Search found 2045 matches

by Random Walker
Sun Nov 19, 2017 3:32 pm
Forum: Investing - Theory, News & General
Topic: Morningstar - AQR: The Vanguard of Alternative Investing?
Replies: 41
Views: 2212

Re: Morningstar - AQR: The Vanguard of Alternative Investing?

Robert, Thanks for that excellent explanation. Wouldn’t P2,4 be a superior choice to P1,3? I agree P2,4 would almost certainly be cheaper. Wouldn’t P2,4 also be more efficient? P1,3 and P2,4 have same exposures to market beta and value. But P2,4 does this with 30% risk free T-bills. P2,4 would have ...
by Random Walker
Sun Nov 19, 2017 12:15 pm
Forum: Investing - Theory, News & General
Topic: Schwab acct. security tool
Replies: 8
Views: 403

Re: Schwab acct. security tool

I also got one of those gizmos from Schwab but have not activated it. Nice to hear that it is easy to use.

Dave
by Random Walker
Sun Nov 19, 2017 12:11 pm
Forum: Investing - Theory, News & General
Topic: Morningstar - AQR: The Vanguard of Alternative Investing?
Replies: 41
Views: 2212

Re: Morningstar - AQR: The Vanguard of Alternative Investing?

Midareff, I agree there is absolutely nothing wrong with your approach, and lots that is right! The best and cheapest diversifier of equity risk is high quality bonds. As we add complexity to our portfolios with relatively small allocations to the esoteric stuff, marginal benefit decreases and margi...
by Random Walker
Sun Nov 19, 2017 12:02 pm
Forum: Investing - Theory, News & General
Topic: Morningstar - AQR: The Vanguard of Alternative Investing?
Replies: 41
Views: 2212

Re: Morningstar - AQR: The Vanguard of Alternative Investing?

Hi Robert, Not sure I completely understood your point. Are you saying one should compare a cheaper long only tilted equity portfolio with a portfolio of equal non market factor exposure that uses some of these more expensive market neutral alternatives? Wouldn’t the portfolio using alternatives hav...
by Random Walker
Sat Nov 18, 2017 7:52 pm
Forum: Investing - Theory, News & General
Topic: annualized TLH data from Wealthfront
Replies: 7
Views: 865

Re: annualized TLH data from Wealthfront

I think that TLH is kicking the can down the road, but it’s potentially very worthwhile to do! Accumulating losses during accumulation phase allows one to offset the realized gains when one starts to make distributions in decumulation phase. So the tax burden is lessened during decumulation. More mo...
by Random Walker
Sat Nov 18, 2017 7:37 pm
Forum: Investing - Theory, News & General
Topic: Morningstar - AQR: The Vanguard of Alternative Investing?
Replies: 41
Views: 2212

Re: Morningstar - AQR: The Vanguard of Alternative Investing?

Midareff, I think it is incorrect to consider market neutral QSPIX part of an equity allocation. It invests in four styles across at least four asset classes. The styles are value, Momentum, carry, defensive. And the asset classes are equities, bonds, commodities, currencies I think. The styles with...
by Random Walker
Fri Nov 17, 2017 2:32 pm
Forum: Investing - Theory, News & General
Topic: annualized TLH data from Wealthfront
Replies: 7
Views: 865

Re: annualized TLH data from Wealthfront

I’m skeptical of the data. I signed up with an advisor in 2009, and one of the big reasons I took the advisor plunge was for effficient TLH. An Arnott and Berkin paper sometimes discussed on this site says TLH can yield about 0.5-0.7% per year. My advisor has seen very few TLH opportunities in my po...
by Random Walker
Fri Nov 17, 2017 1:38 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Why Trend Following Works
Replies: 0
Views: 381

Larry Swedroe: Why Trend Following Works

http://www.etf.com/sections/index-investor-corner/swedroe-why-trend-following-works?nopaging=1 The addition of TS Momentum to a portfolio should improve its efficiency due to it's lack of correlation to both stocks and bonds. I strongly recommend the paper from AQR that Larry links: the smile curve ...
by Random Walker
Wed Nov 15, 2017 10:28 pm
Forum: Investing - Theory, News & General
Topic: Do you subscribe to taking risk only on the equity side
Replies: 40
Views: 2250

Re: Do you subscribe to taking risk only on the equity side

Nisiprius wrote: What is the case for using investments that have an intrinsic in-between nature, rather than just adjusting the proportions of the traditional categories of security? So far, I've seen absolutely nothing to convince me that using the in-between stuff in a portfolio is very different...
by Random Walker
Tue Nov 14, 2017 9:03 pm
Forum: Investing - Theory, News & General
Topic: Do DFA advisors get kickbacks?
Replies: 11
Views: 1597

Re: Do DFA advisors get kickbacks?

