Search found 1936 matches

by Clive
Fri Feb 17, 2017 6:02 pm
Forum: Investing - Theory, News & General
Topic: Bonds Are Riskier Than You Think? Article implications for today?
Replies: 60
Views: 7552

Re: Bonds Are Riskier Than You Think? Article implications for today?

What is the keypoint of of this article? My take is that the article is just stating the facts Whether that is about to happen, and the bond regime about to flip, is for others to say. (Usually, by pouring a cup of tea and examining the leaves.) This column merely points out the issue . There are times—many times—in which bonds can be more dangerous than stocks. That is information worth knowing, for anybody who owns a bond-heavy portfolio. Nobel Prize-winning Harry Markowitz didn’t bother computing his own efficient frontier, saying : “I should have computed the historical co-variances of the asset classes and drawn an efficient frontier.” But, he said, “I visualized my grief if the stock market went way up and I wasn’t in it — or if it w...
by Clive
Thu Feb 16, 2017 10:08 pm
Forum: Investing - Theory, News & General
Topic: 20 year average versus median
Replies: 3
Views: 926

Re: 20 year average versus median

My guess is the particular time period of that second chart ... strong gains during the 1990's tempting more investors to buy stocks (relatively high). Dot com bubble bursting 2000 to 2003 causing concerns and partial (maybe full) withdrawal. Then 2008/9 financial crash causing capitulations. Net effect many lost money (didn't even beat T-Bills) due to having profit chased (bought high), left in fear (sold low).
Image
by Clive
Thu Feb 16, 2017 8:38 pm
Forum: Investing - Theory, News & General
Topic: 20 year average versus median
Replies: 3
Views: 926

Re: 20 year average versus median

In that first chart it's interesting to see how for 20 year periods started between the mid 1950's and mid 1970's how stock total returns barely maintained purchase power. 5% SWR for 20 years might just about have been OK (subject of course to sequence of returns). 3% SWR might have had around 40% of the inflation adjusted start date amount remaining after 20 years (what started as a 3% of the portfolio value withdrawal had, 20 years later, risen to a 3 / 0.4 = 7.5% SWR relative to the remainder of portfolio value).
by Clive
Thu Feb 16, 2017 8:26 pm
Forum: Investing - Theory, News & General
Topic: 20 year average versus median
Replies: 3
Views: 926

20 year average versus median

Looking at historic US stock total returns since 1896 from a UK investor perspective (adjusted to British Pound and for UK inflation, after assuming a constant 15% dividend withholding tax) - for all 20 year periods since 1896 (calendar year granularity) and there's a marked difference between the average and median values. The average 20 year real gain (accumulation/dividends reinvested) was a 4.05 gain factor (7.2% annualised). However the median was 3.17 gain factor (5.9% annualised). Much like measuring 'average' wages uses the median value so that a few earning extremely high wages don't tilt the average upwards, a few relatively good 20 year periods distorts the average. A small number of very tall trough (lows) to peaks (highs) 20 ye...
by Clive
Thu Feb 16, 2017 5:01 am
Forum: Non-US Investing
Topic: International ETFs with 0% dividend withholding tax?
Replies: 22
Views: 3348

Re: International ETFs with 0% dividend withholding tax?

Without looking, IIRC something like 70% of UK FT100 (largest 100 by market cap) index is via foreign business/revenues/earnings. 50% foreign earnings for the next 250 largest (FT250) midcap index ... which in US scale compares to small cap. Above average dividends could be considered as being 'value' (so UK FT250 = small cap value). Much like a international fund via a single point/holding, and no withholding tax. Isn't S&P500 also up at around 50% foreign revenue/earnings? Such that a combination of S&P and FT250 might span domestic/foreign, large/small, growth/value. My figures show yearly FT250 (UK midcap) % total returns in US$ adjusted since 1986 of 36.9 44.1 10.6 13.0 0.8 13.7 2.4 34.2 1.2 18.0 27.7 6.3 5.2 32.2 -3.6 -9.2 -16...
by Clive
Tue Feb 14, 2017 6:58 pm
Forum: Non-US Investing
Topic: Irish resident: Bond investing in the case of a EURO collapse
Replies: 15
Views: 2259

Re: Irish resident: Bond investing in the case of a EURO collapse

A Euro collapse would trigger a significant flight to safety reaction. I would expect significant capital inflows into U.S. markets and the dollar to strengthen relative to other global currencies. Although the UK and Germany are flight to safety currencies, they're not exactly independent from a Euro collapse. China is having problems at the moment. Japan has epic sovereign debt at the moment. All superficial signals point to the U.S. as having the strongest argument of where to park capital in the event of a Euro collapse. IMF SDR as of September 2016 were revised to U.S. dollar 41.73 percent (compared with 41.9 percent at the 2010 Review) Euro 30.93 percent (compared with 37.4 percent at the 2010 Review) Chinese renminbi 10.92 percent J...
by Clive
Tue Feb 14, 2017 4:46 pm
Forum: Non-US Investing
Topic: Irish resident: Bond investing in the case of a EURO collapse
Replies: 15
Views: 2259

Re: Irish resident: Bond investing in the case of a EURO collapse

Have a look at a stock/gold 50/50 barbell as a alternative to bonds. Two extremes and if the stock is US stock that's like a long/short US$ hedged position (US$ currently being the worlds primary reserve currency). More volatile than bonds over interim periods, but ride through that volatility and the outcome tends to be satisfactory. Typically when bad things happen, inflation spikes ... as do taxes. Bonds in paying regular income are susceptible to such taxflation risk. Hold for instance 50/50 BRK-B (Berkshire Hathaway) and physical gold and that's somewhat like holding a stock index mutual fund and real assets (physical gold) - where there's no income being produced. Broadly one of either stocks or gold will tend to pop +20% to the up si...
by Clive
Tue Feb 14, 2017 2:24 pm
Forum: Investing - Theory, News & General
Topic: Are stock valuations so high because interest rates are so low?
Replies: 28
Views: 4083

Re: Are stock valuations so high because interest rates are so low?

