Search found 1104 matches

by Random Walker
Fri May 27, 2016 9:31 am
Forum: Investing - Theory, News & General
Topic: Tax considerations: Only an Asset Location decision??
Replies: 13
Views: 632

Re: Tax considerations: Only an Asset Location decision??

Hi, Yes, I think one needs to consider taxes in the design of the portfolio, especially if most of one's savings are in taxable accounts. Tilting to small and value are less tax efficient than TSM. So one may decide to avoid tilting for the sake of taxes, tilt less, or perhaps decide to use tax mana...
by Random Walker
Wed May 25, 2016 10:08 am
Forum: Investing - Theory, News & General
Topic: a new look at the size premium
Replies: 44
Views: 3700

Re: a new look at the size premium

An easy way to compare funds:
When evaluating the size and value loadings of a fund, a good start is just to look at the average book value and P/B of the funds

Dave
by Random Walker
Wed May 25, 2016 10:05 am
Forum: Investing - Theory, News & General
Topic: Can I just let my money compound now?
Replies: 51
Views: 5809

Re: Can I just let my money compound now?

I would say NO CHANCE! Even with excellent compounding you are facing big headwinds. First of all the effect of inflation and taxes will be way bigger than you think. Secondly, expected returns from today's generous valuations are modest. Lastly, given the terrible financial condition of the country...
by Random Walker
Wed May 25, 2016 9:59 am
Forum: Investing - Theory, News & General
Topic: This Bull Seems to be Getting Pretty Long In the Tooth
Replies: 69
Views: 5857

This Bull Seems to be Getting Pretty Long In the Tooth

Seems as though the S&P 500 has had a huge, nearly continuous, rise since 2008-9. Anyone getting weary? Anyone pondering taking some risk off the table and cooling off the AA? Anyone struggling with whether to pay a capital gains tax?

Dave
by Random Walker
Mon May 23, 2016 5:43 pm
Forum: Investing - Theory, News & General
Topic: Only 1/4 of stock held in taxable accounts
Replies: 13
Views: 1716

Re: Only 1/4 of stock held in taxable accounts

This certainly doesn't address the question raised, but it does bring up a topic that I think is very relevant here. Is the Boglehead population likewise 1/4 taxable and 3/4 tax advantaged? This is relevant for investors giving and taking advice on this board. Taxes could be a much larger cost for t...
by Random Walker
Sun May 22, 2016 9:25 pm
Forum: Investing - Theory, News & General
Topic: a new look at the size premium
Replies: 44
Views: 3700

Re: a new look at the size premium

Elbowman, It's hard to argue against lower costs, but it's important to realize that in choosing between a cheaper fund with less factor exposure and a more expensive fund with more concentrated factor exposure, one needs to realize both what he gets and doesn't get. In an effort to diversify across...
by Random Walker
Sat May 21, 2016 12:07 pm
Forum: Investing - Theory, News & General
Topic: Any thoughts on this? [Why advisors don't like target funds]
Replies: 28
Views: 3584

Re: Any thoughts on this? [Why advisors don't like target funds]

To continue afan's point, Target date funds have a glide path that is solely determined by dates. The market will do wild things over much shorter periods than the time to target date. There are times when huge market changes may warrant the individual to change allocation in a way different than th...
by Random Walker
Fri May 20, 2016 8:01 pm
Forum: Investing - Theory, News & General
Topic: Any thoughts on this? [Why advisors don't like target funds]
Replies: 28
Views: 3584

Re: Any thoughts on this? [Why advisors don't like target funds]

Taylor and Leonard, Agree with both of you. I think it's important to know the relevant issues an tradeoffs, then make decisions. Simplicity is wonderful, but important to appreciate the tradeoffs one may be making for simplicity sake. It's spectacular that some of the simplest portfolios are also t...
by Random Walker
Fri May 20, 2016 5:57 pm
Forum: Investing - Theory, News & General
Topic: Any thoughts on this? [Why advisors don't like target funds]
Replies: 28
Views: 3584

Re: Any thoughts on this? [Why advisors don't like target funds]

I believe one adverse feature of target date funds is that by definition the asset location is not optimized. Generally best to use tax advantaged space for bonds and taxable space for equities. Both bonds and equities in same fund means one is possibly not in optimal location.

