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The Final, Definitive Thread on Rebalancing

With the market volatility of late, there have been a ton of threads about rebalancing. As a service to the Bogleheads community, I occasionally provide what I'm sure all agree are helpful and dare I say it, definitive, threads that consolidate all of the discussions into a single place so new peopl...
by stlutz
Sat Oct 18, 2014 9:04 pm
 
Forum: Investing - Theory, News & General
Topic: The Final, Definitive Thread on Rebalancing
Replies: 24
Views: 1669

Re: What tax software do you use and why

I use free fillable forms. Two reasons: a) I just have a problem paying someone to help me pay money to someone. b) I always worry about skipping things I should report (or can deduct). As such, I prefer to sit down and just read through the rules each time. At the end of the day it only take a few ...
by stlutz
Sat Oct 18, 2014 6:23 pm
 
Forum: Personal Finance (Not Investing)
Topic: What tax software do you use and why
Replies: 44
Views: 1773

Re: inefficiencies in small lot, near-term muni bonds prices

Thoughts? Since I don't always say this, I agree 100% with Larry. :sharebeer You can search some other threads about buying individual munis. There are plenty of posts that say that individuals should never ever buy an individual bond, but a there are also more complete discussions of the positives...
by stlutz
Sat Oct 18, 2014 6:05 pm
 
Forum: Investing - Theory, News & General
Topic: inefficiencies in small lot, near-term muni bonds prices?
Replies: 8
Views: 649

Re: How does Vanguard shield ETF shareholders from turnover

Anyway, if you're worried about this the simple test is to check the tracking error of the VG ETF you're considering vs the alternatives. +1. A good example to look at is corporate bond ETFs. VCIT has underperformed its benchmark by 10 basis points since inception, a little less than its ER. Compar...
by stlutz
Sat Oct 18, 2014 6:00 pm
 
Forum: Investing - Theory, News & General
Topic: How does Vanguard shield ETF shareholders from turnover cost
Replies: 20
Views: 1313

Re: How does Vanguard shield ETF shareholders from turnover

It doesn't cost other customers or investors money because Vanguard brokerage service is not part of the ETF or mutual fund. If they waste their time processing too many free trades for their ETFs, that doesn't reduce the NAV of any of the Vnaguard products. They might start to charge higher commis...
by stlutz
Sat Oct 18, 2014 5:56 pm
 
Forum: Investing - Theory, News & General
Topic: How does Vanguard shield ETF shareholders from turnover cost
Replies: 20
Views: 1313

Re: "I've had it" at work - how often

I guess the key must be to avoid moving into management, the mistake I made 15 long years ago For people who were in management and moved out of it, did you do it with the same employer or did you move to another company I moved into a management role a year or so ago and would like to move out. I ...
by stlutz
Sat Oct 18, 2014 5:47 pm
 
Forum: Personal Finance (Not Investing)
Topic: "I've had it" at work - how often
Replies: 80
Views: 6144

Re: How does Vanguard shield ETF shareholders from turnover

how does Vanguard protect the ETF shareholders from this issue? The bottom line answer is that in most cases they don't take any special action. The more important question, however, is whether it matters. VTI (the ETF class of VG total market) has trailed its index by .02% per year since the incep...
by stlutz
Fri Oct 17, 2014 11:55 pm
 
Forum: Investing - Theory, News & General
Topic: How does Vanguard shield ETF shareholders from turnover cost
Replies: 20
Views: 1313

Re: How will we know if value-tilting has stopped working?

Finally, for what it is worth, value stocks have been more volatile no matter what time frame you look at LOL Larry! You're just demonstrating the point the point I made earlier which you dismissed--more concentrated portfolios are more volatile than less concentrated ones. Let's look at the standa...
by stlutz
Thu Oct 16, 2014 11:56 pm
 
Forum: Investing - Theory, News & General
Topic: How will we know if value-tilting has stopped working?
Replies: 44
Views: 3017

Re: So do we care more about change in bond price or bond yi

There is nothing inheritance better or worse for a fund selling before maturity. It is just another way of increasing the duration of the fund. If you want to have two five year funds (my Fund 0-5 and Fund 1-5) to have the same maturity the Fund 0-5 would have to become a Fund 0-6. An active fund m...
by stlutz
Thu Oct 16, 2014 10:42 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 145
Views: 9825

Re: How will we know if value-tilting has stopped working?

