Non Boglehead AA Thought

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Non Boglehead AA Thought

Postby goalie » Sun Jan 06, 2013 10:01 am

I find that I am Boglehead in most of my thought. I watch my costs,index where I can and drive an '07 Toyota Yaris (clear title), instead of something enjoyable. I also overweight SCB and REIT on the domestic side and EM MKTS, SCB and RE on the Int'l side. When I look at TSM and TISM, I see a triangle on its point. Meaning that I don't see enough exposure where the risk /reward is. I have read with great interest as the "slice-n-dice" debates has gone on through the years. But this is not the reason for this post.

Within my IPS is a 10% market timing window for myself. I will drop to 65%/35% when I feel the market is overbought and I will Increase to 85%/15% when I feel it is oversold. I make these moves within my Transamerica 401K so as to not cause any tax issues. I have made these moves with mixed results through the years. Last year I did well, with a 17.37% return for a generally 75%/25% AA, with a few drops to 65%/35% to miss a few dips in the market. To me, this is my 10% play money like others that buy individual securities, gold, art or a nicer car.

Is there anyone else out there that makes adjustments like me? I see a clear difference when the DOW is at 13,400 VS 12,100. Thank you, Chip
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Re: Non Boglehead AA Thought

Postby stevewolfe » Sun Jan 06, 2013 10:07 am

Maybe you could tell us what the "clear difference" is between the DOW at 13,400 and the DOW at 12,100? I know I'd be curious to hear what that is.
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Re: Non Boglehead AA Thought

Postby goalie » Sun Jan 06, 2013 10:19 am

I have seen the DOW move around between these #s for awhile and I move some AA to bonds when at the upper end and move it back at the lower end of the scale. Again it is the 10% play money, not all of it. VGI would not let me do this in my IRAs, but TA does not stop me in my 401K :greedy
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Re: Non Boglehead AA Thought

Postby blevine » Sun Jan 06, 2013 10:35 am

If you are saving enough in your non-play money to fund your long term goals,
does not matter what you do with your "play money". More important the amount
of play and serious money, than what you do with that play money.
Buy a car, go to Las Vegas or do market timing, it's all the same, play.
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Re: Non Boglehead AA Thought

Postby mhc » Sun Jan 06, 2013 11:34 am

Goalie,

I'm not sure this is really 10% play money. Are you tracking this 10% so that once it is gone, you will stop this behavior?

Or is your play money and endless 10% of your portfolio that could theatrically drive your portfolio to $0?
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Re: Non Boglehead AA Thought

Postby wesleymouch » Sun Jan 06, 2013 11:37 am

I THINK THAT THE ONE THING THAT YOU CAN KNOW IS VALUATION. THEREFORE WITH A CAPE OF 22.5 FOR THE US STOCK MARKETS THERE WILL LIKELY BE A 1% OR SO ANNUAL RETURN FOR THE NEXT DECADE. THEREFORE I UNDERWEIGHT THE US AND HAVE OVERWEIGHTED EUROPE AND JAPAN GOING FORWARD.
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Re: Non Boglehead AA Thought

Postby ofcmetz » Sun Jan 06, 2013 11:43 am

goalie wrote:
Within my IPS is a 10% market timing window for myself. I will drop to 65%/35% when I feel the market is overbought and I will Increase to 85%/15% when I feel it is oversold.


Seems like a 20% market timing window to me. Kind of a wide range in my opinion.

goalie wrote: Is there anyone else out there that makes adjustments like me? I see a clear difference when the DOW is at 13,400 VS 12,100. Thank you, Chip


I see the difference as well. It is 1,300.

I rebalance according to my IPS, and would consider adjusting it to be more conservative if a bull market in equities caused me to meet my financial goals early. I don't think you can time things correctly enough to even waste the effort trying. There are worse things than what you are doing, but I don't think you are helping yourself. Find an asset allocation and concentrate on he things that matter like your savings rate and your investment costs.
Showing up at the donut shop at 5 am to get them hot out of the oil is an example of successful market timing.
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Re: Non Boglehead AA Thought

Postby livesoft » Sun Jan 06, 2013 11:52 am

goalie, please give specific trades that you did in 2012 that demonstrate your actual behavior.

