Search found 7768 matches

by richard
Wed Feb 18, 2015 5:46 pm
Forum: Investing - Theory, News & General
Topic: Calculating TIPS duration?
Replies: 6
Views: 2764

Re: Calculating TIPS duration?

Doc wrote:What I do now is to take advantage of the bond ladder "tool" at Vanguard. I create a ladder with the TIPS being replaced with the closest "nominal". I try to use a low coupon nominal and shorter rather than longer maturity if I can't get an exact match. Vanguard calculates all the data for me with no effort as long as the market is open. I only need to expend any effort if I buy or sell one of the bonds. (I do keep the actual TIPS in the ladder but with a zero quantity for reference purposes.)
That's a nice tool. It even seems to work after hours.
by richard
Wed Feb 18, 2015 8:11 am
Forum: Investing - Theory, News & General
Topic: Calculating TIPS duration?
Replies: 6
Views: 2764

Re: Calculating TIPS duration?

The prior thread you referenced contains a lot of good information concerning the relationship between TIPS coupon rates and duration. That's why I referenced it :D I particularly like Doc's observation that changes in future inflation rates have a disproportionate impact on TIPS duration because of their unusually low coupon rates. My take is that lower rate bonds have longer durations, all things equal. With positive inflation, TIPS have lower quoted rates than nominals. Think of how zero coupon bonds behave when trying to determine which estimate you choose to follow. Also, take a look at how long term low coupon TIPS behaved in 2013, when interest rates rose substantially while inflation actually declined. Jan 2028 tip, 1.75 coupon: Ja...
by richard
Wed Feb 18, 2015 6:24 am
Forum: Personal Consumer Issues
Topic: A Special Message From Social Security
Replies: 68
Views: 12994

Re: A Special Message From Social Security--NOT!

1) Don't click on links in emails.

2) govdelivery.com is a legitimate company.
by richard
Wed Feb 18, 2015 5:54 am
Forum: Investing - Theory, News & General
Topic: Calculating TIPS duration?
Replies: 6
Views: 2764

Calculating TIPS duration?

I'm trying to calculate the duration of some individual TIPS I own. The purpose of the exercise is to make sure the average duration of my total bond portfolio is within a range I find acceptable. I'm looking for a method that's approximately correct. As an example, I own some of the 2% Jan 2026, currently trading at about 115.2 and 0.5% 1) Use Excel's mduration function (Macauley modified duration), with a settlement date of today. result = 9.9% 2) Use Excel's mduration function on a nominal treasury with a low coupon and similar maturity, for example, the 2% Feb 2025. result = 9% 3) Look at how this TIPS reacted to a change in rates. About a year ago, it was trading at 113.2 and 0.766% - price changed +1.96 and yield changed -0.266%, the ...
by richard
Tue Feb 17, 2015 12:41 pm
Forum: Investing - Theory, News & General
Topic: Why Active Management Fell Off a Cliff
Replies: 6
Views: 2348

Why Active Management Fell Off a Cliff

As you are likely well aware by now, 2014 was the worst year for actively managed mutual fund performance in three decades. Less than 20% of stock-picking managers were able to exceed the returns of their benchmarks last year and, in some categories, the number was closer to 10%. How on earth could things have gotten so bad?
More importantly, is it secular or cyclical? Permanent or fixable? There is some evidence that last year was an anomaly and some evidence that the decline of active management is inexorable. Below, I will solve the mystery behind how this happened and I’ll let you decide whether or not things will change.
http://thereformedbroker.com/2015/02/17 ... rmanently/
by richard
Fri Feb 13, 2015 9:14 am
Forum: Investing - Theory, News & General
Topic: Seeking alpha is flawed. Ex-ante alpha must be 0.
Replies: 19
Views: 3618

Re: Seeking alpha is flawed. Ex-ante alpha must be 0.

