Search found 1361 matches

by Random Walker
Wed Jan 18, 2017 12:51 pm
Forum: Investing - Theory, News & General
Topic: Using "worst case" portfolio results to help determine asset allocation - yea or nay?
Replies: 18
Views: 1205

Re: Using "worst case" portfolio results to help determine asset allocation - yea or nay?

I think for the case of making necessary assumptions in determining AA, I would assume equities can drop 50% at any given time and that bonds would at least hold stable under those circumstances. Larry has made an excellent recommendation that I wholeheartedly agree with. When pondering asset alloca...
by Random Walker
Wed Jan 18, 2017 10:20 am
Forum: Investing - Theory, News & General
Topic: Using "worst case" portfolio results to help determine asset allocation - yea or nay?
Replies: 18
Views: 1205

Re: Using "worst case" portfolio results to help determine asset allocation - yea or nay?

I think you are thinking very correctly. I believe you need to assume the equity portion of your portfolio will experience one or two 50% drops in your investing lifetime. I started investing in 1996 and felt the pain in 2000-2002 and 2008-2009. Rick Ferri has a paper where he describes taking clien...
by Random Walker
Tue Jan 17, 2017 9:07 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1129
Views: 151967

Re: QSPIX - thoughts on interesting fund

Homer J,
I think most folks interested in these alternatives would not call it a free lunch. They'd call it a portfolio addition that should improve the Sharpe ratio or bring compounded portfolio return closer to average annual return of portfolio components.

Dave
by Random Walker
Tue Jan 17, 2017 8:49 pm
Forum: Investing - Theory, News & General
Topic: Deciding on types of bonds is harder than stocks!
Replies: 14
Views: 1526

Re: Deciding on types of bonds is harder than stocks!

I really like the concept of taking the risk on the equity side and limiting the bonds to highest quality and short to intermediate term. Very hard to argue with 50% Treasuries 50% TIPS in a tax deferred account. In taxable, highest quality Munis with likely some CDs at the short end of the spectrum...
by Random Walker
Sun Jan 15, 2017 11:37 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1129
Views: 151967

Re: QSPIX - thoughts on interesting fund

Lieutenant.Columbo, And FWIW, I'm starting to lean in your RT6 direction. It seems to me that market beta tends to dominate portfolio risk and it is very worthwhile to try to keep expected return of a portfolio constant but decrease the portion of expected return due to market beta and increase the ...
by Random Walker
Sun Jan 15, 2017 11:31 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1129
Views: 151967

Re: QSPIX - thoughts on interesting fund

Lieutenant.Columbo, No, I think you are correct. The bonds are the real safety net. I don't think diversifying across factors can supplant bonds for safety. Risk stories for size, value, beta, ? Profitability, do involve risk. Behavioral stories for value, momentum, profitability, have the potential...
by Random Walker
Sun Jan 15, 2017 6:51 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1129
Views: 151967

Re: QSPIX - thoughts on interesting fund

Tar Heel,
I'm 54, but not really sure if I might be forced into retirement earlier than I'd like

Dave
by Random Walker
Sun Jan 15, 2017 12:07 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1129
Views: 151967

Re: QSPIX - thoughts on interesting fund

Lieutenant.Columbo, Actually I've increased my QSPIX allocation to 9% of total portfolio. The market has done so well over last 7-8 years that I really have felt the need to take some risk off the table, but I think I have a bit of a gambling personality. Or perhaps I'm just an asset class junkie. I...
by Random Walker
Sat Jan 14, 2017 9:13 pm
Forum: Investing - Theory, News & General
Topic: Liquidity risk/funding risk and are they rewarded
Replies: 13
Views: 772

Re: Liquidity risk/funding risk and are they rewarded

Seems like many types of asset classes might offer a liquidity premium. Over time though, seems competition would result in these assets becoming more "investable" as more competitors offer more products and fees come down. Is it fair to say that these illiquid investments would see a one ...
by Random Walker
Fri Jan 13, 2017 10:27 am
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 110
Views: 6537

Re: Factor-Diversified Portfolio

Larry has a list of funds near the end of his most recent book. I think there are funds directly available to the public in the list.

