Search found 1092 matches

by acegolfer
Fri Sep 07, 2018 3:46 pm
Forum: Investing - Theory, News & General
Topic: Where's the Inflation Hedge for Short-Term TIPS?
Replies: 79
Views: 4518

Re: Where's the Inflation Hedge for Short-Term TIPS?

Sure. Breakeven inflation rate is the difference between the yield on a TIPS and the yield on a nominal treasury with the same maturity. Since you know what yield curve is, you just need to look at the two curves (real and nominal) for the date I mentioned (July 14, 2017). Since the CPI-U tables ju...
by acegolfer
Fri Sep 07, 2018 2:14 pm
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

Discussing risks without considering the investment horizon. Suppose John will retire in 20 years and invests in a 20-yr zero-coupon bond today. a. after 20-yrs, he will earn a guaranteed risk-free rate of return. It's a risk-free asset. b. bond price fluctuates year to year. The stdev of annual bon...
by acegolfer
Fri Sep 07, 2018 1:24 pm
Forum: Investing - Theory, News & General
Topic: Where's the Inflation Hedge for Short-Term TIPS?
Replies: 79
Views: 4518

Re: Where's the Inflation Hedge for Short-Term TIPS?

If we accept that the breakeven inflation rate reflects "expected inflation," then yes it has. Inflation has been 2.95% over the past twelve months (latest reported CPI-U July 2018 versus July 2017). The breakeven inflation rate for five year TIPS twelve months ago was 1.62% (using July 14 treasury...
by acegolfer
Fri Sep 07, 2018 1:16 pm
Forum: Investing - Theory, News & General
Topic: asset allocation -- why bond/stock split first?
Replies: 25
Views: 1985

Re: asset allocation -- why bond/stock split first?

Is it reasonable to expect a portfolio of zero coupon bonds with a 20 or 30 year maturity to be more volatile than a portfolio of utility stocks paying high dividend yields? Yes, I'd say so. Yes, for year-to-year price volatility, it can be bigger. However, ppl who buy 20-yr zero coupon bond don't ...
by acegolfer
Fri Sep 07, 2018 12:49 pm
Forum: Investing - Theory, News & General
Topic: asset allocation -- why bond/stock split first?
Replies: 25
Views: 1985

Re: asset allocation -- why bond/stock split first?

That said, it's not strictly true that stocks are riskier than bonds (at least when measured by price volatility, as in standard MPT). From 2010 to present, the most volatile ETF offered by Vanguard has been a treasury bond fund (Vanguard Extended Duration Trs ETF, ticker EDV). Even the shorter dur...
by acegolfer
Fri Sep 07, 2018 12:40 pm
Forum: Investing - Theory, News & General
Topic: Are the stock market movements really random?
Replies: 37
Views: 2811

Re: Are the stock market movements really random?

+1, for both michaeljc70 posts. When I take the dog out off-leash, his path is not random. Every step is taken with intention and in response to some combination of internal and external factors. It also can not be predicted by any available means. Suppose stock market is not random. What's the pra...
by acegolfer
Fri Sep 07, 2018 7:24 am
Forum: Investing - Theory, News & General
Topic: Good time to do value investing?
Replies: 37
Views: 2491

Re: Good time to do value investing?

Rather than.time factors I like to diversify across factors, for example, value, momentum, quality, size, and market make a powerful combo. It is better to hold one fund that targets all the factors you want, rather than separate funds for value, momentum etc. I do long only portfolios except for m...
by acegolfer
Fri Sep 07, 2018 7:23 am
Forum: Investing - Theory, News & General
Topic: Where's the Inflation Hedge for Short-Term TIPS?
Replies: 79
Views: 4518

Re: Where's the Inflation Hedge for Short-Term TIPS?

As I've already posted earlier in this thread, this has actually happened for TIPS purchased one year ago. It's not a hypothetical. 8-) Can you provide some real numbers on your TIPS? 1. What's the term to maturity? (or maturity date) 2. What's the coupon rate? 3. What's the adj par value? (or adj....
by acegolfer
Fri Sep 07, 2018 7:14 am
Forum: Investing - Theory, News & General
Topic: asset allocation -- why bond/stock split first?
Replies: 25
Views: 1985

Re: asset allocation -- why bond/stock split first?

