Search found 1053 matches

by pdavi21
Thu Jun 20, 2019 11:22 am
Forum: Investing - Theory, News & General
Topic: Exploring SCV diversification with Morningstar category averages, 1968-2018
Replies: 121
Views: 7044

Re: Exploring SCV diversification with Morningstar category averages, 1968-2018

To placate the fanatics, just throw out all of the controversial early 70's data, and use a different argument: LV beat LB SB beat LB SV lost to SB Why is that? It's for two reasons: 1. Randomness 2. Morningstar category averages are unreliable ...but if the reason is number 1 more than number 2, th...
by pdavi21
Wed Jun 19, 2019 11:11 am
Forum: Investing - Theory, News & General
Topic: Exploring SCV diversification with Morningstar category averages, 1968-2018
Replies: 121
Views: 7044

Re: Exploring SCV diversification with Morningstar category averages, 1968-2018

Thanks for this analysis, but here is what I think of the following: My calculations assumed annual rebalancing at the end of every December. One should use a different kind of rebalancing. What kind? Why? The kind that small cap value tilters were strongly advocating for in 1968, obviously. :wink:
by pdavi21
Wed Jun 19, 2019 10:56 am
Forum: Investing - Theory, News & General
Topic: Exploring SCV diversification with Morningstar category averages, 1968-2018
Replies: 121
Views: 7044

Re: Exploring SCV diversification with Morningstar category averages, 1968-2018

Easy. When a tilt sends you to a smaller portion of the market, tilt returns get more random. That doesn't mean small/value premiums don't exist. It more means the guy who could've hypothetically invested that way would've lost money because a somewhat randomly chosen basket of small value stocks (...
by pdavi21
Wed Jun 19, 2019 10:07 am
Forum: Investing - Theory, News & General
Topic: Exploring SCV diversification with Morningstar category averages, 1968-2018
Replies: 121
Views: 7044

Re: Exploring SCV diversification with Morningstar category averages, 1968-2018

Easy. When a tilt sends you to a smaller portion of the market, tilt returns get more random. That doesn't mean small/value premiums don't exist. It more means the guy who could've hypothetically invested that way would've lost money because a somewhat randomly chosen basket of small value stocks (t...
by pdavi21
Thu Jun 13, 2019 9:55 am
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

I get to excited and often exaggerate my claims, but no one can deny that two large value funds track much closer than any two small value funds. It's fact. Track WHAT much closer? If you mean track each other more closely, the only thing that would cause that would be to use improper sampling. If ...
by pdavi21
Thu Jun 13, 2019 9:07 am
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

I am saying HML and SMB (if they exist) do not have enough of an impact on "small value" mutual funds to overcome the random (or misunderstood) performance discrepancy introduced when choosing a very small slice of the market. This is a claim with enough specificity to test, and it has been repeate...
by pdavi21
Wed Jun 12, 2019 4:17 pm
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

Perhaps you can give me two very commonly used small cap value mutual funds or ETFs that have followed different indices over their lifetime and have had nearly identical performance (EDIT: Long term) that adequately distinguishes itself from the total market? Here you go That's not close enough to...
by pdavi21
Wed Jun 12, 2019 3:41 pm
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

I am saying HML and SMB (if they exist) do not have enough of an impact on "small value" mutual funds to overcome the random (or misunderstood) performance discrepancy introduced when choosing a very small slice of the market. This is a claim with enough specificity to test, and it has been repeate...
by pdavi21
Wed Jun 12, 2019 3:10 pm
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

I did not intend to suggest that investing in 450 small companies is the same as investing in one large company. That's why I added the caveat that it would be less risky. You seemed to take offense to that one statement, but my main point was that picking a small sample of the US stock market intr...
by pdavi21
Wed Jun 12, 2019 1:28 pm
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 18735

Re: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run

The problem is that when the evidence becomes compelling enough to change your factor choices, you are no longer staying the course with your initial factor choices (which may take decades to pay off-assuming they will pay off). When the back-testing and justifications come out that say, wait size i...
by pdavi21
Wed Jun 12, 2019 1:06 pm
Forum: Investing - Theory, News & General
Topic: AliBaba
Replies: 178
Views: 22871

