Search found 286 matches

by LHerr
Sat Jun 13, 2015 9:35 am
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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 Momentum portfolio is 26.5% vs. 45.3% for the benchmark.

The DM portfolio was reviewed every 33 days and investments were confined to the top two performing ETFs based on a ranking system I can explain if anyone is interested. ETFs were sold if they ranked below SHY.

One negative of any trading system is the impact of taxes. It is better to use DM with tax deferred accounts.

LHerr
by LHerr
Sat Jun 13, 2015 8:38 am
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

[OT link removed by admin LadyGeek]
by LHerr
Sat Jun 06, 2015 11:02 am
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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 model on my own and that is what I am doing with several portfolios. While my experience is roughly two years old, there are signs the momentum model may give a slight edge over a passively managed portfolio. I am also watching over passive portfolios so I have a good reference as well as several benchmarks. It will take another bear market to truly test the merits of managing portfolios using a momentum model. There is such a thing as the Schwert ...
by LHerr
Sat Jun 06, 2015 8:36 am
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

"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 so the trading costs are minimal. As for the 12-month look-back period, it is looking like this time frame is too long. The study is still under investigation.

As you point out, anomalies such as the momentum effect sometimes disappear, attenuate, or even reverse direction. However, one is unlikely to be hurt significantly since ETFs are used to populate the portfolio and a cutoff ETFs helps investors avoid major bear markets.

LHerr
by LHerr
Fri Jun 05, 2015 1:55 pm
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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. There are so many variables to consider I think there is plenty of room for the small investor to capitalize on the momentum anomaly.

A problem is likely to arise when an individual is attempting to move large blocks of a particular ETF.

A suggestion for doubters is to set aside a small amount of money and test a momentum model vs. a passively managed portfolio - or just benchmark the momentum portfolio against a passive benchmark.

LHerr
by LHerr
Fri Jun 05, 2015 10:38 am
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3898
Views: 2434640

Re: The Three Fund Portfolio

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
by LHerr
Thu Jun 04, 2015 2:46 pm
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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 examination include look-back periods, weights assigned look-back periods to access security rankings, portfolio review periods, number of securities to invest at any one time, whether to use mean-variance or semi-variance for volatility calculations, etc. 2. Prepare "virgin" portfolio(s) that will eventually serve as out-of-sample portfolio(s). 3. Employ the model with several portfolios while the back-testing continues. Performance d...
by LHerr
Thu Jun 04, 2015 10:13 am
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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. Antonacci uses a 12-month look-back period and from back-tests I'm aware of, this is too long. Could that be a problem that leads to the 50% error you found? If U.S. Equity (VTI for example) is one of the securities used to populate the Dual Momentum portfolio, then it seems unlikely the error rate would reach the 50% level since VTI tracks the U.S. market. There are many variables that work their way into back-testing a Dual Momentum portfolio. What is...
by LHerr
Thu Jun 04, 2015 7:39 am
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

"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 other than VBMFX." Woofwoof, I would use the three index funds but for the problem of finding a good low volatile cutoff security that has the same long track record. Do you have a suggestion for something to replace SHY? One option is to go to cash. I want a cutoff other than VBMFX as there are plenty of times when bonds are under-performing SHY. Right now is one of those times so I want to be out of bonds. What I did not mention in my prior...
by LHerr
Wed Jun 03, 2015 7:58 pm
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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 51.6%.

Portfolio Contrib % 100.00 SPY Contrib % 100.00
Portfolio MaxDD % 16.26 SPY MaxDD% 51.55
Portfolio Return % 332.15 SPY Return % 217.04
Portfolio CAGR % 12.67 SPY CAGR% 9.86
Portfolio Volatility 11.60 SPY Volatility 17.72
Portfolio Sharpe 1.09 SPY Sharpe 0.56


LHerr
by LHerr
Wed Jun 03, 2015 8:26 am
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

"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
by LHerr
Tue Jun 02, 2015 7:52 pm
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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
by LHerr
Tue Jun 02, 2015 6:43 am
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

LittleD,

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

LH
by LHerr
Mon Jun 01, 2015 4:46 pm
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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 indepth this method becomes more like a full time job than something your Joe Schmoe can do effectively after his work hours. So EVEN if this works, how do we know the average person can apply this properly to simulate similar returns." It is not too difficult to use the sector rotation model, although I'm not using this approach with any portfolios. I prefer to keep expenses low so I use commission free ETFs. Take a look at the following blo...
by LHerr
Mon Jun 01, 2015 3:12 pm
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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
by LHerr
Mon Jun 01, 2015 2:31 pm
Forum: Investing - Theory, News & General
Topic: Dual Momentum Investing
Replies: 256
Views: 63451

