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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: 38
Views: 1996

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: 38
Views: 1996

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: 1390

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: 1390

Re: The volatility of premiums

but there is no one I know that would argue small is less risky than large Of course. The smaller and smaller the slice you choose, the more risky it becomes. 10% of the market will be more risky than the other 90%. (A possible exeception might be if you are specifically selecting less risky compan...
by stlutz
Tue Sep 30, 2014 12:34 am
 
Forum: Investing - Theory, News & General
Topic: The volatility of premiums
Replies: 21
Views: 1390

Re: Minimum volatility - simply factor exposure

Larry-- In case I didn't make it clear before, I have absolutely no objection to pursuing a strategy of picking high volatilty stocks with low short interest. I choose not to do so because a) I don't invest in individual stocks; and b) such a strategy is not available in ETF form. If it was, I would...
by stlutz
Tue Sep 30, 2014 12:26 am
 
Forum: Investing - Theory, News & General
Topic: Minimum volatility - simply factor exposure
Replies: 38
Views: 1996

Re: The volatility of premiums

Stocks have outperformed bonds in 68% of the time period studied in the article, but I know you're not arguing that stocks are less risky than bonds... Nope. Stocks and bonds are two very different things. Comparing them is much different than comparing one set of stocks vs. another set of stocks.
by stlutz
Mon Sep 29, 2014 11:46 pm
 
Forum: Investing - Theory, News & General
Topic: The volatility of premiums
Replies: 21
Views: 1390

Re: High yield muni bonds

High yield muni bonds should be thought of as a way to pick up an extra 1% return 9 years out of 10, with the tenth year being the year that they lose by 10%. That's a gross oversimplification, but that's how the risks of high yielding bonds work out.
by stlutz
Mon Sep 29, 2014 11:38 pm
 
Forum: Investing - Help with Personal Investments
Topic: High yield muni bonds
Replies: 16
Views: 1051

Re: Fidelity Freedom Index Funds - Available to retail inves

This is something that those who post in the portfolio help threads should definitely make themselves aware of.
by stlutz
Mon Sep 29, 2014 11:33 pm
 
Forum: Investing - Help with Personal Investments
Topic: Fidelity Freedom Index Funds - Available to retail investors
Replies: 6
Views: 999

Re: Proper way to do backdoor Roth in Vanguard?

Yep, that's exactly what you'd do.

Here is a step-by-step: http://www.mymoneyblog.com/traditional- ... guard.html

And this is worth reading through before pulling the trigger as well:

http://thefinancebuff.com/the-backdoor- ... ow-to.html
by stlutz
Mon Sep 29, 2014 11:26 pm
 
Forum: Investing - Help with Personal Investments
Topic: Proper way to do backdoor Roth in Vanguard?
Replies: 3
Views: 358

Re: The volatility of premiums

If I picked any random half of the market, wouldn't the odds of my portfolio premium being negative in any given year be 50%? If so, it looks to me like value is less risky than growth and small is less risky than large, as both are ways to underperform the average less than 50% of the time.
by stlutz
Mon Sep 29, 2014 11:23 pm
 
Forum: Investing - Theory, News & General
Topic: The volatility of premiums
Replies: 21
Views: 1390

Re: Minimum volatility - simply factor exposure

Larry, Yes, the short-interest anomaly is a powerful one. Perhaps you can point me to the low short interest ETF? I'm not aware that one exists. For someone picking their own stocks, it's a good indicator to use. Regardless, I don't see how the short-interest anomaly is a problem for low vol. So, sh...
by stlutz
Mon Sep 29, 2014 11:06 pm
 
Forum: Investing - Theory, News & General
Topic: Minimum volatility - simply factor exposure
Replies: 38
Views: 1996

Re: Is it good time or bad time to buy bond ???

cause interest rate will go up


This is the 5th year in a row that rates were sure to go up but didn't. Well, they sort of did in 2013 but went right back down this year.
by stlutz
Mon Sep 29, 2014 12:39 am
 
