Search found 1614 matches

by backpacker
Sun May 14, 2017 5:52 pm
Forum: Investing - Theory, News & General
Topic: "The long run is only longer than the short run, not safer"
Replies: 37
Views: 5316

Re: "The long run is only longer than the short run, not safer"

Selling you that put has the same risk for me as buying the S&P 500 for the same period. Sorry, what? Selling a 30 year European put on the S&P 500 with a strike price of 2390 has a completely different risk/payoff profile compared to a long-only purchaser of the S&P 500 at 2390. They don't have the same risk at all. Think about it in reverse if that helps. The combination of owning stocks and a put at the risk free rate for 30 years (or whatever) has the same risk as owning risk free bonds over the same period. The put guarantees that you can't do worse than risk free bonds. But then, if the put cost less than the (discounted) difference in expected return between stock and risk free bonds, your portfolio would generated highe...
by backpacker
Sun May 14, 2017 5:29 pm
Forum: Investing - Theory, News & General
Topic: Home Country Bias...makes sense?
Replies: 235
Views: 17791

Re: Home Country Bias...makes sense?

http://i65.tinypic.com/r88enn.png I thought I would take a swing at defending willthrill81's international skepticism. The best case for international skepticism IMO relies on being skeptical of long-term historical data, not relying on it. Take a look at this chart from Vanguard's white paper on home bias. The blue line shows what happens to overall portfolio volatility as we add international stocks, assuming that international stocks in the future have the reasonably low volatility and low correlation with US stocks that they had in the past. But can we assume this? As Vanguard notes in the paper, most US investor did not own much international stock during the period of low volatility and low correlations that we use now to justify own...
by backpacker
Sat May 13, 2017 1:21 pm
Forum: Investing - Theory, News & General
Topic: "The long run is only longer than the short run, not safer"
Replies: 37
Views: 5316

Re: "The long run is only longer than the short run, not safer"

If stocks are less risky over increasing time horizons, then put options would become cheaper with longer expiration date. However, they don't. Anyone who thinks the risk of the market declines over time should go price some put options on S&P 500 ETFs. If your belief is correct, these securities should be cheaper the further out on the calendar you go. The put option argument was first made by Zvi Bode in his paper "On the Risk of Stocks in the Long Run" ( link ). The argument is fallacious because it completely misunderstands how option pricing works. Suppose you want me to sell you a 50 year put on stocks. The put pays out if stocks returns less than risk free bonds. Selling you that put has the same risk for me as buying ...
by backpacker
Thu May 11, 2017 3:30 pm
Forum: Investing - Theory, News & General
Topic: WSJ: Most market anomalies academics have identified don’t exist
Replies: 53
Views: 10826

WSJ: Most market anomalies academics have identified don’t exist

From the Wall Street Journal, a summary of new study that attempted to replicate 447 academic factors using consistent statistical methodology. A link to the original article "An Algorithm, an ETF and an Academic Study Walk Into a Bar" can be found here . As it turns out, 380 factors failed replication and many of the remaining proved to be much smaller than originally estimated. A new study making waves in quantitative finance tested 447 anomalies identified by academics and found more than eight out of 10 vanish when rigorous tests are applied. Among those failing to reach statistical significance: one anomaly recently set out by the godfathers of quantitative finance, Nobel-winning economist Eugene Fama and his colleague Kennet...
by backpacker
Thu May 11, 2017 1:09 pm
Forum: Personal Investments
Topic: international stocks poised to outperform US ???
Replies: 80
Views: 9568

Re: international stocks poised to outperform US ???

That means that while it now takes twice as many euros to get a dollar, things in France also cost twice as many euros. Your French wine company has to make twice as many Euros to send you a dollar, but that’s easy because they are now getting twice as many euros for their wine. Here you can see the power of your assumptions. Normally, if the USD/Euro exchange rate changes, the French company still gets the same number of Euros for their wine--unless perhaps they are selling that wine to USD buyers. If they are selling it to Euro buyers, they probably can't double their price just because that will make their US investors whole. The point of the example was just to illustrate the difference between nominal and real exchange rate fluctuatio...
by backpacker
Thu May 11, 2017 9:59 am
Forum: Personal Investments
Topic: international stocks poised to outperform US ???
Replies: 80
Views: 9568

Re: international stocks poised to outperform US ???

