Search found 716 matches

by Park
Mon Aug 03, 2020 1:46 pm
Forum: Investing - Theory, News & General
Topic: Who's doing 100% international equity?
Replies: 129
Views: 17537

Re: Who's doing 100% international equity?

https://www.starcapital.de/en/research/studies/ https://www.starcapital.de/fileadmin/user_upload/img/StarCapital/Kapitalmarktforschung/Research_Prognose_01.png Except at the extremes, the dispersion of returns at any particular CAPE is not small. I modestly tilt towards regional stock subasset class...
by Park
Mon Aug 03, 2020 11:43 am
Forum: Investing - Theory, News & General
Topic: Who's doing 100% international equity?
Replies: 129
Views: 17537

Re: Who's doing 100% international equity?

http://www.fortunefinancialadvisors.com/blog/the-limits-of-cape-analysis-for-global-market-rotation "Consider the case of Sweden which, hit a Japan-like CAPE high of 79 in early 2000. At the same time, the U.S. was also at its all-time high, but seemingly a relative bargain at just 47. Since then th...
by Park
Mon Aug 03, 2020 1:26 am
Forum: Investing - Theory, News & General
Topic: REIT's and Rick Ferri
Replies: 97
Views: 17220

Re: REIT's and Rick Ferri

https://humbledollar.com/2020/05/betting-on-bricks/ "CEM Benchmarking’s 2019 study reviewed asset class returns of public and private sector pensions, and found that their REIT returns over the last 20 years significantly outperformed both private funds and internally managed real estate." https://w...
by Park
Sat Jul 18, 2020 9:53 pm
Forum: Investing - Theory, News & General
Topic: Count Cash as Fixed Income?
Replies: 80
Views: 3327

Re: Count Cash as Fixed Income?

The following is for beginner investors, like myself. Consider cash in your wallet. It's completely liquid and there is no chance of nominal loss. That makes it different from fixed income. The liquidity means it can be used as an asset to match unknown liabilities (emergencies); you're managing ris...
by Park
Tue Jun 16, 2020 8:21 am
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 2054
Views: 162569

Re: Small Cap Value heads Rejoice !!!

https://www.morningstar.com/articles/988237/small-value-stocks-peril-and-opportunity A link to a column by John Rekenthaler at morningstar. "Even at peak conditions, most small value firms are relatively unprofitable. Nor are they financially robust, recording an average grade of C+ on Morningstar’s...
by Park
Sun May 03, 2020 1:19 am
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12787

Re: The Bottom Line on Factor Investing

there are also risks DonIce mentioned that apply much more to growth stocks than value stocks. A priori, these are much more compelling risks and are precisely why we intuitively think of Tesla or Facebook as being riskier than Johnson & Johnson. Ultimately, as you seem to acknowledge, even if ther...
by Park
Sat May 02, 2020 6:29 pm
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12787

Re: The Bottom Line on Factor Investing

value companies are NOT riskier Assume there are two companies that are very similar, except for their risk. In order to compensate for increased risk, expected return will increase. Increased expected return will likely manifest as lower price multiples for the company of higher risk. Of the two c...
by Park
Sat May 02, 2020 6:00 pm
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12787

Re: The Bottom Line on Factor Investing

value companies are NOT riskier Assume there are two companies that are very similar, except for their risk. In order to compensate for increased risk, expected return will increase. Increased expected return will likely manifest as lower price multiples for the company of higher risk. Of the two c...
by Park
Sat May 02, 2020 5:27 pm
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12787

Re: The Bottom Line on Factor Investing

Value/growth is not the only way to differentiate companies based on risk. However,If you believe that the market prices risk well in the long run, value/growth will reflect risk. Why is value more risky than growth? For a value company to meet expectations, all it has to do is keep plodding along....
by Park
Sat May 02, 2020 3:36 pm
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12787

Re: The Bottom Line on Factor Investing

With value stocks, the idea that they are riskier is reverse engineered from looking at performance data over some period of time. If the performance data had been the opposite, it would been easy to come up with plausible explanations for why growth stocks are riskier. For example, if FF had made ...
by Park
Sat May 02, 2020 1:20 pm
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12787

Re: The Bottom Line on Factor Investing

especially if a group of people think these stocks have some ability to create excess returns when in fact they do not (the Emperor has No Clothes effect). Packer Your point is well taken. Value stocks don't have an inherent ability to create excess returns; it is the pricing of value stocks that c...
by Park
Sat May 02, 2020 12:37 pm
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12787

