Search found 4165 matches

by grayfox
Tue Sep 01, 2015 2:14 pm
Forum: Investing - Theory, News & General
Topic: 100% Equities?
Replies: 67
Views: 4069

Re: 100% Equities?

... Question on methodology: How did you compute (10.0, 5.3) from equities over 30 years? Doesn't that imply when sigma=-1.886 you lose everything? Did you use normal or lognormal returns? I calculated simple returns. Yes, you are right, I probably should have calculated continuously-compounded ret...
by grayfox
Tue Sep 01, 2015 4:17 am
Forum: Investing - Theory, News & General
Topic: 100% Equities?
Replies: 67
Views: 4069

Re: 100% Equities?

… The main issue I care about, I think, is whether or not expected investment term influences portfolio risk and portfolio efficiency. I'm inclined to think it does, though how much and in what ways may be pretty complicated. What I'm pretty sure of, though, is that short-term volatility and sharp ...
by grayfox
Tue Sep 01, 2015 3:09 am
Forum: Investing - Theory, News & General
Topic: 100% Equities?
Replies: 67
Views: 4069

Re: 100% Equities?

Suppose today you make a $1,000 investment with a horizon of exactly 30 years. At the end of the 30 years, you will liquidate and purchase an immediate annuity. Let's say that you will invest half in S&P500 and half in Treasuries bonds. There are numerous strategies you can use and methods of a...
by grayfox
Mon Aug 31, 2015 6:35 am
Forum: Investing - Theory, News & General
Topic: 100% Equities?
Replies: 67
Views: 4069

Re: 100% Equities?

Run the sharpe ratios and see if you did better on a risk adjusted basis. Were you compensated adequately for taking on more risk in a 100% equities portfolio? For some reason, these sorts of discussion always use one-year standard deviation to measure risk and one-year sharp ratios to measure risk...
by grayfox
Sun Aug 30, 2015 4:08 am
Forum: Investing - Theory, News & General
Topic: Some thoughts about VWEHX (Vg High Yield Corporate)
Replies: 7
Views: 521

Re: Some thoughts about VWEHX (Vg High Yield Corporate)

Putting it all together, I am willing to make a guess at an R of somewhere between 3.5% and 4%. I am still thinking it over, but am inclined to jump back in with a small position. Anyone have thoughts about VWEHX or the high-yield markets in general? If last week's equity action was any indication,...
by grayfox
Thu Aug 27, 2015 4:15 am
Forum: Investing - Theory, News & General
Topic: Individual Stocks Does it Ever Make Sense?
Replies: 81
Views: 7348

Re: Individual Stocks Does it Ever Make Sense?

Individual Stocks Does it Ever Make Sense? The big difference between an individual stock and an index fund is that the individual stock can go up 10x in a relatively short period, like a few years. So if you want to double, triple, quadruple your money quickly, you can only do it with individual s...
by grayfox
Thu Aug 27, 2015 3:51 am
Forum: Investing - Theory, News & General
Topic: How are you being GREEDY when others are fearful?
Replies: 84
Views: 11454

Re: How are you being GREEDY when others are fearful?

Well, I tried to be GREEDY, but others were not fearful enough. But instead of falling, VDE rose +3.36% yesterday. VYM +3.63%.

VIX is down to 30.32 from a peak 43.26 on Monday. It looks like the Plunge Protection Team has stopped the fall. :annoyed
by grayfox
Wed Aug 26, 2015 4:31 am
Forum: Investing - Theory, News & General
Topic: How are you being GREEDY when others are fearful?
Replies: 84
Views: 11454

Re: How are you being GREEDY when others are fearful?

OK, I am going to try again. Before the open today (Wednesday) I placed a 1-day limit order for Vanguard Energy ETF ( VDE ) at $80.01. Closing price on Tuesday was $83.31. YTD is -25.42% . 1-year is -28.03% SEC Yield = 3.01% http://finance.yahoo.com/echarts?s=VDE+Interactive#{"range":"...
by grayfox
Tue Aug 25, 2015 3:49 am
Forum: Investing - Theory, News & General
Topic: How are you being GREEDY when others are fearful?
Replies: 84
Views: 11454

Re: How are you being GREEDY when others are fearful?

