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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: 1309

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: 2682

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: 5636

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: 11788

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: 3921

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: 1353

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: 2192

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: 3861

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: 17117

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: 17117

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: 5145

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: 5145

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: 5474

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: 5474

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: 5474

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: 5474

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: 2642

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: 2642

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: 11004

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: 11011

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: 17562

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: 17562

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: 17562

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: 17562

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: 17562

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: 22599

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: 22599

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: 22599

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: 22599

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: 744

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: 2469

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: 2469

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: 2469

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: 2469

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: 7207

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: 1936

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: 2469

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: 35
Views: 7002

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: 2074

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: 105
Views: 17562

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: 5170

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: 4238

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: 4238

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: 3016

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: 3016

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: 4284

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: 7264

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: 4284
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