Re: The Bottom Line on Factor Investing

If there are two companies, which are very similar except for risk, I"m going to expect a higher return for the more risky company. This is true, only if the market compensates for that risk. However, not all risks such as idiosyncratic risks are compensated. There are few who doubt that there is a...
by Park
Sat May 02, 2020 9:43 am
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12787

Re: The Bottom Line on Factor Investing

Many believe that factors such as small and value have been arbitraged away. But there’s an even stronger case to be made that the equity premium itself has been arbitraged away by efficient markets. Indeed, since 2000 the Shiller CAPE has remained at historic highs, consistent with such a hypothes...
by Park
Mon Apr 27, 2020 10:10 pm
Forum: Personal Investments
Topic: Lifecycle Investing Leverage Strategy Using LEAPS - How To?
Replies: 140
Views: 19036

Re: Lifecycle Investing Leverage Strategy Using LEAPS - How To?

I abandoned this strategy; when I looked at the effective interest rates, it didn't make sense. That doesn't mean I abandoned leverage. Several weeks ago, as per my IPS based on valuations, I went 125% asset allocation to stocks in my open account. I'm using IB margin loans. Based on personal experi...
by Park
Wed Apr 08, 2020 1:23 am
Forum: Investing - Theory, News & General
Topic: What is the CAPE of US Small Value?
Replies: 11
Views: 993

Re: What is the CAPE of US Small Value?

https://mailchi.mp/verdadcap/whats-priced-in?e=b838bc224f Figure 1: March 2020 vs. June 2009 TEV/EBITDA Multiples https://mcusercontent.com/6dc62f307511d466ff78a94fe/images/56c109e8-a9a8-4149-9b09-a21a210de030.png "Growth stocks in the US and Europe are still 30–40% more expensive than 2009. By cont...
by Park
Sat Apr 04, 2020 4:25 pm
Forum: Investing - Theory, News & General
Topic: Margin loan or leveraged ETFs?
Replies: 19
Views: 1294

Re: Margin loan or leveraged ETFs?

About leveraged ETFs, you're making a bet on the price of the underlying assets and you're also making a bet on the volatility of those assets. The effect of the volatility bet can have a very significant impact on the return of the first bet.
by Park
Sat Apr 04, 2020 4:04 pm
Forum: Investing - Theory, News & General
Topic: What is the CAPE of US Small Value?
Replies: 11
Views: 993

Re: What is the CAPE of US Small Value?

https://www.osam.com/Commentary/blizzardwintericeage https://portalvhdst3l6zspf51mvl.blob.core.windows.net/osam/blogphotos/photo_1732.PNG "when we compare the earnings yield of the cheapest small stocks (cheapest decile by price-to-earnings) to the most expensive decile of large cap stocks, we see a...
by Park
Sat Apr 04, 2020 12:54 pm
Forum: Investing - Theory, News & General
Topic: What is the CAPE of US Small Value?
Replies: 11
Views: 993

Re: What is the CAPE of US Small Value?

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2736423 The above link provides research examining the forecasting ability of CAPE and price book. From the paper, "the results may even suggest that PB is superior to CAPE". It is possible to get price book data on small value. https://www.etf.co...
by Park
Sat Apr 04, 2020 12:32 pm
Forum: Investing - Theory, News & General
Topic: What is the CAPE of US Small Value?
Replies: 11
Views: 993

Re: What is the CAPE of US Small Value?

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2736423 The above link provides research examining the forecasting ability of CAPE and price book. From the paper, "the results may even suggest that PB is superior to CAPE". It is possible to get price book data on small value. https://www.etf.com...
by Park
Sat Apr 04, 2020 11:55 am
Forum: Investing - Theory, News & General
Topic: What is the CAPE of US Small Value?
Replies: 11
Views: 993

What is the CAPE of US Small Value?

https://www.multpl.com/shiller-pe It is relatively easy to get an estimate of the CAPE of the S&P500. The source above gives an estimate of 23.49. However, my guess is that if you divide the US stock market by small//mid/large and value/blend/growth, there is significant diversity of CAPE between th...
by Park
Wed Feb 05, 2020 1:08 pm
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 63
Views: 11909

Re: Jason Hsu and William Bernstein Like Overbalancing

https://www.morningstar.com/podcasts/the-long-view/41 It looks like Ben Carlson and Ritholtz Wealth Management also like overbalancing: "In recent years, we have made just a slight overallocation to international markets...it's something that we think over the next three, five, seven years can poten...
by Park
Sat Feb 01, 2020 10:17 am
Forum: Personal Investments
Topic: Tilt In Stock Subasset Allocation Based On CAPE (Overbalancing)
Replies: 7
Views: 495

Re: Tilt In Stock Subasset Allocation Based On CAPE (Overbalancing)

