Search found 2861 matches

by Random Walker
Wed Aug 15, 2018 1:24 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Betting Against Beta
Replies: 5
Views: 708

Larry Swedroe: Betting Against Beta

https://www.etf.com/sections/index-investor-corner/swedroe-betting-against-beta Betting against beta makes my head spin a bit. The last few sentences summarize the article well. “Low-beta stocks outperform high-beta stocks on average, on a risk-adjusted basis, but the outperformance is stronger when...
by Random Walker
Wed Aug 15, 2018 1:00 pm
Forum: Investing - Theory, News & General
Topic: The Case for Multifactor Funds
Replies: 9
Views: 556

Re: The Case for Multifactor Funds

Worthwhile to point out that value, momentum, carry are not limited to just equities; they are present in other asset classes as well. The correlation of the different factors for the same asset class is low. Also, the correlations for the same factor between asset classes is low. Potential strong d...
by Random Walker
Wed Aug 15, 2018 10:11 am
Forum: Investing - Theory, News & General
Topic: The Case for Multifactor Funds
Replies: 9
Views: 556

Re: The Case for Multifactor Funds

I agree with the premise of diversifying across factors. Chapter 9 of Larry’s factor book shows the benefit by looking at 1/n portfolios diversified across factors. And I’d extrapolate that to the power of diversifying into other alternative uncorrelated sources of return. A more efficient portfolio...
by Random Walker
Tue Aug 14, 2018 4:11 pm
Forum: Investing - Theory, News & General
Topic: Importance of sequence of real returns for SWR, CAPE valuation, and Luck
Replies: 88
Views: 3174

Re: Importance of sequence of real returns for SWR, CAPE valuation, and Luck

Marcopolo, I think there is more to CAPE than historical data. It’s logical that the more expensive it is to purchase a dollar of earnings, the more likely the price is to move down rather than up. HomerJ, Completely agree that a model can be wrong. And I really agree that my understanding of a mode...
by Random Walker
Tue Aug 14, 2018 2:39 pm
Forum: Investing - Theory, News & General
Topic: Importance of sequence of real returns for SWR, CAPE valuation, and Luck
Replies: 88
Views: 3174

Re: Importance of sequence of real returns for SWR, CAPE valuation, and Luck

Marcopolo, When I say the distributions shift left and the bad outcomes are worse, I’m not looking at any of the above charts. I’m just using my version of common sense. We all tend to anchor on our greatest net worth or our current net worth. If markets fall to an average PE of say 15-20 (I know we...
by Random Walker
Tue Aug 14, 2018 2:20 pm
Forum: Investing - Theory, News & General
Topic: Importance of sequence of real returns for SWR, CAPE valuation, and Luck
Replies: 88
Views: 3174

Re: Importance of sequence of real returns for SWR, CAPE valuation, and Luck

Bikechuck,
I was trying to be efficient with my words. You’ll get up to speed very quickly I’m sure :-)

Dave
by Random Walker
Tue Aug 14, 2018 8:58 am
Forum: Investing - Theory, News & General
Topic: Importance of sequence of real returns for SWR, CAPE valuation, and Luck
Replies: 88
Views: 3174

Re: Importance of sequence of real returns for SWR, CAPE valuation, and Luck

Marcopolo, 1) I would use a lower number perhaps 3-3.5%. I think the best way to do this is with Monte Carlo for your specific proposed AA. 2) don’t have a good answer for you on that one. My understanding of CAPE is probably about the same as yours. I am impressed by the shifting dispersion of pote...
by Random Walker
Tue Aug 14, 2018 8:18 am
Forum: Investing - Theory, News & General
Topic: Importance of sequence of real returns for SWR, CAPE valuation, and Luck
Replies: 88
Views: 3174

Re: Importance of sequence of real returns for SWR, CAPE valuation, and Luck

I think it’s Bernstein or maybe Zwecher who refers to “Murphy’s Law Of Retirement”. An investor profits from a long bull market. As valuations rise, his portfolio swells. Seeing the larger than expected portfolio, the investor decides to retire. But he is retiring into a period of high valuations a...
by Random Walker
Mon Aug 13, 2018 10:30 pm
Forum: Investing - Theory, News & General
Topic: Importance of sequence of real returns for SWR, CAPE valuation, and Luck
Replies: 88
Views: 3174

