Search found 1916 matches

by Clive
Sat Jan 21, 2017 9:40 pm
Forum: Investing - Theory, News & General
Topic: Replicating Index with Individual Stocks vs Index Fund
Replies: 27
Views: 2208

Re: Replicating Index with Individual Stocks vs Index Fund

Here's William Bernstein's article about returns distributions: http://www.efficientfrontier.com/ef/900/15st.htm . He concludes that you need to own the entire market. It is not clear to me how he reached that conclusion quantitatively, e.g., why is half the market not enough? Its pretty fractal to...
by Clive
Thu Jan 19, 2017 5:15 pm
Forum: Investing - Theory, News & General
Topic: Replicating Index with Individual Stocks vs Index Fund
Replies: 27
Views: 2208

Re: Replicating Index with Individual Stocks vs Index Fund

Nobody has mentioned the main reason one would consider buying the stocks directly: A legal restriction or tax structure that disadvantaged using funds. PFIC is but one example. Apply 'standard' (most common) rate tax to UK stock total returns and you might hit 0% net real. https://s29.postimg.org/...
by Clive
Thu Jan 19, 2017 4:46 pm
Forum: Investing - Theory, News & General
Topic: Formula for dividend tax drag?
Replies: 45
Views: 3726

Re: Formula for dividend tax drag?

Historic tax rates were relatively higher and fewer if any tax advantaged options were available (costs were generally higher as well). For UK basic rate taxpayer (most common tax rate), if you discount basic rate tax from dividends (more recently 20%, but historically since WW2 years as high as 47....
by Clive
Tue Jan 17, 2017 8:27 am
Forum: Investing - Theory, News & General
Topic: Why not put it all in TIPS?
Replies: 87
Views: 4947

Re: Why not put it all in TIPS?

One if not the biggest causes of serious loss is down to concentration risk. TIPS could suffer due to taxation. Or simply because consumer price inflation lags other asset price inflation. In the UK CPI has broadly lagged house prices, gold, art and stock price only inflation over the last century. ...
by Clive
Mon Jan 16, 2017 5:34 pm
Forum: Investing - Theory, News & General
Topic: Mathematics of international asset allocation
Replies: 43
Views: 3752

Re: Mathematics of international asset allocation

what I want to know is, how should your allocation depend on what currency you will use? Intuitively, forex uncertainty should justify some home bias. Observationally : Initially equal weight across a bunch of countries/currencies, diversifying equally across sectors, bought and held ... will be lo...
by Clive
Mon Jan 16, 2017 3:32 pm
Forum: Investing - Theory, News & General
Topic: Mathematics of international asset allocation
Replies: 43
Views: 3752

Re: Mathematics of international asset allocation

So the problem with your mathematics is that there's no way to get input data that's trustworthy enough to give you trustworthy output. I think it is actually even worse. While it is true that the mathematics are very sensitive to errors in inputs and past data are noisy at best, saying that really...
by Clive
Sun Jan 15, 2017 7:02 am
Forum: Investing - Theory, News & General
Topic: leverage and beating the market
Replies: 45
Views: 4084

Re: leverage and beating the market

Zvi Bodie likes 10/90. 90% in TIPS, 10% in 10x (he likes LEAPS/Options for that and loads into the equivalent of 10x leveraged stock exposure). Between trades the downside is <10% i.e. all of the Options value lost, less any gains the TIPS make. Personally I use 5x equivalents myself such as short v...
by Clive
Sun Jan 15, 2017 6:47 am
Forum: Investing - Theory, News & General
Topic: leverage and beating the market
Replies: 45
Views: 4084

Re: leverage and beating the market

SPXL 3x ETF Just wondering what about 1/3rd 3x leveraged ETF; 2/3rds cash ... Market return with a maximum possible drawdown of 33%? http://i.imgur.com/J1NRuB5.png Market return tracking it tighter if you rebalance relatively frequently such as quarterly https://s23.postimg.org/65zf3nm4r/Screenshot...
by Clive
Fri Jan 13, 2017 7:25 pm
Forum: Investing - Theory, News & General
Topic: Over what time period should stocks NOT lose money
Replies: 50
Views: 3974

Re: Over what time period should stocks NOT lose money

I don't think there is any timeline where anything is safe. People are incredibly bad at forecasting. Around the world, just in the 19-somethings, without trying to be all inclusive: Private property was confiscated in Russia, China, Eastern Europe, Cuba--foreign investment was nationalized and tha...
by Clive
Fri Jan 13, 2017 12:10 pm
Forum: Investing - Theory, News & General
Topic: Over what time period should stocks NOT lose money
Replies: 50
Views: 3974

