Search found 165 matches

by ScottW
Wed Jan 11, 2012 1:05 pm
Forum: Investing - Theory, News & General
Topic: yesterday's masters of the universe
Replies: 10
Views: 1916

Re: yesterday's masters of the universe

You might find this post from Kenster in late 2010 to be of interest. He was responding to a thread discussing the "current" funds to be in, and he noticed that many of the names he'd seen over the years were conspicuously absent in the "new" list. Here are the missing funds, many of which you'll probably recognize.

http://socialize.morningstar.com/NewSoc ... 1326308052
by ScottW
Fri Jan 06, 2012 2:33 pm
Forum: Investing - Theory, News & General
Topic: When Does Vanguard's Patent(s) Expire?
Replies: 42
Views: 8082

Re: When Does Vanguard's Patent(s) Expire?

Vanguard originally filed a utility patent (6,879,964) in March 2001 for VIPERs, but then filed an amended patent (7,337,138) March 28, 2005. Utility patents are good for 20 years from the filing date, so they either expire March 2021 or March 2025. I'm not sure if amended patents reset the lifespan. You can search on the patent #s in Google if you're interested.

In any case, it'll be a while . . .
by ScottW
Wed Sep 14, 2011 10:14 am
Forum: Investing - Theory, News & General
Topic: Real estate in 2005, A great read
Replies: 28
Views: 4387

Where are they now?

Soon Debbie will show up in a New York Times article about 40-somethings who cannot retire early. Her husband will have left her, her kids will be getting free school lunches, she will have zero saved for retirement (lost it all in the crash....), she won't have a job (never had a legitimate one anyway...) and her outlook will be dim. Actually, it appears that Debbie and her husband are still going strong, and have created a business to help other people buy and sell real estate. And if real estate isn't your thing, you're in luck--they also buy gold: http://www.investmentpartnersgroup.com/aboutus.php Trish Don Francesco appears to still be a broker (she was one of the few individuals in the piece who, as a broker, benefited from the boom ...
by ScottW
Wed Sep 14, 2011 7:39 am
Forum: Investing - Theory, News & General
Topic: FA article "Rethinking Small Caps"
Replies: 116
Views: 12370

Re: nisprius

This, again is combining a real risk factor (equity risk) with a couple of historical patterns as if they were on the same terms. So we're all on the same page, is it your view that all equity is equal and it makes no difference what segments of the market you get it from? I think most people would agree that the equity of a relatively stable, large company with a vast suit of products to sell will be less risky to own that that of a small company selling a single product that is struggling with sales and is heavily laden with debt. Of course, valuations matter--if the small company is selling at 1/2 times revenue and the large company is a 5000 times revenue you have a different situation, but assuming that valuations aren't completely ou...
by ScottW
Tue Aug 23, 2011 10:11 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Market Plunge May Not Have Been A Bad Idea
Replies: 45
Views: 8277

Lbill wrote:Vanguard does offer BRSVX, but it might not be like BOSVX. For example, it looks like it has about 10% in REIT holdings.
BRSVX is Bridgeway's actively managed small value fund. Their passive small value fund (BOSVX), is not, to the best of my knowledge, available to retail investors.
by ScottW
Fri Jul 22, 2011 10:51 am
Forum: Investing - Theory, News & General
Topic: Sell limit on ETF
Replies: 12
Views: 1562

xerty24 wrote:So as Enron dropped, it became a better value? Sometimes things fall for a reason.
I see your point, but that logic doesn't hold up with diversified mutual funds. If all holdings in a fund drop for a good reason and should be sold, it wasn't an investment you should have purchased in the first place (the Nasdaq 100 comes to mind). The time to re-evaluate whether your investments make sense isn't during a freefall.
by ScottW
Tue Jun 14, 2011 9:36 am
Forum: Investing - Theory, News & General
Topic: Value investing
Replies: 34
Views: 12121

Re: few thoughts

First to add to what was said earlier--at one point if my memory serves Fairholme held just TWO stocks. I don't think that's correct. Before starting Fairholme he worked at Smith Barney for a couple of years managing a portfolio for a handful of wealthy clients. During this time, in 1994, he owned just Berkshire Hathaway and Fireman's Fund Insurance Co. That was a few years before he left the firm to start Fairholme. His prior year annual reports are no longer available on his website, but I think he's normally kept 15-20 stocks for the fund. Consider how much it has grown in assets, he's either going to start adding stocks, or go after larger caps. Of course, if his performance doesn't recover, the "large asset base" problem wil...
by ScottW
Thu Apr 28, 2011 1:54 pm
Forum: Investing - Theory, News & General
Topic: "Fund of the Decade"
Replies: 26
Views: 6936

Taylor, your statement is a little misleading. Morningstar currently ranks Fairholme in the bottom 1% of LV funds for <i>over the past four months</i>. At the end of 2010, just a few months ago, it fell within the top 1% of funds for the year.

