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Re: Larry: 20 Dollar Bills and Factor Persistence

Here are some numbers from Vanguard: VLACX = Vanguard Large-Cap Index Fund (Apple, Exxon-Mobil, Google, Microsoft, J&J, Wells Fargo, GE, Chevron, Berkshire, JP Morgan) NAESX = Vanguard Small-Cap Index Fund (Hillshire Brands, Salix Pharm, Foot Locker, Arthur H Gallagher, Harman Intl, Alkermes, Ga...
by grayfox
Mon Jul 28, 2014 4:43 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 105
Views: 8357

Re: One of the simplest rational reasons why some should til

First, this applies to only some investors not everyone. Second, I'm still an index investor because this or other reasons for tilting don't apply to me. Here it goes. There are firms that are negatively affected more in times of financial distress such as recessions. Small firms and value firms (h...
by grayfox
Mon Jul 28, 2014 4:17 am
 
Forum: Investing - Theory, News & General
Topic: One of the simplest rational reasons why some should tilt
Replies: 41
Views: 3241

Re: Larry: 20 Dollar Bills and Factor Persistence

You seem to keep missing the point that if it's risk that leads to the premium doesn't matter how many people are aware of it it won't go away----in other words it's not higher risk adjusted returns (at least in isolation). No different than everyone aware of BETA premium but people don't fully inv...
by grayfox
Mon Jul 28, 2014 3:19 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 105
Views: 8357

Re: Daily Telegraph: World War One Archive

Yes, there was an amazing amount of detail in the news stories in those days. The articles are quite lengthy and written in a highly literate style. It's clearly written for an educated readership. Not simple and dumbed down like so many news articles you might read online today.
by grayfox
Mon Jul 28, 2014 2:55 am
 
Forum: Personal Consumer Issues
Topic: Daily Telegraph: World War One Archive
Replies: 3
Views: 234

Re: Bonds beat stocks over the last 15 years

In the long term, it doesn't make sense for bonds to beat stocks. Nevertheless it can happen. Think of a simpler case that has a definite endpoint: 10-year default-free Treasury bond vs. 10-year A Corporate Bond. They both pay annual interest and then pay back $1000 at the end of 10 years. The Trea...
by grayfox
Mon Jul 28, 2014 1:24 am
 
Forum: Investing - Theory, News & General
Topic: Bonds beat stocks over the last 15 years
Replies: 93
Views: 7055

Daily Telegraph: World War One Archive

FYI - The Daily Telegraph is making available the complete daily newspaper from 1914 to 1918. You can follow the course of The Great War as seen by a contemporary reader in Britain. I'll probably spend the next four years following it. World War One Archive Most days there is a new issue. This is fr...
by grayfox
Mon Jul 28, 2014 12:07 am
 
Forum: Personal Consumer Issues
Topic: Daily Telegraph: World War One Archive
Replies: 3
Views: 234

Re: Factor investing - A parody

[All of the rest should be taken as a joke, but it should rang familiar with you from this forum] I think I have stumbled upon the perfect tilt that everyone should be doing. Everyone should be investing into the Apple tilt. The Apple index [consisting only of the stock AAPL] have consistently outp...
by grayfox
Sun Jul 27, 2014 11:20 am
 
Forum: Investing - Theory, News & General
Topic: Factor investing - A parody
Replies: 22
Views: 1368

Re: Larry: 20 Dollar Bills and Factor Persistence

Somehow I think the SV proponents overlook where the expected risk premium comes from. Suppose you have a choice between two assets, A and B. A is guaranteed to pay $100 in 10 years. The price of A is $75. B will also pay $100 in 10 years, but is not guaranteed. Most of the time B pays $100, but the...
by grayfox
Sun Jul 27, 2014 5:36 am
 
Forum: Investing - Theory, News & General
Topic: Larry: 20 Dollar Bills and Factor Persistence
Replies: 105
Views: 8357

Re: Bonds beat stocks over the last 15 years

My claim was that most of the extra volatility over long time periods comes from upward volatility. I'm sure there's still downward volatility, but I'm not convinced that it's less than the volatility for nominal bonds. Maybe inflation adjusted bonds. I wanted to get back to this point. My concern ...
by grayfox
Sun Jul 27, 2014 2:43 am
 