Re: Dual Momentum Investing

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. The true test will come when the next bear market arrives as the absolute momentum side of the strategy is designed to keep one away from major draw-downs. I am using SHY as the cutoff or "circuit breaker" ETF. I think Antonacci uses another ETF, but he is somewhat vague on this point. Antonacci reviews his portfolios every month. I use a 33-Day review period so the portfolio is updated different times of the month. This rotation also ...
by LHerr
Sun Oct 12, 2014 8:08 am
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3898
Views: 2434640

Re: The Three Fund Portfolio

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 removed by admin LadyGeek]
by LHerr
Tue Sep 16, 2014 12:23 pm
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3898
Views: 2434640

Re: The Three Fund Portfolio

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 performing below SHY. If they are, they are sold out of the portfolio and the cash goes to a money market or is invested in SHY. So we really have a Four ETF Portfolio in this case. Here is a detailed explanation of what I am talking about - but using a six ETF (plus SHY) portfolio. http://seekingalpha.com/article/2436415-the-swensen-6-portfolio-how-to-reduce-risk-and-trounce-the-market As with any back-tested model the question always remains - w...
by LHerr
Tue Sep 16, 2014 11:04 am
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3898
Views: 2434640

Re: The Three Fund Portfolio

The one addition I would add to The Three Fund Portfolio is a risk reduction model that would prevent major draw-downs.
by LHerr
Mon Sep 15, 2014 4:55 pm
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3898
Views: 2434640

Re: The Three Fund Portfolio

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 are lower for the Three Fund (ETF) Portfolio vs. going the VT route.

Lowell
by LHerr
Sun Sep 14, 2014 9:58 am
Forum: Investing - Theory, News & General
Topic: The Three-Fund Portfolio
Replies: 3898
Views: 2434640

Re: The Three Fund Portfolio

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.
by LHerr
Sun Feb 05, 2012 11:45 am
Forum: Investing - Theory, News & General
Topic: Active vs. Passive Investing Returns
Replies: 7
Views: 1290

Re: Active vs. Passive Investing Returns

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 passive, to distinguish between day-trader 20-year-olds and retired investors in blue-chips, to factor in leverage costs or offsetting portfolios at different brokerages, etc. makes this an impossible task. Their cash movements in and out of accounts over time makes the measurement of returns in different types of markets impossible. But these measurements are necessary for any conclusions about the claim that passive investing outperforms. Active in...
by LHerr
Sat Feb 04, 2012 7:26 am
Forum: Investing - Theory, News & General
Topic: Active vs. Passive Investing Returns
Replies: 7
Views: 1290

Re: Active vs. Passive Investing Returns

"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 passive management styles, I defer to Harold Evensky. I provide the link below. Read the first paragraph. If one uses Evensky's definitions, the passive investor does have a little more latitude than a true index investor. I posit most Boglehead readers fall into the passive rather than pure index investing. I could be wrong. I just posted the third installment of my rebuttal to the Active vs. Passive paper and I'm working on Section Four - which i...
by LHerr
Fri Feb 03, 2012 8:24 pm
Forum: Investing - Theory, News & General
Topic: Active vs. Passive Investing Returns
Replies: 7
Views: 1290

Re: Active vs. Passive Investing Returns

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
by LHerr
Thu Feb 02, 2012 1:47 pm
Forum: Investing - Theory, News & General
Topic: Active vs. Passive Investing Returns
Replies: 7
Views: 1290

Active vs. Passive Investing Returns

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 interest for me to go through it bullet by bullet refuting points where I think it is incorrect and arguments that have merit. My responses will be strung out over many days as I just came across this article. Here is a link to my first reactions to Point One of the article. I'm sure many readers of this Forum will have their own, and different reactions. [commercial link removed by admin LadyGeek] LHerr Disclaimer: To the best of my knowledge, links wi...
by LHerr
Sun May 08, 2011 12:36 pm
Forum: Investing - Theory, News & General
Topic: Target Limits for Rebalancing
Replies: 13
Views: 1918

"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 study using eight asset classes, I found that a 25% target limit works best if rebalancing once a year.

For example, if one holds 10% in REITs, it is best not to rebalance until the the asset class moves to 12.5% of the portfolio or below 7.5%.

