Bogleheads.org

bob90245

Like MPT, market efficiency leading to the Market Portfolio of all risky assets being optimal has many assumptions about risk, investor behavior, etc etc. And some people like me scratch their heads and ask why two seperate concepts have been merged in the same sentence. No need to come up with dif...

bob90245

I haven't read the paper. But I can tell you what I know with playing with all sorts of spreadsheets containing historical data. Yes, savings rate does matter. But only before the nest egg has grown to a certain amount, say, $200,000 or thereabouts. After that, the rate earned on those savings matte...

bob90245

I've got news for all you so called no tilt people out there, if you own VTI, or any other single ETF, or mutual fund that owns the markets, then you're tilted toward large cap stocks. So dump the this argument about tilting being a bad thing. VTI et al are "tilted" to whatever the market says has ...

bob90245

On the other hand, portfolio efficiency means that there is some combination of stock asset classes that will fall on the efficient frontier. Of course, we can never know that optimal combination ahead of time. But we can look at history to see how it turned out. Click on image for full size. http:...

bob90245

As far as reversion to the mean, John Bogle has excellent writing on this in his book Common Sense on Mutual Funds . I recall other authors writing about it as well. From what I remember it occurs to various mutual funds as well as individual asset classes. For me it confirms my decision to go for ...

bob90245

Efficient markets mean that the longer the time frame the less likely it is for active managers to outperform a benchmark index. Think Bill Miller as a recent example. On the other hand, portfolio efficiency means that there is some combination of stock asset classes that will fall on the efficient ...

bob90245

Kevin M wrote:I do miss the average trend line. Could we make it a very light, dotted line? It could even be non-continuous so it does not interfere with the "average" indicators.

I would cast a "NO" vote. I don't see it necessary to add any more lines. It'll just clutter things up.

bob90245

LadyGeek wrote:Next update. The top chart is bob90245's suggestions.

Top chart is even better!

bob90245

Yes, I think that chart is accurate for someone whose holding period is a year - but then, they shouldn't be owning stocks in the first place, as the chart implies. A 20-30 year chart, showing the long term benefits of stocks (returns compound with time, standard deviation with only the square root...

bob90245

I used the same data file and created a new chart. http://www.bogleheads.org/w/images/5/5e/Range_of_Annual_Returns.jpg Much, much better! Actually, I came up with an idea to make this chart even clearer. 1) Remove the extra vertical bar that is labeled "Risk" 2) Underneath the skinny part of the lo...

bob90245

LadyGeek wrote:I used the same data file and created a new chart.

Much, much better!

bob90245

Modified to make increasing risk (uncertainty) and return more clear: http://i40.tinypic.com/juiibq.png Your title of "Average Returns" is misleading. Yes you do have the horizontal hash marks for average returns. But the vertical lines represent "Range of Annual Returns". As you describe in the te...

bob90245

Maybe this will covered in part 2. But it seems your figures are bi-model (tri-model?). Perhaps in the sub-section on Asset Allocation , you can make the point that risk can be somewhat controlled by how much or how little you have in risky and less risky assets. Use a chart like this for illustrati...

bob90245

Also there is no need to take risk. This stuff about risk as a need is straight from Larry Swedroe who is not an academic. Swedroe is often wrong when he talks about risk and this is one of the many cases where he is wrong about risk. This was already discussed. But apparently it didn't sink in. So...

bob90245

Perhaps Bodie's views were influenced bythe Japanese stock market. That makes sense.

bob90245

Peter L. Berstein's book "Capital Ideas, The Improbable Origins of Modern Wall Street" discusses the contributions of such notables as Alfred Cowles, Harry Markowitz, Paul Samuelson, Eugene Fama, James Tobin and others. A very good read.-----Jim I second the recommendation for Capital Ideas . A bri...

bob90245

I use the adage of "measure twice and cut once" so not yet for me. For me, more like double-, triple-, and quaduple-check. Plus I make hard copies of my spreadsheet that documents the potential trade. Plus I have a separate browser tab telling me the closing trade price. And I look over all documen...

bob90245

I remember from previous web surfing, there is an SEC website that will probably be much more instructive than the one featured in the opening post. Check it out here:

http://www.sec.gov/investor/pubs/assetallocation.htm

bob90245

There are a dozen or so. These two articles provide a listing:

http://www.ifa.com/12steps/step2/step2page2.asp

http://www.ifa.com/12steps/step2/step2page3.asp

bob90245

Tomorrow, take the rest off the table. Stocks are no place for money you need in the short term (college this fall).

bob90245

A person would have to be in extreme dire straits having burned through all other cash, CDs and other fixed income accounts to have no other choice than to tap their long-term retirement accounts holding stocks in order to put food on the table.

bob90245

Gordon wrote:Where are you there Rick, Larry and William???

You left out Jack Bogle. He seems to be expert on expected returns and when or when not to lighten up on equities.

bob90245

Why single out QE3? Aren't there dozens of potential policy actions that will affect investors? Or is your response to change your portfolio in different ways depending on the policy action implemented?

bob90245

It's common for novices to have someone like your Metlife person helping you with your investments. And as you've learned, that advice is not free. Once you climb up the learning curve, you'll have the knowledge to do this investing stuff yourself. It appears you're on that track. When you're ready ...

bob90245

If everyone switches to low-cost index fund investment, would that not "change the game" substantially? Could the market be efficient, if it even is now, if all investments were just market cap weighted index buys? Somebody needs to be out there actively trading. Don't worry yourself. Human nature ...

bob90245

Vanguard advertises in Money Magazine.

bob90245

I wouldn't consider Forbes a "mainstream" media outlet. The Atlantic might be more "mainstream".

