Search found 426 matches

by rmelvey
Wed Jul 29, 2015 11:37 am
Forum: Investing - Theory, News & General
Topic: Are equities really as risky as anyone thinks?
Replies: 225
Views: 9543

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: 225
Views: 9543

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: 225
Views: 9543

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: 16
Views: 1626

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: 6792

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: 6792

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: 6792

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: 6792

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: 211

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: 498

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: 980

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: 680

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: 386

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: 386

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: 9171

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: 771
Views: 122254

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: 771
Views: 122254

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: 771
Views: 122254

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: 771
Views: 122254

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: 771
Views: 122254

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: 998

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: 784

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: 18616

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: 5509

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: 5509

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: 1018

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: 5285

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: 4078

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: 1006

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: 2105

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: 2105

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: 2176

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: 3487

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: 598

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: 12011

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: 1368

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: 939

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.
by rmelvey
Fri Jun 21, 2013 12:39 am
Forum: Investing - Theory, News & General
Topic: Saving money for ~1 year - how to invest?
Replies: 31
Views: 2323

Re: Saving money for taxes - invest it?

You should invest it... but in T-Bills :wink:
by rmelvey
Thu Jun 20, 2013 9:18 am
Forum: Investing - Theory, News & General
Topic: The Perfect Storm for the Permanent Portfolio?
Replies: 5
Views: 809

Re: The Perfect Storm for the Permanent Portfolio?

The thing is, in the short run tapering is no good for any asset except for cash. No major asset class is up today. The PP can not work magic. For someone that is in a PP, departing from a PP almost necessarily means moving to something less diversified which runs the risk of blowing up later.
by rmelvey
Tue Jun 18, 2013 1:27 pm
Forum: Investing - Theory, News & General
Topic: Does your bond fund own any stocks?
Replies: 6
Views: 616

Re: Does your bond fund own any stocks?

I think an even sneakier example of this is when bond funds own bonds that act like stocks because the credit quality is so low. Makes it really hard to understand your risk allocation.
by rmelvey
Tue Jun 11, 2013 3:02 am
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9204

Re: How Commodities Can Help a Portfolio

Another important thing to keep in mind is that gold and silver have been perfectly investable in since the early 1970s. I think squabbling over the commodity indices is missing the bigger picture. One can use gold and silver as a proxy for the commodity universe and understand the diversification s...
by rmelvey
Fri Jun 07, 2013 2:10 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9204

Re: How Commodities Can Help a Portfolio

rmelvey, Can you do this for commodities? And explain how, if one ignores ex-post returns, one can be sure the macro theory was correct, and applied correctly? use simple macro theory to understand the diversifying properties of certain investments, ignoring their ex-post correlation coefficients W...
by rmelvey
Fri Jun 07, 2013 1:48 pm
Forum: Investing - Theory, News & General
Topic: Today's WSJ: Old School Stock Picker Struggles w Index Craze
Replies: 17
Views: 2389

Re: Today's WSJ: Old School Stock Picker Struggles w Index C

Active management is what makes indexing work. Rick Ferri Hah, much more succinct than my post :) There are few arbitrage opportunities because people think that there are arbitrage opportunities. Contrarily, if everyone thought that there were no arbitrage opportunities, they would be plentiful. T...
by rmelvey
Fri Jun 07, 2013 1:29 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9204

Re: How Commodities Can Help a Portfolio

I feel like most of the commodity detractors in this thread here haven't internalized the difference between a supply shock and a demand shock. Citing the 2008 crisis as a reason to not hold commodities is a prime exhibit of this. If you hold the stock market: -bonds offer a demand shock hedge -comm...
by rmelvey
Fri Jun 07, 2013 1:21 pm
Forum: Investing - Theory, News & General
Topic: Today's WSJ: Old School Stock Picker Struggles w Index Craze
Replies: 17
Views: 2389

Re: Today's WSJ: Old School Stock Picker Struggles w Index C

Personally, I think that active managers play a crucial role in keeping the markets sane. I especially respect value investors, who IMO, help the markets function as they are supposed to. With that said, I index because it makes sense from a cost perspective. When you index, you basically have all o...
by rmelvey
Wed Jun 05, 2013 7:51 pm
Forum: Investing - Theory, News & General
Topic: Heavy Reading
Replies: 12
Views: 1673

Re: Heavy Reading

If you want to dive really deep into the non-normality of markets than I would check out Benoit Mandelbrot's book "The (mis)Behavior of markets." He proposes a way of describing the stock market using fractal mathematics. In one of the final models he proposed before he died, he suggested ...
by rmelvey
Wed Jun 05, 2013 12:18 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9204

Re: How Commodities Can Help a Portfolio

Hi Larry, Since monetary policy has such a huge affect on the bond market (explicitly altering the short end of the curve, and implitly changing the long end because of pure expectations hypothesis), couldn't one make the argument that gold is the better inflation hedge in the context of a diversifi...
by rmelvey
Tue Jun 04, 2013 2:00 pm
Forum: Investing - Theory, News & General
Topic: Holding all world currencies in a cap-weighted index fund
Replies: 3
Views: 329

Re: Holding all world currencies in a cap-weighted index fun

Well, I am not sure the OP is referring to holding money under the mattress. Probably at very least held in interest bearing cash equivalents. BWZ is the best proxy for an international ST debt portfolio, although you can't backtest it very far. Personally I wouldn't count on currency diversificatio...
by rmelvey
Tue Jun 04, 2013 12:09 pm
Forum: Investing - Theory, News & General
Topic: How Commodities Can Help a Portfolio
Replies: 129
Views: 9204

Re: How Commodities Can Help a Portfolio

Hi Larry, I just did a little messing around in simba's spreadsheet and I would appreciate your thoughts... I looked at excess returns (above the T-Bill return) for stocks, commodities, gold, and inflation. With respect to inflation (in excess of the T-Bill rate) gold has a beta of 5.4, commodities ...
by rmelvey
Mon Jun 03, 2013 1:39 pm
Forum: Investing - Theory, News & General
Topic: Argument for a 100% stock allocation for 20 yr horizon
Replies: 112
Views: 8906

Re: Argument for a 100% stock allocation for 20 yr horizon

Yes I think it varies depending upon the job/field. For most young people the present value of their human capital is the most valuable asset they own. I think it makes sense to get a rough grasp on the approximate equity beta of their human capital before deciding on a stock/bond mix. For example, ...

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