Search found 2984 matches

by SimpleGift
Sun Jun 24, 2018 1:41 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Diversification, Long Before Mr. Markowitz
Replies: 26
Views: 1207

Re: Portfolio Diversification, Long Before Mr. Markowitz

SimpleGift, please allow me to side-track a tiny bit. Did you read "Against the Gods: The Remarkable Story of Risk" by Peter Bernstein? I just finished it. If you did not, then go for it, you'll have a blast... Such a truly remarkable book. And a very witty title. Thank you for the recommendation, ...
by SimpleGift
Sun Jun 24, 2018 11:15 am
Forum: Investing - Theory, News & General
Topic: Portfolio Diversification, Long Before Mr. Markowitz
Replies: 26
Views: 1207

Re: Portfolio Diversification, Long Before Mr. Markowitz

Merchant of Venice act 1 scene 1 ANTONIO Believe me, no: I thank my fortune for it, My ventures are not in one bottom trusted, Nor to one place; nor is my whole estate Upon the fortune of this present year: Therefore my merchandise makes me not sad. Thanks, grok. It's interesting that Harry Markowi...
by SimpleGift
Sun Jun 24, 2018 9:19 am
Forum: Investing - Theory, News & General
Topic: Heavy in equities?
Replies: 31
Views: 2696

Re: Heavy in equities?

So retirees or those nearing retirement might consider doing a stress test like what happened in 2008. While each "correction" is different 2008 seemed to be pretty much a worse case (or close to it). The results might help fashion an allocation that fits your retiree status - it even might confirm...
by SimpleGift
Sat Jun 23, 2018 10:41 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Diversification, Long Before Mr. Markowitz
Replies: 26
Views: 1207

Re: Portfolio Diversification, Long Before Mr. Markowitz

Upon reflection, it's really no wonder that U.K. investors in the late 1800s developed basic concepts of portfolio diversification. They were faced with a bewildering choice of securities, each with very different risks and characteristics, and from all parts of the world (for example, table below)....
by SimpleGift
Sat Jun 23, 2018 8:53 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Diversification, Long Before Mr. Markowitz
Replies: 26
Views: 1207

Re: Portfolio Diversification, Long Before Mr. Markowitz

... He recommended investors continue the process, adding additional stocks from different world trading zones with each additional 100 pounds, to gradually produce a diversified, multi-stock, approximately equal-weighted stock portfolio. Did he suggest they "rebalance" to maintain equal weight? If...
by SimpleGift
Sat Jun 23, 2018 8:37 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Diversification, Long Before Mr. Markowitz
Replies: 26
Views: 1207

Re: Portfolio Diversification, Long Before Mr. Markowitz

...Mr. Lowenfeld's advice still seems sound over 100 years later — though the diversification benefits may be a bit less today... In your portfolio, you give equal weight to the United States and Central America? Obviously not — but I'm fairly certain the concept of diversification by market capita...
by SimpleGift
Sat Jun 23, 2018 7:05 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Diversification, Long Before Mr. Markowitz
Replies: 26
Views: 1207

Re: Portfolio Diversification, Long Before Mr. Markowitz

Just to add: In his 1906 book, Investment: An Exact Science , Henry Lowenfeld recommends that investors divide their capital between the various continents and economic zones of the world (table below). His reasoning is fairly specific about distributing portfolio risk internationally: "As the trade...
by SimpleGift
Sat Jun 23, 2018 6:24 pm
Forum: Investing - Theory, News & General
Topic: Portfolio Diversification, Long Before Mr. Markowitz
Replies: 26
Views: 1207

Portfolio Diversification, Long Before Mr. Markowitz

In researching the deep history of global stock and bond returns (discussed here ), I wanted to share some interesting historical tidbits about portfolio diversification in the late 1800s and early 1900s, primarily from the United Kingdom. The U.K. certainly had the largest and most diverse security...
by SimpleGift
Thu Jun 21, 2018 4:41 pm
Forum: Investing - Theory, News & General
Topic: Effect of Index funds on Market Efficiency
Replies: 19
Views: 1106

Re: Effect of Index funds on Market Efficiency

My only question is attribution of institutions as "non-index"-I just don't know enough, I would assume that a sizable chunk of institutions offer index and target date funds? This 2017 Reuters article slices the global equity pie a bit differently from my post and may be what you're looking for: T...
by SimpleGift
Thu Jun 21, 2018 10:18 am
Forum: Personal Finance (Not Investing)
Topic: What is/ was your career and would you recommend it now?
Replies: 153
Views: 10200

Re: What is/ was your career and would you recommend it now?