Re: AliBaba

Nice work. Now sell it and buy VTI to lock in the gain.
by pdavi21
Wed Jun 12, 2019 12:57 pm
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

The 1-2% is not in reference to market cap but rather the members of the population. The market cap does not come into play. Your backtesting results are not surprising because the sample is not random. The two samples are chosen based on similar criteria. Both indices have market caps between 1.5 ...
by pdavi21
Wed Jun 12, 2019 12:34 pm
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

I think this is pretty far off. The standard deviation of a group of small-cap stocks and a single megacap stock should not be expected to be the same simply because they have the same market capitalization. That fact tells you nothing about what to expect regarding their relative standard deviatio...
by pdavi21
Wed Jun 12, 2019 12:14 pm
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

The standard deviation of total returns for small cap value funds (because they have very low market capitalization) is extremely high. Some inappropriately label this extra risk as boosting expected return. However, it is simply a result of picking a very small slice of the market and is functiona...
by pdavi21
Wed Jun 12, 2019 11:31 am
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

The standard deviation of total returns for small cap value funds (because they have very low market capitalization) is extremely high. Some inappropriately label this extra risk as boosting expected return. However, it is simply a result of picking a very small slice of the market and is functiona...
by pdavi21
Wed Jun 12, 2019 10:54 am
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

Does anyone actually have some sort of defense (academic, logical, or back-testing) indicating that a multi-factor fund is likely to outperform a mixture two factor funds? Has anyone actually studied the factors to determine that the best momentum stocks won't be filtered out by a value screen and t...
by pdavi21
Wed Jun 12, 2019 9:22 am
Forum: Investing - Theory, News & General
Topic: Best Vanguard value factor exposure?
Replies: 42
Views: 2854

Re: Best Vanguard value factor exposure?

Small cap value funds are too small to avoid random performance. You better hope S&P 600 continues to be a good index while Russell 2000 continues to be a bad index. The standard deviation of total returns for small cap value funds (because they have very low market capitalization) is extremely high...
by pdavi21
Wed Jun 12, 2019 8:59 am
Forum: Investing - Theory, News & General
Topic: VFMF (Vanguard Multifactor) == Closet Value Index Fund
Replies: 50
Views: 3922

Re: VFMF (Vanguard Multifactor) == Closet Value Index Fund

Also, you should be multiplying the total returns, not weighted averaging the percentages (assuming performance is 100% factor driven-which it is not). It's because if momentum returned 3%, and value lost 8%, you'd expect momentum stocks with a value filter to return 1.03 x 0.92-1 and not 3% x 50% -...
by pdavi21
Tue Jun 11, 2019 3:29 pm
Forum: Investing - Theory, News & General
Topic: Pay Growth vs Stock Market Returns
Replies: 26
Views: 1756

Re: Pay Growth vs Stock Market Returns

Your pay growth would have to be 4.3% of your total portfolio, not just your salary. So with a $500k stock allocation that was cash instead, you'd need a pay raise of $21,500 to make up for the difference. If you make $60k, that's over a 30% raise.
by pdavi21
Tue Jun 11, 2019 3:05 pm
Forum: Investing - Theory, News & General
Topic: Slice and dice for bonds
Replies: 49
Views: 3448

Re: Slice and dice for bonds

Slicing and dicing bonds has less impact than slicing and dicing stocks. Neither are (EDIT: unquestionably and universally) logical, and neither are guaranteed to make more money than not doing them. EDIT: Good point willthrill. There can be logical implementations of any slice and dice strategy tha...
by pdavi21
Tue Jun 11, 2019 2:58 pm
Forum: Investing - Theory, News & General
Topic: Help me understand "inflation risk" for bond funds
Replies: 24
Views: 822

Re: Help me understand "inflation risk" for bond funds

Bonds eventually have a higher nominal return in response to inflation too, assuming you kept on rolling into new bonds (with the higher nominal rates investors demanded). The OP's co-variance is referencing a shorter term interval while others are suggesting a longer term interval. However, I would...
by pdavi21
Tue Jun 11, 2019 2:50 pm
Forum: Investing - Theory, News & General
Topic: Help me understand "inflation risk" for bond funds
Replies: 24
Views: 822

