BJJ_GUY
Thank you for your comments. Yes, the US market is the referenced market and the S&P 500 would be a good proxy for it.
I find it both amusing and frustrating that the most basic of information on the "market" seems to be covered in fog.
Perhaps the FED has produced a report on market owners and participants.
TJSI
Search found 399 matches
- Tue Mar 19, 2019 8:54 pm
- Forum: Investing - Theory, News & General
- Topic: Passive investing now controls nearly half the US stock market
- Replies: 39
- Views: 4391
- Tue Mar 19, 2019 7:58 pm
- Forum: Investing - Theory, News & General
- Topic: Passive investing now controls nearly half the US stock market
- Replies: 39
- Views: 4391
Re: Passive investing now controls nearly half the US stock market
Several people have mentioned the issue of defining the "market". It is a topic for which I have never seen a clear or good study.
Instead you usually see references to traders, sovereign funds, institutional investors, endowments, pension funds, and retail investors but never a good breakdown of who owns what or who is participating in daily trades.
Does the SEC ever produce a report of ownership? Surely each company in the S&P 500 has some knowledge of who their stock owners are. But is a summary report ever issued?
Instead you usually see references to traders, sovereign funds, institutional investors, endowments, pension funds, and retail investors but never a good breakdown of who owns what or who is participating in daily trades.
Does the SEC ever produce a report of ownership? Surely each company in the S&P 500 has some knowledge of who their stock owners are. But is a summary report ever issued?
- Wed Mar 06, 2019 6:20 pm
- Forum: Investing - Theory, News & General
- Topic: S&P 500 Dividend Yield Plus Buyback Yield for 2018 Was 5.96%
- Replies: 32
- Views: 4983
Re: S&P 500 Dividend Yield Plus Buyback Yield for 2018 Was 5.96%
jdilla1107,
You can't null out a buyback by selling your shares since you don't know when, if, or at what price the buyback (if any) was performed.
The simple fact is that if a company is overpaying for their stock they are reducing their return on equity. Or as it was well put: You can't get rich paying $1.10 for a $1. Some buybacks are correct and some are a mistake.
TJSI
You can't null out a buyback by selling your shares since you don't know when, if, or at what price the buyback (if any) was performed.
The simple fact is that if a company is overpaying for their stock they are reducing their return on equity. Or as it was well put: You can't get rich paying $1.10 for a $1. Some buybacks are correct and some are a mistake.
TJSI
- Wed Feb 20, 2019 12:54 pm
- Forum: Investing - Theory, News & General
- Topic: Portfolio visualizer says no rebalance bonus
- Replies: 38
- Views: 4395
Re: Portfolio visualizer says no rebalance bonus
A slightly different purpose to rebalancing is the desire to "take your winnings off the table". Although just a part of risk management, it provides a rational for rebalancing. If you are at or near retirement, it does make sense to book your gains.
However, in general there is no automatic rebalancing bonus, free lunch from diversification, or volatility drag. They are just the result of good/bad timing.
TJSI
However, in general there is no automatic rebalancing bonus, free lunch from diversification, or volatility drag. They are just the result of good/bad timing.
TJSI
- Wed Jan 16, 2019 5:44 pm
- Forum: Investing - Theory, News & General
- Topic: John Bogle has died at age 89
- Replies: 856
- Views: 82085
Re: John Bogle is dead at 89
The passing of a giant of the investment industry is a sad day. He freely gave of himself his time, knowledge and wisdom. The welfare of the common investor was always his goal. We are sad today, but we are all richer for having read his books, read his papers, or listened to him. Rest in peace in Mr. Bogle, we thank you for your life of service.
TJSI
TJSI
- Tue Jan 15, 2019 10:24 pm
- Forum: Personal Investments
- Topic: low volatility funds in a Roth IRA
- Replies: 12
- Views: 1576
Re: low volatility funds in a Roth IRA
Aristotelian,
The low volatility anomaly has been known and well documented for quite some time. Back in 1972 Black, Jensen, and Scholes found that low beta stocks outperformed the market ( The Capital Asset Pricing Model: Some Empirical Tests). There have been several published studies since then confirming that low volatility stocks outperform,. (See The Hidden Value in Low Volatility Stocks by TFS Capital, or Risk & Return within The Stock Market: What Works Best by Ibbotoson & Kim).
A more recent paper by Alliance Bernstein (The Paradox of Low Risk Stocks) discusses the anomaly.
Since it contradicts the conventional risk based theories some prefer to just ignore the low anomaly findings,
TJSI
The low volatility anomaly has been known and well documented for quite some time. Back in 1972 Black, Jensen, and Scholes found that low beta stocks outperformed the market ( The Capital Asset Pricing Model: Some Empirical Tests). There have been several published studies since then confirming that low volatility stocks outperform,. (See The Hidden Value in Low Volatility Stocks by TFS Capital, or Risk & Return within The Stock Market: What Works Best by Ibbotoson & Kim).