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” - Warren Buffett What specific strategies are you considering or implementing in this fear cycle ? All responses are appreciated, ie. buying EM, PME, rebalancing with bands according to IPS, market timing, stay the course, etc. ...
by grayfox
Tue Aug 25, 2015 3:35 am
Forum: Investing - Theory, News & General
Topic: Graham's "margin of safety" for US stocks (6-29-15)
Replies: 33
Views: 6388

Re: Graham's "margin of safety" for US stocks (6-24-15)

Change from 24-Jun-2015 to 24-Aug-2015 S&P 500 P/E10 = 27.07 -> 24.00 E10/P = 3.69413% -> 4.16667% Vanguard Intermediate-Term Corporate Bond ETF ( VCIT ) Market price = $85.05 -> 84.78 NAV = $85.01 -> $85.15 SEC Yield = 3.33% -> 3.46% Premium/Discount = +$0.04 -> -$0.37 NAV a risen slightly, whi...
by grayfox
Tue Aug 25, 2015 2:47 am
Forum: Investing - Theory, News & General
Topic: [Original Research] [Theory] The Optimal Portolio
Replies: 40
Views: 3213

Re: [Original Research] [Theory] The Optimal Portolio

N=30, b=p1=p2=1 (patient, naive): 100% stock. N=30, b=1, p1=0.75, p2=1.5 (patient pessimist): 35% stock. N=1, b=1=p2=1 (impatient, naive): 30% stock. N=1, b=1, p1=0.75, p2=1.5 (impatient pessimist): 15% stock. N=30, b=2, p1=p2=1 (patient risk-averse naive): 75% stock. N=30, b=0, p1=0.75, p2=1.5 (pa...
by grayfox
Sat Aug 22, 2015 5:04 am
Forum: Personal Finance (Not Investing)
Topic: With Stock Market heading south
Replies: 95
Views: 11256

Re: With Stock Market heading south

I'm surprised nobody has mentioned that the simple moving average has been crossed, the so-called Death Cross. :twisted: Or maybe I missed the reference. $SPX 200-Day MA Chart Mebane Faber Timing Model If you are following the 200-day SMA, now is the time to get out of both US and Foreign Stocks. Bu...
by grayfox
Sat Aug 22, 2015 4:37 am
Forum: Investing - Theory, News & General
Topic: Graham's "margin of safety" for US stocks (6-29-15)
Replies: 33
Views: 6388

Re: Graham's "margin of safety" for US stocks (6-24-15)

Change from 24-Jun-2015 to 21-Aug-2015 S&P 500 P/E10 = 27.07 -> 24.99 E10/P = 3.69413% -> 4.0016 Vanguard Intermediate-Term Corporate Bond ETF ( VCIT ) 06/24/2015-> 08/21/2015 Market price = $85.05 -> 85.02 NAV = $85.01 -> $85.12 SEC Yield = 3.33% -> 3.47% Premium/Discount = +$0.04 -> -$0.10 Van...
by grayfox
Fri Aug 21, 2015 4:46 am
Forum: Investing - Theory, News & General
Topic: Range of Outcomes for Different Stock/Bond Allocations
Replies: 17
Views: 1606

Re: Range of Outcomes for Different Stock/Bond Allocations

Like this? Terminal $ values per initial $ worst equity 1 2 5 10 20 0% 0.89 0.94 0.98 1.08 1.37 20% 0.89 0.88 1.03 1.37 2.01 40% 0.81 0.75 0.89 1.33 2.04 60% 0.73 0.63 0.76 1.20 1.98 80% 0.64 0.52 0.63 1.03 1.83 100% 0.56 0.42 0.51 0.84 1.60 median equity 1 2 5 10 20 0% 1.03 1.07 1.23 1.47 2.15 20%...
by grayfox
Fri Aug 21, 2015 4:42 am
Forum: Investing - Theory, News & General
Topic: The Risk Quandary
Replies: 29
Views: 2504

