Search found 2800 matches

by Robert T
Fri Jan 26, 2024 5:41 am
Forum: US Chapters
Topic: 🎁 🎉Happy 100th Birthday to Taylor Larimore 🎊🎂
Replies: 429
Views: 41904

Re: 🎁 🎉Happy 100th Birthday to Taylor Larimore 🎊🎂

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Happy birthday Taylor! Amazing man. Amazing life.
Kathleen Ryan wrote: Sun Jan 21, 2024 11:48 pm
Taylor has the grace to face personal adversity with bravery and without complaint; first as a young soldier in WWII, and then later in life. This was brought to the forefront when he lost his voice to cancer, but shows us that does not have to be a limit, in any sense of the word.
This is one (of many) things I admire about Taylor - a role model of response under adversity.
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by Robert T
Mon Oct 09, 2023 9:52 am
Forum: US Chapters
Topic: Sad News - LadyGeek's Mom has passed
Replies: 158
Views: 37366

Re: Sad News - LadyGeek's Mom has passed

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So sorry to hear of your loss LadyGeek! Sincere condolences.
by Robert T
Tue Aug 08, 2023 9:52 am
Forum: Investing - Theory, News & General
Topic: Nuggets from Bernstein's "Four Pillars"
Replies: 57
Views: 9271

Re: Nuggets from Bernstein's "Four Pillars"

Nuggets from Bernstein's "Four Pillars"
The whole book is a nugget.
by Robert T
Fri Oct 21, 2022 3:53 pm
Forum: Investing - Theory, News & General
Topic: Long Treasuries down 55%. Time to bottom fish?
Replies: 416
Views: 52055

Re: Long Treasuries down almost 50%. Time to bottom fish?

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I have a somewhat nuanced view. There is a risk that discussions on long-term bonds assumes (short-term) tolerable loss is irrelevant i.e. the only thing that matters is matching duration to time horizon. While this approach reduces/eliminates interest rate risk it likely increases capitulation risk (while getting to that time horizon), as we have seen with the recent bond capitulation threads. And capitulation risk (selling out of a long-term strategy) could be more costly to final consumption than the interest rate risk an investor is trying to avoid.
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by Robert T
Tue Oct 11, 2022 7:04 pm
Forum: Investing - Theory, News & General
Topic: Another Nobel Laureate will probably use a Total Market Index Fund
Replies: 4
Views: 1647

Re: Another Nobel Laureate will probably use a Total Market Index Fund

. Douglas Diamond is a member of the Board of Directors of DFA (since 2017) According to the DFA Statement of Additional Information Fiscal year ending October 31, 2021 he was paid $433,000 by DFA (pg. 26). From note under the table on pg. 26. “…the compensation to certain of the disinterested Directors may be in amounts that correspond to a hypothetical investment in a cross-section of the DFA Funds. Thus, the disinterested Directors who are so compensated experience the same investment returns that are experienced by shareholders of the DFA Funds although the disinterested Directors do not directly own shares of the DFA Funds.” From pg. 27 Under a deferred compensation plan (the “Plan”) adopted effective January 1, 2002, the disinterested...
by Robert T
Mon Oct 10, 2022 1:03 am
Forum: Investing - Theory, News & General
Topic: Market capitalization of TIPS / Sudden Popularity
Replies: 178
Views: 15809

Re: Market capitalization of TIPS / Sudden Popularity

If you are going to try to time the bond market, then you are going to have to come up with some rules for switching from bonds to cash and cash to bonds or else you are just going on gut feeling. Larry Swedroe outlined various rules in his 2005 book “The Only Guide to A Winning Bond Strategy You’ll Ever Need ” Shifting Maturity : Based on the 1987 Fama-Bliss paper “The Information in Long-Maturity Forward Rates” (published in the American Economic Review). Here are some extracts from Larry's book. "Extend maturity only if you are getting paid sufficiently to take the risk. As discussed in Chapter 4, you might consider establishing the following rule: Extend the maturity only if by extending one year you gain at least an incremental y...
by Robert T
Sun Oct 09, 2022 5:54 pm
Forum: Investing - Theory, News & General
Topic: Comparing 2008-9 and 2022
Replies: 130
Views: 10077

