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Re: Trying to figure out why not tilt heavily to Small

Am I missing some major long-term risk here (like a longer-term cycle that's not being adequately captured in the past 15 year's returns), or should i finally bite the bullet and go say 50/50 total market/small cap for my domestic equities? Relative outperformance by small caps and large caps go in...
by Simplegift
Sat Dec 14, 2013 2:02 am
 
Forum: Investing - Help with Personal Investments
Topic: Trying to figure out why not tilt heavily to Small
Replies: 21
Views: 1911

Re: Investor Deficit Effect

Investor Deficit Effect (IDE) is confirmation of why Stay The Course is important... Haven't seen a fifty-year chart comparing investor returns and market returns, but as a buy-hold-rebalance investor, it's fascinating (and quite baffling) to look at aggregate mutual fund flows in and out of stock ...
by Simplegift
Fri Dec 13, 2013 2:15 am
 
Forum: Investing - Theory, News & General
Topic: Investor Deficit Effect
Replies: 1
Views: 276

Re: To Be or Not To Be: Orthodox or Unorthodox Asset Allocat

Why own the whole market, when owning more uncorrelated slices of the market appears to produce better results (i.e. higher returns, comparable volatility, lower draw-downs and better compensation for risk)? Incorporating "uncorrelated slices of the market" into one's portfolio has been t...
by Simplegift
Tue Dec 10, 2013 2:11 am
 
Forum: Investing - Theory, News & General
Topic: To Be or Not To Be: Orthodox or Unorthodox Asset Allocation
Replies: 14
Views: 1491

Re: Is there a new size of small, mid and large caps???

According to Morningstar's "style box" methodology, they use a floating system that's designed to avoid being significantly affected by market movements: Rather than a fixed number of "large cap"or "small cap" stocks, Morningstar uses a flexible system that isn't advers...
by Simplegift
Fri Dec 06, 2013 7:35 pm
 
Forum: Investing - Theory, News & General
Topic: Is there a new size of small, mid and large caps???
Replies: 4
Views: 502

Re: Endpoint sensitivity on "historic" data

... My point is more the uncertainty of historic data, due to the almost pathological amount of fluctuation in market data. I was honestly surprised that a small change in endpoints could affect a 70-80 year average by 2%. Rolling returns (despite their shortcomings) also serve to reinforce Nisi's ...
by Simplegift
Thu Dec 05, 2013 11:46 am
 
Forum: Investing - Theory, News & General
Topic: Endpoint sensitivity on "historic" data
Replies: 30
Views: 1193

Re: of bitcoins, money & Byzantium

The graphs of the bitcoin value are interesting but two other charts would be more interesting if anyone can find them; 1) Dollar value of bitcoin actual purchases of merchandise. 2) Number of locations that accept bitcoins for purchases. Watty, some of the current bitcoin charts and statistics in ...
by Simplegift
Mon Dec 02, 2013 11:39 am
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4316

Re: of bitcoins, money & Byzantium

In my opinion, the log chart at first glance dramatically understates what has happened with the price of a Bitcoin this year. What has happened to the price of bitcoin this year that is dramatically different than previous years? In all three years of its market existence, the bitcoin price has in...
by Simplegift
Sun Dec 01, 2013 5:13 pm
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4316

Re: New DFA Paper on Inflation and Global Stock & Bond Retur

"All five of the indices included in this study had positive inflation-adjusted average returns during high-inflation years, with non-US stocks showing the highest average. Thus, the well-documented advantages of international diversification carry over to returns that are adjusted for US infl...
by Simplegift
Sun Dec 01, 2013 12:46 pm
 
Forum: Investing - Theory, News & General
Topic: New DFA Paper on Inflation and Global Stock & Bond Returns
Replies: 7
Views: 765

