Search found 79 matches

by skeptic42
Wed Dec 04, 2019 5:07 pm
Forum: Investing - Theory, News & General
Topic: [Wiki article update - Inverse and leveraged ETFs]
Replies: 116
Views: 4005

Re: [Wiki article update - Inverse and leveraged ETFs]

I think volatility drag and volatility decay are related phenomena, but not necessarily the same. Volatility drag expresses the difference between arithmetic and geometric means due to volatility. Volatility decay happens due to continuously rebalancing a volatile leveraged asset allocation. (e.g. ...
by skeptic42
Wed Dec 04, 2019 9:42 am
Forum: Investing - Theory, News & General
Topic: [Wiki article update - Inverse and leveraged ETFs]
Replies: 116
Views: 4005

Re: [Wiki article update - Inverse and leveraged ETFs]

I think volatility drag and volatility decay are related phenomena, but not necessarily the same. Volatility drag expresses the difference between arithmetic and geometric means due to volatility. Volatility decay happens due to continuously rebalancing a volatile leveraged asset allocation. (e.g. a...
by skeptic42
Wed Nov 20, 2019 2:30 pm
Forum: Non-US Investing
Topic: Global Government Bonds ETFs hedged to EUR - available in Germany
Replies: 3
Views: 336

Re: Global Government Bonds ETFs hedged to EUR - available in Germany

All your 3 found funds track the same index, "FTSE World Government Bond Index - Developed Markets". I think they are different share classes of one and the same bond fund. And number 1 is not hedged to EUR.
by skeptic42
Sat Nov 02, 2019 3:50 pm
Forum: Non-US Investing
Topic: What bond funds do you hold or would you ideally hold as a non-US investor, is global aggregate enough?
Replies: 21
Views: 2463

Re: What bond funds do you hold or would you ideally hold as a non-US investor, is global aggregate enough?

StarsChild wrote:
Sat Nov 02, 2019 2:23 pm
I would like to go for iglo or IAAA but from my research the only etf which is accumulating and eur edged is aggg, right? Any other option in this area?
There is an accumulating Global Govt Bond ETF hedged to EUR from Xtrackers (DBZB).
by skeptic42
Tue Sep 03, 2019 2:16 am
Forum: Non-US Investing
Topic: The cost of hedging for aggregate bond investors
Replies: 13
Views: 1024

Re: The cost of hedging for aggregate bond investors

From what I have read, hedging from US to EUR takes about 3% from your yield. So for instance, if YTM for Vanguard Global Aggregate Bond UCITS ETF EUR Hedged Accumulating (VAGF) is 1.3%, this means our nominal return is -1.7%, while if we also adjust with inflation, it gets about -2.8% real return....
by skeptic42
Sun Sep 01, 2019 5:27 pm
Forum: Investing - Theory, News & General
Topic: Rob Arnott on value investing and the Achilles' heel of market cap indexing (Morningstar podcast)
Replies: 62
Views: 6208

Re: Rob Arnott on value investing and the Achilles' heel of market cap indexing (Morningstar podcast)

There's no beating around the bush: total market funds are large cap funds for all intents and purposes. From 1993 until now, the annualized returns of VTSMX (TSM) and VFINX (S&P 500) were separated by just one basis point, and all other metrics were nearly identical. That doesn't make TSM or marke...
by skeptic42
Sat Aug 31, 2019 3:37 am
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 126
Views: 7769

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

However, as robermcd stated, I still am of the opinion that leveraging the STT (which generally have a higher sharpe ratio) is preferred over using LTT. I think using leveraged STT is possibly a very reasonable strategy, though it sounds to me very much like an attempt at arbitrage. And I generally...
by skeptic42
Tue Aug 27, 2019 7:26 am
Forum: Investing - Theory, News & General
Topic: "Factors" and language misuse
Replies: 71
Views: 3950

Re: "Factors" and language misuse

Thanks for this great summary, stlutz! But investing in the total market (however that is defined) has a much richer set of exposures than the dismissal, “You’re just investing in beta”. IMO this is one of the most annoying statements in all of these factor threads. As you noted the factors are arbi...
by skeptic42
Tue Aug 27, 2019 6:14 am
Forum: Investing - Theory, News & General
Topic: At what point would Bonds be considered a bubble or 'speculative asset'?
Replies: 51
Views: 4967

Re: At what point would Bonds be considered a bubble or 'speculative asset'?