Re: Over what time period should stocks NOT lose money

https://www.bogleheads.org/forum/viewtopic.php?p=1820900#p1820900 examples of how long it has taken to break-even (in real terms) after significant market declines across 19 countries between 1900-2010. Some of the longest include: Equities Germany: 45 years France: 43 years Italy: 37 years (I note ...
by Clive
Wed Jan 11, 2017 10:01 am
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

Historically since 1913 average dividend yield 4.2%. Average tax on dividends for a high rate taxpayer 40% (with considerable volatility around that). Market makers back in postal vote days often widened spreads out to 5% or even 10%, such that over a 10 year holding period that could have added a ...
by Clive
Mon Jan 09, 2017 1:00 pm
Forum: Investing - Theory, News & General
Topic: Over what time period should stocks NOT lose money
Replies: 50
Views: 3974

Re: Over what time period should stocks NOT lose money

World, equal weight, around 20 years http://2.bp.blogspot.com/-YddFgKJazSs/U9lVP2rqSNI/AAAAAAAAILI/Ch8xZWlxB2Y/s1600/Worst+Case+Scenario.png If you concentrate the chances are you'll lag the equal weight average. That's fractal. And a major reason IMO why cap weighted has a tendency to lag (which is...
by Clive
Sun Jan 08, 2017 8:55 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

Conclusions that I have made from this analysis of stock and bond data over the past 90 years is that around a 80% Stock, 20% Bond portfolio minimizes failure rates at 4% and 5% yearly withdrawal rate (constant, inflation adjusted, proportion of original investment). Furthermore, worst case scenari...
by Clive
Sat Jan 07, 2017 7:33 am
Forum: Investing - Theory, News & General
Topic: When thinking about diversification it's dispersion of returns that matters
Replies: 4
Views: 767

Re: When thinking about diversification it's dispersion of returns that matters

This MSCI paper (PDF) highlights how stock markets around the world (see table on page 6) have moved from being more home biased to being more global ... at least when measured from a Index angle. Within that however there are firms who will be predominately domestic economy reflective. Diversifyin...
by Clive
Sat Jan 07, 2017 6:53 am
Forum: Investing - Theory, News & General
Topic: I am timing the market. Why am I wrong?
Replies: 89
Views: 5726

Re: I am timing the market. Why am I wrong?

I would suggest a 50/50 stocks/bonds portfolio. That way you are always right! What about half of time 100% stock, other half of time bonds? (Average 50/50). Generally on average you'd expect similar outcome (reward) over the total period compared to constant 50/50. But within that there'd be more ...
by Clive
Fri Jan 06, 2017 11:57 pm
Forum: Investing - Theory, News & General
Topic: What gets cheap when the dollar gets strong
Replies: 32
Views: 5409

Re: What gets cheap when the dollar gets strong

If you look at the top 10 companies in the FTSE100, which are c. 40% of the index, you find HSBC, Vodafone, Glaxo Smithkline, Astra Zeneca, BP, Shell, Rio TInto, BHP etc. DIageo. So HSBC makes a lot of its money in China/ Hong Kong-- tracks the USD. Pharma companies make more than half their money ...
by Clive
Fri Jan 06, 2017 11:42 pm
Forum: Investing - Theory, News & General
Topic: What gets cheap when the dollar gets strong
Replies: 32
Views: 5409

Re: What gets cheap when the dollar gets strong

Other currencies being compared to that suggest the dollar to be relatively strong by comparison :wink: In 1874 1 Japanese Yen bought 1 US$, more recently it requires 117 Yen to buy a dollar. Over a similar period ... 1 GB Pound (which originally in the 750's was a Saxon pound weight of silver, part...
by Clive
Thu Jan 05, 2017 9:53 pm
Forum: Investing - Theory, News & General
Topic: Why S & P 500 fund is safer than Total Stock Market fund
Replies: 40
Views: 5159

Re: Why S & P 500 fund is safer than Total Stock Market fund

I am reasonably sure that virtually no one will perform "well" if the U.S. economy stagnates because we are a consumer nation and where the world comes to sell a large portion of their manufactured products. We sneeze the world catches a cold. On the flip side we have a domestic consumer ...
by Clive
Thu Jan 05, 2017 2:21 pm
Forum: Investing - Theory, News & General
Topic: Why S & P 500 fund is safer than Total Stock Market fund
Replies: 40
Views: 5159