Is it any more valid than looking at data from 1937, or from 1960, when there have been intervening, mitigating, unplanned factors? There will always be mitigating factors. Stlutz mentioned the creation of the SEC in 1937, for just one example. You can look at those as noise, or as unplanned events...
by stlutz
Thu Oct 16, 2014 10:25 pm
 
Forum: Investing - Theory, News & General
Topic: How will we know if value-tilting has stopped working?
Replies: 44
Views: 3017

Re: "The best response to market volatility"

A while back I looked at the tax-loss harvesting moves I've made and the replacement funds I chose always ended up underperforming what I sold to get the tax loss. Personal experience that demonstrates to me at least the best advice is more often than not to do nothing.
by stlutz
Thu Oct 16, 2014 9:42 pm
 
Forum: Investing - Theory, News & General
Topic: "The best response to market volatility"
Replies: 27
Views: 3169

Re: Does "substantially identical" apply to combined securit

I would read that paper I linked to up toward the top on bonds. I think it may provide some helpful guidance. For example, selling a bond with 1 year of maturity left and replacing with one with 2 years is okay; replacing a 25 year bond with a 26 year bond (from the same issuer) is not because they ...
by stlutz
Thu Oct 16, 2014 9:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: Does "substantially identical" apply to combined securities?
Replies: 31
Views: 1420

Re: How to write an effective complaint letter

BTW, have you contacted a repair shop to ask what they would charge to replace it?
by stlutz
Thu Oct 16, 2014 9:27 pm
 
Forum: Personal Consumer Issues
Topic: How to write an effective complaint letter
Replies: 27
Views: 1198

Re: How to write an effective complaint letter

For me the key has always been to a) ask for something specific; and b) be reasonable. In this case it might be asking for 1/2. I'm seeing a battery listed on Amazon right now for $73. I had (well still have, actually) a Dell Laptop that had a similar ridiculous procedure to replace a hard drive. Wh...
by stlutz
Thu Oct 16, 2014 9:26 pm
 
Forum: Personal Consumer Issues
Topic: How to write an effective complaint letter
Replies: 27
Views: 1198

Re: How will we know if value-tilting has stopped working?

First re volatility of returns. There is clearly evidence that value stocks are more volatile. 1927-2013 LG had SD of 18.7 and LV of 26.2, that's not only higher SD but 40% higher SD Couple of notes: First, F/F define their populations in a somewhat quirky way that is very unlike the way it is done...
by stlutz
Wed Oct 15, 2014 10:40 pm
 
Forum: Investing - Theory, News & General
Topic: How will we know if value-tilting has stopped working?
Replies: 44
Views: 3017

Re: "Smart" Beta - general consensus?

Here a writeup from the firm that coined the name: http://www.towerswatson.com/DownloadMedia.aspx?media={CEAA2C30-486C-4E14-A486-8FECC97C56AD} Smart beta is simply about trying to identify good investment ideas that can be structured better, whether that is improving existing beta opportunities or c...
by stlutz
Wed Oct 15, 2014 10:05 pm
 
Forum: Investing - Theory, News & General
Topic: "Smart" Beta - general consensus?
Replies: 8
Views: 504

Re: Does "substantially identical" apply to combined securit

Does anybody have links to relevant tax court rulings. From some Googling, this was the one useful paper I could find focused on fixed income: http://g2ft.com/papers/G2FTAdvancedTopicsinWashSales_SubstantiallyIdenticalBonds.pdf From what I gather, there simply aren't any rulings when it comes to sel...
by stlutz
Tue Oct 14, 2014 10:05 pm
 
Forum: Investing - Help with Personal Investments
Topic: Does "substantially identical" apply to combined securities?
Replies: 31
Views: 1420

Re: How will we know if value-tilting has stopped working?

In the part of one's investing lifetime where this question matters, the answer is that you won't know. If you are going to value tilt, you should go into it at the outset knowing that there is a very good chance that it will not work. That is the risk of making bets on particular corners of the mar...
by stlutz
Tue Oct 14, 2014 9:14 pm
 
Forum: Investing - Theory, News & General
Topic: How will we know if value-tilting has stopped working?
Replies: 44
Views: 3017

Re: So do we care more about change in bond price or bond yi

By the way, I don't think that the IRS will actually let SF1 get away with it, consistently delivering returns as capital gains by buying low coupon bonds. Something akin to the discount rules for individuals must be stopping the practice, probably the same rule that makes VFIUX amortize all discou...
by stlutz
Tue Oct 14, 2014 12:58 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 145
Views: 9825