Forum: Investing - Theory, News & General
Topic: Bonds beat stocks over the last 15 years
Replies: 93
Views: 7055

Re: Bonds beat stocks over the last 15 years

I've come across that piece before and glad I am revisiting it. So if it's true that there is in fact no time diversification, and in fact this is one of the most pervasive things being told across all forms of media: that young investors should be more into equity than elderly investors. If that i...
by grayfox
Sun Jul 27, 2014 1:49 am
 
Forum: Investing - Theory, News & General
Topic: Bonds beat stocks over the last 15 years
Replies: 93
Views: 7055

Re: Bonds beat stocks over the last 15 years

. Annualized return 15 years to 7/23/2014 Vanguard total stock market (VTSMX) = 5.25% Vanguard total bond market (VBMFX) = 5.37% The equity premium can be negative for long periods of time (as can the value, size, and I would argue, momentum premium). The benefit from exposure to these factors come...
by grayfox
Sat Jul 26, 2014 3:33 am
 
Forum: Investing - Theory, News & General
Topic: Bonds beat stocks over the last 15 years
Replies: 93
Views: 7055

Re: P/E Ratio: How do YOU interpret/use it?

I'm relatively new to finance and I've come across people using the P/E ratio in pretty wildly different ways. I just talked to someone who used to work as a financial advisor who told me that once a P/E ratio hits 40, then you should look to take your money out of stocks, because that is signaling...
by grayfox
Tue Jul 22, 2014 1:22 pm
 
Forum: Investing - Theory, News & General
Topic: P/E Ratio: How do YOU interpret/use it?
Replies: 26
Views: 1343

Re: Is Market on "Wrong Side of History"?

What was the final 2014Q1 Real GDP growth? Q1 GDP Revised Down to -2.9% Annual Rate :oops: The stock market has been booming even as the U.S. economy has been doing very poorly. Can this be explained? The market clearing price for shares is determined by supply and depend. If equilibrium price rose,...
by grayfox
Thu Jul 10, 2014 2:00 am
 
Forum: Investing - Theory, News & General
Topic: Is Market on "Wrong Side of History"?
Replies: 22
Views: 2696

Re: How I look at $ in the real world vs my retirement accou

I've just started a new additional investment from my paycheck to add $500 into a 403b during each pay period. The Vanguard lady at my work that I met with convinced me this is a better use of my money then paying extra on my mortgage, which you may or may not agree with but I'm convinced now it's ...
by grayfox
Thu Jul 10, 2014 1:42 am
 
Forum: Personal Finance (Not Investing)
Topic: How I look at $ in the real world vs my retirement accounts
Replies: 45
Views: 5786

Re: No bonds at all.

What is peoples opion about this. When you are at the accumulating stage 100% equiltys. In retirement get enough annuiltly to have a (floor to live on) and rest in stocks?? With a holding period of 20+ years 100% equities makes sense. With a holding period of less than 5 years, 100% Treasury bonds ...
by grayfox
Fri Jun 20, 2014 4:48 am
 
Forum: Investing - Theory, News & General
Topic: No bonds at all.
Replies: 176
Views: 11835

Re: Can someone explain B Bernstein's math

Last year (Feb-2013) I looked at whether stocks become less risky at longer holding periods. I used Value-At-Risk as the measure of risk. Value-At-Risk , VaR, tells you how much you can lose with some probability, alpha, over some period of time. E.g. if 5% VaR = $1,000 over 1-month, there is a 5% c...
by grayfox
Fri Jun 20, 2014 3:48 am
 
Forum: Investing - Theory, News & General
Topic: Can someone explain B Bernstein's math
Replies: 42
Views: 3942

Re: International Tilting and the Predictability of Returns

berntson wrote:Practical upshot: tilting toward countries with better valuations has historically been a sensible policy. Trying to predict absolute returns using valuations has not been.[/b]



Good work, berntson, I'm putting you in for a promotion.
by grayfox
Sat Jun 14, 2014 6:03 am
 
