Search found 28 matches

by Eric R
Sun Jan 23, 2011 12:22 am
Forum: Investing - Help with Personal Investments
Topic: an argument against tilting
Replies: 84
Views: 7357

What do you mean? Are you saying that small and/or value has uncompensated risk? That's not what an efficient market should provide. If you truly believe that there is no premium there, then you should not only avoid a tilt that way, you should tilt away from it. If the risks are not compensated, i...
by Eric R
Sun Jan 23, 2011 12:08 am
Forum: Investing - Theory, News & General
Topic: a theoretical argument against tilting
Replies: 16
Views: 1894

Investors tilt to SCV to increase returns. Bonds are there to reduce risk. Bonds should not be compared with tilting. Also the effect of tilting on a balanced portfolio is not going to be substantial, unless SCV outperforms TSM by a big margin (for which the possibility exists that it will massively...
by Eric R
Fri Jan 21, 2011 10:34 pm
Forum: Investing - Help with Personal Investments
Topic: an argument against tilting
Replies: 84
Views: 7357

If one has more tolerance for risk, why not tilt their asset allocation toward equities (from 60/40 to for example 65/35)?
by Eric R
Fri Jan 21, 2011 4:34 pm
Forum: Investing - Help with Personal Investments
Topic: an argument against tilting
Replies: 84
Views: 7357

That maybe a sign that the SCV premium has been factored in the price already. What do you mean? Are you saying that small and/or value has uncompensated risk? That's not what an efficient market should provide. If you truly believe that there is no premium there, then you should not only avoid a t...
by Eric R
Fri Jan 21, 2011 2:03 am
Forum: Investing - Help with Personal Investments
Topic: an argument against tilting
Replies: 84
Views: 7357

livesoft wrote:Maybe it is time for another SCV poll? Past polls show that folks who overweight SCV outnumber TMW folks at least among folks who respond to polls.


That maybe a sign that the SCV premium has been factored in the price already.
by Eric R
Thu Jan 20, 2011 7:12 pm
Forum: Investing - Help with Personal Investments
Topic: an argument against tilting
Replies: 84
Views: 7357

The expense ratios are higher for SCV that TSM.
by Eric R
Tue Jan 18, 2011 6:56 pm
Forum: Personal Finance (Not Investing)
Topic: New car vs. used car: what are lifetime saving of used cars?
Replies: 78
Views: 13734

I did a comparison a few years back when I was going to buy a car. I came to the conclusion that for someone willing to keep the car for 10-12 years or more, there is no major advantage in buying slightly used versus new. It may be safer to buy new, just to make sure the car was not abused and to us...
by Eric R
Mon Jan 17, 2011 12:36 am
Forum: Investing - Theory, News & General
Topic: 280% Stocks or 0% Stocks? I'm confused.
Replies: 60
Views: 6419

Rick Ferri wrote: A good rule of thumb, i.e. Adrians Rule, is to invest only the amount in stocks that you can stand to lose 50% and still rebalance to maintain your investment plan.

Rick Ferri


That would be between 0 to 200% stock allocation for the rest of us. Pretty much in line with Bodie and Milevsky.
by Eric R
Mon Jan 17, 2011 12:01 am
Forum: Investing - Theory, News & General
Topic: 280% Stocks or 0% Stocks? I'm confused.
Replies: 60
Views: 6419

These views are not necessarily contradictory nor extreme. A 45 yo professor is in the accumulation phase. He or she takes more risk knowing that it things go awry, he has a tenured position and can teach until he drops. OTOH someone who is 65 yo and contemplating retirement may want to assess his/h...
by Eric R
Sun Jan 16, 2011 11:05 pm
Forum: Investing - Help with Personal Investments
Topic: Owning The Market vs. Slice n' Dice
Replies: 29
Views: 5723

As I see it, for the average investor, the effect, if any, would be minimal in the long run. Let's say TSM delivers 10% per year for the next 20 years and SCV returns 12% during the same time period. In a portfolio of 50/50 stocks/bonds with a tilt to SCV=20%*equities, small cap will be 10% of the ...
by Eric R
Sun Jan 16, 2011 10:46 pm
Forum: Investing - Help with Personal Investments
Topic: Owning The Market vs. Slice n' Dice
Replies: 29
Views: 5723

As I see it, for the average investor, the effect, if any, would be minimal in the long run. Let's say TSM delivers 10% per year for the next 20 years and SCV returns 12% during the same time period. In a portfolio of 50/50 stocks/bonds with a tilt to SCV=20%*equities, small cap will be 10% of the e...
by Eric R
Sun Jan 16, 2011 5:46 pm
Forum: Investing - Theory, News & General
Topic: Why rebalance?
Replies: 90
Views: 7561

For most years, rebalancing is a passive activity. During accumulation years you add to the side that is lagging and during decumulation years you spend from the side that is ahead. In market extremes, rebalancing means one would be buying low or selling high.
by Eric R
Sat Jan 15, 2011 3:24 pm
Forum: Investing - Theory, News & General
Topic: Investing vs. Speculating
Replies: 34
Views: 3388

There is also a certain element of subjectivity too. For example, someone who is in the oil business could make certain acquisitions that based on their knowledge of the oil market may be considered investing, while for an average investor this would be speculating. Intent is a factor too. For examp...
by Eric R
Tue Jan 11, 2011 1:40 am
Forum: Investing - Theory, News & General
Topic: The case against cap-weighting bonds
Replies: 44
Views: 4358