The practice of bond/stock asset allocation first is derived from capital market line (CML). CML represents all combinations of tangency portfolio and risk-free asset. Depending on one's risk profile, his optimal investment will be on this line.
by acegolfer
Fri Sep 07, 2018 7:05 am
Forum: Investing - Theory, News & General
Topic: Good time to do value investing?
Replies: 37
Views: 2491

Re: Good time to do value investing?

Empirical results represent effect. Theories explaining them represent cause. When investing for the long term, it’s important to understand cause (as much as one can) so that you can be comfortable with your choices and stick with them. Well said. There are many causes to value premium. Using one ...
by acegolfer
Fri Sep 07, 2018 6:57 am
Forum: Investing - Theory, News & General
Topic: Are the stock market movements really random?
Replies: 37
Views: 2811

Re: Are the stock market movements really random?

What I mean is their is some random elements to it and some non-random elements. When two tennis (or golf or whatever) players face off, is who is going to win random? What if player A won 3 times in previous match-ups and player B won 3 times in previous matchups? I don't think anyone would say wh...
by acegolfer
Thu Sep 06, 2018 1:09 pm
Forum: Investing - Theory, News & General
Topic: Are the stock market movements really random?
Replies: 37
Views: 2811

Re: Are the stock market movements really random?

I'm curious about what the implication of this question is.

If random, then we can't predict the movement. Invest in passive funds.
If not random, then what can one practically do?
by acegolfer
Thu Sep 06, 2018 11:47 am
Forum: Investing - Theory, News & General
Topic: Are the stock market movements really random?
Replies: 37
Views: 2811

Re: Are the stock market movements really random?

michaeljc70 wrote:
Thu Sep 06, 2018 11:34 am
I don't think it is random. I also don't think it can be predicted.
Can you elaborate the difference between the 2? Isn't random = can't predict?
by acegolfer
Thu Sep 06, 2018 10:48 am
Forum: Investing - Theory, News & General
Topic: Is it necessary to diversify across Factors?
Replies: 126
Views: 9543

Re: Is it necessary to diversify across Factors?

By diversifying across risk factors, I agree that one can lower stdev of overall investment. This is a simple math in a multi-factor asset pricing model. What about other risks? Ppl who advocate factor investing think risk of investment portfolio is stdev and nothing else. Correct me, if wrong. By h...
by acegolfer
Thu Sep 06, 2018 10:13 am
Forum: Investing - Theory, News & General
Topic: Good time to do value investing?
Replies: 37
Views: 2491

Re: Good time to do value investing?

No. What we learned about value investing is based on empiricals (not on fundamental theory). Using past history, we found value investing performed better than what CAPM indicated. To justify this value anomaly, we came up with many reasonable risks. You mentioned 2 of them. If you use 1 justificat...
by acegolfer
Thu Sep 06, 2018 9:37 am
Forum: Personal Consumer Issues
Topic: Experience With No Car? (Uber/Lyft)
Replies: 31
Views: 2823

Re: Experience With No Car? (Uber/Lyft)

I have been using uber/lyft to commute for 4 years. I sold my car but the wife still has a car. pros: can work during commute no hassle on parking/maintenance got closer with colleagues (sometimes they give me ride home) ride different cars cons: obviously, cost (in my case, annual cost ~$2k, cheape...
by acegolfer
Thu Sep 06, 2018 7:40 am
Forum: Investing - Theory, News & General
Topic: Where's the Inflation Hedge for Short-Term TIPS?
Replies: 79
Views: 4518

Re: Where's the Inflation Hedge for Short-Term TIPS?

You probably have more knowledge than I, but my understanding was that this was particularly true for moderate inflation (2-4%), but for higher inflation (>5%) stocks have historically done poorly. Not necessarily bear market, money losing poorly but rather more poorly than long term averages. The ...
by acegolfer
Wed Sep 05, 2018 7:58 pm
Forum: Investing - Theory, News & General
Topic: 100% Bonds to boost returns?
Replies: 61
Views: 6392

Re: 100% Bonds to boost returns?

No. They. Are. Not. You cannot assign any significant mathematical likelihood to a Random Walk. That is the root of your problem and the reason why you are seeking all the wrong solutions. Stay the course. This is false. Only short term movements are quasi-random/chaotic. Long term returns are base...
by acegolfer
Wed Sep 05, 2018 2:29 pm
Forum: Investing - Theory, News & General
Topic: Where's the Inflation Hedge for Short-Term TIPS?
Replies: 79
Views: 4518

Re: Where's the Inflation Hedge for Short-Term TIPS?