Some investors (perhaps non BHs) calculate ex-post alpha using asset pricing models such as CAPM, 3-factor, 4-factor, etc. What's the objective? 1. If the model is correct, then ex-ante alpha for any security is 0. There's no alpha to seek. 2. If the model is wrong, then one is using a wrong model to estimate alpha. Flawed alpha. 3. Or, is it strictly for evaluating past investment performance and not for seeking alpha? Can you explain why one measures alpha? When you run a CAPM, 3-factor, etc. model, you're running it on historic data. The model allows you to determine exposure to the relevant factor or factors over the relevant time period and to determine if there was any alpha under the model. The models themselves say nothing about th...
by richard
Fri Feb 13, 2015 4:37 am
Forum: Investing - Theory, News & General
Topic: Tolerance for "rebalancing risk" in retirement
Replies: 29
Views: 3331

Re: Tolerance for "rebalancing risk" in retirement

Buying equities at a discount during a recession sounds like a great way to double your money when the market recovers. If I was in retirement I would be happy to sell 65% bonds so long as I had enough fixed income to last an extended bear of 5-7 years. "when the market recovers" implies a higher degree of certainty in an adequate recovery than may be warranted, as does the "extended bear of 5-7 years". The problem is that the market may not recover as quickly or as completely as is hoped. We don't have enough useful historical data to have a high degree of confidence in these things and there's no reason to believe them from first principles. They seem contrary to the idea that the equity premium is a reward for risk. ...
by richard
Thu Feb 12, 2015 1:31 pm
Forum: Investing - Theory, News & General
Topic: No "Value Premium" in real mutual funds
Replies: 32
Views: 5234

Re: No "Value Premium" in real mutual funds

....It is highly likely there are types of risk that are not measured by standard deviation.... My working hypothesis is that risk is risk, and that all honest measures of risk are highly correlated and any one of them is a decent proxy for all the others. If risk is two (or more) dimensional this cannot be true. Think of it like latitude and longitude. How far north you are tells you nothing about how far east you are. If you then say okay lets use distance from Greenwich (a function of both latitude and longitude) you find you have no information on direction. If different people care about two measures in different ways there is no way to reduce it to a single measure. The mean variance framework cannot capture non-linearities. For exam...
by richard
Thu Feb 12, 2015 9:26 am
Forum: Investing - Theory, News & General
Topic: The Future of Global Interest Rates — Trending Lower?
Replies: 19
Views: 5348

Re: The Future of Global Interest Rates — Trending Lower?

market timer wrote:<>I do believe central banks can choose inflation rates. As a Neo-Fisherian<>
A bit off-topic so I'll just link to a post "let’s blow the neo-Fisherite model right out of the water" http://www.themoneyillusion.com/?p=26671
by richard
Thu Feb 12, 2015 5:55 am
Forum: Investing - Theory, News & General
Topic: The Future of Global Interest Rates — Trending Lower?
Replies: 19
Views: 5348

Re: The Future of Global Interest Rates — Trending Lower?

2. Differences in nominal interest rates across countries are largely a function of expected inflation. The argument would be stronger if you used real rates, as this reflects demand for capital (you might want to argue demographics explain inflation, but that's a different story). While not all of these countries issue inflation-linked bonds, I suspect the correlation with demographics is much weaker among those countries where information on real rates is available. Do you have evidence differences are a function of expected inflation? How are you measuring expected inflation for countries without inflation-linked bonds? I'm just using the following identity: Nominal rate = real rate + expected inflation. For countries that don't issue i...
by richard
Wed Feb 11, 2015 8:58 am
Forum: Investing - Theory, News & General
Topic: Passive Investing Makes Even More Sense In Inefficient Mkts
Replies: 8
Views: 1903

Re: Passive Investing Makes Even More Sense In Inefficient M

A classic paper in this genre is The Inefficient Market Argument for Passive Investing, http://marriottschool.net/emp/SRT/passive.html
by richard
Wed Feb 11, 2015 6:01 am
Forum: Investing - Theory, News & General
Topic: Developed Markets Index Fund has lower QDI
Replies: 6
Views: 1214

Re: Developed Markets Index Fund has lower QDI

I continue not to understand how Vanguard could have changed such a fundamental attribute of a fund (tax management) without the approval of holders. We invested in TMI precisely for the tax management and now have a fund with a higher yield and lower QDI without any corresponding benefit.
by richard
Wed Feb 11, 2015 5:49 am
Forum: Investing - Theory, News & General
Topic: The Future of Global Interest Rates — Trending Lower?
Replies: 19
Views: 5348

Re: The Future of Global Interest Rates — Trending Lower?

