Search found 439 matches

by rmelvey
Fri Aug 14, 2015 8:51 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3720

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

Well, I think calculating the standard deviations of one year returns is still relevant from a liquidity perspective. Yes you might own long duration bonds (and one could also argue that stocks are a long duration asset, a risky perpetuity) but sometimes you need to use the money sooner than anticip...
by rmelvey
Fri Aug 14, 2015 7:48 am
Forum: Personal Finance (Not Investing)
Topic: General Finance Strategies for Upper Middle Class
Replies: 33
Views: 5382

Re: General Finance Strategies for Upper Middle Class

Ibonds are a great deal for the middle class investor. Also timing the purchase of ee bonds to coincide with kids college expenses or the start of your retirement.
by rmelvey
Thu Aug 13, 2015 1:11 pm
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3720

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

The sharpe ratio is only a really valuable tool if it reflects the true cost of borrowing for the investor. I wonder how many analyses would change if using a more realistic margin rate for the individual investor. If properly adjusted I think that longer duration bonds would play a larger role in s...
by rmelvey
Thu Aug 13, 2015 12:54 pm
Forum: Investing - Help with Personal Investments
Topic: 401K vs Taxable Acct.
Replies: 18
Views: 1912

Re: 401K vs Taxable Acct.

Don't forget that you can roll over this 401k once you leave the employer. If you don't max out the 401k now, you won't be able to go back and increase your contributions beyond the limit. Worst case, why not just leave the money in the 401k's short term reserve fund? Then when you leave you can buy...
by rmelvey
Wed Aug 12, 2015 10:17 am
Forum: Investing - Theory, News & General
Topic: Cap-weight indexers, how do you explain these graphs?
Replies: 64
Views: 3505

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

The invention of the index fund had very little to do with EMH. In fact, Bogle didn't even know about EMH until 10 years after his creation of the index fund. EMH and indexing have a long tight history. The Wells Fargo S&P 500 fund, launched 2 years prior to Bogle starting his index fund, was d...
by rmelvey
Wed Aug 12, 2015 9:42 am
Forum: Investing - Theory, News & General
Topic: Cap-weight indexers, how do you explain these graphs?
Replies: 64
Views: 3505

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

The invention of the index fund had very little to do with EMH. In fact, Bogle didn't even know about EMH until 10 years after his creation of the index fund. The whole idea was to ensure that you do better than average. That is the timeless aspect of indexing and if that's what you care about (I do...
by rmelvey
Wed Aug 12, 2015 9:21 am
Forum: Investing - Theory, News & General
Topic: Cap-weight indexers, how do you explain these graphs?
Replies: 64
Views: 3505

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

Everyone is different, but I personally care about my wealth relative to others. That is why I prefer cap weighted indexing. Secondly, your graphs show the past but not the future. Of course I wouldn't care about tracking error if I knew I could get a much better risk adjusted return with some other...
by rmelvey
Wed Aug 12, 2015 9:08 am
Forum: Investing - Theory, News & General
Topic: Cap-weight indexers, how do you explain these graphs?
Replies: 64
Views: 3505

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

The whole cap weighted indexing argument is best explained when using the language of statistics. I cap weight so that I can capture the population. Owning the population is the only way to ensure that you get your fair share of the market's returns, and because indexing has the lowest expense ratio...
by rmelvey
Tue Aug 11, 2015 2:52 pm
Forum: Investing - Theory, News & General
Topic: CDs vs. treasury bonds
Replies: 99
Views: 7192

Re: CDs vs. treasury bonds

Okay thank you everyone. It seems advisable to make brokered part of the "deep" bond allocation. Part of me is leaning towards a split of vanguard intermediate term corporate and 10 year brokered CDs. I like the simplicity and liquidity of TBM but it's hard to ignore the large spread on CD...
by rmelvey
Tue Aug 11, 2015 12:57 pm
Forum: Investing - Theory, News & General
Topic: CDs vs. treasury bonds
Replies: 99
Views: 7192

Re: CDs vs. treasury bonds

Does anyone here have experience with the typical bid / ask spread of 10 year CDs on Vanguard Brokerage Services? They have a 10 year Goldman Sach's CD yielding 3.05%. Adjusted for slightly longer duration this is still a significant spread over TBM. Only real reason to hold TBM over this would be l...
by rmelvey
Tue Aug 11, 2015 7:42 am
Forum: Investing - Theory, News & General
Topic: Does higher volatility make long-term bonds + stocks better than intermediate-term bonds + stocks?
Replies: 54
Views: 3720

