Search found 663 matches

by Ben Mathew
Wed Jul 17, 2019 3:39 pm
Forum: Personal Finance (Not Investing)
Topic: College cost prediction and savings for 5, 3, and newborn
Replies: 101
Views: 5074

Re: College cost prediction and savings for 5, 3, and newborn

There very well could be a revolution in education coming. DS is currently taking a couple summer courses at his expensive private college and because the schedules make his classes overlap, he's taking one as an online course. This has become a near standard at his college, where students can watc...
by Ben Mathew
Tue Jul 16, 2019 7:11 pm
Forum: Personal Finance (Not Investing)
Topic: College cost prediction and savings for 5, 3, and newborn
Replies: 101
Views: 5074

Re: College cost prediction and savings for 5, 3, and newborn

There very well could be a revolution in education coming. DS is currently taking a couple summer courses at his expensive private college and because the schedules make his classes overlap, he's taking one as an online course. This has become a near standard at his college, where students can watc...
by Ben Mathew
Tue Jul 16, 2019 10:32 am
Forum: Personal Investments
Topic: Poor financial advisor performance
Replies: 71
Views: 3866

Re: Poor financial advisor performance

I think I may have misstated my investment behavior in the original post which has led to some wrong perceptions. In the 5 years we’ve been with the FA we have not once asked him to add or drop a fund. He has proposed a few changes over the period which we approved. Historically, I have been in onl...
by Ben Mathew
Tue Jul 16, 2019 10:22 am
Forum: Personal Investments
Topic: Poor financial advisor performance
Replies: 71
Views: 3866

Re: Poor financial advisor performance

I'd think very carefully about leaving your advisor. Being a DIY'er really isn't for everyone. I remember reading (with shock) in Investor's Manifesto by Bill Bernstein when he stated that most people need a financial advisor. I've come around to thinking he may have a point. Talk with your advisor...
by Ben Mathew
Tue Jul 16, 2019 2:08 am
Forum: Personal Investments
Topic: Poor financial advisor performance
Replies: 71
Views: 3866

Re: Poor financial advisor performance

Hi Folks, I am a 62 year old male. I’ve been investing since the mid-1980s. Over that time I have made just about every classic investing mistake possible. At some point I read about John Bogle and the power of indexing. His argument made complete sense to me and I became a convert. Unfortunately, ...
by Ben Mathew
Sat Jul 13, 2019 4:41 pm
Forum: Personal Investments
Topic: my mom is a "financial advisor"
Replies: 66
Views: 7175

Re: my mom is a "financial advisor"

1) 30 years ago there might have been a thousand or more mutual funds to choose from. Just by luck a few of them will perform well enough to beat a comparable index fund. Probably 800 or 900 hundred of them will have disappeared over the years so the few remaining ones will likely look pretty good....
by Ben Mathew
Thu Jul 11, 2019 11:43 am
Forum: Investing - Theory, News & General
Topic: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?
Replies: 63
Views: 4713

Re: Asset Allocation of the Ultra-Wealthy, can I copy their portfolio with index funds?

The wealthy are not necessarily astute investors. There is no need to copy them.
by Ben Mathew
Wed Jul 10, 2019 10:43 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks continue to soar!
Replies: 1317
Views: 125021

Re: S&P 500 hit 3,000 today

The good news is that the price growth is driven mostly by earnings growth, and not excessive valuations. The median P/E ratio in the chart below is 21.13. If we apply that to the latest earnings (Mar 2019), we get a price of 21.13* $134.39 = $2840. So $3,000 does not seem over the top. http://drive...
by Ben Mathew
Tue Jul 09, 2019 2:22 pm
Forum: Investing - Theory, News & General
Topic: Why factor investing isn't working
Replies: 484
Views: 20539

Re: Why factor investing isn't working

Looking at past returns as the sole metric for evaluating strategies is dangerous. If you view stocks as real businesses, there would be no reason to get excited by the fact that a firm that was overpriced yesterday has become even more overpriced today. But that's exactly the mindset that a lot of ...
by Ben Mathew
Tue Jul 09, 2019 12:32 am
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

I think 8 dollars total of dividends would be quite a low estimate no? There are 9 dividends until Dec17, 2021. Each quarterly dividend has been ~1.3 to 1.4 dollars (for an annual dividend yield of ~1.9%). That's about 13 dollars worth of dividends. My spreadsheet reinvests them so they get to abou...
by Ben Mathew
Mon Jul 08, 2019 8:30 pm
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