A more recent paper by Alliance Bernstein (The Paradox of Low Risk Stocks) discusses the anomaly.
Since it contradicts the conventional risk based theories some prefer to just ignore the low anomaly findings,
TJSI
- Sun Dec 23, 2018 7:36 pm
- Forum: Personal Investments
- Topic: Research paper James Grant CNBC
- Replies: 9
- Views: 1312
Re: Research paper James Grant CNBC
Finished reading this paper by Prof McQuarrie in which he dissects stock market returns. He reviews the market return over multiple time periods starting in 1830. There is a lot of good analysis and discussion of the Siegel return and the total return approach. He tells a cautionary tale that one should not depend upon achieving the Siegel return over any finite holding period. He has a good discussion of the geometric return and how it can mislead investors. And he cautions those approaching retirement to not rely on the total return approach. He ends the paper with the following statement: " Once portfolio accumulation ceases with retirement, portfolio income must be spent to live. Under those circumstances real price return, over sh...
- Wed Dec 19, 2018 10:37 pm
- Forum: Personal Investments
- Topic: Research paper James Grant CNBC
- Replies: 9
- Views: 1312
Re: Research paper James Grant CNBC
rmgtl,
Thank you posting an interesting and provocative paper. It is long so it will take some effort to digest it completely. But it certainly presents a fresh look at the topic of stock market returns.
TJSI
Thank you posting an interesting and provocative paper. It is long so it will take some effort to digest it completely. But it certainly presents a fresh look at the topic of stock market returns.
TJSI
- Fri Nov 16, 2018 10:44 am
- Forum: Investing - Theory, News & General
- Topic: If riskier than US, why doesn't international outperform?
- Replies: 245
- Views: 22027
Re: If riskier than US, why doesn't international outperform?
The idea that taking more risk leads to greater return is one of most enduring fallacies of finance. Sometimes it is stated something like "investors demand greater return otherwise they would not take the added risk." Well you can demand all you want but that does not mean you are going to get.
TJSI
TJSI
- Sat Nov 10, 2018 11:09 am
- Forum: Investing - Theory, News & General
- Topic: 18 topics badly explained by many Finance Professors
- Replies: 14
- Views: 3329
Re: 18 topics badly explained by many Finance Professors
Thanks for the link--very informative paper.
TJSI
TJSI
- Sun Oct 28, 2018 10:07 pm
- Forum: Investing - Theory, News & General
- Topic: Bogle’s SP500 Returns Math
- Replies: 21
- Views: 4365
Re: Bogle’s SP500 Returns Math
GuitarXM,
I believe the chart you are looking at are returns developed using Bogle's predictive method. See for instance, the paper What's Ahead for Stocks and Bonds--And How to Earn Your Fair Share-- Keynote Speech by John Bogle. On page 8 where he discusses the returns of the 1990s it is in terms of his model. He calls the 3.2 the initial div yield of the 1990s.
TJSI
I believe the chart you are looking at are returns developed using Bogle's predictive method. See for instance, the paper What's Ahead for Stocks and Bonds--And How to Earn Your Fair Share-- Keynote Speech by John Bogle. On page 8 where he discusses the returns of the 1990s it is in terms of his model. He calls the 3.2 the initial div yield of the 1990s.
TJSI
- Sun Oct 28, 2018 12:11 am
- Forum: Investing - Theory, News & General
- Topic: Bogle’s SP500 Returns Math
- Replies: 21
- Views: 4365
Re: Bogle’s SP500 Returns Math
GuitarXM,
If I understand your comments correctly, you are comparing a prediction with an actual result. Mr Bogle has provided a predictive tool and it is not 100% accurate. As a predictive tool it is fairly accurate. I believe in his second book he discusses its accuracy and limitations. Valuation estimates are often a source of error.
TJSI
If I understand your comments correctly, you are comparing a prediction with an actual result. Mr Bogle has provided a predictive tool and it is not 100% accurate. As a predictive tool it is fairly accurate. I believe in his second book he discusses its accuracy and limitations. Valuation estimates are often a source of error.
TJSI
- Thu Oct 18, 2018 10:02 pm
- Forum: Investing - Theory, News & General
- Topic: Why is dividend yield a part of expected future returns
- Replies: 15
- Views: 1337
Re: Why is dividend yield a part of expected future returns
At all times, the value of your investment is equal to the number of shares you own times the price of each share. The rate at which you shares increase is the dividend yield. So it is one component of your return. Price increase is the other component of your return.