If Fairholme had an extraordinary run and then crashed and burned over a period of several years, it might be a cautionary tale for performance chasers. Four months? Not so much.
by ScottW
Fri Apr 15, 2011 8:05 am
Forum: Investing - Theory, News & General
Topic: Has Larry Swedroe been fair on American Funds?
Replies: 32
Views: 5302

I'm not sure the results show that American Funds have added no value, either--it looks like more of a stalemate. As Amarone mentioned, they beat both Vanguard and DFA in two out of four categories. As for emerging markets, New World isn't a "pure" emerging markets fund, and invests in companies that derive a "significant portion of the company’s assets or revenues (generally 20% or more)" from developing countries. Last year the fund only invested 44% in emerging markets stock and 9% in emerging debt. The remaining 37% was in developed countries.

This seems a case of "how can I interpret these results to make my point?"
by ScottW
Wed Apr 13, 2011 8:47 am
Forum: Investing - Theory, News & General
Topic: interview on Seeking Alpha
Replies: 31
Views: 5640

Re: stratton

b) they have bad experiences with retail money as it flees in bear markets and that becomes a BIG problem when trading very small stocks. I'd like to comment on this. I'm now sure how other fund companies fare, but hot money and performance chasing is a huge problem at Bridgeway. I don't own any of their funds, but I was looking into BRSIX for a while and read a few of their annual reports. The inflows (and significant outflows over the past few years) for many of their funds is rather depressing. As Rick mentioned, it's not out of the question that they could open a retail-oriented version at some point (after all, just about everything they've done up to this point has been retail), but given the rampant performance chasing afflicting mo...
by ScottW
Fri Apr 08, 2011 8:11 pm
Forum: Investing - Theory, News & General
Topic: interview on Seeking Alpha
Replies: 31
Views: 5640

Re: Rick

empb wrote:Does its relative lack of holdings (86) bother you? I'd presume you'd not consider this a sufficient number of stocks for you to use it as your personal U.S. allocation.
Larry uses their new BOSVX fund that is not available to retail investors. He used the ticker for their actively managed fund (BRSVX) by accident.
by ScottW
Tue Apr 05, 2011 10:52 am
Forum: Investing - Theory, News & General
Topic: Pension plan forecasted returns - calling WBern
Replies: 21
Views: 3781

Does the CFO have an incentive to push this assumption as high as possible? The higher the expected rate of return, the less money the company has to contribute to meet its future obligations. If the actual return is lower and they find themselves short, well, upper management will have probably moved on to another company by then, so it's no longer their problem. The following WSJ article discusses the friction between local governments and actuaries forecasting returns. The actuaries want the pension plans to adopt more conservative targets, while governments are fighting back because they fear that doing so will strain their current budgets. http://online.wsj.com/article/SB10001424052748703410604576216981387864802.html?KEYWORDS=pension ...
by ScottW
Mon Mar 28, 2011 12:23 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Files for New Active EM Fund
Replies: 19
Views: 5551

Random Musings wrote:IMHO, very disappointing that Vanguard took this approach versus adding a passive/index EM value fund.
Keep in mind that they wouldn't add a value fund without adding a growth counterpart (Vanguard doesn't buy into value premium, and if anything, many of their directors seem to prefer growth judging by where they have their money). They might be skeptical that there would be enough interest to support a pair of new index EM funds.
by ScottW
Thu Feb 17, 2011 12:44 pm
Forum: Investing - Theory, News & General
Topic: Index ETF vs Mutual Fund MER
Replies: 21
Views: 3325

idahospud wrote:
RaleighStClaire wrote:Of course, you are only dealing with Vanguard here because they hold the patent on the ETF+Mutual Fund shenanigans.
huh?...what do you mean?
Vanguard was the first company to create ETFs that were just a different class of an existing open-ended mutual fund. They applied for and were granted a patent, so anyone else who wants to do the same must pay Vanguard a fee.