In my view, an interest rate of zero or less is not a natural state of things. A person should naturally demand a “liquidity premium” of some amount to incent him to tie up his money in a bond rather than cash. Having a zero or negative liquidity premium makes no sense to me. So a common sense defi...
by skeptic42
Sat Aug 24, 2019 4:19 am
Forum: Investing - Theory, News & General
Topic: [Larry Swedroe: Small Value Stocks are Cheap, Factor Investing Works]
Replies: 673
Views: 29213

Re: Larry Swedroe: Factor Investing Works (Despite What Some May Say)

... Again, I totally agree that it's possible that the theory is sound, and it just hasn't worked out in the short time we've been using it... But any reasonable person should be able to wonder, if maybe, just maybe, the theory is wrong. That is not a stupid position to take. +1 One could call it t...
by skeptic42
Tue Aug 20, 2019 5:42 am
Forum: Investing - Theory, News & General
Topic: Total market index fund and recency
Replies: 29
Views: 2163

Re: Total market index fund and recency

He (John Bogle)argued any benefits from small, value, and other departures from the total market, were temporary anomalies that would come out in the wash due to mean reversion. My understanding is that the important thing is not that small and value will do better, but that they are less correlate...
by skeptic42
Sun Aug 11, 2019 2:47 pm
Forum: Investing - Theory, News & General
Topic: Factors, tilting, and efficient markets
Replies: 55
Views: 3631

Re: Factors, tilting, and efficient markets

The momentum behavioral stories are lacking some logic as well:
1. Investors tend to sell their winners too early and hold their losers too long.
2. Investors tend to follow the herd, buying recent winners and selling recent losers.
by skeptic42
Sat Aug 03, 2019 3:48 am
Forum: Investing - Theory, News & General
Topic: Asset Allocation w/ Bond Yields at Zero%
Replies: 12
Views: 1932

Re: Asset Allocation w/ Bond Yields at Zero%

I am from Europe and I hold a bond ETF including negative yields, because I don't want to hold 100% stocks. Funny thing, the return of the bond ETF was not so bad despite negative yields. Nevertheless, if you look at the stocks/bonds portfolio as a whole, the negative yield of some bonds is not that...
by skeptic42
Tue Jul 30, 2019 9:15 am
Forum: Investing - Theory, News & General
Topic: John Bogle's "Philosophical Disagreement" with Eugene Fama
Replies: 104
Views: 11622

Re: John Bogle's "Philosophical Disagreement" with Eugene Fama

I mean, if small and value stocks are RISKIER then they should continue to outperform... otherwise, why would we expect stocks to beat bonds? But, are small and value stocks riskier? Small stocks seem to be riskier, but sometimes people prefer riskier things just for fun, like gambling. I am not co...
by skeptic42
Sat Jun 22, 2019 4:41 am
Forum: Investing - Theory, News & General
Topic: Net worth and risk tolerance
Replies: 30
Views: 4974

Re: Net worth and risk tolerance

My head is spinning :shock: I heard two interpretation on this issue. 1) The higher the net worth, the higher the risk tolerance. Example: a 20% drop in a $5m portfolio is more tolerable than a 20% drop in $200k portfolio. 2) The lower the net worth, the higher the risk tolerance. Example: a 20% dr...
by skeptic42
Wed Jun 19, 2019 11:57 am
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 113
Views: 10550

Re: Utilities - worth another look?

What if instead of VPU (utilities etf) we used one utility stock. NextEra (NEE) is the largest holding in VPU. Consider this portfolio: 50% VTI / 50% NEE According to portfolio visualizer, NEE and VTI have a correlation of 0.4. Therefore, the above portfolio should be objectively more diversified t...
by skeptic42
Tue Jun 18, 2019 6:42 pm
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 113
Views: 10550

Re: Utilities - worth another look?

