Great and succinct description of how the debates typically go here.Beensabu wrote: ↑Sat Jan 01, 2022 10:43 pm It just depends on where you draw your equity diversification line.
1. companies
2. industries/sectors
3. geographies
4. capitalization
5. style
Just about everyone is on board with 1 and 2.
A lot of people add 3.
Some people skip 3, but add 4 and 5.
Some people do all of them.
People who add 4 tend to add 5, but some people add 5 without 4.
Search found 248 matches
- Sat Jan 01, 2022 10:46 pm
- Forum: Investing - Theory, News & General
- Topic: How can you believe in [total market] Indexing AND Small-Cap Value at the same time?
- Replies: 165
- Views: 14830
Re: How can you believe in [total market] Indexing AND Small-Cap Value at the same time?
- Sat Jan 01, 2022 10:25 pm
- Forum: Investing - Theory, News & General
- Topic: How can you believe in [total market] Indexing AND Small-Cap Value at the same time?
- Replies: 165
- Views: 14830
Re: How can you believe in [total market] Indexing AND Small-Cap Value at the same time?
True, most aren't, but people like Swedroe are.Apathizer wrote: ↑Sat Jan 01, 2022 10:12 pm
Most of us aren't arguing for that degree of factor tilt. I'm arguing for degree that includes both market and some degree of factor exposure. Expensive, low-profit stocks have low expected returns, so removing or under-weighting them improves expected returns. I'm not advocating removing growth stocks entirely; only those that are low-profit, which most small growth stocks are.
- Sat Jan 01, 2022 10:25 pm
- Forum: Investing - Theory, News & General
- Topic: How can you believe in [total market] Indexing AND Small-Cap Value at the same time?
- Replies: 165
- Views: 14830
Re: How can you believe in Indexing AND Small-Cap Value at the same time?
:twisted: The skewness problem should prevent anyone from tilting 100% towards factors. To elaborate, only a small percentage of all the stocks in the investable universe are responsible for 100% of the markets gains. The rest are duds. If you tilt 100% towards small value without any market cap allocation you are exposing yourself to a massive risk of underperformance thanks to this skewness. My rule of thumb has always been to maintain a 50/50 split between market cap weighting and factor exposure in order to have the best of both worlds. Skewness is a feature of Cap Weighting as well. Diversification is what allows you to capture it. It is. But point being is that with a market cap fund you are guaranteed to own those select few winners...
- Sat Jan 01, 2022 9:54 pm
- Forum: Investing - Theory, News & General
- Topic: How can you believe in [total market] Indexing AND Small-Cap Value at the same time?
- Replies: 165
- Views: 14830
Re: How can you believe in Indexing AND Small-Cap Value at the same time?
:twisted: The skewness problem should prevent anyone from tilting 100% towards factors. To elaborate, only a small percentage of all the stocks in the investable universe are responsible for 100% of the markets gains. The rest are duds. If you tilt 100% towards small value without any market cap allocation you are exposing yourself to a massive risk of underperformance thanks to this skewness. My rule of thumb has always been to maintain a 50/50 split between market cap weighting and factor exposure in order to have the best of both worlds. Skewness is a feature of Cap Weighting as well. Diversification is what allows you to capture it. It is. But point being is that with a market cap fund you are guaranteed to own those select few winners...
- Sat Jan 01, 2022 8:47 pm
- Forum: Investing - Theory, News & General
- Topic: How can you believe in [total market] Indexing AND Small-Cap Value at the same time?
- Replies: 165
- Views: 14830
Re: How can you believe in Indexing AND Small-Cap Value at the same time?
The skewness problem should prevent anyone from tilting 100% towards factors.
To elaborate, only a small percentage of all the stocks in the investable universe are responsible for 100% of the markets gains. The rest are duds. If you tilt 100% towards small value without any market cap allocation you are exposing yourself to a massive risk of underperformance thanks to this skewness.
My rule of thumb has always been to maintain a 50/50 split between market cap weighting and factor exposure in order to have the best of both worlds.