I have a different view on TIPS from most BHs. Since my stock returns are positively correlated with inflation, I don't need to use TIPS to hedge against the inflation risk. My stocks are the protection against inflation. OTOH, If my portfolio were 100% bonds, then I'd use TIPS because my portfolio ...
by acegolfer
Wed Sep 05, 2018 8:10 am
Forum: Investing - Theory, News & General
Topic: What to look for when investing?
Replies: 12
Views: 964

Re: What to look for when investing?

aristotelian wrote:
Wed Sep 05, 2018 7:58 am
I see. Would you accept "same expected value"? In other words, one dollar of Sears stock has the same market value as a dollar of Amazon stock, etc.
Not sure what you meant by "same expected value." If you consider $1 of egg has the same market value as $1 of milk, then yes to your question.
by acegolfer
Tue Sep 04, 2018 7:09 pm
Forum: Investing - Theory, News & General
Topic: Small-cap exposure in VBR, ie CRSP small-cap value index fund
Replies: 64
Views: 4968

Re: Small-cap exposure in VBR, ie CRSP small-cap value index fund

. According to the porfoliovisualizer data, in fact, for the 2013-2018 data small and value premiums were negative: higher loadings on SMB and HML over this period reduced returns. So either there is no SMB premium or the data set is too short. I chose to use the smaller fund JIC it is the recent d...
by acegolfer
Tue Sep 04, 2018 7:03 pm
Forum: Investing - Theory, News & General
Topic: What to look for when investing?
Replies: 12
Views: 964

Re: What to look for when investing?

aristotelian wrote:
Mon Sep 03, 2018 12:45 pm
The expected return for Sears and GE are exactly the same as for Netflix and Amazon.
This isn't true even if you believe in EMH. The expected return will be higher for the stock with higher systematic risks.
by acegolfer
Tue Sep 04, 2018 3:18 pm
Forum: Investing - Theory, News & General
Topic: Why are you not compensated for taking unsystematic risk?
Replies: 42
Views: 2331

Re: Why are you not compensated for taking unsystematic risk?

you can check a number of blogs and articles, such as this https://www.etf.com/sections/index-investor-corner/swedroe-explaining-low-vol-anomaly-0 or this one more technical and involving leverage to exploit the anomaly http://pages.stern.nyu.edu/~lpederse/papers/BettingAgainstBeta.pdf Just read th...
by acegolfer
Tue Sep 04, 2018 2:28 pm
Forum: Investing - Theory, News & General
Topic: Why are you not compensated for taking unsystematic risk?
Replies: 42
Views: 2331

Re: Why are you not compensated for taking unsystematic risk?

So beta measures the volatility of a stock price relative to the market (e.g. beta<1 means that it is less volatile than the market and beta>1 that it is more volatile) Apparently, we have different definitions for volatility, which is fine. You described volatility as systematic risk. I consider v...
by acegolfer
Tue Sep 04, 2018 12:51 pm
Forum: Investing - Theory, News & General
Topic: Why are you not compensated for taking unsystematic risk?
Replies: 42
Views: 2331

Re: Why are you not compensated for taking unsystematic risk?

IOW, we can express expected excess return of any stock by beta * expected excess market return. E(Ri)-Rf = beta_i * ( E(Rm) - Rf ) But then my understanding is that besides beta, factors like size and value or momentum are also important: how do they fit in? Also, people talk of low volatility (so...
by acegolfer
Tue Sep 04, 2018 10:24 am
Forum: Investing - Theory, News & General
Topic: Why are you not compensated for taking unsystematic risk?
Replies: 42
Views: 2331

Re: Why are you not compensated for taking unsystematic risk?

The following piece of advice has been given to me, on the question of whether buying individual stocks makes sense: The main thing is that you would be taking unsystematic risk. Because unsystematic risk is diversifiable, you are not compensated for taking this risk. I found this quote very intere...
by acegolfer
Mon Sep 03, 2018 5:17 pm
Forum: Personal Consumer Issues
Topic: How much do you spend on kids extracurriculars?
Replies: 85
Views: 4608

Re: How much do you spend on kids extracurriculars?