Re: The Risk Quandary

Yes, A lot of people a led to believe that expected return is the return that you should expect to get. Should probably label the chart "Mean Return", which should not expect to get. For right-skewed distributions, like stock returns, the mean is higher than the medium, i.e. 50-percentile....
by grayfox
Thu Aug 20, 2015 3:38 am
Forum: Investing - Theory, News & General
Topic: The Risk Quandary
Replies: 29
Views: 2504

Re: The Risk Quandary

So I would ask you, if volatility is not very useful for the long term investor what yard stick do you think should be used. As I mentioned above, I think Markowitz definition from 1952, i.e. variance or sd of the final outcome, is good enough for comparing two assets. Or you could just show the di...
by grayfox
Thu Aug 20, 2015 3:25 am
Forum: Investing - Theory, News & General
Topic: Range of Outcomes for Different Stock/Bond Allocations
Replies: 17
Views: 1606

Re: Range of Outcomes for Different Stock/Bond Allocations

I'm hoping to find a good resource that shows the range of outcomes for different stock and bond allocations over different time periods. For example, say I have $1 million now and a 60/40 stock-bond split, what would be the range of expected balances in 1, 2, 5, 10, and 20 years (Say the 10th , 50...
by grayfox
Tue Aug 18, 2015 4:58 am
Forum: Investing - Theory, News & General
Topic: The Risk Quandary
Replies: 29
Views: 2504

Re: The Risk Quandary

scott, thanks for defining risk, but does it tell us anything about how much money we might lose? We now have your definition, and then coachz comes along and quietly drops in a bomb -- uncertainty. Here's a good discussion on the difference between risk and uncertainty from 2011. https://www.bogle...
by grayfox
Tue Aug 18, 2015 4:05 am
Forum: Investing - Theory, News & General
Topic: The Risk Quandary
Replies: 29
Views: 2504

Re: The Risk Quandary

from Markowitz, Portfolio Selection , 1952 The concepts "yield" and "risk" appear frequently in financial writings. Usually if the term "yield" were replaced by "expected yield" or "expected return," and "risk" by "variance of return,&...
by grayfox
Mon Aug 17, 2015 3:22 am
Forum: Investing - Theory, News & General
Topic: Slice and dice: optimal for high-risk-tolerant investors?
Replies: 44
Views: 2528

Re: Slice and dice: optimal for high-risk-tolerant investors?

Let's suppose for the sake of argument that SCV, emerging markets, REITs etc. can offer no higher risk-adjusted returns than the broad cap-weighted market. Assume further for the sake of argument that a cap-weighted portfolio actually offers the highest risk-adjusted returns and that any deviation ...
by grayfox
Sun Aug 16, 2015 4:11 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3708

Re: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?

I don't think I buy this. Instead, I think you're highlighting is that there is no risk-free asset for 30 years. A 30 year nominal bond has a significant variance of outcome in real terms. Even a 30 year TIPS has a lot of variance because that depends on how the inflation of my retirement needs var...
by grayfox
Sun Aug 16, 2015 3:53 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3708

Re: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?

Wouldn't intermediate results matter for rebalancing opportunities, or do we assume that's negligible? You raise an important point. In fact, your post may be the most important post in the history of Bogleheads forum because it contains a key idea that might explain the great Bogelhead mystery. No...
by grayfox
Sat Aug 15, 2015 3:45 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3708

Re: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?

To expand on this MPT-framework for an actual retirement plan. Suppose your retirement date is 2045. Your strategy is to liquidate your portfolio in 2045 and purchase an immediate annuity for guaranteed lifetime income. You make annual contributions starting in 2015. In 2015 you would invest in some...
by grayfox
Sat Aug 15, 2015 3:17 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3708

Re: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?