Re: Comparing 2008-9 and 2022

. Here are extracts from David Swensen and Larry Swedroe from about 20 years ago . Both had an influence over my choice for fixed income allocation. They are still relevant today . From David Swensen’s 2000 book on Pioneering Portfolio Management “In the case of unanticipated inflation, fixed income positions perform poorly, as increases in the price level erode the value of the fixed nominal coupon flows and principal payments promised to bond investors. For much of the modern era, fixed income holdings disappointed investors as yields marched ever upward. From 2 percent coupons in the 1950s to 4 percent coupons in the 1960s to 8 percent coupons in the 1970s and 16 percent coupons in the 1980s, bond investors faced a relentless series of i...
by Robert T
Sat Oct 08, 2022 1:47 pm
Forum: Investing - Theory, News & General
Topic: Worst. Bond. Market. Ever.
Replies: 73
Views: 11836

Re: Worst. Bond. Market. Ever.

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Not the worst ever globally.

Image
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Source: Credit Suisse Global Investment Returns Yearbook 2017
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by Robert T
Fri Oct 07, 2022 12:34 pm
Forum: Investing - Theory, News & General
Topic: Are DFA Funds Worth Paying 1% to an Advisor?
Replies: 83
Views: 15797

Re: Are DFA Funds Worth Paying 1% to an Advisor?

There can be some value to an advisor protecting the investor from behavioral errors. True. How successful they are in doing this is another question. For example, Alan Roth’s recent article raised some questions about this with regards to the DFA US Small Value fund. And if an advisor has hundreds and hundreds of clients – perhaps the investor would talk to the advisor a few times per year at most, and not for very long. How did you manage to dredge up a thread from over 9 years ago? What were you searching for? Alan Roth’s recent article on his 20-year experience / lessons etc. posted by Taylor earlier this week got me thinking about my own experience over the same time period. Alan Roth also brought up the issue of the need to pay an ad...
by Robert T
Fri Oct 07, 2022 6:18 am
Forum: Investing - Theory, News & General
Topic: Are DFA Funds Worth Paying 1% to an Advisor?
Replies: 83
Views: 15797

Re: Are DFA Funds Worth Paying 1% to an Advisor?

. I remember these types of discussions. The answer was and still is a resounding no. And now ETF versions of DFA funds are available. A 1% advisor fee is at least 25% of a retirees' annual expenses. Think about that... If the sustainable withdrawal rate is less than 4% then the advisor fee share is even higher! And over the past 20 years of tracking a portfolio of non-DFA funds with a portfolio of DFA funds - with both portfolios having the same (ex-ante estimated) factor loads - they have had the same annualized returns (consistent with the Fama-French research), despite claims from some of a 1-2% alpha from DFA funds beyond factor exposure. Interestingly, one advisor critique of the factor-matched portfolio comparison was that the non-DF...
by Robert T
Thu Oct 06, 2022 8:32 pm
Forum: Investing - Theory, News & General
Topic: "Wrong! My Mistakes Over a 20-Year Advisory Career"
Replies: 57
Views: 9388

Re: "Wrong! My Mistakes Over a 20-Year Advisory Career"

Even at 20 years, you have to take into account the tax-inefficiencies and advisor fees to get into these funds. Agree that total costs matter, a lot. And I would not hold those DFA mutual funds in a taxable account. Were your advisor fees higher for someone using DFA funds vs. Vanguard Market Index funds? I would have thought they would be the same/similar. Don't have to answer. Certainly they underperformed on a risk adjusted basis. Not sure that I would conclude "certainly". Yes, in the US, but there seems to be a general tendency to draw global conclusions from US markets. Here are some “risk metrics” (Sharpe ratio, and max drawdown) added to the returns over the same 20-year time period as posted earlier. The Sharpe ratios o...
by Robert T
Thu Oct 06, 2022 6:03 pm
Forum: Investing - Theory, News & General
Topic: 3 Reasons International Investing Hasn't Paid Off.
Replies: 185
Views: 17800

Re: 3 Reasons International Investing Hasn't Paid Off.

What podcast are you referring to? Here’s the podcast with Matt McLennan – cued to when they start discussing aspects related to international investing . On other aspects discussed in the thread. Exchange rate / currency valuation effects Past 10-year annualized returns to yesterday (10/5/2022) +3.69% = MSCI ACWI ex US (unhedged currency) +7.29% = MSCI ACWI ex US (hedged currency) -3.60% = difference due to relative strengthening of the US dollar On democracy and equity returns This is an interesting aspect, and there was much related discussion on this when the Russian stock market went to zero. There have been other studies on this as well e.g. Democracy, political risk, and stock market performance . There was also an interesting 2012 ...
by Robert T
Thu Oct 06, 2022 8:17 am
Forum: Investing - Theory, News & General
Topic: 3 Reasons International Investing Hasn't Paid Off.
Replies: 185
Views: 17800

Re: 3 Reasons International Investing Hasn't Paid Off.