I too have an independent fiduciary advisor. The company uses DFA funds in addition to a few others. To the best of my knowledge there is no financial incentive for the advisor to use the DFA funds. If there were, I expect they would have been legally obligated to reveal that to me in writing or ora...
by Random Walker
Tue Nov 14, 2017 8:45 am
Forum: Investing - Theory, News & General
Topic: "A Case Against Over Weighting International Equity"
Replies: 11
Views: 1417

Re: "A Case Against Over Weighting International Equity"

The market prices risk. The lower P/E ratios of Int and EM reflect perceived higher risk and thus higher expected return. FWIW, I think the real bang for the portfolio diversification buck is in international small value. You diversify internationally and diversify into the size and value factors. M...
by Random Walker
Mon Nov 13, 2017 10:48 pm
Forum: Investing - Theory, News & General
Topic: Value, and Slice and Dice - How Much?
Replies: 6
Views: 745

Re: Value, and Slice and Dice - How Much?

Here is why I have more faith than garlandwhizzer. The market prices risk, it doesn’t equilibrate returns. Prices of small and value should be lower because they are more risky. Lower prices implies higher expected future returns. It makes sense to me that the expected return on a company is it’s co...
by Random Walker
Mon Nov 13, 2017 3:24 pm
Forum: Investing - Theory, News & General
Topic: What is all the recent talk about a bond bubble?
Replies: 22
Views: 2283

Re: What is all the recent talk about a bond bubble?

Elb1, A bond fund is just a collection of individual bonds, so they are inherently the same. If you hold a bond to maturity, you get the principal back. But that does not mean that if bond prices fall you will not be affected. If bond prices fall, interest rates will rise. Although you will get your...
by Random Walker
Mon Nov 13, 2017 11:32 am
Forum: Investing - Theory, News & General
Topic: “Flight to Quality:” the old way of thinking?
Replies: 16
Views: 1462

Re: “Flight to Quality:” the old way of thinking?

Nsiprius makes some good points. One should expect to see the equity side of his portfolio take 1,2, maybe 3 50% declines in the course of an investing lifetime. At these times bonds will rise maybe 5%. So one could expect a 60/40 portfolio to lose about 25% under these circumstances. Even a 50/50 p...
by Random Walker
Mon Nov 13, 2017 10:50 am
Forum: Investing - Theory, News & General
Topic: “Flight to Quality:” the old way of thinking?
Replies: 16
Views: 1462

Re: “Flight to Quality:” the old way of thinking?

US government debt obligations are considered the least risky of investments. To pay back its obligations the government can always raise taxes or print more money. The short term 1 year treasuries are considered the riskless asset. When things in the investing world get scary, investors will want s...
by Random Walker
Mon Nov 13, 2017 10:45 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Active Won’t Save Your Retirement
Replies: 3
Views: 875

Re: Larry Swedroe: Active Won’t Save Your Retirement

Rkhusky, I agree that using specific numbers leads to a sense of accuracy that can be misleading. There is a WIDE dispersion of potential outcomes. I use that terminology in an attempt to clarify the trade offs: more of a higher expected return asset class, less overall equity exposure, more bonds, ...
by Random Walker
Mon Nov 13, 2017 10:40 am
Forum: Investing - Theory, News & General
Topic: Value, and Slice and Dice - How Much?
Replies: 6
Views: 745

Re: Value, and Slice and Dice - How Much?

Tracking error is totally behavioral. An investor needs to either acknowledge it in himself or more productively, educate himself to build the mental fortitude to not be subject to it. One can increase the SV tilt, decrease the overall exposure to equity market risk, increase bond allocation, keep e...
by Random Walker
Mon Nov 13, 2017 10:25 am
Forum: Investing - Theory, News & General
Topic: “Flight to Quality:” the old way of thinking?
Replies: 16
Views: 1462

Re: “Flight to Quality:” the old way of thinking?