Anyway, I think everyone would agree that you would hold a different mix of investments depending on the horizon. If 1-year horizon, most here would probably say CD. If 30 year horizon most would say a healthy portion of stocks. It seems logical to me that MPT would also give different result depend...
by grayfox
Sat Aug 15, 2015 2:57 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3708

Re: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?

(Shrug) I don't know how bogus it is or isn't. Here's the thing. (First, just to get one red herring out of the way, the (weighted) arithmetic mean is the correct thing to calculate if you are calculating the return of a mix of assets that are growing simultaneously over a specified time period. Th...
by grayfox
Fri Aug 14, 2015 4:29 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3708

Re: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?

Here is one reason why all this one-year analysis is bogus. We all know that when you invest in stocks or bond funds there is a distribution of possible outcomes . The actual outcome depends on the future state of the world, which is unknown. MPT says the mean of the distribution is the expected ret...
by grayfox
Fri Aug 14, 2015 4:03 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3708

Re: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?

so I think we need to invent a better form of MPT here. We need to get away from Sharpe ratio and "risk-adjusted returns" in their classical sense and instead tie the measurement of volatility to periods matching the investor's horizon. An investor with a 10-year horizon should not care w...
by grayfox
Thu Aug 13, 2015 3:56 am
Forum: Investing - Theory, News & General
Topic: a look at impact of financialization of commodities
Replies: 20
Views: 1881

Re: a look at impact of financialization of commodities

I looked at PCRIX on Morningstar . Here is the growth shrink of $10,000 PCRIX 1M 9058.82 3M 8619.44 YTD 8715.64 1Y 6890.72 3Y 6031.84 5Y 7329.81 10Y 7316.73 Long ago, I read a book by Andrew Tobias, The Only Investment Book You Will Ever Need. Tobias said to stay away from commodities. I'm glad I fo...
by grayfox
Thu Aug 13, 2015 3:23 am
Forum: Investing - Theory, News & General
Topic: Cap-weight indexers, how do you explain these graphs?
Replies: 64
Views: 3502

Re: Cap-weight indexers, how do you explain these graphs?

1972-2014 ... If cap-weighting was efficient, I would expect the Total Market indices to not be strictly dominated by another allocation with higher return and less risk. http://i.imgur.com/HrbcKQD.png How I would explain this graph: Over the period 1972-2014 Small Cap Value had both higher CAGR an...
by grayfox
Tue Aug 04, 2015 2:01 am
Forum: Investing - Theory, News & General
Topic: Houston, we have a problem... [Small cap historical performance]
Replies: 57
Views: 4673

Re: Houston, we have a problem... [Small cap historical performance]

One of the interesting things about the smallcap "premium" is how much the questioning of it has started up after a long-period of small cap *outpeformance.* Usually you see a lot of additional interest in asset classes/sub-classes after such outperformance, with a lot of academic/sophist...
by grayfox
Sun Aug 02, 2015 3:58 am
Forum: Investing - Theory, News & General
Topic: Which is more optimal in retirement? Total return vs. income investing
Replies: 41
Views: 3558

Re: Which is more optimal in retirement? Total return vs. income investing

I see two different strategies people use here: --- Which one do you use and why? The answer is: None of the Above. Most financial economists recommend having a source guaranteed lifetime retirement income which include SS, pension, annuities (SPIAs, DIAs), government bonds, CDs, etc. This provides...
by grayfox
Sat Aug 01, 2015 5:16 am
Forum: Investing - Theory, News & General
Topic: Factors or Fundamentals?
Replies: 38
Views: 1670

Re: Factors or Fundamentals?