. International diversification helps reduce sequence of return risk, it does not reduce drawdowns in global financial crises like 2008. On sequence of return risk, I always remember this perceptive post by ‘randomguy’. Someone was comparing 100% US vs. 50:50 US:Intl. from 1972-2015 (when portfolio visualizer had intl data back to 1972) saying there was little/no benefit. randomguy’s response: Run the same numbers but this time add in a 5% SWR. For those too lazy to do it, the US only investor goes broke in 1994 while the international investor has 3x as much money as they started with. Obviously that is a result of picking the start date. But when you retire how comfortable are you at figuring out if international or the US will outperform...
by Robert T
Wed Oct 05, 2022 6:52 pm
Forum: Investing - Theory, News & General
Topic: "Wrong! My Mistakes Over a 20-Year Advisory Career"
Replies: 57
Views: 9388

Re: "Wrong! My Mistakes Over a 20-Year Advisory Career"

. As my portfolio is coming up to its 20 year anniversary I was interested in the article (even though I am an individual investor, not an advisor). “Wrong! My Mistakes Over a 20-Year Advisory Career” The first two points did not rhyme as strongly with my experience - some illustrations below “dead wrong in thinking they [factors] would outperform the overall market beta based on the long-term compensation for taking on that additional risk.” Here’s the actual data over the past 20 years. 20 years: September 2002 to August 2022 (article was written in August) Annualized return (%) US Market 9.9 = Vanguard Total Stock Market (VTSMX) 10.4 = DFA US Small Value (DFSVX) +0.5 = Difference Developed-ex US Markets 6.1 = Vanguard Developed Markets (...
by Robert T
Sun Oct 02, 2022 12:35 pm
Forum: Investing - Theory, News & General
Topic: Why not use 100% S&P500 portfolio?
Replies: 70
Views: 9648

Re: Why not use 100% S&P500 portfolio?

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The S&P500 doesn't always outperform

1965-1981 [17 years]: Annualized returns (%)
6.3% = S&P500
6.7% = T-bills
6.5% = US Inflation rate
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by Robert T
Mon Sep 26, 2022 12:53 am
Forum: Investing - Theory, News & General
Topic: Why don't you factor tilt?
Replies: 882
Views: 55492

Re: Why don't you factor tilt?

. For simplicity: Market–rf = 1*equity risk premium Small Value-rf = 1*equity risk premium + b*size risk premium + c*value risk premium rf=risk free rate "b" and "c" are obviously less than 1 as small value is long-only. Small value, in addition to equity market risk includes size and value risk factors. As these risk factors have low average correlations with each other, and as they all have time-varying returns (that include long periods of underperformance) there is some [sequence of return] diversifying benefit from exposure to all three risk factors. For example: here are the annual correlation coefficients: 1929-2021 0.40 = Equity risk premium: size risk premium 0.10 = Equity risk premium: value risk premium 0.09 =...
by Robert T
Sat Sep 24, 2022 4:45 am
Forum: Personal Investments
Topic: Are any asset classes up YTD?
Replies: 29
Views: 2836

Re: Are any asset classes up YTD?

. Yes, stocks and bonds are both down YTD, unlike 2008, when stocks were down but US treasuries were up . FWIW - out of interest, just done a portfolio check-up – and my overall portfolio returns YTD (at least so far) are still much better than 2008, even in real terms. Survival : The bond portion of my portfolio is for “survival”, to help me stay the course (to reduce the risk of bailing out in equity market downturns). When setting up my portfolio, my ‘estimated’ tolerable loss was a 30-35% portfolio value decline in a calendar year which equated to a 75:25 stock:bond allocation (obviously no guarantees). Historically, there have been at least 3 types of market conditions with significant equity declines: 1929-32 great depression, 1973-74...
by Robert T
Wed Sep 21, 2022 6:21 am
Forum: Personal Consumer Issues
Topic: Favorite music from the 1980s?
Replies: 150
Views: 11395

Re: Favorite music from the 1980s?

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Here are some - with links to one of the more memorable songs from each.