Re: App for writers on Macs

Is it worth the time and effort to learn Pages? Is there any way in which it is superior to Word? The most appropriate answer is that "it depends on what you use it for." I've used Pages for years, mostly for writing short technical pieces (up to 50 pages) that are quite graphics intensiv...
by Simplegift
Sun Dec 01, 2013 11:39 am
 
Forum: Personal Consumer Issues
Topic: App for writers on Macs
Replies: 15
Views: 602

Re: of bitcoins, money & Byzantium

I don't find anything misleading about it. Using a linear scale, if you chart anything over a long enough period that starts with a low initial value and has a constant growth rate, a "panic chart" will always result — one that is flat for a long time at the start, and then becomes steepe...
by Simplegift
Sun Dec 01, 2013 3:54 am
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4316

Re: of bitcoins, money & Byzantium

Chart it from Jan 1, 2013 to Friday, and it will still look scary... You're right, it looks a bit scary — but not apocalyptic. Just wanted to encourage the use of log scale charts when depicting rate-of-growth data. Otherwise, the chart can appear quite misleading. Log scale: http://i.imgur.com/z4K...
by Simplegift
Sun Dec 01, 2013 3:29 am
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4316

Re: of bitcoins, money & Byzantium

Has a financial graph that looks like that EVER turned out well in the end? Don't know anything about bitcoins, but do know that if you chart the rate-of-change for almost any growth on a linear scale, you'll get a "panic chart" like the one posted upthread for bitcoins. Even if the rate-...
by Simplegift
Sun Dec 01, 2013 1:53 am
 
Forum: Investing - Theory, News & General
Topic: of bitcoins, money & Byzantium
Replies: 78
Views: 4316

Re: Correlation between US Large cap/small cap/international

I am thinking presently to sell my Tax managed small cap and invest in the VXUS (International Total Market) just to keep things simple. I found another graft that indicates that international (developed and emerging) is a slightly less correlated to large cap than small cap (see http://www.assetco...
by Simplegift
Wed Nov 27, 2013 11:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Correlation between US Large cap/small cap/international
Replies: 7
Views: 776

Re: Correlation between US Large cap/small cap/international

So my question is in terms of diversification what percentage of correlation is there between US large cap vs US small cap and between US large cap vs total international market. In other words, is it more important to get the international/domestic US allocation right rather than the domestic smal...
by Simplegift
Wed Nov 27, 2013 8:01 pm
 
Forum: Investing - Help with Personal Investments
Topic: Correlation between US Large cap/small cap/international
Replies: 7
Views: 776

Re: Is the bond market efficient?

It would seem that bond markets have many built-in mechanisms that tend to create an efficient market. Bond ratings, interest rate derivatives, wide publication of bond-yield curves and spreads, and predominance of long-term institutional investors (such as insurance companies and pension plans) wou...
by Simplegift
Sun Aug 11, 2013 7:40 pm
 
Forum: Investing - Theory, News & General
Topic: Is the bond market efficient?
Replies: 11
Views: 936

Re: Who manages your finances? Him/Her/Both?

Now in retirement, we have separate portfolios, which we've each maintained for most of our adult lives. Both portfolios are passively invested, according to Boglehead principles, and we rely on withdrawals from both for our annual spending needs.
by Simplegift
Sun Aug 11, 2013 4:25 pm
 
Forum: Personal Finance (Not Investing)
Topic: Who manages your finances? Him/Her/Both?
Replies: 58
Views: 2817

Re: poll: What equity allocation strategy do you use?

Slice and dice - complex. However, it doesn't seem that complex in practice, since it just means a few extra rows on the spreadsheet and Vanguard statements. 50% Stocks: Total market, value tilt, small-cap tilt, intl and emerging markets, REIT index, energy fund. 50% Bonds: Short-intermediate munis ...
by Simplegift
Sun Aug 11, 2013 1:37 pm
 
Forum: Investing - Theory, News & General
Topic: poll: What equity allocation strategy do you use?
Replies: 30
Views: 2316

Re: Who Falls for this Tripe?

