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Re: The dangers of backtesting and overfitting data - paper

Ideally, one would have data from entirely separate sources. For example, develop your model with data from the U.S. and then test the results on European data without adjusting parameters. Yes to the first statement. Not so much to the second. US and European markets behave quite similarly to one ...
by stlutz
Thu Apr 17, 2014 9:21 pm
 
Forum: Investing - Theory, News & General
Topic: The dangers of backtesting and overfitting data - paper
Replies: 18
Views: 938

Re: problem with Amica, what to do next?

Let me start out by saying that I'm a huge Amica fan because of the way a very large claim was handled for me a few years ago. However, I would suggest that you shop around your insurance. There is no reason to stay with a company that provides you with bad service. There are other reputable insuran...
by stlutz
Tue Apr 15, 2014 8:47 pm
 
Forum: Personal Finance (Not Investing)
Topic: problem with Amica, what to do next?
Replies: 20
Views: 1652

Re: Big VWO (Emerging Markets) tracking error

Those difference are likely an artifact of fair-value pricing. The gaps you are seeing aren't there is you look at returns through 3/31:

https://personal.vanguard.com/us/funds/ ... =INT#tab=1
by stlutz
Sun Apr 13, 2014 2:12 pm
 
Forum: Investing - Theory, News & General
Topic: Big VWO (Emerging Markets) tracking error
Replies: 3
Views: 658

Re: The market portfolio vs. value tilts

The argument of costs in tsm vs vbr is most definitely not insignificant. If so, this should show up in the returns--extra costs should mean the fund trails its benchmark by more than its ER. This hasn't happened with VBR. Now, in a taxable account, the lower percentage of qualified dividends of VB...
by stlutz
Sun Apr 13, 2014 1:59 pm
 
Forum: Investing - Theory, News & General
Topic: The market portfolio vs. value tilts
Replies: 66
Views: 3143

Re: Portfolio for Young Investors: High Bonds and Risky Equi

Livesoft wasn't being harsh--he was just injecting a note of humor into his reply as a way of saying that you aren't doing anything new or radical, which around here is a good thing. :D I am a big fan of a 60/40 equity bond split for pretty much all investors. Over time is has proven to be an alloca...
by stlutz
Sun Apr 13, 2014 1:53 pm
 
Forum: Investing - Theory, News & General
Topic: Portfolio for Young Investors: High Bonds and Risky Equities
Replies: 30
Views: 2008

Re: A Bubble in Value Stocks?

Note: Bernstein's "market return" in the "15 stock" article was the 500 stocks held in equal proportion, not cap. weighted.
by stlutz
Sun Apr 13, 2014 2:39 am
 
Forum: Investing - Theory, News & General
Topic: A Bubble in Value Stocks?
Replies: 31
Views: 2433

Re: The market portfolio vs. value tilts

On that point, we agree.
by stlutz
Sun Apr 13, 2014 12:37 am
 
Forum: Investing - Theory, News & General
Topic: The market portfolio vs. value tilts
Replies: 66
Views: 3143

Re: Question about Bonds

"Duration" is the key metric to pay attention to with bond funds. http://www.bogleheads.org/wiki/Bonds:_advanced_topics#Duration Two comments: When rates increase, the loss in value of a bond fund is temporary. At maturity, bonds will still pay back at par. So, suppose you buy a newly issu...
by stlutz
Sat Apr 12, 2014 11:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: Question about Bonds
Replies: 4
Views: 649

Re: The market portfolio vs. value tilts

Market-Cap weighting has intrinsic efficiencies of being a low-cost self-balancing portfolio that doesn't need to incur transaction costs. But those transaction costs have become very small. Again, most ETFs trail their benchmark by about their ER. For example, just to pick a non-cap-weighted one t...
by stlutz
Sat Apr 12, 2014 11:36 pm
 
Forum: Investing - Theory, News & General
Topic: The market portfolio vs. value tilts
Replies: 66
Views: 3143