Using such a high threshold reduce trading and rebalancing is rare, particularly if new money is added each month through savings. I use between 12 and 15 asset classes, excluding cash.

LHerr
by LHerr
Sat May 07, 2011 4:26 pm
Forum: Investing - Theory, News & General
Topic: Target Limits for Rebalancing
Replies: 13
Views: 1918

retiredjg wrote: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 larger percentage?

LHerr
by LHerr
Sat May 07, 2011 3:49 pm
Forum: Investing - Theory, News & General
Topic: Target Limits for Rebalancing
Replies: 13
Views: 1918

Target Limits for Rebalancing

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

LHerr
by LHerr
Wed Mar 09, 2011 12:25 pm
Forum: Investing - Theory, News & General
Topic: Active Share and Mutual Fund Performance
Replies: 9
Views: 2630

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. 2) In the article, Cremers states that in the analysis they "put aside passive funds." In other words, the research makes a difference between "passive index funds" or what I call a true index funds and a "closet mutual fund." Interesting distinction. Have other readers followed up on Cremers research and do you have additional information related to very active managers outperforming a benchmark such as the S&...
by LHerr
Tue Mar 08, 2011 8:08 am
Forum: Investing - Theory, News & General
Topic: Rebalance?
Replies: 16
Views: 2798

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
by LHerr
Mon Mar 07, 2011 6:27 pm
Forum: Investing - Theory, News & General
Topic: A question on risk and AA
Replies: 9
Views: 1372

"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 from the last three years and I projected the S&P 500 will increase annually at a rate of 7.3%. That may be a high projection.

For the investments I used VTI, VBR, and BND.

Lowell
by LHerr
Mon Mar 07, 2011 4:17 pm
Forum: Investing - Theory, News & General
Topic: A question on risk and AA
Replies: 9
Views: 1372

Rick Ferri wrote: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 too highly recommend "All About Asset Allocation" and I have no vested interest. AAAA makes my Top Five Investment Books list.

LHerr
by LHerr
Mon Mar 07, 2011 3:56 pm
Forum: Investing - Theory, News & General
Topic: A question on risk and AA
Replies: 9
Views: 1372

"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% equities, but some of the equities are higher risk."

I ran an analysis on the two portfolios mention above. With the 90/10 stock/bond ratio the Return/Risk ratio was 0.49 or quite low.

The Return/Risk ratio for the second portfolio was not much better with a 0.51 value. The second portfolio did reduce the risk by 2% points, not a trivial difference.

I would not be satisfied with either portfolio.

LHerr
by LHerr
Sun Mar 06, 2011 5:41 pm
Forum: Personal Investments
Topic: Random Acts of Kindness?
Replies: 41
Views: 6637

Re: Random Acts of Kindness?

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 their communities or perform their own "Random Acts of Kindness?" My wife and I are involved with MEDA Trust where we provide financial help for individuals to begin their own business. In the last three years we helped to begin over 225 business in Afghanistan and Nicaragua. MEDA operates similar to Kiva, although with MEDA the loans are actually charitable gifts. Loans are paid back so the money can be loaned again and again. The Canadia...
by LHerr
Sun Mar 06, 2011 8:02 am
Forum: Investing - Theory, News & General
Topic: top 3 ETF screener websites
Replies: 4
Views: 1457

Re: top 3 ETF screener websites

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
by LHerr
Sun Mar 06, 2011 7:36 am
Forum: Investing - Theory, News & General
Topic: Use of Short ETFs
Replies: 17
Views: 2952

"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 not include anything about hedging a portfolio. Instead, it is all about asset allocation and the various percentages one places in various asset classes. Second, everything I've read about short ETFs is that they are primarily designed for day traders. I'm anything but that. Third, I've only toyed with this in tax-deferred accounts, not taxable accounts.

LHerr
by LHerr
Sun Mar 06, 2011 7:13 am
Forum: Investing - Theory, News & General
Topic: Use of Short ETFs
Replies: 17
Views: 2952

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
by LHerr
Sun Mar 06, 2011 7:08 am
Forum: Investing - Theory, News & General
Topic: Use of Short ETFs
Replies: 17
Views: 2952

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
by LHerr
Sun Mar 06, 2011 7:04 am
Forum: Investing - Theory, News & General
Topic: Harry Markowitz on cap-weighting
Replies: 7
Views: 1792

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
by LHerr
Sun Mar 06, 2011 6:57 am
Forum: Investing - Theory, News & General
Topic: Use of Short ETFs
Replies: 17
Views: 2952

Use of Short ETFs

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 definitely a market timing decision and market timing has a very poor track record. With this in mind, is there a probability argument to be made that a hedge of 5% in SDS may be a prudent move to preserve capital?