If the dollar goes up, your intl investments go down but your buying power per dollar goes up. Again, good offsetting bad. If you mostly buy services and things denominated in dollars, you can't buy more of those services and things because the dollar has gained relative to other currencies. Instead, the income you can get from your foreign investments just buys less of those services and things. There is a difference between real exchange rates and nominal exchange rates and, so, a difference between real currency risk and nominal currency risk. The nominal exchange rate tells you how many euros you can get for how many dollars, for example. The real exchange rate tells you about the relative price of goods. So for example, suppose you ca...
by backpacker
Wed May 10, 2017 8:55 am
Forum: Personal Investments
Topic: Maximum Gain,swinging for the fences
Replies: 65
Views: 7668

Re: Maximum Gain,swinging for the fences

mak1277 wrote:
backpacker wrote: In that case, the clear winner is a leveraged portfolio.
OP also stated "with new investment dollars" though. Would that eliminate the possibility of using leverage? Seems like "going negative" or eating into the existing portfolio is a non-starter.
The OP could use new money to buy e-mini futures for example with the leverage built in.
by backpacker
Wed May 10, 2017 8:42 am
Forum: Personal Investments
Topic: Maximum Gain,swinging for the fences
Replies: 65
Views: 7668

Re: Maximum Gain,swinging for the fences

If your goal was to maximize potential gains :oops: with new investment dollars (without regard for loss) between today and 1/1/2021 what would you do with the :moneybag :moneybag :moneybag? "Maximum Gain Without Regard for Loss" makes me think of ridiculously risky "bets" with extremely high return potential but almost no chance of "winning"... The question (as I understand it) is basically which investment has the highest expected return ignoring risk (e.g. standard deviation). So even though lottery tickets have high potential payouts, they do not maximize gains in the intended sense because they have negative expected return. In that case, the clear winner is a leveraged portfolio. Which leveraged portfoli...
by backpacker
Mon May 08, 2017 6:42 pm
Forum: Personal Investments
Topic: Solid justification for including all stocks & NO bonds?
Replies: 143
Views: 12577

Re: Solid justification for including all stocks & NO bonds?

Suppose the OP has $2 million, invests it all in a global stock portfolio, and decides to live off the dividends. The dividend yield is currently 2.25%, so that would be $45k a year. Everyone is focusing on the fact that the price of the portfolio could fall by half, but who cares? If you're living off the dividends, what you care about are the dividend checks coming the mail. As already pointed out , dividends are far less volatile than price and fall far less than price in a crash. As Robert Shiller points out in the linked paper, even through the great depression, real dividends were substantially below trend (i.e. between -10% and -25%) for only four years (1933, 1934 1935 and 1938). Putting the matter in more concrete terms, if we go ...
by backpacker
Mon May 08, 2017 6:30 pm
Forum: Personal Investments
Topic: Solid justification for including all stocks & NO bonds?
Replies: 143
Views: 12577

Re: Solid justification for including all stocks & NO bonds?

Suppose the OP has $2 million, invests it all in a global stock portfolio, and decides to live off the dividends. The dividend yield is currently 2.25%, so that would be $45k a year. Everyone is focusing on the fact that the price of the portfolio could fall by half, but who cares? If you're living off the dividends, what you care about are the dividend checks coming in the mail. As already pointed out , dividends are far less volatile than price and fall far less than price in a crash. As Robert Shiller points out in the linked paper, even through the great depression, real dividends were substantially below trend (i.e. between -10% and -25%) for only four years (1933, 1934 1935 and 1938). Putting the matter in more concrete terms, if we g...
by backpacker
Mon May 08, 2017 8:58 am
Forum: Personal Investments
Topic: Solid justification for including all stocks & NO bonds?
Replies: 143
Views: 12577

Re: Solid justification for including all stocks & NO bonds?

All of this makes it sounds like I'm a dividend investor, which I'm not. The dividend investors I've met tend to become obsessed with dividends as a measure of productivity when, in fact, its only one way of estimating it. A company is not less productive because it decides to return money in the form of share buy backs than in the form of dividends. Nor is a company less productive because it has productive ways to invest earnings rather than sending them back to shareholders. Dividends are, though, an easy way to estimate the productivity of your investments so that you can focus on that instead of the price. If you have the data, you can do a more "sophisticated" version of this by tracking real earnings (as opposed to dividen...
by backpacker
Mon May 08, 2017 8:48 am
Forum: Personal Investments
Topic: When do I add bonds to my child's 529?
Replies: 22
Views: 3612

Re: When do I add bonds to my child's 529?

