Search found 1072 matches

by Random Walker
Wed May 04, 2016 9:06 pm
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 7
Views: 810

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

Your post is consistent with something Larry has been teaching: in equity heavy portfolios, the volatility is dominated by the stocks, so one may as well take the higher yield associated with term risk. In portfolios with low equity allocation, where the point is to avoid volatility, keep duration s...
by Random Walker
Wed May 04, 2016 8:59 pm
Forum: Investing - Theory, News & General
Topic: Factor concentration within funds – does it really matter?
Replies: 10
Views: 308

Re: Factor concentration within funds – does it really matter?

In the deep small and value corners of the market, I wonder if the non-linearity Robert talks about is at least partly reflective of an additional liquidity premium.

Dave
by Random Walker
Wed May 04, 2016 8:51 pm
Forum: Investing - Theory, News & General
Topic: Factor concentration within funds – does it really matter?
Replies: 10
Views: 308

Re: Factor concentration within funds – does it really matter?

Seems to me factor concentration is important. The more factor exposure a fund has, the less of it is needed to obtain a given targeted exposure for the portfolio. The asset class funds are more expensive, so less of the more expensive and more concentrated fund is needed to obtain a certain exposur...
by Random Walker
Tue May 03, 2016 11:08 am
Forum: Investing - Theory, News & General
Topic: How Can "Smart Beta" Go Horribly Wrong?
Replies: 37
Views: 4981

Re: How Can "Smart Beta" Go Horribly Wrong?

Regarding "How Can Smart Beta Go Horribly Wrong", The only way I can see a portfolio diversified across sources of return going wrong is by increased costs. (I realize that is huge!). But I thing when one is diversified across risk factors / sources of return, if shortfall occurs it won't ...
by Random Walker
Tue May 03, 2016 9:44 am
Forum: Investing - Theory, News & General
Topic: How Can "Smart Beta" Go Horribly Wrong?
Replies: 37
Views: 4981

Re: How Can "Smart Beta" Go Horribly Wrong?

Here's another reason for the core fund approach. Core funds typically cheaper than the individual asset class funds, so overall portfolio ER probably lower using core as mainstay and only adding asset class funds as desired rather than doing it all with individual asset class funds.

Dave
by Random Walker
Mon May 02, 2016 8:27 am
Forum: Investing - Theory, News & General
Topic: Paul Merriman's Emergency Fund Recommendation
Replies: 24
Views: 3049

Re: Paul Merriman's Emergency Fund Recommendation

I agree that short term bonds can serve as emergency funds. They can play two roles in the portfolio at once: risk level adjustment and emergency fund.

Dave
by Random Walker
Sun May 01, 2016 11:09 am
Forum: Investing - Theory, News & General
Topic: Jonathan Clements: higher % stocks -> higher % of stocks international
Replies: 14
Views: 1509

Re: Jonathan Clements: higher % stocks -> higher % of stocks international

I get his point, but I think one should focus on the equity allocation that is right for them, whether they are 100% equities or 20% equities. If one thinks equities should be diversified across geography, then that applies at both low equity allocation and high equity allocation I think. Personally...
by Random Walker
Sat Apr 30, 2016 10:44 pm
Forum: Investing - Theory, News & General
Topic: Altering the glide path
Replies: 11
Views: 1088

Re: Altering the glide path

Makes perfect sense, thanks Taylor.

Dave
by Random Walker
Sat Apr 30, 2016 10:26 pm
Forum: Investing - Theory, News & General
Topic: Altering the glide path
Replies: 11
Views: 1088

Re: Altering the glide path

This brings up the problem I have with target date funds. Target date funds don't account for at least two things I can think of: changes in personal circumstance and big market fluctuations. If the market has a big bull run, one might want to take risk off the table in a big chunk rather than wait ...
by Random Walker
Sat Apr 30, 2016 10:14 pm
Forum: Investing - Theory, News & General
Topic: The long term volatility of value stocks vs the market
Replies: 26
Views: 2021

Re: The long term volatility of value stocks vs the market

From what I remember the question of value stock volatility depended on the time series used, but most people believe value is more volatile. Moreover, value's risk shows up in a different way. It does especially poorly in bad times. And that bad timing of poor returns is it's own kind of risk that ...
by Random Walker
Sun Apr 24, 2016 7:57 pm
Forum: Investing - Theory, News & General
Topic: Concentrated Factor Indexing
Replies: 9
Views: 782