Companies can still offer any ETF they want, but they have to be part of an isolated fund to avoid infringing on the patent.
by ScottW
Thu Feb 17, 2011 12:28 pm
Forum: Investing - Theory, News & General
Topic: RAFI Funds
Replies: 31
Views: 4687

Re: few thoughts

larryswedroe wrote:That is one reason we prefer the fund families of DFA and Bridgeway---more constant exposure to the asset class we want exposure to.
Larry, are you just referring to the Ultra-Small Market fund (BRSIX) when you mentioned Bridgeway, or are there other funds you like? Everything aside from BRSIX and their large-cap index appear to be actively managed with fairly high turnover. I know they managed institutional accounts, but I was under the impression they were just variations of their retail mutual funds (or perhaps a separate share class of the same fund).

I'm just curious.
by ScottW
Thu Jan 27, 2011 8:01 pm
Forum: Investing - Theory, News & General
Topic: Should price wag value or vice versa, RAFI strategies...
Replies: 23
Views: 3722

Re: Should price wag value or vice versa, RAFI strategies...

grap0013 wrote:Think about VBR for a minute. Since it's cap weighted it gives the highest weighting to the most expensive small cap value stocks. So basically it overweights the growiest small cap value stocks.
I never understood this logic. Take two companies: "A" has $1 million in annual earnings, while "B" brings in $100 million. Both have been growing at the rate of 5% a year.

Company A has a market value of $50 million (50x earnings). Company B's value is $150 million (1.5x earnings). According to the logic above, company B is more "expensive" and "growthy".

Market value alone is virtually useless--it must be viewed in context with other factors for it to be meaningful.
by ScottW
Thu Jan 20, 2011 8:48 am
Forum: Investing - Theory, News & General
Topic: Why all the praises for DB pension plans?
Replies: 38
Views: 4634

Re: Why all the praises for DB pension plans?

But the reality is the typical employer has gone from contributing maybe 10-12% of payroll to a DB pension plan to contributing maybe 3% of your pay to a 401K (provided that you are putting in 6% of pay). I agree that pension plans are not feasible unless job security is very high, and you can spend most of your career with the same company. In my field (IT), many of my coworkers don't stay at a company for more than a few years. However, Jeffy makes a huge point. In many cases, companies haven't really moved from one form of retirement benefit to another, they've eliminated it altogether. It's one thing if they switched to a 401K and continued funding it on your behalf, but when a company match is less than 5%, the employees not only beco...
by ScottW
Mon Jan 10, 2011 6:58 am
Forum: Investing - Theory, News & General
Topic: 2nd year of cap gains distribution for VSS (int small cap)
Replies: 11
Views: 1947

natureexplorer wrote:ETFs and Vanguard ETFs are two different things.
There's debate over whether the dual-class structure helps or hurts tax efficiency. Also, the ETF class accounts for 80% of the total assets, so it's unlikely the mutual fund portion can have that adverse of an effect.

In a recent interview, Vanguard argued that one reason this had a short-term capital gain was that it began operations right before the market took off, so even with the arbitration mechanism in place, the fund didn't have many high-price shares available for redemption.
by ScottW
Wed Dec 08, 2010 9:57 am
Forum: Investing - Theory, News & General
Topic: Comparing VT and DFA 100 red portfolio?
Replies: 33
Views: 3990

You don't know what it is at this moment? > Both funds are characterized by 3 factors, right? You can't compare the aggregate of the 3 for DFA vs the aggregate of the 3 for Vanguard _at this moment_? You can determine what the loading factors were during a certain period of time in the past, but you cannot tell for certain what they will be in the future. The only thing we can be reasonably certain of going forward is that DFA funds will generally have a greater tilt to small and value than comparable Vanguard funds. If you believe in the small/value premium, that should translate to higher expected returns over time, but you have little way of knowing how they will perform in the short term, which is what you need to know to market time e...
by ScottW
Mon Nov 22, 2010 6:47 am
Forum: Investing - Theory, News & General
Topic: "Small Caps vs. Large ?"
Replies: 58
Views: 7469

Pete,
Before we decide that Core funds are useless because they are identical to the Total Stock Market, let's compare TSM against small value during the same time period.