Forum: Investing - Help with Personal Investments
Topic: Is it good time or bad time to buy bond ???
Replies: 5
Views: 582

Re: Does market cap weighted indexing logically follow from

my gut feeling can't help thinking that it doesn't make sense to hold ten times as much in a 500 billon dollar company as in a 50 billion dollar company, and one hundred times as much as in a 5 billion dollar company I'll pass on the EMH and CAPM discussions since I don't really subscribe to either...
by stlutz
Mon Sep 29, 2014 12:36 am
 
Forum: Investing - Theory, News & General
Topic: Does market cap weighted indexing logically follow from EMH?
Replies: 17
Views: 942

Re: Minimum volatility - simply factor exposure

And FWIW low vol stocks now look completely different than they used to as cash flowed in. IMO not a good bet now as they don't look anything like value stocks any more Look at the chart I linked to. You'll see that low vol. has been in the "non-value" area for long periods historically. ...
by stlutz
Mon Sep 29, 2014 12:24 am
 
Forum: Investing - Theory, News & General
Topic: Minimum volatility - simply factor exposure
Replies: 38
Views: 1996

Re: Obese airline passenger

One time I was on a flight to Detroit with a bunch of WWF guys on it. One of them had the middle seat next to me. Needless to say, he stood in the aisle for most of the flight. I also wondered if George Contanza was the one making their travel arragements.
by stlutz
Sun Sep 28, 2014 9:22 pm
 
Forum: Personal Consumer Issues
Topic: Obese airline passenger
Replies: 62
Views: 4664

Re: Minimum volatility - simply factor exposure

"Simply factor exposure" is a problem when it's not that. For example, the DFA crowd claims that lov vol performance is due to value exposure. Yet, when you plot the exposure across time, you get a chart that looks like this: http://1.bp.blogspot.com/-TMnzlBYGEHE/TnaNPh6S33I/AAAAAAAABbY/7Y...
by stlutz
Sun Sep 28, 2014 9:16 pm
 
Forum: Investing - Theory, News & General
Topic: Minimum volatility - simply factor exposure
Replies: 38
Views: 1996

Re: Obese airline passenger

What is the policy of your airline? If the airline did not follow its policy, you should complain and see what you get.

http://www.cheapair.com/blog/travel-tip ... is-summer/
by stlutz
Sun Sep 28, 2014 6:46 pm
 
Forum: Personal Consumer Issues
Topic: Obese airline passenger
Replies: 62
Views: 4664

Re: Tax loss harvest

Also remember that if you don't have gains that you are applying the losses against, then you can deduct the captial loss against regular income (up to $3K per year). Future gains when you sell would be taxed at the capital gains rate. So, deduct 28% now and pay 15% later. What could screw the strat...
by stlutz
Sun Sep 28, 2014 6:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: Tax loss harvest
Replies: 8
Views: 464

Re: Will Investment Returns Ever Revert to "Normal"?

Greater uncertainty, such as you describe (due to energy price spikes, unstable inflation expectations, more frequent recessions, etc.), would serve to increase the risk of stock investments, unless I'm mistaken. Greater risk = greater expected returns; and conversely, lower risk = lower expected r...
by stlutz
Sun Sep 28, 2014 2:45 pm
 
Forum: Investing - Theory, News & General
Topic: Will Investment Returns Ever Revert to "Normal"?
Replies: 56
Views: 4260

Re: Will Investment Returns Ever Revert to "Normal"?

I'm referring to the average historical returns of stocks and bonds contained, for example, in the Ibottson database for the U.S. since 1926 or the Dimson-Marsh-Stuanton database of global returns since 1900. It hasn't been uncommon on the Forum lately for posters to indicate that they are expectin...
by stlutz
Sun Sep 28, 2014 2:04 pm
 
Forum: Investing - Theory, News & General
Topic: Will Investment Returns Ever Revert to "Normal"?
Replies: 56
Views: 4260

Re: VXUS and Muni Bonds tax efficiency

Welcome to the forum! The problem with VXUS is that it has a relatively high dividend yield. If you put this in taxable, you do get the benefit of the foreign tax credit but you still have to pay taxes on those higher dividends. As such, it really isn't the case that there is some huge tax advantage...
by stlutz
Sun Sep 28, 2014 1:48 pm
 
Forum: Investing - Help with Personal Investments
Topic: VXUS and Muni Bonds tax efficiency
Replies: 9
Views: 705

Re: what is risk?