Maybe start by picking an allocation for the 529s and your retirement portfolio thinking of them as different portfolios. Then forget that they are different portfolios and use that as your overall allocation. Then distribute funds across accounts based on taxes, funds available, fees and such. As you age, you can adjust increase the fixed income of your overall portfolio if you like. There's no particular need to take your children into special consideration since, every year that there age increases, your age increases. So by this logic if I end up with a 60/40 overall allocation when my kids hit college age AND I'm not taking the 529 into consideration regarding when I need those funds versus retirement I could end up with ALL stocks in...
by backpacker
Mon May 08, 2017 8:40 am
Forum: Investing - Theory, News & General
Topic: Are indexed funds overblown?
Replies: 89
Views: 9521

Re: Are indexed funds overblown?

a) what happens if public stocks get very cheap with 99.9999% indexers: Companies generate capital by issuing either stocks (ownership) or by bonds (loans). If stocks look very cheap compared to interest rates(bonds), companies can buyback their own shares. Since 2009, there has been a huge amount of share buyback by US companies at least partially explained by very low interest rates. There is no limit to this. If stocks look cheap enough, a board can vote to take the entire company private in a friendly interaction by inviting bids or in a hostile takeover by private equity folks. This again has happened again and again in history in sectors/industries, countries and for the whole market. b) what happens if public stocks get very expensi...
by backpacker
Mon May 08, 2017 7:59 am
Forum: Personal Investments
Topic: Solid justification for including all stocks & NO bonds?
Replies: 143
Views: 12577

Re: Solid justification for including all stocks & NO bonds?

Is there any solid reason NOT to invest 100% in stocks, perhaps a balance of large cap, TSM, and TISM? Telling someone that there are good reasons to put their entire portfolio in stocks is a little bit like telling someone that there are good reasons to have a drink. Generally true, but the person you're talking to might need to drive home, be pregnant, be under age, have a drinking problem, etc. Much of the advice in this thread reflects that. Better to err on the side of advising others to be cautious when your information about their life circumstances and temperament is limited. That said, here is one of my own reasons for owning a stock-heavy portfolio. The chart below is from Robert Shiller's classic paper “Do Stock Prices Move Too ...
by backpacker
Mon May 08, 2017 7:04 am
Forum: Investing - Theory, News & General
Topic: Bill Sharpe's preferred portfolio
Replies: 681
Views: 156870

Re: Bill Sharpe's preferred portfolio

An answer I've heard is someone who is employed at a small distressed company may want to tilt to large growth. But I'm not sure that really makes sense. Do employment hedging properties really matter enough to affect portfolio decisions so much? Also that assumes no behavioral component to value of which there certainly is, and so why sign yourself up for negative systematic alpha... I share your skepticism here. I've never seen anyone who thought that value stocks had higher expected returns conclude that they should nevertheless tilt towards growth stocks to mitigate risk. On the other hand, it's very common to see investors hold shorter bonds while happily admitting that longer bonds have higher expected returns. Also might depend on w...
by backpacker
Mon May 08, 2017 6:56 am
Forum: Personal Investments
Topic: When do I add bonds to my child's 529?
Replies: 22
Views: 3612

Re: When do I add bonds to my child's 529?

Maybe start by picking an allocation for the 529s and your retirement portfolio thinking of them as different portfolios. Then forget that they are different portfolios and use that as your overall allocation. Then distribute funds across accounts based on taxes, funds available, fees and such. As you age, you can adjust increase the fixed income of your overall portfolio if you like. There's no particular need to take your children into special consideration since, every year that there age increases, your age increases. So by this logic if I end up with a 60/40 overall allocation when my kids hit college age AND I'm not taking the 529 into consideration regarding when I need those funds versus retirement I could end up with ALL stocks in...
by backpacker
Sat May 06, 2017 1:54 pm
Forum: Personal Investments
Topic: What to do with 300,000?
Replies: 29
Views: 4406

Re: What to do with 300,000?

