Search found 1325 matches

by Random Walker
Fri Dec 09, 2016 5:13 pm
Forum: Investing - Theory, News & General
Topic: SEARS: Reminder of Single Stock Risk
Replies: 5
Views: 767

SEARS: Reminder of Single Stock Risk

http://www.foxbusiness.com/markets/2016/12/09/is-sears-dying-slow-death.html Just saw this headline: Sears company dying a slow death. Some companies we think will be around forever and we might view their stocks as buy once and hold forever. Just thought this story was a great reminder that in gene...
by Random Walker
Fri Dec 02, 2016 9:00 pm
Forum: Investing - Theory, News & General
Topic: How many books should i read for long term investing.
Replies: 22
Views: 984

Re: How many books should i read for long term imnvesting.

I haven't read the thread, so I apologize if it's already been said. After you've had your fill of passive investing Boglehead books, I recommend you read one book on financial history. Knowing history helps build the strength to stay the course. Devil Take The Hindmost is excellent. Manias, Panics,...
by Random Walker
Thu Dec 01, 2016 8:43 pm
Forum: Investing - Theory, News & General
Topic: The "purity" of small value
Replies: 12
Views: 948

Re: The "purity" of small value

Live soft, I disagree with your thought that all is equal if you just use more of the less small and less valuey VG fund to get same factor load as you can with less of funds with more exposure to small and value. I believe you can achieve the same loads on SmV and HmL, but you will need to take on ...
by Random Walker
Wed Nov 30, 2016 10:33 am
Forum: Investing - Theory, News & General
Topic: which factors matter to investors?
Replies: 10
Views: 876

Re: which factors matter to investors?

In addition to all the often cited reasons to have a factor tilted portfolio, this essay makes me want to minimize CAPM beta market exposure to avoid the trappings of following the crowd.

Dave
by Random Walker
Wed Nov 30, 2016 10:20 am
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 2759

Re: "Sequence of returns risk"

Rbaldini, I disagree with your response to me above. If two portfolios have the same expected return, but different Sharpe ratios, I wouldn't call one portfolio more conservative. I'd call it more efficient. It's just more diversified across potential sources of return and types of risk. Dave
by Random Walker
Wed Nov 30, 2016 10:12 am
Forum: Investing - Theory, News & General
Topic: An interesting new value metric--maximum dividend
Replies: 20
Views: 2026

Re: An interesting new value metric--maximum dividend

Ive likely misunderstood the profitability premium, but this is the way my head has wrapped around value and profitability. A value company can have a high BtM ratio either because it's just not very profitable or because it carries more of some inherent valuey risk. By screening for profitability o...
by Random Walker
Wed Nov 30, 2016 12:44 am
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 2759

Re: "Sequence of returns risk"

Rbaldini, Sequence of returns is obviously a huge issue for someone in early retirement; the withdrawn money cannot recover after a bear. But there is something I believe one can do to minimize SOR risk. If one could construct a portfolio with the same mean expected return, but a narrower dispersion...
by Random Walker
Mon Nov 28, 2016 8:37 pm
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 2759

Re: "Sequence of returns risk"

Lack_ey,
Summarized my thoughts pretty well. It's not just the higher expected returns of small and value though, it's also the lack of correlation between the factors.

Dave
by Random Walker
Mon Nov 28, 2016 8:33 pm
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 2759

Re: "Sequence of returns risk"

Fire chief, By three fund portfolio you mean Total Stock Market, Total International, Total Bond? No I definitely do not mean that. Total market portfolios definitely have wide exposure to equities, but not net exposure to size and value. On the equity side, they are effectively exposed to a only a ...
by Random Walker
Mon Nov 28, 2016 7:53 pm
Forum: Investing - Theory, News & General
Topic: "Sequence of returns risk"
Replies: 42
Views: 2759

Re: "Sequence of returns risk"

I agree, the answer to your question is yes. I believe those first few years of retirement are critical. People frequently say things like "I'm retired, I can't afford to wait a long time for a tilted portfolio to outperform" or "I can't risk a long period of underperformance by tilti...
by Random Walker
Mon Nov 28, 2016 10:28 am
Forum: Investing - Theory, News & General
Topic: Commodities in your assets allocation
Replies: 22
Views: 984

Re: Commodities in your assets allocation

From my reading, the stocks of commodity producers behave much more like stocks than commodities. They are just equities. The potential diversification benefit comes mainly from investing in the CCFs funds.

