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Re: Kiplinger: Why You Should Avoid Most Bond Index Funds

If you believe that the lower volatility means that investment grade bonds are even more efficiently priced than stocks, then this becomes easy. Buy a low cost investment grade bond fund. The prices of the bonds will be as good a prediction of interest rate and default risk you van get. As long as t...
by afan
Sat Jul 12, 2014 5:44 pm
 
Forum: Investing - Theory, News & General
Topic: Kiplinger: Why You Should Avoid Most Bond Index Funds
Replies: 32
Views: 6554

Re: Delaying SS while working past age 70

bobcat,

The Shoven papers are exactly on point. I will read them tonight.

Thank you so much.

afan
by afan
Sat Jul 05, 2014 9:46 am
 
Forum: Personal Finance (Not Investing)
Topic: Delaying SS while working past age 70
Replies: 135
Views: 9906

Re: Delaying SS while working past age 70

Thanks everyone for all the replies. Working my way through them. The discount rate is simply a rate for discounting future cash flows. It depends on the likelihood of receiving the cash flows, but not at all on how they are invested. This simply is not true. From my textbook "Finance" by ...
by afan
Sat Jul 05, 2014 9:35 am
 
Forum: Personal Finance (Not Investing)
Topic: Delaying SS while working past age 70
Replies: 135
Views: 9906

Re: Delaying SS while working past age 70

I found a calculator from AARP of which the finance buff seemed to approve. It said to have the lower income spouse claim at 66, higher income claim spousal benefits at 66 and own benefits at 70. But it discussed only total value of lifetime SS benefits, without considering time value of money or pr...
by afan
Fri Jul 04, 2014 7:57 pm
 
Forum: Personal Finance (Not Investing)
Topic: Delaying SS while working past age 70
Replies: 135
Views: 9906

Re: Delaying SS while working past age 70

Just tried males. The longer lives of women might make getting the cash flows of the later years more likely. But we did run it without discounting for the chance of death before getting a payment. Delaying was still a bad idea. It does not seem that the higher likelihood of living longer would resc...
by afan
Fri Jul 04, 2014 7:37 pm
 
Forum: Personal Finance (Not Investing)
Topic: Delaying SS while working past age 70
Replies: 135
Views: 9906

Re: Delaying SS while working past age 70

You didn't mention taxes on SS. These will be large if you continue to work until age 70 and to be fair you can only invest the after tax portion of the payments. Sounded like you invested the whole thing? Also, did you look at the common strategy that lower earner collects at 66 and higher earner ...
by afan
Fri Jul 04, 2014 7:16 pm
 
Forum: Personal Finance (Not Investing)
Topic: Delaying SS while working past age 70
Replies: 135
Views: 9906

Re: Combining finances - gift tax?

Well, you might end up caring about the lifetime exclusion. From a tax point of view, wating until you are married, or splitting the gifts into 14k each year, would preserve your full exclusion. If you are relatively young, your estate tax return will not be filed for decades, and that will be the o...
by afan
Fri Jul 04, 2014 5:45 pm
 
Forum: Personal Finance (Not Investing)
Topic: Combining finances - gift tax?
Replies: 15
Views: 744

Delaying SS while working past age 70

I have been on BH for quite a while now, but I have not been reading the Social Security threads. It is far enough off for me that I assume the rules will change before I have to deal with it. But a friend and I got into a discussion of his decision and my search has not found a thread addressing it...
by afan
Fri Jul 04, 2014 5:36 pm
 
Forum: Personal Finance (Not Investing)
Topic: Delaying SS while working past age 70
Replies: 135
Views: 9906

Re: Worth it to eliminate counterparty risk with Treasuries?

Well, if you are buying a Vanguard FUND, as opposed to buying Treasuries in a Vanguard brokerage account, then Vanguard is a counterparty. If you buy a fund, you do not own Treasuries, you own shares of the fund. I thought the post was about holding Treasuries rather than a Treasury bond fund. You w...
by afan
Sun Jun 29, 2014 8:24 pm
 
Forum: Investing - Theory, News & General
Topic: Worth it to eliminate counterparty risk with Treasuries?
Replies: 17
Views: 1060

Re: Home Appraisal Comps

Given the errors in appraising a house, I suspect the value of the sorts of negotiations discussed here are lost in the noise. The appraised value is an estimate, with limited accuracy. You would love for it to be within 10% of the sale price. You hardly expect it to be within 1-2%. If someone were ...
by afan
Sun Jun 29, 2014 7:42 pm
 
Forum: Personal Finance (Not Investing)
Topic: Home Appraisal Comps
Replies: 12
Views: 841

Re: Paid off home as LTC Insurance?