Geographer (retired), specializing in mapping and satellite image analysis for conservation groups. Came of age and was trained in the "manual era" of paper maps, aerial photography and acetate overlays. But modern training today in digital geographic information systems and satellite remote sensing...
by SimpleGift
Wed Jun 20, 2018 7:52 pm
Forum: Investing - Theory, News & General
Topic: Effect of Index funds on Market Efficiency
Replies: 19
Views: 1106

Re: Effect of Index funds on Market Efficiency

I'm just your everyday investor but I've read the large flow of capital into index funds (now comprising somewhere near half of stock investments). Index funds and ETFs make up about half of the managed funds industry — but the managed funds industry only accounts for about one-third of the entire ...
by SimpleGift
Wed Jun 20, 2018 6:02 pm
Forum: Investing - Theory, News & General
Topic: General Electric booted from Dow Jones Industrial Average
Replies: 48
Views: 5258

Re: General Electric booted from Dow Jones Industrial Average

It's a bit difficult to consider GE as a strictly U.S. company anymore, and thus a reflection of the U.S. economy. 62% of sales, 50% of assets, and 66% of employees were outside of the United States in 2017, according to a recent United Nations report . But also true of Google, Pfizer, JP Morgan, D...
by SimpleGift
Wed Jun 20, 2018 3:27 pm
Forum: Investing - Theory, News & General
Topic: Why is Mr. Bogle so against investing internationally?
Replies: 24
Views: 2776

Re: Why is Mr. Bogle so against investing internationally?

From a 2016 interview with Mr. Bogle: "So if people knew they were putting 45% of their so-called international, non-US, money in Great Britain, France and Japan — I mean every one of those three countries has real problems," Bogle said. "The French don’t work very hard, The Japanese have a structur...
by SimpleGift
Tue Jun 19, 2018 6:00 pm
Forum: Investing - Theory, News & General
Topic: General Electric booted from Dow Jones Industrial Average
Replies: 48
Views: 5258

Re: General Electric booted from Dow Jones Industrial Average

It's a bit difficult to consider GE as a strictly U.S. company anymore, and thus a reflection of the U.S. economy.

62% of sales, 50% of assets, and 66% of employees were outside of the United States in 2017,
according to a recent United Nations report.
by SimpleGift
Tue Jun 19, 2018 3:55 pm
Forum: Investing - Theory, News & General
Topic: Are large cap stocks more internationally diversified?
Replies: 6
Views: 259

Re: Are large cap stocks more internationally diversified?

Do large cap US stocks potentially have better growth potential because they are much more internationally exposed while small cap stocks are mostly domestic? In recent decades, with the expansion of globalization, one could make the case that large caps (U.S. and international) had a definite comp...
by SimpleGift
Mon Jun 18, 2018 2:03 pm
Forum: Investing - Theory, News & General
Topic: Debt Song Not a Pretty Tune
Replies: 5
Views: 1553

Re: Debt Song Not a Pretty Tune

As Ms. Sonder's charts clearly show, private debt holders and households have mostly deleveraged after the 2008-09 Financial Crisis, but it's the massive expected increases in U.S. public debt that will present problems for future economic growth. A recent study from the Dallas Fed, which looked at ...
by SimpleGift
Mon Jun 18, 2018 1:26 pm
Forum: Investing - Theory, News & General
Topic: Revisiting Risk and Reward
Replies: 16
Views: 1151

Re: Revisiting Risk and Reward

Nice analysis, siamond. Always enjoy your work and appreciate your sharing it on the Forum. Your article had this essential message, from my perspective: Keeping a significant engine of growth in one’s portfolio should definitely matter for most retirees. How much stock exposure to select has to be ...
by SimpleGift
Mon Jun 18, 2018 12:12 am
Forum: Investing - Theory, News & General
Topic: Mean Reversion in Long-Term Stock Returns?
Replies: 25
Views: 1953

Re: Mean Reversion in Long-Term Stock Returns?