If it makes sense for you to DCA into a market because it has hit new highs, then it makes sense for me to sell everything and DCA back into the market because it has reached new highs. Why shouldn't I be a bit more cautious? It may mean you shouldn't necessarily wait for a pre programmed rebalance point and maybe you should be more cautious. There certainly is a good point to be made that "sunk" money often feels different than new money. I'm in favor of selling some equities in the portfolio when market have had a long bull run and are at market highs. Not waiting for some pre planned rebalancing trigger -- though I have one. I don't consider that market timing but others do - yet the same people who call that market timing fee...
by backpacker
Sat May 06, 2017 1:28 pm
Forum: Investing - Theory, News & General
Topic: Anyone following the latest in Bitcoin and cryptocurrency news?
Replies: 25
Views: 9312

Re: Anyone following the latest in Bitcoin and cryptocurrency news?

With the advent of dark markets, we will always have cryptocurrency. The only questions are which one and how mainstream will it get?

I'm not convinced that bitcoin will still be the currency of choice in ten years. Persistent currency deflation is a big problem and the reason that no one is on the gold standard anymore.
by backpacker
Sat May 06, 2017 1:24 pm
Forum: Investing - Theory, News & General
Topic: Fuzzy size factors
Replies: 2
Views: 909

Re: Fuzzy size factors

This is the same thing DFA does with their trading bands or whatever they're called. You don't trade a value stock the moment it stops being a value stock. You slowly selling the holding incase the stock decides to migrate back into being a value stock.
by backpacker
Sat May 06, 2017 1:22 pm
Forum: Personal Finance (Not Investing)
Topic: Should I pay my entire credit card balance if I have 0% APR?
Replies: 4
Views: 850

Re: Should I pay my entire credit card balance if I have 0% APR?

radnor wrote:I recently got a credit card that includes a 6-month 0% APR promotion. I definitely can (and always do) simply pay off the entire statement balance each month, but was wondering if, given the promotion, could I somehow benefit from only paying the minimum?
Well, you can put the money in a savings account and earn 1% for six months. That's not nothing. On the other hand, this will temporarily hurt your credit score because your balance will be higher. Too much work IMO.
by backpacker
Sat May 06, 2017 1:20 pm
Forum: Personal Investments
Topic: managed vs indexed funds for international stocks
Replies: 16
Views: 3103

Re: managed vs indexed funds for international stocks

Aside from other factors, such as that managers often bring more risk than just following an index, is the above comparison method even a valid way to look at things? No. You have no way of knowing whether the outperformance reflects skill or pure luck. If anything, the outperformance suggests that you especially do not want to invest in this fund given that funds that do well in the past are more likely than funds in general to do poorly in the future. It's counterintuitive. Also, given that so many corporations are international anyway, does one even need that exposure? Think about a European investor asking the same question. European companies are international, so why buy US stocks? But European stocks have gone nowhere as compared to...
by backpacker
Sat May 06, 2017 1:13 pm
Forum: Personal Investments
Topic: Another allocation between spouses question
Replies: 5
Views: 1048

Re: Another allocation between spouses question

I would do whatever is most convenient. Think of your funds as one big portfolio that just happens to be located across several accounts. Probably, the easiest thing to do is to have a 60/40 split (or whatever) in each account.
by backpacker
Sat May 06, 2017 1:10 pm
Forum: Personal Investments
Topic: Aggressive index funds
Replies: 15
Views: 3884

Re: Aggressive index funds

Taking on additional risk has diminishing marginal returns. If you were to, say, hold an all stock portfolio with Vanguard total market funds (VTSAX VTIAX) you would IMO have very satisfactory results with a reasonably high but manageable level of risk.

The problem with actively managed funds (even those managed by Vanguard) is that they have what is called uncompensated risk. Your manager might leave. The fund might concentrate its holdings too narrowly. You as the investor will not be paid for any of that risk. By owning an all stock portfolio that is fully diversified, you will be taking on only risk that you can expected to be paid for.
by backpacker
Sat May 06, 2017 1:03 pm
Forum: Personal Investments
Topic: Fixed Annuities - Pros -vs- Cons
Replies: 28
Views: 5165

Re: Fixed Annuities - Pros -vs- Cons

What are the terms of the proposed annuities? How would they fit into your financial plans? Maybe tell us what companies are offering them?

