Search found 2564 matches

by Random Walker
Fri May 25, 2018 9:53 pm
Forum: Investing - Theory, News & General
Topic: Fact, Fiction, and the Size Effect
Replies: 78
Views: 5175

Re: Fact, Fiction, and the Size Effect

I definitely have the above mentioned bug. From 96-2001 I had individual stocks through a broker friend. Read a lot and became a hard core ultra low ER TSM Boglehead 2001-9. Started with in interest in tilting to value in taxable account. In 2009 switched to advisor DFA route. Since then have tilted...
by Random Walker
Fri May 25, 2018 9:30 am
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Random Walker wrote: "I believe there is an error or two in your logic. Firstly, need to account for rebalancing." But that is the point of the thought experiment. Without rebalancing there is no loss. It is only through your investment decision to rebalance at some point does the possibilty of los...
by Random Walker
Fri May 25, 2018 9:18 am
Forum: Investing - Theory, News & General
Topic: Fact, Fiction, and the Size Effect
Replies: 78
Views: 5175

Re: Fact, Fiction, and the Size Effect

I will maintain a small tilt to of about 5-8% of my portfolio to small and small value just in case I'm wrong but other than two distinct periods I don't see any difference. HOWEVER, they do seem to run at different times, so as part of an overall equity allocation I believe there can be a re-balan...
by Random Walker
Thu May 24, 2018 12:46 pm
Forum: Investing - Theory, News & General
Topic: Fact, Fiction, and the Size Effect
Replies: 78
Views: 5175

Re: Fact, Fiction, and the Size Effect

Marcopolo, Not really talking about intuition in the gut feel / psychic sort of mode. More talking about believing in a rational risk based or behavioral based reason for a premium to exist. In the case of size, I do think that smaller companies should be riskier and I believe I have learned that th...
by Random Walker
Thu May 24, 2018 9:50 am
Forum: Investing - Theory, News & General
Topic: Asset Class Forecasts
Replies: 47
Views: 2459

Re: Asset Class Forecasts

I think staying the course is always the disciplined default course of (in)action. But as one progresses through the investing stages: early accumulation, late accumulation/Pre retirement, early retirement, later retirement, it makes sense to evaluate where one is relative to their financial goals, ...
by Random Walker
Thu May 24, 2018 9:36 am
Forum: Investing - Theory, News & General
Topic: Fact, Fiction, and the Size Effect
Replies: 78
Views: 5175

Re: Fact, Fiction, and the Size Effect

I think Larry Swedroe’s 5 criteria for a factor provide an excellent framework for evaluating whether to incorporate a source of return into a portfolio. They are persistent, pervasive, robust, investable, intuitive. Perhaps I’m a bit naive, optimistic, or devoid the brains to actually look at data....
by Random Walker
Wed May 23, 2018 10:39 am
Forum: Investing - Theory, News & General
Topic: Taxable Account Near Retirement
Replies: 16
Views: 1564

Re: Taxable Account Near Retirement

I would recommend you learn as much about investing as you can as early as possible. It is much easier to make allocation changes when young with relatively little investable assets than later on when there will be huge tax implications to any moves you make. Diversification is especially critical i...
by Random Walker
Wed May 23, 2018 9:21 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: What Returns Can Teach
Replies: 6
Views: 925

Re: Larry Swedroe: What Returns Can Teach

Reb Tevye wrote:
Wed May 23, 2018 9:15 am
I’m chasing an alpha of zero, after taxes and fees.
That’s a good point. An investor truly tracking a benchmark should be perturbed by both negative and positive tracking error.