Do you know what weights would be assigned to each sector, if you maximize the diversification ratio of a portfolio built of all sectors which are part of TSM? I was out of town for funeral this weekend, but I just ran the numbers and got this: 38.88% Vanguard Utilities ETF ( VPU ) 18.04% Vanguard ...
by skeptic42
Mon Jun 17, 2019 9:46 am
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 113
Views: 10550

Re: Utilities - worth another look?

Mathematically speaking, the logical issue is due to the diversification ratio is not associative. That means the DR of assets A,B,C is not the same as the DR of (A,B),C. For example, three assets with the exact same volatilities and expected returns and zero correlations, it is logical from symmetr...
by skeptic42
Sun Jun 16, 2019 5:27 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Has The Value Trade Become Overcrowded.
Replies: 64
Views: 5225

Re: Larry Swedroe: Has The Value Trade Become Overcrowded.

As I've said in other threads, whenever we have the next significant and sustained downturn in the market, I predict that value will outperform nicely just because it hasn't gone up as much --value stocks seem to be playing their more traditional role of being the less risky part of the market. The...
by skeptic42
Sun Jun 16, 2019 3:26 pm
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 113
Views: 10550

Re: Utilities - worth another look?

That's a good observation. A similar logical issue occurs with risk parity. IMO this logical issue makes the diversification ratio less useful as an objective measurement of diversification, because the DR of TSM alone is 1, adding VPU increases the DR, but VPU is already part of TSM, so you are ad...
by skeptic42
Sun Jun 16, 2019 3:32 am
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 113
Views: 10550

Re: Utilities - worth another look?

Portfolio A: 100% TSM Portfolio B: 50% TSM / 50% VPU (utilities) Is Portfolio B objectively more diversified? If so, how do you know? Is there a metric you look at to determine this? This is a serious question. I’ve been thinking a lot about diversification and I’m not sure how to measure it in a l...
by skeptic42
Sat Jun 15, 2019 5:43 pm
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 8426

Re: What is wrong with AQR?

One cannot believe in efficient markets and also think that much more volatile small value stocks don't have higher expected returns than TSM--that's like saying you don't believe much higher SD stocks don't have higher expected returns than tbills. The factor research discovered a low volatility a...
by skeptic42
Fri Jun 14, 2019 6:23 pm
Forum: Investing - Theory, News & General
Topic: Factors: After being spotted in the wild, where have they gone?
Replies: 22
Views: 2559

Re: Factors: After being spotted in the wild, where have they gone?

Much the same pattern can be seen in commodities (or, at any rate, collateralized commodities funds). And in managed futures funds. Here's a chart for managed futures. There is a Credit Suisse Managed Futures Liquid index (grey), and up through 2008 it was going gangbusters, about 11% per year. Exc...
by skeptic42
Fri Jun 14, 2019 10:08 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

Packer, here's an entirely different view of your statement When you deviate from a market weighted portfolio, you are saying you know better than the market on average on how to weight stocks in a portfolio When you deviate from market it's because you want to avoid the concentration of risk in th...
by skeptic42
Thu Jun 13, 2019 3:47 pm
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

I have not seen a successful multi-factor fund that has truly done better than the TSM funds. Small sample but INTF did better than TSM funds since inception. ISCF did even better . The first group appears pretty close (no where near the 2% difference folks have been talking about). For the second ...
by skeptic42
Thu Jun 13, 2019 10:25 am
Forum: Investing - Theory, News & General
Topic: What is wrong with AQR?
Replies: 128
Views: 8426

Re: What is wrong with AQR?

