Search found 178 matches

by jln
Sun Mar 31, 2013 7:17 am
Forum: Investing - Theory, News & General
Topic: John Norstad website
Replies: 5
Views: 1508

Re: John Norstad website

You should write a book ... I did write a book - it's the finance page on my web site, I just didn't get it published by a third party! The series of "homework" papers on MPT, when smashed together in order from first to last, is pretty much indistinguishable from a book. But that book is heavy on ...
by jln
Sat Mar 09, 2013 10:24 am
Forum: Investing - Theory, News & General
Topic: Interesting asset allocation experiment
Replies: 14
Views: 1483

Re: Interesting asset allocation experiment

Would you share how you found an apartment for 3 months and the approximate range of pricing for that area of Paris? Our goal is to also spend 3 to 6 months in Paris sometime in the next 3 years and so far all apartments we have seen, seem more geared to annual rentals. Also looking to do the same ...
by jln
Sat Mar 09, 2013 10:09 am
Forum: Investing - Theory, News & General
Topic: Interesting asset allocation experiment
Replies: 14
Views: 1483

Re: Interesting asset allocation experiment

So John...is your equity share in Total World Stock? :happy My version of Taylor's famous four fund portfolio: 35% Vanguard Total Stock Market Index Fund Admiral Shares 15% Vanguard Total International Index Fund Admiral Shares 25% Vanguard Total Bond Market Index Fund Admiral Shares 25% Vanguard I...
by jln
Sat Mar 09, 2013 4:45 am
Forum: Investing - Theory, News & General
Topic: Interesting asset allocation experiment
Replies: 14
Views: 1483

Re: Interesting asset allocation experiment

Since you're the one who wrote the simulation you should already be aware that just because a computer can print out a number to arbitrarily many decimal places doesn't necessarily mean those digits signify anything. The precision of the output is no better than the precision of the least precise i...
by jln
Thu Mar 07, 2013 10:41 am
Forum: Investing - Theory, News & General
Topic: Interesting asset allocation experiment
Replies: 14
Views: 1483

Re: Interesting asset allocation experiment

NYBoglehead wrote:While you seem to have thought it out, I'm not sure I would change my AA to increase the probability by 0.2%. That's just me.
The probability decreases by 0.2%, from 3.0% to 2.8%. Not a huge deal to be sure, but it is in fact heading in the right direction!

John Norstad
by jln
Thu Mar 07, 2013 10:09 am
Forum: Investing - Theory, News & General
Topic: Interesting asset allocation experiment
Replies: 14
Views: 1483

Interesting asset allocation experiment

Hi all. I'm 64 and retired. For about 15 years, since I first got interested in Finance in the late 90's, I've held through thick and thin a 60/40 stock/bond portfolio, currently invested in Taylor's famous four fund Vanguard portfolio. I have also written some simulation software that tells me amon...
by jln
Sun Jan 06, 2013 9:27 am
Forum: Personal Finance (Not Investing)
Topic: Personal finances for 3 months in Paris
Replies: 15
Views: 1592

Personal finances for 3 months in Paris

Bonjour à tous le monde. I'm going to be living in Paris for 3 months this summer and taking a class at the Sorbonne. What's the best way to arrange my personal finances during this visit? My bank (JP Morgan Chase) charges a 3% transaction fee when I use my Visa charge card. At least, that's what th...
by jln
Fri Nov 09, 2012 7:22 am
Forum: Investing - Help with Personal Investments
Topic: Stocks for the long run good book?
Replies: 20
Views: 3949

Re: Stocks for the long run good book?

this article written by some random guy Gee, I don't FEEL random - I feel pretty much non-stochastic, or something like that. Hey, trying to be funny ain't easy this early in the morning. But your main point is quite valid. I have absolutely no academic or any other credentials, so you have to judg...
by jln
Wed Apr 18, 2012 12:41 pm
Forum: Investing - Theory, News & General
Topic: How to think about diversification
Replies: 124
Views: 7725

Re: How to think about diversification

Apple is a great example. Apple could easily be toast in a few years. Yes. !5 years ago it was in fact almost toast. Then Steve Jobs came back and saved the company. Now sadly Steve is gone. What's going to happen next? Continued success, or another downward spiral like in the 80's and 90's when St...
by jln
Wed Apr 18, 2012 8:28 am
Forum: Investing - Theory, News & General
Topic: How to think about diversification
Replies: 124
Views: 7725

Re: How to think about diversification

Think about diversifying across the economy vs. diversifying across companies. We'll use Apple as an example of a big company with 5% of "the economy" (or, more properly speaking, 5% of the total value of the investable equity in the US). We'll use Joe's Auto Parts as an example of a tiny company wi...
by jln
Wed Mar 28, 2012 7:41 am
Forum: Investing - Theory, News & General
Topic: Think Twice About that Financial Advisor
Replies: 44
Views: 4760

Think Twice About that Financial Advisor

Harold Pollack has an interesting blog post titled Think twice about that financial advisor that talks about a new NBER paper. Here's a digested version: The correct advice pretty much fits on a single sheet of paper that is available for free at the public library. Moreover, the products one should...
by jln
Tue Feb 21, 2012 3:21 pm
Forum: Investing - Theory, News & General
Topic: What are your metrics?
Replies: 15
Views: 1184

Re: What are your metrics?