Re: The market portfolio vs. value tilts

I think a useful exercise for both sides of this discussion is to come up with valid, persuasive reasons why they are wrong. Then you can go forward with your eyes more open. Starting on one side: TSM folks often claim that this form of investing is much cheaper than the alternatives. Historically, ...
by stlutz
Sat Apr 12, 2014 8:34 pm
 
Forum: Investing - Theory, News & General
Topic: The market portfolio vs. value tilts
Replies: 66
Views: 3143

Re: Schwab Fundamental Index Funds

Their open-end fundamental index funds have tended to lag their benchmarks by a fair amount more than their ER, except in the US large cap space. On the ETFs, I'd want to wait and see what their tracking error vs. their underlying index ends up being.
by stlutz
Fri Apr 11, 2014 10:46 pm
 
Forum: Investing - Theory, News & General
Topic: Schwab Fundamental Index Funds
Replies: 11
Views: 1274

Re: A Bubble in Value Stocks?

First some indices split things in half, but that's not by market cap, it's by stocks. So like top 250 of the S&P is S&P growth and bottom half value. Just to make sure I wasn't getting too old, I thought I would check my memory on this: S&P states: "One of the design goals is to c...
by stlutz
Fri Apr 11, 2014 10:43 pm
 
Forum: Investing - Theory, News & General
Topic: A Bubble in Value Stocks?
Replies: 31
Views: 2433

Re: A Bubble in Value Stocks?

The index providers all divide the market into half when splitting between value and growth. As such, value and growth always have the same amount of assets. A more useful metric might be to compare the number of companies in, say, the Russell value indices now vs. at some point historically. If inv...
by stlutz
Thu Apr 10, 2014 11:57 pm
 
Forum: Investing - Theory, News & General
Topic: A Bubble in Value Stocks?
Replies: 31
Views: 2433

Re: Quality premium is global

Are there any factors/premia which don't hold globally? I guess I don't really see these test against other markets for the same time period as really being "out of sample." Global markets fluctuate in tandem--much of the non-correlation between them is due to currency impacts. The same ty...
by stlutz
Tue Apr 08, 2014 12:07 am
 
Forum: Investing - Theory, News & General
Topic: Quality premium is global
Replies: 13
Views: 1124

Re: Advice for [Religious Investor]

One option worth considering, at least within the IRA, are minimum variance stocks funds like USMV or ACWV. These funds will generally be about 1/3 less volatile than the overall market, and are thus somewhat akin to a 70/30 stock/bond mix.
by stlutz
Sun Apr 06, 2014 9:28 pm
 
Forum: Investing - Help with Personal Investments
Topic: Advice for [Religious Investor]
Replies: 39
Views: 2989

Re: Investing in foreign government bonds - theory and pract

Hi t0x1n, Interesting and challenging questions. In my opinion, there a definite risks in just picking a broad global government bond fund. My preference would be to focus on countries that: a) borrow in their own currency (i.e. the US, Japan, the UK). This excludes countries in the Euro. b) Have a ...
by stlutz
Sun Apr 06, 2014 5:04 pm
 
Forum: Investing - Theory, News & General
Topic: Investing in foreign government bonds - theory and practice
Replies: 19
Views: 1145

Re: How Ignorant am I? 5yr on Job, No 401k. 100K collecting

Hi OP-- Welcome to the forum! I'm going to contradict some of the other folks here and just say, slow down! Here are the steps to follow: 1) Find out how to enroll in your 401K and what funds are available. 2) When you know what funds are available in your 401K, post that list here to get advice on ...
by stlutz
Sat Apr 05, 2014 4:20 am
 
Forum: Investing - Help with Personal Investments
Topic: How Ignorant am I? 5yr on Job, No 401k. 100K collecting dust
Replies: 36
Views: 3586

Re: Where is the Vanguard 03/31/2014 statement?

