonds is not beneficial to a portfolio as a whole , has shown combinations he deemed a better fit for a portfolio as a whole , and if one were to use High Yield...
by Roy
Sun Jul 15, 2012 6:04 pm
 
Forum: Investing - Theory, News & General
Topic: Another look at high yield bonds
Replies: 121
Views: 7832

Re: Alex Frakt and Forum Administration

Alex does a staggering amount of work—on-stage and off—and manages it with a grace I find astonishing. Thanks to Alex and the rest of you Mods for making it happen.
by Roy
Thu Jul 12, 2012 1:34 pm
 
Forum: Forum Issues and Administration
Topic: Alex Frakt and Forum Administration
Replies: 38
Views: 4311

Re: The "50% portfolio"

Presumably, you had a reason for going 50% US and 50% International when you set up your plan. A few years ago, many were using "world market cap weights" as their excuse to put more into international after a really good 5 year run. No doubt today, with the 5yr return tables flip-flopped...
by Roy
Wed Jul 11, 2012 1:17 pm
 
Forum: Investing - Help with Personal Investments
Topic: The "50% portfolio"
Replies: 28
Views: 4340

Re: Is being too conservative just as risky

Good points, Keith. I like the Umfundi warthog too.
by Roy
Thu Jul 05, 2012 8:42 am
 
Forum: Investing - Theory, News & General
Topic: Is being too conservative just as risky
Replies: 24
Views: 2640

Re: Skill or luck ?

Do you believe Warren Buffett was simply lucky? Hi, LondonJimmy: Do you mean as a stockpicker? The popular answer is that he has (or had) superior selection skills. I don't know the answer. Now, Buffett does seem to know how to structure deals in ways that few others can. Even with those massive ad...
by Roy
Wed Jul 04, 2012 4:15 pm
 
Forum: Investing - Theory, News & General
Topic: The Three Fund Portfolio
Replies: 454
Views: 128450

Re: Is being too conservative just as risky

Stemikger: I think you have stated good reasons for your personal choice. For those with a low marginal utility of wealth, a "conservative" strategy may make sense, though. And the same can apply for some who would not sleep were they more aggressively invested, regardless of wealth. I thi...
by Roy
Tue Jul 03, 2012 5:27 pm
 
Forum: Investing - Theory, News & General
Topic: Is being too conservative just as risky
Replies: 24
Views: 2640

Re: Have the Benefits of a Diversified Portfolio Declined?

Roy, last time I checked, Bogle was basically a 3-fund guy, not a small/value tilter. Valuations do matter to me, especially when people tell me that I should deviate from my 3-Fund model to overweight small caps or REITs or commodities futures or whatever happens to have done well over the recent ...
by Roy
Mon Jul 02, 2012 6:07 pm
 
Forum: Investing - Theory, News & General
Topic: Have the Benefits of a Diversified Portfolio Declined?
Replies: 33
Views: 2699

Re: Have the Benefits of a Diversified Portfolio Declined?

Daniel: If you are fully invested in the majesty of simplicity that is TSM investing (and it IS a great way to invest), then valuations should not matter to you, certainly not those of Small Caps. Nor should the market timings of Jeremy Grantham, posters on Seeking Alpha—or anyone else. I think that...
by Roy
Mon Jul 02, 2012 4:16 pm
 
Forum: Investing - Theory, News & General
Topic: Have the Benefits of a Diversified Portfolio Declined?
Replies: 33
Views: 2699

Re: Have the Benefits of a Diversified Portfolio Declined?

It seems questionable, at best, to try to time any "Value Effect" (even as Growth and Value, Small and Large each seem to have their moments over time). Perhaps Large Growth is ready to outperform. Many seem to think so these days, after the last 10 years, especially the CNBC crowd, who to...
by Roy
Mon Jul 02, 2012 3:21 pm
 
Forum: Investing - Theory, News & General
Topic: Have the Benefits of a Diversified Portfolio Declined?
Replies: 33
Views: 2699

Re: Aggressive Bogleheads Portfolio

Regarding tracking error (regret), I think the ever-present media reflects what the S&P 500 (essentially, TSM too) does when it says, "the stock market is doing well/bad". As most investor portfolios are driven by equity volatility (particularly of the Large Cap and Domestic sort), I s...
by Roy
Sun Jul 01, 2012 12:54 pm
 
Forum: Investing - Theory, News & General
Topic: Aggressive Bogleheads Portfolio
Replies: 51
Views: 3508

Re: Aggressive Bogleheads Portfolio

What if SCV underperforms TSM in the next 15 years? Don't forget tracking error regret. I only have been investing for a few months, I don't know what it feels like to look at my portfolio, and realize that I could have been doing better with TSM, without the SCV tilt. But I imagine it would be a v...
by Roy
Sun Jul 01, 2012 10:34 am
 
Forum: Investing - Theory, News & General
Topic: Aggressive Bogleheads Portfolio
Replies: 51
Views: 3508

Re: Study reports that advisers underperform do-it-yourselfe

The Abstract describes brokers , and lower tiered advisors, and it is unstated who, if any, are bound by a fiduciary standard of care. If various types of "advisors" were used, it seems difficult to partile-out those types with a specificity helpful to readers here; though the paper discus...
by Roy
Sun Jul 01, 2012 8:34 am
 
Forum: Investing - Theory, News & General
Topic: Study reports that advisers underperform do-it-yourselfers
Replies: 8
Views: 1081

Re: Aggressive Bogleheads Portfolio

A lot of good talk going on here, and solid points being raised on both sides. I agree with Mptfan about the potential challenge in owning heavily-tilted equities—tracking error regret and extra volatility over sustained periods. In my view, that is the biggest risk of such a position, especially fo...
by Roy
Fri Jun 29, 2012 4:24 pm
 
Forum: Investing - Theory, News & General
Topic: Aggressive Bogleheads Portfolio
Replies: 51
Views: 3508
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