@Ben, I plugged things into my spreadsheet and I'm getting different numbers. Hopefully, we could check my math here real quick? Price of SPY= 296.65 @Strike 300 Call ask = 27.93 put bid = 29.99 ... If dividends=$0, I'm getting implied interest of .43% @ strike 300 This would imply you invest (296....
by Ben Mathew
Mon Jul 08, 2019 12:25 pm
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

Is there anything else that occurs to you that might explain why the rate would go down as strike price goes up given a reasonable dividend? Maybe something to do with how likely the option would get assigned earlier or something? Perhaps if it's very thinly traded, it would be too difficult to liq...
by Ben Mathew
Mon Jul 08, 2019 11:24 am
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

Are you using current bid/ask quotes for the calculations (not last price, which will be stale)? If so, can you post the bid/ask quotes you got? I think so. Here's where I got them from (LEAPS, Dec 17, 2021): https://finance.yahoo.com/quote/SPY/options?ltr=1&date=1639699200 The 410 call would cost ...
by Ben Mathew
Fri Jul 05, 2019 3:39 pm
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

Are you using current bid/ask quotes for the calculations (not last price, which will be stale)? If so, can you post the bid/ask quotes you got?
by Ben Mathew
Fri Jul 05, 2019 1:46 pm
Forum: Personal Investments
Topic: Noob worried about retiring in 7-10 years! Will I have enough - you decide!
Replies: 32
Views: 3666

Re: Noob worried about retiring in 7-10 years! Will I have enough - you decide!

I think you're modeling this in a confusing and convoluted way. I actually had in mind not only unforeseen stuff, but also some continued savings. Should we continue to save and invest in retirement? I think I assumed that because my money would probably run out if I didn't continue to save. Or mayb...
by Ben Mathew
Fri Jul 05, 2019 9:21 am
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

The implication is that if I wanted to use this strategy, I should pick a strike price that has plenty of options traded in order to minimize the spread cost. Yes, you'd want to go with the strike price that's most thickly traded (smallest bid ask spread), which is generally at strike around curren...
by Ben Mathew
Thu Jul 04, 2019 9:11 am
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

@Ben (or anyone else who might know of course): One question. We agreed that the following are equivalent: - Buy the SPY at market price (say, that's 100) - Sell a put and buy a call, both at strike price of 100 (SPY's market price) and invest in a bond that will grow to be 100 by the time of expir...
by Ben Mathew
Tue Jul 02, 2019 11:31 am
Forum: Investing - Theory, News & General
Topic: Allan Roth: Probabilities, Truth, and Consequences
Replies: 40
Views: 3798

Re: Allan Roth: Probabilities, Truth, and Consequences

It's good to imagine terrible scenarios with equities, but be sure to do so nominal bonds as well. Someone saving $20K per year (real dollars) for 40 years will end up with (a) Stocks @ 5% real return: $2,415,995 (b) Nominal bonds @ 2% real return: $1,208,040 If stocks drop 90% at some point in thos...
by Ben Mathew
Sat Jun 29, 2019 3:39 pm
Forum: Investing - Theory, News & General
Topic: Simplicity (Three Fund) vs. Return (Slightly more complex):
Replies: 45
Views: 3139

Re: Simplicity (Three Fund) vs. Return (Slightly more complex):

Focusing on value vs growth as an example, one of two things will happen over your investing horizon: 1. Growth > Total > Value 2. Value > Total > Growth If you bet on total, you know for sure that you'll come in second. That's not a bad place to be. You don't know what your absolute returns will b...
by Ben Mathew
Sat Jun 29, 2019 1:19 pm
Forum: Investing - Theory, News & General
Topic: Simplicity (Three Fund) vs. Return (Slightly more complex):
Replies: 45
Views: 3139

Re: Simplicity (Three Fund) vs. Return (Slightly more complex):

Focusing on value vs growth as an example, one of two things will happen over your investing horizon: 1. Growth > Total > Value 2. Value > Total > Growth If you bet on total, you know for sure that you'll come in second. That's not a bad place to be. You don't know what your absolute returns will be...
by Ben Mathew
Sun Jun 23, 2019 1:17 pm
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

