Rick Ferri's Portfolio

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Postby jeffyscott » Sat Aug 14, 2010 6:04 pm

Maybe this would have helped with your comprehension, since the context of the comment was insufficient for you?

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Postby Ed 2 » Sat Aug 14, 2010 6:22 pm

jeffyscott wrote:Maybe this would have helped with your comprehension, since the context of the comment was insufficient for you?

Image


1.sarcasm- ridicule or mockery is used harshly, often crudely and contemptuously, for destructive purposes.

2.In other words sarcasm- If you are unable to understand due to poor manner or insecure person trying to hide own problems.

3.My answer- IGNORE. 8)
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Postby Chuck T » Sat Aug 14, 2010 6:55 pm

Rick - I noticed you have chosen to use ETF classes rather than Admiral classes. In most cases the ER of ETF and Admiral class are the same. I have read much about the pluses and minuses of ETF's. Why are you using ETF's at this point? Thank you.
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Postby jeffyscott » Sat Aug 14, 2010 7:35 pm

Ed 2 wrote:1.sarcasm- ridicule or mockery is used harshly, often crudely and contemptuously, for destructive purposes.


Hmm, that doesn't sound right...sorry, wrong sign.

I was more like just..."an implied discrepancy between what is said and what is meant".

http://www.tnellen.com/cybereng/lit_terms/irony.html
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Postby Rick Ferri » Sat Aug 14, 2010 11:03 pm

Adjusted Market Value

You clearly have an agenda to discredit me by twisting so much of what I've said in an attempt to make people believe I said something that I didn't. For example, saying that I'm "skeptical" of the FF 3 factor model. That's just ridicules. I never said that.

You just joined this forum a month or so ago. It''s obvious you are in the business and are a DFA disciple. Why don't you just tell us who you are, and what the name of the investment firm you work for, so it's out in the open and we don't have to play this silly game?

Rick Ferri
Last edited by Rick Ferri on Sat Aug 14, 2010 11:12 pm, edited 1 time in total.
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Postby Rick Ferri » Sat Aug 14, 2010 11:11 pm

Chuck T wrote:Rick - I noticed you have chosen to use ETF classes rather than Admiral classes. In most cases the ER of ETF and Admiral class are the same. I have read much about the pluses and minuses of ETF's. Why are you using ETF's at this point? Thank you.


My account is held at Schwab and have to pay a commission when I trade ETFs or open-end funds. Tradings costs for ETFs are much lower than open-end funds. So, I use then on equity funds when I can. That's the reason. BTW, bonds are different. I'm not yet doing Vanguard bond ETFs.

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Postby dnaumov » Sat Aug 14, 2010 11:16 pm

Rick: Nice to see you posting here, I just finished reading your book on ETFs a few days ago :)
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Postby Chuck T » Sun Aug 15, 2010 10:14 am

Rick Ferri wrote:
Chuck T wrote:Rick - I noticed you have chosen to use ETF classes rather than Admiral classes. In most cases the ER of ETF and Admiral class are the same. I have read much about the pluses and minuses of ETF's. Why are you using ETF's at this point? Thank you.


My account is held at Schwab and have to pay a commission when I trade ETFs or open-end funds. Tradings costs for ETFs are much lower than open-end funds. So, I use then on equity funds when I can. That's the reason. BTW, bonds are different. I'm not yet doing Vanguard bond ETFs.

Rick Ferri


rick - Thank you for the reply. Yes, I noticed you bought Bond funds. What would you recommend a direct VG account holder buy, ETF's or investor class shares? should you always buy the class with the lowest ER? Thanks
Last edited by Chuck T on Sun Aug 15, 2010 10:42 am, edited 2 times in total.
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Postby Chuck T » Sun Aug 15, 2010 10:22 am

If there are industry professionals participating in these threads they should be required to identify themselves as such and the firm they represent. The rest of us need to know who they are and who they represent on a professional level.