I don't know what the indexing community consensus is on frontier market funds. I like the idea of Frontier Markets investing for diversity, but there really are no good funds out there. From a practical standpoint it's difficult. The primary problem appears to be a lack of liquidity in frontier co...
by Simplegift
Sat Aug 10, 2013 3:35 pm
 
Forum: Investing - Theory, News & General
Topic: Who Falls for this Tripe?
Replies: 16
Views: 1950

Re: Break Even Point for Bond Portfolio Management Fees?

Mr. Bogle once published a few scatter plots of 10-year bond fund returns versus expense ratios (sample chart below). They show that there are indeed a few higher cost, active bond fund managers who can overcome their expense disadvantage and realize greater returns (in yellow) — either by taking on...
by Simplegift
Sat Aug 10, 2013 11:18 am
 
Forum: Investing - Theory, News & General
Topic: Break Even Point for Bond Portfolio Management Fees?
Replies: 2
Views: 508

Re: Protected money market funds

You could take a look at Treasury-Only Money Market Funds . Many of these have closed to new investors in the past few years due to extremely low yields (including Vanguard's Treasury MM Fund). The next step up the risk ladder would be government-only money market funds, which include federal agency...
by Simplegift
Fri Aug 09, 2013 1:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: Protected money market funds
Replies: 3
Views: 272

Re: CPI Increases Since 1963 with & without Food & Energy

However the Fed generally targets the CPI excluding food & energy since this is less volatile than the All Items index. Interesting. It makes sense for the Federal Reserve to look at core-CPI (without food and energy) in deciding whether or not to adjust the Fed funds rate, as this removes the ...
by Simplegift
Fri Aug 09, 2013 12:58 am
 
Forum: Investing - Theory, News & General
Topic: CPI Increases Since 1963 with & without Food & Energy
Replies: 4
Views: 808

Re: Yet another (good) paper on dividends

2.3: Dividends Offer the Potential for Downside Protection Looking at a longer history, it appears dividend stocks at rare times did provide protection in a downturn (see 2000), but most times they did not. The authors were clever to suggest "the potential for downside protection." http:/...
by Simplegift
Thu Aug 08, 2013 4:23 pm
 
Forum: Investing - Theory, News & General
Topic: Yet another (good) paper on dividends
Replies: 12
Views: 1562

Re: Interview: Vanguard's Tips Funds

Excellent read, Barry, thanks for posting it.
by Simplegift
Wed Aug 07, 2013 1:26 pm
 
Forum: Investing - Theory, News & General
Topic: Interview: Vanguard's Tips Funds
Replies: 1
Views: 397

Re: "past performance does not predict future returns"

As discussed above, there have been increasing concerns, arising from the period of extraordinary market performance in 1999 and 2000, that some funds, when advertising their performance, may resort to techniques that create unrealistic investor expectations or may mislead potential investors. Clea...
by Simplegift
Wed Aug 07, 2013 10:48 am
 
Forum: Investing - Theory, News & General
Topic: "past performance does not predict future returns"
Replies: 20
Views: 1646

Re: Worth it to take huge cap gains to rebalance?

sperry8 wrote:I do - I have a lot of tax loss carry forward. Mid 6 figures. So is this the best way to use it (rebalancing)?

Absolutely. That's the very best use for it, in my view, if you have to realize capital gains to rebalance your portfolio.
by Simplegift
Wed Aug 07, 2013 9:29 am
 
Forum: Investing - Help with Personal Investments
Topic: Worth it to take huge cap gains to rebalance?
Replies: 25
Views: 2031

Re: Update: The 50/50 Portfolio for the Defensive Investor

I wish more people used 50/50 as a baseline idea... When researching the original post, I ran across the chart below, showing the aggregate portfolio allocations for U.S. households and non-profits from 1945-2008. Besides the market impacts, and not surprisingly, it appears when stocks were doing w...
by Simplegift
Wed Aug 07, 2013 9:18 am
 