Re: Concentrated Factor Indexing

The article talks about using as few as 50 stocks. If one has 50 stocks, then on average an individual stock occupies 2% of the portfolio equity. If a single stock blows up, 2% straight down the drain. Single stock risk is uncompensated risk. Moreover diversification is very important in the small a...
by Random Walker
Sun Apr 24, 2016 4:37 pm
Forum: Investing - Theory, News & General
Topic: Concentrated Factor Indexing
Replies: 9
Views: 782

Re: Concentrated Factor Indexing

Haven't read the articles yet, but your title got my attention. It's a reminder that the ER is not the only way to evaluate a mutual fund. What really matters is cost per unit of factor exposure. It is quite possible that a person requires less of a smaller more valuey fund to get the same exposure ...
by Random Walker
Sun Apr 24, 2016 11:11 am
Forum: Investing - Theory, News & General
Topic: Every DFA fund (ex-S&P 500) has underperformed the S&P 500 for the past decade
Replies: 101
Views: 6982

Re: Every DFA fund (ex-S&P 500) has underperformed the S&P 500 for the past decade

Tilting away from the total market to increase industry sector exposure or factor exposure and potential earn a higher risk-adjusted return must be a very long-term strategy. I believe it should be a life-long investment strategy because it could take decades to work. If you're not willing to wait ...
by Random Walker
Sun Apr 24, 2016 10:51 am
Forum: Investing - Theory, News & General
Topic: Allan Roth on why bond funds are better than individual bonds
Replies: 63
Views: 4895

Re: Alan Roth on why bond funds are better than individual bonds

Here are Allan's 5 reasons to prefer bond funds over individual bonds: 1. Diversification 2. Liquidity 3. Reinvestment of Interest 4. Consistent interest rate risk 5. Don't get tricked on interest I am the furthest thing from a bond expert, but I think I there are competing arguments for individual ...
by Random Walker
Sat Apr 23, 2016 4:46 pm
Forum: Investing - Theory, News & General
Topic: Every DFA fund (ex-S&P 500) has underperformed the S&P 500 for the past decade
Replies: 101
Views: 6982

Re: Every DFA fund (ex-S&P 500) has underperformed the S&P 500 for the past decade

Also, and please correct me if I'm wrong, when when a portfolio diversified across sources of return falls short of the overall market, the underperformance tends to be quite modest. I believe the size of underperformance is significantly smaller than the size of outperformance when that occurs. Dave
by Random Walker
Sat Apr 23, 2016 4:39 pm
Forum: Investing - Theory, News & General
Topic: Every DFA fund (ex-S&P 500) has underperformed the S&P 500 for the past decade
Replies: 101
Views: 6982

Re: Every DFA fund (ex-S&P 500) has underperformed the S&P 500 for the past decade

Whenever we talk about factor investing, it seems to me too many people go to the videotape and review historical returns over some finite period of time. Historical results are certainly important, but it is also very important for the investor to understand and believe in a logic explaining why th...
by Random Walker
Sat Apr 23, 2016 10:56 am
Forum: Investing - Theory, News & General
Topic: How do you avoid bad market timing for lump sum investments?
Replies: 23
Views: 2059

Re: How do you avoid bad market timing for lump sum investments?

Dollar cost averaging is one solution: fixed amount at regular intervals. Another option well worth learning about is Value Averaging. There is a book titled Value Averaging by Michael Edleson; William Bernstein is a big proponent of this book and this method for investing a large fixed sum. In fact...
by Random Walker
Wed Apr 20, 2016 10:49 am
Forum: Investing - Theory, News & General
Topic: Current Valuations US v. Int & Expected Returns
Replies: 22
Views: 2509

Re: Current Valuations US v. Int & Expected Returns

Hi Andy, US large and EAFE are frequently highly correlated, but not perfectly; and correlations do change. The market prices risk. With PE ratios substantially lower in foreign developed and EM, the market is saying foreign is more risky. More risky implies higher expected returns. Markets price ri...
by Random Walker
Tue Apr 19, 2016 5:52 pm
Forum: Investing - Theory, News & General
Topic: Current Valuations US v. Int & Expected Returns
Replies: 22
Views: 2509

Current Valuations US v. Int & Expected Returns

I'm curious if anyone has good numbers for current valuations for US, International, and Emerging Markets and the resulting expected returns. And while I'm asking, if someone could show how and why the P/E ratio yields an expected return, I'd appreciate that as well. Lastly, anyone pondering taking ...
by Random Walker
Mon Apr 18, 2016 1:25 pm
Forum: Investing - Theory, News & General
Topic: Emergency fund needed?
Replies: 17
Views: 1662

Re: Emergency fund needed?