I measure my portfolio's performance using its monthly internal rate of return data for the last 36 months. For benchmark data I use S&P 500 monthly returns, US 1 month T-bill monthly returns, and monthly Fama-French data from Ken French's web site. I update my data and recalculate at the beginning ...
by jln
Thu Feb 16, 2012 1:21 pm
Forum: Personal Finance (Not Investing)
Topic: At what age did you start feeling old?
Replies: 110
Views: 11018

Re: At what age did you start feeling old?

When I was 20 in college and a high school kid called me "sir" in a fast food restaurant when he asked if he could take a chair from my table. I still remember it quite well. I was shocked. For real? Probably around 50 or so when I discovered I no longer had either the physical energy or the passion...
by jln
Thu Feb 16, 2012 1:11 pm
Forum: Investing - Theory, News & General
Topic: Are SWR studies "joint-and-survivor?"
Replies: 41
Views: 2702

Re: Are SWR studies "joint-and-survivor?"

I have a Monte Carlo simulator that I wrote for my personal use that deals with this issue. It knows my current age and my wife's current age. It also has CDC mortality tables for males and females. In each simulation, the software uses the mortality tables to compute random death dates for me and m...
by jln
Thu Jan 12, 2012 5:03 pm
Forum: Personal Consumer Issues
Topic: Coffee
Replies: 64
Views: 9042

Re: Coffee

We like Metropolis Redline Espresso. We use a DeLonghi espresso coffee maker. We buy a 5lb bag mail order every 3-4 weeks and store it as is in the closed bag in a dry closet. We use a cheap blade grinder but grind it fine. Metropolis is a local small Chicago company.

John Norstad
by jln
Thu Jan 12, 2012 4:39 pm
Forum: Personal Consumer Issues
Topic: Do you own Apple products?
Replies: 114
Views: 8035

Re: Do you own Apple products?

In my family of 3 (not counting a daughter who doesn't live with us): 1 MacBook Pro 1 iMac 1 iPad 3 iPhones 1 Apple TV 1 Time Capsule 3 Airport Express -- 11 Total Not counting old equipment in storage that is no longer in active use (various iPods, etc.) I've been an addict since 1984 (and an Apple...
by jln
Sun Jan 08, 2012 8:47 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

Can you summarize what’s been done in that kind of utility assessments of investments? – utility maximizing where the utility to be maximized is purchasing power produced from her cash flow plan for her future needs and goals?? Dick Purcell Wikipedia gives a nice summary: Intertemporal Consumption ...
by jln
Sat Jan 07, 2012 10:59 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

John's simulator shows that the timing of IRA distributions has a bigger impact than return means, No, the return mean has a much bigger impact. The Roth vs. Rollover IRA issue has a smaller impact that is still significant, and turns out to be fairly independent of the return mean assumption. Conf...
by jln
Sat Jan 07, 2012 7:39 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

The more I study the problem though the more I start to wonder if annuities aren't as horrible as they're made out to be. I guess I'm going to have to go do some more research there, I've somewhat neglected them so far. Same here. I want to some major research and thinking about this in terms of ou...
by jln
Sat Jan 07, 2012 6:57 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

Don't withdraw more than 4% inflation adjusted This one was the big problem for me, because in planning for retirement I quickly realized that our needs for portfolio withdrawals were not even close to being constant. Before my wife and I start taking social security, we have to take all of our nee...
by jln
Sat Jan 07, 2012 6:28 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

In posts I just use "about 1 chance in 3 of being outside geomean +/- std". That's perfectly OK for short horizons like one year - the difference is just a rounding error in this situation. But it doesn't work at all for longer horizons like 10-40 years, where you start to see absurdities like a 1 ...
by jln
Fri Jan 06, 2012 8:34 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

Very very slow double-take. ... OK, then, what is the correct measure of variability ? Obviously (?) not the standard deviation of the raw data, but the standard deviation of the logarized data (?). And that's where I block... You've made a good start. In the normal distribution model we have geome...
by jln
Fri Jan 06, 2012 8:11 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

