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Re: Should market valuations be completely disregarded?

No. Stock market valuations should be considered but not completely disregarded. If one thinks valuations are high, what do you do about them? First, reduce your expectations of future returns. Second, it might be a good time to rebalance your portfolio. In the case of extreme valuations, you might ...
by nedsaid
Thu Jul 24, 2014 12:49 am
 
Forum: Investing - Theory, News & General
Topic: Should market valuations be completely disregarded?
Replies: 42
Views: 2520

Re: "What Has Time Taught Bill Bernstein?"

This was an excellent article and Bill Bernstein's observations is a confirmation of my experience as an investor. Emotions have a very powerful effect on investment returns if unrestrained and that effect is usually negative. Another way of saying it is that successful investing is mostly behaviora...
by nedsaid
Thu Jul 24, 2014 12:23 am
 
Forum: Investing - Theory, News & General
Topic: "What Has Time Taught Bill Bernstein?"
Replies: 12
Views: 2786

Re: Developing a sound framework for optimal asset allocatio

Investing is largely behavioral, human emotions play a big role in how markets perform. So all the math can precisely measure the effects of human behavior in the past, it has limited value in predicting the future. I would not get hung up on optimal asset allocation. There is a lot less precision i...
by nedsaid
Sun Jul 20, 2014 6:49 pm
 
Forum: Investing - Theory, News & General
Topic: Developing a sound framework for optimal asset allocation
Replies: 44
Views: 2701

Re: Japan's Lost Decades in One Chart

It shouldn't surprise me that multi-national companies hedge against currency risk. It is honestly something that I haven't given much thought to. Airlines hedge their fuel costs with futures. Food companies buy commodity futures for the same reason. I just figured that over the long term that all t...
by nedsaid
Sun Jul 20, 2014 6:19 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2854

Re: Stop Loss on stocks/ ETFs

Don't do it. Markets are volatile enough that at some point you will probably hit your stop loss limits. All you are doing is locking in your losses. Better to ride out market volatility. Peter Lynch in his books recommended against this.
by nedsaid
Sun Jul 20, 2014 11:49 am
 
Forum: Investing - Help with Personal Investments
Topic: Stop Loss on stocks/ ETFs
Replies: 12
Views: 885

Re: Jeremy Grantham pokes holes in EMH

Bertilak, you raise a good point. My comments are directed towards long term investors. There are all kinds of people out there that like to trade but I am not one of them. Mostly my buy decisions have been good and my sell decisions mostly not so good. I am a buy the good stuff and keep it type of ...
by nedsaid
Sun Jul 20, 2014 11:43 am
 
Forum: Investing - Theory, News & General
Topic: Jeremy Grantham pokes holes in EMH
Replies: 16
Views: 2144

Re: Portfolio Advice & Suggestions for a self taught investo

Midori, you actually have a good portfolio. There are things I would do a bit different but what you have looks awfully good to me. A few thoughts. It looks like your husband is trying to tilt towards value. This is actually a really good idea. It appears that he doesn't have a small cap value fund ...
by nedsaid
Sun Jul 20, 2014 11:35 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio Advice & Suggestions for a self taught investor
Replies: 6
Views: 687

Re: Japan's Lost Decades in One Chart

Clive, you raised a great point about currencies. This has been talked about on other threads. Because of YEN appreciation and very low inflation if not a mild deflation, the Japanese investor did not fare as badly as what is perceived here. I am still a believer in international diversification. By...
by nedsaid
Sun Jul 20, 2014 10:57 am
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2854

Re: Jeremy Grantham pokes holes in EMH

Larry, I think everyone wants to own the quality stocks low debt, stable earnings, consistent sales and earnings growth. Warren Buffett likes to buy what I call the "good stuff" and buys it at a good price. To do this well, it seems to me that an investor would have to be awfully patient a...
by nedsaid
Sun Jul 20, 2014 10:52 am
 
Forum: Investing - Theory, News & General
Topic: Jeremy Grantham pokes holes in EMH
Replies: 16
Views: 2144

Re: Faber: S&P 500 Active Fund in Drag

No, I don't think Faber is correct. There is a committee that decides the make-up of the index but the index but the changes from year to year are not great. The turnover is about 5% in a year. You could say that about just about any index is managed, albeit to a small degree. A little better argume...
by nedsaid
Sun Jul 20, 2014 12:25 am
 
Forum: Investing - Theory, News & General
Topic: Faber: S&P 500 an Active Fund in Drag
Replies: 45
Views: 3496