Dave
by Random Walker
Mon Nov 28, 2016 10:16 am
Forum: Investing - Theory, News & General
Topic: Commodities in your assets allocation
Replies: 22
Views: 984

Re: Commodities in your assets allocation

I used to hold them. I'm a huge believer in the benefits of non / negatively correlated assets in a portfolio. See Gibson's Asset Allocation. But they don't have much of an expected real return and are best placed in valuable tax advantaged space. Now there are other portfolio diversifiers available...
by Random Walker
Mon Nov 28, 2016 9:33 am
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 2199

Re: What do others mean by "Diversification Benefit" or Portfolio Efficiency?

Lieutenant,
FWIW, I'd start with Black Swan to get the general concept. Whether the investor is 100% equities or 10% equities, the point is to diversify the equity risks away from market beta alone with big doses of uncorrelated and higher expected returns small and value.

Dave
by Random Walker
Mon Nov 28, 2016 9:26 am
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 2199

Re: What do others mean by "Diversification Benefit" or Portfolio Efficiency?

Lieutenant, The geometric return of portfolio is always less than the average annual return of the components because volatility is a huge drag on portfolio returns. Take the simplest and most extreme example. A portfolio goes up 100% in first year and declines 50% in next year. It's average annual ...
by Random Walker
Sun Nov 27, 2016 2:47 pm
Forum: Investing - Theory, News & General
Topic: Not DFA - what are the best Value and MOM funds?
Replies: 20
Views: 2042

Re: Not DFA - what are the best Value and MOM funds?

Stlutz, Thanks for that analysis. Good to know 60%VTI/40%VBR yields same tilt as one of the core funds. Of course a single core fund will have advantage of internal rebalancing rather than costs of rebalancing between the VG funds. As you suggest, I'd be surprised if the AUM fee and higher ER don't ...
by Random Walker
Sun Nov 27, 2016 12:16 pm
Forum: Investing - Theory, News & General
Topic: Creating my own target retirement glide
Replies: 57
Views: 3389

Re: Creating my own target retirement glide

I vote for somewhat developing your glide path as you go. Develop an IPS with an AA that you can stick with. Periodically, perhaps 2-4X per decade, see where you stand. Readdress your ability, willingness, need to take risk and decide whether to stick with current AA or cool it off a bit. Monte Carl...
by Random Walker
Sun Nov 27, 2016 12:11 pm
Forum: Investing - Theory, News & General
Topic: From a 20-fund indexed portfolio, to a simple one
Replies: 12
Views: 1235

Re: From a 20-fund indexed portfolio, to a simple one

I tell people I manage that when they've had more than one job, they develop an excellent sense of what's important and what's not. Things held in common between the jobs are important and things different not as much. Probably same with the investing books. They share huge overlying important theme...
by Random Walker
Sun Nov 27, 2016 12:04 pm
Forum: Investing - Theory, News & General
Topic: Not DFA - what are the best Value and MOM funds?
Replies: 20
Views: 2042

Re: Not DFA - what are the best Value and MOM funds?

Think it's worth noting that the value effect is greatest in the smallest equities. So I agree that ER alone is not the way to evaluate these funds.

Dave
by Random Walker
Sat Nov 26, 2016 8:34 pm
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 2199

Re: What do others mean by "Diversification Benefit" or Portfolio Efficiency?