Re: Why S & P 500 fund is safer than Total Stock Market fund

I am reasonably sure that virtually no one will perform "well" if the U.S. economy stagnates because we are a consumer nation and where the world comes to sell a large portion of their manufactured products. We sneeze the world catches a cold. On the flip side we have a domestic consumer ...
by Clive
Thu Jan 05, 2017 11:20 am
Forum: Investing - Theory, News & General
Topic: Why S & P 500 fund is safer than Total Stock Market fund
Replies: 40
Views: 5159

Re: Why S & P 500 fund is safer than Total Stock Market fund

Wouldn't it be more accurate to say "you capture that" than "you beat that"? You're going to get the gains from companies that join the S&P500. But you're also going to take the losses on the companies that depart. The hedge funds are trying to gain on both ends. TSM by defi...
by Clive
Thu Jan 05, 2017 11:03 am
Forum: Investing - Theory, News & General
Topic: Swiss Franc back down?
Replies: 4
Views: 546

Re: Swiss Franc back down?

Note the Jan 2015 jump https://chart.finance.yahoo.com/5y?chfeur=x&lang=en-GB&region=GB Jan 2015 news at the time (BBC) The Swiss franc soared as much as 30% in chaotic trade after the central bank abandoned the cap on the currency's value against the euro. The Swiss National Bank (SNB) said...
by Clive
Thu Jan 05, 2017 8:49 am
Forum: Investing - Theory, News & General
Topic: Why S & P 500 fund is safer than Total Stock Market fund
Replies: 40
Views: 5159

Re: Why S & P 500 fund is safer than Total Stock Market fund

Foreign revenue in a domestic domiciled business does not buffer it from domestic pricing. The America Abroad fund chose stocks from the 500 index that had significant foreign revenues, as an alternative to owning large cap foreign stocks from countries with less stringent accounting rules. The fun...
by Clive
Wed Jan 04, 2017 4:16 pm
Forum: Investing - Theory, News & General
Topic: Over the last 40 years, 71% of the stock market's return came from dividends, not capital appreciation,"
Replies: 91
Views: 8087

Re: Over the last 40 years, 71% of the stock market's return came from dividends, not capital appreciation,"

http://www.forbes.com/sites/steveschaefer/2015/11/13/shark-tanks-kevin-oleary-oshares-etfs-investing/#1608df442ba1 So what does this mean? Allocate more of the dividend paying stocks to capture more value? Is there a research out tthere that shows that dividend paying stocks returm more than S&...
by Clive
Sat Dec 31, 2016 6:45 am
Forum: Investing - Theory, News & General
Topic: Bogle worried about currency risk in Int'l Stocks
Replies: 34
Views: 2668

Re: Bogle worried about currency risk in Int'l Stocks

Bonds (10+ years), Notes (2 to 10 years), Bills (up to 1 year) ... Currency (immediately swappable 0% yield) tend to be more commonly collectively classified as 'Bonds'. Should you hold bonds issued solely by a single entity, or diversify across different providers as sooner or later a idiot may be ...
by Clive
Fri Dec 30, 2016 7:59 pm
Forum: Investing - Theory, News & General
Topic: Bogle worried about currency risk in Int'l Stocks
Replies: 34
Views: 2668

Re: Bogle worried about currency risk in Int'l Stocks

Firms with global/foreign earnings tend to currency hedge to the currency/country they list in, for the greater stability that provides. Sticking with a single stock market/country set of stock listings is a concentration risk, unfavourable taxes/regulations (US applies a 30% dividend withholding ta...
by Clive
Thu Dec 29, 2016 8:25 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

Another way to look at it is whilst the all-stock minimum historic SWR was around 3% or 4%, the maximum sustainable SWR was around 11% or 12%. More typical average SWR being 5% or 6%. The indications being that if the current SWR rises to being 10% of current portfolio value then going forward that ...
by Clive
Thu Dec 29, 2016 8:00 pm
Forum: Investing - Theory, News & General
Topic: All Weather Bond Allocation
Replies: 3
Views: 798

Re: All Weather Bond Allocation

I was under the impression that Dalio uses a SAFE of 10% gold, 20% STT, 30% T-Bills and 40% TIPS (global), with triggers to switch partially or fully to/from that ... and then uses other asset allocations when apparently safe to do so and leverages to risk parity using appropriately selected assets....
by Clive
Thu Dec 29, 2016 6:45 am
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