To elaborate, only a small percentage of all the stocks in the investable universe are responsible for 100% of the markets gains. The rest are duds. If you tilt 100% towards small value without any market cap allocation you are exposing yourself to a massive risk of underperformance thanks to this skewness.
My rule of thumb has always been to maintain a 50/50 split between market cap weighting and factor exposure in order to have the best of both worlds.
- Thu Jun 17, 2021 3:18 pm
- Forum: Investing - Theory, News & General
- Topic: Which version of The Intelligent Investor is best?
- Replies: 8
- Views: 4702
Re: Which version of The Intelligent Investor is best?
- Wed Jun 09, 2021 6:08 pm
- Forum: Investing - Theory, News & General
- Topic: Gold [buying/storing]
- Replies: 208
- Views: 21214
- Tue Jun 08, 2021 4:14 pm
- Forum: Investing - Theory, News & General
- Topic: Gold [buying/storing]
- Replies: 208
- Views: 21214
Re: Gold [buying/storing]
https://www.forbes.com/sites/greatspeculations/2018/08/06/wait-until-you-see-the-price-of-gold-in-venezuela-right-now/?sh=3de9cf685fd2 Even more undeniable evidence of the obvious regarding gold's utility. This, again, is on top of the thousands of years of economic history to which there still has not been a halfway decent rebuttal by anyone. demand for the yellow metal rises when inflation threatens to destroy a nation’s currency—as it’s doing right now in Venezuela. A Venezuelan family that had the prudence to store some of its wealth in gold would be in a much better position today to survive or escape President Maduro’s corrupt, far-left regime. In extreme cases like this, gold could literally help save lives. Such was the case follow...
- Tue Jun 08, 2021 1:50 pm
- Forum: Investing - Theory, News & General
- Topic: Gold [buying/storing]
- Replies: 208
- Views: 21214
Re: Gold [buying/storing]
Yeah, and also saying that gold investors here are claiming that gold is "low risk" when that's not what they're doing is moving the goalposts.
The GB, PP, risk parity type investors here specifically seek out and use gold for its high volatility. So I don't know what's that's about, but it's definitely not true.
The GB, PP, risk parity type investors here specifically seek out and use gold for its high volatility. So I don't know what's that's about, but it's definitely not true.
- Thu Jun 03, 2021 7:11 am
- Forum: Investing - Theory, News & General
- Topic: Should I Add Gold ETF to My Portfolio?
- Replies: 36
- Views: 4264
Re: Should I Add Gold ETF to My Portfolio?
Definitely a good move. I agree with the notion that 10% is really what you want at a minimum to, as you put it, "move the needle." There's a school of thought that says that investing internationally is sufficient to protect oneself against the threats you've mentioned. I disagree personally, especially since that easy access to international capital has also increased the degree of synchronization in the fortunes of the various major economies. Furthermore, countries around the world seem to do nothing but weaken their own currencies in an attempt to stimulate exports. I don't want to hold that instead of gold. 10% gold. Do it. :sharebeer What is your personal target allocation for gold? (Does it happen to be 10%?) And how did ...
- Tue Jun 01, 2021 10:33 pm
- Forum: Investing - Theory, News & General
- Topic: Gold [buying/storing]
- Replies: 208
- Views: 21214
Re: Gold [buying/storing]
Yup, Canadian here. Funny coincidence, as I was just looking at Wealthsimple's platform and noted that too. I think it's a step in the right direction, but I think the amount of gold is insufficient, and the fees are still a tad too high. 50 bps fee on top of the underlying ETF fees, and only 3% gold. For someone who really doesn't want to get into the weeds of finance and wants to set it and forget it, there are worse options though. Overall, I still prefer the direct holding of gold above all other options. I mean, the ETFs are great for cheap rebalancing, but the real robustness of gold comes from its lack of counterparty and infrastructure risk. Bitcoin has been intriguing to me as a complement to precious metals. However, Bitcoin also...