You have done a good job with this. But that seems all too rare. Thanks, Rodc. I try! Number 1 lesson: How enormously uncertain it all is. Cumulative density function graphs show likely outcomes ranging from an ending portfolio value of 0 (failure) up to many millions of dollars. And that's even ig...
by jln
Thu Jan 05, 2012 4:19 pm
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

Isn't it amazing how after all that modeling all you've basically got is what your gut was already telling you? Sometimes, but not always. My gut can only take me so far. When my gut does express an opinion, and it happily happens to agree with my simulations, I take that to be a nice sanity check ...
by jln
Thu Jan 05, 2012 9:01 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

People are forever trying to make finance a branch of physics, trying desperately to tame the uncertainty by this sort of analysis. Life is uncertain, no amount of math is going to fix that. Just my take, but I think this sort of stuff (and I have done plenty of it over the years) is of no value to...
by jln
Thu Jan 05, 2012 8:06 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

Central Limit Theorem, which says if a large collection of random variables are independent, identically distributed, and have finite variance, then in the limit their sum must be normally distributed. FWIW that is the most common version, perhaps better named the Additive Version of the Central Li...
by jln
Wed Jan 04, 2012 9:06 am
Forum: Investing - Theory, News & General
Topic: Distribution of returns
Replies: 100
Views: 5265

Re: Distribution of returns

In the random walk model, stock returns are lognormally distributed. This is at best a rough first-order approximation to how markets actually work. Here's what I wrote about this problem in section 7 of my paper Random Walks , where I develop the mathematics of the model. The main tool used to deri...
by jln
Fri Dec 30, 2011 12:48 pm
Forum: Investing - Theory, News & General
Topic: Risk vs uncertainty
Replies: 142
Views: 10293

Why standard deviation?

There's some compelling math behind the common practice of using standard deviation as a measure of the informal notion of "risk," at least in contexts compatible with the exposition that follows. Define a risk averse investor to be any investor who has the following two properties: 1. No matter how...
by jln
Fri Nov 04, 2011 2:06 pm
Forum: Investing - Theory, News & General
Topic: My new web site address
Replies: 14
Views: 1484

Re: My new web site address

I will be a devoted follower greedily devouring any future additions to the new website. Stay tuned. I have ideas for work this winter on at least 3 new papers, on pre-retirement glide paths (the stuff Wade and I and others were discussing at length a few months ago), more portfolio survival studie...
by jln
Fri Nov 04, 2011 2:03 pm
Forum: Investing - Theory, News & General
Topic: My new web site address
Replies: 14
Views: 1484

Re: European financial follies

When I want to see how things are going in Europe, I look at this chart first. It is not a pretty picture. Notice that today's spread, since the introduction of the Euro, is a new high. :cry: Paul Krugman follows these spreads too and posts the same charts on his blog, so you're in good company. Ve...
by jln
Fri Nov 04, 2011 1:59 pm
Forum: Investing - Theory, News & General
Topic: My new web site address
Replies: 14
Views: 1484

Re: My new web site address

John I'd be very interested in seeing your current portfolio allocation. I've always been a fan of Peter Bernstein's "60/40 Solution", and that's what I've done for 15 years now, since I took an interest in investing back in the late 1990s. After I finish the rollover from TIAA-CREF to Vanguard, I ...
by jln
Fri Nov 04, 2011 8:36 am
Forum: Investing - Theory, News & General
Topic: My new web site address
Replies: 14
Views: 1484

My new web site address

Good morning! I'm 5 weeks into retirement now and enjoying it very much. I wanted to let people know that my web site has a new address. Apple will be discontinuing their MobileMe web hosting service in June 2012, so I had to find a new home for my finance papers and articles and other stuff. The ol...
by jln
Sun Sep 04, 2011 8:07 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

2. In the population of people below goal, there is a preponderance of people hopelessly below. For example, 10 years from rapid decline of capability to work, maybe $100k in savings. I think that here is a terrible moral dilemma: What to advise? Start saving more, right now, as much as you can, fo...
by jln
Sun Sep 04, 2011 7:03 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

jln - If you have a Vanguard account, go to the bottom right corner of the login page and click the "Financial Engines plan" link under the Services menu. That will bring you to the FinancialEngines.com website, which is the one founded by Bill Sharpe . This software does exactly as you describe. I...
by jln
Sat Sep 03, 2011 9:10 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

Can someone please explain the "CRRA", "DRRA", and "IRRA" acronyms? jln - Your utility function tutorial, An Introduction to Utility Theory is excellent. I can now understand what's being discussed. LadyGeek: I'm very sorry to be so late in my reply. I somehow missed your question and only saw it t...
by jln
Sat Sep 03, 2011 7:53 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