Def Leppard
U2
Foreigner
Dire Straits
Men at Work
Bryan Adams

I still have some of the old cassette tapes with some of their songs. And like listening to 80's music on the car radio - perhaps to stir memories as much as just the songs themselves.
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by Robert T
Wed Sep 21, 2022 6:09 am
Forum: Investing - Theory, News & General
Topic: Why don't you factor tilt?
Replies: 882
Views: 55492

Re: Why don't you factor tilt?

LadyGeek wrote: Tue Sep 20, 2022 7:13 am I should note that Robert T is the OP for the forum sticky topic Collective thoughts [investing mini-reference].

Robert T - If you think it's appropriate, consider adding that content to your forum thread.
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Thank you LadyGeek. I also need to do some other updates that I will try to do, perhaps more completely, at the end of the year.

This paper on Assessing the Relative Magnitude of Premiums (particularly Exhibit 1) may also be relevant for the discussion on factor tilts (or not) in US vs. non-US markets. Obviously no guarantees.
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by Robert T
Tue Sep 20, 2022 6:48 am
Forum: Investing - Theory, News & General
Topic: Why don't you factor tilt?
Replies: 882
Views: 55492

Re: Why don't you factor tilt?

I’m not worried about you, I’m worried about the 20 something just starting out and reading your posts and deciding to concentrate in US Large Cap Growth (which the S&P 500 essentially is) and losing out in the decades to come. So you aren't a Boglehead? Bogle pitched US TSM, but US TSM isn't that much different than S&P500. I don’t feel like a religious devotion to Jack Bogle’s investing recommendation for the average investor near the time of his death is what it means to be a boglehead. Over his life he invested in active funds and wouldn’t have been considered a BH under the strictest only US TSM/BND criteria 60/40 that some follow. It’s really irritating for good arguments to be shut down by appeals to authority to Jack. I can...
by Robert T
Sat Sep 17, 2022 11:08 am
Forum: Investing - Theory, News & General
Topic: Why don't you factor tilt?
Replies: 882
Views: 55492

Re: Why don't you factor tilt?

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To me, people who don’t tilt their financial investments to risk factors ("factor tilt") must mean they are 100% t-bills – as per the Fama-French 1993 paper on common risk factors in the returns on stocks and bonds (i.e. no factor tilt = no tilt to overall equity market risk, term or default risk in fixed income, or risks related to size or value).

I don’t think that describes anyone on Bogleheads. Investors simply give different weights to each risk factor (that could include zero) in their individual portfolios (based on personal circumstances, tastes, and preferences).
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by Robert T
Mon Aug 29, 2022 9:50 am
Forum: Investing - Theory, News & General
Topic: Does the small cap effect really exist?
Replies: 29
Views: 3453

Re: Does the small cap effect really exist?

If the equal-weighted S&P 100 had higher returns than a market-cap weighted S&P 100, that's evidence for a size effect. Indeed. Would add that in addition to smaller cap, it also has a value tilt. Here's a similar example with live returns of funds that track the S&P500 and Equal Weighted S&P500 since 1997. 8/1997 - 7/2022: Annualized return (%) / Current Market Cap / Current P/B 7.91 / 193bn / 3.25 = S&P500 [VFINX] 9.33 / 34bn / 2.31 = S&P500 Equal Weighted [VADDX] Portfolio visualizer: Annualized returns , Factor loads I thought David Dreman did a wonderful demolition job on the Small Cap effect. Dreman certainly made a lot of noise about it - however some of his own data were a bit contradictory to what he said (...
by Robert T
Sat Aug 27, 2022 8:08 pm
Forum: Investing - Theory, News & General
Topic: Antti Ilmanen, Ph.D, provides exceptional insight about investing amid low expected returns in this Bogleheads podcast
Replies: 457
Views: 39118

Re: Antti Ilmanen, Ph.D, provides exceptional insight about investing amid low expected returns in this Bogleheads podca

Right, and as I understand his message, Ilmanen believes that expected real returns should be about: Cash.....................0% Bonds...................0.5%-1.0% Global Equities......4.0% All seem reasonable assumptions for planning purposes — though the future will of course vary. Interestingly, this is similar to Bill Bernstein’s estimates 20 years ago. Bernstein’s “The Four Pillars of Investing” book (pg. 72) provided the following “expected long-term real returns”: US Large Cap Stocks = 3.5% Large Foreign Stocks = 4% Emerging Market Stocks = 6% Treasury Bills and Notes = 0-2% In 2002: US/DM-ex US/EM = 54%/42%/4% => Global Equities = 3.8% expected long-term real return These were the market returns I used for planning purposes 20 years...
by Robert T
Sat Jul 30, 2022 8:10 pm
Forum: Investing - Theory, News & General
Topic: Paper: "Long-Only Value Investing: Does Size Matter?" - thoughts on rigor/results?
Replies: 217
Views: 14970

Re: Paper: "Long-Only Value Investing: Does Size Matter?" - thoughts on rigor/results?