Maybe they are withholding statements from Flagship customers?


I just have to say that livesoft is my favorite Boglehead. :D

(I'm not Flagship, and I have a statement, BTW.)
by stlutz
Fri Apr 04, 2014 10:58 pm
 
Forum: Investing - Help with Personal Investments
Topic: Where is the Vanguard 03/31/2014 statement?
Replies: 32
Views: 2042

Re: Bogle: Tilt To Corporates For More Yield

One mental exercise I recommend is to ask one's self when it comes to this issue: If all yields were 3% higher than they are today, would you still load up on corporates vs. higher rates types of debt? I suspect Bogle would not have the same advice if yields were higher, which makes it questionable ...
by stlutz
Tue Apr 01, 2014 9:44 pm
 
Forum: Investing - Theory, News & General
Topic: Bogle: Tilt To Corporates For More Yield
Replies: 60
Views: 5655

Re: Higher Returns at Lower Risk - please comment

This is the paper I referenced. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=879291 Right now, since inception (1998) VG Small Value has returned 8.77%/yr; small growth has returned 8.92%/yr. A *portion* of the value underperformance was due to the exact timing of VG's switch from using S&...
by stlutz
Tue Apr 01, 2014 12:31 am
 
Forum: Investing - Theory, News & General
Topic: Higher Returns at Lower Risk - please comment
Replies: 55
Views: 5230

Re: Lazy portfolios: no returns or risk information

Ken French has slice-n-diced returns on his website free of charge back to the 1920s. The indexes that VG is using for it's funds haven't been around long at all. The oldest real small/value index (Russell) goes back to the 1970s. The MSCI EAFE index goes back to the late 60s. In terms of real indic...
by stlutz
Mon Mar 31, 2014 2:02 am
 
Forum: Investing - Theory, News & General
Topic: Lazy portfolios: no returns or risk information
Replies: 132
Views: 6578

Re: Higher Returns at Lower Risk - please comment

Because the covered period is so long, the resulting model portfolios should be more reliable indicators of future long-term results when compared to model portfolios based on shorter periods... Why? A few challenges to consider: --First, the portfolios you construct were not held by anyone for the...
by stlutz
Mon Mar 31, 2014 1:48 am
 
Forum: Investing - Theory, News & General
Topic: Higher Returns at Lower Risk - please comment
Replies: 55
Views: 5230

Re: Does each 10% in bonds cost 0.5% in return?

Bonds will provide the preservation of capital on a nominal basis mostly likely not on a real basis (especially after taxes).


The CPI over the last year is up 1.1%. The 10 year treasury yields about 2.7%. A real yield of 1.6% is not way outside of what one would consider "normal".
by stlutz
Sun Mar 30, 2014 7:11 pm
 
Forum: Investing - Theory, News & General
Topic: Does each 10% in bonds cost 0.5% in return?
Replies: 23
Views: 1917

Re: Switching to Treasury Fund

SCHR is the best option in this asset class IMO. There's no compromise going with it. According to etf.com, the average spread on SCHR is .05% vs. 02% on IEI. Not worth worrying about. If this happens to be a taxable account, I would caution against the VG funds/ETFs as they tend to distribute capit...
by stlutz
Sun Mar 30, 2014 7:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Switching to Treasury Fund
Replies: 9
Views: 1139

Re: Purchasing New Tires for Car and Need Suggestions

While I also use tirerack.com for research and to establish a pricing baseline, I've never purchased directly through them. Personally, I think you're better off walking into a local, major chain tire store knowing the exact tire you want based on your research, and then with the TR price quote in ...
by stlutz
Sun Mar 30, 2014 3:01 pm
 
Forum: Personal Consumer Issues
Topic: Purchasing New Tires for Car and Need Suggestions
Replies: 38
Views: 2028

Re: Munis

Larry has also pointed out over the years that you are generally rewarded more for taking term risk with munis vs. other types of bonds.
by stlutz
Sun Mar 30, 2014 2:51 pm
 
Forum: Investing - Help with Personal Investments
Topic: Munis [Limited- or Intermediate-Term Municipal Bonds]
Replies: 5
Views: 812

Re: Poll: how did you decide on stock/bond allocation?