2. Differences in nominal interest rates across countries are largely a function of expected inflation. The argument would be stronger if you used real rates, as this reflects demand for capital (you might want to argue demographics explain inflation, but that's a different story). While not all of these countries issue inflation-linked bonds, I suspect the correlation with demographics is much weaker among those countries where information on real rates is available. Do you have evidence differences are a function of expected inflation? How are you measuring expected inflation for countries without inflation-linked bonds? 3. Most of the correlation appears to come from comparing a few "top-left" EM countries (India, Indonesia, M...
by richard
Tue Feb 10, 2015 11:58 am
Forum: Personal Investments
Topic: What does it mean to buy or sell a stock?
Replies: 26
Views: 3164

Re: What does it mean to buy or sell a stock?

[ Pricing is a function of supply and demand, but it's not the number of buyers and sellers. Consider the market for milk, as a random example. There are a lot more people who want to buy milk then there are sellers of milk. The price can fluctuate over time even if the number of buyers and sellers remain constant. Equity markets are not fundamentally different. Certainly there's a fundamental difference. Milk sellers can increase or decrease the amount of milk they wish to produce based on demand. On the other hand, my comments assume that, as in most instances, there are a fixed number of shares for any particular equity/CUSIP. Issuers don't open or close the spigot of shares based on marketplace demands, "rights" offerings and...
by richard
Tue Feb 10, 2015 8:04 am
Forum: Investing - Theory, News & General
Topic: Emerging markets bonds better than US high yield bonds?
Replies: 28
Views: 5107

Re: Emerging markets bonds better than US high yield bonds?

Efficient market advocates of diversification would point out that if a security was not useful for someone (e.g., the average or representative investor) at its current price, then it's price would drop until its value to a portfolio was high enough that it was worth buying.

The utility of this argument depends on the extent to which markets are efficient and the marginal benefit from the security in question.
by richard
Tue Feb 10, 2015 7:56 am
Forum: Personal Investments
Topic: What does it mean to buy or sell a stock?
Replies: 26
Views: 3164

Re: What does it mean to buy or sell a stock?

skepticalobserver wrote:Equities increase in value when there are more buyers than sellers; they decline in value when sellers out number buyers.<>
Pricing is a function of supply and demand, but it's not the number of buyers and sellers.

Consider the market for milk, as a random example. There are a lot more people who want to buy milk then there are sellers of milk. The price can fluctuate over time even if the number of buyers and sellers remain constant. Equity markets are not fundamentally different.
by richard
Mon Feb 09, 2015 2:41 pm
Forum: Personal Consumer Issues
Topic: Google two step verification & overseas travel
Replies: 10
Views: 2112

Re: Google two step verification & overseas travel

I use the app. I've never had a problem.

I've also printed out codes. The one time I used a code, it worked fine.
by richard
Mon Feb 09, 2015 10:55 am
Forum: Investing - Theory, News & General
Topic: When 60/40 just isn't appropriate
Replies: 182
Views: 34978

Re: When 60/40 just isn't appropriate

nisiprius wrote:Rick, I would really like to know the origins of "60/40." It was a "traditional" allocation long before Peter L. Bernstein's paper, and incidentally I do not agree that his paper presents any real rationale for 60/40. He asks the obvious question and then doesn't answer it!<>
I believe the origins are that it's a round number which approximated the overall composition of the market (i.e., relative market caps) in the early days of modern writing about asset allocation.

Note the prevalence of presenting allocation choices in 20 pp increments (20/80, 40/60, etc.). 40/60 was too low and 80/20 was too high, and 50/50 doesn't fit in the 20 pp sequence, therefore 60/40.
by richard
Sat Feb 07, 2015 6:02 am
Forum: Investing - Theory, News & General
Topic: Next decade outlook from Vanguard CEO
Replies: 17
Views: 3376

Re: Next decade outlook from Vanguard CEO

sanfran2015 wrote:<>For historical context, stocks have returned an average of 10% per year from 1926 to 2014<>
sanfran2015 wrote:Thanks Lack_ey. Both documents are quite insightful. I wonder if several years from now, folks will look back at 2009-2014 as a once in a lifetime historic bull-run.
You might also wonder if folks will regard 1926-2014 as a period of unusually high returns, not to be repeated in their lifetimes.
by richard
Wed Feb 04, 2015 2:33 pm
Forum: Investing - Theory, News & General
Topic: "how to measure risk?"
Replies: 35
Views: 3998

Re: "how to measure risk?"