Bogleheads do not use leverage (except for maybe 1 of us) but there are big money players who use significant leverage. Compare ZIV (short volatility) and SPXL (3x long stock) ... and broadly they're similar . ZIV sells 5 month VIX futures, XIV sells 30 day XIV futures and is even more volatile (more like a 5x). Blend a third in 3x with two thirds bonds and the bonds in effect cancel out the cost of borrowing by the leveraged fund, you end up with a similar reward to having been 100% 1x. Consider for example a 30/70 stock/bond investor who might instead hold 6/94 XIV/bonds and rebalance once yearly. Between rebalance points and assuming bonds to be 'safe' the maximum loss is all of the 6% XIV holdings, less any interest that bonds might pa...
by Clive
Sun Feb 12, 2017 6:15 pm
Forum: Investing - Theory, News & General
Topic: In stock performance statistics or graphs, how are dividends taken into account?
Replies: 4
Views: 781

Re: In stock performance statistics or graphs, how are dividends taken into account?

It can get confusing. As a UK investor for instance Vanguard UK's US (S&P500) tracker fund (that's domiciled in Ireland) shows the total return chart along with total return figures, alongside a benchmark total return line/figures. You have to be careful however to see that the benchmark is the net total return index figure, which discounts 30% default US withholding tax from dividends. Ireland, like the UK, have a tax treaty with the US however that reduces the withholding tax rate to 15% - so like-for-like the fund being full replication would outperform the benchmark by 15% of the dividend. Deduct the funds expenses out of dividends and on a apparent total return basic the fund compares or even marginally exceeds the benchmark total ...
by Clive
Sun Feb 12, 2017 3:33 pm
Forum: Investing - Theory, News & General
Topic: What is the prediction of future long-term returns for your portfolio?
Replies: 64
Views: 9201

Re: What is the prediction of future long-term returns for your portfolio?

Main chart is log scaled (linear scaled and the tall stock bars are clearly 'way up there', as is more evident in the bottom right chart https://s4.postimg.org/61v8q7259/Screenshot_from_2017_02_12_20_18_45.png (Avg. CAGR is the 20 year annualised of the average of the median and average values, and is after the 3% SWR amount (so add 3% onto those figures for the overall real average)). Since 1925 for a UK investor (GB£, UK inflation), 3% SWR over 20 years had 100% success rate of ending 20 years with at least the same inflation adjusted amount as at the start date for a 3-way blend of US stocks, UK stocks and gold. 50/50 UK/US stocks did see a worst case 46% of the inflation adjusted start date amount remaining after 20 years, but had much ...
by Clive
Fri Feb 10, 2017 2:26 pm
Forum: Investing - Theory, News & General
Topic: 96 percent of stocks are no better then TBills
Replies: 52
Views: 9979

Re: 96 percent of stocks are no better then TBills

I have read on this site and others about how index funds work by catching the rare stock that does well. Reading through a working paper linked from MRU, it looks like the skew is even higher than I thought. Only 1000 companies do better than a T Bill per the study.Glad entrepreneurs exist, but wow that is a tough racket. On my end, I will be buying the haystack. https://poseidon01.ssrn.com/delivery.php?ID=074071112000080001021100005122080025056018064054034063029004093123094069075118093077004031019026053056124095120082117113016124118039014012004004005098075018046048117124073012002115102025072105090031014095007122082022020104086070087093031111&EXT=pdf Consider a 100 stock universe, $1 initially invested in each. One does great, gaining...
by Clive
Tue Feb 07, 2017 7:46 pm
Forum: Investing - Theory, News & General
Topic: A short study of the recent Japanese crisis
Replies: 70
Views: 10727

Re: A short study of the recent Japanese crisis

"Safe" bonds - can look pretty scary https://s24.postimg.org/kicvim6h1/2gsonmg.png More so when you consider that the UK has moved away from taxing real (after inflation) gains, towards taxing nominal gains. To a large extent, post 1980's good bond gains are down to yields declining from exceptionally high levels down to more recent exceptionally low levels (yields up prices down, yields down prices up). Much of Japan's big dip post 1990 was a consequence of big up's during the 1970's/80's. The same might be said for the US 1930's crash when prices halved, halved again, halved yet again (followed the "Roaring 20's" when prices doubled, doubled again and doubled yet again). Japan's roaring 70's/80's saw it rise from very ...
by Clive
Tue Feb 07, 2017 7:20 pm
Forum: Investing - Theory, News & General
Topic: Too good to be true? [Bogleheads' model of index investing]
Replies: 48
Views: 11973

Re: Too good to be true?