Dave
by Random Walker
Wed May 23, 2018 8:43 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: What Returns Can Teach
Replies: 6
Views: 925

Larry Swedroe: What Returns Can Teach

http://www.etf.com/sections/index-investor-corner/swedroe-what-returns-can-teach Larry reviews a study showing that investors are getting wiser over the last 25 years. As a group we chase returns much less in the past and focus on costs more. It seems though, we’ve replaced chasing returns with chas...
by Random Walker
Tue May 22, 2018 3:13 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Hey. I finally get this. I get the point. Lower volatility of returns results in higher compounded return. Period. Not forgetting "for the same expected return." A lot of people get confused about that and also there needs to be quantification showing how much can be gained how consistently. An app...
by Random Walker
Tue May 22, 2018 2:48 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Jalbert, Clearly you know way more statistics than I do, but I’m going to disagree on one point anyways. We don’t have to make estimates of expected returns only based on past historical results. The best estimation may be current valuations as provided by CAPE or discount dividend model. Those esti...
by Random Walker
Tue May 22, 2018 11:40 am
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Hey. I finally get this. I get the point. Lower volatility of returns results in higher compounded return. Period. Not forgetting "for the same expected return." A lot of people get confused about that and also there needs to be quantification showing how much can be gained how consistently. An app...
by Random Walker
Tue May 22, 2018 8:15 am
Forum: Investing - Theory, News & General
Topic: Do I understand duration correctly?
Replies: 33
Views: 2477

Re: Do I understand duration correctly?

Magician,
You’re way beyond my league :-) thanks,

Dave
by Random Walker
Sun May 20, 2018 10:53 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Longinvest, I think your critique of the above Larry recommendations is off base. Alternative histories can play out, and one goal of portfolio construction is to build a portfolio robust to different possible alternative histories playing out. CCF’s are a sort of portfolio insurance; you don’t nece...
by Random Walker
Sun May 20, 2018 2:47 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

For those interested, take a look at an excellent book: Successful Investing Is A Process by Jacques Lussier Chapter 4, pages 54-58.

Dave
by Random Walker
Sun May 20, 2018 2:43 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

As the original poster of this topic, let me try to summarize what I've learned, so far: ... Seeking higher returns by trying to bet on future asset correlations , as promoted by author Larry Swedroe (who has an awful track record), is a form of speculation , mostly driven by greed (e.g. the hope t...
by Random Walker
Sun May 20, 2018 2:42 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Mlretired, You don't need to bother with excel to see why there is no such as thing as volatility drag. A thought experiment will suffice. Assume you have two simple portfolios each consisting of a single stock--stock A is highly volatile while stock B is a dullard-- not much volatility. You buy th...
by Random Walker
Sun May 20, 2018 2:34 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Longinvest, I agree with you lots regarding diversification. But finance has evolved. We have diversification opportunities available that have not been available in the past. Modern portfolio theory clearly shows the benefit of diversifying across independent sources of return. We now have at our d...
by Random Walker
Sun May 20, 2018 1:31 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

MIretired, Yes it’s true. You can prove it yourself on Excel. Create two random series of returns using the Normal distribution and Random functions. Use the same arithmetic mean return for both series, but vary the standard deviations. Then calculate the actual arithmetic and geometric mean returns...
by Random Walker
Sun May 20, 2018 1:25 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Rbaldini, Yes, what matters is the portfolio as a whole. What matters is the geometric return of the portfolio. Sounds like you know statistics better than I do, but my focus is entirely at the portfolio level: how individual assets with different expected returns, correlations, volatilities, mix at...
by Random Walker
Sun May 20, 2018 1:18 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Hi Rick, Thanks for chiming in on this topic. I think it is your book that first got me interested in it. Isn’t avoiding the large losses a big part of the variance drain issue? A bigger portfolio compounding at a more consistent yet modest rate can accomplish lots, with or without a rebalancing bon...
by Random Walker
Sun May 20, 2018 1:01 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

Yeah, with the proliferation of articles covering valuations and expected returns I've noticed a trend of authors switching back to arithmetic averages even for their historical analyses. For example, In his book "Your complete guide to factor-based investing" Larry Swedroe exclusively uses arithme...
by Random Walker
Sun May 20, 2018 10:34 am
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