A few thoughts on the OP's original question "Risk" is itself a qualitative concept and what risks matter vary from person to person. As has been discussed, for someone in the distribution phase, "sequence of returns" is a very real risk; for someone who is 25 y.o., this is not m...
by stlutz
Sun Sep 28, 2014 1:38 pm
 
Forum: Investing - Theory, News & General
Topic: what is risk?
Replies: 116
Views: 4076

Re: Minimum volatility - simply factor exposure

The MSCI index is specifically trying to avoid non-beta factor exposure in part by imposing sector and stock weighting constraints. Different factor models will of course attribute returns to somewhat different factors, as for example: https://www.capitaliq.com/media/100971-Capital%20IQ%20Quant%20Re...
by stlutz
Sun Sep 28, 2014 11:02 am
 
Forum: Investing - Theory, News & General
Topic: Minimum volatility - simply factor exposure
Replies: 38
Views: 1996

Re: Advice for insurance for car rental (I don't own a car)

You might want to shop for an umbrella policy and see what (if any) additional specific auto coverage the insurer requires you to have.
by stlutz
Sun Sep 28, 2014 10:44 am
 
Forum: Personal Finance (Not Investing)
Topic: Advice for insurance for car rental (I don't own a car)
Replies: 3
Views: 330

Re: Will Investment Returns Ever Revert to "Normal"?

How long of a "future" are you talking about? It is certainly the case that bond returns for the next 10 years or so will be lower than they have been on average unless we enter into a persistent deflation. Does that mean that the 10 rate will still be around 2 or 3% 10 years from now? I'd...
by stlutz
Sat Sep 27, 2014 9:11 pm
 
Forum: Investing - Theory, News & General
Topic: Will Investment Returns Ever Revert to "Normal"?
Replies: 56
Views: 4260

Re: Vanguard order placement to execution

If you place your order before market close, you get that day's price. Otherwise you get the next day's price. Transferring the money takes a couple of days.
by stlutz
Fri Sep 26, 2014 9:09 pm
 
Forum: Personal Finance (Not Investing)
Topic: Vanguard order placement to execution
Replies: 7
Views: 632

Re: Disappointed in Vanguard customer service

I prefer no music when on hold...


+1. I like to do something else (post on BH?) while on hold and music ends up being very distracting.
by stlutz
Fri Sep 26, 2014 8:40 pm
 
Forum: Investing - Theory, News & General
Topic: Disappointed in Vanguard customer service
Replies: 37
Views: 4023

Re: Which bond fund?

Keep in mind that the correlation between Treasuries and equities tends to be around zero. That means that if stocks go down, there is a 50% chance that bonds will go up and a 50% chance that bonds will go down (to oversimplify to make a point). As such, one should not assume that it will automatica...
by stlutz
Fri Sep 26, 2014 7:08 pm
 
Forum: Investing - Help with Personal Investments
Topic: Which bond fund?
Replies: 15
Views: 879

Re: Which company would you go with? (HVAC contractor)

This is a completely new install, not a replacement. They quoted the exact same unit from American Standard. Haven't looked if either is factory certified. I'll check into that. Edit: company B is NATE certified and an American Standard "Customer Care" dealer; company B is not. Edit #2: Fo...
by stlutz
Fri Sep 26, 2014 6:17 pm
 
Forum: Personal Consumer Issues
Topic: Which company would you go with? (HVAC contractor)
Replies: 11
Views: 678

Which company would you go with? (HVAC contractor)