Dave
by Random Walker
Wed May 18, 2016 10:06 am
Forum: Investing - Theory, News & General
Topic: Another Bernstein Gem-Don't be Greedy
Replies: 42
Views: 7243

Re: Another Bernstein Gem-Don't be Greedy

That Warren Buffet quote about the Long Term Capital Management guys really is poignant : "in an effort to make money they didn't need and didn't have, they risked money they did need and did have". Really makes me think hard about these pre retirement years. Bill Bernstein made another im...
by Random Walker
Wed May 18, 2016 8:42 am
Forum: Investing - Theory, News & General
Topic: Overconfident Investors, Predictable Returns, and Excessive Trading
Replies: 10
Views: 1411

Re: Overconfident Investors, Predictable Returns, and Excessive Trading

I first became interested in value investing about a decade ago because the risk story was so compelling. I then developed the Larry attitude that value is no free lunch, but there might be a free, behavioral based, stop at the dessert tray. Now, the more I read the bigger I feel the behavioral comp...
by Random Walker
Tue May 17, 2016 7:12 pm
Forum: Investing - Theory, News & General
Topic: Another Bernstein Gem-Don't be Greedy
Replies: 42
Views: 7243

Re: Another Bernstein Gem-Don't be Greedy

This thread is really critical for any of us in retirement or nearing retirement. William Bernsteins short E book The Ages of the Investor: A Critical Look at Lifecycle Investing is a must read. On top of that, I also think it's a must re-read! I just read a section where William writes that early i...
by Random Walker
Mon May 16, 2016 2:50 pm
Forum: Investing - Theory, News & General
Topic: The predictability (or not) of the value premium
Replies: 3
Views: 452

Re: The predictability (or not) of the value premium

This article is definitely a must read for any tilters out there who are questioning their strategy after last several years underperformance compared to TSM / S&P 500.

Dave
by Random Walker
Sat May 14, 2016 6:58 pm
Forum: Investing - Theory, News & General
Topic: How to treat a 2nd home or rental property in considering asset allocation?
Replies: 11
Views: 1112

Re: How to treat a 2nd home or rental property in considering asset allocation?

I consider it in net worth calculation, but it's seperate from the investable asset allocation. That being said, its presence does affect my asset allocation. I sort of consider it a Plan B reserve that I can sell in a disaster. Having the rental house has at times helped me stay put on a fairly agg...
by Random Walker
Sat May 14, 2016 10:40 am
Forum: Investing - Theory, News & General
Topic: A 401k after leaving a job...?
Replies: 7
Views: 792

Re: A 401k after leaving a job...?

Don't know specific rules, but I'm quite positive you want to roll it over into your own IRA rather than leave it in 401K: more control.

Dave
by Random Walker
Thu May 12, 2016 2:12 pm
Forum: Investing - Theory, News & General
Topic: "Keep your focus on fees."
Replies: 3
Views: 1265

Re: "Keep your focus on fees."

The ER is the most obvious cost in investing. But there are other costs (positive and negative) that are important yet harder to measure: efficient v inefficient trading, securities lending, bid/ask spreads, rebalancing costs, taxes. Taxes could be largest.

Dave
by Random Walker
Tue May 10, 2016 8:32 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 42
Views: 5631

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

I did not say that corporate bonds "equate" to equity risk. I'm not a financial pro, but I'm confident that there is a bit of equity type risk in corporates that increases as one goes down the quality spectrum. I think that specific loadings from the 5 factor model can be attributed to cor...
by Random Walker
Tue May 10, 2016 8:26 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 5 — What’s a Thing Worth?
Replies: 11
Views: 2185

Re: Classic Bernstein 5 — What’s a Thing Worth?

The market prices risk; more risk, lower price, higher future expected returns. Less risk, higher price, lower expected returns.

Dave
by Random Walker
Sun May 08, 2016 9:37 pm
Forum: Investing - Theory, News & General
Topic: Another Bernstein Gem-Don't be Greedy
Replies: 42
Views: 7243

Re: Another Bernstein Gem-Don't be Greedy

I'm a big fan of considering all my assets as components of a single portfolio and managing it top down. That being said, I'm starting to appreciate the wisdom of something William Bernstein describes in his Investing for Adults series. He describes two separate portfolios for an individual: a Liabi...
by Random Walker
Sun May 08, 2016 7:54 pm
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 42
Views: 5631

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

I think it makes great sense to avoid corporates. As one goes down the quality spectrum, the bonds gain equity like characteristics. It's simply more efficient to take one's risk on the equity side.

Dave
by Random Walker
Sat May 07, 2016 7:51 pm
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 3 — Diversifying Portfolio Equities
Replies: 15
Views: 2387

Re: Classic Bernstein 3 — Diversifying Portfolio Equities

Simplegift,
I certainly see where you're coming from. Personally, at this point I've diversified across all I know: size, value, momentum, profitability. But I have the real conviction for the ones with the most straightforward risk explanations: size and value.