I've been considering a small-cap value tilt and examining evidence for/against factor investing, and the Fama French factors specifically. I found this paper, "Long-Only Value Investing: Does Size Matter?" that indicates equal weighted large-cap value has historically performed equally well to small-cap value in a long-only portfolio. While I read academic literature regularly, finance isn't my field. Do you all have thoughts about the methodology, implementation, conclusions, etc. that would help me and others interested understand the quality of this research? I am interested in the idea of splitting my value tilt to LC and SCV ETFs. https://deliverypdf.ssrn.com/delivery.php?ID=2581051111011101211211200040291080880380020350540...
by Robert T
Sat Jun 18, 2022 9:37 pm
Forum: Investing - Theory, News & General
Topic: Factor Investing: The Next-Gen Boglehead frontier
Replies: 383
Views: 34780

Re: Factor Investing: The Next-Gen Boglehead frontier

. FWIW I have used the Fama-French (original) five factor model (three equity risk factors, and two bond risk factors) as the cornerstone of my investment approach for the past 19.5 years – following the Fama-French 1993 paper (linked below). I have stuck with the approach (same risk factor tilts) for the entire period despite the periodic, loud, and often vitriolic – value is dead, size is dead, bonds are dead – voices. Also made no changes during overall equity market downturns over this period. The global small cap and value tilted equity portion of my portfolio = 1.4% annualized return above MSCI ACWI (global stock) for the past 19.5 years. Some of this is from a fixed EM equity allocation that was higher than the MSCI ACWI in 2003, and...
by Robert T
Wed Mar 16, 2022 3:59 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Managing Risk With Factors
Replies: 326
Views: 28493

Re: Larry Swedroe: Managing Risk With Factors

Taylor Larimore wrote: Tue Mar 15, 2022 6:59 pm There are still "many roads to Dublin" for those who follow The Bogleheads Investing Philosophy:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course
Thank you Taylor. A good reminder for all of us.

Robert
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by Robert T
Tue Mar 15, 2022 6:45 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Managing Risk With Factors
Replies: 326
Views: 28493

Re: Larry Swedroe: Managing Risk With Factors

I sort of lost track of Larry Swedroe's articles and internet postings etc. Where can one follow him these days. He certainly is gone from Bogleheads :-| I can't say I blame him. I like this forum but selling factor investing ideas to this group is like trying to sell protection at a nunnery. It ain't happening so why bother. Better off going somewhere where people are excited to talk about things you like to talk about. . The forum used to be: “there are many roads to Dublin” It seems to now becoming:“there is only one road” with strong and persistent rebuke of any other roads (a tendency to be “holier than Bogle”). Unfortunately, this does not encourage dialogue and discussion – rather the opposite. Many great contributors have left as a...
by Robert T
Mon Oct 18, 2021 6:05 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 5577
Views: 618996

Re: Small Cap Value heads Rejoice !!!

Massdriver wrote: Sun Oct 17, 2021 11:42 pm I haven’t posted much on RR, but it is refreshing to read so many people that are into factors. It’s a nice change of pace.
It is refreshing. Nice to see the free flow of the discussions. Good to hear Larry’s insights again, and also interesting insights from Wes Gray - particularly on fixed income alternatives.
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by Robert T
Mon Oct 18, 2021 2:03 am
Forum: Personal Consumer Issues
Topic: Books that changed your life!!
Replies: 159
Views: 24557

Re: Books that changed your life!!