A fundamental index is a reasonable option, although it doesn't work as well in my case. If one is using fundamental indices, then overbalancing is of lesser importance, although you can still make a case for it. https://www.starcapital.de/fileadmin/user_upload/files/publikationen/Research_2016-01_P...
by Park
Fri Jan 31, 2020 2:44 pm
Forum: Personal Investments
Topic: Tilt In Stock Subasset Allocation Based On CAPE (Overbalancing)
Replies: 7
Views: 495

Re: Tilt In Stock Subasset Allocation Based On CAPE (Overbalancing)

https://www.starcapital.de/fileadmin/user_upload/files/publikationen/Research_2016-01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling.pdf In the above link, there is a figure (Fig. 6) at the top of page 11, which shows the relationship between CAPE and average real return over the next 10-15 y...
by Park
Fri Jan 31, 2020 12:49 am
Forum: Personal Investments
Topic: Tilt In Stock Subasset Allocation Based On CAPE (Overbalancing)
Replies: 7
Views: 495

Re: Tilt In Stock Subasset Allocation Based On CAPE (Overbalancing)

There is a disparity between the market capitalization data that I presented and that derived from VT. For an investor using US domiciled market cap mutual funds/ETFs, the VT data is more relevant. I agree that a 10% relative tilt doesn't move the needle much. I'm not sure that less than a 10% relat...
by Park
Thu Jan 30, 2020 12:59 pm
Forum: Personal Investments
Topic: Tilt In Stock Subasset Allocation Based On CAPE (Overbalancing)
Replies: 7
Views: 495

Tilt In Stock Subasset Allocation Based On CAPE (Overbalancing)

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=199349&p=4933165&hilit=Overbalancing#p4933165 The above thread is one I started on overbalancing. That's where you go a step beyond rebalancing to one's original asset allocation, and instead mildly increase one's asset allocation to underperform...
by Park
Thu Jan 23, 2020 8:41 pm
Forum: Investing - Theory, News & General
Topic: Lowest cost way to get leveraged equity exposure
Replies: 49
Views: 3705

Re: Lowest cost way to get leveraged equity exposure

I'm presently reading "The Sceptical Investor" by John Stepek: "If you use leverage, you are transforming volatility risk - risk that sceptical investors can ignore to their advantage - into a genuine risk, one that can cause the permanent loss of capital. That why so many people lose so much money ...
by Park
Sat Jan 18, 2020 12:39 am
Forum: Investing - Theory, News & General
Topic: Lowest cost way to get leveraged equity exposure
Replies: 49
Views: 3705

Re: Lowest cost way to get leveraged equity exposure

https://pbs.twimg.com/media/EN3Tg4IU8AAntJe?format=png&name=small The S&P500 assets to equity ratio is about 4. So there's lots of leverage when you buy an S&P500 index fund. The companies that make up the S&P500 can often borrow on better terms than the individual investor, and their borrowing cos...
by Park
Sun Jan 05, 2020 1:00 am
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 63
Views: 11909

Re: Jason Hsu and William Bernstein Like Overbalancing

I'm thinking about overbalancing between stock subasset classes... I can't predict when a stock subasset class will reach its relative peak or nadir. I would expect no more than modest benefit from this strategy, so I plan to make modest portfolio changes. I would plan to own a little more of what ...
by Park
Sun Jan 05, 2020 12:31 am
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 63
Views: 11909

Re: Jason Hsu and William Bernstein Like Overbalancing

If there are two stock indices with the same means and volatilities, and their correlation is less than 1.0, then rebalancing does not affect the arithmetic return, but it does reduce the volatility of returns, and therefore it boosts the geometric return and Sharpe ratio. https://awealthofcommonse...
by Park
Sat Jan 04, 2020 10:00 am
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 63
Views: 11909

Re: Jason Hsu and William Bernstein Like Overbalancing

https://www.aqr.com/Insights/Research/White-Papers/Portfolio-Rebalancing-Part-1-Strategic-Asset-Allocation The paper gives autocorrelations for asset classes between 1972-2014. Positive autocorrelation favors momentum. Negative autocorrelation favors reversion to mean. US stocks: 12 months 0.05, 3 y...
by Park
Wed Jan 01, 2020 3:34 pm
Forum: Investing - Theory, News & General
Topic: Why does rebalancing reduce total return?
Replies: 25
Views: 3085

Re: Why does rebalancing reduce total return?