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

Yes I have found the same. I see long bonds as offering a form of implicit leverage. If I could borrow at the risk free rate then levering an intermediate portfolio would make more sense, but for the average retail investor the margin rates are too high! This is all in the context of a stock heavy p...
by rmelvey
Tue Aug 04, 2015 10:29 pm
Forum: Investing - Theory, News & General
Topic: TLT+Gold/Silver vs Total Bond
Replies: 9
Views: 558

Re: TLT+Gold/Silver vs Total Bond

Both gold and Ltt are great diversifiers of equities. You could also do age in that combo although I would stop once you get to 66% (66 years old) and you basically end up retiring with a Harry Browne PP.
by rmelvey
Tue Aug 04, 2015 9:10 pm
Forum: Investing - Theory, News & General
Topic: Pfau: Why Bond Funds Don't Belong in Retirement Portfolios
Replies: 119
Views: 10844

Re: Pfau: Why Bond Funds Don't Belong in Retirement Portfolios

Spia have long duration so while the mortality credits are nice the strategy might not do as well if interest rates and inflation get traction upward. Maybe adding some commodities and short term credit could help as well.
by rmelvey
Wed Jul 29, 2015 11:37 am
Forum: Investing - Theory, News & General
Topic: Are equities really as risky as anyone thinks?
Replies: 271
Views: 14669

Re: Are equities really as risky as anyone thinks?

I keep coming back to the Mike Tyson quote "Everyone has a plan until they get punched in the face."

I don't think OP has been rocked by the market before and 100% equities is fighting with your gloves down. Nothing in investing is certain, not even your time horizon.
by rmelvey
Wed Jul 29, 2015 10:20 am
Forum: Investing - Theory, News & General
Topic: Are equities really as risky as anyone thinks?
Replies: 271
Views: 14669

Re: Are equities really as risky as anyone thinks?

Just be aware that sentiment is very positive right now. Lot's of people are greedy. If you haven't gone through a large decline before it isn't something that can be learned in a book. When your portfolio gets larger it starts translating into years of income. Losing 5 years of income, even if in r...
by rmelvey
Wed Jul 29, 2015 10:04 am
Forum: Investing - Theory, News & General
Topic: Are equities really as risky as anyone thinks?
Replies: 271
Views: 14669

Re: Are equities really as risky as anyone thinks?

How old are you? Have you been through a 50% decline that resulted in years of lost earnings?
by rmelvey
Wed Jul 29, 2015 9:50 am
Forum: Personal Finance (Not Investing)
Topic: CFA Exam Results
Replies: 19
Views: 2075

CFA Exam Results

CFA exam results came out yesterday. Did anyone on this forum participate? I just passed level 2 and am excited to take level 3! I think the program material is wonderful and it is a nice alternative to a very expensive MBA. The books are quite well written and generally support the the Boglehead's ...
by rmelvey
Sun Jul 19, 2015 10:15 pm
Forum: Investing - Help with Personal Investments
Topic: Why invest in BNDX's when 30 day SEC yield = 0.76%.
Replies: 102
Views: 7139

Re: Why invest in BNDX's when 30 day SEC yield = 0.76%.

Yes you can hedge that way but you don't pick up any forward points if the short term interest rates between the currencies are the same. I'm kind of disappointed by this. Thanks for pointing it out Kevin
by rmelvey
Sun Jul 19, 2015 9:45 pm
Forum: Investing - Help with Personal Investments
Topic: Why invest in BNDX's when 30 day SEC yield = 0.76%.
Replies: 102
Views: 7139

Re: Why invest in BNDX's when 30 day SEC yield = 0.76%.

Hmm yes they are hedging using one month contracts so if the short end of the curve is the same across currencies then you buy longer dated debt then there is kind of a mismatch there.
by rmelvey
Sun Jul 19, 2015 8:44 pm
Forum: Investing - Help with Personal Investments
Topic: Why invest in BNDX's when 30 day SEC yield = 0.76%.
Replies: 102
Views: 7139

Re: Why invest in BNDX's when 30 day SEC yield = 0.76%.

