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Re: Emerging markets 1900-2013

This sort of thing leads me to doubt the objectivity of Dimson & al. and wonder whether they are not pushing a point of view. The best available data is not necessarily good data. There's no doubt that it can be extremely difficult to reconstruct global stock market returns going back 100 years...
by Simplegift
Tue Aug 26, 2014 7:16 pm
 
Forum: Investing - Theory, News & General
Topic: Emerging markets 1900-2013
Replies: 17
Views: 1670

Re: What are you up YTD?

• 50% Stock/50% Bonds
• Modest tilt to small and value
• 6.63% year-to-date
by Simplegift
Tue Aug 26, 2014 4:16 pm
 
Forum: Investing - Help with Personal Investments
Topic: What are you up YTD?
Replies: 67
Views: 3389

Market Corrections — Befriending the Beast

Quite a few recent posters have expressed their concern about today's elevated stock market levels and their fear of a market correction. This post is intended to give a broader, historical perspective on yearly market drops and to show that they are, 1) very common, and, 2) not an impediment to str...
by Simplegift
Tue Aug 26, 2014 3:02 pm
 
Forum: Investing - Theory, News & General
Topic: Market Corrections — Befriending the Beast
Replies: 6
Views: 799

Re: Emerging markets 1900-2013

Thanks, Robert T, for posting the excellent summary. It's interesting to see how relatively consistent the returns of emerging markets have been over the last century (with the exception of the world war periods!). Nearly all of the other historical returns series we've had just date back to about 1...
by Simplegift
Tue Aug 26, 2014 9:59 am
 
Forum: Investing - Theory, News & General
Topic: Emerging markets 1900-2013
Replies: 17
Views: 1670

Re: The Extreme Outliers of the Investment Universe

Technically, I believe you are right, Nisi. The super, outperforming investors would be considered part of the natural distribution of returns — even though they may be three standard deviations from the mean. Thus, their returns would not be anamolous outliers in the technical sense, just way above...
by Simplegift
Mon Aug 25, 2014 5:20 pm
 
Forum: Investing - Theory, News & General
Topic: The Extreme Outliers of the Investment Universe
Replies: 27
Views: 2609

Re: What if there were only index funds?

Does anyone know what percent of the global stock market is in index funds? I have some vague recollections of the percent of U.S. stocks in index funds, and it was pretty low. I would guess the entire world stock market is less than 10% in index funds. A quick search didn't turn up the % of global...
by Simplegift
Mon Aug 25, 2014 4:11 pm
 
Forum: Investing - Theory, News & General
Topic: What if there were only index funds?
Replies: 20
Views: 1750

Re: The Extreme Outliers of the Investment Universe

This topic reminded of another paper, Buffet's Alpha , which showed how much of an outlier Mr. Buffet's long-term performance has been, compared with active equity fund managers (first chart) and other companies (second chart): http://i.imgur.com/NifYiWf.jpg This figure shows the distribution of ann...
by Simplegift
Mon Aug 25, 2014 1:35 pm
 
Forum: Investing - Theory, News & General
Topic: The Extreme Outliers of the Investment Universe
Replies: 27
Views: 2609

Re: Any good studies on active vs. passive BEFORE fees?

From one study of over 7,000 mutual funds for the ten-year period ending 12/31/12: So are professional investors really underperforming the market or are they earning positive alpha (returns in excess of the market) but capturing all of the gains for themselves with high fees? The data shows that th...
by Simplegift
Mon Aug 25, 2014 11:49 am
 
Forum: Investing - Theory, News & General
Topic: Any good studies on active vs. passive BEFORE fees?
Replies: 10
Views: 935

Re: The Extreme Outliers of the Investment Universe

Thanks for sharing this- those charts are really informative. Two questions about them- does the chart for active funds include expenses? What is the time period for the active fund chart- just the first six months of 2012? YDNAL has you on the right track. There's more on the study methodology beh...
by Simplegift
Mon Aug 25, 2014 10:48 am
 
Forum: Investing - Theory, News & General
Topic: The Extreme Outliers of the Investment Universe
Replies: 27
Views: 2609

The Extreme Outliers of the Investment Universe

The chart below was forwarded by a fellow chart enthusiast — who noted it was from a recent book by Frederik Vanhaverbeke, Excess Returns , published June, 2014. Apologies if this chart has been posted previously here. http://i.imgur.com/5s5RX90.png While it's tantalizing to know that a select group...
by Simplegift
Mon Aug 25, 2014 4:20 am
 
Forum: Investing - Theory, News & General
Topic: The Extreme Outliers of the Investment Universe
Replies: 27
Views: 2609

Re: How Do Rising Interest Rates Affect Stock Prices?