Myself, I would rather just put the money in a conservative balanced fund.

Vanguard also offers fixed annuities.
by backpacker
Sat May 06, 2017 12:48 pm
Forum: Personal Investments
Topic: Signed up with 2 Advisors - Need Feedback, My Questions
Replies: 30
Views: 2817

Re: Signed up with 2 Advisors - Need Feedback, My Questions

confusedinvestor wrote:Signed up with 2 Advisors.
I believe this is known as sinning boldly. :D

More seriously, why not use Vanguard advisory service? They're top notch and cost only .3%.
by backpacker
Sat May 06, 2017 12:01 pm
Forum: Investing - Theory, News & General
Topic: Why should this chart not scare me from investing?
Replies: 20
Views: 2686

Re: Why should this chart not scare me from investing?

Literal cash isn't fair. Try something that fairly represents typical ultra-low-risk interest-earning investments, like Treasury bills and decent bank savings accounts. In real terms they are all roughly flat, close to zero real return. This is a fair point. You might wonder, though, whether the US returns represent the real distribution. Owning bills in other countries has been much more harrowing. Take France for example. http://i63.tinypic.com/10z4if9.png Suppose someone handed you this chart without any labels and asked, which of these assets is the safest? Would be hard to argue that it was the red or grey lines rather than the blue line. Of course the big drops are the result of world wars, which we hope are a thing of the past. But ...
by backpacker
Sat May 06, 2017 11:41 am
Forum: Investing - Theory, News & General
Topic: Why should this chart not scare me from investing?
Replies: 20
Views: 2686

Re: Why should this chart not scare me from investing?

star9 wrote:Please tell me why this chart shouldn't scare me away from the stock market.
Image
by backpacker
Sat May 06, 2017 10:18 am
Forum: Personal Investments
Topic: What to do with 300,000?
Replies: 29
Views: 4406

Re: What to do with 300,000?

Lump sum vs DCA is another example of over use of the market timing label. Yes, studies have shown that lump sum investing usually turns out better than DCA. Some common sense would indicate that the best time to lump sum is when the market is well off it's historic high - say in 2008-2009. The best time to DCA at least some portion of a lump sum would be after a long bull market when values are at or close to their historic highs. No guarantees either way. Lump sum investing in 2008-9 might have resulted in a major loss since equity markets might have dropped 90% vs 50%. It seems to me the advice to 100% lump sum invest after a 50% decline makes more sense than when equity markets are at an historic high. None of us knows what the market ...
by backpacker
Sat May 06, 2017 9:32 am
Forum: Personal Consumer Issues
Topic: Honda vs. Mazda vs. Ford
Replies: 40
Views: 5298

Re: Honda vs. Mazda vs. Ford

If you are buying a Honda, buy new. Hondas depreciate so little in the first few years, it doesn't make sense to buy used. This is a myth. The same is often said of Toyotas, but I bought a three-year old Toyota with like 35,000 miles for 2/3 the price of buying new. It probably does not make sense to buy certified used vehicles, but that is because the prices are artificially inflated by the dealers. I see where you are coming from, but I wouldn't want to pay 2/3 for a three year old car with 35k miles. I realize modern cars go a lot more than 100k miles, but I never keep a car more than 100k miles. Also, the first three years and first 35k miles are by far the best, and also under warranty. I did buy a used Nissan Maxima once, but I got i...
by backpacker
Sat May 06, 2017 8:59 am
Forum: Personal Investments
Topic: Help: Vanguard Total International Stock Market vs. Schwab International Index
Replies: 15
Views: 7557

Re: VGTSX vs SWISX

I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds. Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER. Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible. Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just...
by backpacker
Sat May 06, 2017 8:37 am
Forum: Investing - Theory, News & General
Topic: value stocks in taxable
Replies: 8
Views: 1590

Re: value stocks in taxable

^ OK, this spreadsheet is amazing. That's what you need.
by backpacker
Sat May 06, 2017 8:32 am
Forum: Investing - Theory, News & General
Topic: Are indexed funds overblown?
Replies: 89
Views: 9521

Re: Are indexed funds overblown?