Re: Japan's Lost Decades in One Chart

Japan is an excellent example of why an investor should diversify internationally. One should note that while Japan was experiencing bust in the 1990's, the US Stock Market was booming. Another thing to note was that Japan had overinvested and thus had too much slack capacity in its economy. I belie...
by nedsaid
Sat Jul 19, 2014 6:08 pm
 
Forum: Investing - Theory, News & General
Topic: Japan's Lost Decades in One Chart
Replies: 23
Views: 2854

Re: I was tempted to market time and didn't

The problem with hunches is that markets can act in ways that you don't expect. Years ago I remember watching Nightly Business Report with my father. Chrysler came out with a good earnings report and the stock went down!! Dad asked why this was so and I explained to him that the market was a market ...
by nedsaid
Sat Jul 19, 2014 5:47 pm
 
Forum: Investing - Theory, News & General
Topic: I was tempted to market time and didn't
Replies: 19
Views: 1807

Re: Jeremy Grantham pokes holes in EMH

One point that I wanted to raise from reading the article. It would seem to me that quality companies with low debt and stable earnings be in the sweet spot of a lot of active managers stock screens. Isn't that what most investors want? It would seem to me that such companies would be pretty fully p...
by nedsaid
Sat Jul 19, 2014 5:30 pm
 
Forum: Investing - Theory, News & General
Topic: Jeremy Grantham pokes holes in EMH
Replies: 16
Views: 2144

Re: POLL: Do you have a dedicated REIT allocation?

The reason that a REIT investor who has valuation concerns about REITs continues to hold them is a hedge against being wrong. "Overvalued" REITs have had a strong 2014 performance so far and a person who sold out in 2013 would feel stupid indeed. Another reason is that sell decisions are m...
by nedsaid
Sat Jul 19, 2014 2:04 pm
 
Forum: Investing - Theory, News & General
Topic: POLL: Do you have a dedicated REIT allocation?
Replies: 123
Views: 6906

Re: Ways to lose money and destroy personal wealth by invest

Here are a few I can think of. 1) Following excessively bearish gurus. The stock market tends to be up 2 years for every year it is down. A person who is always bearish will be wrong 2/3 of the time. If you follow the optimists, you odds of being right are dramatically higher. 2) Chasing performance...
by nedsaid
Sat Jul 19, 2014 1:51 pm
 
Forum: Investing - Theory, News & General
Topic: Ways to lose money and destroy personal wealth by investing
Replies: 81
Views: 9175

Re: Why I can't be a day trader.

Crow Hunter, you have experienced the "Nedsaid effect." I can make the price of a stock go up just by selling it!! Then whatever I buy to take its place does worse than what I just sold!! This has happened to me a lot. That is why I am so reluctant to sell. This has happened with mutual fu...
by nedsaid
Wed Jul 16, 2014 10:26 pm
 
Forum: Personal Finance (Not Investing)
Topic: Why I can't be a day trader.
Replies: 38
Views: 2937

Re: POLL: Do you have a dedicated REIT allocation?

I own REITs and still add to them at my workplace savings plan with 10% of my new monies for investment. We heard the gloom and doom about REITs and I was among those with valuation concerns. Just checked, one of my REIT funds is up 19% so far this year. I still think REIT returns will be muted goin...
by nedsaid
Wed Jul 16, 2014 10:13 pm
 
Forum: Investing - Theory, News & General
Topic: POLL: Do you have a dedicated REIT allocation?
Replies: 123
Views: 6906

Re: Bet it ALL on Small Cap Value when you're young

You are #^&@* right that I am scared. I have been through two bear markets where the market dropped more than 50% since the year 2000. The first time, I had an approximately 80% stock/20% fixed income portfolio. The second time, I had something more like a 72/28% portfolio. The losses hurt and y...
by nedsaid
Wed Jul 16, 2014 12:55 am
 
Forum: Investing - Theory, News & General
Topic: Bet it ALL on Small Cap Value when you're young
Replies: 64
Views: 6113

Re: Does anyone expect tilts to *under*perform?