Thanks for those historic insights AlohaJoe. The same might be said for stocks across the 20th century. For instance UK tax rates and costs were much higher in the past, nor were the tax-advantaged choices as beneficial. Some traded via post and market makers alongside brokers could make a killing (...
by Clive
Thu Dec 29, 2016 5:34 am
Forum: Investing - Theory, News & General
Topic: Picking Individual Stocks Is Dangerous
Replies: 58
Views: 5261

Re: Picking Individual Stocks Is Dangerous

That's some pretty epic under performance. I'd bet it would be hard to under perform by that much even if you tried! If if were that easy to relatively underperform the index by individual stock picking then hedge fund management would be a walk in the park ... long index, short individual stocks. ...
by Clive
Wed Dec 28, 2016 6:51 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

More pinches of salt .... with some vinegar :) The US had a relatively good 20th century, rising from modest/low world weighting to pretty high weighting ... until Japan had its 1980's boom and pushed that back down from near 75% levels to 25 - 30% type levels (going by eye) http://investorshub.advf...
by Clive
Tue Dec 27, 2016 6:03 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

= average 70/30 stock/bonds Rather than a physical 2 bucket approach you can use the same average overall exposure as a proxy for how such a 2 bucket might have performed historically. As a (very) crude backtest of my own I used UK historic stock total return data from 1896 70% constant weighted (y...
by Clive
Tue Dec 27, 2016 5:39 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

A interesting choice is a two bucket approach. 60% initially into a 30 year inflation bond ladder to provide 2%/year SWR (drawdown) for 30 years; 40% in a equal weighted world stock 30 year accumulation/growth bucket - that historically provided a 119% gain in the worst case (which would have increa...
by Clive
Tue Dec 27, 2016 4:56 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

I have not seen the Worst Case Chart before. More detailed here This paper suggests that survivorship bias was relatively small (one tenth of a percent annualised (geometric)) i.e. if you account for cases where historical data wasn't available and assumed total losses in such cases (see document p...
by Clive
Tue Dec 27, 2016 8:01 am
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

The 20th century saw the US being a form of emerging market right tail economy. From Patrick O'Shaughnessy, which shows the worst case scenario for stock markets around the world during different time intervals from 1900 to 2012 http://2.bp.blogspot.com/-YddFgKJazSs/U9lVP2rqSNI/AAAAAAAAILI/Ch8xZWlxB...
by Clive
Tue Dec 27, 2016 7:26 am
Forum: Investing - Theory, News & General
Topic: Bogleheads and stocks picking
Replies: 26
Views: 2003

Re: Bogleheads and stocks picking

The tracker phenomenon described above with 15-30 stocks is what I call the sampling effect. If you get a large enough sample, it should reflect the characteristics of the universe. This is why I tell people to diversify across industry groups, first for diversification purposes, and secondly to pr...
by Clive
Tue Dec 27, 2016 7:05 am
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

A single/few extreme upside outliers from all stock uplifts the average figure by a hearty chunk. The (more reasonable) median less so. Assuming similar worst case outcomes across stock-heavy and stock-light and where both are sufficient for your needs, its a question of whether you go for that high...
by Clive
Mon Dec 26, 2016 7:32 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

Also, as an independent check, if you run the data set in FireCalc for overlapping thirty year periods and compare the end point wealth for a stock portfolio compared to a bond portfolio, the range of outcomes for stocks is huge compared to that for bonds. Is it not more a case however that the wor...
by Clive
Mon Dec 26, 2016 7:16 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

If you're for example 100% stocks, I think 3.6% withdrawal rate is safe for let's say 30 years. Or something like that, maybe a little more. Anyway, let's say you're minding your business withdrawing about that much, and five years later your account balance is about 50% of the original in real ter...
by Clive
Mon Dec 26, 2016 6:18 pm
Forum: Investing - Theory, News & General
Topic: Bogleheads and stocks picking
Replies: 26
Views: 2003

Re: Bogleheads and stocks picking

I have 15-16 individual stocks in my retirement accounts and they are about 12% of the portfolio. In early 2000, individual stocks were 45%. The markets taught me some harsh lessons and I decided to de-emphasize their role in my portfolio. For me, it is a matter of preference and personal enjoyment...
by Clive
Sat Dec 24, 2016 11:09 am
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

When backtesting for historic SWR you should also factor in changes in circumstances. Pre 1930's (at least from 1800) much of the world were on a gold standard (generally). Bonds during those years provided a real return such that investing in bonds was broadly 'satisfactory' and relatively safe. De...
by Clive
Sat Dec 24, 2016 10:43 am
Forum: Investing - Theory, News & General
Topic: Is rebalacing only about risk?
Replies: 60
Views: 3064

Re: Is rebalacing only about risk?