Re: Importance of sequence of real returns for SWR, CAPE valuation, and Luck

I think it’s Bernstein or maybe Zwecher who refers to “Murphy’s Law Of Retirement”. An investor profits from a long bull market. As valuations rise, his portfolio swells. Seeing the larger than expected portfolio, the investor decides to retire. But he is retiring into a period of high valuations an...
by Random Walker
Mon Aug 13, 2018 1:44 pm
Forum: Investing - Theory, News & General
Topic: Importance of sequence of real returns for SWR, CAPE valuation, and Luck
Replies: 88
Views: 3174

Re: Importance of sequence of real returns for SWR, CAPE valuation, and Luck

Strongly recommend William Bernstein’s short e-book on lifecycle investing. He addresses this issue at the very end. If the markets have been generous, then it’s prudent for the investor getting close to retirement to take some definitive action.

Dave
by Random Walker
Mon Aug 13, 2018 1:41 pm
Forum: Investing - Theory, News & General
Topic: Importance of sequence of real returns for SWR, CAPE valuation, and Luck
Replies: 88
Views: 3174

Re: Importance of sequence of real returns for SWR, CAPE valuation, and Luck

Sequence of returns is a huge issue immediately preceding retirement and in early retirement. This, influenced by recent valuations, is perhaps the biggest reason I’ve diversified as much as I can across sources of return. I’ve decreased overall equity exposure, increased bond exposure, tilted equit...
by Random Walker
Mon Aug 13, 2018 9:21 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Effective Fund Comparison
Replies: 1
Views: 307

Larry Swedroe: Effective Fund Comparison

https://www.etf.com/sections/etf-strategist-corner/swedroe-effective-fund-comparison?nopaging=1 In this article Larry goes into depth beyond factor loadings and expense ratios to compare two small value funds. Cost alone is not what matters. What matters is cost per unit value added. There are multi...
by Random Walker
Mon Aug 13, 2018 8:51 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

I agree with Park here. You do see value at the individual security level (a cheap stock) more than you see in diversified groups of stocks. By definition this is the case. Packer I think I disagree. I believe the performance of the small value asset class is almost fully explained by just a few wi...
by Random Walker
Sun Aug 12, 2018 5:47 pm
Forum: Investing - Theory, News & General
Topic: Massive small cap tilt with low equity AA - anybody do this?
Replies: 8
Views: 870

Re: Massive small cap tilt with low equity AA - anybody do this?

Also, take a look at Larry’s Your Complete Guide to Factor Based Investing. I agree this is a good book on the subject. It's readable even for those without a finance background. Well, I think so at least. I have a finance background so maybe I can't judge that. LOL I have no finance background and...
by Random Walker
Sun Aug 12, 2018 3:10 pm
Forum: Investing - Theory, News & General
Topic: Massive small cap tilt with low equity AA - anybody do this?
Replies: 8
Views: 870

Re: Massive small cap tilt with low equity AA - anybody do this?

Also, take a look at Larry’s Your Complete Guide to Factor Based Investing.

Also, take a look at the thread I bumped today on the rewards of multi asset class investing: expand the concept beyond the few asset classes in the chart to size, value, alternatives.

Dave
by Random Walker
Sun Aug 12, 2018 3:05 pm
Forum: Investing - Theory, News & General
Topic: Massive small cap tilt with low equity AA - anybody do this?
Replies: 8
Views: 870

Re: Massive small cap tilt with low equity AA - anybody do this?

I do the big (almost exclusive) SV tilt and decreased overall equity allocation. I’m 40% equity/36% bonds/24% alternatives. The equities are almost entirely SV and split evenly US/Int. Larry Swedroe promotes the concept of big tilt and decreased equity allocation. I believe the rationale for it make...
by Random Walker
Sun Aug 12, 2018 10:32 am
Forum: Investing - Theory, News & General
Topic: Expanding on The Rewards Of Multiple Asset Class Investing
Replies: 48
Views: 5388