Would 6% total return long term after inflation (but not counting taxation) be too good to be true? Depends upon the tax rate https://upload.wikimedia.org/wikipedia/commons/thumb/8/8c/Historical_Marginal_Tax_Rate_for_Highest_and_Lowest_Income_Earners.jpg/640px-Historical_Marginal_Tax_Rate_for_Highest_and_Lowest_Income_Earners.jpg In the UK during the 1960's, investors were hit with a 15% 'unearned income' (investment) tax in addition to basic rate (most common) tax up near 40% levels (80% for higher rate taxpayers). 55% to 95% taxation !!! A final straw for some was Roy Jenkins adding a retrospective tax in 1968, pushing highest rate tax up to 136% (yep! some paid £1.36 tax on £1 of income !!!). High taxation was the cause of the likes of ...
by Clive
Mon Feb 06, 2017 7:55 pm
Forum: Investing - Theory, News & General
Topic: A short study of the recent Japanese crisis
Replies: 70
Views: 10727

Re: A short study of the recent Japanese crisis

Dirghatamas wrote:You write
"
One basically needed twice as many Yen to buy US dollars 30 years ago compared to now....
When the Japanese Yen was introduced in 1871, its value was more or less the same as the US dollar 1 Yen bought 1 US$ :)

There's historic Yen/US$ price data since 1949 here
by Clive
Sun Feb 05, 2017 5:29 am
Forum: Investing - Theory, News & General
Topic: Allocation/Diversification of Equities During Withdrawal Phase
Replies: 10
Views: 1544

Re: Allocation/Diversification of Equities During Withdrawal Phase

My concern is rather with the question of how the equity portion of one's holding should be allocated so that there is a maximum probability of something always being up more than other holdings (or down less than other holdings) to withdraw from . Look at LEXCX Created in 1935 with an equal number of common stock shares of the 30 leading U.S. companies at the time; currently invested in a total of 22 leading U.S. corporations . Bought and held since 1935 has seen 30 original stocks decline down to 22 (after splits/mergers etc.). Those 22 stocks likely are priced at multiple times their original price (cost). Also this One of the most fascinating things in the academic research looking at stock market returns over the past century or more ...
by Clive
Thu Feb 02, 2017 9:00 am
Forum: Investing - Theory, News & General
Topic: Is a total market fund the most diversified
Replies: 157
Views: 19767

Re: Is a total market fund the most diversified

in this dynamic world, new companies are created every year. If you invested equal weight 25 years back in the US, you would have gotten Apple and Microsoft but would have missed out on Google, Amazon, Facebook.. In the last few years you would have missed on Tesla and now on Snap. In practice buy and hold is very dynamic, takeovers ... etc. Let alone dividends. If you hold 50 stocks collectively paying 2% dividends the more cost effective way to reinvest those dividends is to simply accumulate them and periodically add another stock to the set. Or for 500 stocks perhaps add another 10 stocks to the set each year ...etc. LEXCX bought 30 stocks back in 1935 and has just held those since. Of those 22 remain (evolved/merged into other firms/n...
by Clive
Wed Feb 01, 2017 9:25 pm
Forum: Investing - Theory, News & General
Topic: Is a total market fund the most diversified
Replies: 157
Views: 19767

Re: Is a total market fund the most diversified

Bogle recommends the ultimate in buy-and-hold investing: a completely static portfolio. He would buy the 50 largest companies in the S&P 500 and then never buy another. Equal weighting initially, buy and hold, will find its own cap weighting over time. Additionally initially equal weight across sectors and that's the most neutrally diversified overall. Perhaps equal weight each sector, equally weighting each stock in each sector. For instance 10 sectors, one sector with 100 stocks, spread the 10% sector allocation equally across each of the 100 stocks (0.1% each). Another sector of 10 stocks = 1% each. Typically left tail is finite (-100%), right tail unbounded. The average stock lags the broader (index) average (pick a individual stoc...
by Clive
Mon Jan 30, 2017 9:48 am
Forum: Investing - Theory, News & General
Topic: Vanguard's Wellesley Income fund is incredible
Replies: 716
Views: 177110

Re: Vanguard's Wellesley Income fund is incredible

According to portfoliovisualizer, very similar since 2007 to 40/60 Small Cap Value/Bonds (click image)
Image

Image

Also, compare to this 8/92 XIV/Bond (XIV (short volatility) is like a 5x long stock holding) - note that uses quarterly rebalancing to reduce "tracking error"
by Clive
Mon Jan 30, 2017 3:14 am
Forum: Investing - Theory, News & General
Topic: Try and hit it big with 25% of your portfolio?
Replies: 51
Views: 6725

Re: Try and hit it big with 25% of your portfolio?