Re: Help me understand "inflation risk" for bond funds

I do not think it is as simple as saying stocks simply return more on average and thus make up for it. There are fundamental economic reasons that equities will be driven up to eventually offset unexpected inflation. That's still too simple because some portions of the stock market favor inflation,...
by pdavi21
Tue Jun 11, 2019 2:28 pm
Forum: Investing - Theory, News & General
Topic: Help me understand "inflation risk" for bond funds
Replies: 24
Views: 822

Re: Help me understand "inflation risk" for bond funds

"Bonds are subject to inflation risk" is just a questionable way of stating that they have lower expected returns. Sounds like you are dbr are saying about the same thing. If I'm understanding right, "inflation risk" just a way of saing "inflation happens". Inflation doesn't "eat more" from bonds t...
by pdavi21
Tue Jun 11, 2019 2:22 pm
Forum: Investing - Theory, News & General
Topic: Help me understand "inflation risk" for bond funds
Replies: 24
Views: 822

Re: Help me understand "inflation risk" for bond funds

"Bonds are subject to inflation risk" is just a questionable way of stating that they have lower expected returns. At first I didn't read your whole comment, but then after reading it, I would say you are probably spot on. Whichever goes up more when inflation goes up has less inflation risk. The co...
by pdavi21
Tue Jun 11, 2019 1:59 pm
Forum: Investing - Theory, News & General
Topic: VFMF (Vanguard Multifactor) == Closet Value Index Fund
Replies: 50
Views: 3922

Re: VFMF (Vanguard Multifactor) == Closet Value Index Fund

I've been following the performance (I don't own the fund) of VFMF (Vanguard Multifactor). And trying to figure out why the terrible performance, given that Momentum and Quality have been doing ok. I wouldn't necessarily take that as a given. Since the inception of VFMF, the monthly factor premiums...
by pdavi21
Tue Jun 11, 2019 12:31 pm
Forum: Investing - Theory, News & General
Topic: The logical fallacy behind "Bonds Are For Safety"
Replies: 248
Views: 16016

Re: The logical fallacy behind "Bonds Are For Safety"

Here I'm just going to observe that there is an internal inconsistency with conceding that your definition of "asset class" is subjective (and therefore arbitrary) and accusing someone else of using the wrong definition of "asset class". Here I think the argument veers into the dangerous territory ...
by pdavi21
Tue Jun 11, 2019 12:24 pm
Forum: Investing - Theory, News & General
Topic: VFMF (Vanguard Multifactor) == Closet Value Index Fund
Replies: 50
Views: 3922

Re: VFMF (Vanguard Multifactor) == Closet Value Index Fund

There are risks that tend to be higher with a tilted fund: 1. Index Choice 2. Factor Methodology 3. Expenses There could, theoretically be two multi-factor funds that have vastly differing performance over longer term intervals because one decided to hold a few high climbing stocks while one decided...
by pdavi21
Tue Jun 11, 2019 12:05 pm
Forum: Investing - Theory, News & General
Topic: The logical fallacy behind "Bonds Are For Safety"
Replies: 248
Views: 16016

Re: The logical fallacy behind "Bonds Are For Safety"

No. The fallacy is your "asset classes" aren't asset classes. I can't figure out what to make of this statement in general. I certainly don't see how it relates to the notion that an asset’s risk and return should not be assessed by itself, but by how it contributes to a portfolio’s overall risk an...
by pdavi21
Tue Jun 11, 2019 11:38 am
Forum: Investing - Theory, News & General
Topic: The logical fallacy behind "Bonds Are For Safety"
Replies: 248
Views: 16016

Re: The logical fallacy behind "Bonds Are For Safety"

No. The fallacy is your "asset classes" aren't asset classes. I can't figure out what to make of this statement in general. I certainly don't see how it relates to the notion that an asset’s risk and return should not be assessed by itself, but by how it contributes to a portfolio’s overall risk an...
by pdavi21
Tue Jun 11, 2019 11:10 am
Forum: Investing - Theory, News & General
Topic: The logical fallacy behind "Bonds Are For Safety"
Replies: 248
Views: 16016