- Tue Jun 01, 2021 1:54 pm
- Forum: Investing - Theory, News & General
- Topic: Gold [buying/storing]
- Replies: 208
- Views: 21214
Re: Gold [buying/storing]
Wonderful plan, OP. Gold really is unparalleled as a form of inflation/disaster protection. No other asset has preserved wealth so effectively for literally thousands of years. 5% I think is a sensible amount, as it does not overwhelm you income generating assets. You can always recalibrate at a later time if you wish. I personally think that the best policy in regards to gold holding and storage is diversification. Some ETF shares, some coins at home, and perhaps some in your safe deposit box will give you reasonable assurance that no single event will devastate all three caches. And yes, when you buy at dealers they do indeed mark up the bullion from spot. Competition usually keeps these markups minimal though. If you buy in larger denom...
- Tue Apr 20, 2021 12:56 am
- Forum: Investing - Theory, News & General
- Topic: Is passive investing leading to bigger market inefficiencies?
- Replies: 63
- Views: 6107
Re: Is passive investing leading to bigger market inefficiencies?
In the market for stocks the rise of passive investing might create inefficiencies in the future.
In the market for investment products the rise of passive investing has created (and is continuing to create) greater efficiencies.
In the market for investment products the rise of passive investing has created (and is continuing to create) greater efficiencies.
- Mon Apr 12, 2021 1:56 pm
- Forum: Investing - Theory, News & General
- Topic: Is this the single worst time to be a passive investor
- Replies: 73
- Views: 11088
Re: Is this the single worst time to be a passive investor
If it's the worst time to be a passive investor then by definition it must be an even WORSE time to be an active investor.
- Fri Apr 09, 2021 7:26 pm
- Forum: Personal Investments
- Topic: Simplicity over Small Cap Value
- Replies: 85
- Views: 8851
Re: Simplicity over Small Cap Value
It's funny how behavioral problems can manifest themselves so differently in different individuals.
For me, not tilting would engender more behavioral problems than tilting would. By tilting I don't have to be worried about which factor will perform the best. I own all of them.
For me, not tilting would engender more behavioral problems than tilting would. By tilting I don't have to be worried about which factor will perform the best. I own all of them.
- Thu Apr 08, 2021 2:05 pm
- Forum: Personal Investments
- Topic: Simplicity over Small Cap Value
- Replies: 85
- Views: 8851
Re: Simplicity over Small Cap Value
Put on a tilt and just forget about it. It can be made almost as simple as a pure market weighted implementation with the addition of just one extra fund. Not exactly a lot of extra complexity.
- Tue Apr 06, 2021 11:53 pm
- Forum: Investing - Theory, News & General
- Topic: TSLA gamed the system - Could Index Funds Be ‘Worse Than Marxism’?
- Replies: 108
- Views: 15888
Re: TSLA gamed the system - Could Index Funds Be ‘Worse Than Marxism’?
The chain of logic in the OP doesn't hold. If the number of shares outstanding goes up then all other things being equal the price will go down.
Also, the index funds won't just automatically buy in the given scenario you've presented. Index funds hold stock in proportion to market cap, not the number of shares outstanding. If the number of shares outstanding increase with a concomitant decrease in price that leads to an equal market cap before and after the issuance, then the index fund will do nothing.
Also, the article about index funds being worse than Marxism because they somehow kill the market's pricing mechanism is just plain silly. Mostly because it's obviously not happening.
Also, the index funds won't just automatically buy in the given scenario you've presented. Index funds hold stock in proportion to market cap, not the number of shares outstanding. If the number of shares outstanding increase with a concomitant decrease in price that leads to an equal market cap before and after the issuance, then the index fund will do nothing.
Also, the article about index funds being worse than Marxism because they somehow kill the market's pricing mechanism is just plain silly. Mostly because it's obviously not happening.
- Fri Apr 02, 2021 2:46 pm
- Forum: Personal Consumer Issues
- Topic: What is the BEST thing you spent money on?
- Replies: 461
- Views: 69269
Re: What is the BEST thing you spent money on?
My college education. Nothing else in my life has even come close.
- Tue Mar 30, 2021 3:04 am
- Forum: Investing - Theory, News & General
- Topic: What’s the correct diversification for high inflation?