Stlutz, Most people think of diversification in the equity realm as increased number of stocks. Some people believe that since adding another stock to an equity portfolio increases diversification that the natural extension of that is that a TSM equity portfolio is maximally efficient. But once a pe...
by Random Walker
Sat Nov 26, 2016 4:49 pm
Forum: Investing - Theory, News & General
Topic: Swedroe's Factor Based Investing expanded table
Replies: 1
Views: 451

Re: Swedroe's Factor Based Investing expanded table

Svensk Anga, Thanks for posting. I think the point you make that CAGR will be even closer than average annual returns is HUGE. Volatility drag on returns is potentially a portfolio killer. I think the biggest benefit of diversification (of all types) is to dampen portfolio volatility and get the CAG...
by Random Walker
Fri Nov 25, 2016 10:09 pm
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 2199

Re: What do others mean by "Diversification Benefit" or Portfolio Efficiency?

Hi Taylor, Thanks for your response. So you view portfolio efficiency as increased Sharpe ratio. But why is less volatility significant to you? I believe I've even read something by Bogle saying that he didn't really care much about volatility. But as I said above, I believe volatility is a huge dra...
by Random Walker
Fri Nov 25, 2016 9:13 pm
Forum: Investing - Theory, News & General
Topic: What do others mean by "Diversification Benefit" or Portfolio Efficiency?
Replies: 27
Views: 2199

What do others mean by "Diversification Benefit" or Portfolio Efficiency?

There have been many threads concerning multi factor investing and the potential diversification benefit achieved by adding a certain asset class or style. I'm curious what "diversification benefit" means to others. Is it improved Sharpe ratio, cutting tails, bringing compounded return clo...
by Random Walker
Fri Nov 25, 2016 8:48 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 134
Views: 9156

Re: A look at the research and evidence on time-series MOM

Lack_ey,
I thought that was the answer. Thanks for a great explanation.

Dave
by Random Walker
Fri Nov 25, 2016 5:17 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 134
Views: 9156

Re: A look at the research and evidence on time-series MOM

Larry,
Scaled to target 10% volatility; that means leveraged to different extents depending on recent volatility? Thanks,

Dave
by Random Walker
Fri Nov 25, 2016 12:49 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 134
Views: 9156

Re: A look at the research and evidence on time-series MOM

For those not "buying the kool aid", do you believe the data? Do you think the benefit will be arbitraged away? Do you not trust it because it is a behavioral story rather than a risk story? Do you look at it in isolation rather than as a component of a multi-factor portfolio? Just looks t...
by Random Walker
Fri Nov 25, 2016 12:14 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 134
Views: 9156

Re: A look at the research and evidence on time-series MOM

Lack_ey,
Thanks. Your explanation of TS Momentum just above clarified things for me greatly. So my next question is how often does the AQR fund reconstitute based on the prior months 2-12?

Dave
by Random Walker
Fri Nov 25, 2016 10:24 am
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 134
Views: 9156

Re: A look at the research and evidence on time-series MOM

Larry, Is the AQR TS Momentum fund long/short? If so, would it have no exposure to market beta? Or can it be long and short to different extents at different times, thus changing its equity exposure over time? For example, doesn't QSPIX have no net equity exposure and give pure exposure to value fac...
by Random Walker
Thu Nov 24, 2016 11:48 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 134
Views: 9156

Re: A look at the research and evidence on time-series MOM

I don't understand how TS Momentum results in shifting asset allocation. I thought long stocks going up and short stocks going down would eliminate stock risk and isolate TS Momentum premium. The long and short sides aren't equal? Thanks,

Dave
by Random Walker
Thu Nov 24, 2016 11:43 am
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 32
Views: 3382

Re: DFA vs Vanguard (I know, I know)

Just thought I'd give this post a bump. I believe anyone interested in DIY investing through VG, should at least actively consider the Advisor DFA route. Then if they choose DIY VG, they will have more conviction to stick to their plan. Interested to hear what others think.