Image

The Core funds behaved similarly to TSM because small and value behaved similarly. When the two diverge (between 1995-2005, for example), I'd expect the Core results to look quite different.
by ScottW
Wed Nov 17, 2010 1:18 pm
Forum: Investing - Theory, News & General
Topic: call options
Replies: 8
Views: 1313

Wagnerjb wrote:When an individual writes a book about a strategy that promises extraordinary returns, you can tell that the strategy isn't effective at generating reliable and consistent profits. But....selling a book to naive investors is an excellent strategy that produces reliable and consistent profits.
The Big Short isn't a how-to investment book. It's about the subprime mortgage debacle, and focuses on a few hedge funds that saw the crisis looming before anyone else did. The trades being discussed in this thread were merely how one of the hedge funds got started. It's more of a historical account than something meant to be a training manual.

It's an interesting book. I finished it a few weeks ago.
by ScottW
Tue Nov 02, 2010 10:10 am
Forum: Investing - Theory, News & General
Topic: Importance of Asset Allocation
Replies: 27
Views: 3263

I read the paper ddb linked to, and didn't find it to have much substance. For one thing, he never really clarified what he meant by "asset allocation". Does he mean the domestic stock market in aggregate versus bonds or cash? Stocks by style or market cap? Domestic versus international? I think the entire paper can be summarized in two sentences. Your split between stocks and fixed income is the largest, and therefore most important, driver of your return. Asset allocation (assuming he's referring where in the stock market you invest) affects a much smaller part. Unless I've completely misunderstand what he's saying, this is kind of true. Fama/French's research is about using risk to increase/decrease your expected return relativ...
by ScottW
Wed Oct 20, 2010 12:43 pm
Forum: Investing - Theory, News & General
Topic: Mr. Bogle's views on investing overseas
Replies: 28
Views: 4294

SpringMan wrote:I respect Mr. Bogle's opinion but don't really see how it is more expense to invest in foreign markets from a cost stand point.
The problem isn't with the expense ratios of the funds. International stocks generally have higher trading costs than domestic companies, with emerging markets being the worst. For US investors, international stocks have to have higher returns just for us to break even.

I don't recall the figures off the top of my head, but I believe some of Larry's books have touched on the issue. You could probably scrounge up an article online as well.
by ScottW
Tue Oct 19, 2010 12:22 pm
Forum: Investing - Theory, News & General
Topic: International Indexing - A Better Mousetrap Allan Roth
Replies: 9
Views: 1893

I'd rather they offered an international value index fund instead, but considering that iShares EFV has only attracted a little over a billion in assets, I'm guessing Vanguard may not feel there's enough interest. I'm curious to see what the upcoming Russell value ETFs look like.

This ETF is good news for those looking for an international flavor of TSM, though.
by ScottW
Wed Oct 13, 2010 2:21 pm
Forum: Investing - Theory, News & General
Topic: Who "overweights" large and growth?
Replies: 47
Views: 7289

Small and value stocks have expected but not guaranteed risk premiums, so it's not exactly a sure thing. The majority of investors have no idea what they are doing, even though many probably think they do. How many of them would believe that investing in distressed companies with uncertain futures could be preferable to solid "growth" companies that receive all the praise from analysts? Even if you "got through" to an individual and convinced them that a particular method was the way to go, they'd jump ship as soon as something new and shiny caught their attention. I'm convinced most people are performance chasers, despite what they might believe. Finally, consider this: most people invest in actively managed funds, the ...
by ScottW
Wed Oct 13, 2010 10:39 am
Forum: Investing - Theory, News & General
Topic: SV premium, will it persist
Replies: 47
Views: 5421

Re: SV premium, will it persist

On average, people would have to be rewarded for the possibility of their stock tanking. As a whole, the class did better, due to risk of the individual components, that one could not diversify away. Now, however, that risk can be diversified away by indexing. I disagree. Investing in many stocks (whether through an index or an active fund) may reduce the risk of any particular stock tanking, but it does not make the asset class any less risky as a whole. Small companies are still, in aggregate, more risky than larger, established companies. To imply otherwise would mean that it doesn't matter where you invest, just as long you buy many companies in that area. Would you feel as comfortable putting your money in the S&P 500 as you would...
by ScottW
Mon Oct 11, 2010 1:47 pm
Forum: Investing - Theory, News & General
Topic: What Now For High Value Vanguard Investors
Replies: 100
Views: 18236