For example, Rick Ferri, Biil Bernstein and Larry Swedroe to name a few have all identified themselves to the group.
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Postby Bradley » Sun Aug 15, 2010 12:27 pm

Adjusted Market Value wrote:

The fact is, since 1928 over all 15 year calendar periods (68 total),






How do you arrive at 68 total 15 year calender periods?
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Postby amv » Sun Aug 15, 2010 1:47 pm

Rick Ferri wrote:Adjusted Market Value

You clearly have an agenda to discredit me by twisting so much of what I've said in an attempt to make people believe I said something that I didn't. For example, saying that I'm "skeptical" of the FF 3 factor model. That's just ridicules. I never said that.

You just joined this forum a month or so ago. It''s obvious you are in the business and are a DFA disciple. Why don't you just tell us who you are, and what the name of the investment firm you work for, so it's out in the open and we don't have to play this silly game?

Rick Ferri


Rick,

You lose any credibility when you stoop to personal attacks instead of addressing the issues at hand. If you disagree with my views on capital markets, please enlighten us why.

If you want to make this personal, save yourself and us the time.

thanks!
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Postby amv » Sun Aug 15, 2010 1:48 pm

Bradley wrote:
Adjusted Market Value wrote:

The fact is, since 1928 over all 15 year calendar periods (68 total),


How do you arrive at 68 total 15 year calender periods?


use rolling 15 year periods
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Postby jeffp » Sun Aug 15, 2010 3:08 pm

Bradley wrote:
Adjusted Market Value wrote:

The fact is, since 1928 over all 15 year calendar periods (68 total),


How do you arrive at 68 total 15 year calender periods?


We're talking about EVERY 15-year period you can make since 1928. So 1/1/1928-12/31/1942, 1929-1943, 1930-1944, etc. History obviously won't tell you everything, but looking at overlapping 15-, 20-, 25-year periods (and so on) can often give you pretty reliable data.
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Postby Rick Ferri » Mon Aug 16, 2010 9:14 am

Chuck T wrote:Rick, I noticed you bought Bond funds. What would you recommend a direct VG account holder buy, ETFs or investor class shares? should you always buy the class with the lowest ER? Thanks

If your account is at Vanguard and you have enough to buy Admiral Shares, then that's probably what I would do across the board. ETFs are lower cost were you don't have enough for Admiral Shares. But we are really splitting hairs on this one.

Mixing open-end funds and ETFs does present some problems with settlement. Traditional open-end funds settle the next day and ETFs settle in three days. So, if you sold an ETF, you couldn't buy a traditional open-end fund for 3 days.

If there are industry professionals participating in these threads they should be required to identify themselves as such and the firm they represent. The rest of us need to know who they are and who they represent on a professional level.

I have been saying this a long time. Any person, including me, who may have a conflict of interest should identify themselves with an icon next to our name or something along those lines. This includes advisors, fund company reps, brokers, and some attorneys. I brought this idea up a couple of years ago and it was turned down.

Rick Ferri
Last edited by Rick Ferri on Mon Aug 16, 2010 11:21 am, edited 1 time in total.
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Postby Chuck T » Mon Aug 16, 2010 10:48 am

Rick - thank you for your advice on ETF share class versus open end funds at Vanguard.
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Postby arthurdawg » Mon Aug 16, 2010 3:20 pm

Adjusted Market Value wrote:
Rick Ferri wrote:Adjusted Market Value

You clearly have an agenda to discredit me by twisting so much of what I've said in an attempt to make people believe I said something that I didn't. For example, saying that I'm "skeptical" of the FF 3 factor model. That's just ridicules. I never said that.

You just joined this forum a month or so ago. It''s obvious you are in the business and are a DFA disciple. Why don't you just tell us who you are, and what the name of the investment firm you work for, so it's out in the open and we don't have to play this silly game?

Rick Ferri


Rick,

You lose any credibility when you stoop to personal attacks instead of addressing the issues at hand. If you disagree with my views on capital markets, please enlighten us why.

If you want to make this personal, save yourself and us the time.

thanks!