This note from vanguard explains why the quoted yields are not apples to apples: https://personal.vanguard.com/pdf/ISGHC.pdf Vanguard calls it "hedge return" and within that hedge return component (along with the currency fluctuations) are the forward points that international investors de...
by rmelvey
Sun Jul 19, 2015 7:01 pm
Forum: Investing - Help with Personal Investments
Topic: Why invest in BNDX's when 30 day SEC yield = 0.76%.
Replies: 102
Views: 7139

Re: Why invest in BNDX's when 30 day SEC yield = 0.76%.

I don't think the sec yield reflects the forward points you pick up from hedging back to the dollar. Generally speaking hedged bond yields are very close to domestic ones when you add in the forward points. Read up on international interest rate parity for more details
by rmelvey
Sat Jul 11, 2015 9:04 am
Forum: Investing - Theory, News & General
Topic: Corporate Capital Structure Index
Replies: 1
Views: 216

Corporate Capital Structure Index

We talk a lot about indexing within an asset class (i.e. holding all equities using market cap weighting) but not very much time thinking about indexing between asset classes. Corporations finance their operations using both stocks/bonds. Thus the returns to the firm are the sum of the returns on th...
by rmelvey
Wed Jul 08, 2015 10:41 am
Forum: Investing - Theory, News & General
Topic: Portfolios for Intermediate Term Investing
Replies: 3
Views: 538

Re: Portfolios for Intermediate Term Investing

I have been thinking about this a lot lately. I basically want a supercharged bank account (albeit with more risk). When I look at the Vanguard Target Retirement Income trust I really like the risk profile. The portfolio is conservative enough where I would feel comfortable splitting my taxable mone...
by rmelvey
Tue Jun 23, 2015 2:45 pm
Forum: Investing - Theory, News & General
Topic: Cyclical EDV holdings? [Vanguard Extended Duration ETF]
Replies: 10
Views: 1033

Re: Cyclical EDV holdings?

I can't speak to the market timing aspect but when holding long bonds combined with stocks be aware that your portfolio's Achille's heel is a supply shock inflation. This is when the supply curve unexpectedly shifts left. If you want to hedge that the long bond/stock portfolio pairs well with CCF fu...
by rmelvey
Wed May 27, 2015 10:13 am
Forum: Investing - Help with Personal Investments
Topic: Best options when Roth is not an option
Replies: 10
Views: 687

Re: Best options when Roth is not an option

Do you have a ROTH 401k available through your employer? Those don't have the income limit
by rmelvey
Tue May 26, 2015 11:33 am
Forum: Personal Finance (Not Investing)
Topic: CDs between Bank Accounts
Replies: 4
Views: 390

Re: CDs between Bank Accounts

Good points. The transfers from Ally up to a year in advance seems perfect. Thanks for the thoughts everyone
by rmelvey
Tue May 26, 2015 10:40 am
Forum: Personal Finance (Not Investing)
Topic: CDs between Bank Accounts
Replies: 4
Views: 390

CDs between Bank Accounts

Hi everyone, I get a large portion of my total compensation in annual lump sums. I want a disciplined way to spread this over the year. Ideally I want to purchase CDs that mature each month and have them deposit into my Bank of America checking account. Bank of America's yields are pretty bad though...
by rmelvey
Fri May 15, 2015 10:40 am
Forum: Investing - Theory, News & General
Topic: Best Asset Allocation if you've "won the game"
Replies: 86
Views: 9275

Re: Best Asset Allocation if you've "won the game"

I really like the vanguard target retirement income fund. The nice thing about having it all in one fund is that you don't see the individual pieces moving which is easier on your psychology. If you want go the extra mile something like 90% vanguard retirement income and 10% gold is a pretty bulletp...
by rmelvey
Thu May 14, 2015 8:03 am
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 782
Views: 125791

Re: Should I use margin to buy a balanced fund?

Hi rob thanks for the expedited education/wisdom I really appreciate it. Are you saying that you didn't have to pay interest on the borrowed cash used to settle the futures because you had collateral in the form of stocks/bonds? Or is the money borrowed in the securities account not accruing interes...
by rmelvey
Thu May 14, 2015 6:53 am
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 782
Views: 125791

Re: Should I use margin to buy a balanced fund?

