Investing Contest Article

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livesoft
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Investing Contest Article

Post by livesoft »

http://www.nytimes.com/2013/02/02/busin ... e-low.html

James Stewart writes in the NYTimes about an investing contest for when interest rates are low. Readers of this forum will enjoy the results.

I will be able to tell who didn't read the article by their comments in this thread. :twisted:
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Rick Ferri
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Re: Investing Contest Article

Post by Rick Ferri »

I had to chuckle a few times.

The asset management firm BlackRock was a co-sponsor of the contest. The article quotes Michael Fredericks, lead portfolio manager for the BlackRock Multi-Asset Income Fund. “The traditional 60/40 approach to building a portfolio is on the way out, it is being replaced, he said, by tactical asset allocation, a strategy in which investors change their allocation based on the current pricing of asset classes." The BlackRock Multi-Asset Income Fund "A" shares have a 5.25% front-end commission and 1.30% annual fee (0.98% after waiver), "C" shares have a 2.03% fee (1.73% after waiver), and Institutional shares have a 1.03% fee (0.73 after waiver).

It seems the only thing tactical going on here is that BlackRock is using Duke as a marketing ploy to tactically separate investors from their money!

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
NYBoglehead
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Re: Investing Contest Article

Post by NYBoglehead »

^But Rick, think of all the "risk management" you get for those fees!!
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retiredjg
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Re: Investing Contest Article

Post by retiredjg »

I have a secret wish that everyone would start out at 60/40 and not be allowed to move until 2 years after their first real crash.... :P
FinancialDave
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Re: Investing Contest Article

Post by FinancialDave »

There was one true aspect of the report -- THE JURY IS OUT ON THE RESULTS.

The one thing that I did not hear was anything that could beat the 100% stock portfolio long term.

fd
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Fallible
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Re: Investing Contest Article

Post by Fallible »

Rick Ferri wrote:I had to chuckle a few times.

The asset management firm BlackRock was a co-sponsor of the contest. The article quotes Michael Fredericks, lead portfolio manager for the BlackRock Multi-Asset Income Fund. “The traditional 60/40 approach to building a portfolio is on the way out, it is being replaced, he said, by tactical asset allocation, a strategy in which investors change their allocation based on the current pricing of asset classes." The BlackRock Multi-Asset Income Fund "A" shares have a 5.25% front-end commission and 1.30% annual fee (0.98% after waiver), "C" shares have a 2.03% fee (1.73% after waiver), and Institutional shares have a 1.03% fee (0.73 after waiver)....
Last paragraph of the article: "After all the models and projections, they’ve ended up pretty close to the old 60/40 approach."
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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market timer
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Re: Investing Contest Article

Post by market timer »

From the article: Mr. Kim conceded that his team’s projected return for TIPS (5.66 percent) and bonds (5.91 percent) “may be optimistic, given current market conditions.”

So, basically, they assumed away the problem of low yield. I wonder where their model assumes yields will be in 7 years.
letsgobobby
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Re: Investing Contest Article

Post by letsgobobby »

market timer wrote:From the article: Mr. Kim conceded that his team’s projected return for TIPS (5.66 percent) and bonds (5.91 percent) “may be optimistic, given current market conditions.”

So, basically, they assumed away the problem of low yield. I wonder where their model assumes yields will be in 7 years.
I agree; since that was the premise of the entire contest, the whole exercise seems absurd.
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baw703916
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Re: Investing Contest Article

Post by baw703916 »

market timer wrote:So, basically, they assumed away the problem of low yield.
They have a bright future in the financial industry! :D
Most of my posts assume no behavioral errors.
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damjam
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Re: Investing Contest Article

Post by damjam »

The team’s contest entry called for allocating 43 percent to United States stocks — 30.3 percent to a Russell 2000 index fund and 12.7 percent to a Russell 2000 fund that invests in midsize companies. They made no allocation to international stocks. Like more traditional models, they maintained a large allocation to fixed income, but weighted it heavily toward Treasury inflation-protected securities, or TIPS, whose yields rise with inflation. They allocated 32.1 percent to TIPS and 24.9 percent to an aggregate bond fund.