Still waiting to hear about you... Rick has been on this board from the beginning and all of us have benefited from his expertise. If you are a DFA rep we are happy to have you on board if you wish to participate.
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Postby amv » Mon Aug 16, 2010 3:53 pm

Rick Ferri wrote:
If there are industry professionals participating in these threads they should be required to identify themselves as such and the firm they represent. The rest of us need to know who they are and who they represent on a professional level.

I have been saying this a long time. Any person, including me, who may have a conflict of interest should identify themselves with an icon next to our name or something along those lines. This includes advisors, fund company reps, brokers, and some attorneys. I brought this idea up a couple of years ago and it was turned down.

Rick Ferri


Of course it was turned down! Actually, the policy should be just the opposite: that all posters are anonymous so professionals are not able to soft sell their firms and publications. That way, all participants are forced to interpret comments on their own merits, and not the source of the comments.

By definition, anonymity removes the potential for a conflict of interest. More beneficially (such as in this case), it would remove the "out" of personal attacks to deflect legitimate opinions requiring a response.
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Postby vesalius » Mon Aug 16, 2010 3:58 pm

Adjusted Market Value wrote:
Rick Ferri wrote:
If there are industry professionals participating in these threads they should be required to identify themselves as such and the firm they represent. The rest of us need to know who they are and who they represent on a professional level.

I have been saying this a long time. Any person, including me, who may have a conflict of interest should identify themselves with an icon next to our name or something along those lines. This includes advisors, fund company reps, brokers, and some attorneys. I brought this idea up a couple of years ago and it was turned down.

Rick Ferri


Of course it was turned down! Actually, the policy should be just the opposite: that all posters are anonymous so professionals are not able to soft sell their firms and publications. That way, all participants are forced to interpret comments on their own merits, and not the source of the comments.

By definition, anonymity removes the potential for a conflict of interest. More beneficially (such as in this case), it would remove the "out" of personal attacks to deflect legitimate opinions requiring a response.
I am a newer member here, but I agree with Rick and disagree with "Adjusted Market Value". I would rather know or at least have a clue if a poster has a vested financial interest that would bias their post or interactions with other members.
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Postby KyleAAA » Mon Aug 16, 2010 4:10 pm

vesalius wrote:I am a newer member here, but I agree with Rick and disagree with "Adjusted Market Value". I would rather know or at least have a clue if a poster has a vested financial interest that would bias their post or interactions with other members.


I believe this knowledge would hurt you far more than it helped you. An anonymous poster can't have a financial interest in promoting his point of view on the forum if he has no way to sell his services.
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Postby Specialized » Mon Aug 16, 2010 4:26 pm

Rick Ferri wrote:My account is held at Schwab and have to pay a commission when I trade ETFs or open-end funds. Tradings costs for ETFs are much lower than open-end funds. So, I use then on equity funds when I can. That's the reason. BTW, bonds are different. I'm not yet doing Vanguard bond ETFs.

Rick Ferri


Rick, since your account is at Schwab I'm interested in hearing what you think about Schwab's new no-fee ETFs and how they compare to the comparable Vanguard and iShares funds. Specifically:

SCHP to TIP
SCHR to IEI
SCHB to VTI

All your help is greatly appreciated!
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Postby vesalius » Mon Aug 16, 2010 5:01 pm

KyleAAA wrote:
vesalius wrote:I am a newer member here, but I agree with Rick and disagree with "Adjusted Market Value". I would rather know or at least have a clue if a poster has a vested financial interest that would bias their post or interactions with other members.


I believe this knowledge would hurt you far more than it helped you. An anonymous poster can't have a financial interest in promoting his point of view on the forum if he has no way to sell his services.
I understand your point, but disagree somewhat. Campaigning against other people or points of view can be just as damaging and more difficult to see for what it is or might be than simply promoting their own business, agenda or ideas. Besides, just based upon this thread, it is apparently well past the time that everyone here is anonymous. I will stop now though and not rehash a debate that was already apparently decided upon in the past.
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Postby Beagler » Mon Aug 16, 2010 5:02 pm

amv wrote:
Rick Ferri wrote:
If there are industry professionals participating in these threads they should be required to identify themselves as such and the firm they represent. The rest of us need to know who they are and who they represent on a professional level.