But his response will be, "Who cares? I'm young and working. At least I gave it a shot with 25% of my portfolio. I can withstand the loss because this money won't be touched until later in life." How would you reply? Go for it! But why just 25%, make it a third instead, and don't concentrate into single stocks, go with low cost funds. SCV, TSM, Gold equal weighted a third each and one of those will pop +30% on average each year (using data since 1972 sourced from here ), the other two combined will on average pace inflation. When one of the two stocks are the years best performer then the other two make a stock/gold 50/50 barbell, which is a form of volatile bond bullet. Since 1972 SCV was the years best performer (49% of years),...
by Clive
Tue Jan 24, 2017 9:17 am
Forum: Personal Investments
Topic: Using Rebalanced Leveraged ETF increase risk and return
Replies: 8
Views: 1518

Re: Using Rebalanced Leveraged ETF increase risk and return

Here ya go, SPY vs 50/50 SSO/SHY. SSO is a 2x SPY fund and SHY is a very short term treasury fund. The effect is that SHY should neutralize the leverage of SSO, leaving only costs/rebalancing effects to differentiate it from SPY. Rebalanced annually it performs more or less the same. I would rebalance more frequently than that, however. https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2016&lastMonth=12&endDate=01%2F23%2F2017&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&showYield=false&reinvestDividends=true&symbol1=SSO&allocation1_1...
by Clive
Tue Jan 24, 2017 8:45 am
Forum: Investing - Theory, News & General
Topic: Replicating Index with Individual Stocks vs Index Fund
Replies: 28
Views: 4759

Re: Replicating Index with Individual Stocks vs Index Fund

20 randomly selected stocks virtually replicates the return/risk of a index fund. After 20ish thereally is diminishing returns. This was widely quoted going back two or three decades, but recent academic work has contradicted this belief. You cannot have low risk with 20 stocks. Which academic studies are you referring to? My quote is derived from 'A Random Walk Down Wall Street' by Burton G. Malkiel https://books.google.com/books?id=N0OnBQAAQBAJ&pg=PT121&lpg=PT121&dq=20+randomly+selected+stocks+random+walk+wallstreet&source=bl&ots=XZdBX5Fyak&sig=hQv4p_-D7UxdmNz_eH47drQI9rs&hl=en&sa=X&ved=0ahUKEwi-gYKotMzRAhWoqFQKHfPMBIw4ChDoAQgZMAA#v=onepage&q=20%20randomly%20selected%20stocks%20random%20walk%20wall...
by Clive
Sat Jan 21, 2017 8:40 pm
Forum: Investing - Theory, News & General
Topic: Replicating Index with Individual Stocks vs Index Fund
Replies: 28
Views: 4759

Re: Replicating Index with Individual Stocks vs Index Fund

Here's William Bernstein's article about returns distributions: http://www.efficientfrontier.com/ef/900/15st.htm . He concludes that you need to own the entire market. It is not clear to me how he reached that conclusion quantitatively, e.g., why is half the market not enough? Its pretty fractal to have most stocks lag the broader average, a few big winners. The suggestion that you need to hold the entire haystack to ensure you hold the few big winners disregards that more stocks being held dilutes down the portfolio wide reward that the few big winners add to the portfolio. 100 stocks, 1% allocation to each and if one is a ten-bagger (+1000%) that adds 10% to the portfolio value. 10 stocks 10% weighting each and if one +100% that adds 10%...
by Clive
Thu Jan 19, 2017 4:15 pm
Forum: Investing - Theory, News & General
Topic: Replicating Index with Individual Stocks vs Index Fund
Replies: 28
Views: 4759

Re: Replicating Index with Individual Stocks vs Index Fund

Nobody has mentioned the main reason one would consider buying the stocks directly: A legal restriction or tax structure that disadvantaged using funds. PFIC is but one example. Apply 'standard' (most common) rate tax to UK stock total returns and you might hit 0% net real. https://s29.postimg.org/ajkzcekev/TAX_UK_net_real_gains.png Advantages arise out of tax and cost efficiencies. Tax exempt/deferred accounts, tax harvesting ...etc. In more recent times UK investors have non-UK Reporting Registered funds being taxed at their (typically higher) income tax rate, and losses can't be offset. A fairer comparison is to consider net real outcomes, and funds have a distinct disadvantage. A " High Bracket Investors Should Avoid Mutual Funds ...
by Clive
Thu Jan 19, 2017 3:46 pm
Forum: Investing - Theory, News & General
Topic: Formula for dividend tax drag?
Replies: 51
Views: 8618

Re: Formula for dividend tax drag?

Historic tax rates were relatively higher and fewer if any tax advantaged options were available (costs were generally higher as well). For UK basic rate taxpayer (most common tax rate), if you discount basic rate tax from dividends (more recently 20%, but historically since WW2 years as high as 47.5% (which excludes some years having a additional 15% unearned income tax applied on top)), adjust for inflation, and remove the capital gains tax from nominal price appreciation (currently levied at a 18% rate). https://s29.postimg.org/ajkzcekev/TAX_UK_net_real_gains.png Chart assumes all net dividends reinvested, and excludes costs. Utilising yearly allowances and tax harvesting obviously would have improved net real rewards, passive and fund a...
by Clive
Tue Jan 17, 2017 7:27 am
Forum: Investing - Theory, News & General
Topic: Why not put it all in TIPS?
Replies: 87
Views: 8608

Re: Why not put it all in TIPS?

One if not the biggest causes of serious loss is down to concentration risk.

TIPS could suffer due to taxation. Or simply because consumer price inflation lags other asset price inflation. In the UK CPI has broadly lagged house prices, gold, art and stock price only inflation over the last century. I believe more recently in the US CPI has lagged medical care cost inflation. ...etc.