- Fri Sep 28, 2018 11:29 pm
- Forum: Investing - Theory, News & General
- Topic: Larry Swedroe: Exploring Buyback’s Impacts
- Replies: 19
- Views: 2340
Re: Larry Swedroe: Exploring Buyback’s Impacts
I once had a distinguished Prof of Mathematics say of Cramer's Rule for solving linear equations:
"Of little theoretical use and no practical use whatsoever."
The same statemet applies to MM theory.
TJSI
"Of little theoretical use and no practical use whatsoever."
The same statemet applies to MM theory.
TJSI
- Mon Sep 17, 2018 4:53 pm
- Forum: Investing - Theory, News & General
- Topic: Discount Cash Flow Analysis (DCF)
- Replies: 11
- Views: 1207
Re: Discount Cash Flow Analysis (DCF)
GuitarXM,
I think the difficulty lies in your understanding of terminal value. One method of estimating terminal value is to use an assumed P/E times the earnings after X years. So if you are using a 5 year estimate, you calculate (estmate) the earnings after 5 years and mutiply by an assumed P/E. This will give a different value(price) of the stock than the current value(price).
TJSI
I think the difficulty lies in your understanding of terminal value. One method of estimating terminal value is to use an assumed P/E times the earnings after X years. So if you are using a 5 year estimate, you calculate (estmate) the earnings after 5 years and mutiply by an assumed P/E. This will give a different value(price) of the stock than the current value(price).
TJSI
- Thu Sep 06, 2018 10:24 am
- Forum: Investing - Theory, News & General
- Topic: Good time to do value investing?
- Replies: 37
- Views: 3374
Re: Good time to do value investing?
Steve321,
Value stocks earn their reward when they are oversold. The outperformance is relative to their underlying value not compared to growth stocks. Its quite possible that growth is oversold and value stocks are also oversold but not as much. Maybe they are near their true value.
Value stocks earn excess returns by recovery of valuations and compounding of dividends at depressed prices.
TJSI
Value stocks earn their reward when they are oversold. The outperformance is relative to their underlying value not compared to growth stocks. Its quite possible that growth is oversold and value stocks are also oversold but not as much. Maybe they are near their true value.
Value stocks earn excess returns by recovery of valuations and compounding of dividends at depressed prices.
TJSI
- Sun Jul 22, 2018 7:28 pm
- Forum: Investing - Theory, News & General
- Topic: Speculative PE change equation
- Replies: 5
- Views: 1214
Re: Speculative PE change equation
augifm,
Because to some degree P/E refelects the "animal spirits" of the market it is the most difficult parameter to estimate in the Bogle model of returns.
And 10-year estimates of return can have significant error due to its unpredicability.
In the paper "Occam's Razor Redux: Establishing Reasonable Expectatons for Financial Market Returns" by Bogle & Nolan they use a reversion to the mean over a 30-year period of the terminal value of P/E to predict the speculative component of 10-year returns. They find that the model has a pretty good match with actual returns with a correlation of .67 for the period 1915-2014.
TJSI
Because to some degree P/E refelects the "animal spirits" of the market it is the most difficult parameter to estimate in the Bogle model of returns.
And 10-year estimates of return can have significant error due to its unpredicability.
In the paper "Occam's Razor Redux: Establishing Reasonable Expectatons for Financial Market Returns" by Bogle & Nolan they use a reversion to the mean over a 30-year period of the terminal value of P/E to predict the speculative component of 10-year returns. They find that the model has a pretty good match with actual returns with a correlation of .67 for the period 1915-2014.
TJSI
- Mon Jul 16, 2018 1:19 pm
- Forum: Investing - Theory, News & General
- Topic: Is rebalancing an advantage when holding a 3 fund portfolio instead of 2 or 1 fund portfolio?
- Replies: 17
- Views: 1449
Re: Is rebalancing an advantage when holding a 3 fund portfolio instead of 2 or 1 fund portfolio?
willthrill81 said"
"There is no rebalancing bonus. It is a myth."
I think a more balanced statement would be: There might be a rebalancing bonus or perhaps a rebalancing loss. Under the right conditions you can get a bonus. See for instance: "The Rebalancing Bonus" by William Bernstein
If there is a loss, then you suffer the infamous volatility drag.
TJSI
"There is no rebalancing bonus. It is a myth."
I think a more balanced statement would be: There might be a rebalancing bonus or perhaps a rebalancing loss. Under the right conditions you can get a bonus. See for instance: "The Rebalancing Bonus" by William Bernstein
If there is a loss, then you suffer the infamous volatility drag.
TJSI
- Mon Jul 02, 2018 6:58 pm
- Forum: Investing - Theory, News & General
- Topic: "homemade dividends" from Total Stock Market fund
- Replies: 135
- Views: 12264
Re: "homemade dividends" from Total Stock Market fund
IlliniDave,
Your suspicions are correct. The stock price of a dividend paying stock does indeed rise before the payment. See: Dividend Capture and the EX-Dividend Price Behavior of Electric Utilities.