Comeinvest,

After more research I don't think it works the way I had hoped. I think I would need to use futures for all three positions which is unfortunately much less tax efficient.
by rmelvey
Wed May 13, 2015 7:49 pm
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 782
Views: 125791

Re: Should I use margin to buy a balanced fund?

Hmm good point I hadn't thought about daily cash settlement. I guess the best way would be futures contracts for all three positions so I always had enough cash.
by rmelvey
Wed May 13, 2015 5:46 pm
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 782
Views: 125791

Re: Should I use margin to buy a balanced fund?

I have never traded futures so I am still trying to figure out all of the pitfalls. It was my understanding that as long as I have enough collateral to cover the margin requirements I would be fine. Even if gold went to zero in that scenario as long as (hypothetically) my other assets stayed flat I ...
by rmelvey
Wed May 13, 2015 5:09 pm
Forum: Investing - Theory, News & General
Topic: Should I use margin to buy a balanced fund?
Replies: 782
Views: 125791

Re: Should I use margin to buy a balanced fund?

I have contemplated a leveraged risk parity strategy as well. I am exploring using options express as a broker because you can buy stocks, bonds, and futures through them (which is great because you can use your stocks and bonds as the collateral). I am going to start paper trading a strategy that i...
by rmelvey
Fri Mar 27, 2015 8:59 pm
Forum: Investing - Theory, News & General
Topic: Interest in multi asset class investing and crises
Replies: 11
Views: 1008

Re: Interest in multi asset class investing and crises

True of weak diversifers, but high quality long duration bonds typically have a positive skew in crises that offsets equities negative skew. Just look at a chart of tlt against vti. A nearly perfect deflation hedge
by rmelvey
Thu Jan 08, 2015 9:00 pm
Forum: Investing - Theory, News & General
Topic: a good etf total return website
Replies: 3
Views: 793

Re: a good etf total return website

I love etfreplay I just wish they had more tickers
by rmelvey
Tue Jan 06, 2015 2:11 pm
Forum: Investing - Theory, News & General
Topic: Can you make money betting on random coin flips?
Replies: 296
Views: 18743

Re: Can you make money betting on random coin flips?

Chiming in (I made the post with the chart.) I will make a small twist to the game that illustrates why focusing on geometric returns (through positioning sizing / managing volatility) is crucial. Imagine a game where you you put up $1 dollar with a 50/50 chance of it going to $3 or going to $0. Onc...
by rmelvey
Tue Dec 09, 2014 10:14 am
Forum: Investing - Theory, News & General
Topic: Harvey paper says re-balancing adds risk
Replies: 73
Views: 5545

Re: Harvey paper says re-balancing adds risk

when stocks are moving up, rebalancing decreases risk (moving stocks to bonds). When stocks are moving down, rebalancing adds risk (moving bonds to stocks). As pointed out upthread, the goal is to maintain risk at a fairly constant level. You are not getting to the heart of the idea though because ...
by rmelvey
Tue Dec 09, 2014 10:10 am
Forum: Investing - Theory, News & General
Topic: Harvey paper says re-balancing adds risk
Replies: 73
Views: 5545

Re: Harvey paper says re-balancing adds risk

I rebalance religiously, but I understand the argument that it adds risk during an extreme environment. If any one of the assets goes to zero the whole portfolio approaches zero as you keep shoveling money into the asset that is declining. Think about a portfolio that is 50% Russia and 50% US stock ...
by rmelvey
Tue Nov 25, 2014 8:47 pm
Forum: Investing - Help with Personal Investments
Topic: Commodity Index Fund(s)
Replies: 7
Views: 1023

Re: Commodity Index Fund(s)

The only practical commodities to hoard are gold and silver because they don't spoil and take up minimal storage space. Everything else should really be done through futures. Separately, don't try to get caught up in the marketing of commodity "index" funds. They don't exist. The only prod...
by rmelvey
Wed Oct 29, 2014 8:39 pm
Forum: Investing - Theory, News & General
Topic: A Backtest of the Dividend Growth Model, 1871-2010
Replies: 70
Views: 5353

Re: A Backtest of the Dividend Growth Model, 1871-2010

TJSI,

Earnings can definitely be incorporated into the DDM.