I suspect CPI inflation has lagged due to technology. Single Combine Harvester doing the work of fields full of workers. Robots replacing factories full of workers ... etc. Enabling consumable prices to relatively decline ... causing CPI to relatively lag.
by Clive
Mon Jan 16, 2017 4:34 pm
Forum: Investing - Theory, News & General
Topic: Mathematics of international asset allocation
Replies: 44
Views: 7594

Re: Mathematics of international asset allocation

what I want to know is, how should your allocation depend on what currency you will use? Intuitively, forex uncertainty should justify some home bias. Observationally : Initially equal weight across a bunch of countries/currencies, diversifying equally across sectors, bought and held ... will be low ongoing cost once bought and will find its own 'cap weightings' over time. A few will do exceptionally well, others poorly, where the winners more than compensate for the losers (max downside -100%, max upside unlimited). By contrast tilting to particular sectors or countries/currencies may do well, may lag according to luck. Home bias is a tilt. OK provided the home economy doesn't turn out to have been a left tail over the period across which...
by Clive
Mon Jan 16, 2017 2:32 pm
Forum: Investing - Theory, News & General
Topic: Mathematics of international asset allocation
Replies: 44
Views: 7594

Re: Mathematics of international asset allocation

So the problem with your mathematics is that there's no way to get input data that's trustworthy enough to give you trustworthy output. I think it is actually even worse. While it is true that the mathematics are very sensitive to errors in inputs and past data are noisy at best, saying that really good data would really help implies that the underlying market forces and dynamics never change and so the statistical properties of the past (if only we could estimate them accurately) can accurately represent the statistical properties of the future. Much of stock gains are a consequence of a few unpredictable outlier instances. If for instance you compare average yearly total gains with the median then typically those choices that have perfor...
by Clive
Sun Jan 15, 2017 6:02 am
Forum: Investing - Theory, News & General
Topic: leverage and beating the market
Replies: 45
Views: 6720

Re: leverage and beating the market

Zvi Bodie likes 10/90. 90% in TIPS, 10% in 10x (he likes LEAPS/Options for that and loads into the equivalent of 10x leveraged stock exposure). Between trades the downside is <10% i.e. all of the Options value lost, less any gains the TIPS make. Personally I use 5x equivalents myself such as short volatility. As you scale up leverage, so you also need to scale up rebalance frequency. 2x and you get away with yearly rebalancing, 3x and perhaps 6 monthly rebalancing ... etc. Such that the rebalancing voids the drawdown 'protection' as you will at some times repeatedly rebalance from bonds to leveraged stock across a sequential sequence series of rebalance events. Some Investment Trusts in the UK run with terms such as being able to shift anyw...
by Clive
Sun Jan 15, 2017 5:47 am
Forum: Investing - Theory, News & General
Topic: leverage and beating the market
Replies: 45
Views: 6720

Re: leverage and beating the market

SPXL 3x ETF Just wondering what about 1/3rd 3x leveraged ETF; 2/3rds cash ... Market return with a maximum possible drawdown of 33%? http://i.imgur.com/J1NRuB5.png Market return tracking it tighter if you rebalance relatively frequently such as quarterly https://s23.postimg.org/65zf3nm4r/Screenshot_from_2017_01_15_11_35_13.png https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2016&lastMonth=12&endDate=01%2F14%2F2017&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=3&showYield=false&reinvestDividends=true&benchmark=VFINX&symbol1=SPXL&al...
by Clive
Fri Jan 13, 2017 6:25 pm
Forum: Investing - Theory, News & General
Topic: Over what time period should stocks NOT lose money
Replies: 50
Views: 7323

Re: Over what time period should stocks NOT lose money

I don't think there is any timeline where anything is safe. People are incredibly bad at forecasting. Around the world, just in the 19-somethings, without trying to be all inclusive: Private property was confiscated in Russia, China, Eastern Europe, Cuba--foreign investment was nationalized and that was just the communists, other governments have done the same Hyperinflation in Germany and other countries after WWI Swiss Banks holding Jewish investments, stolen Jewish art Of course nothing like those things could ever happen in the US (read: it's different this time :oops: http://static4.businessinsider.com/image/4e1c5b08ccd1d50779000000-1200/lets-begin-with-a-look-at-the-top-income-tax-bracket-since-the-federal-income-tax-was-started-in-1...
by Clive
Fri Jan 13, 2017 11:10 am
Forum: Investing - Theory, News & General
Topic: Over what time period should stocks NOT lose money
Replies: 50
Views: 7323

Re: Over what time period should stocks NOT lose money

viewtopic.php?p=1820900#p1820900
examples of how long it has taken to break-even (in real terms) after significant market declines across 19 countries between 1900-2010. Some of the longest include:

Equities

Germany: 45 years
France: 43 years
Italy: 37 years (I note this is a different number to the OP article - not sure why)
Japan: 33 years
Belgium: 31 years

The longest for a globally diversified equity portfolio: 7 years
by Clive
Wed Jan 11, 2017 9:01 am
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 19196

Re: The Argument for More Stocks in Retirement

Historically since 1913 average dividend yield 4.2%. Average tax on dividends for a high rate taxpayer 40% (with considerable volatility around that). Market makers back in postal vote days often widened spreads out to 5% or even 10%, such that over a 10 year holding period that could have added a 0.5% to 1% annualised drag factor. Add in taxes on capital gains ... and that some might have held equity exposure via funds that (like even still evident even to this day) might have levied 1.5%+ fees .... and all of mathematical real gains might have been purely for the benefit of others. No... but "dividends" on bonds would be expected to be similar, if not higher, than stocks... so, if I were to include them, I'm not sure it would c...
by Clive
Mon Jan 09, 2017 12:00 pm
Forum: Investing - Theory, News & General
Topic: Over what time period should stocks NOT lose money
Replies: 50
Views: 7323