How many threads do we need to derail with this hot money nonsense? Last year, Merriman wrote an article comparing Vanguard and DFA funds. At the top of the article: Editor’s note: We have been teaching investors how to use Vanguard and Dimensional Fund Advisors funds for more than a decade. That doesn't sound anti-Vanguard to me. He goes on to discuss the pros and cons of each company, and yes, he prefers DFA over Vanguard because of a few tactics they employ, the same tactics that have been praised by others on this board like Larry and SmallHi. He discusses the now infamous "hot money" problem, and displays a profound grasp of the obvious: that large inflows and outflows are generally not a good thing. They drive up internal fu...
by ScottW
Sun Oct 10, 2010 8:02 pm
Forum: Investing - Theory, News & General
Topic: U.S.Growth's Fall From Grace
Replies: 30
Views: 5113

slick_dealer_05 wrote:Performance of the Primecap fund has also lagged behind VTI for the past 5 years. I wonder if Vanguard will do something about it.
That's incorrect. According to Vanguard's website, as of 9/30 the average annual returns have been:

Code: Select all

Primecap: 3.93%  $12,126 (admiral shares)
VTI:      1.24%  $10,635
by ScottW
Thu Oct 07, 2010 9:33 pm
Forum: Investing - Theory, News & General
Topic: Hot Money Flows and new lowered admiral requirements vs DFA
Replies: 49
Views: 6497

hotmoney wrote:but again where is some academic research to counter what Merriman infers, that by costing a little more, we keep the unwashed masses and their hot money away?
I feel like I've just been hit by a giant wall of stupid.

Clearly the solution is for Vanguard to jack up their expense ratios to 2% or more, add add a load on top of that. That'll keep out the smelly little cretins.
by ScottW
Wed Oct 06, 2010 10:59 am
Forum: Investing - Theory, News & General
Topic: Lower Minimum on Admiral Shares
Replies: 110
Views: 16677

btownguy wrote:Wow, that's great. It looks like the Admiral shares have the same ER's as the ETF's. I wonder if I should convert my ETF's over to Admiral share mutual funds now.
The conversion is one way--from fund to ETF. To go from ETF to fund, you have to sell the ETF and then purchase the fund separately.
by ScottW
Tue Sep 21, 2010 8:44 am
Forum: Investing - Theory, News & General
Topic: Dimensional Fund Advisors - ?
Replies: 37
Views: 6655

Not certain it's all that clear cut if you are unable to hold the DFA funds in a tax advantaged account. The going recommendation (at least based on this thread from 2008: http://www.bogleheads.org/forum/viewtopic.php?t=20832) seems to be that investors should use the DFA tax managed funds in taxable accounts, even over Core and Vector. For what it's worth SmallHi disagreed and felt Core and Vector would probably provide higher after-tax returns. I do agree that "sector" funds such as the regular DFA Small Value are likely not suitable for taxable accounts, although the results below seem to indicate otherwise... What I found interesting were the results of the tax-managed funds versus index-based ETFs. When you switch from the r...
by ScottW
Mon Sep 13, 2010 11:17 am
Forum: Investing - Theory, News & General
Topic: Indexes and ETF's Distorting Markets - Article
Replies: 14
Views: 1948

Hmm. I always thought index funds bought stocks because that was what active investors were buying and they were attempting to replicate that fact. Did someone force investors to buy the S&P500? Those types of arguments never made any sense to me either. While I agree that the inclusion or removal of a stock from an index can affect its price in the short term due to massive buying or selling by the index funds, it has nothing to do with over/undervaluing particular sectors within the index. The index, in essence, looks at what the active investors are doing and then follows their lead. Active management cause a stock/sector/country to become overvalued, not indexes. The article concludes by saying "investors should rely on active...
by ScottW
Fri Sep 10, 2010 7:33 am
Forum: Investing - Theory, News & General
Topic: vanguard new etfs question
Replies: 29
Views: 5437

The style ETFs are more expensive

Not sure if anyone noticed this, but the mid- and small-cap variants are all more expensive than Vanguard's existing MSCI series. The blend indexes are only 1 basis point more expensive, but the growth/value funds are 0.20 for S&P versus 0.14 for MSCI.