We barely have 90 years of more or less reliable market data. An investing lifetime is in excess of 30 years for the vast majority. That means we have three independent data points. Hardly a good basis for predicting the future with a high degree of confidence. 10 year treasuries recently hit their all time high price, low yield. Plainly this was impossible, as it never happened before. Japan's equity markets that have been in the doldrums for a very long time. Society and capitalism seem to be functioning nonetheless. In fact, Japan has very low unemployment (well under US and Europe) and a high standard of living. Capitalism does not imply a rising equity market. The relation between risk and expected return is much closer to a principle ...
by richard
Wed Feb 04, 2015 1:04 pm
Forum: Investing - Theory, News & General
Topic: "how to measure risk?"
Replies: 35
Views: 3998

Re: "how to measure risk?"

Two portfolio risks: shallow (volatility) mitigated by fixed income and deep (inflation)j mitigated by equities and TIPS.
There have been a few posts to this effect.

Where does (1) equities drop by a large amount and stay there or (2) equities fail to rise while dividends fall, fit in? Neither case is really volatility (certainly not the second) and neither is necessarily due to inflation and neither is impossible.
by richard
Wed Feb 04, 2015 9:38 am
Forum: Investing - Theory, News & General
Topic: Vanguard survey: what should they do differently?
Replies: 72
Views: 8070

Re: Vanguard survey: what should they do differently?

More tax managed funds.

Instead, they're moving in the opposite direction, removing the tax-management from tax-managed international. Worse, they did it without consulting holders.
by richard
Wed Feb 04, 2015 9:08 am
Forum: Investing - Theory, News & General
Topic: "how to measure risk?"
Replies: 35
Views: 3998

Re: "how to measure risk?"

There are many statistics, some of which are very simplified measures (standard deviation and its variants, such as Sharpe ratio), some of which are sophisticated (multi-factor models which endeavor to measure risk and return). Most are backward looking, such as the most US stocks have lost in any one year period over the past 90 or so years.

A prominent finance expert has said risk is the chance of your portfolio doing badly in bad times. This is a definition, not a quantification. It may well be the case that there is not good generally applicable number representing risk.

However, none of these measures are helpful if they're not meaningful to you. It really comes down to what is a risk for you.
by richard
Wed Feb 04, 2015 6:31 am
Forum: Personal Consumer Issues
Topic: time to replace my router?
Replies: 45
Views: 10917

Re: time to replace my router?

Sorry to post and disappear. I got inundated with work shortly after I posted my question last night. To answer questions, yes, I do have a Macbook and the Airport Extreme sounds like a good choice, but will it also work well for my daughter and visitors who have non Apple (i.e., Windows) PCs? <> From thewirecutter (mentioned above and a very reliable source): "Even though the Airport Extreme was easy to set up and comes with a few Apple-exclusive features, the router’s high price, limited feature loadout compared to most other routers, and the fact that it doesn’t play very nicely with Windows computers makes it a poor value for the majority of users (Apple-enthusiasts included)." http://thewirecutter.com/reviews/best-wi-fi-rout...
by richard
Wed Feb 04, 2015 5:56 am
Forum: Investing - Theory, News & General
Topic: Are TIPS the ultimate inflation hedge?
Replies: 27
Views: 4290

Re: Are TIPS the ultimate inflation hedge?

Vanguard TIPS v intermediate treasuries
Image
by richard
Wed Feb 04, 2015 5:45 am
Forum: Investing - Theory, News & General
Topic: Are TIPS the ultimate inflation hedge?
Replies: 27
Views: 4290

Re: Are TIPS the ultimate inflation hedge?

There are inflation derivatives that are pure inflation hedges. They do not seem to be available to retail investors and are not very liquid compared to TIPS.
by richard
Wed Feb 04, 2015 5:40 am
Forum: Investing - Theory, News & General
Topic: Asness and Bogle on investment strategy, pensions
Replies: 4
Views: 1481

Re: Asness and Bogle on investment strategy, pensions

Nice video. My favorites:

Asness at 6:00 - the sum of all portfolios (the market portfolio) is always on the efficient frontier, always the starting point, and if anyone tries to beat it someone else loses (beating it is a zero sum game).

Bogle at 7:45 - today's interest rate coupon is the best representation of future bond returns, 91% correlation. Asness agrees at 9:15.

Asness at 13:00 - any deviation from the market index (including value investing) is active management.
by richard
Mon Feb 02, 2015 3:58 pm
Forum: Personal Finance (Not Investing)
Topic: Estate planning - splitting assets and testamentary trusts
Replies: 4
Views: 1143

Re: Estate planning - splitting assets and testamentary trus

craveonewave wrote:IANYL or theirs, but let's forget answering the question you posed.