As to buying high and selling low, this would only occur if I was forced to actually sell these positions right? Yes, but the more leveraged you are, the likely it will happen. Small amounts of leverage might be able to ride out downturns, but the chance is still higher than no leverage. I would al...
by Ben Mathew
Sun Jun 23, 2019 12:26 pm
Forum: Personal Consumer Issues
Topic: what was your worst major purchase? mine is a 2019 mazda3
Replies: 182
Views: 15860

Re: what was your worst major purchase? mine is a 2019 mazda3

A lighthouse! No kidding :oops: Story, please! I was the winning bidder of the Fairport Harbor West Breakwater Lighthouse in Lake County, Ohio. It is located just east of Cleveland on Lake Erie. The government was auctioning off lighthouses that were no longer needed. This was about 8-9 years ago b...
by Ben Mathew
Sat Jun 22, 2019 10:14 pm
Forum: Personal Finance (Not Investing)
Topic: Should I buy a condo in Chicago?
Replies: 52
Views: 5285

Re: Should I buy a condo in Chicago?

I think you're a good candidate for buying. I shared my thoughts on buying vs renting in this thread.
by Ben Mathew
Sat Jun 22, 2019 12:15 pm
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 228
Views: 17735

Re: Lifecycle Investing - Leveraging when young

The reason the authors discourage higher leverage is that it apparently gets very expensive. If I understand the process correctly then: Paying 500 bucks to "borrow" 28200 for 2 months is absurdly expensive. That's an annual interest of 500/28200x6x100%=10.6%. That doesn't even account for the fore...
by Ben Mathew
Sun Jun 16, 2019 7:54 pm
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 7753

Re: What is wrong with AQR?

Ben, the problem I believe is that volatility (market beta) is only one measure of risk and not the only one people care about. Investors also care about skewness and kurtosis (and overpay for assets that have positive skew and excess kurtosis, partly explaining value premium) and also WHEN risks s...
by Ben Mathew
Sun Jun 16, 2019 1:53 pm
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 7753

Re: What is wrong with AQR?

All of that would be captured in the return structure, which in turn would be captured in the market beta. High default risk of SV firms is not a valid reason for the SV premium, because high default risk should be captured as market beta. In other words, a high default risk of SV firms should show...
by Ben Mathew
Sun Jun 16, 2019 1:44 pm
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 7753

Re: What is wrong with AQR?

All of that would be captured in the return structure, which in turn would be captured in the market beta. High default risk of SV firms is not a valid reason for the SV premium, because high default risk should be captured as market beta. In other words, a high default risk of SV firms should show...
by Ben Mathew
Sun Jun 16, 2019 12:08 pm
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 7753

Re: What is wrong with AQR?

Ben CAPM model simply doesn't do a good enough job of explaining return differences, only about 2/3, but 3 factor model explains above 90%. That is because the stocks have different risk characteristics than AVERAGE of market. My factor book provides the various findings demonstrating unique risks,...
by Ben Mathew
Sun Jun 16, 2019 11:17 am
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 7753

Re: What is wrong with AQR?

Ben CAPM model simply doesn't do a good enough job of explaining return differences, only about 2/3, but 3 factor model explains above 90%. That is because the stocks have different risk characteristics than AVERAGE of market. My factor book provides the various findings demonstrating unique risks,...
by Ben Mathew
Sun Jun 16, 2019 10:52 am
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 7753

Re: What is wrong with AQR?

CAPM model simply doesn't do a good enough job of explaining return differences, only about 2/3, but 3 factor model explains above 90%. CAPM provides a solid theoretical explanation for why market beta should provide a premium. Factor models are purely an empirical relationship, with no justificati...
by Ben Mathew
Sun Jun 16, 2019 10:36 am
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 7753

Re: What is wrong with AQR?

The higher EXPECTED returns to SV (which must be true just as it is for market beta, if you believe markets are efficient as they are clearly lot more volatile and expensive to trade and much more volatile earnings and so on) The idea that we can expect small value to have a higher expected return ...
by Ben Mathew
Sat Jun 08, 2019 2:10 pm
Forum: Personal Finance (Not Investing)
Topic: Should I buy more life insurance?
Replies: 25
Views: 1382

Re: Should I buy more life insurance?