I think 43/57 is not pretty much the same as 60/40. Unless 17% variance on either asset class is pretty much the same.
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baw703916
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Re: Investing Contest Article

Post by baw703916 »

But they were pessimistic about Europe and emerging markets, given the euro zone crisis and what they saw as slowing growth in countries like China and Brazil.

The team’s contest entry called for allocating 43 percent to United States stocks — 30.3 percent to a Russell 2000 index fund and 12.7 percent to a Russell 2000 fund that invests in midsize companies. They made no allocation to international stocks.
Um, are they aware that Europe and EM both outperformed the U.S. last year?

Brad
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ladders11
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Re: Investing Contest Article

Post by ladders11 »

I read this article and I'm not sure that I understand the contest. They didn't use any actual market results. Why did the winners win?
"The result was a 9.7 percent projected annual return, with less volatility than the model funds they examined."
How did they project a 9.7 percent annual return from a portfolio comprised of 32.1% TIPS, 24.9% AGG, 30.3% Russell 2000 and 12.7% Russell midcaps? Who thinks this is likely?

Oh, and the prize is "an interview and a shot at an internship". What gives, BlackRock? Can't commit? I love a contest that awards the winner "a shot" at a prize, which is in fact free or underpaid labor in an office. Grrrrrrrreat. America 2013.
paper200
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Re: Investing Contest Article

Post by paper200 »

More than the student or Blackrock - what was the Class Professor thinking? Backing testing can predict future volatility and short term returns. The prof should re-educate himself in this website.
Having freedom, food and roof is being 90% lucky in life and so is index investing. So, don't let the remaining 10% bother you.
mm9811
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Re: Investing Contest Article

Post by mm9811 »

Rick Ferri wrote:I had to chuckle a few times.

The asset management firm BlackRock was a co-sponsor of the contest. The article quotes Michael Fredericks, lead portfolio manager for the BlackRock Multi-Asset Income Fund. “The traditional 60/40 approach to building a portfolio is on the way out, it is being replaced, he said, by tactical asset allocation, a strategy in which investors change their allocation based on the current pricing of asset classes." The BlackRock Multi-Asset Income Fund "A" shares have a 5.25% front-end commission and 1.30% annual fee (0.98% after waiver), "C" shares have a 2.03% fee (1.73% after waiver), and Institutional shares have a 1.03% fee (0.73 after waiver).

It seems the only thing tactical going on here is that BlackRock is using Duke as a marketing ploy to tactically separate investors from their money!

Rick Ferri
+1

I love that phrase "tactical asset allocation" and "The traditional 60/40 approach to building a portfolio is on the way out"....along with "the new normal" and "this time things are different"
:D :D
jdilla1107
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Re: Investing Contest Article

Post by jdilla1107 »

"43% to US stocks"

A number that precise sure sounds like overfitting to past results.
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baw703916
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Re: Investing Contest Article

Post by baw703916 »

Since Boglehead Ed Tower is an econ professor at Duke, I wonder if he has any information on the backstory behind this contest?
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SSSS
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Re: Investing Contest Article

Post by SSSS »

Rick Ferri wrote:The BlackRock Multi-Asset Income Fund "A" shares have a 5.25% front-end commission and 1.30% annual fee (0.98% after waiver), "C" shares have a 2.03% fee (1.73% after waiver), and Institutional shares have a 1.03% fee (0.73 after waiver).
BlackRock must have bipolar disorder or something. In my 401k I've got a BlackRock total stock index collective trust at 0.08%, a total bond market at 0.07%, and index-based target retirement funds at 0.11%. Seems like they have a weirdly versatile product lineup.
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roymeo
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Re: Investing Contest Article

Post by roymeo »

Wait, I'm supposed to have 60/40, but then I'm supposed to have my age in bonds?

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umfundi
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Re: Investing Contest Article

Post by umfundi »

This is a beauty pageant and infomercial, not a contest.

Nothing was measured, the "winners" were chosen by Blackrock.

Companies do this all the time, sponsor bogus (and sometimes real) contests to help them find future employees. I was just surprised there was not a redemption section for essays on save the children or world hunger.

( :oops: That was Miss America.)

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