Search found 3814 matches

Return to advanced search

Re: Blog:William Bernstein’s Coward’s Portfolio

Hi: Continuing a series of blog posts examining lazy portfolios"s - Bogleheads , we have a new blog posting, William Bernstein’s Coward’s Portfolio | Bogleheads® Blog . SInce the blog had the annual returns from 1999 - 2013, this prompted we to compare the total return to my own portfolio and ...
by grayfox
Sat Apr 19, 2014 5:58 am
 
Forum: Investing - Theory, News & General
Topic: Blog:William Bernstein’s Coward’s Portfolio
Replies: 18
Views: 2595

Re: High Yield Bonds as an Annuity?

The recent thread concerning John Bogle using Corporate Bonds was thought provoking. The main snag with Corporate Bonds is that they have exhibited correlation with stocks, so are down when you need the capital to buy stocks. However later in life bonds are more for income than dry powder for stock...
by grayfox
Fri Apr 18, 2014 9:44 am
 
Forum: Investing - Theory, News & General
Topic: High Yield Bonds as an Annuity?
Replies: 23
Views: 1663

Re: Another take on the "rebalancing bonus"

Dr. Bernstein investigated the effect of portfolio rebalancing some 18 years ago as documented in this article: http://www.efficientfrontier.com/ef/996/rebal.htm Michael Edesess revisits Dr. B's study in this article: Does Rebalancing Really Pay Off? Thanks for linking that article. I file "re...
by grayfox
Wed Apr 16, 2014 3:57 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3503

Re: Japan Does not Show That Stocks are Dangerous

http://greenbackd.files.wordpress.com/2013/07/japan-value.jpg?w=771&h=575 Investors who bought reasonably priced equities did fine, since doing so game them a margin of safety. Buying equities with extreme valuations, on the other hand, is a recipe for disaster. The lesson that I have mistakenl...
by grayfox
Wed Apr 16, 2014 2:46 am
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 79
Views: 3897

Re: Save for 25 years = $1million?

I should add, that most financial economists would recommend a funding level that's calculated using the default-free rate, not expected stock market returns.

So that would be the baseline scenario that required 35% savings rate.
by grayfox
Tue Apr 15, 2014 4:28 am
 
Forum: Investing - Help with Personal Investments
Topic: Save for 25 years = $1million?
Replies: 22
Views: 3987

Re: Save for 25 years = $1million?

A nephew is 25 years of age, no college, good job with fairly good pay at a Fortune 500 company. He works hard and they like him; he had received several raises and promotions. He is not yet married and has no children. At a recent family gathering, he asked me how much he would have to save each m...
by grayfox
Tue Apr 15, 2014 3:53 am
 
Forum: Investing - Help with Personal Investments
Topic: Save for 25 years = $1million?
Replies: 22
Views: 3987

Re: SCV premium is a history/math story, its not scientific

This chart from nisiprius shows that the small-stock premium comes and goes. http://s25.postimg.org/he0iqubsv/Screen_Shot_2014_01_27_at_8_33_01_AM.png http://www.bogleheads.org/forum/viewtopic.php?p=1939229#p1939229 We are probably in a period when small-cap premium has gone away. I would not tilt t...
by grayfox
Mon Apr 14, 2014 11:11 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2238

Re: SCV premium is a history/math story, its not scientific

I'm willing to believe that there is small company risk. Large companies have the ways and means to crush their smaller competitors. E.g. Standard Oil drove many small oil companies out of business. The "Big Three" auto makers put all Hudsons and Packards out of business. Most industries s...
by grayfox
Mon Apr 14, 2014 10:40 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2238

Re: The market portfolio vs. value tilts

I'm trying to think what exactly something like small-stock risk r SmB is. What is the risk of being a small company compared to being a large company? Think of one industry, say the oil industry in the 1870's. There were dozens or maybe hundreds of small oil producers. Then along comes John D. Rock...
by grayfox
Mon Apr 14, 2014 3:12 am
 
Forum: Investing - Theory, News & General
Topic: The market portfolio vs. value tilts
Replies: 66
Views: 3162

Re: I'm buying more equities now. Going for 95-98%

On pp. 94-95 of the fifth edition of Stocks for the Long Run, Siegel describes his findings on the relative real returns of holdings in stocks, bonds, and bills: "Stocks are unquestionably riskier than bonds or Treasury bills over one- or two-year periods. However, in every five-year period si...
by grayfox
Sun Apr 13, 2014 1:58 pm
 
Forum: Investing - Theory, News & General
Topic: Stock markets in free fall?
Replies: 92
Views: 6530