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“The five major pieces to the life puzzle” by Jim Rohn

First read about 27 years ago - when I was still figuring out what I wanted to do / direction to take.
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by Robert T
Sun Oct 17, 2021 10:22 am
Forum: Investing - Theory, News & General
Topic: Endowment funds are up over 50% this year
Replies: 25
Views: 3452

Re: Endowment funds are up over 50% this year

. Asset allocation and ‘security (manager) selection’ likely contributed to both the relatively high and widely dispersed endowment returns in the Jul 2020 – June 2021 period. Private equity seemed to perform well. For example, Harvard’s private equity investments returned 77% over this period for their 34% allocation to the asset class. Some others seem to have even higher allocations to private equity. The challenge with these ‘alternative’ asset classes is that the dispersion of active manager performance is high. Picking ‘losers’ seems equally as likely as ‘picking winners’, and losers can lose by a lot. For example – from Swensen’s book’s here’s the dispersion (spread) between first and third quartile active manager returns for the 10 ...
by Robert T
Sat Oct 16, 2021 8:15 am
Forum: Investing - Theory, News & General
Topic: Endowment funds are up over 50% this year
Replies: 25
Views: 3452

Re: Endowment funds are up over 50% this year

. Reporting time period: Jul 2020 - Jun 2021. And if private equity returns are similar to small value (as per Rick's podcast with Ted Aronson), over this period: VBR = 65.6% AVUV = 90.4% RZV = 102.7% https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2020&firstMonth=7&endYear=2021&lastMonth=6&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestD...
by Robert T
Sat Oct 16, 2021 5:48 am
Forum: Investing - Theory, News & General
Topic: WSJ: leveraged portfolios are good for you!
Replies: 112
Views: 16295

Re: WSJ: leveraged portfolios are good for you!

. Just to note the idea in the article (behind NTSX) is not new. Here’s a 1996 article by Asness showing relative back-tested performance from 1927-1993 of a levered 60/40 portfolio. https://www.aqr.com/Insights/Research/Journal-Article/Why-Not--Equities I am more sympathetic to leverage than some. After all, I implicitly used leverage by holding a mortgage and investment portfolio at the same time, and a small cap value tilted portfolio is a form of ‘return stacking’ (term used in the OP linked article). However, the level and form of leverage can vastly change the likely dispersion of returns. For example – the implicit 1.5x leverage of 60:40 S&P500/US treasuries portfolio (similar to NTSX), had relatively good back-tested performance...
by Robert T
Sun Oct 03, 2021 7:07 pm
Forum: Investing - Theory, News & General
Topic: 2021 was the year International was finally going to outperform
Replies: 354
Views: 28932

Re: 2021 was the year International was finally going to outperform

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Longest period of data available for these funds – 23.5 years.

April 1998 – September 2021

Annualized return / Sharpe Ratio
9.46 / 0.45 = DFA US Small Value
8.60 / 0.45 = DFA International Small Value
9.50 / 0.42 = DFA EM Value
9.59 / 0.48 = 50:37:13 DFA US SV: DFA Intl. SV: DFA EM Value

The combined 50:37:13 portfolio had a higher annualized return and Sharpe ratio than each of the individual components alone.
Combined portfolio
Component parts

Obviously no guarantees

Robert
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by Robert T
Fri Oct 01, 2021 8:12 am
Forum: Investing - Theory, News & General
Topic: Portfolios for long term investors
Replies: 55
Views: 9840

Re: Portfolios for long term investors

imak wrote: Thu Sep 30, 2021 12:10 pm John Cochrane on Rational Reminder podcast, episode released today, discusses this paper in addition to other topics:
https://www.youtube.com/watch?v=gbaCOB6CZ6E
Very good podcast - good questions / insightful responses. Thanks for the link.
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by Robert T
Wed Sep 29, 2021 9:16 am
Forum: Investing - Theory, News & General
Topic: Question for those who hold both SCV and bonds..
Replies: 18
Views: 2821

Re: Question for those who hold both SCV and bonds..

Why would someone hold both SCV and bonds? If you wanted to increase more risk for more expected reward, wouldn't you just decrease the amount of bonds you have? What benefit is there to have both SCV and bonds? The main benefit for me over the past 18+ years has been downside (left tail) ‘risk reduction’. Similar to what others have already said. 2003 to date (almost 19 years) – my investment period so far Annualized return (%): 2008 downside return (%) 9.4: -42.2 = 100% MSCI All Cap World Index (World Stock) 9.4: -28.7 = 75%:25% global small cap value titled equity: US intermediate treasury (my actual returns) 8.4: -30.3 = 75%:25% MSCI All Cap World Index (World Stock): US Aggregate Bond So far, annualized return over the full period has...
by Robert T
Mon Sep 27, 2021 7:25 am
Forum: Investing - Theory, News & General
Topic: Portfolios for long term investors
Replies: 55
Views: 9840