The 550K is pretax and since OP is in bay area that income leads to likely 375K or less after tax assuming reasonable deductions. The 3M + 1.75M or 4.75M if OP passes is likely well over 10 years of after tax income. I think taxes need to be considered here. Life insurance is after tax usually, no?...
by Ben Mathew
Sat Jun 08, 2019 1:26 pm
Forum: Investing - Theory, News & General
Topic: are TIPS expensive? or are they cheap?
Replies: 186
Views: 15456

Re: are TIPS expensive? or are they cheap?

But from the perspective of a borrower who is not subject to money illusion, inflation-adjusted bonds should also be more attractive because of the protection against unexpected deflation, and can therefore extract a higher real yield than nominal contracts. Did you mean to state just "unexpected d...
by Ben Mathew
Sat Jun 08, 2019 12:16 pm
Forum: Investing - Theory, News & General
Topic: Market up because of rate cut expectation - why ?
Replies: 21
Views: 2888

Re: Market up because of rate cut expectation - why ?

As other posters have noted, the fact that economy has been slowing is already known before the Fed announcement. So when Fed announces an interest rate cut, there is no new information about the economy. The only new information is about the Fed's likely response. A higher than expected rate cut dr...
by Ben Mathew
Sat Jun 08, 2019 10:18 am
Forum: Investing - Theory, News & General
Topic: are TIPS expensive? or are they cheap?
Replies: 186
Views: 15456

Re: are TIPS expensive? or are they cheap?

<snip> Under the heading "Lower Risk and Lower Expected Returns" he goes on to write: "Given that TIPS have a lower expected return than similar-maturity nominal-return coupon bonds, a question for investors is how to decide if the insurance premium is worth the price paid to hedge the risk of infl...
by Ben Mathew
Sat Jun 08, 2019 9:41 am
Forum: Personal Finance (Not Investing)
Topic: Should I buy more life insurance?
Replies: 25
Views: 1382

Re: Should I buy more life insurance?

With $3M savings + $1.75M in life insurance = $4.75M, your family would not be in bad shape financially if you die. But it would still be lower than if you continued earning $550K for another decade. An extra $2 million for the next 10 years sounds reasonable to me.
by Ben Mathew
Sat Jun 08, 2019 9:26 am
Forum: Investing - Theory, News & General
Topic: [Nominal] Annuities are a bet on future inflation rates and should not be purchased by retirees
Replies: 183
Views: 12970

Re: Annuities are a bet on future inflation rates and should not be purchased by retirees

This from Oblivious Investor, argues that annuities with a fixed COLA actually are actually worse than nominal annuities for most people when there is high inflation: The key point here is that, the higher inflation is over this person’s lifetime, the worse the annuity with the COLA does as compare...
by Ben Mathew
Sat Jun 08, 2019 9:03 am
Forum: Investing - Theory, News & General
Topic: [Nominal] Annuities are a bet on future inflation rates and should not be purchased by retirees
Replies: 183
Views: 12970

Re: Annuities are a bet on future inflation rates and should not be purchased by retirees

Now maybe they are charging too much for the protection but I am not sure anyone can tell you if it is a 1% or 10% chance of high inflation showing up over the next 40 years. We can use TIPS vs nominal treasuries as the benchmark to see if real annuities cost too much. Since TIPS don't cost much mo...
by Ben Mathew
Thu Jun 06, 2019 11:58 am
Forum: Personal Finance (Not Investing)
Topic: Older retirees: Are your expenses lower now than in early retirement?
Replies: 49
Views: 6384

Re: Older retirees: Are your expenses lower now than in early retirement?

It would be useful to know the relative prices of a) thru e). Good point. The implicit assumption I had in mind was that the all policies are available actuarially fair prices. I've now edited the OP to make that assumption explicit. Real annuities are currently more expensive. But I did not want t...
by Ben Mathew
Sat Jun 01, 2019 12:00 pm
Forum: Investing - Theory, News & General
Topic: [Nominal] Annuities are a bet on future inflation rates and should not be purchased by retirees
Replies: 183
Views: 12970

Re: Annuities are a bet on future inflation rates and should not be purchased by retirees

… Given that the expected yield of TIPS isn't significantly less than that of nominal bonds ..., it's not clear to me why most people choose to hold nominal bonds instead of real. TIPS offer free, or almost free, insurance against unexpected inflation. Why take a risk we don't have to? Same with re...
by Ben Mathew
Sat Jun 01, 2019 11:53 am
Forum: Personal Finance (Not Investing)
Topic: Older retirees: Are your expenses lower now than in early retirement?
Replies: 49
Views: 6384

Re: Older retirees: Do you have lower expenses now than you did in early retirement?