Re: Expanding on The Rewards Of Multiple Asset Class Investing

Just thought I’d give my old thread a bump. As stated at the top, the specific asset classes are almost irrelevant. What is relevant is how less than perfectly correlated assets mix in a portfolio. Whether we are talking asset classes, styles, alternatives, geography, they all have the potential to ...
by Random Walker
Sat Aug 11, 2018 8:57 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe:Don’t Go “Mad Money”
Replies: 22
Views: 3101

Larry Swedroe:Don’t Go “Mad Money”

https://www.etf.com/sections/index-investor-corner/swedroe-26?nopaging=1 In this article Larry reviews the performance of Jim Cramer’s recommendations. He reviews several studies comparing results to the common factors; results are predictable to us Bogleheads. Apparently there is a lot of momentum ...
by Random Walker
Fri Aug 10, 2018 7:11 pm
Forum: Investing - Theory, News & General
Topic: Evaluating Munis beyond rating
Replies: 11
Views: 841

Re: Evaluating Munis beyond rating

Avoid munis from high tax states unless you live in those states. People who live in those states derive a bigger tax benefit than people not paying the in state taxes, thus prices get bid up higher.

Dave
by Random Walker
Fri Aug 10, 2018 6:34 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

I don't think you'd call it "market timing" if your life circumstances (including financial circumstances) have changed considerably. Certainly not. Changing your portfolio on the basis of your own personal situation is not market timing. But changing your portfolio on the basis of current or antic...
by Random Walker
Fri Aug 10, 2018 2:12 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

I’ve become a big fan of Monte Carlo Simulation. The results can be surprising. In my own case, I found that there was surprisingly little sensitivity to AA of me meeting my goals. I also found that maximizing terminal wealth and meeting specific goals are very separate and distinct goals. As Larry ...
by Random Walker
Fri Aug 10, 2018 1:37 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

Sperry, If you’ve benefitted from the long bull, and want to spend those profits, might it make sense to realize some of those profits and save them as cash and short term bonds? That would be an AA change towards the more conservative. Dave Doesn't re-balancing do this without needing to change yo...
by Random Walker
Fri Aug 10, 2018 10:40 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

Sperry,
If you’ve benefitted from the long bull, and want to spend those profits, might it make sense to realize some of those profits and save them as cash and short term bonds? That would be an AA change towards the more conservative.

Dave
by Random Walker
Fri Aug 10, 2018 7:56 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

Homer J, I totally get your point. I think it’s very important that, like you, people focus as much (or more) on the potential dispersion of returns as the mean. I think we’d agree that not much of this is actionable for the young investor. Whether expected returns are 3%, 5%, or 7%, he just needs t...
by Random Walker
Thu Aug 09, 2018 11:12 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

Homer, We basically agree. As we get older and accumulate wealth, past returns, current valuations, expected returns, and our own net worth become tremendously interrelated. We choose an AA based on our ability, willingness, need to take risk. All of those are related to what the market has given us...
by Random Walker
Thu Aug 09, 2018 8:46 pm
Forum: Investing - Theory, News & General
Topic: Evaluating Munis beyond rating
Replies: 11
Views: 841

Re: Evaluating Munis beyond rating

I believe potential to be called is a biggie

Dave
by Random Walker
Thu Aug 09, 2018 8:40 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

I will add this, we invest in equities even though they are riskier. Reason we anticipate a risk premium. Now at some point you should believe the risk premium isn't worth it. That is a different level for every person. The ERP has historically been high because wealthy people have little need to t...
by Random Walker
Thu Aug 09, 2018 3:10 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

It is interesting that Larry Swedroe has decided not to participate in discussions on this forum some time ago. Yet people continued to put every one of his articles for discussions here as soon as they are published. Well, pretty much those people are me. As I’ve said before, I’d be happy to post ...
by Random Walker
Thu Aug 09, 2018 2:43 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

No I don’t believe at all that Larry is calling for market timing. He is talking about long term committed changes to the asset allocation. He appreciates that most US individual investors substantially underweight international relative to world market cap weighting. Since a good starting point fo...
by Random Walker
Thu Aug 09, 2018 12:36 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

Homer J, No I don’t believe at all that Larry is calling for market timing. He is talking about long term committed changes to the asset allocation. He appreciates that most US individual investors substantially underweight international relative to world market cap weighting. Since a good starting ...
by Random Walker
Thu Aug 09, 2018 11:36 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

http://www.etf.com/sections/swedroe-valuations-too-high?nopaging=1 Excellent article placing current CAPE in perspective. Larry reviews multiple reasons for CAPE to have drifted upwards over the decades. When we talk mean reversion, what mean do we revert to? Equities may be generously valued, impl...
by Random Walker
Wed Aug 08, 2018 8:14 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

Good point. But still think one might be better off using best estimates of forward looking returns rather than that 4%.

