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LHerr

Let me try this. Applying a Dual Momentum model with the IVY or Faber 10 from 6/30/2006 through 6/11/2015 showed positive results. These are averages from a Monte Carlo analysis. Dual Momentum return is 240% vs. 77% for the VTTVX benchmark. This is a stock and bond fund. Max. DD for the Dual Momentu...

LHerr

[OT link removed by admin LadyGeek]

LHerr

Does the momentum model really work? That is the underlying question of this Dual Momentum Investing topic. While the anomaly seems to have merit, I think the jury is still out, despite the claims by Gary Antonacci made in his recent book. The only way I know to answer the question is to test the mo...

LHerr

"If the 12 months is correct, then in order to stay ahead of the crowd, one would still have to shorten the look back period to get the signals faster. This will lead to more whipsawing and increased trading costs until the benefit is arbitraged away." Dad2000, I use commission free ETFs s...

LHerr

Garland, Massive trading is unlikely to happen as investors are reviewing portfolios at different times of the month and the look-back periods are not the same for everyone. In addition not everyone is using the same set of ETFs to populate the portfolio nor is everyone using the same cutoff ETF. Th...

LHerr

Steven,

Expect your bond fund will decrease in value when interest rates begin to rise. For this reason I am holding very few dollars in bonds.

LHerr

LHerr

Dual Momentum Investing - How we propose to evaluate the DM model. 1. Several of my Internet friends are running systematic back-tests on the various variables inherent in the DM model. These include Monte Carlo runs showing statistical results that include wide ranges of volatility. Variables under...

LHerr

Yogiyoda, "The book’s Absolute Momentum guessed the direction of the market incorrectly more than 50% of the time." The above quote caught my eye. By "market" I assume you are referring to the performance of something like SPY, VTSMX, or VTI. Is this a correct assumption. Antonac...

LHerr

"If you switch from ETF's to the mutual fund equivalents (VTSMX VGTSX VBMFX) you can work back to '97. Sure, in real life you would have to use multiple funds to avoid frequent trading restrictions but it's reasonable for data approximations. 5 month look back, not using any additional cutoff o...

LHerr

Here is performance data using the three index funds recommended for the Bogleheads Three Security portfolio. The starting date was July 30, 2002 or going back as far as SHY data is available. SHY is the cutoff ETF. Note the Dual Momentum portfolio Maximum Draw-Down of 16.3% vs. the MDD for SPY of 5...

LHerr

"I will certainly post my progress on this thread."

Yesterdaysnews,

What ETFs or index funds are you using to populate your portfolio and what look-back period are you using?

LHerr

LHerr

It is possible to apply the Dual Momentum model to the Bogleheads Three Portfolio. While I've yet to run any back-tests, my guess is that one would do better due to avoiding deep bear markets.

LHerr

LHerr

LittleD,

I've found that selecting low correlated ETFs for the potential building blocks of a portfolio is beneficial.

LH

LHerr

ginmqi, "The one thing I do not like about the book is that the author states his favorite strategy is the sector rotation momentum using the Morningstar 11 sector divides and trading those ETFs' momentums. Of course does not give any specifics on how to do that actually and....as we get more i...

LHerr

Yesterdaysnews,

My primary ETFs are VTI, VEA (or VEU), VWO, BIV with SHY as the circuit breaker ETF.

With some portfolios I am using a few more low correlated ETFs.

LH

LHerr

RunningRad, While I am late to this discussion, I have a few comments to add. I too read Gary Antonacci's Dual Momentum book several months ago and am testing the model with several portfolios to see if and how well it works. The GEM portfolio, as described in the book, is easy to set up and manage....

LHerr

In addition to investing in three funds, I would add a risk reduction model to accompany this approach to investing. Sometime over the next few weeks I'll run an analysis to explain what I mean by reducing portfolio risk. BTW, my three securities of choice are: VTI, VEU, and BND. Physlab [OT link re...