Instead let's think about a 90 year old doing Medicaid planning, because there's a lookback period of 5 years with Medicaid for transfers/conveyances. She may be in a unique position, health or otherwise. But anyways.<>
As I understand it, there's a 5 year lookback if you're funding a trust with your own assets, but not if you are left a trust in a will by a third party (including a spouse). That's why they would have to retitle assets, so they would not be funding their own trusts.
by richard
Mon Feb 02, 2015 3:23 pm
Forum: Personal Finance (Not Investing)
Topic: Estate planning - splitting assets and testamentary trusts
Replies: 4
Views: 1143

Estate planning - splitting assets and testamentary trusts

Some relatives are redoing their wills. They are a couple, each approximately 90 years old. They'd like to know how much of a hassle it would be to implement their lawyer's recommendation. The lawyer recommends that they retitle their assets so that approximately half would be owned by each of them (at present almost everything is jointly owned) and have their wills provide that the surviving spouse would inherit in trust. The idea is that if the surviving spouse needs long-term care, such as a nursing home, she would only have to spend "her" assets (i.e., those not in trust) before becoming eligible for Medicaid. This would only be needed for the wife, the husband has coverage for long-term care (I'm not sure why they'd split ass...
by richard
Sun Feb 01, 2015 2:01 pm
Forum: Investing - Theory, News & General
Topic: Are there skilled investors and managers?
Replies: 25
Views: 3357

Re: Are there skilled investors and managers?

pkcrafter wrote:You can't say there are skilled managers. You can only say there are some managers with good past records. You know how luck works. When you decide to invest in one with a good record, it disappears. :happy

Paul
You can't say there are skilled managers. You can't say that no managers have skill.

I can say I have no ability to choose skilled managers. I can also say that skilled managers capture essentially all of the benefits of their skill through fees, leaving not much for their investors. In addition, trying to pick skilled managers risks picking unskilled and ending up worse off. Doesn't seem worth trying to find them.
by richard
Sun Feb 01, 2015 1:58 pm
Forum: Investing - Theory, News & General
Topic: Are there skilled investors and managers?
Replies: 25
Views: 3357

Re: Are there skilled investors and managers?

Here's a thread on a Fama-French paper that appears to have found skill. viewtopic.php?f=10&t=155692
by richard
Sun Feb 01, 2015 8:00 am
Forum: Personal Finance (Not Investing)
Topic: Need SS calculator for early retirees
Replies: 5
Views: 1139

Re: Need SS calculator for early retirees

RMD3819 wrote:I am using the estimator on the SS website which pulls from my history.
When I use the estimator it asks for last year's earnings (on the screen after login). If I enter 0, it calculates based on 0 until I start collecting (FRA, 70 or 62).

The AnyPIA gets the same results, but with much more work.
by richard
Sun Feb 01, 2015 7:16 am
Forum: Personal Finance (Not Investing)
Topic: Need SS calculator for early retirees
Replies: 5
Views: 1139

Re: Need SS calculator for early retirees

What SS calculators are you using? Try entering 0 as your last year's income.
by richard
Fri Jan 30, 2015 8:43 pm
Forum: Investing - Theory, News & General
Topic: Is it time to give-up on TIPS?
Replies: 161
Views: 36176

Re: Is it time to give-up on TIPS?

grok87 wrote:
richard wrote:
grok87 wrote:30 year tips real yield now at 0.485%. At this point I am stopping buying new 30 year tips. Still holding onto the ones I've got. If the real yield gets close to 0 I will be selling
I was just noticing that 10 year TIPS was yielding approximately 0% and the 30 year approximately 0.5% and was considering selling if the trend continues. OTOH, short term nominal bonds are not exactly high yield instruments.
7 year pen fed cds @ 1.75%?
I'm old enough to remember a time when 1.75% wasn't considered a high yield instrument :shock:
by richard
Fri Jan 30, 2015 1:06 pm
Forum: Investing - Theory, News & General
Topic: The missing value premium- a 10 year global lookback
Replies: 57
Views: 6534