If there are two stock indices with the same means and volatilities, and their correlation is less than 1.0, then rebalancing does not affect the arithmetic return, but it does reduce the volatility of returns, and therefore it boosts the geometric return and Sharpe ratio. https://awealthofcommonse...
by Park
Tue Dec 31, 2019 8:38 am
Forum: Investing - Theory, News & General
Topic: Getting deeper small-cap value exposure in taxable is almost free
Replies: 59
Views: 13669

Re: Getting deeper small-cap value exposure in taxable is almost free

The bid ask spread on RZV is not trivial, although that is less of an issue for a long term investor. But AUM in RZV is 208 million, and that number might be a little too close to closure risk territory for some. The last point is relevant to a long term investor in a taxable account.
by Park
Sat Dec 28, 2019 11:53 pm
Forum: Investing - Theory, News & General
Topic: Jason Hsu and William Bernstein Like Overbalancing
Replies: 63
Views: 11909

Re: Jason Hsu and William Bernstein Like Overbalancing

Rob Arnott likes overbalancing: "So you have to buy when people are selling, you have to buy what’s out of favor, unloved and legitimately creating fear. One way to do this, a simplistic way to do this is to set a policy mix and just rebalance back to it. Let’s go with the classic 60/40. Stocks rall...
by Park
Tue Dec 17, 2019 8:59 am
Forum: Investing - Theory, News & General
Topic: My 3 buckets: 1 yr cash + 2 yr bond + stocks
Replies: 114
Views: 10665

Re: My 3 buckets: 1 yr cash + 2 yr bond + stocks

https://www.kitces.com/blog/managing-sequence-of-return-risk-with-bucket-strategies-vs-a-total-return-rebalancing-approach/ About a rebalancing strategy versus a buckets strategy, I found the above link from Michael Kitces to be useful. The purpose of a buckets strategy is to decrease the risk of ne...
by Park
Wed Dec 04, 2019 12:33 am
Forum: Investing - Theory, News & General
Topic: My 3 buckets: 1 yr cash + 2 yr bond + stocks
Replies: 114
Views: 10665

Re: My 3 buckets: 1 yr cash + 2 yr bond + stocks

I'm not sure I understand the logic of the bucket approach. If I read you right, it sounds like you are draining your safe buckets as the market falls and holding your stocks because you think they will bounce back. This seems like market timing. Instead, why not determine your asset allocation and...
by Park
Tue Dec 03, 2019 12:38 am
Forum: Investing - Theory, News & General
Topic: My 3 buckets: 1 yr cash + 2 yr bond + stocks
Replies: 114
Views: 10665

Re: My 3 buckets: 1 yr cash + 2 yr bond + stocks

"The Bucket Approach for Retirement: A Suboptimal Behavioral Trick?" Abstract: "A bucket approach, which broadly consists of parking a few years of annual withdrawals safely in cash and investing the rest of the portfolio more aggressively, is a popular strategy often recommended by financial plann...
by Park
Sun Dec 01, 2019 11:24 am
Forum: Investing - Theory, News & General
Topic: My 3 buckets: 1 yr cash + 2 yr bond + stocks
Replies: 114
Views: 10665

Re: My 3 buckets: 1 yr cash + 2 yr bond + stocks

A criticism of a buckets strategy is that because one's asset allocation varies depending on market conditions, it's market timing. And if it's market timing, that's a bad idea; few are successful at market timing. That assumes one considers cash and bonds as investments. But if a financial product ...
by Park
Mon Oct 14, 2019 12:11 pm
Forum: Investing - Theory, News & General
Topic: When Is The Bid Ask Spread Lowest During The Trading Day?
Replies: 20
Views: 2073

Re: When Is The Bid Ask Spread Lowest During The Trading Day?

I may have answered my own question. I've been reading "Muscular Portfolios" by David Livingston. Since I wrote the original post, I've come to a section of the book where it discusses bid ask spreads on ETFs. My conclusion is that for ETFs that invest in the US, the bid ask spread will be lower, if...
by Park
Sun Oct 13, 2019 6:40 pm
Forum: Investing - Theory, News & General
Topic: When Is The Bid Ask Spread Lowest During The Trading Day?
Replies: 20
Views: 2073

When Is The Bid Ask Spread Lowest During The Trading Day?

Many on this board invest in ETFs; some invest in individual stocks ( https://www.bogleheads.org/wiki/Passively_managing_individual_stocks ). Both of those have a cost in the bid ask spread. Does the bid ask spread change enough in a predictable pattern during a trading day that there are better tim...
by Park
Mon Sep 30, 2019 8:47 am
Forum: Investing - Theory, News & General
Topic: Why not use Margin Loan as eFund?
Replies: 63
Views: 4998

Re: Why not use Margin Loan as eFund?