Dave
by Random Walker
Sun Jan 08, 2017 5:06 pm
Forum: Investing - Theory, News & General
Topic: 300,000 value in 5 years
Replies: 13
Views: 1471

Re: 300,000 value in 5 years

Lack_ey,
Didn't understand everything you wrote, but I agree:-)

Dave
by Random Walker
Sun Jan 08, 2017 4:56 pm
Forum: Investing - Theory, News & General
Topic: 300,000 value in 5 years
Replies: 13
Views: 1471

Re: 300,000 value in 5 years

Best estimate of future interest rate is current rate I believe. 300,000(1+0.028) ^5= 344,418

Dave
by Random Walker
Sun Jan 08, 2017 11:05 am
Forum: Investing - Theory, News & General
Topic: Value investing: you must pay for your lunch -- sometimes a lot.
Replies: 52
Views: 5803

Re: Value investing: you must pay for your lunch -- sometimes a lot.

Hi LT, Obviously I'm not Larry, but I'll take a crack at your question anyways. SV is more risky than the market. It also has higher expected return. The answer to your question is really a function of how much you allow the extreme SV tilt to result in decrease of overall equity allocation. You can...
by Random Walker
Fri Jan 06, 2017 11:50 pm
Forum: Investing - Theory, News & General
Topic: When thinking about diversification it's dispersion of returns that matters
Replies: 4
Views: 765

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

Hi Larry, I understand that a more efficient portfolio will have the same mean return, but narrower dispersion of returns and less fat tails. I also think about volatility drag: the difference between average return and annualized return. Is it correct to also view a more efficient portfolio as one ...
by Random Walker
Wed Jan 04, 2017 11:04 am
Forum: Investing - Theory, News & General
Topic: "Academic Research Doesn't Always Make Grade in Real World"
Replies: 47
Views: 3744

Re: "Academic Research Doesn't Always Make Grade in Real World"

Azanon, I would say the size premium is a risk story. I would say the value premium is a strong risk story, but also has a behavioral component. Momentum I believe is entirely behavioral. Profitability some say is a risk story, but it's sort of a tenuous one. I think it's mostly behavioral too. Vola...
by Random Walker
Wed Jan 04, 2017 9:57 am
Forum: Investing - Theory, News & General
Topic: "Academic Research Doesn't Always Make Grade in Real World"
Replies: 47
Views: 3744

Re: "Academic Research Doesn't Always Make Grade in Real World"

Azanon, As you know some of the tilts are risk based, and some are behavioral. Like you, I have more faith in the risk based ones. But human behavior can be pretty darn persistent as well. That being said, with regard to the increased risks of factor tilts, it's not just taking on more risk. It's ta...
by Random Walker
Tue Jan 03, 2017 12:10 pm
Forum: Investing - Theory, News & General
Topic: Value investing: you must pay for your lunch -- sometimes a lot.
Replies: 52
Views: 5803

Re: Value investing: you must pay for your lunch -- sometimes a lot.

Nspirius, Perhaps you are right for this specific time period with these specific funds. But the general concept holds that weakly/ non/ negatively correlated assets improve portfolio efficiency. The greater the loading on HmL and SmB, the better the diversifier effect on a TSM centered portfolio. T...
by Random Walker
Mon Jan 02, 2017 6:12 pm
Forum: Investing - Theory, News & General
Topic: Value investing: you must pay for your lunch -- sometimes a lot.
Replies: 52
Views: 5803

Re: Value investing: you must pay for your lunch -- sometimes a lot.

Nspirius, Your point is well taken. Nonetheless, a couple standard criticisms apply. It's just one relatively short time period. The Vanguard Value index most likely is not all that valuey. Also, when I look closely at the graphs, there is a period when the TSM did better and a period where the Valu...
by Random Walker
Mon Jan 02, 2017 1:00 pm
Forum: Investing - Theory, News & General
Topic: Value investing: you must pay for your lunch -- sometimes a lot.
Replies: 52
Views: 5803

Re: Value investing: you must pay for your lunch -- sometimes a lot.