But such consistent trend over two centuries in two different countries -- I can't make out effects of the great depression nor the industrial revolution, the information age, etc. events and paradigms that we thought defined our age. I understand the scale obscures the recent plateau but I'm more ...
by SimpleGift
Sun Jun 17, 2018 2:57 pm
Forum: Investing - Theory, News & General
Topic: Basic Inflation Questions
Replies: 21
Views: 1077

Re: Basic Inflation Questions

I'm trying to understand basic inflation. I think I'm on the right track but I want to make sure. One thing to keep in mind is that the headline monthly inflation number is highly volatile (in red below), due mainly to the impact of volatile energy prices. If one wants to keep an eye on the general...
by SimpleGift
Sun Jun 17, 2018 11:50 am
Forum: Investing - Theory, News & General
Topic: Mean Reversion in Long-Term Stock Returns?
Replies: 25
Views: 1953

Re: Mean Reversion in Long-Term Stock Returns?

Looking at the OP plots, looks like stocks are causing the GDP, not the other way around. Just saying.... Though generally it's economic expansions or contractions that impact the stock market (or the expectations for these, since markets are forward looking), certainly there are situations where t...
by SimpleGift
Sat Jun 16, 2018 7:33 pm
Forum: Investing - Theory, News & General
Topic: Mean Reversion in Long-Term Stock Returns?
Replies: 25
Views: 1953

Re: Mean Reversion in Long-Term Stock Returns?

So for me the question remains what is a meaningful "mean" to which global markets might "revert"? Not sure your question is answerable, without false precision. All we can say, based on the historical record, is that global stock returns have been fairly sensitive to the rate of global aggregate G...
by SimpleGift
Sat Jun 16, 2018 6:28 pm
Forum: Investing - Theory, News & General
Topic: Rising returns for bonds leads to lower stock prices?
Replies: 2
Views: 300

Re: Rising returns for bonds leads to lower stock prices?

Opinions? Valid arguments or just noise? In the last two rounds of the Fed raising interest rates, there's been a "threshold effect," with rising stock prices correlated with rising short term rates up to about 4%-5%, then falling stock prices above 5% (chart below). https://i.imgur.com/7jw8HN4.jpg...
by SimpleGift
Sat Jun 16, 2018 3:54 pm
Forum: Investing - Theory, News & General
Topic: Mean Reversion in Long-Term Stock Returns?
Replies: 25
Views: 1953

Re: Mean Reversion in Long-Term Stock Returns?

From Ben Inker (GMO): "The first point to understand about stock returns is their relationship with GDP growth. In short, there isn’t one. Stock returns do not require a particular level of GDP growth, nor does a particular level of GDP growth imply anything about stock market returns. This has been...
by SimpleGift
Sat Jun 16, 2018 1:25 pm
Forum: Investing - Theory, News & General
Topic: Mean Reversion in Long-Term Stock Returns?
Replies: 25
Views: 1953

Re: Mean Reversion in Long-Term Stock Returns?

GDP growth rate differences between countries clearly do not predict stock returns (example, EM versus US or DM), but within a given country GDP growth rates do seem to have a connection with market returns... For aggregate GDP growth (not per-capita), the long-term correlation between stock return...
by SimpleGift
Sat Jun 16, 2018 11:42 am
Forum: Investing - Theory, News & General
Topic: Mean Reversion in Long-Term Stock Returns?
Replies: 25
Views: 1953

Re: Mean Reversion in Long-Term Stock Returns?

I would suggest as well that returns prior to the creation of mutual funds and broad based stock holdings by the general populace are also not very indicative of the market we see today. We do have data from more recent periods (discussed previously on the Forum), looking at the relationship betwee...
by SimpleGift
Sat Jun 16, 2018 10:41 am
Forum: Investing - Theory, News & General
Topic: Mean Reversion in Long-Term Stock Returns?
Replies: 25
Views: 1953

Re: Mean Reversion in Long-Term Stock Returns?

Just to add a sense of stock trading in the United Kingdom in the 1800s. The London Stock Exchange, early 1800s — https://i.imgur.com/b7VvSRC.jpg Source: History Press By 1840, there were approximately 250 listed companies on the exchange, with diverse sectors ranging by cap-weight from railroads (3...
by SimpleGift
Sat Jun 16, 2018 10:39 am
Forum: Investing - Theory, News & General
Topic: Mean Reversion in Long-Term Stock Returns?
Replies: 25
Views: 1953

Mean Reversion in Long-Term Stock Returns?