You may very well be right about HELOC being changed only due to the change in value of the house. Perhaps my memory fails me, but I thought that I've read posts on this board from those who had the HELOCs revoked, rather than just changed due to the change in value of the house. About margin lendin...
by Park
Mon Sep 30, 2019 12:04 am
Forum: Investing - Theory, News & General
Topic: Why not use Margin Loan as eFund?
Replies: 63
Views: 4998

Re: Why not use Margin Loan as eFund?

Using a margin loan, HELOC, personal loan, 0% purchase APR credit card, or cash-out refi In a recent post, there is mention that in the last recession, many banks stopped offering 0%APR and many banks cut existing credit line limits. https://en.wikipedia.org/wiki/Home_equity_line_of_credit "In 2008...
by Park
Wed Sep 25, 2019 12:39 am
Forum: Investing - Theory, News & General
Topic: A Simple Market Timing Strategy That Works?
Replies: 19
Views: 2602

A Simple Market Timing Strategy That Works?

https://www.whitecoatinvestor.com/6-things-to-do-in-a-bear-market/ The above link is a good article on what to do in a bear market, and includes several strategies that are commonly suggested. However, it also includes a strategy, that is less often discussed: "Defer Major Purchases and Prioritize I...
by Park
Tue Sep 24, 2019 11:43 pm
Forum: Investing - Theory, News & General
Topic: One Reason Why Factor Investing May Continue To Work
Replies: 3
Views: 734

One Reason Why Factor Investing May Continue To Work

Some factors, such value, have both behavioral and risk arguments to support them. Others, such as momentum and quality, are thought to be primarily behavioral in origin. This raises the question, that if markets become more efficient with time, factor investing will be less successful. https://alph...
by Park
Tue Sep 24, 2019 9:44 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6980

Re: Larry Swedroe: Individual Stock Investing Increases Risk

Many financial assets are hybrids of underlying assets. An example would be corporate bonds being a hybrid of government bonds and stocks. When you buy VBR (Vanguard small cap value fund), you're buying a hybrid. You're buying a market cap fund and a small cap value portfolio of stocks. This applies...
by Park
Sun Sep 22, 2019 8:14 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6980

Re: Larry Swedroe: Individual Stock Investing Increases Risk

Maybe DFA, Bridgeway, and the creators of other factor products ought to fire all their managers and analysts and save money by hiring monkeys to throw darts...You are also pointing out that there are a whole lot more Mid/Small Cap stocks than Large Cap stocks, so darts thrown at a dartboard ought ...
by Park
Sat Sep 21, 2019 11:42 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6980

Re: Larry Swedroe: Individual Stock Investing Increases Risk

But the important point is that a random 30 equal weighted stock portfolio turned over every year beat the market on average by 1.7% on a precost basis. That's due to a tilt towards small and value. The tilt (compared to a market-cap weighted index) would be toward small; I don't believe that it wo...
by Park
Sat Sep 21, 2019 11:22 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6980

Re: Larry Swedroe: Individual Stock Investing Increases Risk

From Patrick O'Shaughnessy's blog: http://investorfieldguide.com/2014115how-concentrated-should-you-make-your-value-portfolio/ "I set up portfolios which bought the absolute cheapest stocks trading in the U.S. (including ADRs). Portfolios ranged from 1 stock to 100 stocks, and stocks needed to have ...
by Park
Sat Sep 21, 2019 11:16 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Individual Stock Investing Increases Risk
Replies: 105
Views: 6980

Re: Larry Swedroe: Individual Stock Investing Increases Risk

https://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the-market/#7b9dc646630a The following though is from an article by Rick Ferri, an indexing advocate, in Forbes. He's quoting work done by Research Affiliates. "the company randomly selected 100 portfolios containing 30 stocks fro...
by Park
Tue Aug 20, 2019 12:21 am
Forum: Investing - Theory, News & General
Topic: Why Zero (or Negative) Interest Rates Could Someday Make Sense
Replies: 92
Views: 7306

Re: Why Zero (or Negative) Interest Rates Could Someday Make Sense

The following is from a financial neophyte, so please feel free to correct me. If I go short on investment products with negative interest rates, I can make a profit. There are costs to shorting, so interest rates have to be sufficiently negative to overcome those costs. Nevertheless, doesn't this p...
by Park
Fri Aug 09, 2019 11:28 pm
Forum: Investing - Theory, News & General
Topic: Small Value Tilting Increases Exposure To Unknown Risks?
Replies: 7
Views: 921

Small Value Tilting Increases Exposure To Unknown Risks?

Those who tilt to small and value make the case that such a tilt increases diversification. The argument is that the tilt increases exposure to different risks. The assumption is that just as there is risk associated with the market premium, there is also risk associated with the small and value pre...