Re: The logical fallacy behind "Bonds Are For Safety"

You think that the core tenet of modern portfolio theory (and most financial economics) is based on a fallacy? Really? No. The fallacy is your "asset classes" aren't asset classes. They are tiny pieces of asset classes with capitalizations often smaller than one large company. The fallacy is also t...
by pdavi21
Tue Jun 11, 2019 9:18 am
Forum: Investing - Theory, News & General
Topic: The logical fallacy behind "Bonds Are For Safety"
Replies: 248
Views: 16016

Re: The logical fallacy behind "Bonds Are For Safety"

You are over-thinking this. Right. Because we never want to learn something new, become too smart, or make decisions that are too well-informed. Come on man you should know you just made the classic strawman fallacy. You keep critizing others of logical fallacies (which is fine really) but don't se...
by pdavi21
Tue Jun 11, 2019 9:11 am
Forum: Personal Finance (Not Investing)
Topic: Paying for rent is throwing away money...myth?
Replies: 302
Views: 19267

Re: Paying for rent is throwing away money...myth?

Paying rent is throwing money away. The myth is that owning house isn't also throwing money away (property tax, repairs, insurance, mortgage interest, etc).
by pdavi21
Tue Jun 11, 2019 9:08 am
Forum: Investing - Theory, News & General
Topic: Best day of the month to invest?
Replies: 41
Views: 4550

Re: Best day of the month to invest?

This is a good way to prove that backtesting is worth almost nothing. The random movements of markets make it look like certain days, weeks, and months were good or bad on average. However, if you add another 100 years of data, the result will be totally different. Pick a random day you are comforta...
by pdavi21
Mon Jun 10, 2019 4:36 pm
Forum: Investing - Theory, News & General
Topic: Index filter false market cap?
Replies: 13
Views: 698

Re: Index filter false market cap?

The short answer is it doesn't matter.
The SP 500 is about 80-85% of the total US stock market and will behave very similarly over time even with the closeted active management.
by pdavi21
Mon Jun 10, 2019 4:20 pm
Forum: Investing - Theory, News & General
Topic: Instead of bonds; why not 100% Low Vol?
Replies: 8
Views: 1624

Re: Instead of bonds; why not 100% Low Vol?

1. A low volatility fund isn't going follow the low volatility factor predictably and the performance of the low volatility funds are likely to diverge over time based on Index/Method/Expenses. 2. I don't think the low volatility factor is statistically significant according to the factor zoo. I thi...
by pdavi21
Mon Jun 10, 2019 3:43 pm
Forum: Investing - Theory, News & General
Topic: The logical fallacy behind "Bonds Are For Safety"
Replies: 248
Views: 16016

Re: The logical fallacy behind "Bonds Are For Safety"

There are many logical fallacies going around these days.
"Bonds are for safety" is one of the less harmful ones.
by pdavi21
Wed May 22, 2019 12:09 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 2508
Views: 190523

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Do you actually want the sources, or just to disagree? I named FINRA, SEC, Morningstar, Vanguard, and Bogleheads.org (check the wiki). Can you name a regulatory authority that has endorsed leveraged/inverse ETFs, or one that has NOT issued a warning to investors? EDIT: If you are an experienced inv...
by pdavi21
Wed May 22, 2019 11:27 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 2508
Views: 190523

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

I just wanted to warn you before to go along this path. The general consensus of regulatory authorities, disinterested parties, and Bogleheads is that leveraged funds are garbage. So understand the risks before you make your choice. Sources? Do you actually want the sources, or just to disagree? I ...
by pdavi21
Wed May 22, 2019 11:05 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 2508
Views: 190523

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Sources? Do you actually want the sources, or just to disagree? I named FINRA, SEC, Morningstar, Vanguard, and Bogleheads.org (check the wiki). Can you name a regulatory authority that has endorsed leveraged/inverse ETFs, or one that has NOT issued a warning to investors? EDIT: If you are an experi...
by pdavi21
Wed May 22, 2019 11:01 am
Forum: Investing - Theory, News & General
Topic: Regression to the Mean - and our money
Replies: 16
Views: 1640