Re: Over what time period should stocks NOT lose money

World, equal weight, around 20 years http://2.bp.blogspot.com/-YddFgKJazSs/U9lVP2rqSNI/AAAAAAAAILI/Ch8xZWlxB2Y/s1600/Worst+Case+Scenario.png If you concentrate the chances are you'll lag the equal weight average. That's fractal. And a major reason IMO why cap weighted has a tendency to lag (which is more commonly highlighted as being equal weighted/smaller cap ...etc 'rewarding more'). That's total returns, adjusting for inflation. Add costs, taxes and withdrawals and the odds worsen. Also less if you don't ignore survivorship (for example that table doesn't include Russia or China). The indications are however that survivorship bias can be relatively small (negligible) http://www.cfapubs.org/doi/pdf/10.2470/rf.v2011.n4.5 page 42 (pdf page ...
by Clive
Sun Jan 08, 2017 7:55 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 19196

Re: The Argument for More Stocks in Retirement

Conclusions that I have made from this analysis of stock and bond data over the past 90 years is that around a 80% Stock, 20% Bond portfolio minimizes failure rates at 4% and 5% yearly withdrawal rate (constant, inflation adjusted, proportion of original investment). Furthermore, worst case scenarios (0 and 5th percentile end-of-timespan returns) are also optimized with this majority-stock portfolio. I was wondering if anyone else, on looking at this data, can come to a different conclusion? Did your data includes costs and taxes? Historically since 1913 average dividend yield 4.2%. Average tax on dividends for a high rate taxpayer 40% (with considerable volatility around that). Market makers back in postal vote days often widened spreads ...
by Clive
Sat Jan 07, 2017 6:33 am
Forum: Investing - Theory, News & General
Topic: When thinking about diversification it's dispersion of returns that matters
Replies: 4
Views: 1281

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

This MSCI paper (PDF) highlights how stock markets around the world (see table on page 6) have moved from being more home biased to being more global ... at least when measured from a Index angle. Within that however there are firms who will be predominately domestic economy reflective. Diversifying across multiple currencies, such as buying some of one currency and then using that currency to invest in predominately domestic (to that currency) business activities ... ditto multiple currencies, will avoid being overweight in a single left tail (bad case) currency outcome (but also avoid being heavily invested into a right tail currency outcome). To some extent that can also hold for indexes as well, as many firms tend to hedge 'foreign' cu...
by Clive
Sat Jan 07, 2017 5:53 am
Forum: Investing - Theory, News & General
Topic: I am timing the market. Why am I wrong?
Replies: 89
Views: 9311

Re: I am timing the market. Why am I wrong?

I would suggest a 50/50 stocks/bonds portfolio. That way you are always right! What about half of time 100% stock, other half of time bonds? (Average 50/50). Generally on average you'd expect similar outcome (reward) over the total period compared to constant 50/50. But within that there'd be more individual case volatility around the constant weighted progression. Much of gains (losses) can arise out of relatively few days. 1994 to 2013 ... if the 40 worst-performing days of the S&P 500 Index were missed, an investor's increased return would have been 893% more than investors who stayed in the market every day throughout the entire 20 years. University of Michigan Professor H. Nejat Seyhun analyzed 7,802 trading days for the 31 years ...
by Clive
Fri Jan 06, 2017 10:57 pm
Forum: Investing - Theory, News & General
Topic: What gets cheap when the dollar gets strong
Replies: 32
Views: 7197

Re: What gets cheap when the dollar gets strong

If you look at the top 10 companies in the FTSE100, which are c. 40% of the index, you find HSBC, Vodafone, Glaxo Smithkline, Astra Zeneca, BP, Shell, Rio TInto, BHP etc. DIageo. So HSBC makes a lot of its money in China/ Hong Kong-- tracks the USD. Pharma companies make more than half their money in USD markets. Oil companies it's essentially 100%. Mining companies products are priced in USD. Diageo (drinks) big markets are US and EM that are USD-linked (like Asia) 60-70% of the profits of the FTSE100 (c. 84% of the FTSE All-Share) are made in USD. So a 10% fall in GBP against USD means reported profits will be +6-7% all things being equal. For the FTSE 250 (the next 12%) there is a much higher concentration of UK profits (housebuilders, ...
by Clive
Fri Jan 06, 2017 10:42 pm
Forum: Investing - Theory, News & General
Topic: What gets cheap when the dollar gets strong
Replies: 32
Views: 7197

Re: What gets cheap when the dollar gets strong

Other currencies being compared to that suggest the dollar to be relatively strong by comparison :wink: In 1874 1 Japanese Yen bought 1 US$, more recently it requires 117 Yen to buy a dollar. Over a similar period ... 1 GB Pound (which originally in the 750's was a Saxon pound weight of silver, partitioned up as 240 silver pennies) bought around 5.5 US$, but more recently buys just $1.22 Ditto gold ... $23 bought a ounce back in 1874, more recently it takes $1138 to buy a ounce of gold. For most of those 200 years there were equal amounts of inflation and deflation, averaging around 0% overall. Since decoupling from the gold standard (1930's) we've mostly just seen inflation (money being backed by just a promise, nothing physical, and more ...
by Clive
Thu Jan 05, 2017 8:53 pm
Forum: Investing - Theory, News & General
Topic: Why S & P 500 fund is safer than Total Stock Market fund
Replies: 40
Views: 8203