I have formalized my strategy on buying on RBDs as written in my IPS.

I sold shares of FUSVX on 5/1/2012, bought shares of VWO on 6/22/2012 sold them on 6/29/2012, sold more FSUVX on 9/13/2012, bought VBR on 11/08/2012, and so on. I even bought equites on 12/28/2012 and 12/31/2012.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Non Boglehead AA Thought

Postby scone » Sun Jan 06, 2013 12:19 pm

IIWY: trade in the Yaris for a Honda Fit. It's a lot of fun to drive, and even more practical than the Yaris. Leave your portfolio alone. That way you'll get the immediate gratification factor, and probably make more money in the long run. Win-win. :D
"Sometimes you eat the bear and sometimes the bear eats you." -- Preacher Roe
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Resisting the Urge to Tweak Portfolios

Postby EDN » Sun Jan 06, 2013 12:21 pm

I don't go in for all this portfolio tweaking. I think the OP called it correctly as more of a speculative/entertainment move and less of a wealth enhancing move. Once you've made the decision to diversify broadly across stocks and high-quality bonds, include smaller and more value-oriented stocks, and rebalance when your mix becomes sufficiently stretched, you've done all you can do.

More than likely, what starts out as small tweaks will morph into full blown market-timing decisions during extreme market environments. Further, it is unlikely these tweaks will add much even if kept in check. We know there is momentum in security prices, and excessive pruning of assets that have done well sometimes choke off further growth while prematurely overweighting assets with more impending pain (remember the fears of "irrational exuberance" in US stocks in 1996?).

If you are trying to micromanage a portfolio or outsmart the markets to this degree, its probable you are missing the forest for the trees. Set your asset allocation, use the best index funds available to you, rebalance back to target periodically and/or with cash flows, and be done with it.

Eric
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Re: Non Boglehead AA Thought

Postby SpringMan » Sun Jan 06, 2013 12:21 pm

I think many Bogleheads rebalance based on percentages away from their target allocations but the percentage is usually 5%, 10% is on the high side but may work for you. My condolences on your Transamerica 401(k), my spouse had a Transamerica 401(k) for years. As expected with an insurance company, their added expenses were high. In our case we had no match, but we contributed anyway. Fortunately, they allowed an in-service rollover for those over 59.5, so her Transamerica 401(k) has been rolled over to a Vanguard IRA. By the way, IMO, a 2007 Toyota Yaris should be enjoyable to drive.
Best Wishes, SpringMan
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Re: Non Boglehead AA Thought

Postby Aptenodytes » Sun Jan 06, 2013 12:25 pm

I'm not sure I'd call that a non-bogelehead thought, if you are basing what you do on research, theory and evidence.

There has been recent research about investment strategies that use the Shiller PE ratio to tweak the equity portion of your portfolio. As you suggest, you might dial the equity portion up when the ratio is low, and dial it down when the ratio is high. I've read a few papers along these lines and they seem reasonable to me. They don't generate crazy fluctuations in the portfolio, just gentle movement based on the risk/return winds.

I don't consider this research to be nearly as settled as the Fama/French work, so I'm not willing to make a change myself. If I changed my approach every time a cool promising idea came along I would be making bad choices along with the good. If the Shiller PE shot into the stratosphere again, though, I'd be lying if I said I wouldn't take a harder look.

[rant]I would never in million years base any decisions on the Dow, however. That is one weird index and seems unusable for any purpose other than being able to report a number with that label. To me it borders on journalistic malpractice when the media report it. [/rant]
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Re: Non Boglehead AA Thought

Postby Peter Foley » Sun Jan 06, 2013 12:42 pm

My impression is that this strategy is not unlike writing covered call options. It works well if the stock or fund stays within a defined range. It would not work if there is a significant run up top a higher level that establishes a new range.
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Re: Non Boglehead AA Thought

Postby Aptenodytes » Sun Jan 06, 2013 12:47 pm

Peter Foley wrote:My impression is that this strategy is not unlike writing covered call options. It works well if the stock or fund stays within a defined range. It would not work if there is a significant run up top a higher level that establishes a new range.