Unless there is an impairment to the ability of a company to pay future dividends, the intrinsic value of the company remains the same. The market price reflects that as the price will first increase then drop as the dividend is paid.
TJSI
Your suspicions are correct. The stock price of a dividend paying stock does indeed rise before the payment. See: Dividend Capture and the EX-Dividend Price Behavior of Electric Utilities.
Unless there is an impairment to the ability of a company to pay future dividends, the intrinsic value of the company remains the same. The market price reflects that as the price will first increase then drop as the dividend is paid.
TJSI
- Mon Jun 11, 2018 8:41 pm
- Forum: Personal Consumer Issues
- Topic: Chipmunk Repellent?
- Replies: 36
- Views: 4113
Re: Chipmunk Repellent?
I have had great success with a Havahart trap. Trapped 15 chipmunks last year and three this year. None seen for over a month. However, you need to transport the little creatures to another location. Tried various chemicals-- none were effective. Chipmunks can do a lot of damage.
Cats can also be very effective. Neighbor had one and it keep the rodent population under control. Unfortunately, it died and the rodents began to populate. The Havahart works well.
TJSI
Cats can also be very effective. Neighbor had one and it keep the rodent population under control. Unfortunately, it died and the rodents began to populate. The Havahart works well.
TJSI
- Fri May 25, 2018 12:12 am
- Forum: Investing - Theory, News & General
- Topic: Three-fund portfolio returns and variance drain
- Replies: 106
- Views: 13501
Re: Three-fund portfolio returns and variance drain
Random Walker wrote: "I believe there is an error or two in your logic. Firstly, need to account for rebalancing." But that is the point of the thought experiment. Without rebalancing there is no loss. It is only through your investment decision to rebalance at some point does the possibilty of loss occur. You should really be talking about a "rebalance drain" not a variance drain. Volatility can cause a loss or if you are a clever fellow (or lucky) you may have a gain. Instead of constantly discusssing the difference between an arithmetic and geometric mean, you would be better off discussing how and when you should rebalance. Rebalancing to maintain a comfortable level of risk is a solid idea. But there is the possibil...
- Sun May 20, 2018 2:01 pm
- Forum: Investing - Theory, News & General
- Topic: Three-fund portfolio returns and variance drain
- Replies: 106
- Views: 13501
Re: Three-fund portfolio returns and variance drain
Mlretired, You don't need to bother with excel to see why there is no such as thing as volatility drag. A thought experiment will suffice. Assume you have two simple portfolios each consisting of a single stock--stock A is highly volatile while stock B is a dullard-- not much volatility. You buy them at the same time and same price (Price P1) and hold them for ten years and by a strange coincidence they end up at the same price P2. There are no dividends to reinvest. Now stock A was highly volatile--it gave you a lot of anxity over the 10 years but you held on. It had a high variance every year--up 50% then down 40%--what a ride! Stock B dull--up 6% then down 3%. No action with stock B. But after 10 years, the price of the stocks was the sa...
- Sun May 20, 2018 12:13 pm
- Forum: Investing - Theory, News & General
- Topic: Three-fund portfolio returns and variance drain
- Replies: 106
- Views: 13501
Re: Three-fund portfolio returns and variance drain
Bah, humbug.
There is no such thing as volatility drag. It is just the use of mathematics to obfuscate what is going on.
If there is a loss due to volatility, it is due to your investment plan. You are buying high and selling low.
As for me, I prefer to get my free lunch at the diversification banquet.
TJSI
(PS: RandomWalker I though your were cured. But no you persist.)
There is no such thing as volatility drag. It is just the use of mathematics to obfuscate what is going on.
If there is a loss due to volatility, it is due to your investment plan. You are buying high and selling low.
As for me, I prefer to get my free lunch at the diversification banquet.
TJSI
(PS: RandomWalker I though your were cured. But no you persist.)
- Tue May 15, 2018 4:06 pm
- Forum: US Chapters
- Topic: Yes, I'm 89 all right! [Jack Bogle]
- Replies: 126
- Views: 20906
Re: Yes, I'm 89 all right! [Jack Bogle]
There use to be a commercial that went:
"When EF Hutton talks people listen".
I'll borrow a bit of that and say:
"When Jack Bogle talks---Pay Attention!"
Happy Birthday and thanks for all your contributions to investors everywhere,
TJSI
"When EF Hutton talks people listen".
I'll borrow a bit of that and say:
"When Jack Bogle talks---Pay Attention!"
Happy Birthday and thanks for all your contributions to investors everywhere,
TJSI
- Wed Mar 21, 2018 11:26 am
- Forum: Investing - Theory, News & General
- Topic: Do "dividend dollars" maintain in a market downturn?
- Replies: 13
- Views: 2153
Re: Do "dividend dollars" maintain in a market downturn?