Re: Why S & P 500 fund is safer than Total Stock Market fund

I am reasonably sure that virtually no one will perform "well" if the U.S. economy stagnates because we are a consumer nation and where the world comes to sell a large portion of their manufactured products. We sneeze the world catches a cold. On the flip side we have a domestic consumer driven economy which is a bit more insulated from global economic issues than a country with an export driven economy especially now that we have the ability to be energy independent. The potential for a billion Chinese and billion Indians moving towards middle-class (consumption) might make the rest of a world catching a cold less correlated in forward time than compared to the past. If and when they transition to consumer based economies that w...
by Clive
Thu Jan 05, 2017 1:21 pm
Forum: Investing - Theory, News & General
Topic: Why S & P 500 fund is safer than Total Stock Market fund
Replies: 40
Views: 8203

Re: Why S & P 500 fund is safer than Total Stock Market fund

TheTimeLord wrote:I am reasonably sure that virtually no one will perform "well" if the U.S. economy stagnates because we are a consumer nation and where the world comes to sell a large portion of their manufactured products. We sneeze the world catches a cold. On the flip side we have a domestic consumer driven economy which is a bit more insulated from global economic issues than a country with an export driven economy especially now that we have the ability to be energy independent.
The potential for a billion Chinese and billion Indians moving towards middle-class (consumption) might make the rest of a world catching a cold less correlated in forward time than compared to the past.
by Clive
Thu Jan 05, 2017 10:20 am
Forum: Investing - Theory, News & General
Topic: Why S & P 500 fund is safer than Total Stock Market fund
Replies: 40
Views: 8203

Re: Why S & P 500 fund is safer than Total Stock Market fund

Wouldn't it be more accurate to say "you capture that" than "you beat that"? You're going to get the gains from companies that join the S&P500. But you're also going to take the losses on the companies that depart. The hedge funds are trying to gain on both ends. TSM by definition gives you the performance of the market. With top cap (largest), a firm might enter the bottom, perhaps rise to towards the top, maybe at some point crash down and out the bottom again ... across its lifetime. With mid caps, a firm might enter the bottom and rise all the way through to be ejected out of the top as it enters the top/large cap group, maybe never to return depending upon how quickly it 'dies'. Some firms might fall out of the...
by Clive
Thu Jan 05, 2017 10:03 am
Forum: Non-US Investing
Topic: Swiss Franc back down?
Replies: 4
Views: 1137

Re: Swiss Franc back down?

Note the Jan 2015 jump https://chart.finance.yahoo.com/5y?chfeur=x&lang=en-GB&region=GB Jan 2015 news at the time (BBC) The Swiss franc soared as much as 30% in chaotic trade after the central bank abandoned the cap on the currency's value against the euro. The Swiss National Bank (SNB) said the cap, introduced in September 2011, was no longer justified. The EU have been printing Euro's at a 1 trillion/year rate (more recently they've planned to drop from something like 80 billion/month to 60 billion/month) https://www.bbva.com/en/news/economy/ecb-meeting-european-central-bank-extends-asset-purchase-program-longer-expected-slower-pace/ the Governing Council decided to extend the asset purchase program through the end of 2017. These ...
by Clive
Thu Jan 05, 2017 7:49 am
Forum: Investing - Theory, News & General
Topic: Why S & P 500 fund is safer than Total Stock Market fund
Replies: 40
Views: 8203

Re: Why S & P 500 fund is safer than Total Stock Market fund

Foreign revenue in a domestic domiciled business does not buffer it from domestic pricing. The America Abroad fund chose stocks from the 500 index that had significant foreign revenues, as an alternative to owning large cap foreign stocks from countries with less stringent accounting rules. The fund tracked the 500 because the fund's stocks were listed and priced on the New York Exchange. Not enough of those domestic stocks' buyers & sellers recognized the nuance of the foreign revenues. Yes, there was foreign exposure but no, it was not reflected in the value of the mutual fund's holdings. Many firms hedge their foreign currency exposure in order to 'reduce foreign currency risk', which mitigates the FX benefit/risk, leaving you just ...
by Clive
Wed Jan 04, 2017 3:16 pm
Forum: Investing - Theory, News & General
Topic: Over the last 40 years, 71% of the stock market's return came from dividends, not capital appreciation,"
Replies: 91
Views: 12173

Re: Over the last 40 years, 71% of the stock market's return came from dividends, not capital appreciation,"

http://www.forbes.com/sites/steveschaefer/2015/11/13/shark-tanks-kevin-oleary-oshares-etfs-investing/#1608df442ba1 So what does this mean? Allocate more of the dividend paying stocks to capture more value? Is there a research out tthere that shows that dividend paying stocks returm more than S&P 500 index? Prof. Kenneth French's data for portfolios formed on dividend yield 1928 onwards yearly data for equal weighted indicates non-dividend to have significantly higher volatility than Hi30 (top 30 ranked by dividend yield) and significantly higher yearly average. Compounded and the two come out at comparable total return (dividends reinvested) annualised (CAGR). Returns for Dividend-Paying and Non-Dividend Paying Firms by Yufen Fu, Tungh...
by Clive
Sat Dec 31, 2016 5:45 am
Forum: Investing - Theory, News & General
Topic: Bogle worried about currency risk in Int'l Stocks
Replies: 34
Views: 5158