I used to be a stock picker before discovering bogleheadism. I would pore over SEC 10-Q forms to try to find bargains. I believe that was called "investing through fundamental analysis". Then Burton Malkiel showed me how that whole thing is flawed, that you just cannot beat the market wit...
by grayfox
Thu Jul 30, 2015 1:18 pm
Forum: Investing - Theory, News & General
Topic: Are equities really as risky as anyone thinks?
Replies: 271
Views: 14658

Re: Are equities really as risky as anyone thinks?

With longer holding periods, the dispersion of outcome got wider whether measured by total range or variance. So by MPT, stocks were riskier over longer periods. I used to believe this, but now I think the logic is flawed. Let's suppose we have a normal distribution, and run a Monte Carlo simulatio...
by grayfox
Thu Jul 30, 2015 3:32 am
Forum: Investing - Theory, News & General
Topic: Are equities really as risky as anyone thinks?
Replies: 271
Views: 14658

Re: Are equities really as risky as anyone thinks?

Are equities really as risky as anyone thinks? I agree with the OP that Bogleheads generally overstate the risk of equities. When I see someone with a horizon of 30 years with 40% bonds because they fear the annual volatility, I believe they are being too timid. Now, equities are certainly riskier ...
by grayfox
Wed Jul 29, 2015 1:42 am
Forum: Investing - Theory, News & General
Topic: The Futility of Predicting Future Returns
Replies: 87
Views: 4348

Re: The Futility of Predicting Future Returns

Suppose that I am 65 years old and have $1,000,000 portfolio invested 50/50 in TSM/TBM. I will fund my 30-year retirement by withdrawing from the portfolio. I am willing to spend down the portfolio. How much should I withdraw each year? Of course, everyone is familiar with the 4% + inflation withdra...
by grayfox
Tue Jul 28, 2015 3:34 am
Forum: Investing - Theory, News & General
Topic: Slice and Dice: why not?
Replies: 84
Views: 4978

Re: Slice and Dice: why not?

Another thing to consider if your are contemplating slicing and dicing: Just like astronomers demoted Pluto from a plant to a dwarf planet, some financial academics have demoted Small-Cap from a factor to the Small-Cap Anomaly. See Finding Smart Beta in the Factor Zoo (July 2014). The small-cap anom...
by grayfox
Tue Jul 28, 2015 3:00 am
Forum: Investing - Theory, News & General
Topic: The Futility of Predicting Future Returns
Replies: 87
Views: 4348

Re: The Futility of Predicting Future Returns

There's a natural human tendency to want to predict future returns. Ya think? Your good-for-nothing brother-in-law asks you to hand over some of your hard earned money to invest in another of his half-baked, get-rich-quick schemes. Wouldn't you want to do some analysis to see if there is a chance o...
by grayfox
Tue Jul 28, 2015 1:52 am
Forum: Investing - Theory, News & General
Topic: Motley Fool - Good Enough Why rules of thumb beat precision
Replies: 30
Views: 3120

Re: Motley Fool - Good Enough Why rules of thumb beat precision

Well, like I said, if the rule of thumb was that there was a 90% chance that stocks will have real return 6% +/-6% annualized over 20 years, I would not have a huge problem with it. But his rule of thumb is that he expects 6% with not even a nod to the wide variation of possible outcomes. His rule o...
by grayfox
Tue Jul 28, 2015 1:28 am
Forum: Investing - Theory, News & General
Topic: Motley Fool - Good Enough Why rules of thumb beat precision
Replies: 30
Views: 3120

Re: Motley Fool - Good Enough Why rules of thumb beat precision

Grayfox, It seems to me that 6% is a pretty good average (midpoint) of each of the ranges you quoted. What grounds do you have to expect that more math will get a better answer? L. In my post you quoted, I showed that using just a little math reveals that there was a range of possible outcomes and ...
by grayfox
Mon Jul 27, 2015 1:34 pm
Forum: Investing - Theory, News & General
Topic: Motley Fool - Good Enough Why rules of thumb beat precision
Replies: 30
Views: 3120

Re: Motley Fool - Good Enough Why rules of thumb beat precision

I don't see why people think this article is intelligent. The rules of thumb that he mentions are demonstrable terrible. I will demonstrate: So I don't use fancy valuation models to calculate how much stocks should return over the next 10 years. I assume 6% a year after inflation over the long haul....
by grayfox
Mon Jul 27, 2015 12:42 pm
Forum: Investing - Help with Personal Investments
Topic: How long until a $10,000 loss matters?
Replies: 39
Views: 3441

Re: How long until a $10,000 loss matters?