I wonder if they will fall over time as assets increase, or if the higher price is the result of higher licensing fees.

I still wish they'd introduce an international value fund and stop futzing around with trying to introduce as many overlapping domestic funds as possible. They already have an actively managed large cap variant, so I can't see why adding style international indexes would be such a big deal.
by ScottW
Thu Sep 09, 2010 6:34 pm
Forum: Investing - Theory, News & General
Topic: Vanguard Joins the Investment Porn Crowd
Replies: 72
Views: 12510

Based on some of the responses, you'd think Vanguard saved the posters from a burning building. Yes, Vanguard may be the retail mutual fund firm with the most integrity at the moment, and I would like to keep it that way. That means taking them to task for questionable behavior or statements, not waving my hands in a dismissive gesture and trying to justify their actions. Vanguard is a large corporation trying to attract assets and make money. They are not your friend. While many on this site have great respect for John Bogle, remember that Vanguard and Mr. Bogle are not the same thing. Vanguard has changed quite a bit since he left, and while some of the changes are good, some are not. Remember last year when Vanguard asked its shareholder...
by ScottW
Tue Aug 17, 2010 10:33 am
Forum: Investing - Theory, News & General
Topic: DFA Funds For "Free" — which are good?
Replies: 22
Views: 5224

Re: DFA vs. Vanguard ?

Taylor Larimore wrote:According to Morningstar, "In its 18 years of existence, DFA’s small-value tilt has harmed it more than helped. You’d have made a lot more money following Vanguard’s cap-weighted approach."
Hmm . . . wasn't this article written in early 2000, at the height of the large-cap growth insanity that had made Vanguard's offering look great and all small/value approaches look abysmal? I realize that date selection has a lot to do with the "apparent" success/failure of a strategy, but you don't get much more extreme than this example.
by ScottW
Mon Jun 28, 2010 1:01 pm
Forum: Investing - Theory, News & General
Topic: How much royalty does a fund pay for the index provider?
Replies: 6
Views: 1990

Re: How much royalty does a fund pay for the index provider?

Schwab is the only company I'm aware of who discloses this information. They report the money paid to Research Affiliates for their RAFI index funds in their annual reports.
by ScottW
Thu Jun 24, 2010 9:54 am
Forum: Investing - Theory, News & General
Topic: New Vanguard ETF's
Replies: 62
Views: 10981

It's all good. The more choices, the better. True, but it's a little bizarre. After saying that they couldn't get away from the Russell 2000 index fast enough back in the 90s, they've decided to add it back in. Also, the article on Vanguard's web site doesn't mention the S&P and Russell indexes being available to regular investors (aside from the S&P 500). The Morningstar article says those funds will only be available to institutional investors with a $5 million minimum, but it does include ETF-versions. If the S&P and Russell ETFs will be available to the regular Joe, I wonder why Vanguard excluded them from their web site article? Vanguard has a slew of existing ETFs that don't have a "regular" mutual fund counterp...
by ScottW
Wed Jun 02, 2010 12:25 pm
Forum: Investing - Theory, News & General
Topic: International value
Replies: 17
Views: 3442

Since my international value is in my taxable account, I wanted an ETF instead of an open-ended fund. I chose iShares EFV. It's not great, but international value options are limited, and it seemed to be the best option.

If I had tax-deferred space, I might consider Schwab's RAFI International large company (SFNNX). Although it's a mutual fund, its expense ratio is a little lower than EFV. I don't buy into the marketing hype that RAFI is the greatest thing since sliced bread, but I don't see anything wrong with it either.
by ScottW
Fri Apr 23, 2010 5:05 pm
Forum: Investing - Theory, News & General
Topic: Passive works because active doesn’t
Replies: 150
Views: 21568

Re: Past performance is does not forecast mutual fund return

Avo: Sorry, this analogy is flawed. There's an important difference that is often overlooked. In this example, it's the free-throwers' skill against the rim. Their success depends entirely on their skill, and has no correlation with how well other participants do. A better thrower may you look bad by comparison, but he won't affect how many shots you make. In the workplace, while you can compare the relative skill sets of employees against each other, a worker's ability to do his job usually has little to do with the abilities of his co-workers (assuming it's doesn't involve teamwork). On the other hand, investment outperformance is entirely based on your ability to trounce everyone else, at the same time they're trying to do the same to y...
by ScottW
Thu Apr 22, 2010 10:58 am
Forum: Investing - Theory, News & General
Topic: Passive works because active doesn’t
Replies: 150
Views: 21568