I have dealt with relatives getting care at home and in a facility. The at home care never worked very well. The patient got to the point of needing round the clock supervision and assistance. That meant hiring enough people to provide that (the spouse was in better shape, but quite incapable of pro...
by afan
Sun Jun 29, 2014 7:37 pm
 
Forum: Personal Finance (Not Investing)
Topic: Paid off home as LTC Insurance?
Replies: 38
Views: 2005

Re: A challenge to "risk free" pre-payment of Mortgages

I will just note that in a nonrecourse state you sign a contract to EITHER pay the mortgage OR give the house back. As long as you honor your side of the contract by doing one of these things, I don't see an ethical issue. But as the crash illustrated, housing prices can go down dramatically. There ...
by afan
Sat Jun 28, 2014 10:02 pm
 
Forum: Investing - Theory, News & General
Topic: A challenge to "risk free" pre-payment of Mortgages
Replies: 17
Views: 1018

Re: WSJ article on ROTH 401K's vs Traditional

As it is impossible to predict future tax law changes I always find the best financial planning tool to assume that current tax laws will continue indefinitely. Given the frequency with with the laws change, that seems a strange assumption. From Forbes 2013, OK, it is Forbes and they hate taxes, bu...
by afan
Sat Jun 28, 2014 9:45 pm
 
Forum: Investing - Theory, News & General
Topic: WSJ article on ROTH 401K's vs Traditional
Replies: 48
Views: 4476

Re: "Being Done" Saving: White Coat Investor blog post

Ungoliant, You are right that I don't have a lot of other things I intend to do for the rest of my life. Maybe read more classical Greek literature, maybe learn classical Greek, I would like to learn music theory, and there is always always more math. But all of those can be pursued nights and weeke...
by afan
Sat Jun 28, 2014 9:36 pm
 
Forum: Investing - Theory, News & General
Topic: "Being Done" Saving: White Coat Investor blog post
Replies: 47
Views: 7700

Re: "Being Done" Saving: White Coat Investor blog post

Just reading this is a bit depressing. I don't want to work till 70 and I will not have millions and millions to draw from either. So I guess I'm screwed. I don't look at is as depressing. Just the human condition. The vast majority of the humans who ever lived had to work from the point they were ...
by afan
Sat Jun 28, 2014 9:22 pm
 
Forum: Investing - Theory, News & General
Topic: "Being Done" Saving: White Coat Investor blog post
Replies: 47
Views: 7700

Re: Weird theory about how to indefinitely delay tax

Well, you are assuming that the "investment" in the property is to be "enjoyed" and never sold. Under that assumption the appreciation in value is irrelevant. You are also assuming that the value of the financial investment lies only in its ability to be spent. Why cannot one per...
by afan
Fri Jun 27, 2014 11:37 pm
 
Forum: Personal Finance (Not Investing)
Topic: Weird theory about how to indefinitely delay tax
Replies: 9
Views: 1228

Re: NY Times: Not enough younger investment advisors

For the vast majority of investors, there is nothing useful for an investment advisor to do. For tax advice, go to a tax expert, such as an accountant. For trust services, you need a trustee to make disbursements, perhaps pay bills, and so forth. But the trustee should hold the same low cost, low tu...
by afan
Fri Jun 27, 2014 11:30 pm
 
Forum: Investing - Theory, News & General
Topic: NY Times: Not enough younger investment advisors
Replies: 72
Views: 7350

Re: WSJ article on ROTH 401K's vs Traditional

For a Roth to pay off at all, the tax treatment of withdrawals must not change between now and the end of retirement. For someone still working this might 30 years- if the employee is 70 and lives to 100. This might be 80 years if the employee is 20 and lives to 100. So you pay the tax upfront and a...
by afan
Fri Jun 27, 2014 11:15 pm
 
Forum: Investing - Theory, News & General
Topic: WSJ article on ROTH 401K's vs Traditional
Replies: 48
Views: 4476

Re: "Being Done" Saving: White Coat Investor blog post

I can see retiring at 70 because you conclude that you have a sufficient excess over plausible need that you can hold a very conservative portfolio with no realistic risk of running out of money. But getting to that point at 50, based on aggressive projections of investment returns over decades seem...
by afan
Fri Jun 27, 2014 10:56 pm
 
Forum: Investing - Theory, News & General
Topic: "Being Done" Saving: White Coat Investor blog post
Replies: 47
Views: 7700

Re: Total world investing - "owning the market"

Good points ASU. One would have to assume the market correctly discounted all those risks. But you are only likely to find out whether that is true when a crisis hits.