- Replies: 217
- Views: 22773
Re: What’s the correct diversification for hyperinflation?
Bet on gold and Bitcoin. They're the best options, hands down.
Anything "paper" or otherwise someone else's promise will be worthless in such a scenario.
Anything "paper" or otherwise someone else's promise will be worthless in such a scenario.
- Fri Mar 26, 2021 1:33 pm
- Forum: Personal Consumer Issues
- Topic: High ranked Univ with liberal arts major or lower ranked school with STEM major
- Replies: 121
- Views: 10811
Re: High ranked Univ with liberal arts major or lower ranked school with STEM major
100% go for the lower ranked school with STEM major. That is the substance over style choice. The higher ranked school with the liberal arts major is akin to a style over substance choice.
I'd rather study engineering at Penn State than study liberal arts at Stanford, if I were given the binary choice.
I'd rather study engineering at Penn State than study liberal arts at Stanford, if I were given the binary choice.
- Fri Mar 05, 2021 2:32 am
- Forum: Investing - Theory, News & General
- Topic: "Investing Isn't Engineering"
- Replies: 27
- Views: 4115
Re: "Investing Isn't Engineering"
"Investing isn't engineering."
Some folks on this forum didn't get the memo.
I'd say that investment savvy is rather Uncorrelated to one's use of abstruse and arcane logic.
Some folks on this forum didn't get the memo.
I'd say that investment savvy is rather Uncorrelated to one's use of abstruse and arcane logic.
- Thu Feb 25, 2021 3:42 pm
- Forum: Non-US Investing
- Topic: Why does the Forum recommend International Stocks yet dismiss Gold?
- Replies: 101
- Views: 9083
- Thu Feb 25, 2021 3:25 pm
- Forum: Non-US Investing
- Topic: Why does the Forum recommend International Stocks yet dismiss Gold?
- Replies: 101
- Views: 9083
Re: Why does the Forum recommend International Stocks yet dismiss Gold?
Collapse of the U.S. dollar is inflation.vineviz wrote: ↑Thu Feb 25, 2021 3:12 pmThe first claim is objectively false, and even in theory doesn’t follow from the second sentence. Gold is a better hedge against the collapse of the US dollar than against inflation, although I wonder how useful a gold ETF would be if the US dollar goes “to zero”.
- Thu Feb 25, 2021 2:18 pm
- Forum: Non-US Investing
- Topic: Why does the Forum recommend International Stocks yet dismiss Gold?
- Replies: 101
- Views: 9083
Re: Why does the Forum recommend International Stocks yet dismiss Gold?
The Buffett argument is a bad one. A first year philosophy student could easily poke holes in it.
He presents gold and stocks as a binary choice: either a giant cube or all the productive capacity, etc. That's a logical fallacy called a false dichotomy. As investors we don't have a binary choice. There's an infinite number of gradations between 0% and 100%. There's such a thing as marginal utility. I mean, you know you can hold both gold and stocks, right? One can easily see that adding a modicum of gold to a portfolio tends to improve investor outcomes.
https://en.wikipedia.org/wiki/False_dilemma
Let's take the Buffett argument and throw it in the trash bin where it belongs, please.
He presents gold and stocks as a binary choice: either a giant cube or all the productive capacity, etc. That's a logical fallacy called a false dichotomy. As investors we don't have a binary choice. There's an infinite number of gradations between 0% and 100%. There's such a thing as marginal utility. I mean, you know you can hold both gold and stocks, right? One can easily see that adding a modicum of gold to a portfolio tends to improve investor outcomes.
https://en.wikipedia.org/wiki/False_dilemma
Let's take the Buffett argument and throw it in the trash bin where it belongs, please.
- Thu Feb 25, 2021 2:07 pm
- Forum: Investing - Theory, News & General
- Topic: A timely and equanimous article on gold
- Replies: 80
- Views: 8300
Re: A timely and equanimous article on gold
+1. I would run far away from any person who assumes that these type of things apply to investing. If only it was that easy assuming past data predicts future results the librarians would be the richest people in the World. I am still laughing at the applicably of t-stats to assets which don't follow a normal distrubution. Agreed on that one. There are qualitative aspects to investing that often don't get captured in the discussions here. I do believe that the investment community has been afflicted with "physics envy" as many fields have. The boys at LTCM were over-reliant on mathematics and that was really what blew them up. The qualitative matters a lot. People talk a lot about Buffett's alpha and the famous paper that deconst...