I've come to a similar conclusion by watching fund changes in some annual top fund lists. This reminds me of one of the reasons I decided to move away from actively managed funds. When I graduated from college in the mid-nineties I knew very little about investing, so after I checked out the finance section in the local Barnes & Noble, I purchased the book Low Risk Investing by Gordon Williamson. Its main focus was to discuss the pros and cons of the many types of investments available to the average Joe, and while I wouldn't recommend it today, it was a decent book at the time. A few months later I saw he had a new book on the market: The 100 Best Mutual Funds You Can Buy. Anyone remember seeing these? Naturally, they were all active,...
by ScottW
Tue Apr 20, 2010 11:05 am
Forum: Investing - Theory, News & General
Topic: "DFA vs. Vanguard. Which is Better?"
Replies: 167
Views: 35365

The ETF business has come a long way in the past five years. The basket for creating redeeming shares doesn't have to be the entire portfolio. It can be a liquid sampling of larger securities that have more liquidity. This is how Vanguard creates and redeems ETF shares. Interesting. I always thought the baskets had to encompass the entire portfolio. I really don't see how having full access to the DFA lineup would allow one to build better portfolios than by using non-DFA funds. This certainly wasn't the case 5 years ago, but the index/ETF landscape has really been working in the investors' favor lately. While I still feel that DFA has an edge over many of their competitors in the value space, I agree that there are plenty domestic options...
by ScottW
Tue Apr 20, 2010 8:35 am
Forum: Investing - Theory, News & General
Topic: "DFA vs. Vanguard. Which is Better?"
Replies: 167
Views: 35365

I've been suggesting for years that DFA put an end to the wholesale selling of access by just create ETFs for all investors to use. An ETF class share would go a long-way toward making their open-end funds more tax efficient. I have a question about this. Since DFA funds are "passive" and do not strictly follow indexes, they have more leeway when making trades. Would opening up their funds as ETF classes affect their momentum screens and patient trading practices, and would their tax-managed funds need to alter their behavior in any way? I can see how ETFs would probably benefit their larger cap offerings, including the domestic and international Core funds, but I wonder if their would be drawbacks to some of their other funds th...
by ScottW
Fri Apr 09, 2010 2:36 pm
Forum: Investing - Theory, News & General
Topic: Foreign Funds Don't Measure Up!
Replies: 81
Views: 10180

ddb wrote:Very interesting that when the data changed, Rick started focusing on a 20-year period rather than a 15-year period.
Actually, the article is a bit schizophrenic. It starts out claiming a 1.4% per year boost over 20 years, but in the next sentence the time frame switches back to 15 years, and the 1.4% is later attribute to the shorter time frame as well.

I think the article still has a few more corrections to go. And while I respect Rick and all that he does on this forum, if he did switch to a 20-year period to make his case more attractive, isn't that the very same kind of data mining we often criticize fund companies of doing when they select the best periods when promoting their funds?
by ScottW
Tue Mar 30, 2010 9:27 pm
Forum: Investing - Theory, News & General
Topic: Look At Me! I Beat The S&P!
Replies: 109
Views: 18199

Re: Which is blacker, the Kettle or the Pot?

If it is the fund companies job to represent the small cap performance shouldn't they use the Morningstar index which most of us use when we think of style boxes? What gives the Morningstar index priority over others? And if a fund is attempting to replicate a particular index, why would it benchmark itself to another index? Looking at JKL, the iShares implementation of the Morningstar small-value index, I see two things. Over the past five years, the main discrepancy in performance seems to have shown up just last year, when it returned 40% while others came in significantly lower. Also, its portfolio contains only 251 stocks, which seems low to me considering the number of stocks in the small-cap universe. Low sampling can lead to signif...
by ScottW
Tue Mar 30, 2010 1:33 pm
Forum: Investing - Theory, News & General
Topic: Yale Endowment -- Diversify, Diversify & Diversify
Replies: 19
Views: 4174