(d) a nominal annuity with a constant $ payouts (so real payouts decline with time) but also budget to buy an additional smaller annuity every five years or so to make up for the purchasing power that was lost to inflation. How does that work in real life? How does one explain the process to the "n...
by Ben Mathew
Fri May 31, 2019 1:30 am
Forum: Personal Finance (Not Investing)
Topic: Older retirees: Are your expenses lower now than in early retirement?
Replies: 49
Views: 6384

Re: Older retirees: Do you have lower expenses now than you did in early retirement?

So we are still pretty much at the same expense level now as we were seventeen years ago and that is very fortunate. Thanks for sharing your experience. Did your expense level stay about the same in nominal or real terms? Constant in real terms would be about 42% more dollars today compared to doll...
by Ben Mathew
Fri May 31, 2019 1:22 am
Forum: Personal Finance (Not Investing)
Topic: Older retirees: Are your expenses lower now than in early retirement?
Replies: 49
Views: 6384

Re: Older retirees: Do you have lower expenses now than you did in early retirement?

The Wizard wrote:
Thu May 30, 2019 9:22 pm
For instance, I'm a bit old to re-roof my house again in a while as I did 15 years ago.
Hiring out tasks that are physically hard to do as one ages seems like it would be a big consideration, especially if one doesn't downsize the home. Maid service, yard service, etc.
by Ben Mathew
Fri May 31, 2019 1:18 am
Forum: Personal Finance (Not Investing)
Topic: Older retirees: Are your expenses lower now than in early retirement?
Replies: 49
Views: 6384

Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Sandtrap wrote:
Thu May 30, 2019 11:24 pm
Option (E)
Laddering in Annuities (SPIA) incrementally (perhaps every 5 years) beginning at age ?

j :happy
Isn't this the same as Watty's option (d)? Or am I missing something?
by Ben Mathew
Fri May 31, 2019 1:16 am
Forum: Personal Finance (Not Investing)
Topic: Older retirees: Are your expenses lower now than in early retirement?
Replies: 49
Views: 6384

Re: Older retirees: Do you have lower expenses now than you did in early retirement?

2. Would you recommend that a new retiree (say, age 65) seeking to purchase annuities to reduce longevity risk go with: (a) a nominal annuity with a constant $ payouts (so real payouts decline with time) (b) a nominal annuity with a 2% or 3% COLA to cover expected inflation (so real payouts are con...
by Ben Mathew
Thu May 30, 2019 9:09 pm
Forum: Investing - Theory, News & General
Topic: [Nominal] Annuities are a bet on future inflation rates and should not be purchased by retirees
Replies: 183
Views: 12970

Re: Annuities are a bet on future inflation rates and should not be purchased by retirees

I seriously distrust the sudden "discovery" a few years ago that suggests that spending and needed income decreases through retirement. It's "very conVEEEENient" as the Church Lady used to say. At least one of the studies that was cited explicitly said it did not include out-of-pocket healthcare sp...
by Ben Mathew
Thu May 30, 2019 9:05 pm
Forum: Personal Finance (Not Investing)
Topic: Older retirees: Are your expenses lower now than in early retirement?
Replies: 49
Views: 6384

Older retirees: Are your expenses lower now than in early retirement?

There was a discussion in this thread on annuities about whether we can expect our expenses to decline over time during retirement. This question has come up in other threads too, so I thought it would be useful to get the perspective of older retirees here as to what your experience has been. 1. We...
by Ben Mathew
Thu May 30, 2019 6:54 pm
Forum: Investing - Theory, News & General
Topic: [Nominal] Annuities are a bet on future inflation rates and should not be purchased by retirees
Replies: 183
Views: 12970

Re: Annuities are a bet on future inflation rates and should not be purchased by retirees

Why are "graded" (or "fixed % COLA") being so disparaged here? If one doesn't have a true COLA option, isn't having some regular increase over time still much better than no increase at all? I'm not disparaging fixed COLAs--just agreeing with JackoC that it's a misleading term. No harm if people fu...