I think a short term bond fund is a reasonable emergency fund. Even intermediate term seems reasonable to me.

Dave
by Random Walker
Thu Apr 14, 2016 8:53 am
Forum: Investing - Theory, News & General
Topic: How do you measure which retirement income strategy is best? By Michael Kitces
Replies: 21
Views: 1975

Re: How do you measure which retirement income strategy is best? By Michael Kitces

The above is a strong argument for good Monte Carlo simulation. It's a very powerful tool to see how changes in asset allocation and spending affect the probabilities of different goals / outcomes. It's an extremely useful exercise to see where one really stands.

Dave
by Random Walker
Thu Apr 14, 2016 8:49 am
Forum: Investing - Theory, News & General
Topic: Investing legends change their bond portfolio
Replies: 29
Views: 4080

Re: Investing legends change their bond portfolio

I like the idea of keeping it real simple. The best diversifier of equity risk is high quality bonds. Take risk on the equity side. Rather than messing around by stretching for yield, adjust the stock / bond ratio appropriately and keep the bonds high quality and possibly just short to intermediate ...
by Random Walker
Wed Apr 13, 2016 8:52 am
Forum: Investing - Theory, News & General
Topic: A deep look at differences in passive funds from same asset class
Replies: 13
Views: 962

Re: A deep look at differences in passive funds from same asset class

Nspirius,
Pretty sure one would consider the AQR and Bridgeway methodologies passive but not linked to popular public indexes.

Dave
by Random Walker
Wed Apr 13, 2016 8:42 am
Forum: Investing - Theory, News & General
Topic: A deep look at differences in passive funds from same asset class
Replies: 13
Views: 962

Re: A deep look at differences in passive funds from same asset class

Hi Larry,
Thanks for the article. When you quote returns, are they before or after accounting for expense ratios? More generally, is there a standard practice for accounting for costs when reporting returns? Thanks,

Dave
by Random Walker
Wed Apr 06, 2016 9:37 am
Forum: Investing - Theory, News & General
Topic: Impact of taxes on actively managed funds
Replies: 16
Views: 1156

Re: Impact of taxes on actively managed funds

Hi Larry,
For taxable investors who want to diversify across factors, do you have any sense of the incremental benefit of investing in tax managed value funds versus a Vanguard value fund? Last I looked, VG doesn't have tax managed value funds. Thanks,

Dave
by Random Walker
Sun Apr 03, 2016 2:17 pm
Forum: Investing - Theory, News & General
Topic: Which individual countries hold the most promise for future investment gains?
Replies: 84
Views: 4617

Re: Which individual countries hold the most promise for future investment gains?

It's completely analogous to individual stocks. From a risk perspective, countries with faster growing economies are less risky, and therefore have lower expected return. From a behavioral perspective, people overpay for growth. Higher starting price lowers future expected returns. The market prices...
by Random Walker
Fri Mar 18, 2016 5:28 pm
Forum: Investing - Theory, News & General
Topic: Recommended 529?
Replies: 33
Views: 3242

Re: Recommended 529?

I recently changed from West Virginia to Utah. I noticed that the maximum value beyond which no additional contributions are allowed is much higher for Utah. Am I correct that the maximum value varies from plan to plan and one potential to choose one plan over another is higher contribution limits? ...
by Random Walker
Sat Mar 12, 2016 3:44 pm
Forum: Investing - Theory, News & General
Topic: Portland Oregon Ponzi scheme in an FA company
Replies: 16
Views: 2199

Re: Portland Oregon Ponzi scheme in an FA company

I believe this is one way to help ensure statements are correct. If one uses a financial advisor, they should function as an advisor only. There should be a separate mutual fund company and a third separate company holding the clients shares. So there are 3 separate entities: advisor, investment com...
by Random Walker
Sun Mar 06, 2016 12:37 am
Forum: Investing - Theory, News & General
Topic: Under the hood of 5 multifactor funds
Replies: 44
Views: 3945

Re: Under the hood of 5 multifactor funds

Does investment with a profitability screen provide more explanatory power than a value metric with a profitability screen? Thanks,
Dave
by Random Walker
Sat Mar 05, 2016 2:42 pm
Forum: Investing - Theory, News & General
Topic: Under the hood of 5 multifactor funds
Replies: 44
Views: 3945

Re: Under the hood of 5 multifactor funds

Hi Larry,
Sorry, I'm just not getting it :-) what do high and low investment mean? Investments made by the company? In the company? Who's investing? And what are they investing in? Thanks

Dave
by Random Walker
Sat Mar 05, 2016 1:42 pm
Forum: Investing - Theory, News & General
Topic: Diversify with Intl Small Cap instead of EM?
Replies: 35
Views: 3109

Re: Diversify with Intl Small Cap instead of EM?