I tilt for a few reasons. First, I believe that the small and value premiums are real and persist over time. Secondly, I believe these premiums are based on human nature and human behavior and are unlikely to be arbitraged away. Third, value and growth stocks do not move in synch so there is a diver...
by nedsaid
Wed Jul 16, 2014 12:38 am
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: Bet it ALL on Small Cap Value when you're young

The reason you don't bet it all on Small Cap Value when you are young is that this is an incredibly volatile portfolio. Memory recalls that this is about twice as volatile as the stock market as a whole. Small Cap Value can also underperform the rest of the market for years at a time. I believe this...
by nedsaid
Wed Jul 16, 2014 12:08 am
 
Forum: Investing - Theory, News & General
Topic: Bet it ALL on Small Cap Value when you're young
Replies: 64
Views: 6113

Re: Another reason I am my own advisor

Clearly there is a need for a fiduciary standard in the Brokerage Industry. I know of a couple acquaintances who had their rollovers put into variable annuities. Unless there are compelling guarantees against market loss, putting Variable Annuities inside a rollover IRA is Advisor malpractice in my ...
by nedsaid
Tue Jul 15, 2014 11:53 pm
 
Forum: Investing - Help with Personal Investments
Topic: Another reason I am my own advisor
Replies: 15
Views: 3726

Re: What To Do During A Correction In Stocks?

Nothing. Just keep investing on your regular schedule. If you have courage, you could rebalance from bonds back into stocks. I was chicken, I kept my stocks and invested on schedule just like I did before. I waited for the market to rebound.
by nedsaid
Tue Jul 15, 2014 10:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: What To Do During A Correction In Stocks?
Replies: 31
Views: 3664

Re: Does anyone expect tilts to *under*perform?

One more comment I will make on all of this. If a $20 bill was left for me on my desk at work every morning when I got to work and it was replaced the next morning with a new $20 bill; like Pavlov's dogs or B.F. Skinner's pigeons I would get smart very fast and pocket the $20 bill each time. Particu...
by nedsaid
Mon Jul 14, 2014 12:17 am
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: Does anyone expect tilts to *under*perform?

StLutz, I am going to give you a similar answer to what I gave Steve_14. I built my investment portfolio with imperfect investment vehicles. I used imperfect information to make the decisions to buy my imperfect investment vehicles to in turn build my imperfect investment portfolio. Then I make proj...
by nedsaid
Sun Jul 13, 2014 11:50 pm
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: Economist: The $15 trillion question

One reason that people are not annuitizing their nest eggs is the low level of interest rates. With bonds yielding 2-3 percent the payouts from a single premium immediate annuity are not what they used to be. I think this might be one reason that the defined benefit plans are failing. Interest rates...
by nedsaid
Sun Jul 13, 2014 10:58 pm
 
Forum: Investing - Theory, News & General
Topic: Economist: The $15 trillion question
Replies: 5
Views: 2391

Re: a close look at value and momentum

I do own the Vanguard Small Cap Value ETF. I checked Morningstar and the stylebox has the "Small Value" fund as 41% mid cap. It is also 49% Value, 39% Core, and 11% Growth. So what Vanguard did was cut the small cap universe in half and call half the value index and the other half the grow...
by nedsaid
Sun Jul 13, 2014 10:45 pm
 
Forum: Investing - Theory, News & General
Topic: a close look at value and momentum
Replies: 259
Views: 16834

Re: a close look at value and momentum

Thanks Taylor for posting the performance of the Vanguard Value Index versus the Vanguard Growth Index. I was providing real life data from funds that I either own or have owned in the past. So certainly the Growth fund that I cited had performance issues as it trailed not only the S&P 500 but a...
by nedsaid
Sun Jul 13, 2014 7:49 pm
 
Forum: Investing - Theory, News & General
Topic: a close look at value and momentum
Replies: 259
Views: 16834

Re: Investing is starting to get boring

Investing is supposed to be boring. One of Nedsaid's rules of investing is "Boring is good, boring that pays a dividend is even better." It is rule number 2. If you are looking for excitement, there are better places to get a thrill than from your investments. Investing should be as exciti...
by nedsaid
Sun Jul 13, 2014 6:59 pm
 
Forum: Investing - Help with Personal Investments
Topic: Investing is starting to get boring
Replies: 39
Views: 3861

Re: Knowledge gaps + anxiety = shame; gender and investing

I do think there are differences between sexes and from what I understand that recent brain science underscores that. There really is a difference between the male and female brain. One is not better than the other but there are differences. At the same time, we should not stereotype people. I think...
by nedsaid
Sun Jul 13, 2014 6:42 pm
 
Forum: Investing - Theory, News & General
Topic: Knowledge gaps + anxiety = shame; gender and investing
Replies: 75
Views: 5071

Re: a close look at value and momentum

Now lets compare the Value Fund at my favorite mutual fund company with its Growth fund. The Value fund was started September 1, 1993. The Growth Fund actually goes back to 1959. But we will start with the 1993 date. Growth of $10,000 Value $76,615.56 S&P 500 $63,806.98 Growth $47,745.23 The Gro...
by nedsaid
Sun Jul 13, 2014 5:32 pm
 