You can find discussions on the 7Twelve portfolio at the links below. The theory is nothing new: diversification can work to your benefit, and investors who owned a multitude of asset classes probably would have done better over the past decade than those who just stuck to TSM. If you want info on this without the sales pitch, you can look at the link Kenster posted in one of the early threads on the subject, where the professor discussed his 7-asset portfolio before he rolled out his for-profit 7Twelve site. 7Twelve discussions http://www.bogleheads.org/forum/viewtopic.php?t=48533&highlight=7twelve http://www.bogleheads.org/forum/viewtopic.php?t=31544&highlight=7twelve Seven-asset portfolio http://seekingalpha.com/article/73042-cra...
by ScottW
Mon Mar 29, 2010 2:12 pm
Forum: Investing - Theory, News & General
Topic: DFA question: Intl small cap vs Int'l Vector Equity
Replies: 28
Views: 4285

Just a quick comment. The domestic Small-Cap Value Index Fund, VSIIX, has an expense ratio of .06% and DFFVX has an expense ratio of 0.41%. Do you really think it's worth the difference? When looking at fund costs, be sure to subtract any securities lending income from the fund's reported expenses. You can find this information in the annual reports. Based on last year's data, DFFVX earned enough to reduce its expense ratio to 0.16% (see page 157 of the report), while Vanguard's lending income was about half its overall expenses. Vanguard's lending income gets distributed among its investor, admiral, and institutional shares, and I'm not sure how much goes to which class. If we halve the ratios across the board, we'd get a net expense of 0...
by ScottW
Mon Mar 29, 2010 11:04 am
Forum: Investing - Theory, News & General
Topic: DFA question: Intl small cap vs Int'l Vector Equity
Replies: 28
Views: 4285

Re: DFA question: Intl small cap vs Int'l Vector Equity

If you're looking for a small-cap alternative, you don't want Vector, as it's a total stock market fund (minus the most "growthy" large caps) tilted to small and mid-value. According to DFA's literature, the weighted-average market cap of the small-cap fund is $1.2 billion, while Vector is $17 billion.

I would consider Vector to be a good all-in-one fund for those looking for a mid-value tilt, but it's not a replacement for a stand-alone small-cap fund.
by ScottW
Fri Mar 26, 2010 12:27 pm
Forum: Investing - Theory, News & General
Topic: History behind "slice and dice?"
Replies: 24
Views: 3284

Re: History behind "slice and dice?"

nisiprius wrote:2) It would seem to be easy to create a mutual fund to implement this sort of portfolio automatically.
The DFA Core, Vector, and Global funds are flavors of what you describe. Core and Vector are essentially TSM or International TSM tilted by varying degrees towards small- and mid-value, while the Global funds mix domestic and international together with REITS, and in a few funds (the 60/40 and 25/75), with bonds as well.

The main differences between these funds and your example is that they include mid-caps, and are more concerned with overall factor exposure than worrying about specific bands that must be rebalanced to regularly.
by ScottW
Wed Mar 24, 2010 8:54 am
Forum: Investing - Theory, News & General
Topic: Value investing
Replies: 34
Views: 12121

Re: Value investing

ddb wrote:Look at Fairholme fund (FAIRX) - $13 billion in assets across 70 positions. Are we really to believe that Mr. Berkowitz has 70 great investing ideas?
Did you look at portfolio turnover by accident (which is 71%)? I'm only seeing 21 stocks, which is consistent with previous years. I agree that the growth in assets under management is cause for concern, particularly since they seem reluctant to close the fund.
by ScottW
Wed Mar 17, 2010 9:59 am
Forum: Investing - Theory, News & General
Topic: The Unloved Mid Caps: Value, Growth, or Blend
Replies: 32
Views: 12068

Large Value typically has the least Value load. Over time Mid and Small Value load typically hs been fairly close (small maybe a bit more than mid) Also, investors who tilt to value will generally (I assume) tilt to size, and large-cap value funds usually have a negative size tilt. With the exception of DFA, most large value funds: * Tilt you to value, but not as well as mid or small * Tilt you away from a neutral size load, but in the wrong direction Mid value funds generally * Tilt you to value, better than their large counterparts * Have a neutral or slightly positive size load (which you probably want) To confuse matters a little, if you restrict yourself to using Vanguard-only funds, their large value fund (VIVAX) is actually a compos...