Dividends are more stable than earnings and price. Dividends can and have been cut in the past. But a market downturn by itself will not reduce dividends. It takes a significant economic downturn for a dividend reduction. In fact, the generally superior performance of dividend based funds is in part caused by the increase in dividend yield during market downturns when there is not an underlying significant economic event. So a market downturn may increase dividend yield--a good thing. Or if there is a significant economic downturn dividends can be cut. A low volatility fund or dividend aristocrat type fund will give you a fairly safe dividend income stream. If more stability is desired, a high quality corporate bond fund would do better. An...
- Sun Mar 18, 2018 3:06 pm
- Forum: Personal Consumer Issues
- Topic: Quiet vehicle for two cats
- Replies: 15
- Views: 1612
Re: Quiet vehicle for two cats
Just tell them they are not going to the Vet. They will relax and sleep the rest of the way.
- Sat Mar 17, 2018 11:31 am
- Forum: Investing - Theory, News & General
- Topic: Gordon Equation Update???
- Replies: 13
- Views: 2112
Re: Gordon Equation Update???
The Gordon Equation is based on a specific set of assumptions. Mr Bogle's formulation does not assume or depend on those assumptions. The Gordon Equation is of no use for short term estimates of market return. The Bogle Equation is not based on the Gordon Equation. Without trying to speak for him, I would say that it is based on his observation of what drives market returns.
- Sat Mar 17, 2018 10:48 am
- Forum: Investing - Theory, News & General
- Topic: Gordon Equation Update???
- Replies: 13
- Views: 2112
Re: Gordon Equation Update???
The Bogle formulation is not based on the Gordon Equation. It does not depend on the assumptions made in the Gordon Equation. It includes the effect of valuation change which is very important in short term market returns.
- Sat Mar 17, 2018 10:36 am
- Forum: Investing - Theory, News & General
- Topic: Gordon Equation Update???
- Replies: 13
- Views: 2112
Re: Gordon Equation Update???
It looks like the Gordon equation is not getting much love here. If you keep in mind the assumptions behind it, it might get more respect. It assumes a discounted cash flow valuation, constant dividend growth, and an infinite holding period.
It is certainly of no use in predicting or analyzing short term market returns. It is only useful in understanding the very long term return of the market. To the extent that buybacks are good or bad, their effect will show up in the dividend growth rate. You just have to wait an extremely long time to see if they are good or bad.
The Bogle formula is better as analyzing shorter term market returns.
TJSI
It is certainly of no use in predicting or analyzing short term market returns. It is only useful in understanding the very long term return of the market. To the extent that buybacks are good or bad, their effect will show up in the dividend growth rate. You just have to wait an extremely long time to see if they are good or bad.
The Bogle formula is better as analyzing shorter term market returns.
TJSI
- Wed Mar 14, 2018 6:36 pm
- Forum: Investing - Theory, News & General
- Topic: CAPE in the Context of Real Rates & Inflation, 1880-2018
- Replies: 37
- Views: 5692
Re: CAPE in the Context of Real Rates & Inflation, 1880-2018
In answer to gmaynarkrebs question, I believe the best candidate for high valuations are buybacks. They are buying pressure for sure and unless they illicit a negative reaction are going to increase price.
Interest rates also play an important role. If interest rates continue to rise, bonds will again become a competitive source of income and serve as a competitor of stocks for investor money.
If buybacks are cut back at some time, we are likely to see a significant drop in valuations.
TJSI
Interest rates also play an important role. If interest rates continue to rise, bonds will again become a competitive source of income and serve as a competitor of stocks for investor money.
If buybacks are cut back at some time, we are likely to see a significant drop in valuations.
TJSI
- Sat Mar 03, 2018 2:11 pm
- Forum: Investing - Theory, News & General
- Topic: Harvard blows $1Billion picking stocks, averaged 4.4% returns over last decade
- Replies: 79
- Views: 12623
Re: Harvard blows $1Billion picking stocks, averaged 4.4% returns over last decade
James Stewart in a recent NYT article discussed the under performance of endowments (College Endowments Opt for Alternatives, and Less Lucrative, Route https://www.nytimes.com/2018/02/22/busi ... ments.html ).
Avg Ten-Year Returns:
Endowments 4.6%
60-40 Index Portfolio 5.3%
70- 30 Index Portfolio 5.4%
So far, the investment in alternatives has not paid off. The endowments are sticking with their allocations. Perhaps in the very, very long run it will pay off-- but not yet.
TJSI
Avg Ten-Year Returns:
Endowments 4.6%
60-40 Index Portfolio 5.3%
70- 30 Index Portfolio 5.4%
So far, the investment in alternatives has not paid off. The endowments are sticking with their allocations. Perhaps in the very, very long run it will pay off-- but not yet.