Dave
by Random Walker
Thu Nov 24, 2016 11:37 am
Forum: Investing - Theory, News & General
Topic: Glide Paths : Help with Theory
Replies: 31
Views: 1704

Re: Glide Paths : Help with Theory

I would recommend a book that is probably right up an electrical engineer's alley. It's called Value Averaging by Michael Edleson. The book focuses on allocating a fixed sum of money over time, but the concepts are worthwhile for someone in accumulation phase as well. The book likely will not convin...
by Random Walker
Thu Nov 24, 2016 11:31 am
Forum: Investing - Theory, News & General
Topic: Glide Paths : Help with Theory
Replies: 31
Views: 1704

Re: Glide Paths : Help with Theory

I know you asked mainly for data, but I'll add my 2 cents anyways. I would not commit to an absolute glide path in your IPS. Instead I would only commit to a fixed AA that you readdress perhaps once or twice a decade as circumstances change. We can't control what markets will do, but we can control ...
by Random Walker
Thu Nov 24, 2016 11:10 am
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 134
Views: 9156

Re: A look at the research and evidence on time-series MOM

Hi Larry, Can you straighten me out on this? Which is a better diversifier for an equity rich, value oriented portfolio, TS Momentum or CS Momentum? And why? I think I read a post of yours earlier that said CS Momentum negatively correlated with value, while TS Momentum most likely uncorrelated. Can...
by Random Walker
Tue Nov 22, 2016 1:08 pm
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 32
Views: 3382

Re: DFA vs Vanguard (I know, I know)

I made intentionally conservative assumptions to try to offset my confirmation bias. Still the difference between increased costs and increased expected returns put me over the edge.

Dave
by Random Walker
Tue Nov 22, 2016 10:41 am
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 32
Views: 3382

Re: DFA vs Vanguard (I know, I know)

I was a DIY VG Boglehead 2001-2009. As I read more and learned more I became interested in tilting. The overwhelming majority of my savings are taxable though, so I started thinking towards DFA tax Managed value funds. The problem is that the ER differences and Advisor AUM fee are certain, but the a...
by Random Walker
Mon Nov 21, 2016 10:15 am
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 32
Views: 3382

Re: DFA vs Vanguard (I know, I know)

A few brief comments: 1. Obviously there is the advisor and advisor fee issue 2. VG funds are not as deeply tilted, so will have to take more market risk with VG to get same factor exposures. 3. VG does not offer Tax Managed Value funds or Core funds. 4. ER is the easiest cost to measure, but by no ...
by Random Walker
Thu Nov 17, 2016 3:05 pm
Forum: Investing - Theory, News & General
Topic: Why are bonds dropping? They are supposed to be safe.
Replies: 171
Views: 19459

Re: Why are bonds dropping? They are supposed to be safe.

Saltycaper,
Completely agree. In my statement I was implicitly (perhaps subconsciously) assuming highest quality and short to intermediate term. As quality decreases, Equity like characteristics increase.

Dave
by Random Walker
Thu Nov 17, 2016 3:00 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 134
Views: 9156

Re: A look at the research and evidence on time-series MOM

I agree with grap that a person should only invest in a factor to the extent that he has conviction. I, like grap, have more faith in the risk based factors. But, wow, the strength of the data, the size of the premium, and the way TS Momentum mixes with other factors sure makes it intriguing. If any...
by Random Walker
Thu Nov 17, 2016 12:02 pm
Forum: Investing - Theory, News & General
Topic: Why are bonds dropping? They are supposed to be safe.
Replies: 171
Views: 19459

Re: Why are bonds dropping? They are supposed to be safe.

Dbr, How can "bonds are for safety" not be a good thought? The right way to see one's investments is from the perspective of the whole portfolio. Bonds dampen the risk of the portfolio as a whole. A typical 60/40 portfolio probably has at least 80% of the risk on the equity side. Although ...
by Random Walker
Wed Nov 16, 2016 3:09 pm
Forum: Investing - Theory, News & General
Topic: financial advisor core skillset
Replies: 18
Views: 1372

Re: financial advisor core skillset

Here's a short essay Larry Swedroe wrote on choosing a financial advisor.

http://www.cbsnews.com/news/11-principl ... n-advisor/

Dave
by Random Walker
Wed Nov 16, 2016 2:56 pm
Forum: Investing - Theory, News & General
Topic: Why total bond fund rather than short-maturity fund?
Replies: 30
Views: 2627

Re: Why total bond fund rather than short-maturity fund?

I would say take your risk on the equity side. Keep the bonds safe; that means short to intermediate duration and highest quality. As you move down in quality and up in term, the bonds take on more equity like risk. It's more efficient to take the risk on the equity side.