Re: easy rhino

Junk bonds are another. For example the more junk one issues the riskier the debt becomes and does that mean you should buy more of it, regardless of how much risk you want in the portfolio? Yes, but then the yields would be higher to compensate for the lower quality. No company can issue completel...
by Eric R
Mon Jan 10, 2011 9:00 pm
Forum: Investing - Theory, News & General
Topic: The case against cap-weighting bonds
Replies: 44
Views: 4358

I think there is a valid arguement with the muni example. But this is not so much an issue of market cap weighing as it is a matter of asset allocation. It is reasonable for someone living in NY to consider NY munis an asset class (or subclass) of its own. Similar could be said about treasuries vers...
by Eric R
Mon Jan 10, 2011 2:48 am
Forum: Investing - Theory, News & General
Topic: The case against cap-weighting bonds
Replies: 44
Views: 4358

Re: few thoughts

larryswedroe wrote:Consider this, if more junk bonds get issued because lenders are loosening standards (as happened in the 90s), should I buy more junk bonds? If Russia issues more debt, should I buy more of it?


The same argument can be made about stocks too. Bonds are probably more efficiently priced anyway.
by Eric R
Fri Jan 07, 2011 11:25 pm
Forum: Investing - Theory, News & General
Topic: "Don't Count On It" : Q&A With John Bogle: F
Replies: 23
Views: 5143

Bogle: France is larger than Germany. And so you look at that group and say, are there really more attractive investment opportunities there than there are in the U. S. ?



Isn't this performance chasing?
by Eric R
Thu Jan 06, 2011 8:15 pm
Forum: Investing - Theory, News & General
Topic: What is your foreign-bond asset allocation?
Replies: 119
Views: 19402

I think the main value of foreign currency diversification is a protection against domestic (USD) inflation. If USD devalues compared to foreign currencies, then there will be inflationary pressures on products that are built abroad as well as comodities used to make domestic products. During these ...
by Eric R
Thu Jan 06, 2011 7:10 pm
Forum: Investing - Theory, News & General
Topic: this is actually a very good article
Replies: 11
Views: 2123

Looks like a value investment strategy.
by Eric R
Tue Jan 04, 2011 11:26 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing in Bull vs Bear Markets
Replies: 7
Views: 1423

IIRC Jim Otar recommends rebalancing every fourth year (specifically in presidential election years). I wonder if it has anything to do with bull market time being longer but effects of rebalancing less.
by Eric R
Sat Jan 01, 2011 3:11 pm
Forum: Investing - Theory, News & General
Topic: Shiller - S&P 500 may reach 1430 by 2020
Replies: 80
Views: 27936

Jack wrote: Roughly, using the Gordon equation, you would expect that total return is the sum of the dividend yield and the dividend growth.


How does this equation account for return of non-dividend paying stocks?
by Eric R
Fri Dec 31, 2010 6:30 pm
Forum: Investing - Theory, News & General
Topic: Zero Sum Game?
Replies: 69
Views: 6177

alpha is a zero-sum game (one investor can only outperform the market, before expenses, to the extent that others underperform). The market as a whole isn't a zero sum game. Investors are owners of companies who (hopefully) will earn profits, which will either increase the companies' net worth, or ...
by Eric R
Thu Dec 30, 2010 9:28 pm
Forum: Investing - Help with Personal Investments
Topic: The "Ideal" Asset Allocation
Replies: 22
Views: 4366

Is the 'efficient frontier' relevant to this question (based on historical data)?

One should differentiate between highest return and highest return versus risk though.
by Eric R
Thu Dec 30, 2010 9:13 pm
Forum: Investing - Theory, News & General
Topic: Please evaluate Mr. R.E. Tirement's Safe Withdrawal Strategy
Replies: 21
Views: 2409

Jim Otar mentions in his book that if he needs to aggressively withdraw from his portfolio, particularly if the markets turn against him, the likelihood of failure is substantially high. He will be losing principal that should generate future cash flow. IMHO a better way of (mental) accounting in th...
by Eric R
Tue Dec 28, 2010 9:27 pm
Forum: Investing - Theory, News & General
Topic: Zero Sum Game?
Replies: 69
Views: 6177

Re: Zero Sum Game?

Hello fellow Bogleheads (from a newbie): Is it true that active management of equities is a zero sum game with the averge result being market returns minus fees? If yes then: Is this 'zero sum' between the active players only, or does it include the market itself as a whole, in other words, if a sh...
by Eric R
Tue Dec 28, 2010 8:35 pm
Forum: Investing - Theory, News & General
Topic: Zero Sum Game?
Replies: 69
Views: 6177

Most index funds are weighted by market cap. So the fund does not need to buy or sell shares as they change in value. In your example (where a stock goes down and then back up), the index fund would not have gained or lost anything, since it never bought or sold any shares. In this case, where have...
by Eric R
Tue Dec 28, 2010 8:02 pm
Forum: Investing - Theory, News & General
Topic: Zero Sum Game?
Replies: 69
Views: 6177

Thank you for your responses. I did not mean to imply that the market itself is a zero sum game. I was trying to say that the 'activity' of active portfolio managers is a zero sum game (minus fees). The underlying businesses could generate or destroy value. But that also brings up the meaning of act...
by Eric R
Tue Dec 28, 2010 6:09 pm
Forum: Investing - Theory, News & General
Topic: Zero Sum Game?
Replies: 69
Views: 6177

Zero Sum Game?

Hello fellow Bogleheads (from a newbie): Is it true that active management of equities is a zero sum game with the averge result being market returns minus fees? If yes then: Is this 'zero sum' between the active players only, or does it include the market itself as a whole, in other words, if a sho...