In a recent thread , we observed that global stocks had a rather consistent 5%-6% real return over nearly four centuries. It was suggested this may be due to "mean reversion," where returns can be highly variable in the short run but very stable around a long-term average in the long run. This post ...
by SimpleGift
Thu Jun 14, 2018 12:20 pm
Forum: Investing - Theory, News & General
Topic: Is the Dow Jones Industrial Average a useful metric?
Replies: 28
Views: 1371

Re: Is the Dow Jones Industrial Average a useful metric?

I don't really get why the media fixates on what seems like an antiquated and arbitrary heuristic versus something like the S&P 500. It is a bit irritating and is just an artifact of history. Much like the U.S. not adopting the metric system, despite it being the global standard these days. :annoyed
by SimpleGift
Thu Jun 14, 2018 12:04 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

Is there sufficient data to indicate if the correlation between equity and bonds changed over time? On the scale of centuries, none that I'm aware of. For some reason, those who conduct research into the deep history of asset returns seem to be divided into "bond folks" and "equity folks." Perhaps ...
by SimpleGift
Thu Jun 14, 2018 10:19 am
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

If I am reading the graph right, it looks like we are about to level off for a long time at a very low rate of real return for bonds. That has some implications for retirement planning and bequest motives, no? As siamond has well observed, the shorter-term performance of bonds (on the scale of deca...
by SimpleGift
Thu Jun 14, 2018 8:46 am
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

I'd have to understand why those endpoints? 1830 & 1870? Is that simply a function of the data available? Yes. Though there is annual GDP-per-capita data for the United Kingdom going back to 1700 (found here ), for most other major economies all the comparable data starts somewhere in the 1800s, as...
by SimpleGift
Wed Jun 13, 2018 11:51 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

Steady GDP Growth --> Steady Corporate Earnings --> Steady Stock Returns Well. If everything is (was) steady, there is (was) return-to-the-mean, because this is the definition of steady. This is a circular argument, I am afraid. Was hoping to just present empirical evidence (not an argument), via t...
by SimpleGift
Wed Jun 13, 2018 6:56 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

So, what is fundamentally different between equity and bonds such that a return-to-the-mean can occur with equities and not bonds? How can this be true even across changes in monetary systems and standards? To take a quick stab at your question: In recent centuries, for countries not devastated by ...
by SimpleGift
Wed Jun 13, 2018 4:06 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

If you don't want to take my word for it, read the quotes below from the Golez paper. They didn't include UK securities in their estimate of the risk free rate until 1727. Not sure what you're getting at here, but as a cross-check, we can refer to another recent research paper, Eight Centuries of t...
by SimpleGift
Wed Jun 13, 2018 2:57 pm
Forum: Forum Issues and Administration
Topic: Server Maintenance - Today June 21, 2018 at 15:45 EDT
Replies: 18
Views: 1269

Re: Server Maintenance - June 21, 2018 at 15:45 EDT

Larry, the opportunity doesn't arrive often to thank you for your tireless work behind the scenes keeping the Bogleheads Forum up and running, so I'd like to take advantage of this one. Thank you — your efforts are very much appreciated!
by SimpleGift
Wed Jun 13, 2018 2:36 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

... It's interesting that inflation is so low. When and why did modern-era inflation set in? When money/bonds stopped being backed by a fixed physical commodity gold/silver standard. To support JoMoney's point, an historical chart showing the deep history of inflation going back to the 1200s (at le...
by SimpleGift
Wed Jun 13, 2018 12:35 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

Any similar long term data on real returns of real estate and commodities? Not sure if it qualifies as "deep history" by the standards of this thread, but a recent paper did report the returns of commercial residential real estate (as a rental investment, not an abode) for 16 advanced countries ove...
by SimpleGift
Wed Jun 13, 2018 12:10 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

it would be a nice confirmation of the narrative to see both bond return and risk numerically decrease over the centuries. In my scan of your links (thanks!) I didn’t see it in numbers, though the charts look pretty wild! If low real bond yields are a price of keeping the Four Horsemen away, I’m ok...
by SimpleGift
Wed Jun 13, 2018 11:37 am
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

Even ignoring the quality issues with the stock returns, this glosses over the assumptions in coming up with a risk-free rate of return. Well, I have to take the professional researchers at their word for the risk-free rates that they've published in the table above (see RF% in the table). They sho...
by SimpleGift
Wed Jun 13, 2018 11:13 am
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