- Wed Feb 24, 2021 4:00 pm
- Forum: Non-US Investing
- Topic: Why does the Forum recommend International Stocks yet dismiss Gold?
- Replies: 101
- Views: 9083
Re: Why does the Forum recommend International Stocks yet dismiss Gold?
- Tue Feb 23, 2021 5:26 pm
- Forum: Investing - Theory, News & General
- Topic: The inflation trade
- Replies: 89
- Views: 9329
Re: The inflation trade
Buy some gold, silver, and Bitcoin and you'll be fine even if the US Dollar goes the way of the Continental. You have no such assurances with TIPS, therefore making them a poor form of inflation protection.
- Sat Feb 06, 2021 12:12 am
- Forum: Investing - Theory, News & General
- Topic: Small Cap Value heads Rejoice !!!
- Replies: 5577
- Views: 618964
Re: Small Cap Value heads Rejoice !!!
Here's an analogy that I've been using for a while. Imagine the entire stock market is represented by a casino. Individual stock pickers are like gamblers who pick a game (stock) to play. A few will win at this, the vast majority will fail miserably. Total market investors are the house. They own every game in the whole casino. The house may lose to a few high rollers here or there, but mathematically, when all of the games are taken in aggregate, the house is all but destined to win. Factor tilters (SCV, etc.) are people who don't want to own the whole house. They only want to own the games in the house that they think will probabilistically generate outsized rewards relative to other games. They might bias towards owning the roulette whe...
- Fri Feb 05, 2021 10:53 pm
- Forum: Investing - Theory, News & General
- Topic: Small Cap Value heads Rejoice !!!
- Replies: 5577
- Views: 618964
Re: Small Cap Value heads Rejoice !!!
Here's an analogy that I've been using for a while. Imagine the entire stock market is represented by a casino. Individual stock pickers are like gamblers who pick a game (stock) to play. A few will win at this, the vast majority will fail miserably. Total market investors are the house. They own every game in the whole casino. The house may lose to a few high rollers here or there, but mathematically, when all of the games are taken in aggregate, the house is all but destined to win. Factor tilters (SCV, etc.) are people who don't want to own the whole house. They only want to own the games in the house that they think will probabilistically generate outsized rewards relative to other games. They might bias towards owning the roulette whe...
- Fri Feb 05, 2021 9:43 pm
- Forum: Investing - Theory, News & General
- Topic: Small Cap Value heads Rejoice !!!
- Replies: 5577
- Views: 618964
Re: Small Cap Value heads Rejoice !!!
Here's an analogy that I've been using for a while. Imagine the entire stock market is represented by a casino. Individual stock pickers are like gamblers who pick a game (stock) to play. A few will win at this, the vast majority will fail miserably. Total market investors are the house. They own every game in the whole casino. The house may lose to a few high rollers here or there, but mathematically, when all of the games are taken in aggregate, the house is all but destined to win. Factor tilters (SCV, etc.) are people who don't want to own the whole house. They only want to own the games in the house that they think will probabilistically generate outsized rewards relative to other games. They might bias towards owning the roulette whee...
- Fri Feb 05, 2021 9:31 pm
- Forum: Investing - Theory, News & General
- Topic: Small Cap Value heads Rejoice !!!
- Replies: 5577
- Views: 618964
- Sun Jan 24, 2021 1:03 pm
- Forum: Investing - Theory, News & General
- Topic: Why isn't every indexer investing in small cap value index funds?
- Replies: 372
- Views: 45747
Re: Why isn't every indexer investing in small cap value index funds?