My portfolio is down well over $10,000 over the past week. No big deal the market ebbs and flows and I am still drawing a steady check. I was wondering when you are retired how long does it take and how large a loss before you think this might have a material effect on my retirement? If you follow ...
by grayfox
Mon Jul 27, 2015 12:17 pm
Forum: Investing - Theory, News & General
Topic: Slice and Dice: why not?
Replies: 84
Views: 4978

Re: Slice and Dice: why not?

So this is my question: why believe in an equity risk premium but not a SCV premium? If you conclude from past data that stocks outperform bonds why not conclude from past data that SCV outperforms TSM or at the very least adds diversification through uncorrelation? Well I showed that today there i...
by grayfox
Mon Jul 27, 2015 11:56 am
Forum: Investing - Theory, News & General
Topic: Slice and Dice: why not?
Replies: 84
Views: 4978

Re: Slice and Dice: why not?

In case I confused everybody, what I'm saying is that past returns are about the worst forecast you can make for future returns. If over some past period, P1 returned 10.25% and P2 returned 11.04%, then concluding that P2 will return more than P1 in the future is just naive. For bonds, forecast ret...
by grayfox
Mon Jul 27, 2015 11:51 am
Forum: Investing - Theory, News & General
Topic: Slice and Dice: why not?
Replies: 84
Views: 4978

Re: Slice and Dice: why not?

I don't want to hijack this thread and talk about forecasting bond fund returns. It get complicated quickly. There have been threads about modeling bond funds, why the actual return is not exactly what the SEC Yield predicted, the shape of the yield curve, riding the yield curve, etc. Many were star...
by grayfox
Mon Jul 27, 2015 11:37 am
Forum: Investing - Theory, News & General
Topic: Slice and Dice: why not?
Replies: 84
Views: 4978

Re: Slice and Dice: why not?

For bonds, forecast returns using YTM or SEC Yield for bond funds. ... In summary, if you read any precise bond return prediction (e.g. " expect SEC Yield " where no range around that prediction is provided), the person making the prediction either: ⋅  does not understand bond f...
by grayfox
Mon Jul 27, 2015 5:00 am
Forum: Investing - Theory, News & General
Topic: Slice and Dice: why not?
Replies: 84
Views: 4978

Re: Slice and Dice: why not?

In case I confused everybody, what I'm saying is that past returns are about the worst forecast you can make for future returns. If over some past period, P1 returned 10.25% and P2 returned 11.04%, then concluding that P2 will return more than P1 in the future is just naive. For bonds, forecast retu...
by grayfox
Mon Jul 27, 2015 4:01 am
Forum: Investing - Theory, News & General
Topic: Slice and Dice: why not?
Replies: 84
Views: 4978

Re: Slice and Dice: why not?

Some people here prefer cap weight portfolios, others slice and dice. In an attempt to settle the debate once and for all, I want to let the data speak. I ran 3 simulations with Portfolio Visualizer. The details are here https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&In...
by grayfox
Sat Jul 25, 2015 3:43 am
Forum: Investing - Theory, News & General
Topic: [Original Research] The Failure of PE Market Timing Models
Replies: 50
Views: 3703

Re: [Original Research] The Failure of PE Market Timing Models

I have been fascinated with the idea of a tactical asset allocation that looks at both equity yields (inverse PE) and bond yields and assigns a weight to each proportion to their yield. Then I downloaded Shiller's S&P and treasury data http://www.econ.yale.edu/~shiller/data/ie_data.xls the mont...

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