Dave
by Random Walker
Sat May 07, 2016 3:24 pm
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 3 — Diversifying Portfolio Equities
Replies: 15
Views: 2387

Re: Classic Bernstein 3 — Diversifying Portfolio Equities

I really like this topic, so I thought I'd find an excuse to bump it up. Another one of my favorite short reads is a 3 page essay by Larry Swedroe: Effective Diversification in a Three Factor World. I simply think it's 3 of the best pages of investment reading anyone can find anywhere. And I think i...
by Random Walker
Fri May 06, 2016 8:06 pm
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 3 — Diversifying Portfolio Equities
Replies: 15
Views: 2387

Re: Classic Bernstein 3 — Diversifying Portfolio Equities

Jainin, I'm overwhelmingly taxable and have pretty highly torqued portfolio. I'm in accumulation phase so I rebalance with new money. Haven't seen any problems with taxes yet. In decumulation, would rebalance with withdrawals. I have tax managed versions of value funds and use core funds to start of...
by Random Walker
Fri May 06, 2016 5:44 pm
Forum: Investing - Theory, News & General
Topic: Multi-Factor Investing - Can You Help Interpret/Explain These Data Tables?
Replies: 24
Views: 1549

Re: Multi-Factor Investing - Can You Help Interpret/Explain These Data Tables?

Afan, Yes they are risk factors. But they are unique and independent risk factors. Doesn't it make sense to diversify across different risks than place all bets on just one? And this is especially true if one increases the bond allocation to keep expected return constant. Galeno, Although I'm a fan ...
by Random Walker
Fri May 06, 2016 5:33 pm
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 3 — Diversifying Portfolio Equities
Replies: 15
Views: 2387

Re: Classic Bernstein 3 — Diversifying Portfolio Equities

Simple gift, Ya I'm a huge fan of that chart. It basically summarizes the whole essay, and the essay basically summarizes his whole book :-). Note 2 asset classes generally beat 1, and 3 beat 2. I'm sure that additional asset classes have decreasing marginal benefit as the number of asset classes go...
by Random Walker
Fri May 06, 2016 10:31 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 3 — Diversifying Portfolio Equities
Replies: 15
Views: 2387

Re: Classic Bernstein 3 — Diversifying Portfolio Equities

A portfolio's annualized return will always fall short of the weighted average annual return of portfolio components due to volatility. Dampening portfolio volatility by mixing weakly or non correlated assets makes a portfolio more efficient by bringing the compounded (annualized) return closer to t...
by Random Walker
Fri May 06, 2016 10:23 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 42
Views: 5631

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

Long Invest, I agree with you on all counts. Where we disagree perhaps is on our philosophy about purpose of bonds in a portfolio. I heavily lean towards taking all my risk on the equity side. I think it's more efficient to take the equity type risk on the equity side of the portfolio. I use bonds p...
by Random Walker
Fri May 06, 2016 10:12 am
Forum: Investing - Theory, News & General
Topic: Multi-Factor Investing - Can You Help Interpret/Explain These Data Tables?
Replies: 24
Views: 1549

Re: Multi-Factor Investing - Can You Help Interpret/Explain These Data Tables?

JMK, It is not only that small and value represent increased risk, it is also that they represent unique, weakly or non correlated, risks different from the market. Look at a graph showing the returns of TSM and S&P 500. They virtually overlap; the total stock market is effectively a large growt...
by Random Walker
Thu May 05, 2016 8:31 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 42
Views: 5631

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

Long invest,
Agree, concentrated regarding term risk
Concentration of quality risk irrelevant since the bond is riskless

Dave
by Random Walker
Thu May 05, 2016 8:26 am
Forum: Investing - Theory, News & General
Topic: Why does DFA not offer a market neutral fund?
Replies: 16
Views: 1229

Re: Why does DFA not offer a market neutral fund?

Larry,
Thanks for straightening me out on the relative persistence of the premiums. Funny that you answered the question the way you did. I figured another book had to be coming soon and had been pondering asking you what you had in store. Thanks for the preview.

Dave
by Random Walker
Thu May 05, 2016 7:33 am
Forum: Investing - Theory, News & General
Topic: Why does DFA not offer a market neutral fund?
Replies: 16
Views: 1229

Re: Why does DFA not offer a market neutral fund?

I believe I've read that the value premium is more consistent than the equity premium, so it's worthwhile going for it. Moreover it's uncorrelated with equity premium making it an outstanding portfolio component.

Dave
by Random Walker
Thu May 05, 2016 7:30 am
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 42
Views: 5631

Re: Classic Bernstein 2 — Choosing Portfolio Bond Duration

"Concentration risk" is not relevant with regard to treasuries since they are considered riskless. I guess you could consider intermediate term concentrated with regard to term risk.

Dave
by Random Walker
Wed May 04, 2016 9:06 pm
Forum: Investing - Theory, News & General
Topic: Classic Bernstein 2 — Choosing Portfolio Bond Duration
Replies: 42
Views: 5631

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: 11
Views: 673

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: 11
Views: 673

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: 5156

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: 5156

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: 3458

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: 1611

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: 1154

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: 1154

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: 2247

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: 849

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: 849

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: 7724

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: 5417

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: 7724

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: 7724

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: 2254

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: 2719

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...

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