I think both emerging market and international small are good diversifies. I believe I've heard that international small value is an even better diversifier than EM.

Dave
by Random Walker
Sat Mar 05, 2016 11:56 am
Forum: Investing - Theory, News & General
Topic: Under the hood of 5 multifactor funds
Replies: 44
Views: 3945

Re: Under the hood of 5 multifactor funds

What is the investment factor? I don't understand its meaning. Thanks,

Dave
by Random Walker
Tue Jan 12, 2016 10:21 pm
Forum: Investing - Theory, News & General
Topic: Small value underperformance, DFA
Replies: 106
Views: 7945

Re: Small value underperformance, DFA

Volatility is a portfolio killer; it takes a 100% return to make up for a 50% portfolio loss. The compounded portfolio return always falls short of the weighted average return of the portfolio components due to volatility. By dampening portfolio volatility one brings the compounded return closer to ...
by Random Walker
Sat Jan 02, 2016 6:17 pm
Forum: Investing - Theory, News & General
Topic: frustrating to keep investing in international/EM
Replies: 110
Views: 8580

Re: frustrating to keep investing in international/EM

"Stay the course" is very sound advice. BUT!!! There are a handful of occasions in ones investing lifetime where the course should or may change. We've had a huge bull market over the last 6 years and we've all become 6 years older. It's a good time for an individual to reflect on his pers...
by Random Walker
Sat Jan 02, 2016 5:48 pm
Forum: Investing - Theory, News & General
Topic: Lump Sum vs Dollar Cost Averaging
Replies: 9
Views: 808

Re: Lump Sum vs Dollar Cost Averaging

The expected return for equities is always positive, albeit sometimes smaller than others. That being said, the academic answer is lump sum as early as possible. If you really have conviction in your chosen AA, I think that is especially true.

Dave
by Random Walker
Sat Jan 02, 2016 5:43 pm
Forum: Investing - Theory, News & General
Topic: frustrating to keep investing in international/EM
Replies: 110
Views: 8580

Re: frustrating to keep investing in international/EM

I'm a huge believer in chemical equilibrium, Econ 101 perfect competition, and efficient markets. Many people say a good starting point for an efficient portfolio is the world market cap weighting, which is roughly 50% US /50% International (and 25% international in emerging markets). Most of us by ...
by Random Walker
Sun Dec 27, 2015 10:40 am
Forum: Investing - Theory, News & General
Topic: Retiring in a bull market
Replies: 10
Views: 1666

Re: Retiring in a bull market

I'm 53 and recently had a Monte Carlo analysis done. Was really surprised at the lack of sensitivity to changes in the stock bond mix. Maybe good time change the AA or at least spend down to new AA by withdrawing from the equity side. A lot depends on an individual's end of life goal: leave as big a...
by Random Walker
Sun Dec 27, 2015 9:41 am
Forum: Investing - Theory, News & General
Topic: Retiring in a bull market
Replies: 10
Views: 1666

Re: Retiring in a bull market

It has really worked well for you! Have you made your asset allocation less risky since then or stayed with the same stock/bond mix since then?

Dave
by Random Walker
Sat Dec 26, 2015 1:43 pm
Forum: Investing - Theory, News & General
Topic: Tracking Net Worth, insightful and motivating
Replies: 45
Views: 4298

Re: Tracking Net Worth, insightful and motivating

I think it's good to track net worth. It's a true measure of where you really stand, and I think it can help strengthen the fortitude to stick to one's asset allocation in the liquid investment realm.

Dave
by Random Walker
Thu Dec 24, 2015 11:29 am
Forum: Investing - Theory, News & General
Topic: Final Part of Perfect Storm series,
Replies: 18
Views: 1837

Re: Final Part of Perfect Storm series,

In the article Larry comments that use of Monte Carlo simulation could be very productive. I have done this with my financial advisor and found the results quite surprising and enlightening. First of all, a good Monte Carlo simulation will look at the likelihood of different end points: say age 85 w...
by Random Walker
Tue Dec 22, 2015 11:27 am
Forum: Investing - Theory, News & General
Topic: Let Tax Tail Wag the Asset Allocation Dog?
Replies: 23
Views: 2207

Re: Let Tax Tail Wag the Asset Allocation Dog?