I think the role of Short treasuries as the riskless asset is not changing anytime soon. They are basically uncorrelated with equities. What is very significant is that when equities take it on the chin, the correlation between equities and treasuries tends to turn strongly negative. This brings up ...
by Random Walker
Mon Nov 13, 2017 10:14 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Active Won’t Save Your Retirement
Replies: 3
Views: 875

Larry Swedroe: Active Won’t Save Your Retirement

http://www.etf.com/sections/etf-industry-perspective/swedroe?nopaging=1 Good article showing passive funds from VG and DFA outperforming active from Russell. In today’s environment of high US equity valuations and low interest rates, expected returns are modest. Active funds are unlikely to give inc...
by Random Walker
Sat Nov 11, 2017 8:02 pm
Forum: Investing - Theory, News & General
Topic: Volatility and Risk relationship
Replies: 29
Views: 1960

Re: Volatility and Risk relationship

Tyler9000 wrote The interesting impact of this effect when it comes to portfolio construction is that a portfolio with a lower average return can sometimes be more desirable (not just emotionally but also financially) than one with a higher average return because of the different underlying volatili...
by Random Walker
Sat Nov 11, 2017 6:04 pm
Forum: Investing - Theory, News & General
Topic: Volatility and Risk relationship
Replies: 29
Views: 1960

Re: Volatility and Risk relationship

I think a more efficient portfolio that minimizes volatility drag will likely increase compounded return by about 0.4-0.6%. It may increase expense too, so that advantage is offset somewhat.

Dave
by Random Walker
Sat Nov 11, 2017 3:57 pm
Forum: Investing - Theory, News & General
Topic: Volatility and Risk relationship
Replies: 29
Views: 1960

Re: Volatility and Risk relationship

Totally agree with Tyler9000,
When I’ve played around with the numbers, I think I found decreasing SD by about 4% adds about 0.5% annualized.

Dave
by Random Walker
Sat Nov 11, 2017 3:02 pm
Forum: Investing - Theory, News & General
Topic: Volatility and Risk relationship
Replies: 29
Views: 1960

Re: Volatility and Risk relationship

Bgf, This is somewhat at the limits of my understanding, but here goes. First of all, we need to look at portfolios with combinations of assets. Some of the magic is in the rebalancing and reinvestment. There is an equation that approximates the compounded geometric return of a portfolio relative to...
by Random Walker
Fri Nov 10, 2017 10:06 pm
Forum: Investing - Theory, News & General
Topic: Volatility and Risk relationship
Replies: 29
Views: 1960

Re: Volatility and Risk relationship

If interested, I started a thread in the past on the issue of volatility drag. If two portfolios have the same average annual return but different volatilities, the portfolio with less volatility will have a higher terminal wealth. It’s compounded return will be greater. To me, this is a strong reas...
by Random Walker
Fri Nov 10, 2017 9:57 pm
Forum: Investing - Theory, News & General
Topic: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?
Replies: 14
Views: 1018

Re: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?

Aloha Joe,
Did you look at the AQR 100 years paper? Based on that I’d go for the AQR fund. TS Momentum can have some long bad stretches, but diversifying across several uncorrelated asset classes should really help smooth out it’s behavior.

Dave
by Random Walker
Fri Nov 10, 2017 9:51 pm
Forum: Investing - Theory, News & General
Topic: The Next Bear Market, Ben Carlson
Replies: 13
Views: 2065

Re: The Next Bear Market, Ben Carlson

Galeno,
That’s the exact equation I use: -0.5(%equity)+5% for bonds performing well in the really bad times.

Dave
by Random Walker
Fri Nov 10, 2017 5:53 pm
Forum: Investing - Theory, News & General
Topic: Asset Allocation Consideration
Replies: 5
Views: 490

Re: Asset Allocation Consideration

I would say yes, take them into account. In fact a Monte Carlo Simulation can account for this as well,

Dave
by Random Walker
Fri Nov 10, 2017 5:50 pm
Forum: Investing - Theory, News & General
Topic: The Next Bear Market, Ben Carlson
Replies: 13
Views: 2065

Re: The Next Bear Market, Ben Carlson

Excellent article. So important to do the severe extended bear market mind experiment in one’s head before experiencing it, unprepared, for real. Rick Ferri wrote an article where he described walking clients through a potential 1971-1972 bear market scenario. Best to do that experiment now, when pa...
by Random Walker
Fri Nov 10, 2017 9:39 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Past Performance Deceives
Replies: 2
Views: 553

Larry Swedroe: Past Performance Deceives

http://www.etf.com/sections/index-investor-corner/swedroe-past-performance-deceives?nopaging=1 “Insanity is doing the same thing over and over again, and expecting different results”. Apparently there is a lot of insanity in the realm of hiring investment managers. Another good article by Larry. Dave
by Random Walker
Thu Nov 09, 2017 3:18 pm
Forum: Investing - Theory, News & General
Topic: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?
Replies: 14
Views: 1018

Re: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?

https://www.aqr.com/-/media/files/paper ... esting.pdf

This is the article that got me interested in time series momentum, especially the smile curve in exhibit 2 and the bear market performance in exhibit 3.