Just not worth the risk.
by afan
Tue Jun 24, 2014 12:58 pm
 
Forum: Investing - Theory, News & General
Topic: Total world investing - "owning the market"
Replies: 23
Views: 2768

Re: Total world investing - "owning the market"

The theory of holding all risky assets at market weights assumes you can borrow at the risk free rate if you find the expected return to the market portfolio is too low. You could then use leverage to get farther out in risk and expected return. But you cannot borrow at the risk free rate. Instead, ...
by afan
Tue Jun 24, 2014 10:24 am
 
Forum: Investing - Theory, News & General
Topic: Total world investing - "owning the market"
Replies: 23
Views: 2768

Re: Do you see profit or ponzi?

The notion of getting some of the money back is wishful thinking. The manager is simply going to steal everything sent to him/her. I would be very surprised if they did any trading. Just take the money, send some phony statements claiming returns, double talk when someone asks to take their money ou...
by afan
Mon Jun 23, 2014 11:19 pm
 
Forum: Investing - Theory, News & General
Topic: Do you see profit or ponzi?
Replies: 100
Views: 7135

Re: Guaranteed profit from forex trading

Folks, get real. They are not going to gamble in forex with your money. They are just going to take it. No investments at all will be made. The only guarantee is that once you turn over any money, you will never see it again.
by afan
Mon Jun 23, 2014 11:11 pm
 
Forum: Investing - Theory, News & General
Topic: Guaranteed profit from forex trading
Replies: 14
Views: 1316

Re: If Harvard invested in Vanguard...

I have no idea what Yale's costs might be, but big endowments often can get very good deals on investment management. Few institutional investors pay anything close to what retail investors are charged for mutual funds. When firms deal only with a small number of large clients, they do not have all ...
by afan
Sun Jun 22, 2014 10:36 pm
 
Forum: Investing - Theory, News & General
Topic: If Harvard invested in Vanguard...
Replies: 50
Views: 5056

Re: Do you see profit or ponzi?

To the OP, The reason people are reacting to the promise as fraud, is closely related to the believability of the claims. We don't believe, for a moment, that the manager is achieving these returns. We don't believe anyone could, absent a run of great luck. But the method proposed requires an astoni...
by afan
Sun Jun 22, 2014 10:31 pm
 
Forum: Investing - Theory, News & General
Topic: Do you see profit or ponzi?
Replies: 100
Views: 7135

Re: Do you see profit or ponzi?

No way this is legitimate. A legitimate firm would have the "prospectus" carefully prepared by accountants and securities lawyers. Inconceivable that professionals in these fields would generate something written like this. Inconceivable that a legitimate firm would not have auditors. Unim...
by afan
Sun Jun 22, 2014 5:16 pm
 
Forum: Investing - Theory, News & General
Topic: Do you see profit or ponzi?
Replies: 100
Views: 7135

Re: If Harvard invested in Vanguard...

The reports I have seen suggest that Harvard may have avoided the liquidity crisis if it had kept money needed in the short term in cash, rather than in the risky portfolio. You have to be careful about the press claims of great performance. They almost always look at raw returns and ignore risk. If...
by afan
Sun Jun 22, 2014 3:25 pm
 
Forum: Investing - Theory, News & General
Topic: If Harvard invested in Vanguard...
Replies: 50
Views: 5056

Re: Do you see profit or ponzi?

Coming on here to push a scam would be an odd way to fish for chumps. The OP comes across as skeptical enough that I doubt he is in on it. But scam or not, and this investment is clearly a scam, I find it hard to conjure up a worse idea than hiring an honest person to day trade for you. One might be...
by afan
Sun Jun 22, 2014 12:27 pm
 
Forum: Investing - Theory, News & General
Topic: Do you see profit or ponzi?
Replies: 100
Views: 7135

Re: Do you see profit or ponzi?

The consistent high returns are suspicious, but that is not why I smell fraud. Started in 07, but results only presented for 3 years. Breathtakingly childish writing in the prospectus. Reads like a Nigerian scam. No independent custodian? Why on earth not? What honest reason could their be? No audit...
by afan
Sat Jun 21, 2014 8:38 am
 
Forum: Investing - Theory, News & General
Topic: Do you see profit or ponzi?
Replies: 100
Views: 7135

Re: Is it impossible to buy individual foreign treasuries?