Re: Portfolios for long term investors

. Short-term vs. long-term investors I would add that investors cannot become long-term investors without surviving in the short-term. In the accumulation phase – adding bonds for me has been to help stay the course with my equity-oriented portfolio (survival) over the years. A form of portfolio insurance for the ‘rare disasters’ mentioned in the paper (same reason I hold other forms of insurance). Treasuries provide better insurance (lower opportunity cost) than corporate bonds i.e. can hold less treasuries relative to corporate bonds for similar insurance effect (as Swensen outlined in his books). While dividend streams are less volatile than stock prices, their volatility is not zero (dividends per share on average have not remained cons...
by Robert T
Mon Sep 27, 2021 6:38 am
Forum: Investing - Theory, News & General
Topic: Long term low returns predicted
Replies: 170
Views: 16205

Re: Long term low returns predicted

. From this recent M* interview with Arnott. https://www.morningstar.com/articles/1057408/is-it-time-for-us-investors-to-look-abroad Arnott : ….U.S. stocks have a yield of 1.5%. Historically, they produce a growth rate that is about 1.0% to 1.5% above the rate of inflation. Well, that gets you to a 2.5% to 3.0% real return--a far cry from what most investors want to expect from stocks. Then there is the valuation component. We're currently at a price relative to 10-year smoothed earnings, a Shiller P/E ratio of 38. Historic norm is 18. Now we don't assume a mean reversion to 18. We know that maybe it's a new normal, maybe this is the new normal for valuations. Or maybe it does mean a revert, as it has in the past. Let's split the difference...
by Robert T
Sat Sep 11, 2021 8:18 pm
Forum: Investing - Theory, News & General
Topic: Portfolios for long term investors
Replies: 55
Views: 9840

Portfolios for long term investors

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Portfolios for long term investors by John Cochrane

Quite a long read, but may be of interest to some.

Robert
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by Robert T
Sat Aug 14, 2021 12:58 pm
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 328
Views: 29256

Re: The Bottom Line on Factor Investing

Can you share one or two “A-Ha” moments you had that confirmed your beliefs that factor investing is not necessary? . I think it is important to add the word 'risk' to the sentence. Fama-French's 1993 paper was titled "Common risk factors in the returns of stocks and bonds" https://rady.ucsd.edu/faculty/directory/valkanov/pub/classes/mfe/docs/fama_french_jfe_1993.pdf By extension, those who say they don't believe in these 'risk factors' should then be invested only in t-bills. i.e. they don't believe in term or credit/default risk in bonds so no exposure to either; and they don't believe in equity/market risk so no stock holdings. So to say these 'risk factors' are not necessary is to imply a much higher savings rate and only t-b...
by Robert T
Tue Aug 03, 2021 9:29 pm
Forum: Investing - Theory, News & General
Topic: Momentum Heads Rejoice !!!
Replies: 66
Views: 7772

Re: Momentum Heads Rejoice !!!

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6/1/1994 to 6/30/2021

Annualized return % / Sharpe Ratio

14.15 / 0.75 = MSCI USA Momentum
11.04 / 0.60 = MSCI USA

That is a substantial difference.

Source:https://www.msci.com/documents/10199/f3 ... dc90fad923

MTUM tracks MSCI USA Momentum

Obviously no guarantees.

Robert
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by Robert T
Sun Aug 01, 2021 2:30 am
Forum: Investing - Theory, News & General
Topic: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016
Replies: 148
Views: 18863

Re: Retiring in 2000 withdrawing fixed 5% ran out of money in 2016

. Would not have been the case for a global small value tilted portfolio. 2016 value > 2000 starting value. https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=2000&firstMonth=1&endYear=2021&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=1000000&annualOperation=2&annualAdjustment=50000&inflationAdjusted=true&annualPercentage=500.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=SPY&allocat...
by Robert T
Sun Jul 25, 2021 3:41 pm
Forum: Personal Finance (Not Investing)
Topic: Ways to build wealth. How to?
Replies: 33
Views: 4679

Re: Ways to build wealth. How to?

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May be of interest
https://twitter.com/naval/status/1002103360646823936

Another quote from him: "People who live below their means enjoy a freedom that people busy upgrading their lifestyles can't fathom".
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by Robert T
Thu Jul 22, 2021 5:11 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 5577
Views: 618996

Re: Small Cap Value heads Rejoice !!!