Dave
by Random Walker
Thu Nov 09, 2017 2:20 pm
Forum: Investing - Theory, News & General
Topic: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?
Replies: 14
Views: 1018

Re: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?

QMHIX. This an AQR Time Series Momentum fund that invests across four asset classes: equities, bonds, currencies, commodities. The fund uses some leverage. The fund uses absolute/time series momentum. It buys what’s recently gone up and sells what has recently gone down. This means that it has a shi...
by Random Walker
Thu Nov 09, 2017 1:57 pm
Forum: Investing - Theory, News & General
Topic: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?
Replies: 14
Views: 1018

Re: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?

by Phil DeMuth » Thu Nov 09, 2017 7:57 am It makes sense, because managed futures shine during the worst times, and safe withdrawal rates are about eliminating the 1% of worst-case scenarios. But people can't stick with managed futures as a separate portfolio line item because they have lots of lon...
by Random Walker
Thu Nov 09, 2017 10:42 am
Forum: Investing - Theory, News & General
Topic: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?
Replies: 14
Views: 1018

Re: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?

Not sure it’s worthwhile to compare that AQR fund to an index. It uses trend following in multiple asset classes: I think equities, bonds, interest rates, commodities, currencies. It’s sort of it’s own beast I would think.

Dave
by Random Walker
Thu Nov 09, 2017 10:19 am
Forum: Investing - Theory, News & General
Topic: Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?
Replies: 14
Views: 1018

Wes Gray: Do Trend Folowing Managed Futures Increase Safe Withdrawal Rates?

https://alphaarchitect.com/2017/11/08/trend-following-managed-futures-safe-withdrawal-rates/ This is an article I found on alpha architect by Wes Grey. It looks at how adding Time Series Momentum (Managed Futures) to a Portfolio can increase the safe withdrawal rate in retirement. This is potentiall...
by Random Walker
Tue Nov 07, 2017 9:19 pm
Forum: Investing - Theory, News & General
Topic: "I took all my money out of the stock market and it feels amazing"
Replies: 69
Views: 8700

Re: "I took all my money out of the stock market and it feels amazing"

You can’t Time the market, but you can evaluate where you are relative to your goals, where the market is, and take rational action. With someone who has made great gains in the last decade, is very close to retirement goals, seeing modest forward looking equity returns with wide dispersion of possi...
by Random Walker
Tue Nov 07, 2017 12:46 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Slaughtering The High Dividend Sacred Cow
Replies: 192
Views: 12936

Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

William Bernstein once wrote something to the effect “We make more money when markets going down, we just don’t know it at the time”. The dividend accelerator is a big part of that I believe.

Dave
by Random Walker
Tue Nov 07, 2017 12:26 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Slaughtering The High Dividend Sacred Cow
Replies: 192
Views: 12936

Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Nedsaid,
Have you read Siegel’s other book, The Future For Investors? If I remember correctly, he referred to the “dividend accelerator”: reinvesting dividends when stocks are down to amplify the comeback when stocks rise again.

Dave
by Random Walker
Mon Nov 06, 2017 9:04 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Slaughtering The High Dividend Sacred Cow
Replies: 192
Views: 12936

Re: Larry Swedroe: Slaughtering The High Dividend Sacred Cow

Hoops,
Dividends are a proxy for value, so no surprise to beat S&P 500 over long time frame.

Dave
by Random Walker
Mon Nov 06, 2017 1:35 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Slaughtering The High Dividend Sacred Cow
Replies: 192
Views: 12936

Larry Swedroe: Slaughtering The High Dividend Sacred Cow

https://www.advisorperspectives.com/articles/2017/11/06/slaughtering-the-high-dividend-sacred-cow In this article Larry talks about dividends. There is really nothing special about them. Dividend policy has no effect on a stock’s total return. By focusing on dividends, an investor is likely limiting...
by Random Walker
Mon Nov 06, 2017 11:13 am
Forum: Investing - Theory, News & General
Topic: Investment Books & Your Library
Replies: 36
Views: 2537

Re: Investment Books & Your Library

Sand trap,
Me too. I’ve gotten to the point where I’ve just bought a few copies of my favorite beginner’s books to keep on hand for giving away when the opportunity arises.

Dave
by Random Walker
Mon Nov 06, 2017 10:42 am
Forum: Personal Finance (Not Investing)
Topic: Morningstar: Cognitive decline in aging. A strong case for portfolio simplification?
Replies: 98
Views: 7660

Re: Morningstar: Cognitive decline in aging. A strong case for portfolio simplification?