- the Fed believes the economy is overheating and raises interest rates to slow inflation. This is usually bad for stocks. Looking at recent history, you're right. Fed rate increases have certainly proven to be bad for stocks in the end (as the Fed is ultimately trying to cool off the economy) — bu...
by Simplegift
Sat Aug 23, 2014 3:51 pm
 
Forum: Investing - Theory, News & General
Topic: How Do Rising Interest Rates Affect Stock Prices?
Replies: 5
Views: 769

Re: Help with data points on why passive vs. managed

The book that makes the best and most persuasive case for passive investing is this one, in my view:

Rick Ferri, The Power of Passive Investing, 2010.

It has theory, historical analysis, charts, tables and clear, readable explanations. Highly recommended.
by Simplegift
Sat Aug 23, 2014 1:43 pm
 
Forum: Investing - Theory, News & General
Topic: Help with data points on why passive vs. managed
Replies: 5
Views: 503

Re: How Do Rising Interest Rates Affect Stock Prices?

Just for the record, here is a link to a second study of the "threshold effect," which again found rising stock prices correlated with rising interest rates up to 6%, then falling stock prices at rising interest rates above 6%. Not too surprising, as the time period and methodology are ver...
by Simplegift
Sat Aug 23, 2014 1:29 pm
 
Forum: Investing - Theory, News & General
Topic: How Do Rising Interest Rates Affect Stock Prices?
Replies: 5
Views: 769

Re: Diversification in practice: Investing from Australia

To invest in international shares, the easiest way will likely be in a Superannuation fund (I use SunSuper who have relatively low-fee International Enhanced Index funds available. Most diversified/balanced/conservative/growth funds will include an international allocation). Outside of super there ...
by Simplegift
Sat Aug 23, 2014 12:02 pm
 
Forum: Investing - Theory, News & General
Topic: Diversification in practice: Investing from Australia
Replies: 4
Views: 531

Re: How Do Rising Interest Rates Affect Stock Prices?

More evidence of the "threshold effect" (at 6% this time) and more discussion of possible reasons in this New York Times article from June 2, 2013: Doug Ramsey, chief investment officer at the Leuthold Group, has looked at stock valuations and bond yields going back to 1878. He has found t...
by Simplegift
Sat Aug 23, 2014 11:22 am
 
Forum: Investing - Theory, News & General
Topic: How Do Rising Interest Rates Affect Stock Prices?
Replies: 5
Views: 769

How Do Rising Interest Rates Affect Stock Prices?

The usual argument is that rising interest rates mean higher borrowing costs for corporations, which leads to lower profit margins, then lower corporate earnings and stock prices. But looking at the chart below, it doesn't appear that this a direct, straight line, cause-and-effect relationship. Inst...
by Simplegift
Sat Aug 23, 2014 2:41 am
 
Forum: Investing - Theory, News & General
Topic: How Do Rising Interest Rates Affect Stock Prices?
Replies: 5
Views: 769

Re: Is the Aggregate Index Too Heavy in Treasuries?

Doc wrote:
Simplegift wrote:Can anyone shed light on why the duration has risen nearly 40% in the five years since 2009?

This was addressed in the thread that Nisi referenced earlier.

Johno wrote:This Treasury report has graph of average maturity (not duration) of govt debt since 1980, p. 19

Thanks, Doc and Johno, very helpful!
by Simplegift
Fri Aug 22, 2014 11:27 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 63
Views: 2780

Re: Is the Aggregate Index Too Heavy in Treasuries?

Do you have any information on average maturity? Duration is essentially a function of interest rate and maturity. No, offhand I don't — but I'd like to research this situation in more depth. The rise in duration is concerning and I'd like to understand more about it before making a decision on my ...
by Simplegift
Fri Aug 22, 2014 9:56 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 63
Views: 2780

Re: Is the Aggregate Index Too Heavy in Treasuries?

Has maturity increased? Duration increases as interest rates decrease, so the drop in interest rates could be enough to account for the duration change. Looking at the long-term trends (chart below), the duration of the Barclays U.S. Aggregate Index was fairly constant at around 4.5 years for the t...
by Simplegift
Fri Aug 22, 2014 9:29 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 63
Views: 2780

Re: Is the Aggregate Index Too Heavy in Treasuries?