I haven't been in the investing world too long but the one thing I've noticed is that when everybody is so sure, trouble eventually follows. Conventional wisdom has also long said the default risk on U.S. Treasuries is low, but that stocks are likely to generate higher real returns in the long run. And that's been true for a long time now, with many, many, many investors relying on those basic propositions over time. So while anything is possible, including default on Treasuries or stocks failing to perform even in the long run, worrying about index funds is similarly low on my list. The hypothetical danger of index funds is that the market as a whole will eventually have too little active management. Imagine that investors, instead of inv...
by backpacker
Sat May 06, 2017 7:21 am
Forum: Investing - Theory, News & General
Topic: "Fake Markets"
Replies: 10
Views: 2182

Re: "Fake Markets"

The article refutes all the claims by the doomsday crowd (Peter Schiff, Marc Faber) that the Fed is making things worse and the end is nigh. It doesn't say that asset purchasing, easy credit, or excess liquity isn't affecting the markets. Only that the market isn't overvalued. Or wasn't back in 2015 when the article was written. Myth: The Federal Reserve (or the Central Bank of whichever country you are in) sets interest rates, short term as well as long term. [...] Reality: There is only one rate that the Federal Reserve sets, and it is the Fed Funds rate. It is the rate at which banks trade funds, that they hold at the Federal Reserve, with each other. Needless to say, not only is this an overnight rate, but it is of little relevance to ...
by backpacker
Sat May 06, 2017 7:12 am
Forum: Personal Investments
Topic: Help: Vanguard Total International Stock Market vs. Schwab International Index
Replies: 15
Views: 7557

Re: VGTSX vs SWISX

I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds. Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER. Schwab is what I am offered via my employer's plan. I suppose I could buy vanguard on the schwab platform, but the fees are $76 which isn't worth it to me. And I am not comfortable with ETFs. I just want to keep it as simple as possible. Ah, I see. Maybe say a bit more about why you don't like ETFs? Vanguard's ETF shares and funds shares are just...
by backpacker
Sat May 06, 2017 7:06 am
Forum: Investing - Theory, News & General
Topic: value stocks in taxable
Replies: 8
Views: 1590

Re: value stocks in taxable

You can estimate the cost of holding value stocks in a taxable account directly using last year's qualified dividends. The summary page from Vanguard is here.

So for example, US total market had 92% qualified dividends and small cap value had 74%. The dividend yield for both funds is about 1.8% for both funds, so you will end up with an extra .3% of unqualified dividend yield with the small cap value fund. If your tax rate is 30%, that means you will lose an extra .09% a year to taxes. Think of it as basically doubling the ER of the fund.

Whether that's worth it depends on your estimate of the value premium going forward.
by backpacker
Fri May 05, 2017 10:22 pm
Forum: Investing - Theory, News & General
Topic: "Fake Markets"
Replies: 10
Views: 2182

Re: "Fake Markets"

I usually stop reading articles once I see the claim that markets are "distorted" by central banks. They're not, really. Central banks have far less power than we usually think. They only move the shortest end of the yield curve at best. Valuations are higher for stocks and yields are lower for bonds because there is more money looking for productive investments than there are productive investments. So buying sovereign and corporate bonds until rates are zero had no effect? And now that bonds are too expensive, buying hundreds of billions in stocks has no impact? Did you know the central bank of a tiny country in Europe with a population of 8 million items half a trillion dollars worth of stocks? I'm not saying the article had a...
by backpacker
Fri May 05, 2017 10:07 pm
Forum: Personal Investments
Topic: Investing 25k using DCA
Replies: 13
Views: 1901

Re: Investing 25k using DCA

TropikThunder wrote:
badbreath wrote:got it but I would rather be right two thirds the times then wrong one third.
Totally agree. My point was just that the DCA didn't lose money, it just did less well then lump sum.
I would think that doing less well would be a great reason not to DCA?
by backpacker
Fri May 05, 2017 9:03 pm
Forum: Investing - Theory, News & General
Topic: "Fake Markets"
Replies: 10
Views: 2182

Re: "Fake Markets"