So I got a couple quotes for adding AC to my house. Both companies have A+ ratings from the BBB and were recommended to me. Company B quoted about $1000 more than company A. However, the guy from company A wasn't particularly confidence-inspiring (both quotes were provided by the owners of the compa...
by stlutz
Fri Sep 26, 2014 5:25 pm
 
Forum: Personal Consumer Issues
Topic: Which company would you go with? (HVAC contractor)
Replies: 11
Views: 678

Re: Who uses both Schwab and Fidelity

I like Schwab Bank. Only time I had a problem was when a foreign ATM fee was not automatically refunded. When I called (after hours), the first person I talked to resolved the problem while I was on the phone.
by stlutz
Mon Sep 22, 2014 11:33 pm
 
Forum: Investing - Help with Personal Investments
Topic: Who uses both Schwab and Fidelity
Replies: 12
Views: 967

Re: inherited 500k, still a college student, how to invest??

I would start out by being very conservative--maybe just put it all in an government bond index fund or ETF like VSIGX or SCHR. As time goes on, you read more from the recommended reading list here, then take more risk by adding in equities later. The stock market has gone up a lot in recent years, ...
by stlutz
Sun Sep 21, 2014 9:54 pm
 
Forum: Investing - Help with Personal Investments
Topic: inherited 500k, still a college student, how to invest???
Replies: 48
Views: 4120

Re: Money Market Funds can Refuse Withdrawals (Or not!)

From the prospectus: "Potentially disruptive redemptions. Vanguard reserves the right to pay all or part of a redemption in kind—that is, in the form of securities—if we reasonably believe that a cash redemption would negatively affect the fund’s operation or performance or that the shareholder...
by stlutz
Sun Sep 21, 2014 9:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Money Market Funds can Refuse Withdrawals (Or not!)
Replies: 10
Views: 854

Re: The Case Against Mid Caps? (Say it ain't so!)

Why doesn't a combination of Vanguard small mid and large cap indexes equal the TSM? The indexes in total have about 1k less equities than TSM. If anyone could point me to a simple explanation that would be great. My understanding is that "small" does not include microcaps, while TSM does...
by stlutz
Sun Sep 21, 2014 9:16 pm
 
Forum: Investing - Theory, News & General
Topic: The Case Against Mid Caps? (Say it ain't so!)
Replies: 23
Views: 2590

Re: Adding Momentum and Quality factor exposure

I think the options you've selected on the US side are good ones. On the international side, I'd skip the AQR funds because of cost. You can always overload on factor exposure in the US and just go with total market exposure for international.
by stlutz
Sun Sep 21, 2014 9:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Adding Momentum and Quality factor exposure
Replies: 4
Views: 316

Re: how to prevent medical expense catastrophe?

Trying to turn this in a practical direction before the thread gets locked. A few ideas: 1) First, be aware of what your state's laws are regarding "balance billing" of such procedures. In many states, if you are in an HMO and you have the procedure at an in-network facility, it's up to th...
by stlutz
Sun Sep 21, 2014 9:07 pm
 
Forum: Personal Finance (Not Investing)
Topic: how to prevent medical expense catastrophe?
Replies: 174
Views: 7536

Re: The Case Against Mid Caps? (Say it ain't so!)

The Vanguard Small Cap Value funds now has so much if midcaps, in fact, that I now consider it my midcap value fund I know you were joking in part, but your comment does point to a problem with these discussions--there is not an objective definition of a "midcap" stock or as "smallca...
by stlutz
Sun Sep 21, 2014 9:37 am
 
Forum: Investing - Theory, News & General
Topic: The Case Against Mid Caps? (Say it ain't so!)
Replies: 23
Views: 2590

Re: should i liquidate this fund due to 12B-1?

The expense ratio on the fund is .73%/yr. As equivalent fund at Vanguard or other ETF options would cost you <.15% per year.
by stlutz
Sat Sep 20, 2014 9:06 pm
 
Forum: Investing - Help with Personal Investments
Topic: should i liquidate this fund due to 12B-1?
Replies: 4
Views: 416

Re: Total bond index or 5 yr CD?