I wonder if there were articles about 14 years ago worrying about whether the Aggregate Index had become too light in Treasuries, because when I first invested in the Vanguard Total Bond Fund about 1992, the proportion that was Treasuries was at the current level or larger than it is now. (Somewher...
by Simplegift
Fri Aug 22, 2014 1:57 am
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 63
Views: 2780

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

For some historical perspective, a chart of Vanguard's market share of total U.S. mutual fund and ETF assets since 1993, relative to its competitors. So far, Vanguard's cost advantage is just unbeatable. On an asset-weighted basis (according to the article), its average expense ratio is 0.15% — well...
by Simplegift
Thu Aug 21, 2014 7:56 pm
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 6390

Re: Is the Aggregate Index Too Heavy in Treasuries?

There is one sense in which the Agg is too heavy in Treasuries: if you invested in it in 2000 and incorporated it into your allocation with the risk it had back then, you are now overly safe. This is the opposite of Valuethinker's dreaded risk creep — and is a clear case of "safety creep."...
by Simplegift
Thu Aug 21, 2014 6:02 pm
 
Forum: Investing - Theory, News & General
Topic: Is the Aggregate Index Too Heavy in Treasuries?
Replies: 63
Views: 2780

Re: Blog:Vanguard surpasses SSgA for the first time

Just for some perspective, Morningstar reports that, at the end of 2013, exchange-traded funds made up just 13% of total managed assets in the U.S. However, ETFs enjoyed a 14% annual growth rate in 2013, compared with a 3% growth rate for mutual fund assets. Looking to the future, it's expected that...
by Simplegift
Thu Aug 21, 2014 5:46 pm
 
Forum: Investing - Theory, News & General
Topic: Blog:Vanguard surpasses SSgA for the first time
Replies: 4
Views: 1167

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

ResearchMed wrote:Was there a breakdown for equity vs. bond fund assets? Probably tricky, given the mixed funds, but it could be separated out.

Sorry, RM, but Morningstar's annual reporting isn't quite that detailed, as best I know. I'm sure the data is out there somewhere, but I don't have ready access to it.
by Simplegift
Thu Aug 21, 2014 2:34 pm
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 6390

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Any idea what percentage of the total money invested at Vanguard is in "index" vs. "managed" funds? According to Morningstar , at the end of 2013, about 70% of Vanguard's assets were indexed and about 30% were actively-managed. The suburban Pennsylvania behemoth now manages $2.3...
by Simplegift
Thu Aug 21, 2014 1:35 pm
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 6390

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Could this all be happening because of the strong bull market? I wonder if people are jumping on board seeing that S&P 500 doubled its value during the last 5 years (actually ~2.5x w/ dividends re-invested). Will they stay on board when the next big correction comes? If the experience of the 20...
by Simplegift
Thu Aug 21, 2014 12:21 pm
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 6390

Re: Investors Pour Into Vanguard, Eschewing Stock Pickers

Looking at mutual fund flows over the past seven years, there appears to be a steady and relentless march out of actively-managed funds and into indexed mutual funds and ETFs. It seems a historic shift in investor attitudes is underway. http://i.imgur.com/T6t5Q4l.jpg Source: 2014 Investment Company ...
by Simplegift
Thu Aug 21, 2014 10:35 am
 
Forum: Investing - Theory, News & General
Topic: Investors Pour Into Vanguard, Eschewing Stock Pickers
Replies: 70
Views: 6390

Re: portfolio turnover

The primary reason is that most fixed income indices are rebalanced monthly — in contrast to most equity indices, which are rebalanced annually, I believe. These monthly bond index rebalancings involve various market changes, including new issues, bonds that have been called or paid down early, cash...
by Simplegift
Wed Aug 20, 2014 10:44 pm
 
Forum: Investing - Theory, News & General
Topic: portfolio turnover
Replies: 9
Views: 933

Re: Subaru Blues

We've driven the same Subaru Outback wagon for 13 years now (bought it new in 2001). After 85,000 miles, all the important elements are still going strong — engine, manual transmission, drive train. We've had a few minor maintenance issues over the years — replacing a faulty oxygen sensor, a worn cl...
by Simplegift
Wed Aug 20, 2014 9:07 pm
 
Forum: Personal Consumer Issues
Topic: Subaru Blues
Replies: 73
Views: 5510

Re: How to weather market downturn with a high chance of lay

I'm in my early 20s and currently holding 50% US stock and 50% international stock. Can I or should I rebalance? (I know it depends on my risk tolerance, and I think I'm okay with 100% stock since I'm so young.) What are options for fixed incomes to sleep well at night? Does that basically means mo...
by Simplegift
Wed Aug 20, 2014 5:36 pm
 
Forum: Investing - Theory, News & General
Topic: How to weather market downturn with a high chance of layoff
Replies: 42
Views: 3174