Dave
by Random Walker
Wed Aug 08, 2018 7:12 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Re: Larry Swedroe: Valuations Too High?

I rarely if ever see anybody on the forum suggesting that we rely on averages of past performance. More typically, I see posters suggesting that it is unreasonable to try to predict future stock market returns using any approach, as the future is unknowable. I think most who advocates 4% safe withd...
by Random Walker
Wed Aug 08, 2018 5:37 pm
Forum: Investing - Theory, News & General
Topic: True Risk-Adjuted Returns
Replies: 17
Views: 1114

Re: True Risk-Adjuted Returns

Responding to both you and Dave, I really have to wonder if the many young people out there in their late 20s and early 30s who are 90% in equities in their Life Strategy funds, have any idea of how how little additional risk adjusted return they are getting with their high equity allocations. [/qu...
by Random Walker
Wed Aug 08, 2018 3:33 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Valuations Too High?
Replies: 200
Views: 10395

Larry Swedroe: Valuations Too High?

http://www.etf.com/sections/swedroe-valuations-too-high?nopaging=1 Excellent article placing current CAPE in perspective. Larry reviews multiple reasons for CAPE to have drifted upwards over the decades. When we talk mean reversion, what mean do we revert to? Equities may be generously valued, imply...
by Random Walker
Wed Aug 08, 2018 3:19 pm
Forum: Investing - Theory, News & General
Topic: True Risk-Adjuted Returns
Replies: 17
Views: 1114

Re: True Risk-Adjuted Returns

Gmaynard, No. The last sentence of your statement implies or states that the market sets prices to equilibrate returns. But it does not. It prices risk. The only way to induce an investor to buy a more risky investment is to depress the price to the point where the expected return is high enough to...
by Random Walker
Wed Aug 08, 2018 12:19 am
Forum: Investing - Theory, News & General
Topic: True Risk-Adjuted Returns
Replies: 17
Views: 1114

Re: True Risk-Adjuted Returns

Gmaynard, No. The last sentence of your statement implies or states that the market sets prices to equilibrate returns. But it does not. It prices risk. The only way to induce an investor to buy a more risky investment is to depress the price to the point where the expected return is high enough to ...
by Random Walker
Tue Aug 07, 2018 7:10 pm
Forum: Investing - Theory, News & General
Topic: True Risk-Adjuted Returns
Replies: 17
Views: 1114

Re: True Risk-Adjuted Returns

Gmaynardkrebs, I don’t think any one investment is better than another. They are just different, and different investors have different individual preferences. The market prices risk. Lower perceived risk results in higher valuations and thus lower expected returns. An investor choosing US is choosi...
by Random Walker
Tue Aug 07, 2018 6:08 pm
Forum: Investing - Theory, News & General
Topic: True Risk-Adjuted Returns
Replies: 17
Views: 1114

Re: True Risk-Adjuted Returns

I think I’ve read that in theory, and in a perfectly efficient market, all investments should have equal Sharpe ratios. I don’t really believe that though because SR is only one proxy for risk. I believe the markets are so efficient though, that even given a multitude of risk definitions, somehow th...
by Random Walker
Tue Aug 07, 2018 5:49 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Disrupted Expectations
Replies: 27
Views: 2904

Re: Larry Swedroe: Disrupted Expectations

With bond yields at about 2% and expected nominal return on US equity at about 5%, seems that the question is how much risk is an investor willing to take for the additional 3%. For a young investor with not much to lose, a lot of human capital in reserve, and the benefits of compounding to look for...
by Random Walker
Tue Aug 07, 2018 9:14 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Disrupted Expectations
Replies: 27
Views: 2904