In my younger days I used 75/25 because I read a book that called that "moderate" which sounded good to me. I've moved to 60/40 over time as my need to take risk has gone down some. But I'm actually an advocate of 60/40 as really being a great default starting point for everyone.
by stlutz
Sun Mar 30, 2014 2:45 pm
 
Forum: Investing - Theory, News & General
Topic: Poll: how did you decide on stock/bond allocation?
Replies: 35
Views: 1850

Re: Really confused by Bernstein

The other dimension to this discussion is what constitutes stock market "risk." I'll oversimplify and propose two options: a) The risk of investing in stocks is a significant short-term (e.g. 1-2 years) drop in the market as in 2001 or 2008. b) The risk of investing in stocks is a signific...
by stlutz
Mon Mar 24, 2014 11:36 pm
 
Forum: Investing - Theory, News & General
Topic: Really confused by Bernstein
Replies: 168
Views: 12847

Re: TIPS Intermediate Fund vs. International Bond Fund

Adding the int'l bond fund makes no sense at the moment. It offers a lower yield and higher risk (both credit and duration-wise) than Intermediate Term Treasury does. Why would you take more risk to get less return? As for whether you need TIPS, you can consult the other threads you've started on th...
by stlutz
Fri Mar 21, 2014 7:53 pm
 
Forum: Investing - Theory, News & General
Topic: TIPS Intermediate Fund vs. International Bond Fund
Replies: 35
Views: 2771

Re: Time to see where things stand with High Yield Bonds

Usually when the market determines that something that used to be risky no longer is, the market ends up being wrong.
by stlutz
Fri Mar 21, 2014 7:37 pm
 
Forum: Investing - Theory, News & General
Topic: Time to see where things stand with High Yield Bonds
Replies: 14
Views: 1385

Re: Municipal Bonds or Vanguard Wellesley Income Fund

Why not use a VG muni bond fund?
by stlutz
Mon Mar 17, 2014 11:56 pm
 
Forum: Investing - Help with Personal Investments
Topic: Municipal Bonds or Vanguard Wellesley Income Fund
Replies: 10
Views: 1274

Re: PE10 And Its Rivals

This article on the overall subject of constructing these metrics is well worth reading--a couple of times: http://philosophicaleconomics.wordpress.com/2013/12/23/valuation-and-returns-adventures-in-curve-fitting/ One of the interesting takeaways is that these various price-to-X ratios have historic...
by stlutz
Mon Mar 17, 2014 11:53 pm
 
Forum: Investing - Theory, News & General
Topic: PE10 And Its Rivals
Replies: 23
Views: 1520

Re: Municipal Bonds or Vanguard Wellesley Income Fund

Individual muni bonds are relatively illiquid and can be hard to sell in an emergency without taking a hit. Equities are too volatile, making them unsuitable as well.

What bond funds do you otherwise own? That might be a good candidate.
by stlutz
Mon Mar 17, 2014 10:41 pm
 
Forum: Investing - Help with Personal Investments
Topic: Municipal Bonds or Vanguard Wellesley Income Fund
Replies: 10
Views: 1274

Re: Dividend stocks for current income in early retirement?

Though dividend investing has been discussed to exhaustion here, this question is a bit different in focusing on early retirement. I think that ER people can have a different risk profile than accumulators or retirees of typical age. That's a good point, as is one I'd suggest the OP consider. Basic...
by stlutz
Sun Mar 16, 2014 12:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: Dividend stocks for current income in early retirement?
Replies: 38
Views: 3492

Re: On track to semi-retire at 45?