IlliniDave, I’m no math whiz, but I disagree. The issue is not just looking at past returns as you wrote above. The issue is building efficient portfolios for the future. Looking forward, each potential portfolio addition has an expected return, a simple mean with a potential dispersion of outcomes....
by Random Walker
Sat May 19, 2018 11:28 pm
Forum: Investing - Theory, News & General
Topic: Three-fund portfolio returns and variance drain
Replies: 106
Views: 8983

Re: Three-fund portfolio returns and variance drain

I believe this is a very important topic. When we create a portfolio, we look at the expected returns, volatilities, and correlations of potential portfolio additions. The expected return of an investment is an estimate of an arithmetic mean return. The expected return of a portfolio is a weighted a...
by Random Walker
Sat May 19, 2018 2:03 pm
Forum: Investing - Theory, News & General
Topic: Do I understand duration correctly?
Replies: 33
Views: 2477

Re: Do I understand duration correctly?

Dbr, I ignored the question and just basically said everything I know about bonds instead :-). Thanks for alerting me to that. People and books always make the point that there is zero difference between individual bonds and a collection of them in a bond fund. Nevertheless it still tricks me up a b...
by Random Walker
Sat May 19, 2018 11:38 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: No Need For Corp Bonds?
Replies: 38
Views: 3699

Re: Larry Swedroe: No Need For Corp Bonds?

Nisiprius makes a great comment about data. In general, longer term data has the potential to be more meaningful because it displays persistence of whatever factor one is looking at. But circumstances change, and shorter more recent data might be more relevant to our current circumstance. To really ...
by Random Walker
Sat May 19, 2018 11:20 am
Forum: Investing - Theory, News & General
Topic: Do I understand duration correctly?
Replies: 33
Views: 2477

Re: Do I understand duration correctly?

The maturity of the bond is decreasing over time. After 1 year, the maturity of a 5 year bond is 4 years. Duration is always less than maturity. As maturity shortens and a bigger proportion of the bonds total payout is the final repayment of principal, the duration comes closer to equaling maturity....
by Random Walker
Sat May 19, 2018 10:38 am
Forum: Investing - Theory, News & General
Topic: Do I understand duration correctly?
Replies: 33
Views: 2477

Re: Do I understand duration correctly?

I know of three useful working definitions for duration: 1. Weighted average time for repayment of all coupons and principal at end 2. Time at which a bond holder is indifferent to a one time change in interest rates because of reinvestment of coupons at new interest rate 3. A measure of price sensi...
by Random Walker
Fri May 18, 2018 11:02 am
Forum: Investing - Theory, News & General
Topic: Rob Arnott:index Investors Buy High, Sell Low
Replies: 51
Views: 4909

Re: Rob Arnott:index Investors Buy High, Sell Low

I think the argument stating that the use of active management to overcome these potential weaknesses of pure indexing is a bit of a straw man. The real comparison should be to passive funds that are willing to accept a little tracking error to overcome the weaknesses of pure indexes.

Dave
by Random Walker
Fri May 18, 2018 9:10 am
Forum: Investing - Theory, News & General
Topic: Rob Arnott:index Investors Buy High, Sell Low
Replies: 51
Views: 4909

Rob Arnott:index Investors Buy High, Sell Low

http://www.etf.com/sections/features-and-news/rob-arnott-index-investors-buy-high-sell-low?nopaging=1 This article is not about what you might think from the title: it’s not about bad individual investor behavior. Rather it’s about a potential weakness of typical market cap weighted index funds. Pas...
by Random Walker
Fri May 18, 2018 7:33 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: No Need For Corp Bonds?
Replies: 38
Views: 3699

Larry Swedroe: No Need For Corp Bonds?

http://www.etf.com/sections/index-investor-corner/swedroe-no-need-corp-bonds?nopaging=1 Corporate bonds are really hybrid securities: a mix of the risks found in Treasuries and stocks. Even though corporate bonds make up a substantial portion of the world fixed income market, the case for adding the...
by Random Walker
Thu May 17, 2018 10:22 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Value Premium Lives!
Replies: 39
Views: 2851