I have never investigated buying foreign government debt. But why would you want unhedged positions? Vanguard claims there is no payoff, and lots of risk. I have not been interested enough to read up on it beyond that, but the V argument seemed to make sense.
by afan
Fri Jun 20, 2014 9:50 pm
 
Forum: Investing - Theory, News & General
Topic: Is it impossible to buy individual foreign treasuries?
Replies: 9
Views: 483

Re: Equity forecasting does not work

Ace, I believe in data. It is hard to find consistent performance of forecasting methods, which was the reason I started this thread. There are plenty of things for which time series analysis works. Predicting stock returns does not appear to be among them. I follow this more for interest than becau...
by afan
Fri Jun 20, 2014 9:47 pm
 
Forum: Investing - Theory, News & General
Topic: Equity forecasting does not work
Replies: 17
Views: 985

Re: Equity forecasting does not work

Well, you could brute force it. Use the observed return probabilities, rather than assuming they are normal. Perhaps smooth the percentile curves to make them somewhat less noisy. Some draw randomly from the set of observed monthly returns, with or without replacement. As for iid, there are methods ...
by afan
Fri Jun 20, 2014 8:58 pm
 
Forum: Investing - Theory, News & General
Topic: Equity forecasting does not work
Replies: 17
Views: 985

Re: Do you see profit or ponzi?

The moral duty is to report this to the SEC and other appropriate financial services regulators (state trade commission?). Remember Harry Markopoulos 'No one would listen'? About Madoff? I agree one should report them, but more to feel good about oneself, than because it will have any effect. HM no...
by afan
Fri Jun 20, 2014 7:52 pm
 
Forum: Investing - Theory, News & General
Topic: Do you see profit or ponzi?
Replies: 100
Views: 7135

Re: Equity forecasting does not work

Ace, Exactly, except that past history suggests it is not realistic to expect iid or normal. In the past stocks have displayed higher probability of extreme returns than normal would suggest. Mean reversion and serial autocorrelation suggest they are not iid. Steve, You are right. I should have been...
by afan
Fri Jun 20, 2014 7:46 pm
 
Forum: Investing - Theory, News & General
Topic: Equity forecasting does not work
Replies: 17
Views: 985

Equity forecasting does not work

This is not a new article, but my unscientific sample finds a lot of threads and posts about the value, even the necessity, of forecasting stock returns. The people who offer their forecasts all sound very confident, but so far I not seen any who provide evidence for the reliability of their methods...
by afan
Fri Jun 20, 2014 5:22 pm
 
Forum: Investing - Theory, News & General
Topic: Equity forecasting does not work
Replies: 17
Views: 985

Re: If Harvard invested in Vanguard...

Manwithnoname, Well, that overstates the case. When they report the investment performance of an endowment, they take account of the fact that new money came in and money was taken out and spent. The same as one does when reporting the performance of a mutual fund. It is not just a comparison of the...
by afan
Fri Jun 20, 2014 5:11 pm
 
Forum: Investing - Theory, News & General
Topic: If Harvard invested in Vanguard...
Replies: 50
Views: 5056

Re: [Poll] Have you taken any Investments course?

I took a finance (not investing) course at a top B school. Then used that background to do do the reading and problems for courses in accounting, more finance, and investments. In part for my work, and in part for curiosity about investing and ability to read the academic finance literature, I have ...
by afan
Fri Jun 20, 2014 12:59 pm
 
Forum: Investing - Theory, News & General
Topic: [Poll] Have you taken any Investments course?
Replies: 60
Views: 2843

Re: If Harvard invested in Vanguard...

The salaries paid to the managers of HMC, and the high cost investments have been long standing issues for students and faculty. Harvard consistently expresses faith in active management, hence the refusal to go with much simpler lower cost portfolios. They note that, compared to the size of the end...
by afan
Fri Jun 20, 2014 12:50 pm
 
Forum: Investing - Theory, News & General
Topic: If Harvard invested in Vanguard...
Replies: 50
Views: 5056

Re: TDA admits routing orders to....

Somehow, I am not surprised. By Fidelity or by Vanguard.

I actually checked this out years ago when there was a hoopla about payment for order flow. Vanguard did not do it then and apparently does not do it now. Yet another point for Vanguard.
by afan
Wed Jun 18, 2014 7:23 pm
 
Forum: Investing - Theory, News & General
Topic: TDA admits routing orders to....
Replies: 13
Views: 1110

Re: Improving upon index funds

Tanelorn, Stocks are born and die, but those are different phenomena than Larry was discussing. He was noting that a hypothetical index fund could be required to churn existing stocks in response to changes in the index. Any fund, even the most elaborately patient, cannot hold stocks that do not exi...
by afan
Tue Jun 17, 2014 9:34 am
 
Forum: Investing - Theory, News & General
Topic: Improving upon index funds
Replies: 16
Views: 1831

