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Re: Do you consider mortgage payments as savings?

If you asked 100 homeowners outside of BH whether their mortgage payment is an expense, my guess is that most would say yes, including both principal and interest. You're right that most homeowners would say their entire mortgage payment is an expense. But popularity of an idea doesn't make it righ...
by acegolfer
Mon Mar 02, 2015 8:42 pm
 
Forum: Personal Finance (Not Investing)
Topic: Do you consider mortgage payments as savings?
Replies: 228
Views: 9280

Re: Do you consider mortgage payments as savings?

IMO, this depends on how and when you account for the car purchase itself. If I use a car loan, I account for the expense on an ongoing basis, at the time I make the car payment. And if I'm going to prepay that loan, same thing, I count it as an expense. As far as credit cards, the purchases made o...
by acegolfer
Mon Mar 02, 2015 7:17 pm
 
Forum: Personal Finance (Not Investing)
Topic: Do you consider mortgage payments as savings?
Replies: 228
Views: 9280

Re: Do you consider mortgage payments as savings?

avenger wrote:Is paying off my car loan considered savings?

I don't think so.


Is paying off my car loan or credit card considered spending?

To me, no. My own definition of savings is income - spending. Since these car loan/credit card payments are not spent, they are savings.

(We just have different views.)
by acegolfer
Mon Mar 02, 2015 6:02 pm
 
Forum: Personal Finance (Not Investing)
Topic: Do you consider mortgage payments as savings?
Replies: 228
Views: 9280

Re: Do you consider mortgage payments as savings?

I have a very simple question. (You may think it's irrelevant to OP. If so, my apologies.) Suppose Joe buys $2k furniture with 0% financing. He will pay $100/month for 20 months. Q1: How would you characterize his spending? (This is a survey and there's no correct answer) a. $2,000 today b. $100 eve...
by acegolfer
Mon Mar 02, 2015 4:54 pm
 
Forum: Personal Finance (Not Investing)
Topic: Do you consider mortgage payments as savings?
Replies: 228
Views: 9280

Re: Do you consider mortgage payments as savings?

FYI, less than 2 months ago, there was a debate on what "saving" is

viewtopic.php?f=2&t=156054
by acegolfer
Sun Mar 01, 2015 8:42 pm
 
Forum: Personal Finance (Not Investing)
Topic: Do you consider mortgage payments as savings?
Replies: 228
Views: 9280

Re: Do you consider mortgage payments as savings?

For me, it's straightforward.

If I recognize the purchase as spending at the time of purchase, then the subsequent principal payments are not spending and hence savings.

If I don't recognize as spending at the time of purchase, then loan payments are spending and not savings.
by acegolfer
Sun Mar 01, 2015 5:47 am
 
Forum: Personal Finance (Not Investing)
Topic: Do you consider mortgage payments as savings?
Replies: 228
Views: 9280

Re: Active managers outperform the index by 0.12% before fee

afan,

Thanks for the FF paper. I glanced through it and found a very interesting point related to this thread.

The alphas of EW actively managed funds are positive. This means the average active managers beat the benchmark. (Don't get me wrong. I'm not saying we should invest in active funds.)
by acegolfer
Tue Feb 24, 2015 5:50 pm
 
Forum: Investing - Theory, News & General
Topic: Active managers outperform the index by 0.12% before fees?
Replies: 22
Views: 1790

Re: Active managers outperform the index by 0.12% before fee

Is this logic wrong?

Suppose
1. Population consists of group A and group B.
2. average A > average B
3. Therefore, average A > population mean.
by acegolfer
Tue Feb 24, 2015 1:34 pm
 
Forum: Investing - Theory, News & General
Topic: Active managers outperform the index by 0.12% before fees?
Replies: 22
Views: 1790

Re: Do most active managers outperform index before expense?

Simple math tells me that half of all active managers must underperform, before fees. OP asked for empirical results not math. Since you brought up Sharpe's math, what will happen to active manager's performance when we have amateur investors who underperform index? Shouldn't most active managers o...
by acegolfer
Tue Feb 24, 2015 12:26 pm
 
Forum: Investing - Theory, News & General
Topic: Active managers outperform the index by 0.12% before fees?
Replies: 22
Views: 1790

Active managers outperform the index by 0.12% before fees?