I have been saying this a long time. Any person, including me, who may have a conflict of interest should identify themselves with an icon next to our name or something along those lines. This includes advisors, fund company reps, brokers, and some attorneys. I brought this idea up a couple of years ago and it was turned down.

Rick Ferri


Of course it was turned down! Actually, the policy should be just the opposite: that all posters are anonymous so professionals are not able to soft sell their firms and publications. That way, all participants are forced to interpret comments on their own merits, and not the source of the comments.

By definition, anonymity removes the potential for a conflict of interest. More beneficially (such as in this case), it would remove the "out" of personal attacks to deflect legitimate opinions requiring a response.


I disagree. The opinion or recommendation of a Rick Ferri, Larry Swedroe, Bill Bernstein or Alan Roth should carry a heck of a lot more weight than from someone like me who's a non-financial professional.
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Postby Rick Ferri » Mon Aug 16, 2010 5:53 pm

Specialized wrote:
Rick Ferri wrote:My account is held at Schwab and have to pay a commission when I trade ETFs or open-end funds. Tradings costs for ETFs are much lower than open-end funds. So, I use then on equity funds when I can. That's the reason. BTW, bonds are different. I'm not yet doing Vanguard bond ETFs.

Rick Ferri


Rick, since your account is at Schwab I'm interested in hearing what you think about Schwab's new no-fee ETFs and how they compare to the comparable Vanguard and iShares funds. Specifically:

SCHP to TIP
SCHR to IEI
SCHB to VTI

All your help is greatly appreciated!


SCHB is fine because it's starting to get some assets and has good trading volume now. SCHP is getting better. If you use it, you'll need to put in limit orders because the bid/ask spread is wider than TIP. SCHR is the same as SCHP. There's not a lot of volume. I'd probably stick with TIP and IEI for now.

If you go to Goggle Finance and compare the charts for 1 trading day on these ETF pairs, you'd see what I mean.

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Postby caklim00 » Mon Aug 16, 2010 6:07 pm

vesalius wrote:
Adjusted Market Value wrote:
Rick Ferri wrote:
If there are industry professionals participating in these threads they should be required to identify themselves as such and the firm they represent. The rest of us need to know who they are and who they represent on a professional level.

I have been saying this a long time. Any person, including me, who may have a conflict of interest should identify themselves with an icon next to our name or something along those lines. This includes advisors, fund company reps, brokers, and some attorneys. I brought this idea up a couple of years ago and it was turned down.

Rick Ferri


Of course it was turned down! Actually, the policy should be just the opposite: that all posters are anonymous so professionals are not able to soft sell their firms and publications. That way, all participants are forced to interpret comments on their own merits, and not the source of the comments.

By definition, anonymity removes the potential for a conflict of interest. More beneficially (such as in this case), it would remove the "out" of personal attacks to deflect legitimate opinions requiring a response.
I am a newer member here, but I agree with Rick and disagree with "Adjusted Market Value". I would rather know or at least have a clue if a poster has a vested financial interest that would bias their post or interactions with other members.
FWIW, I agree with aspects of what each said. Personally if I had low cost access to DFA (beyond an old 401k and our 529) I would likely use them exclusively (at least for equity). And, would likely utilize the Vector funds to get out of component-land where I currently live.

Rick, Larry, and William Bernstein helped me see the light from a portfolio simplification and cost standpoint, each in their own way (wish Larry was still as active as he used to be).

And, how they heck did Adjusted Market Value change his id to amv? I've looked over Profile and never saw ID change as an option.
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Postby Rick Ferri » Mon Aug 16, 2010 6:23 pm

If I had access to DFA, I would likely use them exclusively (at least for equity). And, would likely utilize the Vector funds to get out of component-land where I currently live.


If I did an all DFA equity portfolio, it would be:

US Core Equity 1 - 60%
International Core Equity - 20%
Emerging Markets Core - 10%
REITS - 10%

4 funds and done.

I'd only do this in my non-taxable retirement account because in a taxable account, trying to do tax-loss harvesting with DFA core funds is much more difficult than using a slice and dice Vanguard/ETF portfolio.