Re: Bogle worried about currency risk in Int'l Stocks

Bonds (10+ years), Notes (2 to 10 years), Bills (up to 1 year) ... Currency (immediately swappable 0% yield) tend to be more commonly collectively classified as 'Bonds'. Should you hold bonds issued solely by a single entity, or diversify across different providers as sooner or later a idiot may be in control. States can partially (or even fully) default on their 'bonds'. Most will avoid outright defaults and instead use more opaque methods, such as printing more or adjusting taxation. Printing is like counterfeiting, the person who prints gets to spend that money at the expense of devaluing all other notes in circulation, a form of taxation when performed legally. Holding a bunch of stocks issued by a single entity denominated in a single ...
by Clive
Fri Dec 30, 2016 6:59 pm
Forum: Investing - Theory, News & General
Topic: Bogle worried about currency risk in Int'l Stocks
Replies: 34
Views: 5158

Re: Bogle worried about currency risk in Int'l Stocks

Firms with global/foreign earnings tend to currency hedge to the currency/country they list in, for the greater stability that provides. Sticking with a single stock market/country set of stock listings is a concentration risk, unfavourable taxes/regulations (US applies a 30% dividend withholding tax to foreign investors, UK 0% rates such dividends) could be imposed by the state, or in exceptional circumstances the markets might be closed (2012 Hurricane Sandy for instance). Like with FX/currency trading if some large scale stock influencing event occurs then its nice to have the 'free' insurance of 'extended trading' hours such that you can dump some holdings ahead of the crowd if the need arises (i.e. in foreign markets that open earlier ...
by Clive
Thu Dec 29, 2016 7:25 pm
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 19196

Re: The Argument for More Stocks in Retirement

Another way to look at it is whilst the all-stock minimum historic SWR was around 3% or 4%, the maximum sustainable SWR was around 11% or 12%. More typical average SWR being 5% or 6%. The indications being that if the current SWR rises to being 10% of current portfolio value then going forward that is more inclined to see a outcome closer towards the maximum SWR. Noteworthy is that each of all-stock 20, 30 and 50 year SWR's to the end of 2015 indicate below average outcomes. So either each of 20, 30 and 50 year ago start levels were relatively high, or current (Dec 2015) valuations might have been relatively low such that forward 20, 30, 50 year SWR's might turn out to be above average :) Watch out for the projected late 2017 to 2019 crash ...
by Clive
Thu Dec 29, 2016 7:00 pm
Forum: Investing - Theory, News & General
Topic: All Weather Bond Allocation
Replies: 3
Views: 1311

Re: All Weather Bond Allocation

I was under the impression that Dalio uses a SAFE of 10% gold, 20% STT, 30% T-Bills and 40% TIPS (global), with triggers to switch partially or fully to/from that ... and then uses other asset allocations when apparently safe to do so and leverages to risk parity using appropriately selected assets. LTT's would be better suited to if rates were relatively high, not when at current relative lows and as such would on current risk parity weightings be allocated a much lower weighting (if any) than in the past. The All Weather was a one size fits all general suggestion. Not sure, but believe that the last tweak was back in mid 2013 when Dalio convened Bridgewater managers to make adjustments in reflection of excessive risk exposure to rising in...
by Clive
Thu Dec 29, 2016 5:45 am
Forum: Investing - Theory, News & General
Topic: The Argument for More Stocks in Retirement
Replies: 166
Views: 19196

Re: The Argument for More Stocks in Retirement

Thanks for those historic insights AlohaJoe. The same might be said for stocks across the 20th century. For instance UK tax rates and costs were much higher in the past, nor were the tax-advantaged choices as beneficial. Some traded via post and market makers alongside brokers could make a killing (maybe 5% ... even 10%+ spreads). The Beatles sang about 'Taxman', "19 for you, 1 for me ... taxman" in the 1960's in reflection of 95% tax rates, which coincided with periods of high inflation/interest rates/dividend yields. The 'stock market' casino has much favourable attractor publicity, the realities can be markedly different. By the time you factor in costs, spreads, taxes, inflation alongside a tendency for average investors to re...
by Clive
Thu Dec 29, 2016 4:34 am
Forum: Investing - Theory, News & General
Topic: Picking Individual Stocks Is Dangerous
Replies: 62
Views: 9547

Re: Picking Individual Stocks Is Dangerous

That's some pretty epic under performance. I'd bet it would be hard to under perform by that much even if you tried! If if were that easy to relatively underperform the index by individual stock picking then hedge fund management would be a walk in the park ... long index, short individual stocks. More generally a smaller subset of the index will tend to see variance around that index, typically above and below over different time periods, and on average compare to the index. If costs are considered a factor then initially diversifying widely in equal amounts across 33 stocks that collectively produce 3% dividend yield, accumulating the dividends and adding another stock to the set each year ... has a modest initial setup cost (purchase 30...