1. Is $2M a reasonable amount to cover, say, $60k of living expenses from age 45? That would be a 3% withdrawal rate. FIRECalc seems to say it would be OK. 2. Should I have a heavier bond allocation if I'm planning to retire early? I'm thinking yes. 3. About 1/4 of my holdings are held in retiremen...
by stlutz
Sat Mar 15, 2014 1:48 am
 
Forum: Investing - Help with Personal Investments
Topic: On track to semi-retire at 45?
Replies: 11
Views: 1203

Re: New Investor 401k Help

I would use the int'l index fund in your 401K and then pick up your other allocations in your other accounts. 4. What's left into 401k ( looks like an additional $7,000-$9,000 for this next year) Given that the 401K options aren't particularly great, I would personally invest the remainder in a taxa...
by stlutz
Sat Mar 15, 2014 1:37 am
 
Forum: Investing - Help with Personal Investments
Topic: New Investor 401k Help
Replies: 8
Views: 609

Re: "Muni Bond Costs Hit Investors in Wallet"

With muni bonds, there is no single "market price". Individuals buying in small lots can often do better than institutions by seeking out good deals that exist. Such good deals may exist on on trading platform but not another. They may exist if you are buying $15K worth but not $10K or $20...
by stlutz
Wed Mar 12, 2014 11:14 pm
 
Forum: Investing - Theory, News & General
Topic: "Muni Bond Costs Hit Investors in Wallet"
Replies: 22
Views: 1831

Re: Don't like PE/10; How about Warren Buffet's metric

This is the best (most interesting) thing I've read on all of these metrics:

http://philosophicaleconomics.wordpress ... e-fitting/
by stlutz
Sun Mar 09, 2014 11:25 am
 
Forum: Investing - Theory, News & General
Topic: Don't like PE/10; How about Warren Buffet's metric
Replies: 24
Views: 1221

Re: Staying the Course has never been harder

When the pension system worked, most such funds were invested 60/40. Then stocks went up a lot and they decided they could reduce contributions to the funds and make up for it through higher returns by increasing the allocation to stocks. Didn't work out so well. The two keys to always stress are: a...
by stlutz
Sat Mar 08, 2014 1:38 pm
 
Forum: Investing - Theory, News & General
Topic: Staying the Course has never been harder
Replies: 45
Views: 4634

Re: Total Market Bond Fund vs Intermediate Term Fund

If you're wanting to follow the historical data, you shouldn't use either fund. Using intermediate term treasury funds is a risk worth taking as such bonds tend to be good diversifers vs. stocks (i.e. the two investments have near 0 correlation with each other). In corporate bonds, the best risk/rew...
by stlutz
Sat Mar 08, 2014 1:27 pm
 
Forum: Investing - Theory, News & General
Topic: Total Market Bond Fund vs Intermediate Term Fund
Replies: 27
Views: 2247

Re: Vanguard files for active fund ETFs

I think this is first related to their Global Minimum Volatility Fund. When they introduced that fund, VG indicated that they would be seeking exemptive relief to offer an ETF version of this fund (which is actively managed). I doubt we'll see ETF versions of any of their other funds anytime soon. L...
by stlutz
Sat Mar 08, 2014 1:22 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard files for active fund ETFs
Replies: 21
Views: 1522

Re: Are Long-Term Bonds be better than Short-Term?

Going back to the OP, if one buys bonds maturing in 15 years over a period of 15 years (e.g. every year you buy 1 new 15 year bond), you'll end up with a portfolio with an approximate average maturity of 7.5, and a duration likely in the 6.5 or so range--or just a little bit longer than the VG Inter...
by stlutz
Sat Mar 08, 2014 1:15 pm
 
Forum: Investing - Theory, News & General
Topic: Are Long-Term Bonds better than Short-Term?
Replies: 49
Views: 2999

Re: How much is a fair hourly fee?