TJSI
- Fri Feb 16, 2018 2:17 pm
- Forum: Investing - Theory, News & General
- Topic: philosophicaleconomics predicts 4% real equity returns
- Replies: 152
- Views: 14660
Re: philosophicaleconomics predicts 4% real equity returns
HomerJ,
Div yield and EPS have been fairly flat over the last five years. I suspect that buybacks have had a major impact only on valuations. If the music ever stops we could see a collapse of valuations.
TJSI
Div yield and EPS have been fairly flat over the last five years. I suspect that buybacks have had a major impact only on valuations. If the music ever stops we could see a collapse of valuations.
TJSI
- Mon Feb 12, 2018 4:14 pm
- Forum: Personal Investments
- Topic: Is it stupid of me to comprise almost all of my portfolio with high dividend funds/etfs?
- Replies: 17
- Views: 1910
Re: Is it stupid of me to comprise almost all of my portfolio with high dividend funds/etfs?
andrew24p,
You are doing ok with your fund selection as each of them has a good record of exceeding the market total return on a long term basis. However, you need to pay attention to the effect of taxes on your return. Try to estimate the effect on your marginal tax rate by investing in another dividend heavy fund with your $200K. It might be better to just go with a market fund like SPY with the $200K.
Dividend tilted funds are expected to take a hit with the ever expeted interest hike. But you should do well if you don't need to sell your funds.
Ignore the anti-dividend crowd as best you can.
Good luck, TJSI
You are doing ok with your fund selection as each of them has a good record of exceeding the market total return on a long term basis. However, you need to pay attention to the effect of taxes on your return. Try to estimate the effect on your marginal tax rate by investing in another dividend heavy fund with your $200K. It might be better to just go with a market fund like SPY with the $200K.
Dividend tilted funds are expected to take a hit with the ever expeted interest hike. But you should do well if you don't need to sell your funds.
Ignore the anti-dividend crowd as best you can.
Good luck, TJSI
- Fri Jan 05, 2018 7:25 pm
- Forum: Investing - Theory, News & General
- Topic: Evaluation principle for non-dividend paying stock
- Replies: 5
- Views: 602
Re: Evaluation principle for non-dividend paying stock
One good method is to calculate the "owners cash flow". That being the cash flow you could extract from the company if you were the owner. You also need to discount that hypothetical cash flow.
It treats the company as if it were a private company where you the owner get to enjoy the excess cash flow.
TJSI
It treats the company as if it were a private company where you the owner get to enjoy the excess cash flow.
TJSI
- Wed Jan 03, 2018 4:25 pm
- Forum: Investing - Theory, News & General
- Topic: Nice Explanation of Volatility Drag
- Replies: 39
- Views: 5567
Re: Nice Explanation of Volatility Drag
I think it is an obsession!
- Sat Dec 23, 2017 6:48 pm
- Forum: Investing - Theory, News & General
- Topic: One answer to the Dividend stocks puzzle from behavioral finance
- Replies: 184
- Views: 20165
Re: One answer to the Dividend stocks puzzle from behavioral finance
Thank you Patrick!
That is one of the most interesting studies of the superior performance of dividend paying stocks. For the study period ( 12/99 to 9/17) the classic div aristocrats had a return of 10.1%, the high div-low vol had a return of 11.8% while the S&P had a return of 5.1%.
And their returns by dividend decile study shows comparable results to those developed by Professor Siegel.
That is one of the most interesting studies of the superior performance of dividend paying stocks. For the study period ( 12/99 to 9/17) the classic div aristocrats had a return of 10.1%, the high div-low vol had a return of 11.8% while the S&P had a return of 5.1%.
And their returns by dividend decile study shows comparable results to those developed by Professor Siegel.
- Thu Dec 21, 2017 11:34 pm
- Forum: Investing - Theory, News & General
- Topic: Geometric Average vs. Arithmetic Average
- Replies: 92
- Views: 12201
Re: Geometric Average vs. Arithmetic Average
Random Walker,
You are absolutely right--I am not accounting for rebalancing! That is your choice and you may have a rebalancing bonus or loss. There is no automatic drag from volatility. Any loss or gain is the result of an investment decision.
TJSI
You are absolutely right--I am not accounting for rebalancing! That is your choice and you may have a rebalancing bonus or loss. There is no automatic drag from volatility. Any loss or gain is the result of an investment decision.
TJSI
- Thu Dec 21, 2017 10:27 pm
- Forum: Investing - Theory, News & General
- Topic: Geometric Average vs. Arithmetic Average
- Replies: 92
- Views: 12201
Re: Geometric Average vs. Arithmetic Average
Well I will try again. The movement up, down, or sideways does not cause a gain or loss. It is only the decision to buy or sell at a particular time that results in a loss or gain.