Re: Fidelity Investments Hacked

So, is the conclusion that Fidelity is a more secure place to do business than JP Morgan? It seems like this story speaks well of Fidelity (despite complaints about their security on this forum and others).
by stlutz
Mon Oct 13, 2014 11:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Fidelity Investments Hacked
Replies: 21
Views: 2477

Re: So do we care more about change in bond price or bond yi

It is not up to stlutz to define roll-down return; but if it were, I'm sure he'd agree to the following: Roll down return is total return earned by a bond portfolio from the steepness of the yield curve using a strategy of selling bonds before maturity. This return is in excess of bond YtM and of p...
by stlutz
Mon Oct 13, 2014 11:17 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 145
Views: 9825

Re: New tires, where to buy

I bought my last set of tires from tirebuyer.com (a tirerack competitor). I guess I don't see that there is any extra effort there is in buying tires online. I placed my order, had them shipped to a garage two block from my office, I drop off the car and walk over and pick it up a couple of hours la...
by stlutz
Sun Oct 12, 2014 12:57 am
 
Forum: Personal Consumer Issues
Topic: New tires, where to buy
Replies: 36
Views: 2531

Re: So do we care more about change in bond price or bond yi

Nothing particular to add here, but just want to say thanks again to Kevin and ogd for doing all of the analysis and legwork on this! Although with all of the attention that the stultz family of mutual funds received in this thread, I think I see an ER increase the funds' future! :wink: :moneybag
by stlutz
Sat Oct 11, 2014 5:59 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 145
Views: 9825

Re: What to do about my wash sale

[quote]We need a poll to find out how many people have actually read Publication 550. [/quote]

Actually, I'd be interested in a poll comparing the percentage of bogleheads who have read it vs. the percentage of tax preparers.
by stlutz
Sat Oct 11, 2014 11:04 am
 
Forum: Investing - Help with Personal Investments
Topic: What to do about my wash sale
Replies: 22
Views: 850

Re: Why Wouldn't You Tilt To Small Value?

I invest 100% in the single stock that is at the bottom left of the M* style-box--i.e the most valuey microcap out there. My portfolio will crush all of yours. :moneybag
by stlutz
Wed Oct 08, 2014 8:50 pm
 
Forum: Investing - Theory, News & General
Topic: Why Wouldn't You Tilt To Small Value?
Replies: 52
Views: 2896

Re: A close look at factors in real world,

Thanks for the link, jaab. To me, the #1 conclusion is that momentum is the factor that is most worth pursuing. For example, for size the paper concludes: Hence, the size effect emerges when considering more extreme exposure to small stocks, especially extremely mall stocks, through either equal-wei...
by stlutz
Wed Oct 08, 2014 8:44 pm
 
Forum: Investing - Theory, News & General
Topic: A close look at factors in real world,
Replies: 18
Views: 2338

Re: So do we care more about change in bond price or bond yi

My understanding is that Vanguard bond fund "dividend" distributions are just the monthly income from the coupon payments. The distribution yield is simply the distribution amount divided by the average price over previous month (annualized). So I don't see how it has anything to do with ...
by stlutz
Wed Oct 08, 2014 1:24 am
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 145
Views: 9825

Re: So do we care more about change in bond price or bond yi

Thanks for the interesting back-and-forth ogd & Kevin! A couple of things I would add: My understanding is that: --The SEC yield is of course based upon the yield-to-maturity/call of the bonds *currently* --The distribution yield is based on the yield to maturity/call of the bonds *at the time t...
by stlutz
Tue Oct 07, 2014 9:45 pm
 
Forum: Investing - Theory, News & General
Topic: So do we care more about change in bond price or bond yield?
Replies: 145
Views: 9825

Re: Why is EVAL Up 10% today?

EVAL is a thinly traded ETF. Perhaps somebody placed a market order when they shouldn't have? It shows as being up 3% now.

Although one does wonder if livesoft is somehow involved.
by stlutz
Mon Oct 06, 2014 3:31 pm
 
Forum: Investing - Theory, News & General
Topic: Why is EVAL Up 10% today?
Replies: 6
Views: 869

Re: "Vanguard converting mutual fund accounts to brokerage?