One thing to keep in mind is that the hourly financial planner still has fixed costs (office space etc.), so not all of the $x/hour ends up in the planner's pocket. Obviously everyone has to decide for herself what is "fair", but the numbers that have been bandied about ($200-$400 per hour...
by stlutz
Mon Mar 03, 2014 2:11 am
 
Forum: Investing - Theory, News & General
Topic: How much is a fair hourly fee?
Replies: 86
Views: 4841

Re: Cancel Verizon cellular ($100/mo) for PagePlus resllers?

How much data do you use? PagePlus works best for people who mostly voice/text.
by stlutz
Fri Feb 28, 2014 12:50 am
 
Forum: Personal Consumer Issues
Topic: Cancel Verizon cellular ($100/mo) for PagePlus resllers?
Replies: 60
Views: 3303

Re: Ed Jones to Fidelity

Just transfer the accounts "in-kind" to Fidelity. When you get past the 26th, just sell those funds and buy the new funds you want. You should be able to do it all online quite easily, but if you live near a Fidelity office you could even just take your Ed Jones statements down to them and...
by stlutz
Fri Feb 21, 2014 12:15 pm
 
Forum: Investing - Help with Personal Investments
Topic: Ed Jones to Fidelity
Replies: 13
Views: 860

Re: Long-Term Risk, Mean Reversion, and Dispersion of Return

You are comparing investment A and investment B. A has a much higher standard deviation than B. One says that they expect A to have significantly higher returns than over time (say, 4 percent per year). The only way this can be true is if A beats B most of the time, and if B wins, it's not by a lot....
by stlutz
Fri Feb 21, 2014 1:38 am
 
Forum: Investing - Theory, News & General
Topic: Long-Term Risk, Mean Reversion, and Dispersion of Returns
Replies: 20
Views: 1353

Re: The growing case against ETFs ARTICLE

In a taxable account, I prefer ETFs simply because they are much easier to deal with if one wants to switch custodians. Admiral shares cannot be transferred to some brokerages. I assume the same would be true with Fidelity Spartan Advantage shares. Over an investing lifetime, one will likely get mad...
by stlutz
Thu Feb 20, 2014 12:30 am
 
Forum: Investing - Theory, News & General
Topic: The growing case against ETFs ARTICLE
Replies: 36
Views: 3778

Re: Bonds go in taxable (whitecoatinvestor aka EmergDoc arti

tfb also had an excellent posting on his blog regarding this subject quite a while back. http://thefinancebuff.com/tax-efficiency-relative-or-absolute.html How to approach this issue really comes down to making two forecasts: a) Are current interest rates the "new normal"? Whether a 5 year...
by stlutz
Thu Feb 20, 2014 12:24 am
 
Forum: Investing - Theory, News & General
Topic: Bonds go in taxable (whitecoatinvestor aka EmergDoc article)
Replies: 96
Views: 5769

Re: Value: Dividend yield beats P/E and P/B considering risk

And by using the dividend screen you get a less efficient portfolio ... from diversification perspective (60% of US stocks don't even pay dividends and 40% of international stocks don't either) I thought the whole point of tilting was to focus one's portfolio on relatively small corners of the mark...
by stlutz
Thu Feb 20, 2014 12:13 am
 
Forum: Investing - Theory, News & General
Topic: Value: Dividend yield beats P/E and P/B considering risk
Replies: 26
Views: 1879

Re: Getting tempted to toss WellsTrade and a move to Vanguar

Rebalancing at Vanguard is not difficult at all. I think the general opinion here is that VG doesn't have as good of customer service or website as, say, Fido , but it's not like Wells Fargo has some legendary reputation in these areas, so you certainly wouldn't be downgrading in these areas by maki...
by stlutz
Wed Feb 19, 2014 10:50 pm
 
Forum: Investing - Help with Personal Investments
Topic: Getting tempted to toss WellsTrade and a move to Vanguard
Replies: 26
Views: 1159
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