I usually stop reading articles once I see the claim that markets are "distorted" by central banks. They're not, really. Central banks have far less power than we usually think. They only move the shortest end of the yield curve at best. Valuations are higher for stocks and yields are lower for bonds because there is more money looking for productive investments than there are productive investments.
by backpacker
Fri May 05, 2017 8:59 pm
Forum: Personal Investments
Topic: Help: Vanguard Total International Stock Market vs. Schwab International Index
Replies: 15
Views: 7557

Re: VGTSX vs SWISX

bennettg wrote: I've been intrigued with Schwab's new lower cost index funds.....had reluctantly been using ETFs to save a bit. But with the new lower ERs, I'd like to go back to index funds.
Is there are reason you want to use Schwab instead of Vanguard? Vanguard sends all of its security lending revenue back to investors, unlike its for profit competitors, so the ER is often in reality lower than the stated ER.
by backpacker
Fri May 05, 2017 8:39 pm
Forum: Personal Consumer Issues
Topic: Honda vs. Mazda vs. Ford
Replies: 40
Views: 5298

Re: Honda vs. Mazda vs. Ford

I'm 24 with not a big savings, but enough for car payments for sure. No no no. If you can't pay cash for the car, don't buy it. If you are buying a Honda, buy new. Hondas depreciate so little in the first few years, it doesn't make sense to buy used. This is a myth. The same is often said of Toyotas, but I bought a three-year old Toyota with like 35,000 miles for 2/3 the price of buying new. It probably does not make sense to buy certified used vehicles, but that is because the prices are artificially inflated by the dealers. What are thoughts on leasing a car? I"m guessing most Bogleheads say buy it so you begin to accrue equity right? Leasing is financially equivalent to buying a new car every three years. Buying a new car every thr...
by backpacker
Fri May 05, 2017 8:32 pm
Forum: Personal Investments
Topic: What to do with 300,000?
Replies: 29
Views: 4406

Re: What to do with 300,000?

What if you had stated in your IPS a policy that any time you have a lump sum of cash you will invest it 10% at a time (regardless of perceived market valuation) to ensure against losing the investment in a sudden market crash? I don't see how you can say that would be market timing. That would not be market timing, but that's not what the OP is talking about at all. Again, the Wiki says the following: "adjusting one's asset allocation toward greater fixed income holdings because the bond market has lost value recently and there is an expectation of a bond market recovery would be an act of market timing. On the other hand, adjusting one's asset allocation toward greater fixed income holdings because it is in one's asset allocation pl...
by backpacker
Fri May 05, 2017 8:23 pm
Forum: Non-US Investing
Topic: New investor needing advice UK-US
Replies: 22
Views: 2448

Re: New investor needing advice

Someone who knows more about the UK tax system should comment on this. I would think that there should be no general problems.
by backpacker
Fri May 05, 2017 8:20 pm
Forum: Personal Finance (Not Investing)
Topic: Investing in Vanguard's Wellesley Income fund for 10 years to buy car
Replies: 22
Views: 5274

Re: Investing in Vanguard's Wellesley Income fund for 10 years to buy car

EngCapt1 wrote:
Springbok wrote:What are your thoughts on investing it VWINX, Vanguard's Wellesley Income fund? I'm new to investing outside of retirement.

Only ~36% of Wellesley's dividends are qualified, so you'll be paying your normal tax rate for ~64% of the Wellesley dividend income.

https://personal.vanguard.com/us/insigh ... -2016?Sc=1
You could also put 60% of the money in Vanguard Total Market and 40% in CDs or a high yield savings account. That would be more tax efficient and more or less recreate the Wellesley 60/40 portfolio.
by backpacker
Fri May 05, 2017 8:15 pm
Forum: Investing - Theory, News & General
Topic: Research on advisor vs no advisor as opposed to passive vs active
Replies: 66
Views: 5482

Re: Research on advisor vs no advisor as opposed to passive vs active

So I'll be honest I'm not sold on it, at all. The idea is that you're paying for a team of people making the best data-based allocation decisions using low cost instruments. This 0.15 is on TOP of the 1% AUM that ML charges just to have your money with them. So, the true cost of the entire investment is 1.15 ER. Where I'm at: I have a pretty small retirement account with ML that I've had for a while now, with this same advisor. I've been completely ignorant, but will likely soon be inheriting a pretty large amount of money - around $1-2M, so am shopping options and keeping my money at ML for the time being to test the relationship, ask questions, etc. When it's time to make a decision, I doubt I'll plan to invest the rest through ML, but w...
by backpacker
Fri May 05, 2017 8:09 pm
Forum: Investing - Theory, News & General
Topic: "Ten Commandments" by Jonathan Clements
Replies: 24
Views: 5089