Cognitive decline and transfer of assets between generations may be another reason to use a trusted fiduciary financial advisor as well. Perhaps even a simple portfolio will become unmanageable with cognitive decline. 12 funds versus 3 funds may be nothing compared to maintaining appropriate mind co...
by Random Walker
Mon Nov 06, 2017 9:02 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Time Series Momentum Persists
Replies: 1
Views: 475

Larry Swedroe: Time Series Momentum Persists

http://www.etf.com/sections/index-investor-corner/swedroe-time-series-momentum-persists Larry Swedroe reviews a good article discussing Time Series Momentum in the bond market. He also reviews his criteria for a factor worthy of incorporating into an investment plan: persistent, pervasive, robust, i...
by Random Walker
Sun Nov 05, 2017 6:14 pm
Forum: Investing - Theory, News & General
Topic: Investment Books & Your Library
Replies: 36
Views: 2537

Re: Investment Books & Your Library

For those who feel they are seeing decreasing marginal returns from new investment books, I might recommend reading on the transition from accumulation portfolio to retirement portfolio. For example William Bernstein’s ebook on life cycle investing or Retirement Portfolios by Zwecher.

Dave
by Random Walker
Sun Nov 05, 2017 6:09 pm
Forum: Investing - Theory, News & General
Topic: Volatility and Risk relationship
Replies: 29
Views: 1960

Re: Volatility and Risk relationship

I have several thoughts. 1. As a first very good approximation, volatility is a good measure of risk. 2. Value is more risky than total market and it does have a greater SD. Value tends to do especially poorly in bad times. I think adding higher SD value to an S&P500 portfolio, keeping overall equit...
by Random Walker
Sat Nov 04, 2017 4:56 pm
Forum: Investing - Theory, News & General
Topic: "What's Your Uncertainty/Humility Score?"
Replies: 17
Views: 2451

Re: "What's Your Uncertainty/Humility Score?"

Sandtrap wrote: ↑Fri Nov 03, 2017 9:54 am Who would patronize a FI who says he is uncertain? :shock: Unfortunately, probably only those with enough wisdom and knowledge not to need one. :wink: I use an advisor who definitely has no certainty! It is because of the lack of a clear crystal ball that I...
by Random Walker
Fri Nov 03, 2017 7:31 pm
Forum: Investing - Theory, News & General
Topic: Book Recommendation: Adaptive Markets:Financial Evolution At The Speed Of Thought
Replies: 4
Views: 349

Re: Book Recommendation: Adaptive Markets:Financial Evolution At The Speed Of Thought

When I first started reading about investing, EMH resonated with me immediately. In college I studied economics and biochemistry. I instantly saw analogies between EMH and perfect competition in economics and chemical equilibrium in chemistry. Random Walk also describes bacteria and chemoattractants...
by Random Walker
Fri Nov 03, 2017 7:06 pm
Forum: Investing - Theory, News & General
Topic: Book Recommendation: Adaptive Markets:Financial Evolution At The Speed Of Thought
Replies: 4
Views: 349

Re: Book Recommendation: Adaptive Markets:Financial Evolution At The Speed Of Thought

For those who have trouble coming to grips with the fact that stocks become more risky with time, Lo clarifies this greatly with the example of a drunk’s random walk. :-)

And now I’m just starting a section on risk versus uncertainty.

Dave
by Random Walker
Fri Nov 03, 2017 6:50 pm
Forum: Investing - Theory, News & General
Topic: Book Recommendation: Adaptive Markets:Financial Evolution At The Speed Of Thought
Replies: 4
Views: 349

Book Recommendation: Adaptive Markets:Financial Evolution At The Speed Of Thought

Has anyone read Adaptive Markets: Financial Evolution At The Speed Of Thought by Andrew Lo? I’m just getting started on the book and it seems great. In the first 50 pages lots of EMH, wisdom of crowds, madness of crowds. References to Fama, Markowitz, Sharpe already early in the book. Introductory t...
by Random Walker
Fri Nov 03, 2017 4:56 pm
Forum: Investing - Theory, News & General
Topic: Asset Allocation without the heartburn
Replies: 10
Views: 1568

Re: Asset Allocation without the heartburn

I quickly skimmed the article. Their diversifying assets include long term TIPs, commodities, emerging market equities, and REITs. I think these help some, but perhaps not as much as would be hoped for. Commodities are definitely diversifying! But my understanding is that their benefit is not nearly...