Thanks Grabiner,
That's pretty much the way I've been looking at it.

Dave
by Random Walker
Fri Dec 18, 2015 2:44 pm
Forum: Investing - Theory, News & General
Topic: When Commodities Prices Fall Do Expected Returns Rise?
Replies: 2
Views: 287

When Commodities Prices Fall Do Expected Returns Rise?

So, got to admit, I've violated the rule about investing in only things one understands. I got enamored with the lack of correlation of CCFs. They've tanked in the last couple of years. So when equities go down, expected return rises. Is the same true for CCFs? My understanding is that there are thr...
by Random Walker
Fri Dec 18, 2015 11:10 am
Forum: Investing - Theory, News & General
Topic: Let Tax Tail Wag the Asset Allocation Dog?
Replies: 23
Views: 2207

Re: Let Tax Tail Wag the Asset Allocation Dog?

Larry, Just as tax loss harvesting is an interest free loan from the government, is delaying capital gains tax effectively the same thing? Is it profitable to delay capital gains as much as possible or does it end up being a wash, pay now or pay later? I realize we can't anticipate what the market w...
by Random Walker
Fri Dec 18, 2015 11:06 am
Forum: Investing - Theory, News & General
Topic: A perfect storm for investors
Replies: 90
Views: 12329

Re: A perfect storm for investors

This is related to my earlier post on taking chips off the table / cooling off the asset allocation. On the one hand, I appreciate that one would need to increase equity allocation to compensate for lower expected returns. On the other hand, it seems the increased risk is simply not worth it for the...
by Random Walker
Thu Dec 17, 2015 11:06 am
Forum: Investing - Theory, News & General
Topic: Let Tax Tail Wag the Asset Allocation Dog?
Replies: 23
Views: 2207

Re: Let Tax Tail Wag the Asset Allocation Dog?

Not much tax advantaged space, approximately 15% of the portfolio. I'm currently 70/30 and thinking of moving to 60/40 or 50/50. Ive had a Monte Carlo analysis performed, and the results are surprisingly similar with 70/30 and 50/50.

Dave
by Random Walker
Wed Dec 16, 2015 3:07 pm
Forum: Investing - Theory, News & General
Topic: Let Tax Tail Wag the Asset Allocation Dog?
Replies: 23
Views: 2207

Re: Let Tax Tail Wag the Asset Allocation Dog?

Gclancer, Good point. But I figure it could take couple to a few years to rebalance with new additions. Market could do drastic stuff in that time frame. Long dog, Yes I would say that with age and maturity I've gotten more realistic about future financial possibilities and goals, so my "need&q...
by Random Walker
Wed Dec 16, 2015 2:45 pm
Forum: Investing - Theory, News & General
Topic: Let Tax Tail Wag the Asset Allocation Dog?
Replies: 23
Views: 2207

Let Tax Tail Wag the Asset Allocation Dog?

We've had a 6 year bull market, and I'm pondering cooling off my asset allocation even though I'm still in accumulation phase. Of course that means paying capital gains now rather than delaying them to the future. Just curious to hear others thoughts regarding a substantial tax hit for the sake of t...
by Random Walker
Wed Dec 16, 2015 1:36 pm
Forum: Personal Consumer Issues
Topic: WSJ - Cancel and Invest Subscription Fee in S&P500 or Read Daily - Which is a Better Investment?
Replies: 43
Views: 3426

Re: WSJ - Cancel and Invest Subscription Fee in S&P500 or Read Daily - Which is a Better Investment?

No brainier! Buy the WSJ. I'm indifferent as to whether you read the front page news or the financial pages, but the Opinion section is an invaluable resource for clear thinking regarding current events. Just my opinionated 2 cents :-)

Dave
by Random Walker
Fri Nov 27, 2015 5:42 pm
Forum: Investing - Theory, News & General
Topic: Collateralized Commodity Futures Funds
Replies: 33
Views: 2438

Re: Collateralized Commodity Futures Funds

You can check the monthly oil futures price.

Dave
by Random Walker
Wed Nov 25, 2015 8:48 am
Forum: Investing - Theory, News & General
Topic: Slicing, Dicing, Tilting, Factoring, etc-ing -- my take
Replies: 100
Views: 8947

Re: Slicing, Dicing, Tilting, Factoring, etc-ing -- my take

I have posted these before. These two short articles are the most succinct essays I've read displaying the power of diversifying across as many sources of return as possible. The first is called Effective Diversification in a 3 Factor World by Larry Swedroe and the second is called The Rewards of Mu...

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