Forum: Investing - Theory, News & General
Topic: International Tilting and the Predictability of Returns
Replies: 22
Views: 1361

Re: Dividend growth question

As Larry Swedroe likes to point out dividend growth investing does not outperform index funds as dividends come from the value of the stock. Therefor If we compared dividend growth stocks to a large caps index fund we would find the stocks correlate or lagging slightly. Now here is the kicker. We a...
by grayfox
Sat Jun 14, 2014 3:52 am
 
Forum: Investing - Theory, News & General
Topic: Dividend growth question
Replies: 29
Views: 2194

Re: Annuitizing for retirement - what if the market is down?

The solution is to plan ahead, and shift from stocks to bonds when the opportunity presents itself. An example can illustrate. Suppose that your planned retirement is age 67. Further, suppose on retirement you plan to purchase a SPIA for $100,000. Right now, a 67-year-old male can get $593 per month...
by grayfox
Wed Jun 11, 2014 1:56 pm
 
Forum: Investing - Help with Personal Investments
Topic: Annuitizing for retirement - what if the market is down?
Replies: 43
Views: 3897

Re: Bernstein: A Decade of Super-Low Returns [1.4% for 60/40

The other comment I had was presenting expected return as a single number. One thing I learned last year in the Stanford Retirement & Pensions course is that the outcome with risky assets depends on the future state of the world, which is unknown beforehand. So there is a distribution of possibl...
by grayfox
Tue Jun 10, 2014 2:21 pm
 
Forum: Investing - Theory, News & General
Topic: Bernstein: A Decade of Super-Low Returns [1.4% for 60/40]
Replies: 207
Views: 17154

Re: Bernstein: A Decade of Super-Low Returns [1.4% for 60/40

What do you think of Bill's expected returns? How do you plan to deal with low expected returns? http://i59.tinypic.com/dnghee.png ______________________________________________________________________________________________________ 1. I would add 10-year TIPS to the list. According to WSJ , 2024 ...
by grayfox
Tue Jun 10, 2014 1:45 pm
 
Forum: Investing - Theory, News & General
Topic: Bernstein: A Decade of Super-Low Returns [1.4% for 60/40]
Replies: 207
Views: 17154

Re: Question: Prof Ang on small premium

I just finished Prof Andrew Ang's online finance text book. Can anyone help me understand this passage from ch 14 Factor Investing, pg 22-23? Since the mid-1980s, however, there has been no size premium after adjusting for market risk (see Chapter 7). That is, small stocks do have higher returns th...
by grayfox
Tue Jun 10, 2014 12:51 pm
 
Forum: Investing - Theory, News & General
Topic: Question: Prof Ang on small premium
Replies: 13
Views: 875

Re: Large Amount in Personal Savings - scared to invest

I may have missed in all the responses, but I see no mention of what the OP's goal is with this money. And time horizon. Is this going to be an EF? Retirement savings? When will you need access to the money? We need answers to these questions before any advise is valid IMO. That's spot on. Assuming...
by grayfox
Sat May 31, 2014 2:00 pm
 
Forum: Investing - Theory, News & General
Topic: Large Amount in Personal Savings - scared to invest
Replies: 48
Views: 5153

Re: Large Amount in Personal Savings - scared to invest

WallyBird wrote:Allan Roth presents an approach here that may suit you:
http://www.cbsnews.com/news/risk-free-stock-investing/

I like the way this article shows how an investor can manage risk with fixed income.


This is simple yet brilliant. Kudos to Allan Roth.
by grayfox
Sat May 31, 2014 1:56 pm
 
Forum: Investing - Theory, News & General
Topic: Large Amount in Personal Savings - scared to invest
Replies: 48
Views: 5153

Re: Can we defend a 4% Safe Withdrawal Rate?