Forum: Investing - Theory, News & General
Topic: Update: The 50/50 Portfolio for the Defensive Investor
Replies: 8
Views: 2123

Re: Update: The 50/50 Portfolio for the Defensive Investor

In a like fashion, 20 years ago in his first book (as one of his "twelve pillars of wisdom"), John C. Bogle wrote: “There are an infinite number of strategies worse than this one: Commit, over a period of a few years, half of your assets to a stock index fund and half to a bond index fund....
by Simplegift
Tue Aug 06, 2013 7:06 pm
 
Forum: Investing - Theory, News & General
Topic: Update: The 50/50 Portfolio for the Defensive Investor
Replies: 8
Views: 2123

Re: Why only 5-10% for REITs?

REITs lost two-thirds of their value in the 2008 market meltdown (red line in chart below). There was no guarantee at the time that their price would ever recover. How would you feel in 2008 if you had "maxed out" your tax-advantaged space with REITs To play devil's advocate, I'd say: The...
by Simplegift
Tue Aug 06, 2013 4:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why only 5-10% for REITs?
Replies: 44
Views: 4347

Re: Why only 5-10% for REITs?

REITs lost two-thirds of their value in the 2008 market meltdown (red line in chart below). There was no guarantee at the time that their price would ever recover. How would you feel in 2008 if you had "maxed out" your tax-advantaged space with just REITs? http://i.imgur.com/TG70lvq.png So...
by Simplegift
Tue Aug 06, 2013 3:48 pm
 
Forum: Investing - Help with Personal Investments
Topic: Why only 5-10% for REITs?
Replies: 44
Views: 4347

Update: The 50/50 Portfolio for the Defensive Investor

"We are thus led to put forward to most of our readers what may appear to be an oversimplified 50-50 formula. Under this plan the guiding rule is to maintain as nearly as practicable an equal division between bond and stock holdings…We are convinced that our 50-50 version of this approach make...
by Simplegift
Tue Aug 06, 2013 2:59 pm
 
Forum: Investing - Theory, News & General
Topic: Update: The 50/50 Portfolio for the Defensive Investor
Replies: 8
Views: 2123

Re: Worth it to take huge cap gains to rebalance?

I'm totally willing to do this, but hesitated when I saw the cap gains hit.Is it worth it? Since rebalancing is to reduce portfolio risk, I'd say "yes." Otherwise, you'll find yourself going into the next stock downturn with an 80% or 90% stock allocation, which might test your ability to...
by Simplegift
Tue Aug 06, 2013 11:50 am
 
Forum: Investing - Help with Personal Investments
Topic: Worth it to take huge cap gains to rebalance?
Replies: 25
Views: 2031

Re: Why do all asset allocation sites ignore income?

That's a lot simpler than what I was doing. Yes, it sounds like you have the basic idea of the total return approach, as opposed to just looking at income. One's withdrawal rate generally needs to be in the 2%-2.5% range to live off just interest and dividends these days — much less than your 3.8% ...
by Simplegift
Tue Aug 06, 2013 10:29 am
 
Forum: Investing - Theory, News & General
Topic: Why do all asset allocation sites ignore income?
Replies: 33
Views: 3668

Re: What is the Role of TIPS in Your Portfolio?

Buying inflation protection for part of your portfolio only protects that part of your portfolio against inflation. True, but for investors who are concerned about the "deep" risk of long-term inflation, and who look to the stock portion of their portfolios to generate the real returns ne...
by Simplegift
Tue Aug 06, 2013 9:43 am
 
Forum: Investing - Theory, News & General
Topic: What is the Role of TIPS in Your Portfolio?
Replies: 71
Views: 4303

Re: Why do all asset allocation sites ignore income?