I agree with the overall post though, just thought that that might be useful. I am coming around to this idea of market cap investing as the ultimate "value investing" play. Warren Buffett and of course Charlie Munger (in that video you posted) have said that one's idea of value must evolve with the times. You can't be ridged about it as the circumstances change. That would be very foolish. The way I see it, there are multiple eras of value, and we are in a new one. The Ben Graham era starting in the 1930s: Value meant buying quantitatively cheap stocks like net-nets. The Phil Fisher era starting in the 1960s: Value meant buying stocks below earning power value. The Fama/French era starting in the 1990s: Value meant buying the ch...
- Sat Jan 23, 2021 9:26 pm
- Forum: Investing - Theory, News & General
- Topic: Why isn't every indexer investing in small cap value index funds?
- Replies: 372
- Views: 45747
Re: Why isn't every indexer investing in small cap value index funds?
The consensus within the factor literature is not as unanimous as many people seem to be implying in this thread. For one thing, if you branch out beyond the Fama/French literature and read some of the material written by critics you start to encounter many problems. Really, consider the following: - Stocks that have fallen precipitously in price tend to enter the value regime, predicting a premium. - However, stocks that have risen precipitously in price tend to enter the positive momentum regime, predicting a premium. - Value stocks are proxies for distress risk, whose increased riskiness predicts a premium. - However, high-quality stocks with good profitability enter the quality regime, predicting a premium. - High beta stocks have grea...
- Thu Jan 21, 2021 4:10 pm
- Forum: Investing - Theory, News & General
- Topic: Why isn't every indexer investing in small cap value index funds?
- Replies: 372
- Views: 45747
Re: Why isn't every indexer investing in small cap value index funds?
Data collected over wide swaths of time and markets has shown the factor model of returns to be superior to one that only consists of market beta, which is all TSM is exposed to (and only what it is exposed to). That is, returns are driven by market beta, the value factor, the size factor, etc. Saying that an investment that is only exposed to one of those factors is 'value' is just plain wrong unless you're using completely different definitions of the term. If you want to use your own private definitions of widely used investing terms, that's fine for you, but it should be called out as such in a public forum. I am fully aware of the factor literature and I used to be a massive factor advocate. And there is no need to "call out"...
- Thu Jan 21, 2021 3:46 pm
- Forum: Investing - Theory, News & General
- Topic: Why isn't every indexer investing in small cap value index funds?
- Replies: 372
- Views: 45747
Re: Why isn't every indexer investing in small cap value index funds?
That's fine by me that's it's not typical. But the logic is perfectly compelling. If you move the concept of "value" up one level from the individual security level to the fund level then you naturally gravitate to plain vanilla market cap funds.willthrill81 wrote: ↑Thu Jan 21, 2021 3:38 pmIf we use anything close to a typical definition of 'value investing', then TSM is most definitely not the 'ultimate form' of it.
And again, the benefit of what we might call this "meta value investing" is assured. It accrues to you every hour of every day of every year. Guaranteed. Just buying cheap stocks? No such guarantee.
- Thu Jan 21, 2021 3:09 pm
- Forum: Investing - Theory, News & General
- Topic: Why isn't every indexer investing in small cap value index funds?
- Replies: 372
- Views: 45747
Re: Why isn't every indexer investing in small cap value index funds?
If you factor tilt you will likely start leading yourself down into an endless rabbit hole. For a variety of reasons I just don't think it's a good idea. The factor literature and body of knowledge is ever evolving. Do you want to bother keeping up with the latest in research and how it's changing? What's the opportunity cost of doing that? How is that materially different from wasting time researching stocks to pick? What happens when you have a perfectly fine-tuned 5 or 6 factor portfolio and Fama/French come out with a new paper that says "do this"? Will you be able to resist tinkering? And how will you react when it contradicts research from AQR? The cognitive overhead of this factor rigmarole can be tremendous. You say to you...
- Sat Jan 16, 2021 12:55 pm
- Forum: Investing - Theory, News & General
- Topic: "A look back at the life of Vanguard's founder"
- Replies: 16
- Views: 1553
Re: "A look back at the life of Vanguard's founder"
Rest in peace. What a great man.