I throw this out as a discussion point, not something I would do lightly.

LHerr
by LHerr
Thu Mar 03, 2011 5:50 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing
Replies: 12
Views: 1499

"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 is adding cash each month selling over target assets is almost eliminated.

LHerr
by LHerr
Fri Feb 18, 2011 12:34 pm
Forum: Investing - Theory, News & General
Topic: Dividend Growth Rate of Broad Market
Replies: 0
Views: 473

Dividend Growth Rate of Broad Market

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
by LHerr
Mon Feb 07, 2011 9:02 am
Forum: Investing - Theory, News & General
Topic: book recommendations for a retired mathphobe?
Replies: 12
Views: 2022

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 of investing. "The Investment Answer" lays out the five investment decisions one needs to make. And it comes in a 70 page book that can be read in one setting. I don't think many readers of this Forum would find much fault with the ideas. Goldie and Murray recommend investors seek out a fee based investment advisor. The Malkiel-Ellis book is a little more complete, but also written around five ideas. Index investing is at the core of thi...
by LHerr
Sun Jan 16, 2011 12:25 pm
Forum: Investing - Theory, News & General
Topic: Tilting
Replies: 16
Views: 2678

Re: Tilting

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 day. I can present one example of a portfolio I started on 12/1/2000. The portfolio is skewed toward both value and smaller cap stocks. For example, 7% of the portfolio is invested in VBR and none in VBK. Nine percent is in VOE and 7% is allocated to VOT. The portfolio also holds bonds, developed international markets, emerging markets, commodities, U.S. REITs and international REITs (RWX). A few asset classes were added after the portfolio was la...
by LHerr
Sat Dec 11, 2010 1:41 pm
Forum: Investing - Theory, News & General
Topic: What parameters do you track in your portfolio spreadsheet?
Replies: 89
Views: 24398

Re: What parameters do you track in your portfolio spreadshe

natureexplorer wrote: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 spreadsheet known as the TLH spreadsheet. This SS permits me to build a customized benchmark which I track. In addition, I track the Sortino Ratio and the Retirement Ratio.

The spreadsheet is set up to calculate the IRR of the portfolio as well as some other optional benchmarks such as the VTSMX index fund.

LHerr
by LHerr
Thu Dec 02, 2010 11:34 am
Forum: Investing - Theory, News & General
Topic: Power of Passive Investing
Replies: 0
Views: 556

Power of Passive Investing

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 benchmark. I am a strong advocate of the benchmark matching the portfolio policy. Ferri tackles the passive vs. active management debate head on and there are many references in the Notes to back up his conclusions. Many references are a tad old indicating the data in favor of passive over active investing is settled "theology." Will "The Power of Passive Investing" provide new material for Bogleheads readers? Likely not unless th...
by LHerr
Wed Nov 17, 2010 4:01 pm
Forum: Investing - Theory, News & General
Topic: DFA joins Commodities bandwagon
Replies: 46
Views: 7303

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 of the other ETFs. Eighty percent and above is what I consider to be highly correlated. TIP has a correlation of 54% or quite a bit lower than DJP. The other three ETFs are all above 90%.

LHerr
by LHerr
Tue Nov 02, 2010 5:29 pm
Forum: Investing - Theory, News & General
Topic: Importance of Asset Allocation
Replies: 27
Views: 3270

"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, not statistics. Traditional portfolios are also included, so you might get some good hints to answer your question."

Yes, I've read Gibson and highly recommend his book on Asset Allocation. He makes a case for including commodities in a portfolio.

LHerr
by LHerr
Tue Nov 02, 2010 1:45 pm
Forum: Investing - Theory, News & General
Topic: Importance of Asset Allocation
Replies: 27
Views: 3270

"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 "broad market" by the VTSMX Vanguard Total Market Index Fund. I use the VTSMX as a portfolio benchmarks. In addition to measuring portfolio return vs. the benchmark, I calculate the Sortino Ratio (SR) or a slight modification of the SR to determine portfolio risk. When updating a portfolio, I am interested in what the SR is doing as it takes both the portfolio return and portfolio risk into consideration. Even if a portfolio includes a wid...