Forum: Investing - Theory, News & General
Topic: a close look at value and momentum
Replies: 259
Views: 16834

Re: a close look at value and momentum

The turnover at the Value fund at my favorite mutual fund company is now 49%. In other years, it used to be over 100%. I think this fund family is reducing its turnover in most of its funds. They came to the realization that this was a drag on their returns. I have an aggressive growth mid-cap fund ...
by nedsaid
Sun Jul 13, 2014 5:15 pm
 
Forum: Investing - Theory, News & General
Topic: a close look at value and momentum
Replies: 259
Views: 16834

Re: a close look at value and momentum

I just went to Morningstar and took the plain vanilla Value fund at my favorite Mutual Fund Company and looked at a couple different time periods. From September 1st, 1993 until now, $10,000 invested in this fund grew to $76,615.57 outpacing the S&P 500 which grew to $63,758.76. So that is a 20 ...
by nedsaid
Sun Jul 13, 2014 4:59 pm
 
Forum: Investing - Theory, News & General
Topic: a close look at value and momentum
Replies: 259
Views: 16834

Re: Does anyone expect tilts to *under*perform?

StLutz, there is actually a good discussion in the Value and Momentum thread. Berntson and JoMoney are having their usual friendly sparring In that thread. JoMoney believes there is a premium in performance for the stocks that show consistent growth over time. It sounded like he believes in the &quo...
by nedsaid
Sun Jul 13, 2014 4:28 pm
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: A Look at Current P/E Ratios

Steve, I do take into consideration forward P/E's. The fact of the matter is that everything in the investment world is flawed. One has to do their best to separate the wheat from the chaff, the good information from the bad. I could be so skeptical about everything that I read that I would just ana...
by nedsaid
Sun Jul 13, 2014 11:43 am
 
Forum: Investing - Theory, News & General
Topic: A Look at Current P/E Ratios
Replies: 54
Views: 6073

Re: A Look at Current P/E Ratios

Berntson, I want to point out that my portfolio construction is not necessarily from my dazzling brilliance. Frankly, I fell into a lot of this stuff. My brokerage IRA started when a friend went into the brokerage business. My investments with my favorite mutual fund company started because their pe...
by nedsaid
Sun Jul 13, 2014 11:30 am
 
Forum: Investing - Theory, News & General
Topic: A Look at Current P/E Ratios
Replies: 54
Views: 6073

Re: A Look at Current P/E Ratios

I also said Steve that it would be prudent for investors to take both forward and backward P/E's into consideration. You are correct in your observation about earnings estimates being overly optimistic and biased. We live in an imperfect world and so we work with what we have which is flawed and imp...
by nedsaid
Sun Jul 13, 2014 11:10 am
 
Forum: Investing - Theory, News & General
Topic: A Look at Current P/E Ratios
Replies: 54
Views: 6073

Re: Does anyone expect tilts to *under*perform?

Nisiprius, your posts are brilliant. I laughed as you poked fun at factor based investing. Humor is a great way to make a point. I agree with one of your points about investor behavior. "Behavioral shakeout" is an excellent way to describe what I believe will happen. I am still tilting. I ...
by nedsaid
Sun Jul 13, 2014 11:02 am
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: a close look at value and momentum

JoMoney and Berntson keep bring up ideas that get me thinking. This reminds me of Warren Buffett's comment that when you are buying a stock or a bond that really what you are buying are cash flows. So in this context, the "duration" of stocks makes much more sense. It would make sense that...
by nedsaid
Sun Jul 13, 2014 10:54 am
 
Forum: Investing - Theory, News & General
Topic: a close look at value and momentum
Replies: 259
Views: 16834

Re: A Big Thank You After Visiting Accountant

I very much enjoyed reading the original post in this thread by assumer. I am now 55 years old and to my surprise I am much the same person that I was 30 years ago. I also wonder when I am going to get all this wisdom that age is supposed to give you. Unfortunately, a person can be as much of a fool...
by nedsaid
Sun Jul 13, 2014 10:16 am
 
Forum: Local Chapters and Bogleheads Community
Topic: A Big Thank You After Visiting Accountant
Replies: 17
Views: 2486

Re: Rebalancing Band for an asset class based on volatility

This is an excellent question which is a way of saying that I don't know. But I will bump your thread in the hope that others will respond. I am sure someone has done some thinking about this.
by nedsaid
Sun Jul 13, 2014 10:03 am
 
Forum: Investing - Theory, News & General
Topic: Rebalancing Band for an asset class based on volatility
Replies: 12
Views: 1198

Re: Does anyone expect tilts to *under*perform?