Re: Regression to the Mean - and our money

Reversion to the mean is on the fringe of real vs fake economic theories and has been applied improperly in most cases or used to sell financial products. With a risky asset like stocks, mean reversion is not guaranteed over your lifetime. Positive returns are not even guaranteed. I believe someone ...
by pdavi21
Wed May 22, 2019 10:30 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 2508
Views: 190523

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

I just wanted to warn you before to go along this path. The general consensus of regulatory authorities, disinterested parties, and Bogleheads is that leveraged funds are garbage. So understand the risks before you make your choice. Sources? Do you actually want the sources, or just to disagree? I ...
by pdavi21
Wed May 22, 2019 10:09 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 2508
Views: 190523

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

I just wanted to warn you before to go along this path. The general consensus of regulatory authorities, disinterested parties, and Bogleheads is that leveraged funds are garbage. So understand the risks before you make your choice. Sources? Do you actually want the sources, or just to disagree? I ...
by pdavi21
Wed May 22, 2019 10:05 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Active Mgmt Whiffs On Factors
Replies: 19
Views: 1660

Re: Larry Swedroe: Active Mgmt Whiffs On Factors

The implication for investors is that we cannot rely on a fund’s name or stated objective when seeking specific factor exposures. Also true for the overwhelming majority of passive funds. The definitions of factors are so vague and obscure (even for size and Emerging Markets, occasionally), that ev...
by pdavi21
Wed May 22, 2019 9:26 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 2508
Views: 190523

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Do long term treasuries protect you during a stock market crash because during crashes the Fed lowers interest rates to ease debt burdens and thus old LTTs, which the TMF has, increase in value because they offer higher interest rates? No. The Fed only directly manages the federal funds rate (FFR),...
by pdavi21
Wed May 22, 2019 2:25 am
Forum: Investing - Theory, News & General
Topic: Don't add currency risk on top of equity risk
Replies: 68
Views: 4866

Re: Don't add currency risk on top of equity risk

Many use currency risk as a reason to tilt away from INTL.

There are other reasons to and also reasons to tilt away from US.

I don't think uncompensated currency risk is a big deal because global diversification benefits are free(ish).
Uncompensated risk increase minus free risk reduction.
by pdavi21
Wed May 22, 2019 1:07 am
Forum: Investing - Theory, News & General
Topic: When to trade total international ETFs?
Replies: 8
Views: 626

Re: When to trade total international ETFs?

I would pick an exact time that:
1. You are available for trading withought fail.
2. Volatility is likely to be lower (not in the first or last 30 minutes of the day).
3. Is random.

INTL makes no difference in this case.
by pdavi21
Tue May 21, 2019 6:43 pm
Forum: Investing - Theory, News & General
Topic: Vanguard ETFs, ranked by diversification benefit
Replies: 66
Views: 4612

Re: Vanguard ETFs, ranked by diversification benefit

"Everyone else should pick a bond duration based on their investment horizon and call it a day." +1 The risk that VTI and EDV drop over 30% at the same time is probably higher than the risk that VTI and BND drop 30% at the same time. This is because it is nearly impossible that BND will ever drop 30...
by pdavi21
Tue May 21, 2019 2:41 pm
Forum: Investing - Theory, News & General
Topic: Roth 401k vs. traditional for high income earner
Replies: 24
Views: 1640

Re: Roth 401k vs. traditional for high income earner

No, but it might depending on state tax.
by pdavi21
Tue May 21, 2019 2:28 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Measuring Value In Forecasts
Replies: 40
Views: 2189

Re: Larry Swedroe: Measuring Value In Forecasts

What if someone forecasts that forecasts are not going to be accurate?
Would they start being accurate then just so they could continue being inaccurate?

A little disappointed no one tried averaging the forecasts.
It be interesting if it helps a little or does nothing.
by pdavi21
Tue May 21, 2019 1:37 pm
Forum: Investing - Theory, News & General
Topic: Will Admiral Shares Expense Ratio match ETF in the future
Replies: 15
Views: 951

Re: Will Admiral Shares Expense Ratio match ETF in the future

No, they will not. Not unless they launch a Fleet Admiral class with a higher minimum.