What are some of the most popular "mainstream" media outlets that most Americans read? The national paper USA Today?

bob90245

I just realized that every time I read my monthly subscription of Money Magazine, depending on what I read in that particular issue, I start thinking about changing my plan, or adding to it and basically not staying the course. The way I "solved" this problem is that my portfolio has a variety of a...

bob90245

This is hindsight bias: You know sometimes you don't necessarily have to be a lemming and fall off the cliff and "stay the course." There were numerous indications the US economy was in a severe real estate bubble in the mid 2000's that would end badly. What very few knew was that the failure of inv...

bob90245

Do-it-yourself investing is not for the faint of heart. Bogleheads are a unique minority.

bob90245

Here is chart http://www.nytimes.com/interactive/2012/03/20/business/it-pays-to-hang-in-there-if-portfolios-are-diversified.html?ref=your-money Would the chart be better representative if they used a log scale on the Y axis? I know these linear charts make the steep ups and downs more dramatic look...

bob90245

Going by the comments here so far (I haven't read the article), it appears that Malkiel makes the common mistake of examining portfolio components in isolation, and not how each lend their support to the whole.

bob90245

bob90245, do you agree that the data I've presented is reasonably accurate and reasonably objective, and that the issue is not the fact but how to act on them? That is, would you say I'm correct that during periods when the stock market performs poorly, outcome is almost independent of asset alloca...

bob90245

Re: Do you invest with more than one mutual fund company? We are talking about options at your sole discretion, right? Because I don't have a choice of mutual fund company my employer offers. But in both my taxable accounts and traditional and Roth IRAs where I place funds with high distributions, t...

bob90245

To pick a convenient source, the 2010 SBBI yearbook. There are the usual problems here. The "bonds" allocation is represented by long-term government bonds, which is probably not a typical Boglehead practice, and these are real, not nominal returns. But, here's the data, and I insist that this is t...

bob90245

Tilting can also add diversification. You want to have sufficient exposure to all equity asset classes (market, value and small) to guard against periods of underperformance. JG, you sum up nicely a significant reason to tilt. The period 1995 to 1999, and then 2000 to 2010 is a prime example of per...

bob90245

To the contrary, if it doesn't really matter that much, would you see so much passion on both sides? No! Of course, not. No one expends all their energy if, at the end of the day, it really doesn't matter that much.[1] [1] With the possible except of those who debate just for arguments sake. LOL Ac...

bob90245

If there's so much debate, it can't be that clear cut which is better. No, there could be other interpretations. There is so much debate because people are very passionate about their side and put forward pursuasive arguments to a) justify their position b) convert the other side to their position....

bob90245

555 wrote:If there's so much debate, it can't be that clear cut which is better.

No, there could be other interpretations. There is so much debate because people are very passionate about their side and put forward pursuasive arguments to a) justify their position b) convert the other side to their position.

bob90245

I read the book. But in follow up articles, he departs from his advice in his book. Bodie now has said that if you are an investor in your 20's and 30's, you don't need to put 100% of your nest egg devoted to base retirement needs into TIPS and IBonds.

bob90245

All this seems like excessive semantic precision, yet there is a big difference between diversifying across "asset classes" and "asset class categories" (Personally I don't like that term and would call them sectors, flavors or class members, but you get my meaning) If you prefer to use the term "s...

bob90245

As far as I know, the academic approach to differentiate between equity asset classes is along the lines of big and small, value and growth along with their counterparts in international. That doesn't match what I've seen, citation? I suppose you never read about the Three-Factor Model to explain e...

bob90245

Coal mining stocks perform differently than the total market, that doesn't make them a separate asset class, just a different member of the "equities" class. I don't think anyone would categorize coal mining stocks as a separate asset class. Instead, it would be called an "equity sector". In fact, ...

bob90245

Others choose to include other asset classes like small, value, REITs and international Just quibbling really, but those are not asset classes, they're just different flavors of equities. Your comment is not a small quibble. It seems to be a firm rejection of the theory put forward by Boglehead aut...

bob90245

Others choose to include other asset classes like small, value, REITs and international Just quibbling really, but those are not asset classes, they're just different flavors of equities. Your comment is not a small quibble. It seems to be a firm rejection of the theory put forward by Boglehead aut...

bob90245

From this quote, we see that Bogle rejects the Efficient Market Hypothesis (prices already reflect information that is known to market participants): Our mentor, Jack Bogle, gave a long interview with the editors of the Journal of Indexes. It is full of interesting and valuable quotes like these: Th...

bob90245

Investors expecting value tilting/REIT/emerging markets to pay off year in and year out will be disappointed. This is strictly a long term strategy. Those who lack the neccesary patience should stick to total markets. Total markets pay off year in and year out? I don't think those choosing Total ma...

bob90245

letsgobobby wrote:Intraday PE10 fell to about 11 in march 2009. That's close enough that'd I say a single digit figure is highly likely in the future.

I didn't know there is a ticker symbol that tracks P/E10 in real time.

bob90245

There is ALWAYS bad news. Always.

And as Larry is wont to point out, crises occur more often than people suspect. Like every 2 or 3 years.

bob90245

PE10 at the beginning of 2012 was 21.68. It would have to drop by more than 50% [to below 10] by the beginning of 2013 to signal a move from 100% Treasuries to 100% TSM using this decision rule. With P/E10 having to fall below 10 for you to move back to 100% TSM, I think you'll have a long wait. I ...

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