"Active managers outperform the index by 0.12% before fees" source: http://www.nerdwallet.com/blog/investing/2013/active-mutual-fund-managers-beat-market-index/ The author admits his study has survivorship bias, which got me to thinking. What will be the scientific "empirical" r...
by acegolfer
Tue Feb 24, 2015 12:09 pm
 
Forum: Investing - Theory, News & General
Topic: Active managers outperform the index by 0.12% before fees?
Replies: 22
Views: 1790

2014 Balance sheet of U.S. households

http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf Total asset: $95,410 bil (2014 Q3) notable items: amount in billions (% of TA) real estate: $23,151 (24.3%) deposits: $10,105 (10.6%) corporate equities: $12,884 (13.5%) mutual fund shares: $7,620 (8.0%) pension reserves: $20,499 (21.5%) I ...
by acegolfer
Mon Feb 23, 2015 9:30 pm
 
Forum: Personal Finance (Not Investing)
Topic: 2014 Balance sheet of U.S. households
Replies: 2
Views: 780

Re: Value investing doesn't even beat the S&P 500

Most people who invest in the S&P 500 fail to come close to matching the performance of the S&P 500, for similar reasons, so it is not the least bit surprising that that investors in XYZXX also fail to match/beat the S&P 500. Indeed. Vanguard 500 index fund, 15 year total return (for an...
by acegolfer
Mon Feb 23, 2015 4:40 pm
 
Forum: Investing - Theory, News & General
Topic: Value investing doesn't even beat the S&P 500
Replies: 45
Views: 4318

Re: Seeking alpha is flawed. Ex-ante alpha must be 0.

Rob, I didn't know investopedia had different definitions of alpha. Throughout this thread, I was using the definition that knp prefers: 2. The abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM) ...
by acegolfer
Sun Feb 15, 2015 8:34 am
 
Forum: Investing - Theory, News & General
Topic: Seeking alpha is flawed. Ex-ante alpha must be 0.
Replies: 17
Views: 1291

Re: why stocks outperform other asset classes in the long ru

OP, Why E(r) of stock is higher than E(r) of bond? It's riskier. Why is stock riskier than bond? Some answered. A related answer is from accounting practice. Equal weight, rather than cap weight, shares on purchase. This way you are not betting for or against any particular company, you are simply a...
by acegolfer
Sat Feb 14, 2015 9:29 am
 
Forum: Investing - Theory, News & General
Topic: why stocks outperform other asset classes in the long run ?
Replies: 51
Views: 3356

Re: Future Stock Returns in an Aging World?

IN SUM: Unless there are unprecedented advances in productivity over the next 50 years, future global stock market returns are likely to be much lower than the previous 50 years. For those interested in more about the prospects for future productivity growth, the McKinsey Global Institute has recen...
by acegolfer
Sat Feb 14, 2015 9:21 am
 
Forum: Investing - Theory, News & General
Topic: Future Stock Returns in an Aging World?
Replies: 24
Views: 2303

Re: Seeking alpha is flawed. Ex-ante alpha must be 0.

Draw the capital asset line between the risk free asset and your benchmark asset. By definition, anything on this line has alpha = 0. Pick any efficient portfolio. If it has alpha = 0, then it must be on this line. TY for responding. Let me clear up some confusions. 1. In asset pricing model, alpha...
by acegolfer
Sat Feb 14, 2015 5:38 am
 
Forum: Investing - Theory, News & General
Topic: Seeking alpha is flawed. Ex-ante alpha must be 0.
Replies: 17
Views: 1291

Re: [Poll] Is MKT on the multi-factor efficient frontier?

@nisi,

Thanks for the Fama interview. Unfortunately, when people hear FF-3factor model, they think MKT is not efficient any more.
by acegolfer
Sat Feb 14, 2015 5:16 am
 
Forum: Investing - Theory, News & General
Topic: [Poll] Is MKT on the multi-factor efficient frontier?
Replies: 6
Views: 458

Re: Seeking alpha is flawed. Ex-ante alpha must be 0.

Job security. lol. Is the model absolutely correct, or merely "good"? I might suggest that it is probably the latter, especially if we subscribe to the notion that securities (price) behaviour is a constantly in a non-linear state. Thus, there is some alpha, but it would be hard to detect...
by acegolfer
Fri Feb 13, 2015 7:19 pm
 
Forum: Investing - Theory, News & General
Topic: Seeking alpha is flawed. Ex-ante alpha must be 0.
Replies: 17
Views: 1291

[Poll] Is MKT on the multi-factor efficient frontier?