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Postby Specialized » Mon Aug 16, 2010 6:26 pm

Rick Ferri wrote:
Specialized wrote:
Rick Ferri wrote:My account is held at Schwab and have to pay a commission when I trade ETFs or open-end funds. Tradings costs for ETFs are much lower than open-end funds. So, I use then on equity funds when I can. That's the reason. BTW, bonds are different. I'm not yet doing Vanguard bond ETFs.

Rick Ferri


Rick, since your account is at Schwab I'm interested in hearing what you think about Schwab's new no-fee ETFs and how they compare to the comparable Vanguard and iShares funds. Specifically:

SCHP to TIP
SCHR to IEI
SCHB to VTI

All your help is greatly appreciated!


SCHB is fine because it's starting to get some assets and has good trading volume now. SCHP is getting better. If you use it, you'll need to put in limit orders because the bid/ask spread is wider than TIP. SCHR is the same as SCHP. There's not a lot of volume. I'd probably stick with TIP and IEI for now.

If you go to Goggle Finance and compare the charts for 1 trading day on these ETF pairs, you'd see what I mean.

Rick Ferri


I see exactly what you mean. Thanks for a very useful reply!
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Postby caklim00 » Mon Aug 16, 2010 10:03 pm

Rick Ferri wrote:
If I had access to DFA, I would likely use them exclusively (at least for equity). And, would likely utilize the Vector funds to get out of component-land where I currently live.


If I did an all DFA equity portfolio, it would be:

US Core Equity 1 - 60%
International Core Equity - 20%
Emerging Markets Core - 10%
REITS - 10%

4 funds and done.

My 529 is currently in DFA 'All Equity' which is
US Core Equity 2 - 73%
International Core Equity - 19%
Emerging Markets Core - 8%

which is pretty darn close to what you propose. Personally I'd prefer more of a 50/50 US/Ex-Us split. And, I'd rather use US Vector, International Vector, and Emerging Markets Value but understand why they would rather sell Core to the masses since its a very moderate tilt.

Rick Ferri wrote:I'd only do this in my non-taxable retirement account because in a taxable account, trying to do tax-loss harvesting with DFA core funds is much more difficult than using a slice and dice Vanguard/ETF portfolio.
Only argument I could even make is you could TLH between Core and TSM/SCV. Not a 1:1 relationship, but you could maintain the same factor exposure. But, I agree with you here (and I actually only hold VTI and VEU in taxable).
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Postby LH » Tue Aug 17, 2010 3:47 am

Any consideration given to foreign REIT inclusion Rick?

just wondering,

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Postby stratton » Tue Aug 17, 2010 8:15 am

LH wrote:Any consideration given to foreign REIT inclusion Rick?

Read earlier in the thread.

Split the current REIT holdings 50/50 if you're willing to pay the higher ER on foreign real estate.

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Postby Bounca » Tue Aug 17, 2010 9:16 am

Thanks Mr. Ferri.

I've seen his portfolio about 4 years ago on a morningstar thread and it hasn't changed much. That says something to staying the course with an allocation you see fit.

Still, never understood his VPL VGK combo. To keep things simple, a holding of VEA would suffice IMO. VEAs past performance appears to split down the middle of VPL and VGK, which one would think it should. Would love to hear his opinion on that.
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Postby Rick Ferri » Tue Aug 17, 2010 11:45 am

Bounca wrote:Still, never understood his VPL VGK combo. To keep things simple, a holding of VEA would suffice IMO. VEAs past performance appears to split down the middle of VPL and VGK, which one would think it should. Would love to hear his opinion on that.


IMO, a global allocation should have fixed weights to the US, Europe, Pacific, and Emerging. There is a section in my All About Asset Allocation book that explains why. In short, just because the EAFE index lumps both regions together doesn't mean you should. Europe and the Far East are separate markets with separate currencies and should be treated separately in a portfolio.