- Thu Jan 14, 2021 1:04 pm
- Forum: Personal Investments
- Topic: Invest in Company Stock at a Discount vs. Index Funds?
- Replies: 31
- Views: 1785
Re: Invest in Company Stock at a Discount vs. Index Funds?
Hi all, I'll be starting a job at a new company next month, and will have the opportunity to invest 10% of my salary in the company stock at a 20% discount in the share price. Currently, I've been investing my savings in a series of index funds with the following allocation: 50% US Equities 25% International Equities 25% US Bonds The performance of the company stock has been relatively flat during the previous several years. Given this scenario, do you think it would be worth it to take advantage of this opportunity (i.e., buy company stock at a 20% discount), or would it make more sense to continue to put that 10% of my salary into the index funds that I'm already investing in? In case it matters, there is a 4-year vesting period on the c...
- Sun Jan 10, 2021 11:58 am
- Forum: Investing - Theory, News & General
- Topic: The Three-Fund Portfolio
- Replies: 3895
- Views: 2424216
Re: The Three-Fund Portfolio
I love the simplicity of the Three-Fund Portfolio. I am currently now invested in a simple Vanguard Balanced Fund. It is a 60/40 allocation that actually has more than three underlying funds, but I think it is still in keeping with the "spirit" of the Three-Fund strategy. If you have a taxable account the all-in-one funds can present a problem. If you ever change your mind and want a different AA the simplest way to do this (and stay in a single fund) is to sell the whole fund and buy another. This can be a big tax hit. If you have the three-fund portfolio you can adjust by selling and buying only (small) parts of the portfolio. This is much less of a tax hit. Another possibility is to sell part of the all-in-one fund and use the...
- Sun Jan 10, 2021 11:29 am
- Forum: Investing - Theory, News & General
- Topic: The Three-Fund Portfolio
- Replies: 3895
- Views: 2424216
Re: The Three-Fund Portfolio
I love the simplicity of the Three-Fund Portfolio. I am currently now invested in a simple Vanguard Balanced Fund. It is a 60/40 allocation that actually has more than three underlying funds, but I think it is still in keeping with the "spirit" of the Three-Fund strategy.
- Thu Nov 26, 2020 7:20 pm
- Forum: Investing - Theory, News & General
- Topic: Look at current PE 10-actionable?
- Replies: 78
- Views: 5210
Re: Look at current PE 10-actionable?
Yes it's actionable. Valuations based on the CAPE 10 can be used to make asset allocation decisions more prudently, at least on the margin. A high CAPE might encourage a more conservative stock allocation. For instance, you might be 50/50 instead of 60/40. Again, this is only on the margin, but it's not unactionable.
- Tue Oct 27, 2020 7:06 pm
- Forum: Personal Investments
- Topic: Is it too late to buy Gold?
- Replies: 67
- Views: 6151
Re: Is it too late to buy Gold?
I'm starting to think that I should buy every type of asset I can, regardless of whether it's "up" or "down" now. That would include gold. I do not know what your intention was, but your statement, implemented properly is what Roy Dalio preaches. Diversification in asset classes, geographically and by currency. He excludes cash and bonds due to the present ultra low interest rate What does "every asset class" mean? Pork bellies? Coal? Soybeans? Iron? Oil? Milk? Tons of commodities listed on this site if you want to choose something. Perhaps coffee? https://tradingeconomics.com/commodity/steel Yes. All of the above. Dalio has long recommended a basket of commodities as part of one's allocation.
- Sun Oct 25, 2020 6:22 pm
- Forum: Personal Investments
- Topic: Is it too late to buy Gold?
- Replies: 67
- Views: 6151
Re: Is it too late to buy Gold?
It's too late to not buy gold.
- Wed Sep 16, 2020 6:35 pm
- Forum: Investing - Theory, News & General
- Topic: Gold continues to soar!
- Replies: 565
- Views: 62714
Re: Gold continues to soar!