Re: When did you hear of Bill Miller and Legg Mason Value Tr

Along with this kind of poll i wish there was some kind of way to see a funds performance over time along with the market cap of the fund. It would be huge ammo to use in the arguments about funds that outperform over long periods of time if you can show that in reality very few investors were on b...
by Simplegift
Wed Aug 20, 2014 5:17 pm
 
Forum: Investing - Theory, News & General
Topic: When did you hear of Bill Miller and Legg Mason Value Trust?
Replies: 32
Views: 2314

Re: How to weather market downturn with a high chance of lay

I'm a firm believer in the superiority of buy-and-hold over day-trading. However, it is unclear to me how the tracking-the-index strategy works well given the fact that during boom years we tend to have more money to invest, whereas in downturns we tend to have less (due to layoffs, less work for f...
by Simplegift
Wed Aug 20, 2014 4:58 pm
 
Forum: Investing - Theory, News & General
Topic: How to weather market downturn with a high chance of layoff
Replies: 42
Views: 3174

Re: John Hussman, smart guy, should you listen to his foreca

Not to pick on Mr. Hussman, but the long-term performance of his flagship fund (Hussman Stategic Growth-HSGFX) is instructive on the perils of market timing — and how difficult it is to make consistently correct timing calls. Rolling 12-month Total Returns, HSGFX (blue) vs. S&P 500 (orange) http...
by Simplegift
Wed Aug 20, 2014 1:28 pm
 
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 20
Views: 2413

Re: John Hussman, smart guy, should you listen to his foreca

From what I've read of Mr. Hussman's market commentary and the way he's managed his funds, he's the exact opposite of a buy-hold-rebalance investor. In fact, he's a poster boy for the shortcomings of market timing. His approach is to periodically hedge his stock exposure through put options (that sh...
by Simplegift
Wed Aug 20, 2014 10:20 am
 
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 20
Views: 2413

Re: US REITs already have international exposure

Another aspect worth considering about REITs is their role in the portfolio as inflation protection, and not just diversification. Based on the studies I've seen, there seems to be strong evidence that publicly-traded equity REITs (such as Vanguard's REIT Index) have historically provided effective ...
by Simplegift
Wed Aug 20, 2014 12:42 am
 
Forum: Investing - Help with Personal Investments
Topic: US REITs already have international exposure
Replies: 14
Views: 1232

Re: US REITs already have international exposure

Interesting research, InvestorNewb, thanks. Ever since Vanguard came out with their US REIT Index Fund in 1996, I've had a 10% portfolio allocation to it and appreciated its good returns and modest diversification benefits. However, since they launched their Global Ex-US REIT Index Fund in 2010, I h...
by Simplegift
Tue Aug 19, 2014 4:07 pm
 
Forum: Investing - Help with Personal Investments
Topic: US REITs already have international exposure
Replies: 14
Views: 1232

Re: Shiller on Lofty Market Elevations

One important point that shouldn't be overlooked in this discussion is that, even if the average, fair-value PE10 has drifted higher in recent decades (due to persistent low interest rates, changed investor behavior or whatever) — and stocks are actually fairly valued today at a PE10 of 25 — future ...
by Simplegift
Tue Aug 19, 2014 2:37 am
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4868

Re: Shiller on Lofty Market Elevations

Very nice article, thanks! One has to sympathize with Mr. Shiller, in that it's wholly unsatisfactory to believe that stocks have been consistently overpriced since the early 1990s (except at the bear market bottoms). I don't see why not, it matches perfectly with a period of heavy Fed involvement ...
by Simplegift
Mon Aug 18, 2014 9:23 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4868

Re: Shiller on Lofty Market Elevations

Say, I'm wondering whether in previous instances where PE/10 was high, as it is now, were the expected returns on other assets such as bonds also low, as they are now (low current rates)? Do these things tend to move in tandem, so that there's no place to hide? Or were there good places to hide whe...
by Simplegift
Mon Aug 18, 2014 4:22 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4868

Re: Response to Shiller's "lofty" CAPE - where should it be?