Hi Taylor, This change is basically to eliminate the problems people had where dealing with VG Brokerage and VG mutual funds was no easier (and sometimes harder) than dealing with VG mutual funds and, say, Fidelity Brokerage. I also echo ftobin--I wish they would make it more clear if this ultimatel...
by stlutz
Mon Oct 06, 2014 3:27 pm
 
Forum: Investing - Theory, News & General
Topic: "Vanguard converting mutual fund accounts to brokerage?
Replies: 72
Views: 7993

Re: Four-Factor-Only Portfolio?

I think its best to rely on analysis of the underlying factor exposures of a funds/series, rather than relying on a name. For example: 25% MSCI Momentum (tracked by MTUM) 25% MSCI Quality (tracked by QUAL) 25% MSCI Risk Weighted (tracked by SIZE) 25% MSCI Value Weighted (tracked by VLUE) This does ...
by stlutz
Mon Oct 06, 2014 12:08 pm
 
Forum: Investing - Theory, News & General
Topic: Four-Factor-Only Portfolio?
Replies: 30
Views: 2386

Re: Transferring Taxable Account "In Kind" Strategy

Are the funds NTF at Vanguard? How about at your current broker?
by stlutz
Sun Oct 05, 2014 6:23 pm
 
Forum: Investing - Help with Personal Investments
Topic: Transferring Taxable Account "In Kind" Strategy
Replies: 13
Views: 626

Re: How to migrate to factor investments?

Are these in a taxable account or an IRA?
by stlutz
Sun Oct 05, 2014 6:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: How to migrate to factor investments?
Replies: 7
Views: 377

Re: Estimating Future Investment Returns — On a Napkin

For those who haven't read it, it's well worth setting aside this time to work through this blog post:

http://www.philosophicaleconomics.com/2 ... e-fitting/
by stlutz
Sun Oct 05, 2014 1:51 pm
 
Forum: Investing - Theory, News & General
Topic: Estimating Future Investment Returns — On a Napkin
Replies: 75
Views: 4765

Re: Four-Factor-Only Portfolio?

Also, Larry Swedroe had an interesting post in another thread about factor investing. He seems to be pointing to the beat-the-market vs. non-correlatation dimension that you were citing, but he doesn't say--at least in the post--what the variations might be to get different effects. How would one f...
by stlutz
Sun Oct 05, 2014 1:33 pm
 
Forum: Investing - Theory, News & General
Topic: Four-Factor-Only Portfolio?
Replies: 30
Views: 2386

Re: Four-Factor-Only Portfolio?

How do you get the info you have about the composition of the various IShares factor funds? I look for information from the index provider. For example, here is a brief facts sheet on the underlying index for SIZE: http://www.ishares.com/us/products/251465/ishares-msci-usa-size-factor-etf. It state...
by stlutz
Sun Oct 05, 2014 1:05 pm
 
Forum: Investing - Theory, News & General
Topic: Four-Factor-Only Portfolio?
Replies: 30
Views: 2386

Re: [Medallion Signature Dilemma, Assistance Requested]

Have you considered consolidating all of the shares at a discount broker like Fidelity or Schwab? The reason I mention it is that they can provide a medallion guarantee and they would actually have an interest in doing it if they were getting a new account and assets. From the bank's perspective, th...
by stlutz
Sun Oct 05, 2014 12:08 pm
 
Forum: Personal Finance (Not Investing)
Topic: [Medallion Signature Dilemma, Assistance Requested]
Replies: 15
Views: 1501

Re: Four-Factor-Only Portfolio?

In terms of the robustness of the historical return data, momentum would be #1, low volatility (not one of your suggested options) would be #2, value would be #3, size is a distant #4 and quality #5. Let's assume you were after "beating the market". I'd throw quality out altogether. Size w...
by stlutz
Sun Oct 05, 2014 11:50 am
 
Forum: Investing - Theory, News & General
Topic: Four-Factor-Only Portfolio?
Replies: 30
Views: 2386

Re: Four-Factor-Only Portfolio?

I think the answer depends in part on what you want the portfolio to do. Is the goal more to: a) invest in funds that will outperform the market over time? b) invest in funds that have low correlation with each other thus providing lower portfolio volatility and a rebalancing bonus even though each ...
by stlutz
Sun Oct 05, 2014 11:07 am
 
Forum: Investing - Theory, News & General
Topic: Four-Factor-Only Portfolio?
Replies: 30
Views: 2386

Re: Estimating Future Investment Returns — On a Napkin

The inflation rate since 1950 has averaged 3.8%, so we're talking about the same number: 1.34% real + 3.8% inflation = 5.14% nominal. However, it seems unrealistic to expect that the future inflation rate will be anything close to the 3.8% rate since 1950, as central banks around the world learned ...
by stlutz
Sun Oct 05, 2014 3:48 am
 