Shiller's research, and that of the people who are working in a similar vein, is premised on the conclusion that there are no new ranges. Mean reversion rules. So your qualification isn't really a qualification, because if you believed that the PE could enter new sustainable ranges you wouldn't be asking these questions in the first place.
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Re: Non Boglehead AA Thought

Postby goalie » Sun Jan 06, 2013 1:12 pm

As far as specific trade dates or amounts, I do not keep a record except the tracking of that move while I am in the middle of it. I don't keep a record, but the 4 moves that I made this year were well timed. Don't get me wrong I have had my share of stinkers, like presently, I am waiting to move some back in on a dip in Dom SCB, that I pulled out in mid Dec.

As for the ranges changing, THAT is the risk that I am facing now as I wait with $$$ in bonds that should be in SCB. Some fun, EH?

It's funny that a poster spoke of the Fit, I test drove it and chose the Yaris for the trunk and better sight lines. Nothing wrong with the Fit, just chose the sedan for the security.
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Re: Non Boglehead AA Thought

Postby livesoft » Sun Jan 06, 2013 1:21 pm

goalie wrote:As far as specific trade dates or amounts, I do not keep a record except the tracking of that move while I am in the middle of it. I don't keep a record, but the 4 moves that I made this year were well timed. Don't get me wrong I have had my share of stinkers, like presently, I am waiting to move some back in on a dip in Dom SCB, that I pulled out in mid Dec.

You really made laugh out LOUD! What do you mean you do not keep a record! Of course, you don't. Your financial institutions keep records for you. Please go look up your trades and spill the beans. Well-timed my ass. OK, maybe they were, but you have the records, so show them to us.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Non Boglehead AA Thought

Postby Aptenodytes » Sun Jan 06, 2013 1:35 pm

goalie wrote:As far as specific trade dates or amounts, I do not keep a record except the tracking of that move while I am in the middle of it. I don't keep a record, but the 4 moves that I made this year were well timed. Don't get me wrong I have had my share of stinkers, like presently, I am waiting to move some back in on a dip in Dom SCB, that I pulled out in mid Dec.

Although I made a case above for a bogelhead approach to adjusting your equity percentage based on stock prices, if you change your allocation four times within a singe year you are definitely not approaching the challenge in a boglehead manner. Movements in a single year are just noise. You are bound to lose if you do what you are doing consistently, regardless of how lucky you may have gotten in the past.
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Re: Non Boglehead AA Thought

Postby goalie » Mon Jan 07, 2013 6:10 am

Thank you.
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Re: Non Boglehead AA Thought

Postby goalie » Thu Jan 10, 2013 11:09 pm

This is in response to some replies to not only my "silly" post but others too. If you read this thread you will observe a call out by one of the responses, demanding action on my part. I asked for opinions, not to be ordered about like some dope. In another response the same poster spoke quote a bit how others don't understand certain thoughts or math. WHAT AN ELITIST !!! Do you think much of yourself? Go live limp.... Now back to my life, and it will be quite some time before I post again. Thank you for the polite, well thought out replies. Chip
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Re: Non Boglehead AA Thought

Postby zebrafish » Fri Jan 11, 2013 12:08 am

wesleymouch wrote:I THINK THAT THE ONE THING THAT YOU CAN KNOW IS VALUATION. THEREFORE WITH A CAPE OF 22.5 FOR THE US STOCK MARKETS THERE WILL LIKELY BE A 1% OR SO ANNUAL RETURN FOR THE NEXT DECADE. THEREFORE I UNDERWEIGHT THE US AND HAVE OVERWEIGHTED EUROPE AND JAPAN GOING FORWARD.


You are also overweighting the CAPS LOCK
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Re: Non Boglehead AA Thought

Postby bottlecap » Fri Jan 11, 2013 12:13 am

Why waste time to get "mixed results?"

JT
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Re: Non Boglehead AA Thought

Postby zaboomafoozarg » Fri Jan 11, 2013 12:35 am

scone wrote:IIWY: trade in the Yaris for a Honda Fit. It's a lot of fun to drive, and even more practical than the Yaris. Leave your portfolio alone. That way you'll get the immediate gratification factor, and probably make more money in the long run. Win-win. :D


I second this, the Fit is pretty cool.
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