We spend ~$1k per month for 2 kids. We don't think it's waste of money.
by acegolfer
Sun Sep 02, 2018 6:30 am
Forum: Investing - Theory, News & General
Topic: Portfolio Construction: Total World Stock + TIPS or Treasuries
Replies: 40
Views: 3262

Re: Portfolio Construction: Total World Stock + TIPS or Treasuries

Another way to look at it is to think of the guaranteed return asset as having the same maturity as the rebalancing frequency. So if you rebalance annually, you might use 1-year CD rates. People do usually use 1-month or 3-month T-bills, possibly because they don't want to make assumptions about re...
by acegolfer
Sat Sep 01, 2018 3:42 pm
Forum: Investing - Theory, News & General
Topic: The US debt is even larger than stated
Replies: 25
Views: 2016

Re: The US debt is even larger than stated

A related q: What % of Fed gov't spending is on interest pmt on existing Treasury?
by acegolfer
Sat Sep 01, 2018 11:21 am
Forum: Investing - Theory, News & General
Topic: Portfolio Construction: Total World Stock + TIPS or Treasuries
Replies: 40
Views: 3262

Re: Portfolio Construction: Total World Stock + TIPS or Treasuries

Under CAPM, the risk-free asset is very short term, think like a 1-month nominal T-bill. It's not volatile and doesn't really have more purchasing power risk than TIPS with 1 month left to run. Simplest thing to use is a government money market fund. I don't think CAPM "theory" states the risk-free...
by acegolfer
Sat Sep 01, 2018 5:54 am
Forum: Investing - Theory, News & General
Topic: Investment Books
Replies: 42
Views: 2820

Re: Investment Books

genuine question (sorry for side tracking) What can I learn from these books that I can't from reading investments textbooks? (Please do not twist my question. I'm not suggesting textbooks are better. As part of my training, I read 10+ textbooks. I'm curious what I'm missing by not reading these boo...
by acegolfer
Fri Aug 31, 2018 3:11 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Construction: Total World Stock + TIPS or Treasuries
Replies: 40
Views: 3262

Re: Portfolio Construction: Total World Stock + TIPS or Treasuries

I'll offer a non-BH answer. 1. Apparently, OP understands, in a CAPM world, an individual investor should choose a point on the capital market line (CML). This line is created by a portfolio of market portfolio and a risk-free asset. 2. The question is what is a risk-free asset? In CAPM, it's an ass...
by acegolfer
Fri Aug 31, 2018 8:29 am
Forum: Investing - Theory, News & General
Topic: Today in market history
Replies: 6
Views: 666

Re: Today in market history

I'm amazed that it took 10+ years for the real world to implement what Markowitz, Sharpe, and Lintner found in early 60s. Be that as it may, even after 50 yrs, we still have a lot of individuals who don't buy into it.
by acegolfer
Fri Aug 31, 2018 8:20 am
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

And if both conclusions are statistically valid, It would be my opinion that prudence/logic would dictate that the one mathematically demonstrating the potentially more disastrous outcome would be given more weight, given the importance of one's retirement savings. I saw it recently posted that bog...
by acegolfer
Fri Aug 31, 2018 7:56 am
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

If I had to pick one, it would be the notion that stocks are less risky the longer an investor plans to hold them. For me, that one rises to the top because a lot of major financial decisions (e.g. portfolio composition) are often made solely because, or primarily because, one mistakenly believes t...
by acegolfer
Thu Aug 30, 2018 5:47 pm
Forum: Personal Finance (Not Investing)
Topic: how to find 401k fees
Replies: 13
Views: 1175

Re: how to find 401k fees

At my university, 0.17% servicing fee (annualized) is charged at the end of each quarter. They remove equivalent # of shares from my 401k balance.
by acegolfer
Thu Aug 30, 2018 5:35 pm
Forum: Investing - Theory, News & General
Topic: Can margin be beneficial for long-term investing?
Replies: 61
Views: 3539

Re: Can margin be beneficial for long-term investing?