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Unpacking the Fama-French HML factor over the 05/1986 - 05/2021 timeframe gives the following:

FF-HML = 1.13% annualized, as per the Portfolio Visualizer link

FF Small Value component of FF-HML = 12.9% annualized
FF Market = 11.0% annualized
Difference = 1.9%

Implied growth of $1 from start of 05/1986
FF Small Value = $70
FF Market = $39

And the FF-HML in "International ex US" and "Emerging markets" on the Portfolio Visualizer website, for the longest period they have data, give greater than zero numbers.

Robert
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by Robert T
Thu Jul 01, 2021 9:36 am
Forum: Investing - Theory, News & General
Topic: Why are you invested (mainly) in US stocks when all long term forecasts are in favour of ex-US?
Replies: 221
Views: 22241

Re: Why are you invested (mainly) in US stocks when all long term forecasts are in favour of ex-US?

. Looking back April 1998 – June 2021 (longest time series for the DFA funds). Annualized return (%): Sharpe ratio 9.60 / 0.45 = DFA US Small Value 8.67 / 0.45 = DFA International Small Value 9.76 / 0.43 = DFA EM Value https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1989&firstMonth=1&endYear=2021&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName...
by Robert T
Tue Jun 29, 2021 10:35 am
Forum: Investing - Theory, News & General
Topic: Thinking of abandoning my (global value) strategy. Should I do it?
Replies: 38
Views: 4365

Re: Thinking of abandoning my (global value) strategy. Should I do it?

. You need conviction to the stay the course with any investment strategy. And it’s always easy to find a portfolio that outperforms yours in hindsight. Recent lagged performance relative to popular benchmarks is always harder to take. Tracking error regret is real and I think is the dominant factor that leads investors to abandon a particular strategy. But often when tracking error is widest and ‘regret’ is largest, is exactly to wrong time to abandon a strategy. And general sentiment – even on bogleheads – follows recent market performance. When value does badly, (and given human nature) there’s usually an increased stream of negative sentiment about value tilts that usually serves to amplify tracking error regret, not reduce it to help i...
by Robert T
Wed Jun 23, 2021 7:56 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 5577
Views: 618996

Re: Small Cap Value heads Rejoice !!!

Mardoc01 wrote: Wed Jun 23, 2021 7:37 pm What will be the ER ?
0.36%
https://sec.report/Document/0001710607- ... 021485.htm
by Robert T
Sat Jun 19, 2021 6:49 pm
Forum: Personal Consumer Issues
Topic: Favorite Movies - Name Five
Replies: 277
Views: 23907

Re: Favorite Movies - Name Five

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Blood Diamond
Chariots of Fire
The Accountant
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by Robert T
Sat May 29, 2021 6:52 am
Forum: Personal Finance (Not Investing)
Topic: Have a really hard time quitting
Replies: 157
Views: 28197

Re: Have a really hard time quitting

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Instead of putting yourself in the past ie. a poor college student working hard to get a good job and scorning your future self for quitting a $350k per year job. Put yourself in the future I.e. in 10 to 15 years time. What do you think you would be most proud of looking back over this time frame - factoring in the increased risks of poor health or worse (at 50 than when you were in college).

I think in retirement it is important to have something to go to - another passion / hobby etc that stimulates you and brings a feeling of pride/fulfillment in accomplishment (no matter how big or small).
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by Robert T
Sat May 29, 2021 6:15 am
Forum: Investing - Theory, News & General
Topic: MTUM Rebalancing Its Holdings -- Impact on Price?
Replies: 12
Views: 2577

Re: MTUM Rebalancing Its Holdings -- Impact on Price?

. It is an interesting question. A constraint on momentum strategies is their more limited capacity (because of higher turnover) before having significant market impacts. There have been a number of studies on this if I recall by Novy-Marx, possibly also AQR and RAFI. The higher turnover of these strategies is precisely why I prefer momentum exposure in large cap stocks (vs. small caps), or as part of a multi-factor approach) - because of: - likely lower market impact from portfolio turnover - higher liquidity - higher capacity What is the capacity of a fund like MTUM. Don't really know. If we take Applied Materials (AMAT): => one of the smallest companies in top holdings of MTUM (with market cap of 126bn) => MTUM's holdings = $450m => 0.34...