Currently, the EAFE is 65% Europe and 35% Far East. It was as high as 71% Europe a couple of years ago. In 1990, it was 70% Far East. Having fixed weights and rebalancing of these two regions adds slightly to portfolio return over swinging with the EAFE. In a taxable account, this also allows you to do tax-harvesting by region.

Is this a major factor in my portfolio? No. It's amounts to the flavor of the icing on the cake. If someone wanted to us the EAFE, or better, the FTSE x-US, I'd have no issue with it.

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Postby Robert T » Thu Aug 19, 2010 9:38 pm

.
FWIW - I have just done a backtested simulation (with 1927-2005 calendar year data using the solver function in excel) to identify the asset allocation across S&P500, FF LV, CRSP6-10, FF SV, T-bills, 5 yr T-Notes, and 20 yr government bonds that:

    (i) provided the same level of real downside protection (same real losses) during 1929-32 (deflation) and 1973-74 (inflation).
    (ii) provided the highest real return for the worst performing 30 year period over 1927-2005 (used rolling 30 year periods).
The resulting allocation was:

    56% S&P500
    18% FF SV
    26% 5-yr T-Notes
Real loss in 1929-32 and 1973-74 = -41% (nominal losses =54% and 27% respectively).
Worst performing 30 year period real retun = 5.3%

Assuming the 74:26 stock:bond split is fixed then:

    - If a greater weighting is given to real downside protection during 1929-32 than 1973-74, the allocation to S&P500 and 20 yr gov. bonds goes up (with less allocation to SV and 5 yr T-Notes).

    - If greater weighting is given to real downside protection during 1973-74 than 1929-32, the allocation to LV and SV goes up (with less to S&P500).
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backtesing

Postby petrico » Fri Aug 20, 2010 3:52 am

Robert T wrote:.
FWIW - I have just done a backtested simulation (with 1927-2005 calendar year data using the solver function in excel) to identify the asset allocation across S&P500, FF LV, CRSP6-10, FF SV, T-bills, 5 yr T-Notes, and 20 yr government bonds that:

    (i) provided the same level of real downside protection (same real losses) during 1929-32 (deflation) and 1973-74 (inflation).
    (ii) provided the highest real return for the worst performing 30 year period over 1927-2005 (used rolling 30 year periods).
The resulting allocation was:

    56% S&P500
    18% FF SV
    26% 5-yr T-Notes
Real loss in 1929-32 and 1973-74 = -41% (nominal losses =54% and 27% respectively).
Worst performing 30 year period real retun = 5.3%
.

Hi Robert,

Interesting results. Focusing on the "FWIW" part, what's your opinion on 1) how much the backtest should influence a portfolio design going forward, and 2) in what way? (Does this lead us to "fight the last battle"?)

--Pete
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Postby Robert T » Fri Aug 20, 2010 6:19 am

.
Pete,

Two quotes come to mind:

"The distribution of possible future outcomes is wider than the ex post singularity of history." - James Mortimer of GMO.

"Anybody who tells you that their portfolio recommendations are "on the efficient frontier" also talks to Elvis and frolics with the Easter bunny......" however "if you're trying to capture lightning in a jar, you are better off in Texas than in Alaska. There are certain asset combinations and portfolios which are likely (but not certain) to do reasonably well." - William Bernstein

IMO backtests are useful to determine how portfolios would have performed during different market environments. The investor then has to decide which market environment s/he is most sensitive to in consideration of portfolio construction.

Robert
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Re: Rick Ferri's Portfolio

Postby petrico » Sat Aug 21, 2010 2:35 pm

Thank you Robert. Those are very good quotes!

Robert T wrote:IMO backtests are useful to determine how portfolios would have performed during different market environments. The investor then has to decide which market environment s/he is most sensitive to in consideration of portfolio construction.

Something tells me you use more rigorous or detailed backtesting methods than many others. And there does seem to be value there. (Though both quotes still apply!)

Thanks for your insights.