Down to exactly zero Thanks grayfox So a 4% SWR is akin to a 30 year treasury inflation bond ladder with a average 0.67% real yield. Imagine this: With no inflation, 1. If there was no inflation and you had no return, you could withdraw 1/N each year and you would end up with exactly zero. E.g. if ...
by grayfox
Thu May 29, 2014 12:50 pm
 
Forum: Investing - Theory, News & General
Topic: Can we defend a 4% Safe Withdrawal Rate?
Replies: 62
Views: 5478

Re: Can we defend a 4% Safe Withdrawal Rate?

How sensitive is the MWR (30) to the split between stocks and bonds? And is there a graph like this for MWR (25) or (20)? Any idea of how this result matches up against one (some/any?) of the variable withdrawal strategies that aren't trying to run out at the end? Thanks! Very interesting. RM That ...
by grayfox
Tue May 27, 2014 12:43 pm
 
Forum: Investing - Theory, News & General
Topic: Can we defend a 4% Safe Withdrawal Rate?
Replies: 62
Views: 5478

Re: Can we defend a 4% Safe Withdrawal Rate?

Isn't that including drawing down to potentially zero over 30 years (or whatever)? Rather than preserving original (leaving a inheritance). Down to exactly zero. That is how Maximum Withdrawal Rate MWR(30) is defined. The maximum starting withdrawal rate, with the amounted adjusted for inflation ea...
by grayfox
Tue May 27, 2014 12:13 pm
 
Forum: Investing - Theory, News & General
Topic: Can we defend a 4% Safe Withdrawal Rate?
Replies: 62
Views: 5478

Re: Can we defend a 4% Safe Withdrawal Rate?

When calculating out how much to save for retirement, you need to pick some SWR. 4% seems by far the most common over a typical 30 year period, based on the Trinity and other studies. The problem is that those studies were based 20th century US 10% stock and 6% bond returns. This was an extraordina...
by grayfox
Tue May 27, 2014 11:43 am
 
Forum: Investing - Theory, News & General
Topic: Can we defend a 4% Safe Withdrawal Rate?
Replies: 62
Views: 5478

Re: Do individual bonds lose value if held to maturity?

Treasuries are a simple and safe investments. Fortunately, for analytically-minded investors, it's easy to turn a simple and risk-free into complex and risky. Suppose you plan to retire in ten years, May 2024. Your plan is purchase SPIA for $100,000 that will give you income for life. Simple Simon b...
by grayfox
Thu May 15, 2014 3:11 am
 
Forum: Investing - Theory, News & General
Topic: Do individual bonds lose value if held to maturity?
Replies: 41
Views: 2657

Re: Do individual bonds lose value if held to maturity?

I do not agree with JoMoney's analysis. People trying to advocate for certain investments sometimes try to define the words "loss" and "gain" as relative--to assert that you are "losing money" if there is some other investment that would have made more money than yours...
by grayfox
Wed May 14, 2014 2:34 am
 
Forum: Investing - Theory, News & General
Topic: Do individual bonds lose value if held to maturity?
Replies: 41
Views: 2657

Re: enough to retire?

I looked up on http://www.immediateannuities.com what a 60-year-old MALE with 58-year-old FEMALE spouse would get for $1,000,000 Answer: $4,451 per month ($53,412 per year) or 5.34% NOT inflation-adjusted Don't forget that an fixed annuity includes mortality credits which you don't get by DIY. So th...
by grayfox
Mon Apr 28, 2014 7:35 am
 
Forum: Investing - Help with Personal Investments
Topic: enough to retire?
Replies: 33
Views: 11006

Re: Convince me to lump sum into the market

A month or so after a recent seven figure windfall, I'm getting ready to execute my portfolio plan which calls for a reasonable equities allocation. I'm not one to normally time the market, but I'm really not feeling very confident about getting into the market at this level. That's why I'm thinkin...
by grayfox
Mon Apr 28, 2014 4:36 am
 
Forum: Investing - Help with Personal Investments
Topic: Convince me to lump sum into the market
Replies: 57
Views: 11021

Re: Another take on the "rebalancing bonus"

It really was a time when people believed in talented mutual fund managers. L. Yes, remember Peter Lynch ? He was manager of Fidelity Magellan Fund from 1977 to 1990. Averaged a 29.2% annual return. You no longer had to pick stocks, just find the best stock picker. That was the conventional wisdom ...
by grayfox
Sun Apr 27, 2014 4:28 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 105
Views: 17572