Re: The missing value premium- a 10 year global lookback

<snip> Just because a factor exists, doesn't mean you'll live long enough to see it. But to assume it doesn't exist is to assume market participants can consistently/persistently to turn the laws of capitalism on their head. Apply your same logic to the equity risk premium, what do you see? Exactly what law of capitalism is being turned on its head? Stocks as a risk story compared to bonds is much more compelling than value as a risk story compared to growth, if you believe in the relation between risk and hoped for returns. OK, explain why K-Mart (pre-bankruptcy) should have the same cost of capital as Wal-Mart? This is the equivalent of saying FICO scores don't matter with human borrowers... You haven't listed the law of capitalism being...
by richard
Fri Jan 30, 2015 12:48 pm
Forum: Investing - Theory, News & General
Topic: Is it time to give-up on TIPS?
Replies: 161
Views: 36176

Re: Is it time to give-up on TIPS?

nobsinvestor wrote:Why do Bogleheads love TIPS so much? I don't get it. The fed tries its best to control inflation (is it not their mandate?) and we haven't seen much unexpected inflation in decades.

Why not just hold Total Bond Market or Intermediate-Term Munis? Won't those, over the long run, keep up with inflation anyways? I don't get the obsession with TIPS. I blame David Swensen and his book :D
If inflation is as implied by the TIPS spread, you wouldn't do much better investing in nominal treasuries.

TBM and munis are somewhat higher risk, although there may not be a practical difference, at least not absent a financial crisis during which you are obligated to sell.
by richard
Fri Jan 30, 2015 12:45 pm
Forum: Investing - Theory, News & General
Topic: Is it time to give-up on TIPS?
Replies: 161
Views: 36176

Re: Is it time to give-up on TIPS?

grok87 wrote:30 year tips real yield now at 0.485%. At this point I am stopping buying new 30 year tips. Still holding onto the ones I've got. If the real yield gets close to 0 I will be selling
I was just noticing that 10 year TIPS was yielding approximately 0% and the 30 year approximately 0.5% and was considering selling if the trend continues. OTOH, short term nominal bonds are not exactly high yield instruments.
by richard
Fri Jan 30, 2015 12:38 pm
Forum: Investing - Theory, News & General
Topic: Deleted
Replies: 3
Views: 699

Re: German vs US 10 year yields - help me understand?

Recent thread on this subject: viewtopic.php?f=10&t=156308

"Eurozone inflation is low to negative, and the Euro has cratered against the dollar. If an investor expected those trends to continue"
It does not seem to be the case that the market expects both of these trends to continue.

"countries that are clearly worse credit risks than the US - Italy, Spain - have 10 year yields that are lower than the US."
The market apparently expects that the ECB will backstop these countries, as it has said it would, essentially eliminating credit risk.
by richard
Fri Jan 30, 2015 12:10 pm
Forum: Personal Finance (Not Investing)
Topic: I just filed a Restrictive App at the SS office
Replies: 39
Views: 13998

Re: I just filed a Restrictive App at the SS office

I had thought that for one spouse to file and suspend and the other spouse to file a restrictive app to collect spousal benefits, both had to be at FRA. Is this not true?
by richard
Fri Jan 30, 2015 10:45 am
Forum: Investing - Theory, News & General
Topic: Wiki comments requested: The importance of asset allocation
Replies: 208
Views: 28835

Re: Wiki comments requested: The importance of asset allocat

So here's a shorter, simpler, crisper version: "Asset allocation is one of the more important decisions investors make. Selection of individual securities is less significant than the overall allocation to stocks, bonds, and cash." Ok, but from the second part of LadyGeek's original query, can you support this with a citation from a reliable source? That's at the source of the point of contention between several wiki editors, as we want to make sure it is both clear and verifiable This is why I continue to believe that ranking asset allocation over security selection is a mistake. There are many sources and interpretations on both sides. In addition, I don't see any good reason for characterizing asset allocation as more importan...
by richard
Fri Jan 30, 2015 10:41 am
Forum: Investing - Theory, News & General
Topic: Wiki comments requested: The importance of asset allocation
Replies: 208
Views: 28835

Re: Wiki comments requested: The importance of asset allocat

Asset allocation is one of the most important decisions that investors can make. William F. Sharpe writes "It is widely agreed that asset allocation accounts for a large part of the variability in the return on a typical investor's portfolio." This is basically a non sequitur . So you are getting to a citation via a non sequitur . Not a good move. The proportion of variability does not determine the importance of a decision. How much control does one actually have over variability by virtue of some decision making process? Aspects of asset allocation like diversification are important. And the risk/return trade-off is somewhat predictable so that can be an important decision (at least at the extremes). By variability Sharpe appea...
by richard
Fri Jan 30, 2015 9:53 am
Forum: Personal Consumer Issues
Topic: Disputing A Fraudulent Credit Card Charge
Replies: 18
Views: 2895

Re: Disputing A Fraudulent Credit Card Charge

DonM17 wrote:<>if they can't figure out that this is a fraud just by the fact that it was not shipped to your home address - somebody at the credit card company is not doing their job.<>
I've ordered many things online as gifts and had them shipped directly to the recipient. That an item is not shipped to your home address is hardly proof of fraud.