Re: Larry Swedroe: Disrupted Expectations

Stlutz, Thanks for that explanation. Like I said, limits of my knowledge. But seems to me dividend yield is pretty consistently solid roughly 2% and earnings growth usually in the range of 2-3%. Dividend yield + earnings growth + valuation changes= return Seems to me changes in the P/E ratio would d...
by Random Walker
Mon Aug 06, 2018 9:47 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Disrupted Expectations
Replies: 27
Views: 2904

Re: Larry Swedroe: Disrupted Expectations

Valuations matter a lot Dave: What does "a lot" mean? That phrase gets bandied around here a lot but what percent of returns over the next 10-20 years will be determined by today's valuations, do you think? 10%? 80%? Getting to a more precise term than "a lot" might help move the discussion forward...
by Random Walker
Mon Aug 06, 2018 5:15 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Disrupted Expectations
Replies: 27
Views: 2904

Re: Larry Swedroe: Disrupted Expectations

Homer, Another thought :-) more money is certainly better than less. But I think mature investing involves defining specific realistic goals and sticking to an AA that maximizes likelihood of achieving those goals. Sticking to the more aggressive plan has a higher likelihood of accumulating more, bu...
by Random Walker
Mon Aug 06, 2018 4:56 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Disrupted Expectations
Replies: 27
Views: 2904

Re: Larry Swedroe: Disrupted Expectations

In my own personal case, I’m 55 and have benefittted from the almost 10 year equity bull run. Valuations are high, future expected returns more modest, whole potential dispersion of returns shifted left, so I thought it worthwhile to take risk off the table, secure a good portion of the LMP, and go...
by Random Walker
Mon Aug 06, 2018 2:14 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Disrupted Expectations
Replies: 27
Views: 2904

Re: Larry Swedroe: Disrupted Expectations

Packer, Yes, you definitely get what I’m thinking. I tend to believe that if one can secure maybe 15-20 years living expenses in bonds, then maybe feel free to take risk with the remainder. This is the liability matching portfolio concept I learned from reading Bernstein. He I think believes the LMP...
by Random Walker
Mon Aug 06, 2018 12:13 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Disrupted Expectations
Replies: 27
Views: 2904

Re: Larry Swedroe: Disrupted Expectations

I agree that valuations should have little if any effect on a young accumulator’s investment plan. I think a late accumulator close to retirement or in early retirement should think a lot about valuations. Lofty valuations don’t only imply a lower future mean expected return, they also imply that th...
by Random Walker
Mon Aug 06, 2018 9:25 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Disrupted Expectations
Replies: 27
Views: 2904

Larry Swedroe: Disrupted Expectations

http://www.etf.com/sections/index-investor-corner/swedroe-disrupted-expectations?nopaging=1 Larry discusses the important topic of estimating expected returns. Valuations matter a lot, and it is important to account for them rather than blindly use historical averages; people planning for retirement...
by Random Walker
Sun Aug 05, 2018 2:53 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Portfolio Pain Happens
Replies: 49
Views: 4659

Re: Larry Swedroe: Portfolio Pain Happens

Nedsaid, Your point about considering illiquidity is a good one, but I think that premium would be negative in a crisis. People will make flight to liquidity as well as flight to quality. As you note, correlations for all risky assets tend towards 1 in bad times. I’m so curious to see how the alts b...
by Random Walker
Sun Aug 05, 2018 2:40 pm
Forum: Investing - Theory, News & General
Topic: Would buy and hold work if Japan's lost decade happens?
Replies: 64
Views: 7439

Re: Would buy and hold work if Japan's lost decade happens?

I agree with the above poster that it has been more like a lost generation than a lost decade. The lessons I take from it are the following. 1. Yes it can happen here. So this is a reason to diversify geographically broadly. I’m 50% US/50% Int. 2. I believe value investors in Japan did significantly...
by Random Walker
Sun Aug 05, 2018 1:27 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Portfolio Pain Happens
Replies: 49
Views: 4659

Re: Larry Swedroe: Portfolio Pain Happens

Nedsaid, All very good points. We can only invest looking forward and our data only looks backward. I like your kitchen sink approach. Of course our definitions of the kitchen sink can change over time. The academics are looking at as a collection of factors. I believe in diversifying heavily across...