Re: The market portfolio vs. value tilts

As a higher-level point, I became a lot more relaxed around here when I finally realized some posters use the word "diversification" to mean "concentration into particular types of stocks." PJW As they add more factors, like MOM, Profitability, etc they are screening our more an...
by grayfox
Sun Apr 13, 2014 8:42 am
 
Forum: Investing - Theory, News & General
Topic: The market portfolio vs. value tilts
Replies: 66
Views: 3162

Re: The market portfolio vs. value tilts

One thing that some investors may be missing when they tilt to small-cap stocks is that there is more than one aspect of risk. If you go back to the origin of MPT, there was one measure of risk, which was variation in the total return. So you plot standard deviation on the x-axis and total return on...
by grayfox
Sun Apr 13, 2014 8:28 am
 
Forum: Investing - Theory, News & General
Topic: The market portfolio vs. value tilts
Replies: 66
Views: 3162

Re: Portfolio Volatility is a Big Drag on Returns

I was just reading a shortened version of Ilmanen's Expected Returns and came across this statistic. The arithmetic average equity premium from 1802-2009 was 4.17% but the compounded equity premium over the same period was only 2.68%. The compounded return is a full 1.5% less than the average retur...
by grayfox
Sun Apr 13, 2014 2:03 am
 
Forum: Investing - Theory, News & General
Topic: Portfolio Volatility is a Big Drag on Returns
Replies: 25
Views: 1866

Re: BH Greatest Hits: PE10 predictive power

That's not how statistics works under the standard definition of null hypothesis. "In statistical inference of observed data of a scientific experiment, the null hypothesis refers to a general or default position: that there is no relationship between two measured phenomena" http://en.wik...
by grayfox
Sun Apr 13, 2014 1:43 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

Re: Why does Vanguard use average return iso compound annual

The word average covers all the different kinds of averages, which are just ways to describe the central tendency of a bunch of numbers. WIkipedia lists 14 different ways to calculate an average . If you want to more specific, you could say: arithmetic mean, geometric mean, harmonica mean, median, e...
by grayfox
Sat Apr 12, 2014 4:54 am
 
Forum: Investing - Theory, News & General
Topic: Why does Vanguard use average return iso compound annual?
Replies: 99
Views: 4110

Re: BH Greatest Hits: PE10 predictive power

So we have 100+ years of stock market return data. Now I know that some people question the veracity or relevance of some of the earlier data. But assume for the sake of argument that it is all good and relevant data. But if we are interested in 20-, 30-, 40-, 50-years returns, 100 years still not e...
by grayfox
Sat Apr 12, 2014 2:50 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

Re: Anyone else very reluctant to buy right now?

Based on one of Warren Buffet's favorite metrics for determining fair market value, that is total market cap vs. GDP, the market is significantly overvalued right now. Last I checked, total market cap was sitting well over 18 trillion, with GDP closer to 15 trillion. Am I alone in being extremely r...
by grayfox
Fri Apr 11, 2014 3:31 am
 
Forum: Investing - Theory, News & General
Topic: Anyone else very reluctant to buy right now?
Replies: 124
Views: 11798

Re: BH Greatest Hits: PE10 predicitive power

The problem with p/e is one year is noisy. The problem with CAPE is it includes years which are no longer relevant. Vanguard found the two methods to have equal predictive power. As I mentioned up-thread: "We confirm that valuation metrics such as price/earnings ratios, or P/Es, have had an in...
by grayfox
Fri Apr 11, 2014 3:09 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

Re: BH Greatest Hits: PE10 predicitive power

Somewhat relevant, I was wondering how cape10 compares against another arbitrary timeframe such as cape15 or cape5. Just the other day, I was curious and looked it up. The raw data is all in a spreadsheet at Shiller's website: http://www.econ.yale.edu/~shiller/data.htm Adding a few columns for cape...
by grayfox
Thu Apr 10, 2014 3:57 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

Re: BH Greatest Hits: PE10 predicitive power

Similar points are made in more detail in this blog post (it has been discussed in a previous thread): http://philosophicaleconomics.wordpress.com/2013/12/13/shiller/ It is a great critique which goes into a lot of detail on the adjustments. I read that article. I didn't understand all the accounti...
by grayfox
Thu Apr 10, 2014 3:49 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