Now a sharp move in price may induce an investor to sell only to realize later that it was a mistake. But it was the investment decision which caused the loss. Another investor having the same investment with the same volatility who did not sell would not have a loss.
Volatility itself does not cause a drag and indeed has the potential to increase return via volatility harvesting.
Now a sharp move in price may induce an investor to sell only to realize later that it was a mistake. But it was the investment decision which caused the loss. Another investor having the same investment with the same volatility who did not sell would not have a loss.
Volatility itself does not cause a drag and indeed has the potential to increase return via volatility harvesting.
- Thu Dec 21, 2017 9:30 pm
- Forum: Investing - Theory, News & General
- Topic: Geometric Average vs. Arithmetic Average
- Replies: 92
- Views: 12201
Re: Geometric Average vs. Arithmetic Average
Random Walker I see why you like this article as it repeats the incorrect notion that volatility causes a drag.
Although I know it is close to hopeless, let me repeat: Volatility does not cause a loss-- it your investment decisions which might cause a loss.
Why if you are a clever fellow, you can volatility harvest and have a gain.
Although I know it is close to hopeless, let me repeat: Volatility does not cause a loss-- it your investment decisions which might cause a loss.
Why if you are a clever fellow, you can volatility harvest and have a gain.
- Mon Dec 18, 2017 6:41 pm
- Forum: Investing - Theory, News & General
- Topic: Diversification: Is there any way to produce the same returns with less risk?
- Replies: 52
- Views: 7593
Re: Diversification: Is there any way to produce the same returns with less risk?
Yes, if by risk you mean variance of return. You can invest in a low volatility fund or a consumer staples fund. Just be prepared to hold on for the long run and to suffer periods of underperformance.
- Fri Dec 15, 2017 3:44 pm
- Forum: Investing - Theory, News & General
- Topic: Factor-Based Investing: The Long-Term Evidence - Dimson & Marsh
- Replies: 100
- Views: 9421
Re: Factor-Based Investing: The Long-Term Evidence - Dimson & Marsh
lack_ey
Thank you for your response to my cryptic comment. This was an attempt at early morning humor--perhaps I needed more sleep.
But when all is said and done are not factors just correlations about whch a very elaborate lanuage has developed? So no one says such and such a factor is correlated with a return rather the more gentle expression "explains" is used. So A plus B plus C factors explan 95% of returns which really means there is a 95% correlation of the factors with return.
Now I happen to accept that these facors/ correlations do exist and are useful. The evidence of small cap-value is very solid. But it should always be warned that the factors can disapear for extended periods.
TJSI
Thank you for your response to my cryptic comment. This was an attempt at early morning humor--perhaps I needed more sleep.
But when all is said and done are not factors just correlations about whch a very elaborate lanuage has developed? So no one says such and such a factor is correlated with a return rather the more gentle expression "explains" is used. So A plus B plus C factors explan 95% of returns which really means there is a 95% correlation of the factors with return.
Now I happen to accept that these facors/ correlations do exist and are useful. The evidence of small cap-value is very solid. But it should always be warned that the factors can disapear for extended periods.
TJSI
- Fri Dec 15, 2017 2:14 pm
- Forum: Investing - Theory, News & General
- Topic: Factor-Based Investing: The Long-Term Evidence - Dimson & Marsh
- Replies: 100
- Views: 9421
Re: Factor-Based Investing: The Long-Term Evidence - Dimson & Marsh
Aren't factors just correlations with lipstick applied?
TJSi
TJSi
- Mon Dec 11, 2017 8:40 pm
- Forum: Personal Investments
- Topic: Does a tilt toward consumer staples make sense?
- Replies: 15
- Views: 1786
Re: Does a tilt toward consumer staples make sense?
Like one of several tilts, consumer staples has out-performed the market over very long periods. It quite often underperforms--like many tilts. A 2014 paper : Defense Wins Championships: The Defensive Sector Anomaly by PensionPartners reviews the performance of sectors from 10/89 through 6/14.
This is a very long term return and the defensive sectors do best in down markets. I believe there have been some recent articles in Barron's saying that sector should be avoided.
This is a very long term return and the defensive sectors do best in down markets. I believe there have been some recent articles in Barron's saying that sector should be avoided.
- Mon Nov 27, 2017 9:41 pm
- Forum: Personal Investments
- Topic: Re: Divs and Cap Gains are killing me - personal
- Replies: 151
- Views: 24634
Re: Divs and Cap Gains are killing me
Losses hurt worse.
Try to arrange your investments to minimize taxes as best you can. Unfortunately, taxes are a fact of life.
Try to arrange your investments to minimize taxes as best you can. Unfortunately, taxes are a fact of life.