Ray Dalio putting it elegantly on American vs Chinese thinking in his latest paper. It also provides insight into why American investors don't like gold but the Chinese do. Very relevant and powerful. For example, to Americans 300 years is a very long time. For the Chinese it is very recent. While having a revolution or a war that will overturn our systems is unimaginable to an American, it is inevitable to a Chinese person (because the Chinese have seen that they have always happened and the Chinese have studied the patterns of why they have happened). While most Americans focus on particular events, especially those that are now happening, most Chinese, especially their leaders, see evolutions over time and put what is happening in the co...
- Wed Sep 16, 2020 5:12 pm
- Forum: Investing - Theory, News & General
- Topic: AQR still singing the same song
- Replies: 263
- Views: 26328
Re: AQR still singing the same song
Beta is calculated over a time period. It's absolutely a function of time.
And not all technical analysis is about precise timing either.
- Thu Sep 10, 2020 2:05 pm
- Forum: Investing - Theory, News & General
- Topic: Too much S&P 500 index concentration in FAAMGs?
- Replies: 67
- Views: 5065
Re: Too much S&P 500 index concentration in FAAMGs?
Own a total world portfolio with factor tilting and this will be a non-issue.
Way more diversified than a U.S. only portfolio, especially one that's just the S&P 500. I don't understand how anyone could possibly have it in their minds that an all-in allocation to the S&P 500 could be considered fully diversified in any meaningful sense.
Way more diversified than a U.S. only portfolio, especially one that's just the S&P 500. I don't understand how anyone could possibly have it in their minds that an all-in allocation to the S&P 500 could be considered fully diversified in any meaningful sense.
- Wed Sep 09, 2020 9:10 pm
- Forum: Investing - Theory, News & General
- Topic: A timely and equanimous article on gold
- Replies: 80
- Views: 8300
Re: A timely and equanimous article on gold
I think there is a difference between risk and uncertainty. Risks are measurable, they have known probabilities. Uncertainties don’t. They are the “unknown unknowns”, the black swans. My opinion is that it is foolish to believe we can precisely calculate (or even estimate) all probabilities in the world of investing. There are too many uncertainties. Things will happen in the future that are drastically different than have ever happened in the past. I’m not a gold bug. But gold has a long history of existing and storing value and it appears to be a fundamentally different thing than stocks and bonds. So it seems reasonable to me to consider it as a potential diversifier. I think statistical analysis and back testing can be helpful but you ...
- Wed Sep 02, 2020 7:47 pm
- Forum: Investing - Theory, News & General
- Topic: Bridgewater All Weather strategy. It worked, until it didn't.
- Replies: 16
- Views: 2647
Re: Bridgewater All Weather strategy. It worked, until it didn't.
People often misuse the term "all weather" in investing. The phrase is often misconstrued as being a reference to a never changing portfolio allocation. That's not necessarily the case. A portfolio strategy can have constantly shifting allocations and still be "all weather" so long as the process behind those shifts are logical and consistent. It seems that Ray Dalio's is.
- Wed Aug 05, 2020 3:35 am
- Forum: Investing - Theory, News & General
- Topic: "Beware the Hype on Gold"
- Replies: 170
- Views: 16422
Re: "Beware the Hype on Gold"
Let me generalize to make it clearer. If you borrow money to make an investment with a positive return, you will "spend less than you make" in future, but you are making more. If, in a hypothetical example, scenario one you don't borrow and earn $100 per year forever. Scenario two you borrow $10, make an investment and now earn $200. You pay off the loan a year later, and still have $190 to spend vs. the original scenario. I understand that in year two you "spend less than you make," but what is your point? In that particular made up example, what is the consequence of the debt and "creating a cycle?" I understand your point for debt used for consumption, but not for debt used for investment. Yes, precisely. M...
- Tue Aug 04, 2020 8:37 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS Fund vs Gold Fund
- Replies: 90
- Views: 5665
Re: TIPS Fund vs Gold Fund
Oh pfffft. The government would NEVER do anything nefarious. That's just conspiracy theory territory!Crow Hunter wrote: ↑Tue Aug 04, 2020 8:29 pm Just keep in mind the history of gold in the US when you are planning your TEOTWAWKI scenarios.
https://en.wikipedia.org/wiki/Gold_Reserve_Act