Re: "Ten Commandments" by Jonathan Clements

12) Ignore commandment number 3. Make your decision between owning and renting based on actual numbers for your area. If you rent, put your extra equity into stocks rather than a house. Outside of a few aberrant markets (i.e. San Francisco, NYC), I've not seen any actual instances where renting was superior to buying if the owner remained in the property for at least five years. Do you have some examples of this? Housing in the US has historically appreciated .4% a year with stocks appreciating 4.9% (both in real terms). Plug those numbers into the New York Times calculator (which uses US averages for the other values) with the assumption that either investment will be paid for in cash, rather than leveraged, and the calculator reports tha...
by backpacker
Fri May 05, 2017 7:58 pm
Forum: Investing - Theory, News & General
Topic: Buffett/IBM
Replies: 73
Views: 9139

Re: Buffett/IBM

LazySherpa wrote:10% of my portfolio is in IBM at a very low cost basis from a small stock gift when I was very young. Curious what Bogleheads would do given 20 quarters of revenue decline and Buffett's sell announcement. Also, Cramer likes it so that's a red flag.

Big tax hit to sell it. Thoughts?
If you are worried about holding 10% in IBM stock, that probably means you have too much. There is no need to make any quick changes. Maybe sell .5% a month for awhile until you reach a level that you're comfortable with. That could be 5%. It could be 0%.
by backpacker
Fri May 05, 2017 5:26 pm
Forum: Investing - Theory, News & General
Topic: "Ten Commandments" by Jonathan Clements
Replies: 24
Views: 5089

Re: "Ten Commandments" by Jonathan Clements

12) Ignore commandment number 3. Make your decision between owning and renting based on actual numbers for your area. If you rent, put your extra equity into stocks rather than a house. Outside of a few aberrant markets (i.e. San Francisco, NYC), I've not seen any actual instances where renting was superior to buying if the owner remained in the property for at least five years. Do you have some examples of this? Housing in the US has historically appreciated .4% a year with stocks appreciating 4.9% (both in real terms). Plug those numbers into the New York Times calculator (which uses US averages for the other values) with the assumption that either investment will be paid for in cash, rather than leveraged, and the calculator reports tha...
by backpacker
Fri May 05, 2017 2:40 pm
Forum: Investing - Theory, News & General
Topic: Research on advisor vs no advisor as opposed to passive vs active
Replies: 66
Views: 5482

Re: Research on advisor vs no advisor as opposed to passive vs active

So I'll be honest I'm not sold on it, at all. The idea is that you're paying for a team of people making the best data-based allocation decisions using low cost instruments. This 0.15 is on TOP of the 1% AUM that ML charges just to have your money with them. So, the true cost of the entire investment is 1.15 ER. Where I'm at: I have a pretty small retirement account with ML that I've had for a while now, with this same advisor. I've been completely ignorant, but will likely soon be inheriting a pretty large amount of money - around $1-2M, so am shopping options and keeping my money at ML for the time being to test the relationship, ask questions, etc. When it's time to make a decision, I doubt I'll plan to invest the rest through ML, but w...
by backpacker
Fri May 05, 2017 2:26 pm
Forum: Investing - Theory, News & General
Topic: "Ten Commandments" by Jonathan Clements
Replies: 24
Views: 5089

Re: "Ten Commandments" by Jonathan Clements

12) Ignore commandment number 3. Make your decision between owning and renting based on actual numbers for your area. If you rent, put your extra equity into stocks rather than a house.
by backpacker
Fri May 05, 2017 2:21 pm
Forum: Personal Finance (Not Investing)
Topic: Most Common Financial Mistakes
Replies: 108
Views: 19263

Re: Most Common Financial Mistakes

Worst mistake: Portfolio optimization.

It's always tempting to think that there's a "best" portfolio out there for me, but there isn't. And thinking there is leads to all sorts of bad behavior. Fiddling with my asset allocation. Switching funds.

The goal of investing is to build a good portfolio that will get the job done, not to build the best portfolio.