- Sun Nov 26, 2017 8:19 pm
- Forum: Investing - Theory, News & General
- Topic: Common Sense on Mutual Funds
- Replies: 20
- Views: 3539
Re: Common Sense on Mutual Funds
Mr. Whoopee
I don't think diversification is synonymous with reducing risk. There are risks with international investments which are probably harder to understand and evaluate than US based investments.
There are great international companies and countries with a long history of stability but just adding an investment for diversification may not get the job done.
TJSI
I don't think diversification is synonymous with reducing risk. There are risks with international investments which are probably harder to understand and evaluate than US based investments.
There are great international companies and countries with a long history of stability but just adding an investment for diversification may not get the job done.
TJSI
- Mon Nov 20, 2017 10:18 am
- Forum: Investing - Theory, News & General
- Topic: Is holding bonds now dangerous?
- Replies: 162
- Views: 25785
Re: Is holding bonds now dangerous?
One aspect of bond risk not commented upon is the liquidity risk. There has been discussion of this in the press including by El-Erian. it seems to difficult to judge. But apparently it does exist.
TJSI
TJSI
- Sat Nov 18, 2017 10:36 am
- Forum: Personal Investments
- Topic: Confused about cash and retirement - isn't this really about market timing?
- Replies: 38
- Views: 4397
Re: Confused about cash and retirement - isn't this really about market timing?
cyclist,
You have raised an interesting question but I think it would be better to frame it in terms of insurance rather than market timing. Does you need for having a sufficient cash reserve change with retirement? For most individuals the answer is going to be yes. Retirement is a significant event which changes your income steam. If you can, you should have access to income to cover any unexpected large demands for cash. You don't want to be forced to liquidate your investments at an inopportune time.
How much you need is the difficult question to answer. But the concept of having a cash reserve is correct. You would need to determine the size and constituents of the reserve as best you can.
TJSI
You have raised an interesting question but I think it would be better to frame it in terms of insurance rather than market timing. Does you need for having a sufficient cash reserve change with retirement? For most individuals the answer is going to be yes. Retirement is a significant event which changes your income steam. If you can, you should have access to income to cover any unexpected large demands for cash. You don't want to be forced to liquidate your investments at an inopportune time.
How much you need is the difficult question to answer. But the concept of having a cash reserve is correct. You would need to determine the size and constituents of the reserve as best you can.
TJSI
- Thu Nov 09, 2017 10:13 pm
- Forum: Investing - Theory, News & General
- Topic: Has “Dividend Yield” Become Globally Obsolete?
- Replies: 35
- Views: 3876
Re: Has “Dividend Yield” Become Globally Obsolete?
avalpert,
Todd said this is the yield of holding stockholders. They receive nothing directly. Anything value they receive is the result of a correct investment by management. The cash spent goes to selling shareholders. You can't use the cash outlays to compute the return (yield) of holding stockholders.
TJSI
Todd said this is the yield of holding stockholders. They receive nothing directly. Anything value they receive is the result of a correct investment by management. The cash spent goes to selling shareholders. You can't use the cash outlays to compute the return (yield) of holding stockholders.
TJSI
- Thu Nov 09, 2017 10:00 pm
- Forum: Investing - Theory, News & General
- Topic: Has “Dividend Yield” Become Globally Obsolete?
- Replies: 35
- Views: 3876
Re: Has “Dividend Yield” Become Globally Obsolete?
avalpert,
Let me explain it this way: If a company in which I owned stock announced they were doing a buyback, I would like it to be for my benefit and give me a positive yield on the money spent. That is the correct meaning for a stockholder of a buyback yield. Just calculating the percent of money spent based on market capitalization is not a yield in any normal use of the word yield.
TJSI
Let me explain it this way: If a company in which I owned stock announced they were doing a buyback, I would like it to be for my benefit and give me a positive yield on the money spent. That is the correct meaning for a stockholder of a buyback yield. Just calculating the percent of money spent based on market capitalization is not a yield in any normal use of the word yield.
TJSI
- Thu Nov 09, 2017 9:08 pm
- Forum: Investing - Theory, News & General
- Topic: Has “Dividend Yield” Become Globally Obsolete?
- Replies: 35
- Views: 3876
Re: Has “Dividend Yield” Become Globally Obsolete?
avalpert asked:
"Do you also think we should adjust dividend yields for the people who reinvest their dividends in stock when the price is more than 'intrinsic value'?"
The answer is yes. Buying a stock (or any investment) at the wrong price is the wrong decision. I don't think people who have been investing IBM dividends in IBM stock have made the right decision. As some buyback are poor so are some dividend reinvestments.
"Do you also think we should adjust dividend yields for the people who reinvest their dividends in stock when the price is more than 'intrinsic value'?"
The answer is yes. Buying a stock (or any investment) at the wrong price is the wrong decision. I don't think people who have been investing IBM dividends in IBM stock have made the right decision. As some buyback are poor so are some dividend reinvestments.