Forum: Investing - Theory, News & General
Topic: Estimating Future Investment Returns — On a Napkin
Replies: 75
Views: 4765

Re: Safety of large balances in checking accounts (fraud etc

I think direct debiting is the biggest risk. From the bank's perspective, you're basically authorizing the company to pretty much take whatever they want. As long as you are in control of what goes out (checks, bill pay, debit car), I think the risks are small.
by stlutz
Sat Oct 04, 2014 8:59 pm
 
Forum: Personal Finance (Not Investing)
Topic: Safety of large balances in checking accounts (fraud etc.)
Replies: 10
Views: 1192

Re: Moving to 3-fund - requires realizing large capital gain

If it was me I'd sell as much as possible this year while staying below the ACA limit at 200K. There really isn't a big advantage to paying taxes next year vs. this year. If I was going to keep any stocks, I would keep the least volatile/risky ones of the bunch.
by stlutz
Sat Oct 04, 2014 3:17 pm
 
Forum: Personal Finance (Not Investing)
Topic: Moving to 3-fund - requires realizing large capital gains
Replies: 34
Views: 2180

Re: Minimum volatility - simply factor exposure

One (other) concern in this space ... how it may respond in a rising rate. Backtesting-wise, the strategy "worked" as expected during the 60s and 70s--i.e. there was no massive underperformance of the overall market. Another way USMV has changed vs. a couple of years ago is that it no lon...
by stlutz
Thu Oct 02, 2014 10:11 pm
 
Forum: Investing - Theory, News & General
Topic: Minimum volatility - simply factor exposure
Replies: 45
Views: 2852

Re: my review of my HSA with Saturna brokerage

how does the IRS/Saturna know that I'm using the distributions for qualified expenses? In other words, will they let me do this?


They take your word for it unless the IRS audits you. Keep the necessary documentation on what you paid out of your HSA.
by stlutz
Thu Oct 02, 2014 7:13 pm
 
Forum: Investing - Theory, News & General
Topic: my review of my HSA with Saturna brokerage
Replies: 30
Views: 5482

Re: TLH Partner for VXUS

IXUS is another option. It is a total market fund (but not quite as total market as VXUS). I don't know about that, it would be getting perilously close to a clear intentional wash sale. The IRS is known to take a combined view of separate transactions when it fits their purposes. Are you aware of e...
by stlutz
Thu Oct 02, 2014 1:24 pm
 
Forum: Investing - Help with Personal Investments
Topic: TLH Partner for VXUS
Replies: 17
Views: 809

Re: Minimum volatility - simply factor exposure

RE: value and low volatility Something we have to keep in mind is that if low vol has loaded on value historically, the reverse is also true--value has loaded on low. vol. And, interestingly, if you look at the F/F factor data, the value premium has been larger in down market years than in up market...
by stlutz
Wed Oct 01, 2014 10:21 pm
 
Forum: Investing - Theory, News & General
Topic: Minimum volatility - simply factor exposure
Replies: 45
Views: 2852

Re: Minimum volatility - simply factor exposure

IMO if want low vol best way is to go low beta and higher tilt and use only safe bonds. steve r:To translate Larry's recommendation a bit (I'm sure he won't mind :P ), what he means is that you should load up on small cap value stocks and since those are highly likely to exceed the return of the ov...
by stlutz
Wed Oct 01, 2014 10:05 pm
 
Forum: Investing - Theory, News & General
Topic: Minimum volatility - simply factor exposure
Replies: 45
Views: 2852

Re: The volatility of premiums

Sorry but your argument I don't think holds up to scrutiny unless you want to define things using your own definitions rather than the way the rest of the world does so. OK, fine. Forget I used the words "small" and "large". Let's just use group A and group B. Which group do you...
by stlutz
Tue Sep 30, 2014 9:53 pm
 
Forum: Investing - Theory, News & General
Topic: The volatility of premiums
Replies: 21
Views: 1483

Re: The volatility of premiums

I stated: Suppose we divided the market into halves, with the top half by market cap being "large" and the bottom half by market cap being "small". In that case, is "small" more risky than "large". I don't think so. Larry replied: IMO you have an extremely har...
by stlutz
Tue Sep 30, 2014 8:11 pm
 
Forum: Investing - Theory, News & General
Topic: The volatility of premiums
Replies: 21
Views: 1483
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