Re: Improving upon index funds

Taylor, I think you were probably joking, but I am pretty sure Larry was not referring to stocks of lottery or other gambling interests, but rather stocks with strong positive skewness, which some people liken to lottery tickets. PK, I am with you. I am giving up on indexing and investing only in st...
by afan
Mon Jun 16, 2014 7:42 pm
 
Forum: Investing - Theory, News & General
Topic: Improving upon index funds
Replies: 16
Views: 1831

Re: "Bad Timing Costs Investors 2.5% a year"

The finance buff did a nice post about how meaningless these comparisons are. They assume that all investors had all the money they would have to invest available at the start of the period, that they had no new funds to put in and no need to take money out. If that were the case, then one could com...
by afan
Mon Jun 16, 2014 7:36 pm
 
Forum: Investing - Theory, News & General
Topic: "Bad Timing Costs Investors 2.5% a year"
Replies: 14
Views: 1798

Re: Improving upon index funds

Larry, Interesting points, but they would appear to apply only to undiversified narrowly focused funds. A total stock market fund maintains its exposure to the stock market. Its factor loadings will only change if those of the market change. Depending on how you define them, it may not be possible f...
by afan
Mon Jun 16, 2014 5:50 pm
 
Forum: Investing - Theory, News & General
Topic: Improving upon index funds
Replies: 16
Views: 1831

Re: Developing a sound framework for optimal asset allocatio

I take a different message from the people who bailed out during the crash. I think they discovered they had underestimated their risk aversion, the risk of the market, or both. So they sold down to risk level that seemed more appropriate. This is not necessarily wrong. It could have been wrong for ...
by afan
Mon Jun 16, 2014 1:44 pm
 
Forum: Investing - Theory, News & General
Topic: Developing a sound framework for optimal asset allocation
Replies: 44
Views: 2729

Re: Developing a sound framework for optimal asset allocatio

When you do read the literature, make sure to look at iid, serial autocorellation, covariance and mean reversion. Taking these into consideration will substantially change your modelling, even if you stick with the unrealistic assumption of normal stock return distributions. But we have not even sta...
by afan
Mon Jun 16, 2014 9:15 am
 
Forum: Investing - Theory, News & General
Topic: Developing a sound framework for optimal asset allocation
Replies: 44
Views: 2729

Re: Developing a sound framework for optimal asset allocatio

Read the literature. Among many things, you will find that your assumption of normally distributed returns leads you to underestimate the probability of extreme outcomes. Forget about predicting the future, your approach will not work in sample. As alternatives you could Create a lookup table from o...
by afan
Sun Jun 15, 2014 6:06 pm
 
Forum: Investing - Theory, News & General
Topic: Developing a sound framework for optimal asset allocation
Replies: 44
Views: 2729

Re: [NY Times - brokers fight fiduciary obligation]

Ok, parlor game: Which is most ridiculous in this story? 1. Assumption that investors will "have to pay", for fiduciary advice, with its implication that the advice they get from brokers is free? 2. Assumption that any sane person would or should take advice from someone who says that thei...
by afan
Sun Jun 15, 2014 5:50 pm
 
Forum: Investing - Theory, News & General
Topic: [NY Times - brokers fight fiduciary obligation]
Replies: 54
Views: 5077

Re: Developing a sound framework for optimal asset allocatio

Long invest, Many wish that personal wealth was largely a result of personal effort. But the data show a strong intergenerational persistence of socioeconomic status. There are few better ways to be rich than to choose rich grandparents. I, too, want to pass along as much as is practicable to my kid...
by afan
Sun Jun 15, 2014 12:59 pm
 
Forum: Investing - Theory, News & General
Topic: Developing a sound framework for optimal asset allocation
Replies: 44
Views: 2729

Re: Developing a sound framework for optimal asset allocatio

So use historical returns for mean and variance, but assume a distribution that we know was not observed? That does not strike me as well grounded in facts or logic. You say that Sharpe ratios are not intuitive, but they seem a lot more reasonable than picking an arbitrary percentile drawn from a di...
by afan
Sun Jun 15, 2014 11:16 am
 
Forum: Investing - Theory, News & General
Topic: Developing a sound framework for optimal asset allocation
Replies: 44
Views: 2729

Re: MOM exposure-- AQR Managed Futures (AQMIX)?

Then it would seem such a series would have correlation of -1.00, but everyone seems to be saying you don't want that. I can do the same thought experiment, unconstrained by how markets work, to imagine volatile, negatively correlated assets with positive returns. But even here, the negative correla...
by afan
Sat Jun 14, 2014 5:00 pm
 
Forum: Investing - Theory, News & General
Topic: MOM exposure-- AQR Managed Futures (AQMIX)?
Replies: 36
Views: 1658
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