See prior discussion for which the underying logic still applies:

viewtopic.php?f=10&t=118751
viewtopic.php?t=132601&f=10
by stlutz
Sat Sep 20, 2014 2:44 pm
 
Forum: Investing - Help with Personal Investments
Topic: Total bond index or 5 yr CD?
Replies: 36
Views: 2781

Re: Due diligence on RAFI Pure Small Value

Also, Schwab's ETF One Source program has relatively high fees for the ETF provider. As a result, the platform is full of ETFs that are looking for assets. If the ETF has a $1b AUM, the product is likely profitable for the provider and as such, there is no reason for the provider to give a lot of th...
by stlutz
Sat Sep 20, 2014 11:10 am
 
Forum: Investing - Theory, News & General
Topic: Due diligence on RAFI Pure Small Value
Replies: 187
Views: 15854

Re: The Case Against Mid Caps? (Say it ain't so!)

10 year Performance of VG funds:

Large Cap Index: 8.79%
Mid Cap Index: 11.06%
Smallcap Index: 10.90%
by stlutz
Sat Sep 20, 2014 11:01 am
 
Forum: Investing - Theory, News & General
Topic: The Case Against Mid Caps? (Say it ain't so!)
Replies: 23
Views: 2590

Re: Due diligence on RAFI Pure Small Value

Does PowerShares give back 100% of securities lending revenue?


Yes.
by stlutz
Sat Sep 20, 2014 10:55 am
 
Forum: Investing - Theory, News & General
Topic: Due diligence on RAFI Pure Small Value
Replies: 187
Views: 15854

Re: Left tail portfolio - 70% bonds. Good idea?

The question of whether putting 70% of your assets in fixed income and whether to put 100% of your equity allocation in <5% of the market is a good idea are really very different questions. I know some want to to believe with all of their heart that SCV will beat the market by such a huge margin tha...
by stlutz
Thu Sep 18, 2014 12:24 am
 
Forum: Investing - Theory, News & General
Topic: Left tail portfolio - 70% bonds. Good idea?
Replies: 38
Views: 3181

Re: Premiums: Size, Value, Beta, Momentum

Rick, I am not a believer in the benefits of factor investing but this statement still has me a bit confused. Why would anyone want to accept the higher risk associated with factor investing if they should not plan to earn a premium after fees? Either you can plan to earn a premium or you can take ...
by stlutz
Thu Sep 18, 2014 12:15 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2833

Re: Rollover of maturing CDs from bank to brokerage

As an additional clarifying note, using a Life Strategy fund is not a second-best option--it would be an upgrade. Most investors (possibly even on this board?) fail to outperform such a portfolio. This year I switched to using a TR fund in my 401K instead of my previous 4 fund option. I may ultimate...
by stlutz
Wed Sep 17, 2014 12:21 am
 
Forum: Investing - Help with Personal Investments
Topic: Rollover of maturing CDs from bank to brokerage
Replies: 17
Views: 1228

Re: Rollover of maturing CDs from bank to brokerage

I have some serious work to do within my IRAs, given that I am 53 years old, am somewhat risk-averse yet would like a realistic likelihood of obtaining market-rate growth of my retirement assets. I've been trying to use the Paul Merriman portfolio recommendations, but maybe I can simplify things a ...
by stlutz
Wed Sep 17, 2014 12:17 am
 
Forum: Investing - Help with Personal Investments
Topic: Rollover of maturing CDs from bank to brokerage
Replies: 17
Views: 1228

Re: advice on my credit card strategy ?

I don't see that any of the options you've listed are particulary advantageous. The Barclays Arrival Plus card with essentially 2.2% cash back and no foreign transaction fee is worth considering. This is a good site for card shopping:

http://www.nerdwallet.com/rewards-credit-cards
by stlutz
Tue Sep 16, 2014 10:15 pm
 
Forum: Personal Finance (Not Investing)
Topic: advice on my credit card strategy ?
Replies: 6
Views: 905
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