Re: BH Greatest Hits: PE10 predicitive power

My simple understanding is based on the Gordon Model . Dividend Yield + Growth = Expected Return D/P + g = r Put some number on it. D/P = 4%, g = 3%, r = 4 + 3 = 7 If price doubles so that D/P = 2%, then either 1) g must increase or 2) r must fall, or 3) some combination. The Constant Expected Retur...
by grayfox
Wed Apr 09, 2014 11:27 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

Re: BH Greatest Hits: PE10 predicitive power

Here's an October 14, 2013 update on the chart from Brad DeLong http://delong.typepad.com/sdj/2013/10/campbell-shiller-regressions-future-sp-price-changes-regressed-on-ratios-of-prices-to-long-run-moving-averages-of-past-earn.html (wait, the x-axis says Current Price Divided by a Thirty-Year Moving ...
by grayfox
Wed Apr 09, 2014 10:44 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

Re: BH Greatest Hits: PE10 predicitive power

How does one prove dividend growth has not been forecastable by the market? Perhaps the price of risk has changed? Assuming dividend growth is not forecastable, does that necessarily mean that returns are forecastable? Why? I'm not familiar with the actual research, just the summary results that ar...
by grayfox
Wed Apr 09, 2014 10:24 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

BH Greatest Hits: PE10 predictive power

Stocks have had a pretty good run and it seems that there is a lot of discussion about high valuations, and what that means for future returns. Of course, one of the favorite valuations to discuss at Bogleheads is P/E10, a.k.a CAPE or Shiller PE Ratio. You can find Shiller PE Ratio plotted here . Cu...
by grayfox
Wed Apr 09, 2014 2:46 am
 
Forum: Investing - Theory, News & General
Topic: BH Greatest Hits: PE10 predictive power
Replies: 39
Views: 2921

Re: Anyone else very reluctant to buy right now?

Based on one of Warren Buffet's favorite metrics for determining fair market value, that is total market cap vs. GDP, the market is significantly overvalued right now. Last I checked, total market cap was sitting well over 18 trillion, with GDP closer to 15 trillion. Am I alone in being extremely r...
by grayfox
Mon Apr 07, 2014 4:19 am
 
Forum: Investing - Theory, News & General
Topic: Anyone else very reluctant to buy right now?
Replies: 124
Views: 11798

Re: Buffett hasn't beaten the market regularly since '07

I went over to M*. They show that $10,000 invested 5-years ago (4/6/2009 to 4/6/2014) VTSMX 25,522.35 BRK.A 20,323.09 So it is true, BRK.A trailed the market over the past 5 years. I would not be crying though, because BRK.A still doubled in value. VTSMX vs BRKA (4/6/2009 to 4/6/2014) The absolute b...
by grayfox
Sun Apr 06, 2014 9:08 am
 
Forum: Investing - Theory, News & General
Topic: Buffett hasn't beaten the market regularly since '07
Replies: 20
Views: 2385

Re: Three-fund portfolio returns and variance drain

I found this chart that shows the histogram of 20-year returns for S&P 500. X-axis is annualized real total return. http://3.bp.blogspot.com/_NKM5opcTPS8/TCTbIocKPyI/AAAAAAAAAEU/fC1c8X0yGHA/s1600/20-6.png S&P 500 Composite 20-year total real returns It doesn't look like a run-of-the-mill nor...
by grayfox
Sun Apr 06, 2014 8:34 am
 
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 39
Views: 2445

Re: Three-fund portfolio returns and variance drain

Average is just the measure of central tendency . This wikipedia article, Average , lists about a dozen different types of "averages", or measures of central tendency. Even though each is trying to nail down the same idea, i.e. central tendency, they all have a different calculation and gi...
by grayfox
Sun Apr 06, 2014 5:13 am
 
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 39
Views: 2445

Re: Wade Pfau: Lifecycle Finance

Grayfox, thanks for your thoughts but I think there are a few issues with what you are proposing: (1) Regarding income before 70: R40 would not have 638k in tax advantaged space. I specifically highlighted it and indicated they would have ~300k there with rest of savings in regular taxable accounts...
by grayfox
Sun Apr 06, 2014 3:50 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 12023

Re: Why is Joe Brennan defending high frequency trading?