Speak to a supervisor and file a written dispute.
by richard
Fri Jan 30, 2015 9:08 am
Forum: Investing - Theory, News & General
Topic: Initial SEC yield and subsequent 5yr and 10yr returns
Replies: 207
Views: 25805

Re: Initial SEC yield and subsequent 5yr and 10yr returns

I should have written average annualized returns. Sorry about that.

I'm just trying to figure out if the issue is purely wording or not.

Here is my calculation of the annual return on Vanguard's 500 index fund admiral:

Code: Select all

12/31/2013   -170.36
 3/20/2014      0.785
 6/19/2014      0.815
 9/18/2014      0.883
12/16/2014      1.034
12/31/2014    189.89
Vanguard reported 13.64%. I get 13.633% using Excel's xirr formula. 12/31 numbers are prices, the other numbers are dividends and their record dates.

Is this how Kevin and Doc would calculate annual returns?
by richard
Fri Jan 30, 2015 8:23 am
Forum: Investing - Theory, News & General
Topic: Meaning of EMH
Replies: 6
Views: 1394

Re: Meaning of EMH

There are many threads suggesting the EMH is disproved by Buffett, Renaissance, various fund managers, etc., yet no one has anything clear that EMH includes that no one can beat the market, that there's no such thing as investment skill or that the existence of a very successful investment track record is inconsistent with EMH.
by richard
Fri Jan 30, 2015 6:31 am
Forum: Investing - Theory, News & General
Topic: Wiki comments requested: The importance of asset allocation
Replies: 208
Views: 28835

Re: Wiki comments requested: The importance of asset allocat

Another approach to asset allocation, suggested by sscritic, is to set a contribution allocation rather than an asset allocation. For example, set up periodic contributions at 50/50 and go on autopilot.

This is a reasonable approach and likely followed by a very large number. Employer plans tend to provide that employees can set up the allocation of each contribution. Whether to reallocate or rebalance is regarded my many as tinkering.
by richard
Fri Jan 30, 2015 5:54 am
Forum: Investing - Theory, News & General
Topic: The lowest stock allocation you plan to stay with
Replies: 79
Views: 19020

Re: The lowest stock allocation you plan to stay with

I've long been fond of Benjamin Graham's statement to stay between 25/75 and 75/25.

In retirement, don't take unnecessary risk. The exact percentage is less important than ensuring you'll be able to meet your spending needs.
by richard
Fri Jan 30, 2015 5:40 am
Forum: Investing - Theory, News & General
Topic: Wiki comments requested: The importance of asset allocation
Replies: 208
Views: 28835

Re: Wiki comments requested: The importance of asset allocat

^^^ That would be the suggestion by Taylor Larimore, previously posted: LadyGeek: This quote may help: "The first step in assembling an investment portfolio is to decide how to spread your dollars among stock, bond, and cash investments. Spend a lot of time on this decision--it is the most important one you will make." Straight Talk on Investing by Jack Brennan, Vanguard former CEO I'll wait for more comments, but I'm tending to agree. Leeraar also makes a good point. No investing, no money to reach your goal. If you're going with that quote, I'd eliminate or rewrite the last clause (--it is the most important one you will make), given that it's both controversial and unnecessary. It appears that it would be more friendly for new...
by richard
Thu Jan 29, 2015 9:08 pm
Forum: Investing - Theory, News & General
Topic: Wiki comments requested: The importance of asset allocation
Replies: 208
Views: 28835

Re: Wiki comments requested: The importance of asset allocat

richard wrote:Here's a summary of some takes on Brinson, et al, including an Ibottson paper captioned "Does Asset Allocation Policy Explain 40%, 90%, or 100% of Performance?"

http://aatheory.blogspot.com/2007/02/as ... ebate.html
I just noticed the author of that summary.

In any event, why use a controversial statement if it's not necessary?

I agree with clip651 about not cluttering the main text with sources. Keep it simple and readable.