Did anyone dig up volatility numbers for these historical returns? Returns follow risk. Yes, it took me a while to find, but there is return, volatility (standard deviation) and Sharpe ratio data on the deep history of equity returns from 1629 through 1870 (table below): https://i.imgur.com/V7nUQXR...
by SimpleGift
Wed Jun 13, 2018 8:11 am
Forum: Investing - Theory, News & General
Topic: Do Small Caps Outperform?
Replies: 61
Views: 3875

Re: Do Small Caps Outperform?

vineviz wrote:
Wed Jun 13, 2018 7:58 am
Therefore, the point at which we measure and evaluate risk-adjusted return is at the PORTFOLIO level and not at the asset level.
:thumbsup Excellent post, with a very cogent explanation. Thanks.
by SimpleGift
Wed Jun 13, 2018 8:00 am
Forum: Investing - Theory, News & General
Topic: 1 Year Rule - Not allowed to execute new investment strategy until 1 year has passed
Replies: 27
Views: 2438

Re: 1 Year Rule - Not allowed to execute new investment strategy until 1 year has passed

What do you think about this? Too strict? The discipline is wonderful idea in my view, but 3-6 months may be a more practical time frame. When we were first faced with the portfolio allocation decision in the 1990s (we had sold a business and started investing at Vanguard with a substantial lump su...
by SimpleGift
Tue Jun 12, 2018 8:48 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

Just for fun, a copy of the first stock certificate ever issued — a share in the Dutch East India Company in 1606 (known in Dutch as the Verenigde Oost-Indische Compagnie or VOC): https://i.imgur.com/LD5kmJH.png Source: Exploring Markets According to Wikipedia, the VOC was the world's first formally...
by SimpleGift
Tue Jun 12, 2018 6:49 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

Even if we could pretend UK and Dutch stock returns were representative of global returns, there were only nine securities total! Those nine securities were likely the luckiest of the lucky surviving companies. I don't know why anyone would take that data seriously. Actually, according to the resea...
by SimpleGift
Tue Jun 12, 2018 4:00 pm
Forum: Investing - Theory, News & General
Topic: Do Small Caps Outperform?
Replies: 61
Views: 3875

Re: Do Small Caps Outperform?

I think we are in a new age of large caps and I am willing to place a modest bet on that. I'm increasingly coming around to this view as well. As the number of public companies declines (in the U.S. at least), and these fewer large remaining firms grow in size and profitability due to their global ...
by SimpleGift
Tue Jun 12, 2018 3:46 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

The CSRI Global Investment Returns Yearbook would seem to disagree, with real world bond returns increasing from 1.8% since 1900 to 4.2% since 1967 and 4.8% since 2000 -- for a United States investor. Those results are probably completely different for someone in another country. Dimson, Marsh and ...
by SimpleGift
Tue Jun 12, 2018 2:02 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

I have far less faith in that stability and peace. Even if there is "peace", I have much more difficulty seeing continued global financial stability. Very instructive report on the future of globalization, thank you for the link. I would just point out, though, that you've highlighted the "least li...
by SimpleGift
Tue Jun 12, 2018 12:53 pm
Forum: Investing - Theory, News & General
Topic: Do Small Caps Outperform?
Replies: 61
Views: 3875

Re: Do Small Caps Outperform?

Keep in mind we also have small cap data from the United Kingdom for the 1955-2017 period, thanks to Dimson, Marsh & Staunton (chart at right below) — though for the U.K. market, it appears there was mainly a micro-cap premium (which has generally proven difficult to capture in real world mutual fun...
by SimpleGift
Tue Jun 12, 2018 12:15 pm
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

The obvious take away is not to assume more than 2% real for bonds - which you should not be assuming anyway. Yes, my sense of the lessons for the 21st century from the deep history data is that 1) it seems unlikely that global stocks would massively underperform 5%-6% real over the next 100 years,...
by SimpleGift
Tue Jun 12, 2018 11:33 am
Forum: Investing - Theory, News & General
Topic: The Deep History of Stock & Bond Returns
Replies: 75
Views: 5009

Re: The Deep History of Stock & Bond Returns

It would be interesting if stock market data did go back 400 years, but I'm suspicious this is the financial equivalent of archeology. There appear to be substantial quality issues with US market data from the 1800s. If we can't trust the US data from the 1800s, can we trust the UK and Dutch data f...