Matto, TSM is basically a large growth index. Because of the nature of market cap weighting, TSM is dominated by large growth. So the correlation of TSM to LG is very very high. The value factor is basically uncorrelated with market factor. Of course how much any one value fund correlates with TSM w...
by Random Walker
Mon Jan 02, 2017 12:07 am
Forum: Investing - Theory, News & General
Topic: Value investing: you must pay for your lunch -- sometimes a lot.
Replies: 52
Views: 5803

Re: Value investing: you must pay for your lunch -- sometimes a lot.

Taylor, I think your post misses one very important point. If two funds each individually have the same annualized return, but they are less than perfectly correlated, then there is a diversification benefit to owning both. I would bet the 50/50 mix of TSM and Value Index performed better than eithe...
by Random Walker
Sun Jan 01, 2017 3:01 pm
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 77
Views: 4629

Re: Do you think about volatility drag on your portfolio?

Found an excuse to give this thread a bump. Someone this weekend drew our attention to a new investing website by Jason Zweig. It's humbledollar.com. Was perusing the site. And he has a post on the same issue. http://www.humbledollar.com/money-guide/annualized-vs-cumulative-returns/ http://www.humbl...
by Random Walker
Sat Dec 31, 2016 12:43 pm
Forum: Investing - Theory, News & General
Topic: Bernstein-"To Make Money They Didn't Need".....and Pascal's Wager
Replies: 187
Views: 18473

Re: Bernstein-"To Make Money They Didn't Need".....and Pascal's Wager

Larry, Regarding LENDX and SRRIX, can you explain why you wouldn't use these in your taxable account as well. I believe you have said that your taxable account is dominated by munis. Even though LENDX and SRRIX are tax inefficient, if the alternative is munis, wouldn't the after tax return still be ...
by Random Walker
Sat Dec 31, 2016 10:53 am
Forum: Investing - Theory, News & General
Topic: DFA vs Vanguard (I know, I know)
Replies: 34
Views: 4180

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

Lieutenant .Columbo, I can think of one answer to your question. Assume you want to tilt to SV and you have two fund alternatives. One fund is less expensive, less small, less valuey. The other fund is a bit more expensive, smaller, more valuey. To get the same factor exposure, you will need more of...
by Random Walker
Fri Dec 30, 2016 5:00 pm
Forum: Investing - Theory, News & General
Topic: Tax Loss Harvesting - Is it worth it?
Replies: 85
Views: 5260

Re: Tax Loss Harvesting - Is it worth it?

From reading the Berkin et al papers on this site, I believe TLH done right can yield 0.5-0.7% per year. TLH needs to be done on an individual lot basis (HIFO I believe) and done throughout the year. FWIW, it was TLH that helped me decide to go the advisor route. I felt that over time TLH would just...
by Random Walker
Thu Dec 29, 2016 12:36 pm
Forum: Investing - Theory, News & General
Topic: Ownership of international stock during wars
Replies: 25
Views: 2071

Re: Ownership of international stock during wars

I recommend reading a great book: Wealth, Wisdom, & War by Barton Biggs. The book is about 3/4 WW II history and 1/4 stock market history. The book looks at the behavior of the various markets around the world as the war progressed. The major thesis of the book is that the various stock markets ...
by Random Walker
Wed Dec 28, 2016 10:58 am
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 152
Views: 15509

Re: How Much To Tilt To Small Value?

Larry,
Do I recall correctly that you consider ISV an even better diversifier than EM? Thanks,

Dave
by Random Walker
Tue Dec 27, 2016 12:06 pm
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 152
Views: 15509

Re: How Much To Tilt To Small Value?

Hi Larry, A couple of DFA questions on the international side. For taxable accounts, do you still recommend the World Ex US Core fund for starters and then add Int LV and SV to taste? Or do you just use TM LV and ISV for most clients? Would you ever use EMV in taxable over EM Core? Would you recomme...
by Random Walker
Fri Dec 23, 2016 12:15 pm
Forum: Investing - Theory, News & General
Topic: Slice & Dicers Will Like Nov Update of Ken French Data
Replies: 2
Views: 402

Slice & Dicers Will Like Nov Update of Ken French Data

Just looked at the November update of the Ken French data library. After what seems like forever not seeing much benefit to tilting, looks like recent November data is big for size and value. It had big effect on the 3 month and 12 month results. For November Rm-Rf 4.86, SmB 5.69, HmL 8.44 For last ...
by Random Walker
Thu Dec 22, 2016 9:02 am
Forum: Investing - Theory, News & General
Topic: Is rebalacing only about risk?
Replies: 60
Views: 3053

Re: Is rebalacing only about risk?