Re: Another take on the "rebalancing bonus"

Back in the 1960's stock investing usually meant owning a few individual stocks. You would go down to the Merrill Lynch office and the broker would recommend half a dozen companies that their analysts had predicted would go up--Bell & Howell, American Telephone , IBM, etc. You had to buy in roun...
by grayfox
Sat Apr 26, 2014 2:13 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 105
Views: 17572

Re: Another take on the "rebalancing bonus"

:?: So when exactly did maintaining an asset allocation and rebalancing become the standard advice for retirement saving? My copy of "the random walk" is some shorter version of Malkiek's book and it has a three chapter on asset allocation including model portfolios by age and two pages o...
by grayfox
Sat Apr 26, 2014 9:10 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 105
Views: 17572

Re: Another take on the "rebalancing bonus"

When I began saving for retirement in TIAA-CREF there were two investment choices: the TIAA traditional account and the CREF equity account. The first was like a savings account that paid a fixed interest and was principal protected. The second was a growth account that offered the opportunity for ...
by grayfox
Sat Apr 26, 2014 8:17 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 105
Views: 17572

Re: Another take on the "rebalancing bonus"

Rodc - focusing on portfolio volatility month-to-month or year-over-year, which is the standard approach, is off the mark IMO. What counts is the expected value and the expected variability of total portfolio returns at the end of the portfolio accumulation period. This is an important point that i...
by grayfox
Fri Apr 25, 2014 4:35 am
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 105
Views: 17572

Re: Please explain a 3% SWR to me

Here is price, dividend dividend yield from 30 years ago Mean dividend growth G was 4.10% Date Price Div D/P D/P+G RET30 RRET30 2/1984 157.30 7.15 4.55% 8.65% 11.11% 8.08% Today D/P + G is 1.94% + 4.1% = 6.04% So either earnings yield or Gordon, forecast is for about 4% real, 6% after inflation. Bu...
by grayfox
Fri Apr 25, 2014 3:57 am
 
Forum: Investing - Theory, News & General
Topic: Please explain a 3% SWR to me
Replies: 92
Views: 22611

Re: Please explain a 3% SWR to me

Here is price, dividend dividend yield from 30 years ago Mean dividend growth G was 4.10% Date Price Div D/P D/P+G RET30 RRET30 2/1984 157.30 7.15 4.55% 8.65% 11.11% 8.08% Today D/P + G is 1.94% + 4.1% = 6.04% So either earnings yield or Gordon, forecast is for about 4% real, 6% after inflation. But...
by grayfox
Thu Apr 24, 2014 9:57 am
 
Forum: Investing - Theory, News & General
Topic: Please explain a 3% SWR to me
Replies: 92
Views: 22611

Re: Please explain a 3% SWR to me

Now that this thread is heating up... :) Any taker for my question about the Gordon equation and Bogle/Bernstein gloomy forecasts? I don't have the exact numbers handy, but it seems to me that the past 30 years worked reasonably well from an overall return standpoint, and yet dividends were already...
by grayfox
Thu Apr 24, 2014 9:30 am
 
Forum: Investing - Theory, News & General
Topic: Please explain a 3% SWR to me
Replies: 92
Views: 22611

Re: Please explain a 3% SWR to me

I try and try but I just can't wrap my head around someone needing 33x for a 30 year retirement. It seems if that is true it could only be because of too much risk in the portfolio. I know I am missing something. Help bring me in from the dark. Do you know how to put together a spreadsheet? If yes,...
by grayfox
Thu Apr 24, 2014 3:19 am
 
Forum: Investing - Theory, News & General
Topic: Please explain a 3% SWR to me
Replies: 92
Views: 22611

Re: Post on bonds and low volatility anomaly

http://www.etf.com/sections/index-investor-corner/21862-swedroe-fixed-incomes-low-risk-anomaly.html Hope this is helpful Larry from the article With Treasury bonds, the most liquid investment in the world, trading costs are extremely low. And since there is no credit risk, you don’t need to use a m...
by grayfox
Thu Apr 24, 2014 2:56 am
 