ROE*(1-Payout Ratio) = Sustainable Growth Rate
EPS*Payout= Dividend per Share

Yes you are taking the PV of the dividend cash flows, but they are derived from earnings using the payout ratio and ROE.
by rmelvey
Wed May 21, 2014 7:48 pm
Forum: Investing - Theory, News & General
Topic: commodities and multi-asset class portfolios
Replies: 65
Views: 4150

Re: commodities and multi-asset class portfolios

When calculating the skewness of the portfolio are you doing it based off of the log returns? If not, a 5% loss is not equivalent to a 5% gain and so it makes sense that one would prefer positive skew because large negative returns kill the effect of compounding. However, if doing this based off of ...
by rmelvey
Wed Jan 01, 2014 10:46 am
Forum: Investing - Theory, News & General
Topic: (In)efficient markets, utility curves, and investing risk
Replies: 16
Views: 1007

Re: (In)efficient markets, utility curves, and investing ris

I think putting more can into equities for longer time horizons can be justified if you go outside of the EMH. You can break down equity returns into the investment return (dividend payments) and the speculative return (changes in the multiple paid for a dollar of dividends). The actual investment r...
by rmelvey
Tue Dec 31, 2013 11:11 am
Forum: Investing - Theory, News & General
Topic: Rebalancing the Permanent Portfolio
Replies: 28
Views: 2115

Re: Rebalancing the Permanent Portfolio

That article has its facts wrong. The PP was never down 15% in 2013. I wouldn't trust their opinion on the portfolio if they can't calculate its returns properly.
by rmelvey
Tue Dec 31, 2013 10:25 am
Forum: Investing - Theory, News & General
Topic: Rebalancing the Permanent Portfolio
Replies: 28
Views: 2115

Re: Rebalancing the Permanent Portfolio

I am using the PP and have been for the last 3 years. Today I sold some stocks, bought gold, and bought LTT. It does feel contrarian, but I am okay with that. The portfolio didn't have a great year, but every strategy has some down years. If anyone out there is rebalancing into gold, take a look at ...
by rmelvey
Sat Dec 28, 2013 5:21 pm
Forum: Investing - Help with Personal Investments
Topic: The Case for High Yield Bonds
Replies: 24
Views: 2193

Re: The Case for High Yield Bonds

I don't own them, but they are part of the market portfolio. Not owning them is somewhat of a tilt. I can see the benefits (mainly peace of mind that you are getting your fair share) from owning the market portfolio which would warrant a representative allocation to HY bonds.
by rmelvey
Tue Jul 23, 2013 7:33 pm
Forum: Personal Finance (Not Investing)
Topic: CFA Results
Replies: 30
Views: 3493

CFA Results

Anyone else take the CFA? Results came out today. I passed level one :D
by rmelvey
Fri Jul 12, 2013 11:46 am
Forum: Personal Consumer Issues
Topic: Suggestions for Switzerland trip
Replies: 7
Views: 601

Re: Suggestions for Switzerland trip

I am in Zurich right now. So far my favorite part of the city is the old industrial district that is becoming more of an artist spot. Lots of cool shops in the arches of the old viaduct.
by rmelvey
Fri Jul 12, 2013 2:33 am
Forum: Personal Consumer Issues
Topic: [Can you recommend]A spectacular movie, and a terrible movie
Replies: 161
Views: 12097

Re: A spectacular movie, and a terrible movie

I thought Crash was very terrible as well. The worst part is that I was telling my sociology professor how bad the acting and premise was.. turns out she loved it! :|
by rmelvey
Sat Jul 06, 2013 5:24 am
Forum: Investing - Theory, News & General
Topic: TIPS question
Replies: 12
Views: 1373

Re: TIPS question

hudson, There might be a risk premium associated with taking the inflation risk. So if inflation comes in just as expected, the nominal bond would outperform. With that said, TIPS are fantastic for someone who is saving for retirement. They are the closest thing to a "risk free" asset so I...
by rmelvey
Wed Jul 03, 2013 5:51 pm
Forum: Investing - Help with Personal Investments
Topic: How do I TLH gold?
Replies: 12
Views: 942

Re: How do I TLH gold?

The gold ETFs have a totally different legal structure from GTU. They are not very close to being identical at all. That would be a good pair to swap in and out of for TLH.

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