--Pete
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Re: Rick Ferri's Portfolio

Postby fishdrzig » Sun Feb 03, 2013 5:16 pm

Rick

Just reread this thread
1. Would you be so kind as to let us know if anything has changed from your portfolio posted in 2010 - or maybe we have to wait to read the third book :)

Thank you as always
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Re: Rick Ferri's Portfolio

Postby Rick Ferri » Sun Feb 03, 2013 6:15 pm

I no longer own the Bridgeway Ultra-Small Company Fund (BRSIX). The proceeds are now divided between IJS and VTI. The number of stocks on US exchanges has dimished down to about 3,600 from 7,000 in the 1990s. A small value fund and a total market fund covers them all equitably and at less cost than including BRSIX.

Rick Ferri
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Re: Rick Ferri's Portfolio

Postby Grt2bOutdoors » Sun Feb 03, 2013 6:17 pm

Thanks for the update, Rick.
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Re: Rick Ferri's Portfolio

Postby fishdrzig » Sun Feb 03, 2013 6:31 pm

Thank you very much for the update
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Re: Rick Ferri's Portfolio

Postby texasdiver » Sun Feb 03, 2013 11:07 pm

I missed this original thread three years ago. But from the article you said:

Meanwhile, Mr. Ferri has the small-cap funds to capture the fact that small businesses make up more of the economy than are represented in the broader stock market index. “I want to have diversification so my portfolio looks a little more like the economy than the stock market,” he said.


So what exactly do you mean by this and how do you calculate it? Obviously most small businesses are not publicly traded companies so one can't really buy into actual small businesses as part of a mutual fund. But you got me thinking. How large are the smallest companies in say the Vanguard Total Stock Market Index? I can't imagine any of them come close to qualifying as small businesses. So do small cap public companies actually serve as a legitimate proxy for actual small businesses? And how much additional small cap or micro cap funds would one need to buy to mirror the total economy as opposed to the stock market?
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Re: Rick Ferri's Portfolio

Postby Rick Ferri » Mon Feb 04, 2013 11:19 am

I wrote a blog that explains this concept:

The Total Economy Portfolio

I also wrote a similar article on this concept for the Forbes Investing Guide (print) and on their website:

Forbes Investment Guide -The Total Economy Portfolio.

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Re: Rick Ferri's Portfolio

Postby abuss368 » Mon Feb 04, 2013 3:07 pm

Thanks Rick!
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Re: Rick Ferri's Portfolio

Postby lindisfarne » Mon Feb 04, 2013 3:07 pm

It's good to hear the very real world explanation of why Rick has ETFs rather than admiral shares.
I know it's been said on here before: it's not necessary achieve the "perfect" portfolio - just one that is good enough. (I have a tendency to strive in the "perfect" direction & to spend too much time thinking about that. I need reinforcement to keep this in check).

(My first sentence should not be interpreted to say that everyone should think admiral shares are better than ETFs - there's a lot of varying opinions on that ... but again, we get back to "good enough".)
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Re: Rick Ferri's Portfolio

Postby Rick Ferri » Mon Feb 04, 2013 3:10 pm

lindisfarne wrote:It's good to hear the very real world explanation of why Rick has ETFs rather than admiral shares.


I look at all products as arrows in a quiver. The more arrows, the more choices and the more opportunities. It's all good.

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Re:

Postby lindisfarne » Mon Feb 04, 2013 4:11 pm

Blue wrote:
Lbill wrote:Simpler is better, until proven otherwise.

Rick Ferri wrote:Proof?

Occam's Razor


I'm often very skeptical of people who cite Occam to back up their own position (citing "Occam" is not "proof" that simpler is better; "simpler is better" is merely somewhat of a restatement of that principal, not proof that the principal is correct). A lot has been written on the nuanced meanings of "simple" w. r. t. this principle. I'm being somewhat pedantic but I do think people often resort to Occam's without really understanding all the relevant details.

Quite often, they ignore evidence that provides support that a less simple position is at least as good, and sometimes, better. Behavioral factors are also relevant when investing is the topic ... the historical market evidence suggests that being in 100% stocks gives the best return, but most of us realize that because of psychological factors, most investors would not be able to weather the troughs if they didn't have bonds to smooth them out.

I'm not arguing for adding complexity when there isn't support for that complexity.