Shouldn't a long position in a futures contract return almost the same as an investment in the underlying asset?
Then why was the performance of managed futures so bad?
How could they miss all the returns of stocks and bonds in the last years?
by skeptic42
Thu Jun 13, 2019 9:53 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

The factors argument in my view boils down to this. If they are based solely on risk, the quants and the computers could arbitrage them away. If they are based on human nature, the quants and computers could hold them down for a while before human nature and human behavior, the cycle of greed and f...
by skeptic42
Thu Jun 13, 2019 5:55 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

The factors argument in my view boils down to this. If they are based solely on risk, the quants and the computers could arbitrage them away. If they are based on human nature, the quants and computers could hold them down for a while before human nature and human behavior, the cycle of greed and f...
by skeptic42
Mon Jun 10, 2019 7:12 am
Forum: Investing - Theory, News & General
Topic: The logical fallacy behind "Bonds Are For Safety"
Replies: 248
Views: 17359

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

Isn't the immunization concept a similar "fallacy of composition"?
Immunization makes sense for a bond portfolio, but not so much for a stock/bond portfolio, or what is the duration of a stock/bond portfolio?
by skeptic42
Thu Jun 06, 2019 10:45 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

Skeptic This is such an important topic I thought I would weigh in "One can invest in the total market portfolio without talking about factors. Just weight all securities according to their market weight. This is a simple and sensible approach to harvest the market return." First, completely agree....
by skeptic42
Wed Jun 05, 2019 2:56 pm
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

Thanks for your great explanation, vineviz! I agree, it is mostly a matter of taste/risk preference to choose a portfolio with or without factors. But I don' agree with this: The other factors are academic constructs which help to better explain asset pricing. On the contrary, market beta is a much ...
by skeptic42
Wed Jun 05, 2019 10:42 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

I agree that factors are a unique source of risk. But I disagree that the currently known factors are a unique source of positive return in the future, because we cannot know it yet. Completely true. And that statement applies equally to the market factor. All we can do is think in terms of expecte...
by skeptic42
Wed Jun 05, 2019 8:49 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

I agree that factors are a unique source of risk. But I disagree that the currently known factors are a unique source of positive return in the future, because we cannot know it yet. Nonetheless, it's only reasonable to expect that if a factor represents a source of excess expected risk that it sho...
by skeptic42
Wed Jun 05, 2019 7:36 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

I agree that factors are a unique source of risk. But I disagree that the currently known factors are a unique source of positive return in the future, because we cannot know it yet. Investors can only ever make decisions based on expected risk and expected return. Reality doesn't always unfold as ...
by skeptic42
Wed Jun 05, 2019 7:12 am
Forum: Investing - Theory, News & General
Topic: Do Buy & Hold Index Investors "need" people to actively invest?
Replies: 26
Views: 2342

Re: Do Buy & Hold Index Investors "need" people to actively invest?

Umm, so what does the Vanguard S&P 500 index fund do when it gets new money? It gets lots of new money every day. Does it not buy the S&P 500 losers so it can outperform the S&P 500? It should buy the losers and the winners proportionally to the market. It is not the goal of an S&P 500 index fund t...
by skeptic42
Wed Jun 05, 2019 4:22 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

I've read Cochrane's Portfolio advice for a multifactor world and it says: An investor should hold, in addition to the market portfolio and risk-free bonds, a number of passively managed style funds that capture the broad (nondiversifiable) risks common to large numbers of investors. celerity: I th...
by skeptic42
Wed Jun 05, 2019 4:16 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 20779

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

All risk assets go through long periods of poor performance. And that clearly includes beta. Which begs the question of why then concentrate risk in that ONE FACTOR when it can go through such long periods, and that just might be the most important period for you? Just saying. The average investor ...
by skeptic42
Wed Jun 05, 2019 3:32 am
Forum: Investing - Theory, News & General
Topic: Do Buy & Hold Index Investors "need" people to actively invest?
Replies: 26
Views: 2342

Re: Do Buy & Hold Index Investors "need" people to actively invest?