Re: Factor investing with one fund.

if people are worried about value underperformance, that is just more reason to diversify across all the known factors, including market beta: market, size, value, momentum, profitability/quality. Dave: Total Stock Market Index Fund includes all U.S. stock factors in one fund. Please read my "Simpl...
by Random Walker
Wed May 16, 2018 10:09 pm
Forum: Investing - Theory, News & General
Topic: A question concerning expected returns of model portfolio
Replies: 2
Views: 243

Re: A question concerning expected returns of model portfolio

Carol88888, I think you are calculating expected returns correctly: a weighted average of the expected returns of the individual portfolio components. I looked up the example you describe from Larry’s 2014 book. Those are actual returns data from1975-2013. As I’m sure you’ve read, expected returns a...
by Random Walker
Wed May 16, 2018 9:21 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Value Premium Lives!
Replies: 39
Views: 2851

Re: Larry Swedroe: Value Premium Lives!

Several posters seem to be looking at this as a binary choice between value tilt and all TSM. First of all, the data in the article shows that the value premium is negative about as often at each length of time as is market beta. Since value and market are uncorrelated, this is an argument to divers...
by Random Walker
Wed May 16, 2018 2:09 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Value Premium Lives!
Replies: 39
Views: 2851

Re: Larry Swedroe: Value Premium Lives!

I apologize if I misspoke. Though I do believe he has held Wellington fund, described by Morningstar as a LV fund, for a very long time. Perhaps he only holds it for sentimental reasons. I was not speaking from a source, but here is a link to a Bogle lecture on Wellington. He does describe the equit...
by Random Walker
Wed May 16, 2018 10:05 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Value Premium Lives!
Replies: 39
Views: 2851

Re: Larry Swedroe: Value Premium Lives!

But the ultimate question for investors is can active strategies outperform Bogle. Larry has some more work to do on that one... I think Larry and Bogle are way more on the same page than you think. They both ardently believe active management is a loser’s game. Both strongly advocate passive inves...
by Random Walker
Wed May 16, 2018 9:39 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Risks Of Short Selling
Replies: 8
Views: 1105

Re: Larry Swedroe: Risks Of Short Selling

But the simplest example is us individual investors; very easy for us to go long and very difficult to go short.

Dave
by Random Walker
Wed May 16, 2018 9:33 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Value Premium Lives!
Replies: 39
Views: 2851

Re: Larry Swedroe: Value Premium Lives!

Mr. Swedroe's Conclusion: "My conclusion is that the most recent 10 years of performance is likely just another of those occasionally occurring but fairly long periods in which the value premium is negative." It is difficult (and expensive) to try to "beat the market." Best wishes. Taylor In the ar...
by Random Walker
Wed May 16, 2018 8:30 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Value Premium Lives!
Replies: 39
Views: 2851

Larry Swedroe: Value Premium Lives!

http://www.etf.com/sections/index-investor-corner/swedroe-value-premium-lives?nopaging=1 In this article Larry places the last decade’s value performance in historical context and in the context of the behavior of other factors, including market beta, over different time periods. Larry briefly discu...
by Random Walker
Mon May 14, 2018 8:22 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Risks Of Short Selling
Replies: 8
Views: 1105

Larry Swedroe: Risks Of Short Selling

http://www.etf.com/sections/index-investor-corner/swedroe-risks-short-selling?nopaging=1 All of the factors are defined as long-short portfolios. One can easily correct underprocing with long only portfolios, but it is much more difficult to correct overpricing. To efficiently correct overpricing as...
by Random Walker
Sun May 13, 2018 2:35 pm
Forum: Investing - Theory, News & General
Topic: Agressive factor Investing
Replies: 44
Views: 4049