I guess most BH agree that MKT is not on mean-variance efficient frontier. FYI, many academic proofs support this. But is it on the "multi-factor" efficient frontier? In other words, one can increase the expected return of MKT only by increasing one of the risks. (no need to define what th...
by acegolfer
Fri Feb 13, 2015 9:05 am
 
Forum: Investing - Theory, News & General
Topic: [Poll] Is MKT on the multi-factor efficient frontier?
Replies: 6
Views: 458

Seeking alpha is flawed. Ex-ante alpha must be 0.

Some investors (perhaps non BHs) calculate ex-post alpha using asset pricing models such as CAPM, 3-factor, 4-factor, etc. What's the objective? 1. If the model is correct, then ex-ante alpha for any security is 0. There's no alpha to seek. 2. If the model is wrong, then one is using a wrong model t...
by acegolfer
Fri Feb 13, 2015 7:44 am
 
Forum: Investing - Theory, News & General
Topic: Seeking alpha is flawed. Ex-ante alpha must be 0.
Replies: 17
Views: 1291

Re: Anyone regret paying off mortgage early?

Indeed. I was mostly trying to form a framework to show my position so that I could weigh in on the question based on my current thoughts. I was not attacking the OP at all, I assure you. :D I was making a segway that would allow me to comment, despite not having paid off my mortgage. :twisted: I a...
by acegolfer
Fri Jan 23, 2015 3:57 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone regret paying off mortgage early?
Replies: 318
Views: 39011

Re: Anyone regret paying off mortgage early?

The Wizard wrote:Yes, as Dulocracy notes, there's something akin to survivor-ship bias to this question...


TY. If you haven't noticed, OP acknowledged the "survivor bias" 3 years ago.
by acegolfer
Fri Jan 23, 2015 3:08 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone regret paying off mortgage early?
Replies: 318
Views: 39011

Re: Efficient markets: luck v. skill

Almost identical thread: Univ of Chicago [Active Manager Luck vs. Skill] Lubos Pastor https://www.bogleheads.org/forum/viewtopic.php?f=10&t=146034&p=2176238 http://youtu.be/hlGdW8K94mI In the video, Pastor (the author of the paper) states that he found the existence of skilled manager but it...
by acegolfer
Fri Jan 23, 2015 2:33 pm
 
Forum: Investing - Theory, News & General
Topic: Efficient markets: luck v. skill
Replies: 37
Views: 2640

Re: Florida in the summer

For 100 degrees Celsius, add to the list the rest of the U.S. My point is that you can always pick a temperature high enough (or low enough) to form your "group," and grouping on a single criterion is not meaningful. Most people will find substantial differences in the Honolulu, Buffalo a...
by acegolfer
Fri Jan 23, 2015 7:47 am
 
Forum: Personal Consumer Issues
Topic: Florida in the summer
Replies: 81
Views: 5598

Re: What counts as "saving"?

Compound, Nothing wrong with your calculation. It seems you transfer all the money that you didn't spend to investment accounts, loans, etc. Given your checking account doesn't change, it will be equal to income - spending (how the majority calculate saving here). The debate here is whether to consi...
by acegolfer
Fri Jan 23, 2015 7:37 am
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

Re: [Poll] Do u believe in weak/semi/strong EMH? (multi opti

We can't all be "above average", for a portfolio in any given market or subset to outperform, there will be some other that under-performs by a similar amount. Out-performing the average is zero-sum minus expenses in aggregate, anything that purports otherwise is measured wrong. I used to...
by acegolfer
Fri Jan 23, 2015 7:10 am
 
Forum: Investing - Theory, News & General
Topic: [Poll] Do u believe in weak/semi/strong EMH? (multi options)
Replies: 11
Views: 714

Re: Anyone regret paying off mortgage early?

MichDad wrote:From skimming several posts in this thread, I think my view goes slightly against the current.


I don't think you are in the minority. If I had paid off my mortgage and regret that I should have invested the money in the market instead, I would not post it here in a BH forum.
by acegolfer
Thu Jan 22, 2015 6:51 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone regret paying off mortgage early?
Replies: 318
Views: 39011

Re: What counts as "saving"?

leonard wrote:What benefit do you get from calling loan prepayment "savings"?


If you are asking me, I don't remember calling loan prepayment as "savings." I have been saying loan prepayment is NOT savings.
by acegolfer
Thu Jan 22, 2015 6:45 pm
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

Re: What counts as "saving"?