Dave
by Random Walker
Wed Nov 16, 2016 8:51 am
Forum: Investing - Theory, News & General
Topic: financial advisor core skillset
Replies: 18
Views: 1372

Re: financial advisor core skillset

I think it was William Bernstein who wrote that by the time an individual has the knowledge sufficient to choose a good financial advisor, he can probably do the investing himself. That being said, I chose to go the advisor route.

Dave
by Random Walker
Mon Nov 14, 2016 7:27 pm
Forum: Investing - Theory, News & General
Topic: Sudden Recent Jump in Russ 2K Compared to S&P 500?
Replies: 1
Views: 411

Sudden Recent Jump in Russ 2K Compared to S&P 500?

Has anyone else noticed how the Russell 2000 small cap index has had some huge days compared to the S&P 500 over the last week. Seems that generally all markets move pretty much together, but looks to my anecdotal eye that small caps have moved big since the election. I just find it interesting.
by Random Walker
Sat Nov 12, 2016 9:53 pm
Forum: Investing - Theory, News & General
Topic: Why patience and discipline are key to investing, it's temperament not intellect
Replies: 38
Views: 4953

Re: Why patience and discipline are key to investing, it's temperament not intellect

I think Larry's point about time frame is worth emphasizing. The shorter one's timeframe, the more likely any one source of return, including market beta, is to underperform. The shorter one's timeframe, the more important diversification across sources of return is.

Dave
by Random Walker
Fri Nov 11, 2016 1:45 pm
Forum: Investing - Theory, News & General
Topic: Why patience and discipline are key to investing, it's temperament not intellect
Replies: 38
Views: 4953

Re: Why patience and discipline are key to investing, it's temperament not intellect

Huge benefit that the correlations between the factors are very low. Not only is the risk of underperformance reduced by diversifying across factors, portfolio efficiency is increased substantially.

Dave
by Random Walker
Sun Nov 06, 2016 9:46 am
Forum: Investing - Theory, News & General
Topic: Should you use component funds or core funds when allocating to factors
Replies: 6
Views: 876

Re: Should you use component funds or core funds when allocating to factors

Hi Larry, Completely makes sense to me that core funds are superior to building from components. That being said though, weighting on some factors will decrease the weight on other factors. For example, a value oriented fund that uses momentum screen can just about only eliminate the negative moment...
by Random Walker
Sun Nov 06, 2016 9:35 am
Forum: Investing - Theory, News & General
Topic: How publication of financial research impacts prices
Replies: 3
Views: 916

Re: How publication of financial research impacts prices

Thanks for great article. That 32% number from two different papers is amazing similarity of result! It's powerful to know that premiums can be expected to decline but not disappear. This is especially worthwhile to know for the behavioral (all or part) based anomalies where limits to arbitrage make...
by Random Walker
Wed Nov 02, 2016 2:15 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe's latest market returns forecast
Replies: 380
Views: 28466

Re: Larry Swedroe's latest market returns forecast

Longinvest, I'm a huge Bernstein fan, and obviously I'm a mental midget compared to Samuelson and Merton, but I think it is very silly to assume a person's risk tolerance is constant throughout lifetime! Are you sure Bernstein agrees with that statement? First of all, how do you define risk toleranc...
by Random Walker
Wed Nov 02, 2016 10:14 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe's latest market returns forecast
Replies: 380
Views: 28466

Re: Larry Swedroe's latest market returns forecast

Random guy, I agree it would be scary seeing the portfolio drop, and the marginal utility of wealth increases as the portfolio plunges! That being said, thinking as rationally as we can about probabilities. Wouldn't one worry more about losing what they currently have at P/E 30 than P/E 10? Moreover...
by Random Walker
Tue Nov 01, 2016 7:58 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe's latest market returns forecast
Replies: 380
Views: 28466

Re: Larry Swedroe's latest market returns forecast

Jamrock,
If you are 60% equities, would you sleep differently at night with P/E 30 v. P/E 10? Seems to me the downside risk is greater in one case than the other.

Dave

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