I think many ppl probably don't realize they are in fact investing with debt. (nothing wrong with it.)
by acegolfer
Thu Aug 30, 2018 2:07 pm
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

so, you DO NOT need MPT to support index fund investing, you just need a simple understanding of markets and the nature of equity returns. True. One doesn't need lots of assumptions behind MPT, CAPM to support index fund investing. Even if 1. stdev is not the right measure of risk 2. return doesn't...
by acegolfer
Thu Aug 30, 2018 12:43 pm
Forum: Investing - Theory, News & General
Topic: Can margin be beneficial for long-term investing?
Replies: 61
Views: 3539

Re: Can margin be beneficial for long-term investing?

I'm still waiting for someone to run the numbers and tell me how far the market needs to fall on 117% margin to have a margin call :D 1. If margin (= equity / market value of investment) < MMR (maintenance margin requirement, which is set by brokerage), then one gets a margin call. 2. In your 117% ...
by acegolfer
Thu Aug 30, 2018 11:32 am
Forum: Investing - Theory, News & General
Topic: Can margin be beneficial for long-term investing?
Replies: 61
Views: 3539

Re: Can margin be beneficial for long-term investing?

I'm still waiting for someone to run the numbers and tell me how far the market needs to fall on 117% margin to have a margin call :D 1. If margin (= equity / market value of investment) < MMR (maintenance margin requirement, which is set by brokerage), then one gets a margin call. 2. In your 117% ...
by acegolfer
Thu Aug 30, 2018 11:01 am
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

so if you assume the phenomena, in this case market returns, is normally distributed when it is not, you are going to be very wrong in assuming that large changes in returns are as incredibly unlikely as one would expect given a normal distribution with thin tails. they aren't. if the variance is a...
by acegolfer
Thu Aug 30, 2018 7:55 am
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

GrowthSeeker wrote:
Thu Aug 30, 2018 7:22 am
It's not that the term "standard deviation" is misunderstood, but drawing conclusions based on an assumed underlying Normal Distribution when the actual data is not really distributed normally can lead to faulty conclusions and bad decisions.
example of faulty conclusions and bad decisions?
by acegolfer
Thu Aug 30, 2018 6:10 am
Forum: Investing - Theory, News & General
Topic: Can margin be beneficial for long-term investing?
Replies: 61
Views: 3539

Re: Can margin be beneficial for long-term investing?

OP,

I recommend you to first study 2 things: margin trading + capital market line. Once you understand these 2 concepts, then you will learn why trading on margin is not necessarily a bad thing (despite what ppl say in BH).

If you have q's with these 2 topics, feel free to ask.
by acegolfer
Wed Aug 29, 2018 2:37 pm
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

Small / value stocks have higher expected returns than what CAPM indicates because they are riskier without really understanding what "risk" they are referring to. Risk of bankruptcy doesn't count? These are distressed companies. How did they fair during the Great Depression? Yes. Financial distres...
by acegolfer
Wed Aug 29, 2018 2:34 pm
Forum: Investing - Theory, News & General
Topic: Small Value Premium - How Do You View It?
Replies: 113
Views: 9539

Re: Small Value Premium - How Do You View It?

1. Tracking error to the market portfolio 2. Liquidity problems in a crisis are far worse for small caps both on their balance sheets and if they need to be traded. 3. Factor crowding risks like in 2005-07 leading to the quant crash, though that is more a long/short and leveraged problem. 4. Transa...
by acegolfer
Wed Aug 29, 2018 2:28 pm
Forum: Investing - Theory, News & General
Topic: Small Value Premium - How Do You View It?
Replies: 113
Views: 9539

Re: Small Value Premium - How Do You View It?

Need to look at the portfolio as a whole. If increase SV tilt and decrease overall equity exposure, then can keep overall portfolio risk constant. With regard to describing the SV risks, you’re getting at the limits of my knowledge. Many have described the unique risks as “doing badly in bad times”...
by acegolfer
Wed Aug 29, 2018 11:35 am
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

Small / value stocks have higher expected returns than what CAPM indicates because they are riskier without really understanding what "risk" they are referring to.
by acegolfer
Wed Aug 29, 2018 11:07 am
Forum: Investing - Theory, News & General
Topic: Most commonly misused/misunderstood investing terms and concepts (on BH forum)
Replies: 220
Views: 11239

Re: Most commonly misused/misunderstood investing terms and concepts (on BH forum)

Is there a better quantitative measure for risk? Not being facetious, genuinely curious. There may be. But I have not seen any study showing other risk measurements (not loadings) explaining cross-section of expected returns. The real reason why we teach standard deviation as a measurement of inves...