Rebalancing is overwhelmingly about risk control. It does tend to force the investor to sell high and buy low, but that does not guarantee higher overall return. On average over the long term, the investor is selling higher expected return stocks to buy lower expected return bonds. Or the rebalancer...
by Random Walker
Tue Dec 20, 2016 3:48 pm
Forum: Investing - Theory, News & General
Topic: ??? about the Three-Factor Model from Larry's book
Replies: 4
Views: 308

Re: ??? about the Three-Factor Model from Larry's book

Davidkw,

Market premium = return on equities - return on 1 month T Bills

Note that the size and value premia are long/short portfolios. So the market exposure cancels out and HmL and SmB have no net market exposure.

Dave
by Random Walker
Sun Dec 18, 2016 11:04 am
Forum: Investing - Theory, News & General
Topic: 100% Stocks, Huh? May I Suggest You Read This Thread
Replies: 55
Views: 7289

Re: 100% Stocks, Huh? May I Suggest You Read This Thread

I think these results show something that I've posted about several times before; volatility is a huge drag on the compounded return of a portfolio. Diversifying across asset classes with low (or negative) correlations improves portfolio efficiency dramatically. People look at standard deviations an...
by Random Walker
Sun Dec 18, 2016 10:33 am
Forum: Investing - Theory, News & General
Topic: Portfolio Construction using factor Funds
Replies: 3
Views: 352

Re: Portfolio Construction using factor Funds

I would say that core funds are the best way to start: some factor exposure, rebalance with other people's money. But if you aren't going to go the DFA route, I'd say this. Don't look purely at expense ratio, instead look at cost per unit factor exposure. Here's the reason. The mainstay of your port...
by Random Walker
Sat Dec 17, 2016 3:25 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe's New Book is Available Now!
Replies: 155
Views: 16671

Re: Larry Swedroe's New Book is Available Now!

Question about the charts in the book. When the charts look at the "odds of under performance", they are talking under performance relative to what? Thanks,

Dave
by Random Walker
Wed Dec 14, 2016 9:21 am
Forum: Investing - Theory, News & General
Topic: Why risk slicing and dicing at all
Replies: 52
Views: 4426

Re: Why risk slicing and dicing at all

Alchemist, If all you look at is backtesting to evaluate factor investing, then I would agree with you. But investing is about looking forward, putting odds in your favor, sticking to a plan. A HUGE part of sticking to a plan is having a rational risk based or behavioral belief in the factor one is ...
by Random Walker
Wed Dec 14, 2016 9:10 am
Forum: Investing - Theory, News & General
Topic: Why risk slicing and dicing at all
Replies: 52
Views: 4426

Re: Why risk slicing and dicing at all

I highly recommend Larry's newest book. TSMers are making one big bet on a single factor, market beta. It's possible to diversify one's bets across multiple factors (at a price of course): market, size, value, momentum, profitability. In fact, the SHORTER one's time horizon, the more important it li...
by Random Walker
Sun Dec 11, 2016 12:30 pm
Forum: Investing - Theory, News & General
Topic: What is a good balance between US and international stocks?
Replies: 6
Views: 709

Re: What is a good balance between US and international stocks?

The world market cap weighting US/Int is about 50/50, so that is a good starting point. Reasons to weight more heavily to US include tracking error regret (not a very good reason), US investing cheaper and I believe more tax efficient. Reasons to weight more heavily to Int include currently higher e...
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: 859

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: 1143

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: 1042

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: 961

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: 2910

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: 2197

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: 2910

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: 2910

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: 2910

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: 2910

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: 1089

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: 1089

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: 2918

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: 2918

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 ...

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