Umm, so what does the Vanguard S&P 500 index fund do when it gets new money? It gets lots of new money every day. Does it not buy the S&P 500 losers so it can outperform the S&P 500? It should buy the losers and the winners proportionally to the market. It is not the goal of an S&P 500 index fund t...
by skeptic42
Sat May 25, 2019 5:27 am
Forum: Investing - Theory, News & General
Topic: My trend following strategy and experience
Replies: 1023
Views: 83125

Re: My trend following strategy and experience

Obviously, a market timer expects that his endeavor will produce better results than just holding the market, more return for less risk than the market. Sure, betting on trends seem to allow that outperformance in the past. But there is a real risk that it will not work in the future and there is a,...
by skeptic42
Wed May 22, 2019 6:03 pm
Forum: Investing - Theory, News & General
Topic: My trend following strategy and experience
Replies: 1023
Views: 83125

Re: My trend following strategy and experience

Will, what danger are you trying to protect yourself from? Behavioral mistakes, where a 50%-70% downturn will make you sell? Or are you protecting yourself from the (tiny, but not-zero) possibility that the U.S. stock market will crash and not come back? Yes and yes. Also, I would know that I would...
by skeptic42
Wed May 22, 2019 4:20 pm
Forum: Investing - Theory, News & General
Topic: My trend following strategy and experience
Replies: 1023
Views: 83125

Re: My trend following strategy and experience

Will, what danger are you trying to protect yourself from? Behavioral mistakes, where a 50%-70% downturn will make you sell? Or are you protecting yourself from the (tiny, but not-zero) possibility that the U.S. stock market will crash and not come back? Yes and yes. Also, I would know that I would...
by skeptic42
Wed May 22, 2019 10:32 am
Forum: Investing - Theory, News & General
Topic: My trend following strategy and experience
Replies: 1023
Views: 83125

Re: My trend following strategy and experience

Funny, if an unlucky sequence of whipsaws causes "The Big One" for a market timer, the B&H investor will not even notice. I'm not sure about "causes," but the idea is that the triggers that might signal false positives (whipsaws) are economic conditions like S&P 500 falling below the 200 day MA, un...
by skeptic42
Wed May 22, 2019 10:03 am
Forum: Investing - Theory, News & General
Topic: My trend following strategy and experience
Replies: 1023
Views: 83125

Re: My trend following strategy and experience

Funny, if an unlucky sequence of whipsaws causes "The Big One" for a market timer, the B&H investor will not even notice.
by skeptic42
Wed May 22, 2019 4:53 am
Forum: Investing - Theory, News & General
Topic: My trend following strategy and experience
Replies: 1023
Views: 83125

Re: My trend following strategy and experience

Kind of interesting, GEM identical performance to a US investor's global portfolio, post-GFC. 2010-2019. The simple momentum model orientated toward taking advantage of bear markets made the same money as a diversified portfolio in a bull market. US/ex-US/Intermediate bonds 40/30/30, $10,000 become...
by skeptic42
Tue May 21, 2019 4:48 am
Forum: Investing - Theory, News & General
Topic: My trend following strategy and experience
Replies: 1023
Views: 83125

Re: My trend following strategy and experience

I don't understand the whipsaw boogeyman being thrown about. A single whipsaw event will simply see the strategy lose out on gains, which as OP has consistently stated, is not dissimilar to a 50/50 AA. A second whipsaw event closely following or following with no gains after the first whipsaw will ...
by skeptic42
Mon May 20, 2019 8:19 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Trend Following As Insurance
Replies: 110
Views: 5888

Re: Larry Swedroe: Trend Following As Insurance

These funds are unrelated to a strategy which is long the S&P or long bonds. They are trading commodity options, doing all kinds of things under the term 'Trend'. Stocks have a positive expected return whereas livestock futures are a zero sum game. These managed futures funds should exploit trends,...
by skeptic42
Thu May 16, 2019 3:56 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Trend Following As Insurance
Replies: 110
Views: 5888

Re: Larry Swedroe: Trend Following As Insurance

Does anyone know any examples of real-world mutual funds that a) are known to use trend following, and b) have had inception earlier than 2008... and if possible earlier than 2000... so that we can see how they did in bear markets, and how they did compared to stock/bond allocations with comparable...
by skeptic42
Thu May 16, 2019 6:18 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Trend Following As Insurance
Replies: 110
Views: 5888

Re: Larry Swedroe: Trend Following As Insurance

Past performance has a tendency to persist. Stocks sorted on their prior 6 or 12 month returns, separated into deciles, show a perfect staircase of increasing performance for the subsequent 12 months. Losers continue to lose. To be frank; we should be more sceptical of the efficacy of stock momentu...