I would expect Vanguard management, Gus Sauter, etc. to defend the status quo. Everyone nowadays makes money by taking a percentage of Assets Under Management. The more people invest, the more money is made. Nobody inside the industry wants people to think the market is rigged, which would scare awa...
by grayfox
Sat Apr 05, 2014 3:44 am
 
Forum: Investing - Theory, News & General
Topic: Why is Joe Brennan defending high frequency trading?
Replies: 54
Views: 3526

Re: Wade Pfau: Lifecycle Finance

BobK, thank you so much for all the info and great posts. I have a similar kind of question as Richard. Let's imagine a simple scenario: someone with wierd name R40 who wants to retire at 40 and provide a floor of $25k/year. I think following assumptions would be reasonable: - R40 accumulated $300K...
by grayfox
Thu Apr 03, 2014 1:05 pm
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 12023

Re: Lazy portfolios: no returns or risk information

This paper has a good description of MVO. Mean-Variance Investing Andrew Ang Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER) August 10, 2012 Section 4.1 Sensitivity to Inputs has a good examples of how small changes in input parameters can have a huge ef...
by grayfox
Tue Apr 01, 2014 4:08 pm
 
Forum: Investing - Theory, News & General
Topic: Lazy portfolios: no returns or risk information
Replies: 132
Views: 6598

Re: Lazy portfolios: no returns or risk information

I think you need to look at the history of Modern Finance. The theory was developed in the 1950's and 1960's by Markowitz and guys like William Sharpe. The basic idea was Mean-Variance Optimization (MVO). You want to have portfolios on the Efficient Frontier (EF) -- portfolios with minimum variance ...
by grayfox
Tue Apr 01, 2014 1:50 am
 
Forum: Investing - Theory, News & General
Topic: Lazy portfolios: no returns or risk information
Replies: 132
Views: 6598

Re: Lazy portfolios: no returns or risk information

I believe that Simba's spreadsheet calculates two kinds of averages for returns. The first one labeled "Average" is arithmetic mean and the second labeled "CAGR" is geometric mean. By definition, Expected return = E[return] = arithmetic mean. Annualized return is geometric mean. ...
by grayfox
Mon Mar 31, 2014 4:00 pm
 
Forum: Investing - Theory, News & General
Topic: Lazy portfolios: no returns or risk information
Replies: 132
Views: 6598

Re: Lazy portfolios: no returns or risk information

On page 8 google doc, Model Portfolio #18 says 50% SVS / 50% ITGB. SVS = Small Value Stocks ITGB = Intermediate-Term Government Bonds I plugged these into Simba Spreadsheet using VISVX for SVS and VFITX for ITGB, 1985-2013 Average StdDev CAGR Sharpe MP18 10.51% 9.79% 9.23% 0.68 If we use Sharpe slop...
by grayfox
Mon Mar 31, 2014 3:46 pm
 
Forum: Investing - Theory, News & General
Topic: Lazy portfolios: no returns or risk information
Replies: 132
Views: 6598

Re: Lazy portfolios: no returns or risk information

Here is the mean return, standard deviation, annualized return, and Sharpe Ratio for the 25 lazy portfolios 1985-2013 from the Simba spreadsheet. Average StdDev CAGR Sharpe P1 11.23% 11.49% 9.97% 0.64 P2 10.40% 9.20% 9.08% 0.71 P3 11.00% 14.56% 9.55% 0.49 P4 11.41% 15.32% 9.44% 0.49 P5 11.47% 15.36%...
by grayfox
Mon Mar 31, 2014 3:35 pm
 
Forum: Investing - Theory, News & General
Topic: Lazy portfolios: no returns or risk information
Replies: 132
Views: 6598

Re: Lazy portfolios: no returns or risk information

It seems to me that returns and risk information is lacking when lazy portfolios are discussed. The bogleheads wiki for instance doesn't say anything about past or to be expected performance, both in terms of returns or risk: http://www.bogleheads.org/wiki/Lazy_portfolios I know the pitfalls of put...
by grayfox
Mon Mar 31, 2014 5:41 am
 
Forum: Investing - Theory, News & General
Topic: Lazy portfolios: no returns or risk information
Replies: 132
Views: 6598

Re: Statement of the Retirement Funding Problem

Uncertainty or no, we still have to fund retirement spending and a big question is how much does it cost? With the annuity quote given by the earlier poster, $1 of inflation-adjust income per year costs $18.75 With the DCDB benchmark, IA $1 costs $21.89. But you are also getting liquidity. These num...
by grayfox
Sat Mar 29, 2014 8:07 am
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5686

Re: Statement of the Retirement Funding Problem

Thesis: An inflation-indexed annuity that provides guaranteed income for life solves the retirement funding problem. Another possible solution to the retirement fund problem I would like to consider is funding retirement income from some kind of Target Retirement fund, e.g. Vanguard Target Retireme...
by grayfox
Sat Mar 29, 2014 4:49 am
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5686