The second quote is particularly interesting - what should be a normal p/e? Valuing the stock market relative to its own history of price-earnings, that is, comparing the current price-earnings ratio (PE10) to the long-run average, implicitly makes the assumption that there exists some kind of true...
by Simplegift
Sun Aug 17, 2014 5:02 pm
 
Forum: Investing - Theory, News & General
Topic: Response to Shiller's "lofty" CAPE - where should it be?
Replies: 3
Views: 823

Re: Shiller on Lofty Market Elevations

It is encouraging to see that Mr. Shiller is willing to consider investors' behavioral changes as a possible explanation for unexpected or anomalous trends in the PE10 data. Certainly during the late 1990s, when PE10 went from 20 to 44 in five years, investors were exhibiting a marked behavioral cha...
by Simplegift
Sun Aug 17, 2014 2:56 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4868

Re: Shiller on Lofty Market Elevations

So nothing I’ve come up with is a slam-dunk explanation for the continuing high level of valuations. I suspect that the real answers lie largely in the realm of sociology and social psychology — in phenomena like irrational exuberance, which, eventually, has always faded before. If the mood changes...
by Simplegift
Sun Aug 17, 2014 12:22 pm
 
Forum: Investing - Theory, News & General
Topic: Shiller on Lofty Market Elevations
Replies: 55
Views: 4868

Re: Spouse not ready to cut ties with financial advisers

So Bogleheads - do you have any advice for me? Things to consider? Ways to get through to a spouse who basically just wants to cover his ears? Additional items I should bring up during our meeting? My suggestion is that you and your spouse carefully consider the impact on your terminal wealth of th...
by Simplegift
Sun Aug 17, 2014 9:51 am
 
Forum: Investing - Help with Personal Investments
Topic: Spouse not ready to cut ties with financial advisers
Replies: 111
Views: 8414

Re: Poll for 65+ Seniors

Our ages are 65 and 69.
We have a 50% stock allocation, which we plan to maintain to the end.
Our goals are asset growth at pace with inflation during our lifetimes — then family and charitable bequests.
by Simplegift
Sun Aug 17, 2014 9:26 am
 
Forum: Investing - Help with Personal Investments
Topic: Poll for 65+ Seniors
Replies: 51
Views: 5708

Re: Business Insider: The Stock Market Could Drop 50% Tomor

I would personally see this as an opportunity to purchase more. This is an admirable aspiration, ny_rn — but I wouldn't underestimate the extreme emotional and psychological impacts of a 50% market drop, as experienced at the time. You're likely to see drastically lower corporate earnings, much hig...
by Simplegift
Sat Aug 16, 2014 8:39 pm
 
Forum: Investing - Theory, News & General
Topic: Business Insider: The Stock Market Could Drop 50% Tomorrow
Replies: 14
Views: 2184

Re: help with Moms free cash reserves

I was about to suggest that you place the $50,000 in Schwab's Short-Term Bond Fund (SWBDX), if indeed these are emergency funds not needed for everyday trust expenses — and you can handle the modest price fluctuations. This is what I do with my excess cash at Vanguard, in their Short-Term Bond Index...
by Simplegift
Sat Aug 16, 2014 1:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: help with Moms free cash reserves
Replies: 8
Views: 758

Re: 'Risk Creep' - new term

The inadvertent or unintentional introduction of risk into a portfolio by adding a new more volatile asset class (which has high correlation with existing assets) or by a drift in weightings eg holding more equities during an equity bull market. To be proper 'risk creep' it must be unappreciated or...
by Simplegift
Sat Aug 16, 2014 11:40 am
 
Forum: Investing - Theory, News & General
Topic: 'Risk Creep' - new term
Replies: 26
Views: 2197

Re: Do Super wealthy have access to different investing vehi

According to some surveys, the main difference between the portfolios of the super-wealthy and the average investor is their large allocation to alternative investments (hedge funds, venture capital and private equity). This article shows a 30% overall allocation to these alternative vehicles by the...
by Simplegift
Fri Aug 15, 2014 11:36 pm
 
Forum: Investing - Theory, News & General
Topic: Do Super wealthy have access to different investing vehicles
Replies: 76
Views: 6253

Re: Market valuation analysis

At NO time, NEVER, did the value of VTSAX drop below where it was in 1997, so buying stocks when PE10 was near 30 (let alone holding stocks that you bought years before even cheaper) doesn't seem like a terrible decision... You never got a chance to buy back in cheaper. Right. The problem with rely...
by Simplegift
Fri Aug 15, 2014 9:51 pm
 
Forum: Investing - Theory, News & General
Topic: Market valuation analysis
Replies: 36
Views: 1700

Re: For valuation metric fans

As a beginning investor in the 1990s, I used to believe there actually was an objective measure of "market value." However, in the years since, I've come to believe that judging market "value" is a lot like judging "beauty." One might believe that they know what beauty ...
by Simplegift
Fri Aug 15, 2014 7:09 pm
 
Forum: Investing - Theory, News & General
Topic: For valuation metric fans
Replies: 1
Views: 275
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