LHerr

What's that? Please explain? What I do is rank the ETFs used in a portfolio. For example, a Three Fund Portfolio might include VTI, VEU, BND, and SHY (fourth ETF) as the cutoff ETF. Using a ranking system based on three metrics, one checks to see if any of the critical ETFs (VTI, VEU, or BND) are p...

LHerr

The one addition I would add to The Three Fund Portfolio is a risk reduction model that would prevent major draw-downs.

LHerr

Hi LHerr, I have read more about the Three Fund Portfolio the last few years than ever before. The benefits are overwhelming. I was disappointed when Vanguard added the new Total International Bond Index Fund as I thought the Three Fund Portfolio did the trick! Best. I agree as the expense ratios a...

LHerr

Michael Edessess and his three co-authors of "The 3 Simple Rules of Investing," also recommend a simple portfolio similar to The Three Fund Portfolio. The book is an interesting read as these authors dismantle many investment myths.

LHerr

Save and index.

LHerr

The author of the paper, "Active vs. Passive Investing: Does Passive Outperform" makes a valid point in the following statement. "There is really NO research that even starts to measure the returns of individual investors over time. The necessity to distinguish between active and pass...

LHerr

"Most blatant was the "passive investors aren't really passive, they are just hibernating active investors who will choose the exact wrong moment to take action... and that's why they will under-perform" Just plain ignorant." To clarify the difference between active, index and pa...

LHerr

Paul,

I agree, the author missed the point. Here is the link to reactions to Section 1 of 12 sections. I plan to post a response each business day to the 12 sections. So far I posted two.

[commercial link removed by admin LadyGeek]

LHerr

LHerr

Does Passive Outperform? This twelve page paper provides an interesting outline (twelve points with many following bullets) of problems related to the passive vs. active argument. Here is the link to the paper. http://www.retailinvestor.org/activeVSpassive.html The paper generated sufficient interes...

LHerr

"One argument favoring larger bands is that you can ride momentum longer, which is basically increasing risk/reward. It probably doesn't make a huge difference most of the time." I've found that asset classes tend to run longer in both directions than one might expect. Based on an 18-yr st...

LHerr

My target is 50:50. I rebalance when something hits 55%, but not always back all the way to 50%. As I meant to convey in my original question, you then use a target limit of 5%. Assume you include REITs as an asset class. Do you also use a +/-5% limit for that particular asset class or is it a larg...

LHerr

What rebalancing target limits do investors set for asset classes? 10%, 15%, 20%, 25% or higher?

LHerr

LHerr

Check out this interview with Martijn Cremers. http://www.morningstar.com/cover/videocenter.aspx?id=372751 Several points. 1) Note that the comparison was to "closet mutual funds." This phrase tweaked my interest so I looked up Martijn Cremers and I found an article that brings up point #2...

LHerr

I use a threshold limit of 25% for each asset class. Rebalancing takes place when the threshold is violated.

Once a portfolio is in balance, new cash and dividends makes it easy to keep each asset class in balance.

LHerr

LHerr

"LHerr, curious, what tool(s) were used for the analysis? I'd imagine portfolio 2 would (significantly?) reduce fat left tails, but not sure if that was figured into the statistical analysis." Tom, I used Quantext Portfolio Planner (QPP) to come up with the Return/Risk ratio. I used data f...

LHerr

I wrote a book you should read titled " All About Asset Allocation ". It goes a long way toward answering your questions on the relationships between asset class risk, return, and the long-term benefit of not-perfect correlation among various asset class risks and returns. Rick Ferri I to...

LHerr

"Let's consider two portfolios: Portfolio 1: 90% TSM 10% BONDS Portfolio 2: 50% TSM 20% SCV 30% BONDS In my naive mind, I believe that these two portfolios are approximately equal in risk/volatility. Portfolio 1 is 90% equities, but the equities are not super risky ones. Portfolio 2 is only 70%...