Re: Statement of the Retirement Funding Problem

Thesis: An inflation-indexed annuity that provides guaranteed income for life solves the retirement funding problem . In theory, the IA annuity solves the problem. How about in practice? What are practical solutions? 1. A real-life solution doesn't necessarily have to track inflation exactly becaus...
by grayfox
Fri Mar 28, 2014 5:25 am
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5686

Re: Wade Pfau: Lifecycle Finance

I think that often mean-variance approaches don't even have a goal beyond maximizing expected return given the investor's perceived risk tolerance. When mean-variance approaches do have a goal beyond expected return it is often a level of wealth at retirement - not retirement income. That strikes m...
by grayfox
Fri Mar 28, 2014 4:43 am
 
Forum: Investing - Theory, News & General
Topic: Wade Pfau: Lifecycle Finance
Replies: 118
Views: 12023

Re: Statement of the Retirement Funding Problem

Here is another paper that may be of interest Making Retirement Income Last a Lifetime Stephen C. Sexauer, Michael W. Peskin, and Daniel Cassidy, CFA Financial Analysts Journal Volume 68  Number 1 ©2012 CFA Institute To enable investors to spend down the assets in their defined contribution account...
by grayfox
Thu Mar 27, 2014 4:53 pm
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5686

Re: Statement of the Retirement Funding Problem

To re-iterite, my thesis is that an inflation-indexed annuity, or something with equivalent or similar characteristics, solves the retirement funding problem once and for all. The key ideas are inflation-indexed and guaranteed for life . The obvious solution is to just go ahead purchase the IA annui...
by grayfox
Thu Mar 27, 2014 2:25 am
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5686

Re: Statement of the Retirement Funding Problem

Thanks for the many excellent responses. My apologies that I don't have time to respond to each directly. 1. It is probably true that most pensions were not inflation-protected. Regardless, we all know that inflation is the norm and erosion of purchasing power is a risk to those retired and living o...
by grayfox
Wed Mar 26, 2014 3:39 am
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5686

Re: Statement of the Retirement Funding Problem

Let's look at these guys in more detail. The guy with just $100,000 is not even close to buying the $30,000 per year inflation-adjusted annuity. Unless he hits the lottery or dies within 3 years he is S.O.L. Basically, he needs to downsize and learn to live on social security only. Maybe buy an RV w...
by grayfox
Tue Mar 25, 2014 8:32 am
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5686

Statement of the Retirement Funding Problem

Here is the retirement funding problem. Suppose you started working in 1974, age 27. You worked for 40 years until age 67 and collect a paycheck to pay your living expenses. Let's say your minimum required living expenses are $50,000 in 2014. After 2014, you can no longer work. But you still have bi...
by grayfox
Tue Mar 25, 2014 8:14 am
 
Forum: Investing - Theory, News & General
Topic: Statement of the Retirement Funding Problem
Replies: 89
Views: 5686

Statement of the Retirement Funding Problem

decided to make this a sparate thread
by grayfox
Tue Mar 25, 2014 4:25 am
 
Forum: Investing - Theory, News & General
Topic: Really confused by Bernstein
Replies: 168
Views: 12863

Re: Dividends and the Magic Pants

The charts. Total Stock (blue) versus Equity-Income (orange). First, price. http://s21.postimg.org/qt3tb1eon/Screen_Shot_2014_03_20_at_8_54_04_AM.png Humongous difference, showing that, yes indeed, the Total Stock fund's price is reflecting the steady growth from earnings that are being retained, w...
by grayfox
Mon Mar 24, 2014 2:58 am
 
Forum: Investing - Theory, News & General
Topic: Dividends and the Magic Pants
Replies: 38
Views: 4564

Re: Looking at Total Bond vs Malkiel/Ellis div stocks + EM b

In 2010, famous index champions, both with long associations with Vanguard, Burton Malkiel and Charles Ellis, published a book called The Elements of Investing , directed at beginners, offering "timeless" advice and simple portfolios, such as a two-fund portfolio of Total World Stock Inde...
by grayfox
Mon Mar 24, 2014 2:39 am
 
Forum: Investing - Theory, News & General
Topic: Looking at Total Bond vs Malkiel/Ellis div stocks + EM bonds
Replies: 32
Views: 1972

Re: Higher Returns at Lower Risk - please comment

Ok, I can see you are not interested in serious feedback on your analysis.

Good luck.
by grayfox
Mon Mar 24, 2014 1:45 am
 
Forum: Investing - Theory, News & General
Topic: Higher Returns at Lower Risk - please comment
Replies: 55
Views: 5231
Next

Return to advanced search