Forum: Investing - Theory, News & General
Topic: Post on bonds and low volatility anomaly
Replies: 10
Views: 1125

Re: Blog: David Swensen portfolio (from Unconventional Succe

Why does return data only to back to 2001?
The Coward's went back to 1999.
by grayfox
Tue Apr 22, 2014 4:41 am
 
Forum: Investing - Theory, News & General
Topic: Blog: David Swensen portfolio (from Unconventional Success)
Replies: 2
Views: 745

Re: Global Minimum Volatility Fund

yeah but your original investment is no longer 1/N. it's basically a somewhat more random allocation to stocks. I'm not sure I buy your argument with the mu's. I think one could use that argument to justify buying and holding just a single stock instead of a broad 1/N portfolio. so I think if one r...
by grayfox
Mon Apr 21, 2014 12:17 pm
 
Forum: Investing - Theory, News & General
Topic: Global Minimum Volatility Fund
Replies: 29
Views: 2475

Re: Global Minimum Volatility Fund

I'm not opposed to 1/N weighting. But the trouble is if you hold for a year or two then prices change and you are no longer 1/N. So you have to rebalance and that has costs. Say for example you do 1/N on the S&P 500. Then a couple of years later your friend comes to you and wants to do 1/N. Are...
by grayfox
Mon Apr 21, 2014 11:47 am
 
Forum: Investing - Theory, News & General
Topic: Global Minimum Volatility Fund
Replies: 29
Views: 2475

Re: Global Minimum Volatility Fund

i like your framework. I guess i would add though that i think std. dev./variance is the wrong measure of risk. Academics like it because it makes the math tractable. So they can do lots of fancy (and mostly useless math). But in real life downside risk or drawdown is what matters. tails are fat an...
by grayfox
Mon Apr 21, 2014 3:40 am
 
Forum: Investing - Theory, News & General
Topic: Global Minimum Volatility Fund
Replies: 29
Views: 2475

Re: Global Minimum Volatility Fund

GMV is a kind of like mean-variance optimization. But GMV does not require mean return estimates which have huge standard errors. GMV only requires covariance estimates which are not nearly as bad. GMV basically tries to be on the tip of the Markowitz bullet without trying to predict what the mean ...
by grayfox
Sun Apr 20, 2014 4:34 pm
 
Forum: Investing - Theory, News & General
Topic: Global Minimum Volatility Fund
Replies: 29
Views: 2475

Re: Bond mutual fund vs individual bonds

The financial definition of "risk" is the chance that an actual return will be different than an expected return. If your horizon is exactly ten years, and you purchase a ten year, zero coupon bond (or zero coupon TIPS bond, if you care about inflation) then by definition, your risk is ze...
by grayfox
Sun Apr 20, 2014 4:12 pm
 
Forum: Investing - Theory, News & General
Topic: Bond mutual fund vs individual bonds
Replies: 35
Views: 7208

Re: Trying to learn about Brokered CD's

Don't buy a brokerage CD unless you plan to hold to maturity. They will take you to the cleaners. Just like with Muni's bonds.

If you think that you will want to sell early, stick with Treasuries, so that you get reasonably fare pricing.
by grayfox
Sun Apr 20, 2014 4:06 pm
 
Forum: Investing - Theory, News & General
Topic: Trying to learn about Brokered CD's
Replies: 24
Views: 1937

Re: Global Minimum Volatility Fund

Looking at Vanguard Total World Stock Index Fund Investor Shares ( VTWSX ) there are 6161 stocks. Top ten holdings are: 1 Apple Inc. 2 Exxon Mobil Corp. 3 Google Inc. 4 Microsoft Corp. 5 Johnson & Johnson 6 Wells Fargo & Co. 7 General Electric Co. 8 Nestle SA 9 Royal Dutch Shell plc 10 JPMor...
by grayfox
Sun Apr 20, 2014 3:59 pm
 
Forum: Investing - Theory, News & General
Topic: Global Minimum Volatility Fund
Replies: 29
Views: 2475
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