Analytically - what do you gain by classifying it as anything other than the prepayment on a loan? Not sure what you are asking. From accounting perspective, here's my journal entry for making $1k extra principal payment. credit $1k cash, debit $1k liability. (correct me wrong, i took an accounting...
by acegolfer
Thu Jan 22, 2015 5:45 pm
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

Re: How does an Efficient Market explain Buffett?

BHs, can you help me? What's an easy way to convince freshman college students of EMH in 5 minutes? I would suggest they consider their potential to consistently make money betting on sports. Then consider the market mechanism by which security prices are determined. It should be relatively straigh...
by acegolfer
Thu Jan 22, 2015 5:24 pm
 
Forum: Investing - Theory, News & General
Topic: How does an Efficient Market explain Buffett?
Replies: 257
Views: 13265

Re: Anyone regret paying off mortgage early?

I asked this q 2+ years ago and majority said they didn't regret paying off early.

We had another 2 years of bullish market. If you paid off your mortgage early, how do you feel now? Don't you regret you should have invested in the market instead?
by acegolfer
Thu Jan 22, 2015 4:07 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone regret paying off mortgage early?
Replies: 318
Views: 39011

Re: What counts as "saving"?

TO, I agree with what you said. I just want to give my view on others who disagree with you. This is related to the Economics question, "why are houses considered as investment not as consumption?" Suppose you bought both a house and a car using loans. I bet many here will consider the mon...
by acegolfer
Thu Jan 22, 2015 3:55 pm
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

Re: What counts as "saving"?

leonard wrote:Paying off a loan has a different set of financial constraints than "saving". There is no need to force paying off a loan to be something that it's not. Deal with the financial instrument as it is.


How about making extra principal payment on a loan?
by acegolfer
Thu Jan 22, 2015 3:39 pm
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

Re: What counts as "saving"?

If you go to an exclusive restaurant and have an utterly unaffordable meal, say for $50k, then tell the owner that you don't have the money to pay for it right now, but will do so in 360 equal installments over the next 30 years. At the end of the 30 years, have you spent $50k for the meal, or have...
by acegolfer
Thu Jan 22, 2015 3:38 pm
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

Re: How to calculate % savings

In my case, saving rate is 100% - Total spending/Total income. What to include in total spending and total income is the tricky part. 1. Long time ago, I asked BH whether a mortgage principal payment is a spending or not. Half said yes and the other half said no. (I can't find that thread.) Ppl havi...
by acegolfer
Thu Jan 22, 2015 3:18 pm
 
Forum: Personal Finance (Not Investing)
Topic: How to calculate % savings
Replies: 9
Views: 754

Re: What counts as "saving"?

Let's say you begin the year with $0 in your checking account and a student loan of $30k. The 10% student loan is in a deferral period, so no interest is accruing on the balance, and no payments are due until January 1st of the following year. After collecting all your paychecks ($100k gross income...
by acegolfer
Thu Jan 22, 2015 2:30 pm
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

Re: How does an Efficient Market explain Buffett?

I don't understand how a firm (not a fund) outperforming S&P500 disproves EMH. Why not use AAPL to disprove EMH?
by acegolfer
Thu Jan 22, 2015 2:14 pm
 
Forum: Investing - Theory, News & General
Topic: How does an Efficient Market explain Buffett?
Replies: 257
Views: 13265

Re: Am I making a mistake being too conservative?

There's nothing wrong with what you stated. But if I were you, I'd consider hedging your business and human capital.
by acegolfer
Thu Jan 22, 2015 1:51 pm
 
Forum: Investing - Theory, News & General
Topic: Am I making a mistake being too conservative?
Replies: 58
Views: 7638

Re: How does an Efficient Market explain Buffett?

Is berkshire an investment company aka fund? I thought it was some kind of holding company. In such case, can we compare berkshire (a business) with S&P500 to disprove EMH?
by acegolfer
Thu Jan 22, 2015 1:46 pm
 
Forum: Investing - Theory, News & General
Topic: How does an Efficient Market explain Buffett?
Replies: 257
Views: 13265

Re: How does an Efficient Market explain Buffett?

Is Buffett still beating the market from his financial investment consistently now? I read somewhere his marvelous success was mostly in his early years when the market was not nearly competitive as now.
by acegolfer
Thu Jan 22, 2015 11:28 am
 
Forum: Investing - Theory, News & General
Topic: How does an Efficient Market explain Buffett?
Replies: 257
Views: 13265

Re: What counts as "saving"?