Re: Agressive factor Investing

I've read some parts of Larry swedroe's book on factor investing, If you’re only reading parts of the book, make sure you see the tables in Chapter 9 that look at the Sharpe ratios of individual factors, the likelihood of underperformance of each factor over different time periods, and the powerful...
by Random Walker
Sat May 12, 2018 10:54 pm
Forum: Investing - Theory, News & General
Topic: Muni bondholders vs. pensions
Replies: 50
Views: 2968

Re: Muni bondholders vs. pensions

Of all the bonds in the portfolio of VWITX, a total of 19.6% of the bonds are the nine states on Swedroe's "no buy" list. Illinois alone represents 6.4% of all the bonds in the portfolio. Puerto Rico ( not on Swedroe's list ) represents 0.1%. (Taken from the annual report of Oct, 2017.) I respect L...
by Random Walker
Sat May 12, 2018 10:28 pm
Forum: Investing - Theory, News & General
Topic: Agressive factor Investing
Replies: 44
Views: 4049

Re: Agressive factor Investing

Well, if all this factor stuff really works then everyone is going to know about it and either A- it won't work anymore, or B- it will continue to work and become part of the total market profile. If it's B, then I will be in on it because I hold the total market. Paul In case B, you might hold all...
by Random Walker
Sat May 12, 2018 10:22 pm
Forum: Investing - Theory, News & General
Topic: Muni bondholders vs. pensions
Replies: 50
Views: 2968

Re: Muni bondholders vs. pensions

Of all the bonds in the portfolio of VWITX, a total of 19.6% of the bonds are the nine states on Swedroe's "no buy" list. Illinois alone represents 6.4% of all the bonds in the portfolio. Puerto Rico ( not on Swedroe's list ) represents 0.1%. (Taken from the annual report of Oct, 2017.) I respect L...
by Random Walker
Fri May 11, 2018 10:53 am
Forum: Investing - Theory, News & General
Topic: Muni bondholders vs. pensions
Replies: 50
Views: 2968

Re: Muni bondholders vs. pensions

Tarkus, As I recently stated, I’m a client of Larry’s firm. So my bond ladder also excludes the states on the above mentioned list. Another advantage of having a ladder of individual bonds is that the investor can tailor it to his personal tax circumstance. For example, bonds prices rise to the leve...
by Random Walker
Fri May 11, 2018 10:24 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Thinking In Bets
Replies: 22
Views: 2254

Re: Larry Swedroe: Thinking In Bets

Those "rules of thumb" are nice, but kind of squishy. Why 85%? Is 90% conservative enough? You see the point. The reality is that the analysis will be run a number of times during a retirement and the answer to the question "How much can I safely spend?" will evolve. I do not think it's wise to run...
by Random Walker
Fri May 11, 2018 9:32 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Thinking In Bets
Replies: 22
Views: 2254

Re: Larry Swedroe: Thinking In Bets

Daufuskienate,
My advisor generally uses 85% as the recommended success rate for MCS. That being said, one can ratchet that number up or down based on one’s personal risk tolerance and what one has in reserve as Plan B for the potential unsuccessful ourptcomes.

Dave
by Random Walker
Fri May 11, 2018 9:15 am
Forum: Investing - Theory, News & General
Topic: Muni bondholders vs. pensions
Replies: 50
Views: 2968

Re: Muni bondholders vs. pensions

Virtually all of my bonds are individual municipal bonds. I’m not losing any sleep. One advantage of using an individual bond ladder over a fund is that the individual can control credit quality and maturity. By choosing only the highest quality bonds, state general obligations and essential service...
by Random Walker
Fri May 11, 2018 9:07 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Thinking In Bets
Replies: 22
Views: 2254

Larry Swedroe: Thinking In Bets

http://www.etf.com/sections/index-investor-corner/swedroe-lessons-poker-player?nopaging=1 Larry reviews a book called Thinking In Bets by Annie Duke, a former professional poker player. Larry covers a lot of ground in this discussion: confusing strategy and outcome, alternative histories, hindsight ...