If you start at 50/50 and rebalance periodically your overall asset allocation will average around 50/50. If you start at 50/50 and don't rebalance you might see the portfolio drift to perhaps 90/10 over time, and average around 70/30 over that total period. The broad indications are that non rebala...
by Clive
Thu Dec 22, 2016 7:08 am
Forum: Investing - Theory, News & General
Topic: Hello and a Question about the "4% Rule"
Replies: 55
Views: 4246

Re: Hello and a Question about the "4% Rule"

1. Person A has $1M and retires in January. He can withdraw $40K per year plus inflation adjusted. 2. Person B has $1M (the same portfolio as person A) but choses to retire in June, by which time the market has declined and his portfolio is now only $500K. Person B can only withdraw $20K per year b...
by Clive
Wed Dec 21, 2016 5:53 am
Forum: Investing - Theory, News & General
Topic: why not just buy BRK
Replies: 91
Views: 8629

Re: why not just buy BRK

Following his death, for his wife Buffett's advice to the trustees is to avoid BRK stock other than what's held by the S&P500.
by Clive
Tue Dec 20, 2016 7:21 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

The historical record is clear – very high equity in a retirement portfolio not only produces the best returns in good times (nice!) but provides the best protection in bad times (essential!). Go back to 1928 as a start date and there were three choices of Dow average to select from, Dow Industrial...
by Clive
Tue Dec 20, 2016 5:54 am
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 12313

Re: The Argument for More Stocks in Retirement

100% stocks is excessive single asset class risk. One reason that could be critical is if say you were 100% loaded into a index fund and were forced to move (sell/repurchase) that funds/asset inducing a single year large tax event. In the UK we're already starting to see funds being taxed differentl...
by Clive
Sun Dec 18, 2016 8:19 pm
Forum: Investing - Theory, News & General
Topic: leveraging equities with gold
Replies: 5
Views: 672

Re: gold hedging

Or 50/50 yearly rebalance SSO (2x S&P500) and UGL (2x gold) to similar effect. A stock gold 50/50 barbell might conceptually be considered similar to a bond bullet, but will tend to be significantly more volatile. Useful if you want to perhaps reduce income taxes (BRK-A for instance might be co...
by Clive
Sat Dec 17, 2016 10:33 pm
Forum: Investing - Theory, News & General
Topic: Historical data for indices
Replies: 9
Views: 751

Re: Historical data for indeces

You have to take care when looking at historic data. More ideally you want to use realistic net real figures - after costs, taxes and inflation. A problem however is the variability in tax rates across individuals, a reasonable choice might be the most common tax rate applied to Jo-Average. As anoth...
by Clive
Sat Dec 17, 2016 9:44 pm
Forum: Investing - Theory, News & General
Topic: Historical data for indices
Replies: 9
Views: 751

Re: Historical data for indeces

I noticed none of those links contain any gold price data. Any insights on that? I found http://www.kitco.com/charts/historicalgold.html but I am not sure if it reliable... Tricky one, because when on a gold standard and money/notes are convertible into gold and vice-versa you might have opted to i...
by Clive
Fri Dec 16, 2016 7:45 pm
Forum: Investing - Theory, News & General
Topic: Which do you think is more likely to happen?
Replies: 27
Views: 2482

Re: Which do you think is more likely to happen?

If you buy a gold bar today - 20 years from now all you have is that same gold bar. Golds dividend comes like any other commodity, through trading it. Over time the stock purchase power of gold varies enormously. http://www.mining.com/wp-content/uploads/2014/10/600x400xmacrotrends.org_dow_to_gold_r...
by Clive
Fri Dec 16, 2016 7:07 am
Forum: Investing - Theory, News & General
Topic: Nil Dividend Accumulative Wide-Market ETFs?
Replies: 6
Views: 826

Re: Nil Dividend Accumulative Wide-Market ETFs?

The UK has a 0% rated dividend withholding tax. It's stock listings also include Investment Trusts (IT), companies whose sole business activity is stock/investing. Some IT's such as JAM (London Stock Exchange listed), JPMorgan America, can track the S&P500. In the case of JAM they cater for hold...

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