@TO, I didn't read any other discussion. But if I were Joe, here's how I would calculate the saving rate 1) (100k - 20k - 40k - 10k) / 100k = 30% 2) (100k - 20k - 40k - 10k) / 100k = 30% 3) (100k - 20k - 40k - 10k) / 100k = 30% 4) (100k - 20k - 40k - 10k) / 100k = 30% I don't expect others to calcul...
by acegolfer
Thu Jan 22, 2015 11:10 am
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

[Poll] Do u believe in weak/semi/strong EMH? (multi options)

For more on different forms of Efficient Market Hypothesis, see
http://en.wikipedia.org/wiki/Efficient- ... background

admin: If this was asked before plz pull. I did a quick search but didn't find one.
by acegolfer
Thu Jan 22, 2015 10:53 am
 
Forum: Investing - Theory, News & General
Topic: [Poll] Do u believe in weak/semi/strong EMH? (multi options)
Replies: 11
Views: 714

Re: How does an Efficient Market explain Buffett?

Only if it is instantly priced in and done so in a rational and logical manner, will the chance of profit be gone. Is this what EMH implies? Yes. Wikipedia: your wiki source also states that one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis http://...
by acegolfer
Thu Jan 22, 2015 10:09 am
 
Forum: Investing - Theory, News & General
Topic: How does an Efficient Market explain Buffett?
Replies: 257
Views: 13265

Re: How does an Efficient Market explain Buffett?

knpstr wrote:Only if it is instantly priced in and done so in a rational and logical manner, will the chance of profit be gone. Even if the information is priced in immediately but the market responds irrationally (overbuys/oversells) then profit opportunities still exist.


Is this what EMH implies?
by acegolfer
Thu Jan 22, 2015 8:51 am
 
Forum: Investing - Theory, News & General
Topic: How does an Efficient Market explain Buffett?
Replies: 257
Views: 13265

Re: How does an Efficient Market explain Buffett?

BHs, can you help me?

What's an easy way to convince freshman college students of EMH in 5 minutes?
by acegolfer
Wed Jan 21, 2015 7:16 pm
 
Forum: Investing - Theory, News & General
Topic: How does an Efficient Market explain Buffett?
Replies: 257
Views: 13265

How is risk described in newspaper?

To be honest, I don't read news articles myself. I only read those are cited here.

I suspect that the news articles measure return by past performance. I wonder how they measure risk or whether they mention risk at all. Have you seen articles mentioned stdev, beta, VaR, skewness, or kurtosis?
by acegolfer
Wed Jan 21, 2015 7:09 pm
 
Forum: Investing - Theory, News & General
Topic: How is risk described in newspaper?
Replies: 3
Views: 265

Re: What counts as "saving"?

There's an economics definition of saving but ppl have different definitions. As long as you understand the objective of saving, one's definition doesn't matter.

In my definition, all OP stated are saving.
by acegolfer
Wed Jan 21, 2015 6:30 pm
 
Forum: Personal Finance (Not Investing)
Topic: What counts as "saving"?
Replies: 128
Views: 6885

Re: Florida in the summer

What do Honolulu, Buffalo (NY) and Miami (FL) have in common weather-wise?

All three never recorded 100 degrees.

(I'm not saying Miami has pleasant summer weather at all.)
by acegolfer
Wed Jan 21, 2015 6:27 pm
 
Forum: Personal Consumer Issues
Topic: Florida in the summer
Replies: 81
Views: 5598

Re: CAPM and Minimum Variance Portofolio

2.) The way I understand it from the book Investments by BKM and a few journal articles is that the market portfolio tends to drift toward the minimum variance portfolio? Is that true in practice too? I've actually never heard this. Perhaps you or someone else can explain further? I'll try. I think...
by acegolfer
Sun Jan 18, 2015 10:27 pm
 
Forum: Investing - Theory, News & General
Topic: CAPM and Minimum Variance Portofolio
Replies: 4
Views: 500

Re: Does 3-funds offer higher returns or lower risk?

What's your basis for saying it's not on the "efficient frontier"? Plugging in a 3-fund portfolio into the tool at PersonalCapital.com and seeing if it is on the efficient frontier. It is not. I bet the efficient frontier in PC is the mean/stdev efficient frontier. I doubt any site has a ...
by acegolfer
Sun Jan 18, 2015 7:36 pm
 
Forum: Investing - Theory, News & General
Topic: Does 3-funds offer higher returns or lower risk?
Replies: 33
Views: 3510
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