To get serious for a moment, that fantasy tool I outlined is actually doable. I've spent a professional lifetime designing and developing this kind of software in other disciplines, and the technology is up to the task. Some parts are harder than others. The parts that talk to the outside world (inv...
by jln
Sat Sep 03, 2011 6:44 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

You present me this choice? – A. Maintain my U = E(r) – ½ * A * (Little Greek thing)^2 OR B. Improve my prospects for dollars I present you with this equivalent choice: A. Keep the probabilities of the bad cat food outcomes low. OR B. Improve my prospects for dollars by going more aggressive. That'...
by jln
Fri Sep 02, 2011 3:52 pm
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

Then I had a better – scratch that, safer – idea. To retain a modicum of focus in the exchanges, and in self-defense, communicate with you only by Twitter. Ha! LOL. But best to use short words of just one syl like Paul S did. Would slow me down. Said this with 178 chars and only 1-syl words BTW. Ha...
by jln
Fri Sep 02, 2011 3:45 pm
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

I think to serve the investor's interests, it has to be based on (a) current balance, (b) goal, and (c) required return rate to get from (a) to (b). To go from those variables to allocations, we consider various allocations' return-rate probabilities -- and maybe there is where we consider somethin...
by jln
Fri Sep 02, 2011 1:52 pm
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

First, Wade - congratulations and best of luck! I remember when my own kids were born. It's a really, really big day. I've got two of them, but they're 25 and 30 years old now. This post is kind of a combined reply to lots of other ones and wanders around talking about several topics. I'm not going ...
by jln
Fri Sep 02, 2011 12:30 pm
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

So IRRA below goal and DRRA above goal fits people's values and interests. But this idea that the more overshoot there is in your nest egg, the more willing you are and ought to be to gamble it on trying to get FURTHER funds... well, it not only does not make sense to me, I can't imagine myself act...
by jln
Fri Sep 02, 2011 12:14 pm
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

I don't want to try to include all factors such as saving rate -- just allocation as I proceed year by year from start to defined end $$ goal. But why exclude all other factors? If you're short of your goal, making your allocation more aggressive is only one of several things you can do. Shouldn't ...
by jln
Fri Sep 02, 2011 8:58 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

This is a personal story. So we've being doing all this talking about glide paths, and at the same time I'm at the very end of my own glide into retirement (one month left). This prompted me to think about all the decisions I've made over my years of saving for this glorious day. I started saving fo...
by jln
Thu Sep 01, 2011 3:36 pm
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

OK, Dick, let's get creative and have some fun. Imagine a tool that monitors your portfolio over time. You've told it your goal, and it knows your asset allocation, glide path plan, savings rate, and desired retirement date. It alerts you if you go off the path towards your goal. The tool shows a th...
by jln
Thu Sep 01, 2011 2:15 pm
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

I think what you just did is vary return rate for one year out in the middle of the glide curve. Yes, as a quick example of possible "jags" from one year to the next. What about effect on the current allocation from deviations in the return rates of all the prior years? That would change the overal...
by jln
Thu Sep 01, 2011 11:01 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

But I doubt if we'd see very many changes like, for example, a sudden 10% change in the allocation to stocks from one year to the next. Well, I don't have time to do full simulations and graphs right now, but I was able to do a single simple calculation as an example. Look at the curve for A=3 at y...
by jln
Thu Sep 01, 2011 10:28 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

bobcat2 wrote:The idea is to get them a safe level of income thru SS, DB pension, and annuitization.
Excellent. This idea has always appealed to me too. At least enough to meet basic living expenses. Let the portfolio support fancy vacations and other non-essentials.

John Norstad
by jln
Thu Sep 01, 2011 9:18 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

No one is forced to annutize in the DC Managed Plan, although it is encouraged. It is, however, apparently used by the professionals managing the plan to price your retirement income goal prior to retirement. I believe pricing a deferred life annuity before retirement is how they determine whether ...
by jln
Thu Sep 01, 2011 9:05 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

John – I have a question based on a sequence of messages in this thread regarding your glide path graph. For conciseness, in the three numbered items just below I’m paraphrasing excerpts from those messages, fairly I hope: 1. In your graph, a glide path specifies asset allocation for each year thro...
by jln
Thu Sep 01, 2011 7:57 am
Forum: Investing - Theory, News & General
Topic: Redefining risk
Replies: 261
Views: 30861

Re: Effect of sequence of returns on portfolio

It's completely symmetric. This isn't completely true. The general principle is true that large losses and large gains have a greater impact closer to the retirement date both before and after retirement. But the details usually differ. Typically, the number of years of saving before retirement is ...