LHerr

I don't give to charities as much as I should, but I do work with Habitat For Humantiy (couple days a year), regularly pick up litter with my son, give blood, and buy strangers breakfast on Sunday mornings (without them knowing who did). I was wondering today what other ways people give back to the...

LHerr

Buckeye78 wrote:what are the top 3 websites for detailed screening of ETF's? Thank you.

Check this one out to see if it meets your needs.

http://etfdb.com/screener/

LHerr

LHerr

"if you have an Investment Policy Statement, stick to it. (I'm guessing your IPS doesn't say anything about buying SDS when you think the market might be getting overheated.) If you don't have one, create one." "Fred," Thanks and you make a lot of good points. First, my IPS does ...

LHerr

livesoft wrote:Why would you want to use one of these ETFs when you could simply sell VTI short?

Do you ever short ETFs and if so, what conditions trigger such action?

LHerr

LHerr

livesoft wrote:Why would you want to use one of these ETFs when you could simply sell VTI short?

Assume I don't want to toy with VTI for asset allocation reasons.

LHerr

LHerr

Arnott's book is well worth reading. So far, I have not invested in any "Fundamental Index" funds as their track record is too short.

It seems to me that one can tilt a portfolio toward value and small-cap index funds and accomplish much the same effect at lower cost.

LHerr

LHerr

With over 90% of the stocks in the S&P 500 now above their 200-Day MA, the market is considered to be quite high. Assuming this position to be true, are any Bogleheads using short or ultra-short ETFs such as SH or SDS as a hedge against a market correction? Hedging via the use of short ETFs is d...

LHerr

"Is there a particular time of year that is best for rebalancing one's portfolio?" Instead of a time of year I set threshold limits for the different asset classes and rebalance when those limits are violated. Right now I am using 25% limits so rebalancing is not a frequent event. If one i...

LHerr

Would anyone know where I might find the growth rate of dividends for a broad market index such as the VTSMX fund? The S&P 500 would also work.

I know where to find the dividend yield, but I am looking for the growth rate over the last 30 to 50 years. Thanks in advance.

LHerr

LHerr

The two easiest books on investments are: 1) "The Investment Answer" by Daniel Goldie and Gordon Murray and 2) "The Elements of Investing" by Burton Malkiel and Charles Ellis. Both books emphasize index investing, asset allocation, rebalancing when needed and a few other basics o...

LHerr

Small/Value tilting is relatively common based on many years of data. Can anyone comment on the worthiness of of just a small tilt (without the value component) to an equitites portfolio? Same question regarding the value of tilting a bond portfolio toward Intermediate duration. Thanks, enjoy the d...

LHerr

What parameters do you track in your portfolio spreadsheet or other portfolio tracking system you might have (if any)? I am using a Google Spreadsheet and I am tracking a variety of numbers specific to my portfolio that I find helpful. I do this using several sheets in one document. I use a spreads...

LHerr

Kudos to Rick Ferri for his latest book, "The Power of Passive Investing." My copy arrived yesterday and I am using the index to check on topics of interest. I was pleased to see attention given to benchmarking the portfolio, with particular attention paid to developing an appropriate benc...

LHerr

Out of interest to see the correlation between some major asset classes, I ran an analysis using VTI, VEU, VWO, DJP (commodities), and TIP. To keep it simple, I allocated 20% to each ETF and used the last three years of data. DJP has a correlation of 79% or rather a high correlation with the makeup ...

LHerr

"Gibson and others have written about portfolios containing REITS and other classes. In Gibson's Asset Allocation book, a quick easy read, he shows how using very different, uncorrelated classes including REITS (and commodities IIRC) can lead to drastically different returns. Mostly with graphs...

LHerr

"Well, I don't understand this. We can not control market movement, so what can we do about it? " In two words - Not Much . On any given day, if the broad market moves up, my index oriented portfolio also moves up. When the broad market declines, my portfolio usually declines. I define &qu...

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