There are many examples in science where it turned out that the answer is fairly complex - but once you have evidence that suggests a complex answer, you still should favor the simplest explanation that accounts for all the evidence.
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Re: Rick Ferri's Portfolio

Postby Rick Ferri » Mon Feb 04, 2013 4:36 pm

What is simple for one person is often complex for another. For example, the Three Fund Portfolio holds:

1) Vanguard Total Stock Market Index Fund (VTSMX)
2) Vanguard Total International Stock Index Fund (VGTSX)
3) Vanguard Total Bond Market Fund (VBMFX)

Simple to us, right? Try explaining this portfolio to someone who has no knowledge of investing. It's not as simple as it sounds.

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Re: Rick Ferri's Portfolio

Postby lindisfarne » Mon Feb 04, 2013 5:17 pm

Rick Ferri wrote:What is simple for one person is often complex for another. For example, the Three Fund Portfolio holds:

1) Vanguard Total Stock Market Index Fund (VTSMX)
2) Vanguard Total International Stock Index Fund (VGTSX)
3) Vanguard Total Bond Market Fund (VBMFX)

Simple to us, right? Try explaining this portfolio to someone who has no knowledge of investing. It's not as simple as it sounds.

Rick Ferri


Not everyone has the background knowledge to juggle in their minds all that they need to to make sense of investment risks & market trends over time. Over time they may acquire that knowledge & get better at it. If that world view conflicts with other influential opinions they heard over time (for example, from parents/other family members), it may be even more difficult for them to really buy into it.

Fear is also an influencing factor (and it's not the only such factor) - sometimes in a very unconscious way. People will come up with all kinds of ways to rationalize certain decisions without realizing that those decisions are most likely being influenced by certain other (unconscious/less conscious) factors.

For anyone interested in research in this area, Kahneman's book "Thinking, Fast & Slow" is a good place to start (there are threads here about it; many already know it & have provided links to other interesting writing in this area). Or perhaps you don't want to know ... it leads to you wondering whether you ever make careful, considered decisions at all. (or, it can be seen as providing a good argument for thinking through your investment philosophy carefully & always consulting & following that philosophy when making changes to your portfolio, esp. in times that the market is down).
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Re: Rick Ferri's Portfolio

Postby tony g » Tue Feb 05, 2013 7:42 am

Rick Ferri wrote:I no longer own the Bridgeway Ultra-Small Company Fund (BRSIX). The proceeds are now divided between IJS and VTI. The number of stocks on US exchanges has dimished down to about 3,600 from 7,000 in the 1990s. A small value fund and a total market fund covers them all equitably and at less cost than including BRSIX.

Rick Ferri


Hi Rick,
First post. I used IWC instead of BRSIX for my microcap exposure. I noticed a divergence of return between the two.
http://finance.yahoo.com/q/bc?s=IWC&t=m ... =l&c=BRSIX

I understand your reasoning for dropping BRSIX but is IWC showing an adequate return for the risk exposure?
Or would you sell IWC also?

Is the liquidity of microcap stocks a concern for exposure to this sub-asset class?

Thanks!
Tony G
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Re: Rick Ferri's Portfolio

Postby Rick Ferri » Tue Feb 05, 2013 10:32 am

I no longer believe the diversification benefit of a separate micro-cap fund is large enough to warrant paying higher fees due to the shrinking number of securities on the markets and the growing overlap from small-value and TSM,

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Re: Rick Ferri's Portfolio

Postby Gmaloof » Tue Feb 05, 2013 2:25 pm

Rick Ferri wrote:I no longer own the Bridgeway Ultra-Small Company Fund (BRSIX). The proceeds are now divided between IJS and VTI. The number of stocks on US exchanges has dimished down to about 3,600 from 7,000 in the 1990s. A small value fund and a total market fund covers them all equitably and at less cost than including BRSIX.

Rick Ferri

Rick, Would appreciate your current thoughts regarding a small value international mutual fund/etf for non DFA accounts? I know a few years back you mentioned a possible new Russell index fund but I'm not sure if they ever received regulatory approval.

Thanks, GMaloof
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