As a pensioner living off the income from my portfolio this is an important consideration that has to be taken into consideration given my income requirements. Notwithstanding my advancing years I have to compare reducing the risk of my investment choices to the money that I need the portfolio to g...
by Simplegift
Mon Aug 05, 2013 8:51 pm
 
Forum: Investing - Theory, News & General
Topic: Why do all asset allocation sites ignore income?
Replies: 33
Views: 3668

Re: Bonds and risk: Putting interest rate changes in perspec

Actually, they did publish this paper 3 years ago (2010). This is an update. True. But this is an expanded version (10 pages instead of 7), with brand new charts and analysis that the first paper did not contain. For all of the Bogleheads posting with concerns about rising rates and their bond allo...
by Simplegift
Mon Aug 05, 2013 4:07 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and risk: Putting interest rate changes in perspective
Replies: 17
Views: 1584

Re: Bonds and risk: Putting interest rate changes in perspec

What a wonderful paper. This is the best, most clear-eyed summary I've seen about the current risks and benefits of holding high-quality bonds in the portfolio. If Vanguard Research had published this paper six months ago, think how many confusing and inarticulate Boglehead threads about bond risks ...
by Simplegift
Mon Aug 05, 2013 2:41 pm
 
Forum: Investing - Theory, News & General
Topic: Bonds and risk: Putting interest rate changes in perspective
Replies: 17
Views: 1584

Re: The Future of Index Funds

Interesting to see Bill Sharpe opine on the point at which markets become less efficient due to indexing. That's two estimates this week — Bill Sharpe's at 50% indexing and Rick Ferri's at 95% indexing. Since this question can't be answered by a study of existing markets around the world, it seems w...
by Simplegift
Mon Aug 05, 2013 12:19 pm
 
Forum: Investing - Theory, News & General
Topic: The Future of Index Funds
Replies: 7
Views: 806

Re: What is the Role of TIPS in Your Portfolio?

It seems that most people who include TIPS in their portfolio use only a modest allocation - such as 20% of their fixed-income, or maybe 10% of the total portfolio. Somehow, this is viewed as providing portfolio (unexpected) inflation protection. Even if they are not held in a matching liability sc...
by Simplegift
Mon Aug 05, 2013 10:30 am
 
Forum: Investing - Theory, News & General
Topic: What is the Role of TIPS in Your Portfolio?
Replies: 71
Views: 4303

Re: Extreme Early Retirement

Regarding withdrawal rates with a 50-year or longer time horizon, Jim Otar has recent study you may want to peruse: "Perpetual Withdrawal Rates for Foundations, Endowments and Charitable Trusts: A Non-Gaussian Analysis" Though it's directed at foundations and endowments with perpetual with...
by Simplegift
Sun Aug 04, 2013 2:54 pm
 
Forum: Investing - Help with Personal Investments
Topic: Extreme Early Retirement
Replies: 104
Views: 11832

Re: It's not your father's indexing

Sorry not to be able to provide you with a grand theory of a "level" growth-value mix for every investor, Phineas. All I've got to go on is the Fama-French factor data above and my own experiences. For me personally, the growth bias of the total stock market indexes was made quite plain du...
by Simplegift
Sun Aug 04, 2013 2:31 pm
 
Forum: Investing - Theory, News & General
Topic: It's not your father's indexing
Replies: 40
Views: 3773

Re: It's not your father's indexing

You quoted my question, but didn't answer it. Phineas, there is no one answer for every investor. Some are fine with the cap-weighted total market indexes, just the way they are. This discussion started upthread when a poster expressed concern about the dominance of growth stocks in the total marke...
by Simplegift
Sun Aug 04, 2013 2:02 pm
 
Forum: Investing - Theory, News & General
Topic: It's not your father's indexing
Replies: 40
Views: 3773

Re: It's not your father's indexing

Can you please define for us, in terms at least as specific and implementable as cap weighting, what you regard as the level situation cap weighting is a tilt away from? If one looks at camontgo's data for the Fama-French factor analysis of the total stock market from 1926-2011, the average growth-...
by Simplegift
Sun Aug 04, 2013 1:30 pm
 