I am not convinced that value is a risk story. We get told that Value stocks are riskier but mostly the proof is narrative. That is pretty much the "bad company" argument. One of the really respected Bogleheads took a bit of issue with my argument that the value premium is based on human b...
by nedsaid
Sun Jul 13, 2014 9:57 am
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: A Look at Current P/E Ratios

There have been a lot of great points raised on this thread. Unfortunately, Price/Earnings ratios are in the eye of the beholder. They are not a totally objective measure of valuation since there are so many ways to calculate them. I tend to look at the P/E's based on future estimated earnings which...
by nedsaid
Sun Jul 13, 2014 9:41 am
 
Forum: Investing - Theory, News & General
Topic: A Look at Current P/E Ratios
Replies: 54
Views: 6073

Re: International exposure: does it really help?

If I were Canadian, I would have feelings of patriotism and would want to invest more than 4% of my money in my own country. But at the same time, I would not want too much home country bias. This is why I floated the idea of an "anglosphere" portfolio for your "domestic" equitie...
by nedsaid
Sun Jul 13, 2014 9:04 am
 
Forum: Investing - Theory, News & General
Topic: International exposure: does it really help?
Replies: 75
Views: 7344

Re: Does anyone expect tilts to *under*perform?

My expectation is that the small/value tilts will probably experience underperformance for a while as they did in the 1990's. There is some difference in the way value behaves and how growth behaves. Ditto for small cap and large cap. So you have a bit of a teeter-totter effect in that one tends to ...
by nedsaid
Sun Jul 13, 2014 8:50 am
 
Forum: Investing - Theory, News & General
Topic: Does anyone expect tilts to *under*perform?
Replies: 84
Views: 5283

Re: International exposure: does it really help?

Longinvest, since you live in Canada and your country has a small share of the world stock market I would certainly not have the bulk of my stock market investments in Canada. The Canadian stock market is not well diversified and as I recall is dominated by four sectors. I would look at my domestic ...
by nedsaid
Sat Jul 12, 2014 11:41 am
 
Forum: Investing - Theory, News & General
Topic: International exposure: does it really help?
Replies: 75
Views: 7344

Re: Howard Gold: Emerging Markets are Still Lousy Investment

This is why I believe in "core" investing. For most of your portfolio, buy the good stuff. That is the broad US and International Stock Indexes and I add in some blue chip individual stocks. I own good value funds. Investment grade, intermediate term bonds for the bulk of my fixed income i...
by nedsaid
Sat Jul 12, 2014 11:19 am
 
Forum: Investing - Theory, News & General
Topic: Howard Gold: Emerging Markets are Still Lousy Investment
Replies: 4
Views: 1398

Re: A Look at Current P/E Ratios

Excellent discussion of price/earnings ratios. I am a small and value tilter but I don't overdo it. Reading this and similar threads has made me more cautious and I am not advising people to pile into "Larry" portfolios at this time. The small/value tilt is a long-term strategy and I wonde...
by nedsaid
Sat Jul 12, 2014 10:49 am
 
Forum: Investing - Theory, News & General
Topic: A Look at Current P/E Ratios
Replies: 54
Views: 6073

Re: Financial Advice for People Who Aren’t Rich

I might look into this at some point. Now I am mostly self-managing my investments though I work with an independent broker with part of my retirement. I figure two heads are better than one.
by nedsaid
Fri Jul 11, 2014 11:18 pm
 
Forum: Investing - Theory, News & General
Topic: Financial Advice for People Who Aren’t Rich
Replies: 9
Views: 3042

Re: Family member as Financial Advisor

I think what I would do is keep your account with your Dad and start a new account with Vanguard. Keep the peace and keep your Dad happy. An alternative would be to stay with your Dad and buy ETF indexes or pay the fee and buy index funds. I like the first alternative the best. No need to yank the a...
by nedsaid
Fri Jul 11, 2014 11:09 pm
 
Forum: Investing - Help with Personal Investments
Topic: Family member as Financial Advisor
Replies: 35
Views: 2947

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

Investors should pay attention to valuations and it is okay to be cautious when stocks look expensive. The problem is that stocks often look expensive during bull markets. If you get too nervous and get out of stocks you might miss out on the best years of stock market advances. An investor could ha...
by nedsaid
Fri Jul 11, 2014 9:29 am
 
Forum: Investing - Theory, News & General
Topic: Is Market on "Wrong Side of History"?
Replies: 22
Views: 2693
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