Forum: Investing - Theory, News & General
Topic: It's not your father's indexing
Replies: 40
Views: 3773

Re: Buying a House without a Real Estate Agent

Am I missing some vital value that the real estate agent will be providing for me? We've only purchased one house that was "for sale by owner," with no agent representing either the sellers or ourselves. This process put a lot of responsibility on us as buyers, as it was a rural area and ...
by Simplegift
Sun Aug 04, 2013 11:30 am
 
Forum: Personal Consumer Issues
Topic: Buying a House without a Real Estate Agent
Replies: 29
Views: 2427

Re: It's not your father's indexing

Nor is it "neutral" (in the sense you appear to mean) with respect to industry, sector, or (in the case of TSM) domestic location; it's "biased" toward whatever the market has chosen. And so on -- no? The Morningstar data will tell you factually about the sector and size breakdo...
by Simplegift
Sun Aug 04, 2013 8:08 am
 
Forum: Investing - Theory, News & General
Topic: It's not your father's indexing
Replies: 40
Views: 3773

Re: It's not your father's indexing

The three stock styles each account for about one-third of the total free float — so, by definition then, the Total Market Stock Index can never be anything other than a large-cap blend fund. But isn't that true of almost any categorization of assets you could come up with? Those from Fama and Fren...
by Simplegift
Sun Aug 04, 2013 1:03 am
 
Forum: Investing - Theory, News & General
Topic: It's not your father's indexing
Replies: 40
Views: 3773

Re: It's not your father's indexing

It's playing word games to call cap-weighting "tilted." Cap-weighting is the weighting that the market itself has . It's sort of justifiable to take that as the standard. How can you say the market as a whole is "tilted?" It's a matter of definitions. Morningstar has one methodo...
by Simplegift
Sat Aug 03, 2013 10:25 pm
 
Forum: Investing - Theory, News & General
Topic: It's not your father's indexing
Replies: 40
Views: 3773

Re: How have stocks fared when CAPE > 24?

Here are my back of envelope calculations (accuracy not guaranteed) of what happened to the real price of the S&P500 following the month that CAPE crossed above 24. P/E10 is a useful tool, in my view, for estimating a range of future market returns (as in Ranger's posts upthread). It's also hel...
by Simplegift
Sat Aug 03, 2013 2:27 pm
 
Forum: Investing - Theory, News & General
Topic: How have stocks fared when CAPE > 24?
Replies: 98
Views: 6329

Re: The "Lost Decade" and Long-Term Real Stock Returns

For real retirement savers, accumulating during working years and withdrawing during retirement, what is a realistic shape for the portfolio dollar value, and what is the real effective average dollar-weighted time in market ? There is a crazy practice of doing everything in finance with using boxc...
by Simplegift
Sat Aug 03, 2013 12:16 pm
 
Forum: Investing - Theory, News & General
Topic: The "Lost Decade" and Long-Term Real Stock Returns
Replies: 32
Views: 3362

Re: The "Lost Decade" and Long-Term Real Stock Returns

Inducing people to underestimate the risk of stocks and allocate to stocks beyond their risk tolerance, is just going to lead to bitterness, selling at the bottom, and subsequent overreaction when lost decades do happen. Actually, nisi, the point of the original post is not to "induce people t...
by Simplegift
Sat Aug 03, 2013 10:29 am
 
Forum: Investing - Theory, News & General
Topic: The "Lost Decade" and Long-Term Real Stock Returns
Replies: 32
Views: 3362

Re: It's not your father's indexing

It seems to me that there is a problem with market cap indexing in that it doesn't protect you against overvalued sectors like tech in 99-2000 because the sectors share of the market grows in a bubble. Unfortunately market cap seems to be cheapest and thats a big barrier to overcome. Not sure I'd c...
by Simplegift
Sat Aug 03, 2013 9:20 am
 
Forum: Investing - Theory, News & General
Topic: It's not your father's indexing
Replies: 40
Views: 3773
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